NEW DELHI: Major irregularities pertaining to nearly 700 cases of under-assessment of direct taxes, totalling almost Rs. 3,500 crore in 2004-05, have come under the lens of the Comptroller and Auditor-General (CAG).

Expressing concern over the delay in response by income tax authorities, the CAG, in its audit of all taxes under the Central Board of Direct Taxes (CBDT) during the fiscal, noted that 15,874 cases of under-assessment, involving a tax effect of Rs. 6,522 crore. Likewise, there were also 112 cases of over-assessment involving a tax effect of Rs. 144 crore during the same year.

In its report presented to Parliament last week, the CAG pointed out that most of the cases pertained to application of incorrect tax rates, excess allowance of business expenditure, omission to assess capital gains, excess exemptions, wrong deductions and even arithmetical mistakes, leading to under-assessment of income, either in the hands of corporate entities or firms and individuals.

Out of these cases, 688 cases with substantial tax effect, amounting to Rs. 3,486 crore, were referred to the I-T Department and the Finance Ministry to elicit their response for which sufficient time was given.

Despite the wait, the responses from the Ministry were not forthcoming. In its report, the CAG has said, "However, despite CBDT's instructions that all such cases should receive the personal attention of Commissioners of Income-Tax for expeditious action, inordinate delays continue to occur in receipt of departmental responses."

Finally, even when a total of 683 cases were included in the report, the CAG received replies in only 40 cases and the Finance Ministry has consented to only 36 cases for corrective action. The CAG has observed that it was owing to this lukewarm response that a large number of audit observations made even before 2004-05 were still to be settled.

As of March 2005, nearly 81,000 cases involving a tax effect of Rs. 20,993 crore were pending which did not include the cases filed during 2004-05.

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