CAG finds flaws in flow and utilization of Information in CBDT
STRENGTHENING the tax base is arguably one of the most important aspects of the direct tax management. The Income Tax Department (ITD) uses 'pieces of information' arising from different sources to strengthen the tax database, in addition to the information available in the income tax returns/provided by the assessee during assessment.
Central Information Branch (CIB) of ITD collects, uploads information to the ITD Systems and disseminates to the Assessing Officers (AOs). There are 17 formations of CIB across the Country under the Director General of Income Tax (Intelligence and Criminal Investigation). Agencies submit information to CIB or TIN Facilitation Centres of National Securities Depository Limited (NSDL) on behalf of ITD. This flows through CIB Module of ITD Systems software administered by the Director General of Income Tax (Systems).
Annual Central Action Plans of ITD target an increase of 15 per cent per year in assessee base. Against this, annual increase during the ten year period from FY 02 to FY 11 was only 3.1 percent (from 262 lakh to 336 lakh assessees).
CAG found several deficiencies in the scheme of flow and utilization of information.
- ITD did not call for Information from all the sources. Some of the information lacked basic information like PAN of assessees thereby rendering it useless.
- There were cases where incorrect information was transmitted. ITD made no effort to transfer this incorrect transmitted information to AOs dealing with the correct assessees.
- ITD was not following up on notices requisitioning information from the agencies. ITD did not take action against inadequate filing of AIRs.
- CIB delayed and defaulted on uploading information on ITD Systems. They defaulted on classifying and maintaining the data and did not utilize the full functionalities of CIB Module.
- Out of the total cases selected for scrutiny by ITD, an average of 7.7 per cent over FY 08 to FY 10 was on the basis of AIR information.
- 285 high value cases were found where AOs did not utilize the useful available information during assessments or they finalized the assessments relying on the reply of the assessees without verifying the facts and correctness of the transactions.
- AOs also did not bring AIR information to tax in cases where the assessee himself had offered the amount
CAG Recommends:
Collection and Collation of Information:
1. Information from all the compulsory as well as approved optional source codes be collected;
2. Entire collected information be uploaded by CIB/NSDL in the same year and bottlenecks in uploading the information be removed so that it can be used in scrutiny assessment;
3. Suitable system be put in place which ensures correctness and reliability of data received through AIR/CIB before its dissemination to the field. There is also a need for effective penal provisions in the Act for furnishing factually incorrect information in AIR or in reply to notices issued by ITD;
4. Feasibility of developing a web based information collection system be explored to avoid the problems in collecting non-AIR information. This would take care of redundant data and data mismatch;
5. Internal review be initiated to gauge the utility and effectiveness of system of filing of AIR;
6. Time lines for issuing query letters be defined as also for referring back cases to DIT-CIB, as control mechanism to ensure that the query letters are issued by a specified time/date and if the letters return as un-served, the cases are referred to DIT-CIB within a defined time period, enabling effective monitoring of the activity;
Dissemination of Information:
7. Suitable mechanism be devised including business intelligence tools to ensure effective utilization of information collected at high cost, both to ITD and for the agencies tasked with collecting and providing such information to ITD to achieve the objective of deepening and widening of tax base;
8. All available functionalities of CIB module be used;
Utilization of Information:
9. Monitoring system put in place by CBDT needs to be ensured at different levels of ITD;
10. Utilization of declarations received in Form 60/61 be ensured by digitizing and disseminating them;
11. Nomination of Designated Assessing Officers on regular basis to deal with non-PAN AIR cases be emphasized;
12. Responsibility on AOs be defined who fail to record or utilize the information available to them in course of their assessments.