IT department failed to trace 35% of tax demand raised

The October report of the CAG on the 2G scam, suggesting a national loss of Rs 1.76 lakh crores, had created a political upheaval, but the CAG's another report, tabled in March this year, on the much bigger loss of Rs 2.3 lakh crores to the exchequer has gone unnoticed.

The IT Department has been able to collect only 65 per cent of the total tax demand raised in assessment up to 2009-10, while a phenomenal Rs 2.3 lakh crores has not been collected, the CAG report noted, questioning the lethargy in the recovery of such large dues.

It points out that no special laws are needed for the recoveries as the Income Tax Act itself has enough teeth to deal with the defaulters.

The government early this month set up a high- powered committee to examine involvement of independent agencies to track down such tax dodgers and recover the tax arrears from their assets. The involvement of such agencies was justified on the ground that the Income Tax Department does not have enough staff to take these cases to logical conclusion.

The CAG report, however, says this justification given in response to its draft report is not valid as "uncollected demands are rising despite clear provisions in the Income Tax Act to enforce collection and recovery of outstanding demand through attachment and sale of assessee's movable and immovable property.

It points out that the Income Tax Act provides for appointment of a receiver for management of the defaulting assessee's properties and even gives the tax recovery officer powers to arrest such defaulters and prosecute them instead of allowing them to vanish in thin air by selling their assets and shifting base to other states and the department washing its hands off by declaring them as "untraceable" in the files.