Income Tax return: Parliamentary panel pushes for strict assessment of agricultural incomes
A parliamentary panel has pushed the government for greater scrutiny and devising of specific codes for assessment of agricultural incomes to plug evasion of taxes. The panel has flagged that more than 21 lakh tax payers in their returns for the assessment year (AY) 2020-21 claimed agricultural income and of these, nearly 60,000 reported agricultural income exceeding Rs 10 lakh.
The committee has expressed concern over the follow-up action by the Central Board of Direct Taxes (CBDT) to assess and verify these claims. This was after the CBDT chairman, in his deposition, informed the Public Accounts Committee or PAC that of the 59,707 returns of more than Rs 10 lakh among total of 21,55,368 cases, only 3,379 cases were chosen for assessment and scrutiny.
SHORTAGE OF MANPOWER
The Income tax department told the committee that due to shortage of manpower to check 100 percent such cases in all Commissionerates, where agricultural income claimed is above Rs 10 lakh, the Finance Ministry has devised its own mechanism for picking up cases for scrutiny due to paucity of manpower to handle the same.
A system may be designed to examine the 3,379 cases with due promptitude and based on these assessments, new scenarios may be included in the Computer Aided Scrutiny Selection (CASS) for refining the process of selection of cases for scrutiny.
The Committee in its report titled "Assessment Relating to Agricultural Income has flagged that the 3,379 cases chosen by CBDT includes cases of taxpayers reporting agricultural income less than Rs 10 lakh while focus of scrutiny should be on assessees reporting higher agricultural income.
The Committee has recommended that the Ministry should consider devising a mechanism for categorisation of cases of agricultural income in three slabs i.e. above Rs 10 lakh, Rs 50 lakh and Rs l crore in CASS so as to better target high evasion risk cases.
In its report the committee said, "Such a measure will also facilitate scrutiny of different types of agriculturists with the limited resources available with the Ministry/CBDT and enable in preventing possible leakage of revenue."
HIGH AGCRICULTURAL INCOME
The public accounts committee headed by Congress Member of Parliament (MP) Adhir Ranjan Chowdhury noted that the number of cases reporting high agricultural income is significant.
The Government informed the panel that the number of "cases selected for scrutiny is fine tuned with a view to striking a balance between available resources and various types of risk (which requires investigation) through Computer Aided Scrutiny Selection (CASS)." The CASS is a centralised system for selection of cases of scrutiny based on information in Income Tax Return (ITR), IT forms, TDS/TCS, data as reported by third parties, data received through inter-departmental MoUs etc.
The Committee has noted that a major chunk of agriculturists are reluctant to file income tax returns due to practical difficulties arising out of lack of awareness, frequency of going to IT Office and connectivity issues faced by farmers to travel to the Income Tax office.
The panel In its report submitted on Tuesday said, "This has resulted in non-availability of crucial information pertaining to agricultural production, land records etc. for the ITD database. There are also apprehensions of farmers that inclusion of their personal information in the Income Tax Database may disqualify them from accessing various welfare schemes of the Government."
TAX BASE
The Committee opined that if data of agriculturists is included in ITD Database, it will aid in not only widening the tax base but also enable better monitoring and detection of cases of money laundering.
The Committee takes note of Audit scrutiny based on a Public Interest Litigation (PIL) filed in the Patna High Court. Following the PIL, the Tax Department had initiated verification of returns in cases where assessees had returned income of more than Rs 1 crore from Agriculture.
The Directorate of Income Tax (Systems) instructed its units to send Status Reports for the High Court after examination of aspects such as whether tax payer may have made a data entry error while filling up the return.
The DGIT (Systems) then had identified 2,746 cases of agricultural income above Rs 1 crore in the ITRs of the assessment years 2007-08 to 2014-15. The assessment officers or AOs were instructed to verify the claims of exemption on agricultural income in such ITRs.
STATE-WISE REPORT
The Committee flagged that out of 136 Principal Chief Commissioner of Income Tax selected by Audit where status reports furnished to DGIT (systems) were sought, only 26 in ten states furnished the status reports to Audit. The Committee in its report has highlighted that the Comptroller and Auditor General of India conducts the audit of receipts of the Union Government under Section 16 of the Comptroller and Auditor General of India (Duties, Powers and Conditions of Service) Act, 1971 and non-furnishing of required details to audit is a serious lapse and needs to be looked into thoroughly.
The PAC is one of the most powerful Parliamentary panels which scrutinises the audit reports of government revenue earning and spending activities created by the CAG.
The pac has said that C&AG Report No. 9 of 2019 for the year that ended on March 2018 contains significant results of the compliance audit of the Department of Revenue- Direct Taxes of the Union Government and Chapter V of the Report deals with "Assessments relating to Agricultural income."
Public Accounts Committee, decided to examine parts the CAG report pertaining to the "Exemption without verification of supporting documents, Incorrect reflection of agricultural income in ITD Database, Status of Verification by the Department: and Compliance issues - Mistakes in Assessments.
VERIFICATION OF AGRICULTURAL INCOME
The PAC in its report has flagged serious concerns over the low levels of scrutiny and verification of "agricultural income" claims filed by tax payers which could be leading to evasion of taxes via utilisation of the exemption enjoyed by certain categories of agricultural income. As per section 2(IA) of the Income Tax Act, 1961 (the Act) 'agricultural income' means (a) Any rent or revenue derived from land which is situated in India and is used for agricultural purposely (b) Any income derived from such land by agricultural operations including processing of agricultural produce so as to render it fit for market or sale of such produce; (c) Any income attributable to a farm house subject to fulfillment of conditions specified in the Act: (d) Any Income derived from saplings or seedlings grown in a nursery.
As per Section 10 (1) of the Income Tax Act, 1961, agricultural income is exempted from tax.
The panel has expressed concern that while the CAG Report of 2019 flags that Audit review of the scrutiny assessments in the selected cases during 2008-09 to 2013-14 indicated that in 1 ,527(22.5 per cent) of the 6,778 scrutiny assessments, the claim of exemption on account of agricultural income was allowed without verification of supporting documents such as the land records, income and expenditure statements, crop information, proof of agricultural income and expenditure such as ledger account, bills, invoices etc. the report Further states that, Audit scrutiny revealed that of the 1,527 cases, land records were not available in 716 cases (l0.6 per cent) and proof of agricultural income and expenditure such as ledger account, bills, invoices etc. were not available in 1,270 cases (18.7 per cent).
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