New Delhi: The Comptroller and Auditor General (CAG) has asked Ministry of Finance and Ministry of Corporate Affairs to have an inter-ministerial arrangement to establish an interface between the Income Tax (I-T) Department and the Registrar of Companies (RoC) for checking irregularities.
The CAG audit report tabled in Parliament on Tuesday also called for establishing an effective system to ensure compliance in the filing of income tax returns by the sellers of high-value properties.
When a company is registered with the Registrar of Companies, the application for Permanent Account Number (PAN) should be submitted automatically with the Income Tax Department. When a PAN is issued to the newly incorporated company, it will be automatically sent to the Registrar of Companies for the updation.
"The companies should be compulsorily required to submit a copy of the acknowledgment of income tax return while furnishing their annual reports," said the CAG report. "This will ensure that companies file their income tax returns and at the same time the data of Registrar of Companies will be in sync with that of Income Tax Department."
The CAG has also asked the Central Board of Direct Taxes (CBDT) to have a mechanism for ensuring that TDR (transfer of development rights) transactions are brought under the tax net by having a provision to tax them at the source. The board should also introduce a system based on checks and validation to minimise manual interventions by assessing officers and avoiding mistakes in scrutiny assessments.
In the real estate sector, due importance is not accorded by the Income Tax Department to monitor non-PAN transactions despite these being under the highest risk category from the point of view of tax evasion. The CAG said that there is a lack of a mechanism to ensure that persons involved in high-value sales of immovable properties offer capital gain for tax.
"The Income Tax Department did not use surveys effectively to widen its tax base in the real estate sector. Transactions, where sales consideration is undervalued and lower than the value adopted for stamp duty purposes, may remain untaxed in the hand of sellers and buyers, thus generating black money in the process."
"The Central Board of Direct Taxes may put in place an IT-driven mechanism to utilise information on sale and purchase transactions of immovable properties effectively and plug the leakage of reveune," said the CAG report.