Direct Tax

Report No. 23 of 2011 - Performance Audit of Recovery of Arrears of Tax Demand

Date on which Report Tabled:
Fri 16 Dec, 2011
Date of sending the report to Government
Government Type
Union Department
Direct Tax
Sector Taxes and Duties


Direct tax collections, amounting to RS 4.35 lakh crore accounted for three-fourth of revenue receipts of the Government of India in 2009-10. At the same time the uncollected portion of tax demand was RS 2.29 lakh crore in March 2010 equivalent to 54 per cent of total direct tax collections. The arrears of demand also registered a steep hike in last five years.

This review was undertaken to evaluate the reasons for huge build-up of income tax arrears and the measures being taken by the Department to liquidate arrears. The main objectives of our audit were to seek an assurance that the Department: has an effective internal control mechanism and monitoring system and has made all efforts provided in the Act for expeditious recovery of arrears of tax demand; has complied with the instructions issued by the Central Board of Direct Taxes from time to time; is diligently pursuing the disposal of appeals by Appellate Authorities; is liaising with the Settlement Commission for early disposal of cases involving high tax demand.

We employed two tier sampling for selection of assessment units and tax recovery wards and for identification of cases within those units. We also analyzed high value arrear demand cases of RS 10 crore and above available with the Directorate of Income Tax (Recovery).

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