September 10, 2018 12:26:49 am
Raising concerns over high amount of tax refunds, the Standing Committee on Finance has asked the Revenue Department to furnish details of top-50 refund cases during last three years. The parliamentary panel is of the view that overestimation to fulfill revenue targets may be one of the factors behind excess refund of taxes, which needs a re-appraisal by the tax department.
“The Committee are alarmed to observe that in direct tax, more than Rs 1.26 lakh crore has been paid as refunds up to January 2018 (for FY 2017-18) with interest outgo of Rs 10,312 crore (in FY 2016-17), which has substantially increased from Rs 6,889 crore in FY 2015-16. This raises an apprehension that the assessees may be constrained to pay excess advance tax to fulfill revenue targets of the Department,” the Committee’s report said.
As per government data, the tax refunds grew 13 per cent over last four financial years to Rs 1.26 lakh crore (financial year 2017-18). The tax department in its response to the committee as well as to the queries sent by The Indian Express said that processing, determination, issuance and encashment of income tax refunds is an ongoing and computer-driven process, largely operated by the Centralised Processing Centres at Bangalore and Ghaziabad and does not involve any direct interface with the taxpayer.
In its response to the queries sent by The Indian Express, the Central Board of Direct Taxes (CBDT) further said that Rs 94,904 crore of refunds have been issued during April-August 2018, which is 28.1 per cent higher than the refunds issued during the same period in the preceding year.
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At Rs 94,904 crore, the refunds in April-August are 75 per cent of Rs 1.26 lakh crore of total refunds in the whole of financial year 2017-18. The parliamentary committee also raised apprehension that this practice of excess refunds may encourage connivance between tax officials and assessees to the detriment of the Department, it said.
In indirect taxes, the provisional figures of refund is also alarmingly pegged at Rs 47,218 crore. “Therefore, the Committee desire that the Department must look into the reasons behind excess refunds and accordingly take corrective measures,” it said.
The Department in its response to the committee said that in percentage terms the amount of refunds issued vis-a-vis the number of returns filed has decreased both in financial years 2016-17 and 2017-18, allaying apprehensions that revenue targets are fulfilled by compelling taxpayers to pay more advance tax. “Moreover, only a small part of the total refund is on account of excess Advance Tax paid while the bulk of the refunds arise due to excess TDS and orders of Courts/Tribunal,” it said.
The Committee, however, was not convinced that only a small part of the total refund in Direct Tax is on account of excess Advance Tax paid while bulk of the refunds arise due to excess TDS and orders of Courts/Tribunal. “The Committee, however, believe that over-estimation to fulfill revenue targets may be one of the factors behind excess refund of taxes, which thus needs a re-appraisal by the Department. The Committee, therefore, reiterate their recommendation that the Department must look into the reasons behind excess refunds and accordingly take corrective measures,” it said.
The CBDT in its response to The Indian Express queries said that there has been an increased focus on the processing of current refund cases. “Almost 72.03 lakh returns involving current refunds have been processed up to August 2018 compared to 24.65 lakh returns in the corresponding period of the previous year marking a threefold increase in such cases, and consequently, higher refund outgo,” it said.
The Income Tax Department also observed a fortnight (June 1-15) to clear pending appeal effect and rectification cases during which refunds due to the taxpayers were issued expeditiously in more than 40,000 cases, which also resulted in higher number of refunds being issued to the taxpayers, it added.
Direct tax collections for the last financial year had crossed the Rs 10 lakh crore mark, registering an increase of 18 per cent over the previous fiscal. Overestimation of taxes becomes the norm in the last quarter of financial year in order to meet the targets, which then gets translated into higher refunds in the first quarter of the next financial year.
In July 2016, the government had warned tax department to not use unfair means to jack up achievements after an income tax officer had raised an unduly demand of Rs 10,000 crore on State Bank of India (SBI) on March 30, 2016, the last day of the financial year. The bank had requested for rectification the same day as the advance tax paid was Rs 4,900 crore. The assessing officer took only Rs 1,200 crore as advance tax and charged interest of Rs 5,800 crore and then refunded Rs 9,500 crore on next day — April 1, the first day of next financial year.
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