CAG Red Flags Exemption On Farm Income Given By Taxman
CAG audit found that out of 1,527 cases where documentation was inadequate, land records were not available in 716 cases.
India’s auditor has flagged that the income tax department allowed claiming tax exemption for agricultural income without proper verification in some cases.
In its audit report on direct taxes for financial year ended March 2018, the Comptroller and Auditor General of India audited 6,778 cases, and found that the tax department allowed tax exemption claims for agriculture income in 1,527 cases without adequate documentation and verification of supporting documents.
Farm income is exempt from tax in India.
Out of 1,527 cases where documentation and verification by assessing officer was inadequate, land records were not available in 716 cases, the CAG said. The audit also found that proof of agricultural income and expenditure such as ledger account, bills, invoices were not available in 1,270 cases.
“It was not possible to determine whether the system in place was robust enough to ensure that assessees were being allowed exemption for agricultural income, only after adequate examination in the process of assessment,” the findings said.
As inadequate verification has been found in a selected sample of scrutiny assessments, the tax department needs to re-examine not only the remaining scrutiny cases, but also all cases where income has been allowed as agricultural income above a certain threshold, for example Rs 10 lakh or more, the auditor said. This would ensure that exemption has been allowed only to eligible assessees, and is based on appropriate documents and their verification, the auditor said.
The auditor also said that, in some cases, the tax department’s database depicted irrelevant figures in cases where agricultural income allowed was different from that claimed by the assessee.