Tax authority pulled up for delay in I-T refund

A Parliamentary committee has pulled up the tax department for unusual delay in income tax refunds, despite going high-tech and toning up the administration.

The Public Accounts Committee of Parliament said delays in refund payments had shot up to 27.36 months in 2003-04 as compared to just eight months in 1996-97.

As a result, the projected reduction in interest burden on refunds worth over Rs 350 crore was never achieved, the report tabled in Parliament said.

The delay is despite the fact that the department carried out massive restructuring schemes besides induction of information technology in a big way with the objective of improving the administration. The restructuring was initiated in 2001.

The trend showed that the delay has been increasing year after year even though tax authorities claim that they would issue refunds within four months of filing of returns.

The PAC said it was surprised to find that despite five years after approval of scheme of restructuring, the MoU, as stipulated in the Cabinet approval of the restructuring schemes, had not been entered into between the government and the Central Board of Direct Taxes.

The finance ministry may claim that revenue collection over the years has improved, but the main reasons may well be factors such as increase in GDP, better economic conditions, reduced tax rates and inflation rather than due to the restructuring schemes carried out since 2001.

The PAC also rapped the department for inadequate scrutiny assessment carried out in a year. According to an in-house study undertaken by the department, it was expected to complete 6 lakh scrutiny assessments each year. However, it remained far below the expected target.

During the period 2001-02 to 2003-04, the number of scrutiny assessments completed remained below 2 lakh each year.

Further, the percentage of scrutiny assessments completed in a year as a percentage of total assessments due also declined to 0.72 per cent after restructuring in 2003-04 from 3.81 per cent in 1991-92, even though the number of assessing officers have increased.

The committee also observed that the average number of scrutiny assessments completed by each assessing officer had declined by about 100 per cent to 44.50 per assessing officer in 2004-05 as compared to 82.31 per assessing officer in 1999-2000.

After the restructuring, the total number of search and seizures cases have also declined to 0.96 per cent in 2003-04 as against 11.11 per cent in 1999-2000, the PAC noted.

The panel also said the new system of internal audit with 4,626 officials had not yielded results nor had the leakages in tax revenue been checked. The finance ministry's projection of mopping up an additional Rs 6,000 crore after the revamp, which was expected to increase compliance, could not be achieved.

Moreover, the Rs 7,500 crore additional revenues through enhanced recoveries and faster clearance of appellate authorities cases were also not visible, the committee observed.