Performance
Direct Tax

Report No.14 of 2020 - Performance Audit on Search and Seizure Assessments in Income Tax Department, Union Government, Department of Revenue - Direct Taxes

Date on which Report Tabled:
Wed 23 Sep, 2020
Date of sending the report to Government
Thu 06 Aug, 2020
Government Type
Union
Union Department
Direct Tax
Sector Taxes and Duties

Overview

Search and Seizure is a very powerful tool available to Income Tax Department to unearth any concealed income or valuables and to check the tendencies of tax evasion thereby mitigating the generation of black money.  The Income Tax Department resorts to search and seizure only in cases where there is sufficient reason to believe that the person concerned would not disclose the true picture of his income in the normal course of filing of return and regular assessment.

The Performance Audit (PA) covered the search assessments completed during the financial years 2014-15 to 2017-18.  Audit checked 24,869 assessment records pertaining to 185 Groups with assessed income of Rs 1,71,503.78 crore during the PA. Audit issued 1659 observations. having tax effect of Rs 4150.02 crore. 

The Income Tax Department did not centralise all cases in respect of certain groups for assessments due to which issues relating to the assessees pointed out in Appraisal Report could not be addressed.

76.5 per cent of additions made in search assessments did not stand the test of judicial scrutiny in appeals at the level of CIT (A)/ITAT. There were cases where sustainability of additions made in the assessment orders was nil at appellate stage.

Assessing Officers did not take uniform stand in making additions on account of bogus purchases, accommodation entries and in adoption of figures of assessed income/revised income.  The additions were made arbitrarily either on lump sum amount basis or different percentage ranging from five per cent to 50 per cent under similar circumstances without proper justification.  There were cases of non-compliance of CBDT’s instructions/orders.  Provisions related to levy of penalty, allowances of deductions/expenses/set off and carry forward of losses/ MAT etc. were not followed correctly. 

There was a delay ranging from one month to 14 months in handing over of Appraisal Report along with seized material to the AO.

Verification of source/genuineness of the transaction pointed out in Appraisal Report was not done and undisclosed income recommended in the Appraisal Report was not added.  Coordination with other wings of ITD to resolve the issues pointed out in Appraisal report was not there.  Useful information was not shared by ITD with other government agencies/authorities or vice versa either directly or through REIC.

Action Notes based on comprehensive and methodical examination of seized material, were not prepared by the AO. Separate Narrative Reports were not prepared and sent to the Member (Investigations).

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