Income Tax Department's Internal Audit Needs Improvement: CAG

By Vijay Kumar

THE Department introduced a new Internal Audit System with effect from June 2007 to have an effective and objective set up of Internal Audit wherein the Assessment functions and Audit functions were assigned to separate specialized wings. Under each CIT (Audit), there shall be one Additional Commissioner, CIT who would be responsible for internal audit of high value cases and supervision of the audit work of Special Audit Party (SAP) headed by Dy./Asstt. CsIT and the Internal Audit Party (IAP) headed by ITOs. The minimum number of cases to be audited by each Addl. CIT, SAP and IAP in a year shall be 50,300 and 1,300 (600 corporate cases & 700 non-corporate cases) respectively.

Internal Audit wing had planned 2,62,000 cases for audit during 2010-11 based on the working strength of wing. Out of which, 1,73,040 cases were completed thereby achieving 66 per cent of the target.

Internal Audit had raised 13,494 observations in the audited assessments with money value of Rs.5,466.9 crore during the year 2010-11. Based on the reply from assessment units, the Internal Audit had settled 7,996 cases with money value of Rs.921.9 crore.

However, CAG detected numerous observations in the assessments previously audited by Internal Audit. CAG noticed that Internal Audit had audited 2,999 assessments in 2010-11, where CAG pointed out the mistakes but the same were not detected by them. This, says the CAG, indicates a need for improvement in the quality of Internal Audit.

Out of 464 draft paragraphs included in the CAG's latest report, only 29 cases (6.3 per cent) were seen by internal audit and no mistakes were detected by them, which indicates need for improvement in quality of Internal Audit.

Departmental response to Internal Audit also needs improvement. Only 1905 cases (14.9 per cent) having tax effect of Rs. 904.6 crore out of 12,792 cases having tax effect of Rs.9,335.1 crore of the major findings raised by internal audit were acted upon by the assessing officers in 2010-11. The total pendency increased from 6,688 cases having tax effect of Rs.412.9 crore in 2006-07 to 34,940 cases having tax effect of Rs.8,516.4 crore in 2010-11.

Sanctioned and working strength of officers in Income Tax Department