Report of the

Comptroller and Auditor General of India

for the year ended March 2022

Subject Specific Compliance Audit on

Outstanding Demand on Income Tax Assessees

Union Government
Department of Revenue – Direct Taxes
Report No. 14 of 2024

Laid on the table of Lok Sabha and Rajya Sabha on __________

 Report No. 14 of 2024 (Direct Taxes)

Table of Contents

Contents Page
Preface i
Executive Summary iii-v
Summary of Recommendations vi-ix
Chapter 1 : Introduction 1-8
Chapter 2 : Vision, Action Plan and Legal provisions 9-14
Chapter 3 : Audit Approach 15-21
Chapter 4 : Data Analysis and Profiling 23-34
Chapter 5 : Analysis of High value Cases of Outstanding Demand 35-86
Chapter 6 : Compliance Issues 87-122
Chapter 7 : Analysis of Reporting system and accumulation 123-161
of outstanding demand
Appendices 1 to 16 163-207
Abbreviations 209
 Report No. 14 of 2024 (Direct Taxes)

Preface

This Report for the year ended March 2022 has been prepared for submission
to the President under Article 151 of the Constitution of India.

The Report contains significant results of the Subject Specific Compliance

Audit (SSCA) of the Department of Revenue- Direct Taxes of the Union
Government.

Instances mentioned in this Report are those which came to notice in the
course of Audit of the outstanding demand on Income Tax assessees, as on
March 2021, and conducted from November 2020 to July 2021 in phase I. A
supplementary Audit was also conducted for 360 degree analysis of some
high-value assessees in terms of outstanding demand, which continued till
January 2023.

The SSCA has been conducted in conformity with the Auditing Standards
issued by the Comptroller and Auditor General of India.

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Executive Summary
The Income Tax Department (ITD) employs income tax provisions governing
Tax demand arrears as crucial tools to recover tax demands and prevent tax
evasion. Despite these provisions being in place to safeguard revenue
interests, there has been a significant increase in the accumulation of arrears
of tax demand over the years, with a persistently high percentage of tax
demands termed as 'difficult to recover' by the ITD. There has been a steady
increase in outstanding demand and the percentage of tax demand termed as
'difficult to recover' over total arrear tax demands continued to be abnormally
high. Audit selected this topic to assess the robustness and effectiveness of the
procedures in place in the ITD concerning the recovery of outstanding demand
and, through a sample check, verified whether the ITD has taken adequate
measures to liquidate the outstanding demand. The report also highlights a
significant non-production of records, with the ITD failing to provide 42.26% of
the requisitioned cases, thereby limiting the scope of audit. Additionally, ITD
did not provide data on cases closed after March 2020, preventing verification
of the correctness of the closure of these cases.
Audit noted several issues and shortcomings relating to incorrect reporting of
outstanding demand; failure of or delay in recovery of outstanding demand;
systemic issues such as the absence of granular data, lack of risk scoring
technique in fixing targets, non-maintenance of dossier reports and weak
monitoring and review mechanism.
Audit noticed instances of exaggerated tax demands raised by the ITD, such as
not allowing credit for taxes already paid by the assessee, levying incorrect
interest, and committing mistakes while giving effect to the appeal orders. The
audit also noticed that figures of outstanding demand continued to include
nullified demands. Delay in giving effect to appeal orders resulted in delayed
issue of refunds; ITD had to refund the inflated demands collected along with
interest under section 244A of the Income Tax Act, besides resulting in
harassment and hardships to the assessees.
The audit observed delays of up to seven years in giving effect to appeal orders
passed by different appellate authorities, with one case still awaiting orders
for over 11 years. Delays in passing consequential orders resulted in excess
outstanding demand on records; the non-levy of interest under section 220(2)
for the delay in paying tax demand resulted in the underreporting of
outstanding demand. The CBDT still needs to ensure the implementation of
necessary provisions in the current system to levy interest on outstanding
demand annually, in terms of its own instruction.

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Audit observed that though provisional attachment under Section 281B was
invoked, no recoveries could be made by the ITD. TRO did not invoke specific
powers as per Schedule II of the Act to attach and dispose of the properties,
and the recovery process was slow, even after attaching properties in
high-value cases. The audit further noticed that lack of sufficient information
about an assessee's movable and immovable assets often resulted in delayed
recovery of outstanding demand, in violation of the CBDT's instructions.
Audit also observed that the internal audit of TROs is not being conducted as
a regular exercise in all regions, in compliance with the CBDT's instruction
issued in July 2017. TROs could not achieve the target for disposal of TRCs even
though the number of cases transferred from JAOs to TROs was insignificant.
TROs could not reach even 50 per cent of the targets for the survey set by the
CBDT. TROs also did not invoke special powers vested in them to attach
property. Further, the Internal Control mechanism in the ITD needed to be
improved, as evidenced by the non-maintenance of statutory registers by
TROs, which, in turn, hampers recovery of outstanding demand.
CPC-ITR, Bengaluru, makes summary assessments, and the demands raised are
reflected in the respective AO's portal for recovery. The recovery procedure
for demand under summary assessment is similar to the demand raised under
scrutiny assessment. However, the ITD needs to take effective action, such as
preparing dossiers, attaching bank accounts, and transferring cases to TROs,
to recover the demands raised under summary assessment.
Registration of attachment of properties with the Central Registry of
Securitisation Asset Reconstruction and Security Interest (CERSAI) is an
essential part of the recovery mechanism to keep the ITD's right over other
creditors intact. Failure to register even a single case of attachment with
CERSAI, even after a lapse of over four years of issue of instructions by DIT
(Recovery and TDS), shows a lack of internal control in the recovery process.
Though the dossier reports served as a significant tool to the monitoring
authorities for analyzing outstanding demands, formulating policies, and
setting up targets for collection/recovery, the AOs did not bestow the requisite
attention, as evidenced by cases involving non-preparation of dossier reports
and discrepancies in preparation of the same.
Audit further noticed that given the arithmetical inaccuracies and other
discrepancies, the CAP-I statements data are unreliable. The accuracy of the
data in CAP-I could not be verified in the absence of granular details.
Generation of CAP-I and CAP-II data is a combination of automated process
and manual adjustment; Audit could not validate the sources for the CAP-I
statement. Audit noticed that Protective Demands which are not collectible

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demands, have been included in the figure of outstanding demand and placed
under 'demand difficult to recover' in the CAP-I statement. Cases where tax
deducted at source has been deposited into the government account, but the
assessee is yet to get the credit of TDS claimed are being classified as 'demand
difficult to recover', contributing significantly to an increase in the figure for
the 'demand difficult to recover' category. Audit observed inconsistencies in
reporting and non-monitoring of discrepancies as data from various sources
like the e-filing portal, the Central Action Plan, the ITBA portal and budget
documents, requiring reconciliation of these outstanding demands.
Further, there was a difference in the number of duplicate demands in
different ITD data sources, resulting in incorrect reporting of outstanding
demand. No information was shared by the ITD on the action taken in
compliance with specific instructions issued by the CBDT in its Interim Central
Action Plan for the year 2021-22. The duplicate entries continue to exist, and
fresh duplicate cases are added every year.
The audit highlighted the failure of ITD's monitoring and review systems to
provide accurate and reliable data on outstanding demands, hampering the
effective implementation of recovery measures. Despite efforts towards
automation, granular data essential for targeted interventions remained
elusive.
Audit could not derive assurance on the existence and effective functioning of
any committee at any level to consider eligible cases for write-off. Thus, the
primary objective of protecting the interest of revenue and preventing further
accumulation of tax arrears remained unfulfilled to a large extent. The findings
underscore the urgent need to revisit and strengthen the existing recovery
procedures to ensure that the primary objective of protecting revenue
interests and curbing further accumulation of tax arrears is met.

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Summary of Recommendations
Audit recommends that:
• Categorisation of data is essential to identify high-risk vis-à-vis low-risk
cases. ITD may evolve a system / enable provision to extract data from
e-filing/ ITBA to identify and segregate high-risk assessees, enabling the
Assessing officers / TROs to put sustainable efforts into the collection
process.
(Para 4.2.7)
• The CBDT may ensure redressal of grievances within 30 days as per the
commitment made in its taxpayer's charter and, wherever necessary,
consider taking remedial action, including fixing responsibility for not
taking timely action.
(Para 5.3.1)
• The CBDT may ensure that details of the assessment set aside are
updated in the ITBA Recovery system module to reflect the current and
actual status of demand and avoid reflecting inflated, non-existent
demands.
(Para 5.3.2)
• The CBDT may
(i) ensure fixing realistic targets for cash collection and reduction in
arrear demand as fixing a uniform percentage of 40 per cent for
reduction in arrear demand as per the Central Action Plans does not
appear to be realistic or practical.
(ii) consider devising a fast-track process periodically to resolve and
settle the high outstanding demand cases under dispute pending in
the courts for years.
(Para 5.3.3)
• The CBDT may consider speeding up the recovery process where the
provisions of Section 281B of the Act were invoked, taking into account
the nature of the asset attached and the volume of outstanding
demand.
(Para 5.3.4)
• The CBDT may ensure preparation of the dossiers for all cases of
outstanding demands exceeding the specified threshold limit, and
monitor compliance of its instruction no. 10/2015 dated 16/09/2015.
(Para 6.2.1)
• The CBDT may ensure that the time limit prescribed under Section 153
of the Income Tax Act in giving effect to Appellate Orders is strictly

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adhered to and adherence thereto is monitored. The CBDT may

consider taking action in cases where inordinate delay(s) have been
noticed without any justification.
(Para 6.2.4)
• The CBDT’s instruction for collection of the minimum prescribed limit
for the disputed demand for granting a stay of demand may be
enforced for scaling down outstanding demand. The CBDT may
consider taking action for non-compliance without justification
(Para 6.2.5)
• The CBDT may issue suitable instructions and follow-up procedures to
ensure faster clearance of TRCs and strengthen the recovery process.
The CBDT may consider taking action in cases where inordinate
delay(s) have been noticed without justification.
(Para 6.3.1)
• Since the prescribed registers are critical for recovery and monitoring
outstanding demands, the CBDT may ensure that all the prescribed
registers are maintained and updated periodically by TROs and
consider taking action in non-compliant cases.
(Para 6.3.6)
• The CBDT's instructions on conducting internal audits of TROs need to
be reiterated, and action taken to ensure effective compliance with
them in a timely manner.
(Para 6.6)
• The CBDT may
(i) review and streamline the system process to maintain accurate,
granular data for the CAP-I statement at each Assessment unit
level to facilitate extraction of assesse-wise details from CAP-I
and CAP-II statements at all PCsIT, Pr.CCsIT level for better
coordination and monitoring of recovery of demands.
(ii) consider issuing/ reiterating instructions for preparing these
statements uniformly across all regions and data sources;
(iii) further, training may also be considered to avoid inconsistency in
preparation of MIS reports.
(Para 7.1)
• The CBDT may ensure effective reconciliation of arrear demand
reflected on the CPC-ITR portal with the CAP-I statement to enable
uniformity and correctness in reporting on priority to enable recovery of

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the correct outstanding demands and monitor reduction in the actual

arrear demand.
(Para 7.2.3)
• The CBDT may monitor and ensure that there are no duplicate entries
in the system and that the existing duplicate entries are eliminated in a
time-bound manner. Further, reasons for the originating of duplicate
demands may be identified, and rectification required is carried out at
a granular level, on priority.
(Para 7.2.4)
• The CBDT may ensure that:-
(i) Realistic targets for reducing outstanding demand may be fixed
considering risk factors like age, amount of demand, possession of
assets by assessee, status of pendency in appeals, assessee not
traceability, etc. Clearing arrear demand should be prioritised.
(ii) Risk-profiling techniques adopted by the CBDT to fix targets for
cash collections may also be used to fix targets for reducing arrear
demands with appropriate changes.
(iii) Targets for reduction in arrear demand are fixed after considering
various aspects on a Region-wise/jurisdiction-wise basis including
past performance, nature/ type of assesse, etc. Fixing uniform
targets without considering factors specific to the jurisdiction,
assessments, etc., is not logical.
(Para 7.3.1)
• The CBDT needs to develop a mechanism of mapping the PAN details
obtained from the various authorities in the AIS with the PAN details of
demands categorised under 'Assessees not traceable' to identify and
track the assessees, either at the time of assessment or after the
completion of the assessment.
(Para 7.3.4)
• The CBDT may review the classification of factors shown under the
category 'demand difficult to recover', so that only actual outstanding
demands are reflected in the CAP-I report. Capturing figures of
protective demand and cases of TDS mismatch under ‘demand difficult
to recover’ gives an incorrect picture of the status of outstanding
demand.
(Para 7.3.5 and 7.3.6)
• The CBDT may ensure that:-
(i) the format of the CAP-II statement with regard to write-off cases is
suitably modified to give adequate and correct information.

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(ii) the formation of various committees and their functioning

regarding the timely disposal of write-off cases are effectively
monitored.
(iii) a periodical review of the outstanding demand to identify
unrealisable demands is assessed and necessary action is taken in
a timely manner to get these demands written off. The write-off of
small money value cases should be taken up as a priority as it would
result in a significant reduction in terms of the number of cases, if
not in terms of money value.
(Para 7.3.8)
• The CBDT may

(i) prioritise recovery of outstanding demands under summary

assessments as those are not pending with any appellate
authorities, and are collectible.
(ii) issue periodical alerts to remind the assessees of their outstanding
demands and while issuing an intimation of the assessment order,
the pending demands for earlier years, if any, may also be
mentioned.
(iii) ensure monitoring of compliance by Jurisdictional AO, especially
when demands are raised summarily under section 143(1) of the
Act, should be effective, and such cases may be referred to TRO if
required after JAO has exhausted all the options available in the
provisions of the Income Tax Act.
(Para 7.5)

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Chapter 1 Introduction

1.1 Overview

Revenue receipts which play a significant role in the development of a nation

are of two types- Tax revenue and Non-tax revenue. Tax revenue is the primary
source of income for the Government. Taxes are levied to finance government
activities and form a part of the Receipt Budget, which in turn is part of the
Annual Financial Statement of the Union (Budget). Total tax revenue as a
percentage of GDP indicates the share of the country's output collected by the
Government through taxes. This is regarded as one measure of the degree to
which the Government controls the economic resources. The tax revenue
consists of both Direct1 and Indirect taxes2, but this Report deals with the
outstanding demand3 only in respect of Direct Taxes.

In the Indian economy, direct tax collection plays a substantial role in the
overall fiscal management of the Government and the nation’s development.
Direct taxes are collected through various modes such as Tax Deducted at
Source (TDS), Advance Tax, Self-Assessment Tax (SAT) and Regular Assessment
Tax for both Corporation Tax and Income Tax. The pre-assessment tax
collection is voluntary compliance by the entities/taxpayers through TDS,
Advance Tax and Self-Assessment Tax, whereas collection of tax through the
regular assessment stage occurs post-assessment. The Department of
Revenue is the central authority that exercises control in matters relating to
Direct Taxes through the Central Board of Direct Taxes (CBDT), hereinafter
referred to as the CBDT.

The entire object of tax administration is to secure revenue for the

Government and not charge the assessee more tax than is due and lawfully
payable. To curb black money, the Income Tax Act of 1961 has empowered the
Revenue Department with coercive and intrusive action to recover the tax
demand, including the power to arrest and detain an assessee in default.

The following Chart 1.1 shows the collection of Direct and Indirect Taxes as
components of total tax collection for year 2016-17 to 2022-23:

1 Income Tax, Capital Gains Tax, Corporation Tax, Wealth Tax, Securities Transaction Tax, etc.
2 Good and Services Tax (GST), Customs Duty, Value Added Tax (VAT), etc.
3 Word ‘Outstanding demands’ in this Report includes both arrear demand and current demand.

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Chart 1.1 Direct & Indirect Taxes Collection

(₹ in crore)

` 16,61,000
` 14,12,422

` 13,82,000
` 12,89,662
` 11,37,718

` 10,74,809
` 10,50,681
` 10,02,738

` 9,53,513

` 9,47,176
` 9,37,322
` 9,15,256
` 8,61,515
` 8,49,713

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23*

Direct Taxes Indirect Taxes

Source: Income Tax Department Time Series Data for financial year 2016-17 to 2021-22 and Press Information
Bureau, GOI for * Provisional figures of the year 2022-23. The amounts are taken after adjustment of refunds.

The above Chart shows that Direct Tax collections have always been higher
than Indirect Taxes, except in the years 2016-17 and 2020-21, when Indirect
Taxes exceeded Direct Tax collections.
More than ninety per cent of the tax collection is through voluntary compliance
by taxpayers. TDS and Advance Tax are significant contributors to the
pre-assessment tax collections. The direct tax collection through TDS, Advance
Tax and Self-Assessment Tax has consistently increased over the years (except
in year 2019-20). While a significant part of the Direct Tax collections accrue
from voluntary compliance, less than 10 per cent of the tax collections are
made through post-assessment procedures, as depicted in Table 1.1 below.
Table 1.1: Pre-assessment and Regular assessment collections of Direct Taxes
` in crore)
(`
Financial TDS Advance Self- Pre-Assessment Regular Total Percentage of
Year Tax Assess- Collection Assess- Receipts Pre-assessment
ment ment collection to
Tax Tax Total Receipts
(1) (2) (3) (4) (5) = (2)+(3)+(4) (6) (7)=(5)+(6) (8)
2015-16 2,87,412 3,52,899 54,860 6,95,171 63,814 7,58,985 91.59
2016-17 3,43,144 4,06,769 68,160 8,18,073 74,138 8,92,211 91.69
2017-18 3,80,641 4,70,242 83,219 9,34,102 92,044 10,26,146 91.03
2018-19 4,50,769 5,27,529 84,174 10,62,472 99,032 11,61,504 91.47
2019-20 4,80,383 4,67,315 85,099 10,32,797 67,620 11,00,417 93.86
2020-21 4,70,275 5,17,769 84,734 10,72,778 42,296 11,15,074 96.21
Source: Pr. Chief Controller of Accounts, CBDT

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1.2 Assessment and Tax Recovery Mechanism

An efficient tax administration focuses not only on voluntary compliance,
quality of assessment, etc. but also on a robust and systematic collection
mechanism that aids in reducing outstanding demand.
As per the existing system in ITD, after filing the Income Tax Return in the
e-filing portal by a taxpayer, the return is summarily processed4 by CPC-ITR,
Bengaluru, under Section 143(1), and the tax demand, if any, is raised through
an intimation issued to the taxpayer. In the case of regular assessments5 under
Section 143(3), the tax demand is raised upon completion of assessment by
the Assessing Officer (AO) when it is found that any tax, interest, penalty, fine
or any other sum, as applicable, is payable by the assessee. Accordingly, the
AO serves upon the assessee a notice of demand6 under Section 156, in the
prescribed form, specifying the demand so payable.
After the introduction of faceless assessments in October 2019, the
assessment proceedings are conducted electronically in "e-proceeding" mode
through the assessee's registered account. The assessments under Sections
143(3), 144, re-assessment or re-computation under Section 147 are made in
a faceless manner in respect of specified territorial areas7, persons, income or
class of cases. After the designated Faceless Assessment Units make an
assessment, demand notices are issued by the National Faceless Assessment
Centre (NaFAC). Thereafter, all the electronic records of the case are
transferred to the Assessing Officer having jurisdiction over the said case for
such action as may be required under the Act. However, there has been no
change in the processing of returns under Section 143(1) by CPC, Bengaluru,
after introducing the Faceless Assessment Scheme. Further, the intimation of
any sum determined to be payable by the assessee under Section 143(1) is also
deemed to be a notice of demand under Section 156. Whether a case has been
processed in summary or assessed in regular assessment, if the assessee fails
to pay the tax demand within the time limit specified in the notice, it becomes
an outstanding demand. Consequently, the jurisdictional AOs and
jurisdictional TROs are responsible for collecting outstanding demand.
Jurisdictional Pr.CsIT, Pr.CCsIT and other designated authorities monitor its
ultimate reduction or collection.

4 A preliminary assessment, referred to as a Summary Assessment, is done under Section 143(1) of the
Act.
5 A detailed assessment as per the provisions of section 143(3) of the Act, referred to as Scrutiny
Assessment/regular assessment, through which detailed scrutiny of the return of income will be
carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by
the taxpayer in the return of income.
6 A notice of demand, in the prescribed form, served by the AO upon the assessee specifies the sum so
payable towards any tax, interest, penalty, fine, or other sum in consequence of any order passed.
7 Except for Investigation and International Taxation circles

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The data on outstanding demand is one of the key inputs for policy formulation
of the ITD and for the Government in annual budget preparation. The Receipt
Budget of the Government of India also exhibits the tax revenue raised but not
realised, i.e., outstanding demand as on 31 March 2021, as detailed in Table 1.2
below:
Table 1.2: Outstanding Demand of Direct Tax
` in crore)
(`
Category Outstanding Outstanding Total
demand under demand Not outstanding
dispute under dispute tax demand
Over 1 year Less than 2 Years 6,58,110 2,35,632 8,93,742
Over 2 years less than 5 years 3,40,349 1,31,051 4,71,400
Over 5 years less than 10 years 32,765 9,659 42,424
Over 10 years 26,415 7,274 33,689
Total 10,57,639 3,83,616 14,41,255
Source: Annexure 5 of Receipts Budget Year 2022-23

The above table shows that for the year ending 31 March 2021, the
accumulated demand raised but not realised, i.e., outstanding tax demand
stood at ` 14,41,255 crore, of which ` 10,57,639 crore was shown as 'under
dispute', representing 73.38 per cent.

1.3 Role of Jurisdictional AO and TROs

The Jurisdictional Assessing Officers (JAOs) and Tax Recovery Officers (TROs)
play a vital role in collection of demands. The main functions of an Assessing
Officer (AO) include assessment of income, issue of demand notices, collection
of demand, etc. According to the ITD, all arrears and current demands are
available on the erstwhile Assessment Information System (AST)8 / Income Tax
Business Application (ITBA)9 / manual uploads are consolidated in the
Centralised Processing Centre-Financial Accounting System (CPC-FAS)10 at the
CPC-ITR, Bengaluru11 and integrated with ITBA and is accessible to AO in the

8 The AST module was the core process of ITD applications, conceptualized as online, menu-driven
software capable of carrying out all assessments and related functions.
9 The portal aimed to create a paperless electronic process by strengthening the ITD application and
providing a single-user interface to access various functionalities in the ITD.
10 It works as the back-end system and interacts with all the front-end systems, i.e., the CPC-ITR Portal,
the ITBA Portal, the OLTAS portal, AST portal legacy, for data processing of data, calculation of
demand refund and sends the data required to the front-end system.
11 The Central Processing Centre set up by the ITD at Bengaluru for processing of all e-filed returns in
the country and paper returns (filed in Karnataka and Goa), rectifying the mistakes which are
apparent from processing of returns under section 154, to call for information under section 133, to
declare return of income filed by the assessee as invalid return for non-compliance of procedure or
otherwise, to declare return of income filed by the assessees as defective return under sub-Section
(9) of Section 139, processing of Summary Assessments under section 143(1), to set-off or adjustment
of refunds against outstanding tax liability of the assessee under section 245 and to issue notice of
demand under section 156 of the Act.

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Recovery Module of ITBA. The AOs access the details of the assessees'
outstanding demand through two portals, viz. ITBA and e-filing12 Portal.
In collecting outstanding demand, the AOs are empowered to take coercive
action by way of attachment of bank account, rent due to the assessee, etc.
The role of the Tax Recovery Officer (TRO) commences after the AO has
exhausted all possible methods as specified in the Act to recover the
outstanding demand. The TROs have exclusive power to attach properties,
arrest and detain assessees in prison, and appoint a receiver to manage
properties. The powers and functions of AOs and TROs are detailed in Chapter
6 and Appendix 1 of this Report. The process that involves raising the demand
for tax collection at the level of AOs and TROs is given in the following charts:
1.2 (A) & (B):
Chart 1.2 (A) : Process Flow chart of Assessment and Collection of Tax

Filing of return

Processing under Section

143(1)
Issue of intimation for unpaid
tax, if any

Selection of cases for

scrutiny

During the pendency of Assessment:

-Idenfication of assets for provisional
attachment under Section 281B, if required

Assessment under Section

143(3), 144,
147 etc. by AO

Issue of Demand Notice

under Section 156

Payment of tax Payment of tax Tax not paid

within 30 days in installments within 30 days

In addtion to tax:
1) Levy of interest u/s 220(2)
2) Levy of penalty u/s 221(1)

Source: On the basis of provisions of Income Tax Act 1961

12 An official portal of ITD, Ministry of Finance, Government of India, was developed as a

Mission-Mode Project under the National E-Governance Plan to provide taxpayers and other
stakeholders with single-window access to income tax-related services maintained by the
Central Processing Centre - ITR, Bengaluru.

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Chart 1.2 (B) : Collection of Demand through Tax Recovery Officers (TROs)

After receiving intimation from AO a Tax

Recovery Certifcate is drawn by TRO

Notice of Demand issued in Form ITCP-1

Tax Demand Paid Tax Demand Not Paid

Attachment of Attachment of
Apply to court if Arrest of the
Salary or money Bank Accounts, Attachment or
there is money Assessee and Appointment of
due from other Post Office Sale of
belonging to detention in Receiver
persons to Savings, Properties
Assessee prison
Assessee Insurance etc

Source: Tax Recovery Officer’s Manual

1.4 Monitoring of outstanding demand by the Income Tax Department

The CBDT collates and compiles some MIS reports as part of the internal
reporting system, such as CAP-I13, CAP-II14, Dossier etc. for monitoring the
outstanding demand and fixing of annual targets for reduction in arrears of tax
demand, cash collection, reduction in appeal cases at CIT (A) level etc.
Information gathered from these reports is also instrumental in guiding the
policy making. CAPI and CAP-II reports are prepared at AO level on monthly
basis by the Assessing Officers and are consolidated at PCIT / Pr. CCIT level and
finally by the CBDT.
Dossiers are quarterly reports prepared in respect of an assessee with an
arrear demand. All these reports show the gross demand, demand difficult to
recover, demand not collectible, net-collectible demand, appeal status etc.

13 CAP-I statement depicts the opening balance of outstanding demand for the month, demands
generated during the month, demand collected, other statistical details related to ‘demand difficult
to recover’ and its categorization under various heads like ‘Assessee not traceable’, ‘no assets for
recovery’, etc.
14 CAP-II statement provides details of the number of returns processed, number of scrutiny
assessments completed, appeal effects, penalty proceedings, refunds, write-off of arrear demand,
etc.

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Preparation and maintenance of dossiers by AOs and reporting thereon in

respect of outstanding demands of high value cases is an important function
which supplement the collection process. In order to give greater thrust on the
critical area in recovery of outstanding demand, the CBDT notified
(September 2015) the revised monetary limits for its authorities to monitor the
outstanding demands. These monetary limits have been revised again by an
order issued in November 2022 as shown in the Table 1.3 below:
Table 1.3: Process of Monitoring of outstanding demand by ITD through Dossiers
Monitoring As per CBDT order dated 16th As per CBDT order dated 3rd
Authority September 2015 November 2022
Range Head Up to ` 30 lakh ` 10 lakh to ` 1 crore
Pr. CIT Above ` 30 lakh to ` 3 crore Above ` 1 crore to ` 25 crore
CCIT Above ` 3 crore to ` 15 crore (i) For Delhi and Mumbai region:
Above ` 25 crore to ` 250 crore
(ii) For other regions: Above
` 25 crore to ` 100 crore
Pr. CCIT Above ` 15 crore to 25 crore (i) For Delhi and Mumbai region:
Above ` 250 crore to ` 500 crore
(ii) For other regions: Above
` 100 crore to ` 500 crore
Pr. DGIT (Admin) All dossiers above ` 25 crore All dossiers above ` 500 crore by
by Pr. DGIT (Admin) with Pr. DGIT (Admin & TPS) with
assistance of ADG (Recovery) assistance of ADG (Recovery)
Pr. DGIT (Admin) to monitor Pr. DGIT (Admin & TPS) would
specific very high demand submit proposals for monitoring
cases on the directions of very high demand cases for approval
Member (Revenue) with of Members (TPS)
Member assistance of ADG (recovery) ---
(Revenue), CBDT

1.5 Raising tax in Faceless Assessment

As per the information gathered by Audit on present system of raising tax in
ITD, once the Income tax return is filed by an assessee through the e-filing
portal, the same is verified and processed by the CPC-ITR, Bengaluru through
the CPC-ITR portal and Demand notice/refund order is issued. The demand
outstanding, if any, is exhibited in the ITBA portal ‘360 degree Demand
recoverability status’ under the Jurisdictional Assessing Officer’s control.
In respect of scrutiny assessment cases, after assessment is completed by
AO/Faceless assessment unit, along with the interaction with CPC-FAS for
calculation purpose, demand is issued to assessee through the ITBA and the
demand is shown as pending in the ‘ITBA recovery module’. All the possible
subsequent actions like appeal, rectification, giving effect order, penalty,
recovery of demand, etc., are taken similarly through the Income Tax Business
Application (ITBA). Specific modules like 'Assessment', 'Rectification',

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Report No. 14 of 2024 (Direct Taxes)

'Recovery', etc., are available in ITBA for each of the functions of the Assessing
Officer. Through 'Recovery' Module, a dossier report is prepared and demand
analysis and demand recovery details with respect to the assessee are entered
in the system. The legacy AST application is still being used by AOs for
revision/rectification of assessments relating to ITRs of earlier years. After
completion of revision /rectification etc., the demands are uploaded in ITBA.
This information is transmitted to the CPC-ITR also for updating the same in
the e-filing portal and for communication to the assessee. This process has
been explained in Appendix 2.
For generating various reports for monitoring and MIS purposes, CBDT uses
various functionalities in the IT systems of Income Tax Department, as
discussed below:
i. CPC-ITR Portal – It is involved in processing of returns under Section
143(1), making rectifications under Section 154, issue of demand
notice/refund order. It interacts with the back end CPC-FAS system for
calculations and other process and also interacts with the e-filing
portal.
ii. ITBA – It is the front end system used by the Assessing officers for
assessments, is used to prepare demand calculations arising out of
assessment orders, rectifications, reassessment orders, appeal
revisions by the Assessing officers and interacts with CPC-FAS.
iii. CPC-FAS – It works as the back end system and interacts with all the
front end systems i.e. CPC-ITR Portal, ITBA Portal, OLTAS portal, AST
portal legacy for processing of data, calculation of demand, refund and
sends the data required to the front end system15.
iv. AST- ‘Assessment Information System’ is the legacy system prior to
ITBA. Revision/ rectification of assessments completed in the
erstwhile AST are at present manually uploaded by the Assessing
officers in the ITBA.
v. OLTAS- Online Tax Accounting System is the system application
through which the challan details for payment of tax, penalty, interest,
refunds etc. are dealt with.
vi. I-taxnet- is the reporting system through which the CAP-I, CAP-II and
Dossiers reports are internally generated and submitted to the
appropriate authorities.

15 It enables users to access and request the features and services of the underlying information
system.

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 Report No. 14 of 2024 (Direct Taxes)

Chapter 2 Vision, Action Plan and Legal Provisions

The "Vision 2020" document of the ITD spelled out the Vision, Mission and
Values. It analyzed the major challenges confronting the ITD and various
opportunities likely to be thrown up by these challenges during the strategic
plan period 2011-15. As part of the ‘Vision 2020”-Strategic Plan 2011-15, the
ITD intended to put in place a detailed collection plan16 for developing a tax
collection strategy for arrear demands and improving efficiency and
productivity in collections.
The actions to be taken, as per the detailed plan, were stated in the Vision
document as action points, viz. Developing an annual collection plan that
would set targets and time standards for both current and arrear demand to
be collected based on (a) Analysis of the nature of current and arrears demand
to identify collection pattern; (b) Analysis of the tax records of taxpayers; and
(c) Use of risk scoring techniques to create risk profiles of debtors. Other action
points included improving communication to make taxpayers understand their
obligations, developing effective procedures for writing off uncollectible tax
arrears, including both pre-assessment and post-assessment taxes in the
demand analysis and considering separation of assessment and collection
function.
The CBDT laid emphasis on attaining the objectives of the “Vision 2020”
document while preparing the Annual Central Action Plans.17. Through its
Central Action Plan, the CBDT fixes region-wise targets for reduction in arrear
demand, including cash collection, reduction in appeal cases, etc. The regional
Pr.CCITs are entrusted with the responsibility of achievement of the target set
out in its Central Action Plan. It specialises on several critical areas, such as
litigation management of cases locked up in appeals, improving quality in
diverse areas of work and strengthening compliance and enforcement
functions.

2.1 Statutory Provisions

The statutory provisions relating to the recovery of arrears of tax due from the
assessees are contained in Sections 220 to 232 under Chapter XVII of the
Income Tax Act, 1961. The Second Schedule of the Act deals extensively with
the procedure for the recovery of Tax. Details of sections related to levy and
collection of tax have been explained in brief in Table 2.1 below:

16 Chapter 4 Strategic Plan - Para 4.2.6 Developing a tax collection strategy

17 The Central Action Plan is a comprehensive plan that seeks to address all the current priorities of the
ITD in a holistic manner.

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Report No. 14 of 2024 (Direct Taxes)

Table 2.1: Salient provisions relating to recovery of tax/ outstanding demand

Sections of Issues concerned/covered
the Income
Tax Act 1961
140A(3) This section provides that where any tax is payable on the basis of the
return furnished, and the assessee fails to pay the whole or any part of such
tax, he shall be deemed to be an assessee in default, in respect of the tax
remaining unpaid.
156 It deals with the issue of a notice of demand in a prescribed form with
respect to any tax, interest, penalty, fine, or any other sum payable by the
assessee within a specified time limit.
220(2) When the amount specified in notice of demand is not paid within the time
limit, interest at the rate of one per cent for every month of delay is
required to be levied.
221(1) When an assessee is in default in making payment of tax, he is liable to pay
a sum (as AO directs) as a penalty in addition to arrears of demand and
interest.
222 This section deals with the Tax recovery certificate drawn by the TRO in
respect of an assessee who is in default in making tax payments and ways
to recover the specified amount of tax.
223 In this section, jurisdiction of TROs has been defined. The jurisdiction of TRO
is decided on the basis of place of business or place of residence of the
assessee.
224 This section deals with the validity of certificates and the TROs' power to
correct or cancel them.
225 This section is related to stay proceedings in pursuance of the certificate
and amendment or cancellation thereof.
232 This section provides that the modes of recovery specified in Chapter XVII
shall not affect any law relating to the recovery of debts due to the
Government or the right of the Government to institute a suit for recovery
of tax arrears.
245 This section deals with the power of ITD to set off a refund due to an
assessee against any sum that has remained payable by him under the Act
after giving an intimation.
265 Tax shall be payable even if a reference has been made to the High Court
or the Supreme Court or an appeal has been preferred to the Supreme
Court.
281B(1) This section deals with the Provisional Attachment of property by the AO
during the pendency of any proceeding for assessment of income that has
escaped assessment.

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2.2 Circulars and Instructions of the CBDT

The IT Act also empowers18 the CBDT is to issue instructions and directions to
the field formations in the administration of the provisions of the Act.
Accordingly, the CBDT issued various circulars/instructions/general orders to
its field formations on matters relating to demand, collection and recovery of
tax. The relevant circulars/instructions are briefly described in the following
paragraphs:

2.2.1 Action plan to reduce the arrears of tax demands

The CBDT had identified19 (June 1992) 'Reduction of Outstanding Demand of

Income Tax as one of the Key Result Areas (KRA)' and laid down targets for the
amount of income tax demand to be carried forward to the following year,
reduction of arrear demand brought forward and reduction of current demand.

2.2.2 Guidelines for staying and recovery of outstanding demands

The CBDT had reiterated.20 (December 1993) that every demand should be
recovered as soon as it becomes due and that demand may be kept in abeyance
for valid reasons only. It also specified detailed guidelines on (i) Responsibility,
(ii) Stay Petitions, (iii) Staying Demands, etc., duly stating that the Assessing
Officers (AO) and Tax Recovery Officers (TRO) concerned, as the case may be,
and the immediate superior officer shall be held responsible for ensuring
compliance with these instructions.

2.2.3 Revised annual norm for disposal of recovery certificate by TRO

While drawing the Action Plan for the TROs, the CBDT had fixed target21 for
disposal of 20 per cent of brought forward Tax Recovery Certificates (TRCs) or
150 TRCs by each TRO, to be achieved by the end of the respective financial
year.

18 Sub-section 2 of Section 119, provides that the CBDT may, if it considers it necessary or expedient to
do, for the purpose of proper and efficient management of the work of assessment and collection of
revenue, issue, from time to time, general or special orders in respect of any class of incomes or
fringe benefits or class of cases, setting forth directions or instructions (not being prejudicial to
assessees) as to the guidelines, principles or procedures to be followed by other Income-tax
authorities in the work relating to assessment or collection of revenue or the initiation of proceedings
for the imposition of penalties and any such order may, if the CBDT is of opinion that it is necessary
in the public interest so to do, be published and circulated in the prescribed manner for general
information.
19 Chairman CBDT D.O. F. No. 17/1/92-OD/DOMS dated 03 June 1992
20 CBDT Instruction No. 1914 dated 02 December 1993
21 CBDT Central Action Plans for the years 2017-18 / 2018-19 and 2019-20

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Report No. 14 of 2024 (Direct Taxes)

2.2.4 Monitoring the performance of TROs

The CBDT fixes targets for the clearance of TRCs and conducting surveys by
TROs in its Annual Central Action Plan. While emphasizing that the TROs must
be effectively used for tax recovery work in a big way, the CBDT22 (September
1999) stated that TROs’ performance would be judged solely by the cash
collection they achieved and that it was imperative to give proper emphasis to
the recovery work by deploying adequate manpower and proper infrastructure
to effect recovery of taxes in a meaningful way.

2.2.5 Raising of Monetary Ceilings for Write-off and Reconstitution of

Committees

The CBDT reviewed and modified23 (November 2003) the existing structure of
the committees to constitute a three-tier structure for the write-off of
irrecoverable dues under the Regular Procedure as (i) Zonal Committee, (ii)
Regional Committee and (iii) Local Committee, and also redefined the
monetary ceilings for each level (as shown in Appendix 3 B). The CBDT also
fixed (November 2003) the monetary ceiling for ad-hoc procedures at ` 10,000
and the Summary procedure at ` 1,000 to write off arrear demands.
The CBDT further reviewed24 (November 2003) its instructions, adding that the
Zonal Committees are required to meet at least once a month and that the
senior-most CCIT among the permanent members of the Zonal Committee was
required to send a brief report of the Zonal Committee meetings every month
to the Directorate of Recovery and TDS and endorse a copy thereof to the
CBDT.

2.2.6 Steps to secure recovery of demand in High-demand Cases

In view of the ITD was burdened with the responsibility of recovering the huge
arrears with very little possibility of actual recovery in many cases, the CBDT
directed25 (September 2004) that in cases of demand of over ` 5.00 lakh and
above, in big cities like Delhi, Mumbai, Chennai, Kolkata, etc., and over
` 1.00 lakh in other places, it shall be the responsibility of the Assessing Officer
to enquire into all the assets of the assessee and place them under provisional
attachment26 Under Section 281B, during the course of the assessment
proceedings.

22 CBDT Letter F.No.399/1/99-IT(B) dated 28 September 1999

23 CBDT Instruction No. 14 dated 06 November 2003
24 CBDT Instructions dated 18 November 2003
25 CBDT Instruction No. 8 dated 02 September 2004
26 Provisional attachment of property of the assessee by AO to protect the revenue. A provisional
attachment ceases to have effect after the expiry of six months. However, it can be extended further
by recording reasons in writing by PCCIT/CCIT/PCIT. The total period of extension shall not exceed, in
any case, two years or sixty days after the date of the order of assessment, whichever is later.

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2.2.7 Monetary limits for monitoring of dossier cases by Income Tax

authorities

Taking note of the very large number of dossier cases requiring periodical
reporting and review by the various income tax authorities and also
considering that the monetary threshold for dossier cases has not been
reviewed for the past 30 years, the CBDT raised27 (September 2015) and
revised in November 2022, the primary threshold for dossier cases and
readjusted the immediate thresholds for focussed monitoring and
rationalization of workload for all the IT authorities up to the Member
(Revenue), CBDT, as discussed in Para 1.4 and shown in Table 1.3 of Chapter 1
of this Report.

2.2.8 Dossier maintenance

Taking note of the substantial difference in the demands mentioned in the

Dossier report and as available in the CPC-AO demand portal maintained by
CPC-ITR as per its Financial Accounting System (FAS), and considering the
requirement that demand as per the CPC-FAS should be reported in Dossier
reports, the CBDT made a new functionality of generating dossier reports
available in ITBA28. The dossier reports functionality in i-taxnet29 was replaced,
and all dossier reports for the quarter ending 30 June 2018 were proposed to
be submitted through ITBA. Accordingly, now, all arrears and current demand
that was available on AST and the CPC-FAS system have been consolidated in
CPC and made available to the AO in ITBA through the demand analysis screen.

2.2.9 Stay of demand in the first appeal stage

The CBDT's instructions dated 21 March 1996 prescribed that a demand would
be stayed only if there were valid reasons for doing so and that merely filing
an appeal against the assessment order would not be a sufficient reason to
stay the recovery of demand. It further prescribed that while granting the stay,
the field officers may require the assessee to offer a suitable security (bank
guarantee, etc.) and/or require the assessee to pay a reasonable amount in
lump sum or in instalments. Partially modifying its earlier instructions, the
CBDT issued30 fresh instructions (February 2016) for payment of 15 per cent of
the disputed amount in certain cases. The CBDT further revised31 the standard

27 CBDT Instructions no. F. No. 404/02/2015-ITCC dated 16 September 2015 and Instructions no. F. No.
404/1/2022-ITCC date 3 November 2022
28 ITBA- Recovery-Demand Reconciliation and Dossier Instruction No. – 4 dated 31 July 2018
29 The module was mainly utilized for CAP-I & II Reports as part of former ITD/Business Continuity
Procedure (BCP) applications.
30 Office Memorandum dated 29 February 2016
31 Office Memorandum dated 31 July 2017

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Report No. 14 of 2024 (Direct Taxes)

rate at 20 per cent (July 2017) of the disputed amount to be paid by the
assessee where the demand is contested before the CIT (A).

2.2.10 Internal audit of TRO units

In light of the issues raised on internal control in the CAG’s Compliance Audit
Report No. 3 of 2016, the CBDT reviewed32 (July 2017) all its extant instructions
on Internal Audit of the ITD, inter alia directing the Pr. CCsIT to put in place a
system of audit of one TRO by another TRO and that the audit objections raised
shall be followed up by the CIT (Audit) as it was done in case of other
objections.

2.2.11 Levy of interest under Sec. 220(2)

Taking note of CAG’s comments in its Report for the year ended 31 March 1988
(Report No.06 of 1989), the CBDT, after consultation with the Ministry of Law,
issued33 (June 1991) instructions that the AOs should calculate the interest
payable under section 220(2) at the end of each financial year, and further
added that Deputy Commissioners or Commissioners shall carry out half-yearly
review of the work of the AOs and TROs for the periods ending 30 September
and 31 March in the months of November and May, respectively and send a
report thereon to the Chief Commissioners or Commissioners, as the case may
be by 15 December and 15 June, respectively.

32 CBDT Instructions dated 21 July 2017

33 CBDT Instructions No. 1883 dated 07 June 1991

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 Report No. 14 of 2024 (Direct Taxes)

Chapter 3 Audit Approach

3.1 Why we chose the topic

The grounds for selecting this topic for subject-specific compliance audit were:
An analysis of ‘total outstanding demand’ and demand classified by the ITD as
‘difficult to recover’ vis-à-vis the ‘total direct tax collection’ for the financial
years 2016-17, 2017-18, 2018-19 and 2019-20 showed that total outstanding
demand had exceeded direct tax collections consistently. The demand
classified by the ITD as 'difficult to recover' was more than 97 per cent of the
total outstanding demand in all these years, which was a matter of concern, as
shown in Table 3.1 below.
Table 3.1: Details of Arrear Demand vis-a-vis Direct Tax Collection
` in crore)
(`
Financial Total Arrears of Arrears Total Demand Percentage
Year Direct Tax earlier of outstanding classified of Demand
collections year’s current demand by ITD as difficult to
demand year’s difficult to recover to
demand recover Total
Demand
1 2 3 4 5 6 7
2016-17 8,49,713 7,33,229 3,11,459 10,44,688 10,29,725 98.57
2017-18 10,02,738 7,36,975 3,77,207 11,14,182 10,94,023 98.19
2018-19 11,37,718 9,46,190 2,87,888 12,34,078 12,19,485 98.82
2019-20 10,50,681 11,25,314 4,93,640 16,18,954 15,80,220 97.61
2020-21 9,47,176 14,63,126 31,166 14,94,292 14,68,013 98.24
2021-22 14,12,422 14,16,809 5,18,629 19,35,438 18,84,120 97.35
Source: Income Tax Department Time Series Data for Col. 2 and Directorate of Income Tax (Organisation &
Management Services), Demand & Collection report (CAP-1)] for Col. 3, 4, 5, 6 & 7

In the CAG’s Performance Audit Report No. 23 of 2011 also, it was reported
that out of ` 1,96,092.07 crore of arrear demand reported by DIT(Recovery),
an amount of ` 1,65,337.42 crore (84.3 per cent) was categorized as
unrealizable.
1. Towards accomplishing its vision of achieving effective tax administration
with a progressive tax policy and improved tax compliance, the CBDT
prepares, each year, a Central Action Plan fixing targets for its field
formations for reduction in the arrear demand. The annual target for
reduction in arrear demand, including the target for cash collection, was
introduced by the CBDT in 2017-18. Until 2016-17, the CBDT fixed targets
for 'Cash collection' only. The year-wise targets for reduction in arrear
demand for the financial years 2017-18 to 2019-20 and 2022-23 are listed
in Table 3.2 below:

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Report No. 14 of 2024 (Direct Taxes)

Table 3.2: Details of Annual Targets Fixed

` in crore)
(`
Year Total demand as per Target for a reduction Target Percentage
Central Action plan in arrear demand
2017-18 10,52,085 4,20,834 40%
2018-19 11,22,750 4,49,100 40%
2019-20 12,77,644 5,11,058 40%
2020-21 -- -- --
2021-22 -- -- --
2022-23 19,35,377 7,74,152 40%
Source: CBDT’s Central Action Plan for the years 2017-18 to 2022-23
Note: There was no specific target for the years 2020-21 and 2021-22 with respect to the reduction of
outstanding demand.

2. In the Performance Audit on ‘Recovery of Arrears of Tax Demand’ (CAG’s

Audit Report No. 23 of 2011), some deficiencies were pointed out in the
demand recovery system, and recommendations were made to mitigate
the huge pendency of the outstanding demand. This audit was taken up
to review the existing demand recovery system in order to evaluate the
reasons for the huge accumulation of outstanding demand and to verify
whether ITD has taken adequate and effective measures to liquidate the
outstanding demand.
3.2 Audit Objectives
The objectives of conducting the SSCA are to ascertain:
1. Whether the targets fixed in the Central Action Plan and the
achievements thereto are adequate and in line with the ITD’s
“Vision 2020” document34?
2. Whether arrear demand has been properly drawn up and reported to
the stakeholders and to ascertain reasons for huge amounts of
outstanding demand and to analyse the reasons for the year-on-year
increase in its quantum?
3. Whether the ITD has taken all possible action as provided in the Act,
Rules and the CBDT’s instructions for expeditious recovery of arrears of
tax demand?
4. Whether an adequate Internal Control Mechanism exists to watch and
pursue the recovery of dues after the demand is raised?

34 Vision 2020 document spells out the Vision, Mission and Values of ITD. It analyses the major
challenges confronting the ITD and various opportunities likely to be thrown up by these challenges
during the strategic plan period 2011-15.

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3.3 Scope and Methodology of Audit

The SSCA intended to cover:
(i) the outstanding demand as of 31 March 2020 that is pending recovery
up to the date of commencement of audit, i.e. November 2020 [level
2(i) of the audit sample as discussed in the following para 3.4].
(ii) the cases against which the arrear demand has been closed or
cancelled since 01 April 2020 due to collection or subsequent orders
[level 2(ii) of the audit sample].
(iii) assessees with high value of outstanding demand in each region
covering the period up to 31 March 2021.
3.4 Audit Sample
The audit commenced in November 2020 and covered 279 assessment units
and 74 TRO units across India. Subsequently, a supplementary Audit covering
160 high-value pan-India assessees was also carried out until January 2023.
For the selection of sample cases35, Audit had sought details from CBDT of
pan-India assessees from whom demands were pending as on 31 March 2020,
irrespective of the date of raising the demand. However, the CBDT did not
provide the requisite data despite repeated requests. Data is still awaited from
the CBDT (March 2024). Without these details, Audit could not select the cases
centrally after risk analysis and had to profile the cases, modifying its approach,
and adopting a two-tier sampling technique.
First at Level 1, the selection of assessment units and corresponding TROs36
Second, at Level 2, a selection of cases within the selected units was made. At
Level 1, the assessment units were selected using the data on unit-wise
outstanding demand available with Audit as on 22 September 2017. At Level
2, individual cases within the selected assessment units and TROs were
selected. At the commencement of Audit (from November 2020), some of the
outstanding demands as of 31 March 2020 were closed due to collection or
reduction in demand because of revision or rectification orders issued by the
ITD during the intervening period. The assessment units and TROs were
selected separately in each State/region based on the aggregate demand
outstanding. Individual assessees within the units were selected based on the
case-wise outstanding amount. The selection of cases where the outstanding
demand was pending as of the date of the audit was considered Level 2(i), and
the selection of cases closed was considered Level 2(ii).

35 Cases include outstanding demands at different stages with respect to processing under Section
143(1), assessments, rectification, revision, other orders etc.
36 TROs posted under the same PCIT as assessment units selected by Audit.

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Audit criteria for selection of units and cases is given in Appendix 4. The details
of region-wise Assessment units and TRO units selected at Level-1, are
indicated in Appendix 5.
The Assessing officers of the selected units were requested (November 2020)
to furnish the assessee-wise data of outstanding demand as on
31st March 2020. Two of the AOs37 of the selected assessment units stated that
ITBA is highly dynamic and the demand details are updated, as and when there
are changes with respect to additions / reductions / collections and that it does
not support retrieving demand status or data on a date that has passed (a
particular date of past). Hence, the AOs were able to generate a list of only
live/active cases on the day of the extraction of data. It was also stated that
the complete list of closed or cancelled/settled cases was also not available for
generation from the portals: ITBA or e-filing or CPC-AO portal.
Since the information called for (assessee-wise data of outstanding demand as
on 31st March 2020) was not available in the ITBA or e-filing or CPC-AO portals,
Audit extracted the cases of demands pending as on 31 March 2020
aggregating to 21,58,443 cases in 279 sampled assessment units from the list
of cases with outstanding demand, as available in the e-filing portal and
provided by the AOs (November/December 2020). From the e-filing portal
data, Individual records were called for from the Assessing officers and TROs,
and were subjected to audit check.
The total outstanding demand pan-India as on 31 March 2020 was
` 16,18,954 crore38. For this SSCA, Audit selected 279 assessment units39 and
74 TRO units (Appendix 5). The total number of cases under these selected
units was 21,58,443 in respect of 12,73,180 assessees with an aggregate
outstanding demand of ` 8,49,931 crore40, which represents 52.50 per cent of
the total outstanding demand at an All India Level.
A total of 18,870 cases were requisitioned for Audit check from 17 regions of
ITD (records were not requisitioned from Nagpur and Pune regions). The total
10,896 cases produced for audit check include 1,279 cases (filtered five to
fifteen assessees from each region, whose aggregate outstanding demands
were the highest in the respective region) of 160 high value (in terms of
pending outstanding demand) assessees. The aggregate outstanding demand
of 10,896 cases was ` 5,92,371 crore. Region-wise and amount-wise
high-value cases of outstanding demands are detailed in Table 3.3 below:

37 DCIT, Corporate Circle 3(1), Chennai and ACIT, Corporate Circle 1(1), Kochi.
38 Source: DIT (O&M) Services
39 Out of 279 selected units, records were not requisitioned from nine units in the Tamil Nadu region.
40 Data from the e-filing portal in respect of 279 sampled units contained 21,58,443 cases with an
outstanding demand of ` 8,49,931 crore. After the removal of duplicate entries, 20,85,715 cases
with OSD of ` 8,26,157 crore remained

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Table 3.3: Top 160 Assessees Region-wise and Amount-wise

` in crore)
(`
Sl. PCCIT Less than ` 100 ` 100 to 1000 Above ` 1000 to Above ` 10,000 Above ` 1 Lakh Total
No. /Regions Crore Crore 10,000 Crore to 1 Lakh crore Crore
No. of Outstan- No. of Outstan- No. of Outstan- No. of Outstan- No. of Outstan- No. of Outstan-
Asse- ding Asse- ding Asse- ding Asse- ding Asse- ding Asse- ding
ssees Demand ssees Demand ssees Demand ssees Demand ssees Demand ssees Demand
1 Mumbai - - - - 12 27,153 2 1,11,751 1 1,37,563 15 2,76,467
2 Delhi - - - - 10 30,750 2 47,311 - - 12 78,061
3 Int. Tax, Delhi - - - - 2 7,761 1 14,423 - - 3 22,184
Andhra
4 Pradesh & - - 10 5,018 5 20,274 - - - - 15 25,292
Telangana
5 Bengaluru - - 8 5,492 7 18,261 - - - - 15 23,753
West Bengal
6 - - 6 3,233 4 12,693 - - - - 10 15,926
& Sikkim
7 Gujarat - - 5 3,717 5 12,439 - - - - 10 16,156
8 Tamil Nadu - - 10 6,291 5 11,712 - - - - 15 18,003
9 Bhubaneswar - - 5 1,370 - - - - - - 5 1,370
10 Kerala - - 5 950 - - - - - - 5 950
North West
11 01 97 9 2,172 - - - - - - 10 2,269
Region
Bihar &
12 07 260 3 738 - - - - - - 10 998
Jharkhand
13 Rajasthan 02 144 3 625 - - - - - - 5 769
North East
14 02 135 3 597 - - - - - - 5 732
Region
MP &
15 08 543 2 415 - - - - - - 10 958
Chhattisgarh
UP West &
16 05 36 - - - - - - - - 5 36
Uttarakhand
Lucknow, UP
17 10 128 - - - - - - - - 10 128
East
Grand Total 35 1343 69 30,618 50 1,41,043 05 1,73,485 1 1,37,563 160 4,84,052
Source: e-filing portal data provided by ITD

Of 160 high value cases, Audit examined 947 assessment records

(supplementary audit) with an aggregate outstanding demand of
` 4,37,674 crore.
3.5 Non-production of records

Audit requisitioned 18,870 cases (with outstanding demand of

` 7,58,611 core), of which the ITD produced 10,896 cases pertaining to
8,080 assessees with an outstanding demand of ` 5,92,371 crore, representing
78.06 per cent of demands of the selected units. ITD did not produce
7,974 cases (No. of assessees - 6,262, outstanding demand ` 1,66,240 crore)
which is 42.26 per cent. The cases not produced included companies with high
outstanding demand like M/s M1 Ltd. (eight AYs, demand of ` 6,641.40 crore),
M/s V1 Ltd. (two AYs, demand ` 2,086.17 crore) and M/s H1 Ltd. (two AYs,
` 2,336.74 crore), as detailed in Appendix 6. Audit also called for details41 at
the levels of AOs / TROs / Pr. CCsIT, vide 653 Annexures42 of which the ITD did
not respond to 435 Annexures (66.62 per cent). During Audit, 2,156 audit

41 from AOs (1 Annexure), TROs (3 Annexures) and Pr. CCITs (13 Annexures) by 18 field audit offices in
respect of sampled units.
42 Total number of annexures issued across all regions at Pr. CCsIT/Pr.CsIT/AOs level.

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Report No. 14 of 2024 (Direct Taxes)

observations/audit queries were issued. The ITD did not respond to 1,746 audit
observations/queries (80.98 per cent). Region-wise details of non-production
of records as of March 2023 have been shown in Appendix 7.
3.6 Constraints
1. Due to the Covid–19 pandemic, Audit coverage was restricted to the
assessment units situated at the places where audit offices were located.
2. Production of the relevant records was slow and non-production of the
records was quite large at some of the stations.
3. Due to non-production of data on outstanding demands as on 31 March
2018, 2019 and 2020 by the CBDT, selection of units had to be done from
the data available with Audit (as on September 2017), which affected the
scope of Audit as units / case details could not be selected centrally.
4. Granular data for CAP-I Statement was requisitioned, but the same was
not provided by the CBDT and JAOs. Audit obtained the data extracted
from e-filing portal as on date of Audit. In the absence of granular data
for CAP, Audit could not validate the sources for CAP-I statement.
5. The statistical data of age-wise, monetary-wise and category-wise arrear
demand called for, was not made available by DIT (Recovery), New Delhi
despite repeated reminders. In response, it was stated (November 2021)
that the information was awaited from their field units. Details are still
awaited (March 2024).
6. The restructuring of the ITD (August 2020) resulted in merger of several
assessment units into a single unit (Circle / Ward). Though the units were
merged, physical transfer of files / records was still pending in several
cases resulting in non-production of records to Audit.
7. ITD did not provide data on cases closed either on payment or by
reduction / deletion of demand, subsequent to 31 March 2020. As a
result, Audit could not verify correctness of the basis on which these cases
were closed.
8. The samples included cases processed under Section 143(1), i.e. summary
assessment, by the CPC-ITR Bengaluru. Many of the cases could not be
audited due to non-availability of documents viz. Income Tax Return,
Intimation under Section 143(1), etc. with the AOs.
3.7 Finalisation of the Report
An Exit Conference was held with the Member (A&J) and other officials of the
CBDT in May 2023. Further, during the course of Audit before finalization of
the Audit Report, Entry and Exit conferences for this SSCA were held by the

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 Report No. 14 of 2024 (Direct Taxes)

participating Field Audit Offices with the respective regional heads (Pr. CCsIT)
of the ITD.
3.8 Acknowledgement
Audit acknowledges the cooperation extended by the ITD for providing
assessment records and facilitating the conduct of this SSCA. The ITD extended
their co-operation in providing the requisitioned records even under the
testing circumstances due to COVID-19 pandemic. Without their facilitation, it
would not have been possible to finalise the Audit Report.

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 Report No. 14 of 2024 (Direct Taxes)

Chapter 4 Data Analysis and Profiling

In this Chapter, an effort has been made to analyse Pan-India figures of
outstanding demand, age-wise break up of outstanding demand, outstanding
demand in respect of Direct Taxes as compared to GDP, region-wise
outstanding demand, outstanding demand in respect of direct and indirect
taxes, assessment type-wise outstanding demand, age-wise analysis of
outstanding demand in selected cases, status-wise outstanding demand in
selected cases, monetary slab- wise outstanding demand, etc.
As obtained from the ITD e-filing portal, the total outstanding demand in
respect of 279 selected assessment units was ` 8,49,931 crore, involving
21,58,443 cases, for the year ending March 2020.
Maintenance of data, both in granular and aggregate, is essential for profiling
and analysis of outstanding demand. Trend analysis of outstanding demand
over the period, age-wise, status-wise, and amount-wise, was also vital to
understanding the performance of ITD vis-à-vis the targets set for the
reduction of outstanding demand. The audit attempted to profile the
outstanding demand from the budget documents and analyze the outstanding
demand data obtained from the selected 279 units. The results of the analysis
are presented in the following paragraphs.
4.1 Profile of Pan-India Outstanding Demand

The budget document presented annually to Parliament inter-alia provides

details of the outstanding demand for direct taxes, i.e., the revenue raised but
not realized.
4.1.1 Year-wise and category-wise Outstanding Demand:

The Ministry of Finance, through the Receipt Budget under 'Tax Revenues
Raised but not Realized' vide Annexure-5, provides details of outstanding
demand and categorises it into disputed and undisputed. Year-wise and
category-wise Outstanding Demand during FY 2015-16 to 2021-22 is given
below in Table 4.1:
Table 4.1: Year-wise and category-wise Outstanding Demand
Financial Disputed Demand Undisputed Demand Total
year Amount Percentage Amount Percentage Outstanding
` in crore)
(` of Total ` in crore)
(` of Total Demand
Outstanding Outstanding ` in crore)
(`
Demand Demand
2015-16 5,77,725 88 81,406 12 6,59,131
2016-17 6,10,390 83 1,20,656 17 7,31,046
2017-18 6,23,539 85 1,08,751 15 7,32,290
2018-19 8,02,621 85 1,38,471 15 9,41,092

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Report No. 14 of 2024 (Direct Taxes)

Table 4.1: Year-wise and category-wise Outstanding Demand

Financial Disputed Demand Undisputed Demand Total
year Amount Percentage Amount Percentage Outstanding
` in crore)
(` of Total ` in crore)
(` of Total Demand
Outstanding Outstanding ` in crore)
(`
Demand Demand
2019-20 8,83,875 79 2,39,806 21 11,23,681
2020-21 10,57,639 73 3,83,616 27 14,41,255
2021-22 10,36,346 75 3,54,305 25 13,90,651
Source: Receipt Budget of the GoI for the years 2017-18 to 2023-24.

It can be seen from Table 4.1 above that there was an increasing trend in the
disputed demand in line with the total outstanding demand. The disputed
demand increased from ` 5.78 lakh crore in FY 2015-16 to ` 10.36 lakh crore
in FY 2021-22, i.e. an increase of 79.38 per cent over a period of seven years.
At the end of FY 2021-22, 75 per cent of the total outstanding demand was
under dispute, and the undisputed demand accounted for only 25 per cent.

4.1.2 Age-wise and category-wise breakup of outstanding demand

Audit analysis of age-wise and category-wise outstanding demand as on

31 March 2022, is given in Table 4.2 below:
Table 4.2: Age-wise breakup of outstanding demand - as on 31 March 2022
Period Demand Percentage Demand Percen- Total
Under of total not under tage of ` in crore)
(`
Dispute Dispute total
` in crore)
(` ` in crore)
(`
Over 1 year and 6,58,925 76 2,09,576 24 8,68,501
less than 2 years
Over 2 years and 3,15,879 71 1,28,662 29 4,44,541
less than 5 years
Over 5 years and 35,237 80 8,784 20 44,021
less than 10 years
Over 10 years 26,304 78 7,283 22 33,587
Source: Receipt Budget of the GoI for the year 2023-24

It can be seen from Table 4.2 above that the ratio of disputed to undisputed
demand has remained almost the same in all period categories, viz. over 1 year
and less than 2 years; over 2 years and less than 5 years; over 5 years and less
than 10 years; and over 10 years. While disputed demands, due to litigation
and pendency of cases in the courts at various stages, remained outstanding,
Audit noted that the undisputed demands aggregating to ` 3.54 lakh crore also
remained outstanding for more than one year, which is more than
26.48 per cent of the total outstanding demand. As per the Receipt Budget, the
prominent reasons for the non-collection of demand under the dispute

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 Report No. 14 of 2024 (Direct Taxes)

category are no assets or inadequate assets with the assessee for recovery, the
Assessee not traceable, etc.

4.1.3 Outstanding Demand vis-à-vis GDP and Direct Taxes Collection

Audit compared year-wise data relating to GDP, Direct Tax collection and
outstanding demand, which is shown in Chart 4.1 below:

Chart 4.1: Outstanding Demand vis-à-vis GDP and Direct Taxes Collection
(₹ in Crore)

₹ 2,72,41,000
₹ 2,36,64,637
₹ 2,00,74,856

₹ 1,98,00,914
₹ 1,88,86,957
₹ 1,70,98,304
₹ 1,53,62,386

₹ 16,61,000
₹ 14,41,255

₹ 14,12,422
₹ 13,90,651
₹ 11,37,718

₹ 11,23,681
₹ 10,50,681
₹ 10,02,738

₹ 9,41,092

₹ 9,47,176
₹ 8,49,713
₹ 7,31,046

₹ 7,32,290

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23*

GDP Outstanding Demand Direct Tax Collection

Source: Receipt Budget of GOI for outstanding demand, Time Series Data for direct tax collection and GDP.
*Press Information Bureau, GOI for provisional figures. Provisional data on outstanding demand for the year 2022-23
not available.

It can be seen that the outstanding demand vis-à-vis the GDP increased from
4.76 per cent to 5.88 per cent during the period 2016-17 to 2021-22. The
accumulated outstanding demand was more than 70 per cent of the direct tax
collections during each of the FYs 2016-17, 2017-18, 2018-19 and 2021-22; and
the accumulated outstanding demand even exceeded the direct tax collections
during FYs 2019-20 and 2020-21.
4.1.4 Region-wise outstanding demand

With a view to see the region-wise share of outstanding demand, Audit

collected data on outstanding demands from the CAP-I statement of the
respective regions as on 31 March 2022, which is shown in Chart 4.2 below:

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Report No. 14 of 2024 (Direct Taxes)

Chart 4.2 : Region-wise analysis of outstanding demand as on 31st March 2022

(₹ in crore)
Total Outststanding Demand ₹ 17,90,159 crore
West Bengal & Sikkim, ₹ 1,06,856, 6%

Gujarat, ₹ 1,17,083, 7% Tamil Nadu, ₹ 90,301, 5%

Bengaluru, ₹ 83,315, 5%

AP & Telangana, ₹ 81,774, 5%

Pr. CCIT (Intl. Tax.), ₹ 1,17,806, 7%
Pune, ₹ 71,104, 4%

UP East, ₹ 54,501, 3%

MP & Chhattisgarh, ₹ 49,797, 3%

Rajasthan, ₹ 18,617, 1%
Delhi, ₹ 3,50,496, 20%
UP West, ₹ 18,593, 1%

Kerala, ₹ 16,666, 1%

Bihar & Jharkhand, ₹ 15,259, 1%

Mumbai, ₹ 5,79,184, 32% Others*, ₹ 18,810, 1%

Source: CAP-I statements 2021-22 of all regions

*Others include 3 Pr. CCITs -NER, Nagpur and Bhubaneswar; Pr. CCIT -NWR is not included as the data was not made
available to the Audit

It can be seen from the above Chart 4.2 that the Mumbai region had the
highest share of outstanding demand, at 32 per cent of total outstanding
demand. This was followed by Delhi region (20 per cent), international taxation
circles/wards (7 per cent) comprising assessees of NRIs and Foreign companies,
and the Gujarat region (7 per cent).

4.1.5 Outstanding Demand of Direct Tax vis-à-vis Outstanding Demand of

Indirect Taxes

The audit noted that Direct Tax collections vis-à-vis Indirect Tax collections of
the Government of India over the years in terms of the amount collected are
almost the same. The audit compared the outstanding demand for Direct taxes
to the Total Direct Tax collections and for Indirect taxes to the Total Indirect
Tax Collection. Year-wise Direct Tax collections vis-à-vis accumulated
outstanding demand for Direct Taxes and year-wise Indirect Tax collection
vis-à-vis cumulative outstanding demand for Indirect Taxes are shown in
Chart 4.3 below.

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Chart 4.3: Cumulative Direct Tax outstanding demand to Direct Tax Collection
vis-à-vis Cumulative Indirect Tax outstanding demand to Indirect Tax
Collection
` in crore)
(`

Direct Taxes Indirect Taxes

2020-21 9,47,176 14,41,255 10,74,809 1,78,136

2019-20 10,50,681 11,23,681 9,53,513 1,74,294

2018-19 11,37,718 9,41,092 9,37,322 1,68,106

2017-18 10,02,738 7,32,290 9,15,256 1,67,367

2016-17 8,49,713 7,31,046 8,61,515 1,41,647

Direct Taxes Collection Indirect Taxes Collection

Direct Taxes Outstanding Demand Indirect Taxes Outstanding Demand

Source: Receipt Budget of GOI for outstanding demand, Time Series Data for tax collection.

The year-wise percentage of accumulated outstanding demand of Direct Taxes

vis-à-vis Direct Tax collections and year-wise percentage of accumulated
outstanding demand of Indirect Taxes vis-à-vis Indirect Taxes collection is
shown in Chart 4.4 below:

Chart 4.4: Comparision of the percentage of Direct and Indirect Taxes

outstanding demands
152.16%

106.95%
86.03%
73.03% 82.72%

16.44% 18.29% 17.93% 18.28% 16.57%

2016-17 2017-18 2018-19 2019-20 2020-21

Financial Year

% of Direct Tax Outstanding Demand to Tax Collection

% of Indirect Tax Outstanding Demand to Tax Collection

Source: Receipt Budget of GOI for outstanding demand, Time Series Data for tax collection.

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It can be seen from the above Chart 4.3 and Chart 4.4 that percentage of
accumulated outstanding demand of Direct Taxes in each FY (2016-17 to
2020-21) vis-à-vis Direct tax collection in that year (86 per cent to 152 per cent)
was higher in comparison to accumulated outstanding demand of Indirect
Taxes in each FYs (2016-17 to 2020-21) vis-à-vis Indirect tax collection during
the year (16 per cent to 18 per cent).

4.2 Profile of cases falling under Audit Sample

The audit analysed sampled cases in respect to amount-wise, assessment-
wise, status of assessee-wise, age-wise Outstanding Demand, etc. The results
have been depicted in the succeeding paragraphs.

4.2.1 Amount-wise Profiling of Outstanding Demand

Audit selected 18,870 cases as a sample in 279 assessment units and 74 TRO
units (Refer 'to para 3.4 - Audit Sample' of this report). Comparison of the
Pan-India outstanding demand amount (as on 31 March 2020), vis-à-vis
outstanding demands in respect of sampled cases, top 160 high-value sampled
assessees, top 10 sampled Corporate assessees, Individuals, etc. are shown in
the following Chart 4.5.

Chart 4.5: Profile of Audit Sample

(₹ in crore)
` 16,18,954 (100%)

` 7,58,611 (47%)

` 4,84,052 (30%)

` 4,52,092 (28%)

` 2,77,815 (17%)

` 1,03,473 (6%)

Outstanding Outstanding Outstanding Outstanding Outstanding Outstanding

Demand Population Demand Sampled Demand Demand above ₹ Demand for Top 10 Demand for Top 10
cases Top 160 Assessee 1000 Crore Individual & Other Corporates

Source: Data made available by the sampled units from the e-filing portal

It can be seen from Chart 4.5 above that the audit covered 47 per cent of total
outstanding demand, which included the top 160 assessees with 30 per cent
of total outstanding demand; outstanding demand of ` 1,000 crore and above

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with 28 per cent of total outstanding demand; and outstanding demand of top
10 assessees both non-corporate and corporate assessees.
4.2.2 Assessment type-wise profiling of audit sample
Audit analysis of outstanding demand in respect of sampled cases revealed
that the demands were raised consequent to summary processing, scrutiny
assessments, revision of assessment, the rectification of assessment,
imposition of penalty, levy of interest, etc. Results of audit analysis are shown
in the following Chart 4.6:

Chart 4.6: Assessment type-wise Outstanding Demand as on

March 2020
(figures in brackets represent number of cases)
(₹
₹ in crore)
` 4,04,092
(9318)

` 1,39,406
(550) ` 60,408 ` 53,437 ` 48,512 ` 52,755
(1316) (1896) (4198) (1592)

Scrutiny Appeal Penalty Rectification Summary Others*

Source: Data made available by the sampled units from the e-filing portal.
* Others represent cases of Interest, Other Direct Taxes, etc.

It can be seen from Chart 4.6 above that scrutiny assessments constituted
49.4 per cent of sampled cases in which demand of 53.3 per cent of sampled
outstanding demand was involved, and Appeal cases constituted 2.9 per cent
of sampled cases in which demand of 18.4 per cent of total outstanding
demand was involved.
4.2.3 Assessee’s status-wise profiling of audit sample
The audit analyzed sampled cases with respect to the type of assessees against
whom the demands were raised. Results of audit analysis are shown in the
following Chart 4.7:

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 Report No. 14 of 2024 (Direct Taxes)

Chart 4.7: Assessee's status-wise Outstanding Demand (₹ ₹ in Crore)

(figures in brackets represent number of cases)
41,953 12,716 7,017
(1,491) (336) (704)

3,83,108
3,13,817
(10,739)
(5600)

Company Individual AOP/BOI/Trusts Others* Firm

*Others include HUF, Local Authority, Artificial Juridical Person and Government
Source: Data made available by the sampled units from the e-filing portal.

It can be seen from the above Chart 4.7 that number of corporate assessees
were highest at 56.9 per cent of sampled cases wherein demand of
50.5 per cent of sampled outstanding demand was involved followed by
Individuals which was at 29.7 per cent of sampled cases wherein demand of
41. 37 per cent of total outstanding demand was involved.
4.2.4 Region-wise sampled cases
With a view to see Region-wise and amount-wise distribution of sampled
cases, Audit analysed sampled cases. Result of analysis is shown in Chart 4.8
below:

Source: Data made available by the sampled units from the e-filing portal.

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It can be seen from Chart 4.8 above that the highest number of cases of
outstanding demand i.e. 3,198 cases was for the West Bengal and Sikkim
region (16.9 per cent), followed by the Delhi region with 3,008 cases
(15.9 per cent) and the Mumbai region 2,218 cases (11.8 per cent). In terms of
outstanding demand, the highest amount of outstanding demand was for the
Mumbai region with ` 3,34,331 crore (44.1 per cent), followed by the Delhi
region ` 1,51,185 crore (19.9 per cent) and the West Bengal and Sikkim region
` 59,366 crore (7.8 per cent).
4.2.5 Age-wise analysis of outstanding demand for sampled cases
Audit analyzed age-wise outstanding demand in respect of sampled cases. To
carry out this analysis, the audit considered demand, which was outstanding
as of 31 March 2018, 31 March 2019, and 31 March 2020. Results of Audit
analysis is given in Table 4.3 below:
Table 4.3: Age-wise analysis of Outstanding Demand
` in crore)
(`
Period As on 31 March As on 31 March As on 31 March 2020 Increase from Percentage
2018 2019 March 2018 andincrease from
March 2020 March 2018 and
March 2020
No of Outstanding No of Outstanding No of Outstanding No. of Outstanding No of Outstanding
Cases Amount Cases Amount Cases Amount Cases Amount cases Amount
Less than 1 1,642 1,11,418.6 2,695 1,39,513.1 5,925 2,33,874.8 4,283 1,22,456.2 260.8 109.9
year
1 year and 4,899 94,995.1 5,835 1,95,397.2 6,899 3,10,297.4 2,000 2,15,302.3 40.8 226.7
more and
less than 5
years
5 years and 2,556 1,57,371.6 2,992 87,496.6 4,207 97,909.5 1,651 -59,462.1 64.6 -37.8
more and
less than
10 years
More than 765 19,384.2 1,035 1,00,275.9 1,451 1,14,475.8 686 95,091.5 89.7 490.6
10 years
Total 9,862 3,83,169.5 12,557 5,22,682.8 18,482* 7,56,557.5 8,620 3,73,387.9 87.4 97.5
Source: Data made available by the sampled units from the e-filing portal
*Audit analysed 18,482 cases out of 18,870 sampled cases as the date of demand raised for the remaining 388 cases was not made available to Audit

It can be seen from Table 4.3 above that from March 2018 to March 2020, the
amount of outstanding demand increased by 97.5 per cent, whereas the
number of cases involved thereon increased by 87.4 per cent. During this
period, in terms of the amount of outstanding demand, the highest increase
(490.6 per cent) was noticed in the demand category, which was pending for
'more than 10 years', whereas, in terms of a number of cases of outstanding
demand, highest increase (260.8 per cent) was noticed in demand category
which was pending for ‘upto one year'. In the category of demand, which was
outstanding for 5 years and more and less than 10 years, the number of cases
increased (by 64.6 per cent) even though the amount of outstanding demand
decreased (by 37.8 per cent).

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4.2.6 Age-wise and assessee type-wise analysis of outstanding demand

Audit analyzed age-wise and assessee type-wise outstanding demand in
respect of sampled cases. To carry out this analysis, the audit considered
demand, which was outstanding as of 31 March 2018, 31 March 2019, and
31 March 2020. Results of Audit analysis is given in Table 4.4 below:
Table 4.4: Age-wise and type of assessee-wise Outstanding Demand
Type of As on March 2018 As on March 2019 As on March 2020 Increase from Percentage increase
assessee March 2018 to from March 2018
March 2020 and March 2020
No. Outstanding No. of Outstanding No. of Outstanding No. Outstanding No. of Outstanding
of demand cases demand cases demand of demand cases demand
cases ` in crore)
(` ` in crore)
(` ` in crore)
(` Cases (` ` in crore)
Individual 3,140 2,35,963.8 3,911 2,76,936.3 5,491 3,13,575.4 2,351 77,611.6 74.9 32.9
Company 5,693 1,35,596.1 7,230 2,23,396.9 10,522 3,81,446.4 4,829 2,45,850.3 84.8 181.3
Firm 357 1,857.3 441 2,359.5 685 6,981.7 328 5,124.4 91.9 275.9
AOP/BOI/ 531 5,264.5 775 12,346.3 1,454 41,857.2 923 36,592.7 173.8 695.1
Trusts
Others* 141 4,487.8 200 7,643.7 330 12,696.8 189 8,209.0 134.0 182.9
#
Total 9,862 3,83,169.5 12,557 5,22,682.7 18,482 7,56,557.5 8,620 3,73,388.0 87.4 97.4
Source: Data made available by the sampled units from the e-filing portal
* Others include HUF, Local Authority, Artificial Juridical Person and Government
# Audit analysed 18,482 cases out of 18,870 sampled cases as date of demand raised for the remaining 388 cases was not made available to Audit

It can be seen from Table 4.4 above that from March 2018 to March 2020, the
highest increase in the amount of outstanding demand was 695.1 per cent,
whereas the number of cases involved thereon increased by 173.8 per cent for
AOP/BOI/Trusts. During this period, even though the increase in the number
of cases in respect of Individual assessee was 74.9 per cent, the increase in the
amount of outstanding demand was 32.9 per cent, whereas through an
increase in the number of cases in respect of Firm and Company were
91.9 per cent and 84.8 per cent respectively, increase in the amount of
outstanding demand were 275.9 per cent and 181.3 per cent respectively.
4.2.7 Amount and age-wise analysis of outstanding demand
The audit analyzed age-wise outstanding demand in respect of sampled cases
by dividing it into different amount categories. To carry out this analysis, the
audit considered demand, which was outstanding as of 31 March 2018,
31 March 2019, and 31 March 2020. The results of Audit analysis is given in
Table 4.5 below:

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 Report No. 14 of 2024 (Direct Taxes)

Table 4.5: Amount and age-wise analysis of outstanding demand

Category As on March 2018 As on March 2019 As on March 2020 Increase in
per cent from
March 2018 to
March 2020
No. of Amount No. of Amount No. of Amount No. of Amount
Cases ` in Crore)
(` Cases ` in Crore)
(` Cases ` in Crore)
(` Cases
Below ` 1 lakh 3,044 4.7 3,500 5.4 4,310 6.6 41.6 42.3
` 1 lakh and above and less 739 26.0 889 31.7 1,155 42.1 56.3 62.2
than ` 10 lakh
` 10 lakh and above and 543 215.8 706 290.6 1,028 413.9 89.3 91.8
less than ` 1 crore
` 1 crore and above and 2,456 8,010.1 3,353 10,823.1 5,424 17,101.9 120.8 113.5
less than ` 10 crore
` 10 crore and above and 1,839 28,560.2 2,394 37,225.1 3,698 57,473.7 101.1 101.2
less than ` 25 crore
` 25 crore and above and 939 41,686.5 1,259 56,584.7 2,076 94,418.2 121.1 126.5
less than ` 100 crore
` 100 crore and above and 235 48,020.6 345 70,880.3 605 1,25,858.8 157.4 162.1
less than ` 500 crore
` 500 crore and above and 39 27,138.6 49 34,610.0 96 68,100.4 146.2 150.9
less than ` 1,000 crore
` 1,000 crore and above 16 38,327.8 46 83,993.5 69 1,26,917.2 331.3 231.1
and less than ` 5,000 crore
` 5,000 crore and above and 5 37,833.9 6 44,092.8 11 82,079.3 120.0 116.9
less than ` 10,000 crore
` 10,000 crore and above 7 1,53,345.4 10 1,84,145.4 10 1,84,145.4 42.9 20.1
Total 9,862 3,83,169.6 12,557 5,22,682.7 18,482 7,56,557.5 87.4 97.4
Source: Data made available by the sampled units from the e-filing portal
# Audit analysed 18,482 cases out of 18,870 sampled cases as date of demand raised for the remaining 388 cases was not made available

to Audit

It can be seen from Table 4.5 above that the highest number of cases of
outstanding demand out of sampled cases fell in the category where
outstanding demand was '` 1 crore and above and less than ` 10 crore’
(29.3 per cent), followed by category ‘below ` 1 lakh’ (23.3 per cent), followed
by category ‘` 10 crore and above and less than ` 25 crore’ (20.0 per cent),
followed by category ‘` 25 crore and above and less than ` 100 crore’
(11.2 per cent). Further, in terms of the amount of outstanding demand, the
highest amount involved was in the category '` 10,000 crores and above',
followed by category '` 1,000 crore and above and less than ` 5,000 crore’,
followed by category ‘` 100 crore and above and less than ` 500 crore’.
The highest increase in the number of cases and outstanding demand out of
sampled cases from March 2018 to March 2020 was noticed in the category
'` 1,000 crore and above and less than ` 5,000 crore’, followed by category
‘` 100 crore and above and less than ` 500 crore’, followed by category
‘` 500 crore and above and less than ` 1,000 crore’.

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Recommendation 1:
Categorisation of data is essential to identify high-risk vis-à-vis low-risk
cases. ITD may evolve a system / enable provision to extract data from e-
filing/ ITBA to identify and segregate high-risk assessees, enabling the
Assessing officers / TROs to put sustainable efforts into the collection
process.
The Ministry, in its reply, stated (May 2023) that demand cases are being monitored
separately through the dossier reports. The revised limit of outstanding demand
for the dossier has been furnished and stated that a mechanism is in place, and the
Directorate of Recovery under Pr DGIT (Admin & TPS) monitors & analyses the
dossier report containing high-value demand.
The reply furnished by the Ministry is not tenable as the dossiers are being
prepared in a routine manner, and the existing mechanism needs to be
strengthened to reduce the outstanding demand.

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 Report No. 14 of 2024 (Direct Taxes)

Chapter 5 Analysis of High value cases of Outstanding Demand

5.1 Overview

In this chapter, Audit attempted to cover the issues relating to outstanding

demand in respect of 1,279 assessment records of 160 high-value assessees
being assessed in 279 assessment units selected across 17 regions43 of the ITD.
These 160 assessees were selected from the e-filing data furnished by the ITD
after filtering five to fifteen assessees whose aggregate outstanding demands
were highest in each region. These assessees involved an outstanding demand
of ` 4,84,052 crore, constituting 29.94 per cent of pan-India's total outstanding
demand of ` 16,18,954 crore as of 31 March 2020. Audit findings regarding
these assessees, against whom a large amount of demand was pending, have
been included along with recommendations in this chapter.
The audit has highlighted several significant issues within the Income Tax
Department's (ITD) procedures, namely Mistakes in Reporting and Data
Mismatch, as errors were identified in reporting outstanding demands, data
mismatches between different systems (e-filing portal, ITBA/CAP-I), and
discrepancies in Dossier Reports. These inaccuracies may result in difficulties
in the follow-up of demand recovery and incorrect projection of outstanding
demands, affecting the CBDT's ability to set and achieve reduction in targets.
Failure to address grievances within a reasonable timeframe resulted in the
raising of erroneous demands for taxpayers, potentially leading to situation
where the assessee feels mentally harassed due to incorrect raising of
outstanding demands.
The audit further noted that the system did not effectively nullify demands
after an appellate authority had set aside an assessment, leading to the
inclusion of non-existent demands in outstanding figures. This lack of updating
also did not reflect the current status accurately. Further, discrepancies in
reporting figures to the Custodian and the e-filing system versus ITBA hindered
recovery efforts and made it difficult to set accurate reduction targets for
outstanding demands. The system did not capture the process of nullifying a
demand when an appellate authority had set aside an assessment and ordered
a de novo assessment.
The audit noted that the ITD did not take effective steps in a timely manner to
collect the demand even after the provisional attachment of the property.
Further, delay in invoking specific powers as per Schedule II to the Act in
attaching and disposing of the property also resulted in the demand not being
recovered.

43 There are 19 regions, including Pune and Nagpur that were not selected for Audit due to COVID-19,
as Audit coverage was restricted to units situated at places where audit offices were located.

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Audit noted that the CBDT's instruction no. 1937, dated 25 March 1996,
regarding obtaining particulars of assets, including debtors, bank accounts/
bank deposits, etc., was not followed, which eventually resulted in the
accumulation of outstanding demand and the non-fulfilment of the objective
of the aforesaid instruction for early recovery of tax dues.
Audit noted that there was a mismatch in the reporting of figures to the
Custodian and the Demand shown outstanding in the e-filing system and the
ITBA, which may cause difficulty in the follow-up of the recovery of demands
and also an incorrect projection of outstanding demands. Furthermore, in case
the outstanding demand is incorrect, fixing the target for reduction of
outstanding demand would be difficult for CBDT and the target fixed may not
be achieved.
Addressing these issues will require the ITD to improve coordination between
different departments, update and synchronize its systems, address
grievances promptly, adhere to instructions and regulations, and expedite
demand collection processes.

5.2 Profile and category of high-value cases of assessees

We selected 279 assessment units comprising an outstanding demand of

` 8,49,930 crore pertaining to 12,73,180 assessees. Of these outstanding
demands, 160 assessees with an outstanding demand of ` 4,84,052.49 crore,
constituting 58.59 per cent of the total outstanding demands in the aforesaid
selected units, were selected for detailed examination in this SSCA.
Category-wise details of these high-value assessees are given in Table 5.1
below:
Table 5.1: Category-wise 160 Assessees with Outstanding Demand as on 31 March 2020

` in crore)
(`
Sl. Category No. of Outstanding
No. Assessees Demand
1 Company 101 1,85,338.24
2 Individual 31 2,83,601.56
3 AOP/BOI/Trust/LA/Artificial Juridical
Person 21 14,802.27
4 Firm 7 310.42
Grand Total 160 4,84,052.49
Source: e-filing data of ITD for the year ending 31 March 2020

As evident from the above Table 5.1, though, the numbers of non-corporate44
assessees (59) were less than corporate assessees, yet they constituted
61.7 per cent of these demands, whereas the numbers of corporate assessees

44 Non-corporate includes individual, firm and AOP/BOI/Trust/LA/Artificial Juridical Person

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(101) constituted only 38.3 per cent of these outstanding demands. Audit
further observed that out of 59 non-corporate assessees, 31 were individual,
constituting 58.6 per cent of the total outstanding demand of
` 4,84,052.49 crore. Details of the top 10 corporate assessees and
non-corporate assessees are given in Table 5.2 and 5.3, respectively, below:
5.2.1 Details of Top 10 Corporate Assessees

Out of the above 101 corporate assessees, details of the top 10 corporate
assessees are given below:
Table 5.2: Top 10 Corporate Assessees, as on 31st March 2020
` in crore)
(`
Sl. Region Name of the Assessee Outstanding Demand as on
No. March 2020
1 Delhi M/s. N1 Ltd. 23,837.90
2 Delhi M/s. S1 Ltd. 23,473.44
3 Delhi M/s. C1 Pvt. Ltd. 14,423.50
4 West Bengal M/s. I1 Ltd. 8,030.40
5 Tamil Nadu M/s. T1 Ltd 6,774.86
6 Delhi M/s. M1 Ltd. 6,641.40
7 Karnataka M/s. I2 Pvt. Ltd. 6,188.72
8 Delhi M/s. N2 Ltd. 4,892.17
9 Mumbai M/s. G1 Ltd. 4,820.69
10 Delhi M/s. S2 Pvt. Ltd. 4,389.52
Total 1,03,472.60
Source: e-filing portal data of the ITD

As evident from Table 5.2 above, out of the 101 corporate assessees, only the
top 10 had outstanding demand of ` 1,03,472.60 crore, which constituted
55.8 per cent of the outstanding demand of ` 1,85,338.24 crore relating to
these corporate assessees. Further, out of these top 10 corporate assessees
in terms of outstanding demand, six assessees belong to the Delhi region,
having outstanding demand of ` 77,657.93 crore.

5.2.2 Details of Top 10 Non-corporate Assessees

Further, out of the above 59 non-corporate assessees, details of the top 10

non-corporate assessees are given in Table 5.3 below:

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Report No. 14 of 2024 (Direct Taxes)

Table 5.3: Top 10 Non-corporate Assessees, as on 31st March 2020

Sl. Region Name of the Category Outstanding Demand
No. assessee as on March 2020
` in crore)
(`
1 Mumbai H2 Individual 1,37,563.50
2 Mumbai C3 Individual 82,959.40
3 Mumbai H3 Individual 28,791.38
4 AP & Telangana L1 Individual 7,572.70
5 AP & Telangana S3 Ltd. AOP 5,982.23
6 Mumbai A2 Individual 3,470.48
7 Gujarat C4 Individual 3,074.33
8 Mumbai M2 Individual 2,818.17
9 Bengaluru P1 Individual 2,810.36
10 Gujarat S4 AOP 2,772.55
Total 2,77,815.10
Source: the e-filing data of ITD

It could be seen from Table 5.3 above that out of 59 non-corporate assessees;
the top 10 assessees had an outstanding demand of ` 2,77,815.10 crore, which
constituted 92 per cent of the outstanding demand of ` 2,98,714.25 crore
relating to these non-corporate assessees. Further, out of the top 10
non-corporate assesses, five assessees belonged to the Mumbai region, having
an outstanding demand of ` 2,55,602.93 crore. Further, the top two
non-corporate assessees constituted 79.4 per cent of the outstanding demand
of these top 10 non-corporate assessees.
5.3 Audit findings

We examined assessment records relating to 157 (out of 160 selected)

assessees as records relating to three assessees viz. M/s. M1 Ltd. (08 cases
from 1994-95 to 2015-16), M/s. V1 Ltd. (02 cases- 2010-11 & 2011-12) and
M/s. H1 Ltd. (01 cases- 2011-12) for 11 assessment years for all three assessees
with an outstanding demand of ` 11,064.31 crore were not produced to Audit.
Reasons for such non-production included the non-transfer of physical files
from the previous unit due to the restructuring of ITD and exigencies such as
fire in the premises where many records were destroyed, etc., as cited by
the ITD.
The audit noticed several issues, viz., incorrect reporting of the outstanding
demand, mismatches of data available in the e-filing portal, ITBA, and CAP-I,
delay in attaching properties and lapses in their disposal, lack of coordination
between the AOs and the TROs, discrepancies in Dossier Reports, etc. 27 such
cases have been discussed in subsequent paragraphs.

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5.3.1 Grievance not resolved even after considerable time

Assessee: P1
Charge: PCIT-1, Bengaluru

In the case of an individual, P1, a salaried employee of the Defence Research

& Development Organisation (DRDO), Bengaluru, Audit observed from the
e-filing portal data as on 31 March 2020 that the ITD had raised 40 demands,
totalling ` 2,810.36 crore under various sections including 143(1), 154 and
271(1) (c) of the IT Act against the assessee during the period from March 2008
to December 2008 for AYs 1988-89 to 2006-07, and in June 2009 and April 2015
for the AYs 2006-07 and 2012-13 respectively. The demand was also matched
with the ITBA portal demand analysis screen as on December 2021. Audit also
observed that the ITD had classified this outstanding demand of
` 2,810.36 crore as ‘demand difficult to recover’.

Audit noticed from the records that the assessee had raised grievance
petitions representing the incorrect demand against his PAN. It was noticed
that though this case was examined by the different authorities, viz., DCIT,
Circle-1(1)(1), Bengaluru; Central Circle, Mumbai; CPC(ITR) Bengaluru;
CPC(TDS) Ghaziabad; DG (IT) Systems and the CBDT, they could not locate the
cause for the erroneous demands. As a result, the issue has remained
unresolved to date (November 2023). Audit could not ascertain the reasons
for raising huge demands against an assessee who was an employee of DRDO.
However, Audit observed from the records that Central Circle, Mumbai, made
the entry of demand against this PAN. Audit further noted from the Demand
Analysis and Recoverability Status Report (December 2021) of ITBA that the
demand uploaded did not belong to this PAN; this incorrect demand was raised
in the assessee's name due to some technical glitch. The demand was
manually uploaded by DCIT, Central Circle 2, Mumbai, and there appeared to
be some error in PAN while uploading manual arrears to the CPC Portal.

Thus, the issue was not resolved even after the assessee registered a
grievance more than three years ago, which may have resulted in harassment
and incorrect outstanding demand. The Ministry's reply was awaited
(March 2024).

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Recommendation 2:
The CBDT may ensure redressal of grievances within 30 days as per the
commitment made in its taxpayer's charter and, wherever necessary,
consider taking remedial action, including fixing responsibility for not taking
timely action.
In its reply, the Ministry stated (May 2023) that most grievances are redressed within
30 days. Further, in-house studies undertaken by the Department have shown that
most of the mistakes that remained unresolved after 30 days were on the part of
taxpayers, like mistakes in challan, employers not filing TDS, copy of will or death
certificate not furnished where legal heir is to be added, etc. The delay is also
attributable to technical issues due to the constant evolution of IT infrastructure.
However, the Department is constantly making efforts to improve the grievance
redressal mechanism. Faceless Assessment and Faceless Appeals are policy
interventions by the Department for better and more transparent taxpayer services
and improved grievance redressal mechanisms.
The Ministry's reply focuses merely on the Department's grievance handling process,
not on the issues the Assessees face in redressing their grievances. The ITD may
review and strengthen the monitoring of the existing mechanism.

5.3.2 Issues having an impact on outstanding demand in respect of

State-run beverage corporations

In some State governments, the distribution and sale of Indian Made Foreign
Liquor (lMFL) (Wholesale/retail) in their respective States is done through the
formation of exclusive beverage corporations. The respective state
governments exclusively license these state-run beverage corporations to
distribute/sell IMFL in their states. To avoid disclosing surplus in the P&L
account and paying income tax on the same, the profits of these beverage
corporations have been ploughed back by the state governments through the
levy of different kinds of fees like licence fees, privilege fees, etc. These
corporations claim the fees paid to the state government as expenses for
income tax purposes.
However, as per Section 40 (a)(iib)45 of the Act, “any amount paid by way of
royalty, licence fee, service fee, privilege fee, service charge or any other fee
or charge, by whatever name called, which is levied exclusively on or which is
appropriated, directly or indirectly from a State Government undertaking by
the State Government, shall not be allowed as deduction in computing the
business income”.

45 Inserted by Finance Act 2013 w.e.f. 01/04/2014

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Hence, the ITD has disallowed the payment of privilege fees, license fees, etc.,
by the state-run beverage corporations to the State Governments while
computing the business income and taxed accordingly, as detailed in the
following two cases selected for Audit.
(i) M/s. T1 Ltd.
(ii) M/s. A1 Ltd.

5.3.2.1 Assessee: M/s T1 Ltd.

Charge: PCIT Chennai-3
M/s. T1 Ltd. is a Government company incorporated under the Companies Act,
1956, in May 1983 with a Registered Office in Chennai.
Audit observed from the e-filing portal data as on 31 March 2020 in the case
of a company, M/s. T1 Ltd. that the ITD had raised six demands aggregating
` 6,774.86 crore under Sections 143(3), 154, 220 (2) and 254 against the
assessee during the period from December 2012 to December 2019 for
six AYs 2003-04, 2006-07, 2012-13, 2014-15, 2017-18 and 2018-19. On
examination of these six assessment records, it was noticed that out of the
above demand, the demand of ` 6,752.96 crore was related to the
AY 2017-18 only. Audit also noticed specific issues viz. (i) Delay in
Implementation of High Court ruling resulting in non-nullifying of the demand,
(ii) Incorrect Reporting of Demands in Dossier Report, (iii) Effective action not
taken to vacate ITAT’s stay of demand, and (iv) Other issues relating to
outstanding demand of the assessee. These issues are discussed in the
following paragraphs:
The DCIT, Corporate Circle-3(1), Chennai, while finalising the assessment for
the AY 2017-18 under Section 143(3) in December 2019 at an income of
` 14,632.03 crore disallowed the assessee's claim of deduction of
` 14,574.74 crore under Section 40(a)(iib) of the Act and added the same back
to the assessee's total income. A demand of ` 6,761.82 crore was raised in
December 2019.
The assessee filed a writ petition before the Hon’ble Madras High Court in
December 2019 regarding disallowance in terms of Section 40(a)(iib) of the
Act. The Hon’ble Court set aside the assessment order and remitted the case
back to the JAO for a de-novo assessment, which was pending (March 2024).
The assessee filed another writ petition in March 2020 before the Hon'ble
Madras High Court, challenging the constitutional validity of Section 40(a)(iib)
of the Act. The Madras High Court dismissed (March 2020) the said writ
petition without deciding the vires of Section 40(a)(iib), stating that it was not
inclined to entertain it at that stage and that the assessee, without prejudice

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to the rights of the aggrieved parties, could approach the appropriate forum in
accordance with the law in the event the occasion so finally arises. The
assessee filed a Special Leave Petition (SLP) before the Hon'ble Supreme Court
(SC) in September 2020 against the Hon'ble High Court ruling. The Hon'ble
Supreme Court, in its order, stated (November 2020) that the Hon'ble High
Court should have decided the issue with respect to the challenge to the vires
of Section 40(a)(iib) of the Act 'on merits' and that it had failed to exercise the
powers vested in it under Article 226 of the Constitution by not deciding the
writ petitions 'on merits', and not deciding the challenge to the vires of Section
40(a)(iib) of the Act. The Hon'ble SC quashed (November 2020) the impugned
order of the Hon'ble HC and remitted the matter back to the Hon'ble High
Court to decide the writ petition on merits with respect to challenging the vires
of Section 40(a)(iib) of the Act.

Audit noted that the disallowance of ` 14,574.74 crore under Section 40(a)(iib)
of the Act made in the scrutiny assessment was set aside by the Hon'ble
Madras High Court on 26 February 2020. Therefore, the demand of
` 6,761.82 crore pertaining to the aforesaid disallowance should have been
nullified by the ITD. However, Audit noted that the outstanding demand of
` 6,752.96 crore continued to be included in the Dossier Report of the quarter
ending 31 March 2020 and the ITBA portal. Thus, it clearly showed that there
was incorrect reporting of outstanding demand to the assessee by
` 6,752.96 crore as on 31 March 2020.
Reply of the Ministry is awaited (March 2024).
i. Incorrect Reporting of Demands in Dossier Report:
(a) Non-Updating of Information of Outstanding Demand (AY 2014-15)
The AO, while finalising the AY 2014-15 assessment under Section 143(3) in
December 2016 at an income of ` 39.82 crore, raised a demand of ` 4.95 crore.
The assessment was rectified under Section 154 in February 2017 and the
demand was reduced to ` 4.15 crore. Audit observed that on the assessee's
appeal against the scrutiny assessment, the CIT (Appeal) gave relief, and
accordingly, Order Giving Effect (OGE) was passed in December 2019,
determining ‘Nil’ income. Audit noticed that the non-existent demand of
` 3.52 crore was also reflected in the Dossier Report of 4th Quarter of the Year
2019-20 (March 2020).
(b) Non-reconciliation of data available in the ITBA portal and the e-filing
portal (AY 2006-07)
The AO, while finalising the assessment for the AY 2006-07 under Section
143(3) in December 2008 at an income of ` 2.35 crore, determined a refund

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of ` 0.22 crore. The case was subsequently reassessed under Section 147 in
December 2011 at an income of ` 203.14 crore, and a demand of
` 114.23 crore was raised. Audit noticed from the assessment records that
the assessee preferred an appeal before ITAT, and the Hon’ble ITAT had given
relief to the assessee. Consequential Order Giving Effect was manually passed
on 24 December 2012, and a refund of ` 14.85 crore was determined.
However, Audit observed that the aforesaid refund of ` 14.85 crore was shown
as outstanding demand in the e-filing portal as on 31 March 2020. It was also
noticed from the Dossier Report of the 4th Quarter of 2019-20 that the above
refund was wrongly reflected as “demand in CPC-FAS”, though the manual
order was uploaded through the ITBA-Manual Order Upload functionality.
Thus, non-reconciliation of the ITBA and the e-filing portal resulted in incorrect
reporting of a non-existent demand of ` 14.85 crore.
Reply of the Ministry is awaited (March 2024).
ii. Action taken to vacate ITAT’s stay of demand (AY 2012-13)
While finalising the assessment for the AY 2012-13 under Section 143(3) in
March 2015 at an income of ` 4,199.24 crore, the AO raised a demand of
` 1,849.76 crore. Audit noticed from the assessment records that the Hon'ble
ITAT, Chennai, had given relief to the assessee, and accordingly, Order Giving
Effect was passed, reducing the demand to ` 3.85 crore in August 2017. Audit
observed from the Dossier Report for the 3rd Quarter (October – December
2019) that the above demand was categorised under "Demand covered by
Stay", and ITAT had granted stay up to 18 September 2018. It was further
noticed from the Dossier Report for the 4th Quarter (January – March 2020)
that the Additional CIT, Corporate Circle 3(1), Chennai, had directed the DCIT,
Corporate Circle 3(1), Chennai, to pursue the matter further and ascertain the
status of stay granted by the Hon'ble Tribunal. No further information was
available on record. The ITD did not furnish action taken to vacate the stay
and copy of the Dossier Reports for the subsequent periods. Thus, Audit could
not ascertain whether the ITD had taken any action to get the stay of demand
vacated.
Reply of the Ministry is awaited (March 2024).
5.3.2.2 Assessee: M/s A1 Ltd.
Charge: PCIT-1, Hyderabad
M/s. A1 Ltd. is a State Government company incorporated in 2015. It is a
public, unlisted company entrusted with wholesale trading in Indian-made
Foreign Liquor (IMFL)/ Foreign Liquor (FL).
Audit observed from the e-filing portal data as on 31 March 2020 that the ITD
had raised seven demands totaling ` 1,595.73 crore under Sections 143(1),

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143(3), 220 (2) and 254 against the assessee during the period from March
2009 to December 2019 for AYs 2006-07 to 2009-10 and 2014-15.

Audit requisitioned information along with the records of the assessee for
AYs 2006-07 to 2009-10 and 2014-15 against which records related to
interest under Section 220(2) for AY 2008-09 and AY 2009-10 were not
produced to Audit.

The AO, while completing the assessment for the AY 2014-15, under
Section 143(3) in December 2019 at an income of ` 1,260.59 crore, disallowed
the assessee’s claim of deduction on account of Privilege Fee, amounting to
` 1,236.79 crore and added back the same to the total income of the assessee
and raised a demand of ` 313.17 crore in December 2019. Aggrieved by the
order, the assessee preferred an appeal before CIT (A)-Hyderabad-1 in
March 2020.
Audit noticed from the assessment records that even though there was no
evidence for a stay of demand on the record, action for recovery
proceedings was not initiated by the ITD. Audit called for the reasons for such
non-initiation of recovery from the ITD. DCIT Circle-1(1), Hyderabad, stated
(November 2021) that due to COVID conditions during 2020 and 2021, and the
merger of units and the dislocation of staff, the demand could not be pursued.
The ITD further stated that a letter was issued to the assessee to pay the taxes
immediately and collection would be pursued accordingly. Details of further
action taken are awaited (March 2024).
Non-updation of data in ITBA
Further, in respect of AY 2007-08, the case was processed under Section 143(1)
in January 2009, raising a demand of ` 0.15 crore. Subsequently, while
completing the assessment in December 2011 under Section 143(3) read with
Section 147, the AO raised a demand of ` 578.03 crore. However, the Demand
Analysis Report (October 2021) reflected a demand of ` 0.15 crore under
Section 143(1) only. The non-updation of the revised order under Section
143(3), read with Section 147, resulted in short reporting of demand by
` 577.88 crore.
The ITD accepted (November 2021) the audit observation and stated that the
demand has since been uploaded in ITBA and a letter was issued to the
assessee for payment of tax. However, the status of the collection of demand
is awaited (March 2024).
When an assessment is set aside, the AO proceeds with the process of a fresh
assessment. Until a fresh demand is raised, the demand in respect of the
quashed assessment is not in existence. Audit found that the outstanding

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demand continued to include a non-existent demand. The system did not

capture the process of nullifying a demand when an appellate authority had
set aside an assessment and ordered a de novo assessment. The non-updation
of details in the ITD system did not reflect the current/actual status.

Recommendation 3:
The CBDT may ensure that details of the assessment set aside are updated
in the ITBA Recovery system module to reflect the current and actual status
of demand and avoid reflecting inflated, non-existent demands.

5.3.3 Assessee: H3 and A2

Charge: PCIT 2- Central, Mumbai
H346, a prominent Indian stockbroker, was allegedly involved in stock
manipulation.
In the case of individuals: H3 and A2, Audit observed from the e-filing portal
data (as on 31st March 2020) that the ITD had raised 53 demands totaling
` 32,261.24 crore under Sections 143(1), 143(3) and 263 against the assessees
during the period from March 2007 to March 2020 for the AYs 1987-88 to
2003-04, 2006-07 to 2011-12, 2013-14 to 2015-16 and 2017-18 to 2019-20.
Whereas, as per the demand analysis and recoverability statement of the ITBA,
the ITD had raised 56 demands totalling ` 32,882.56 crore against the
assessees during the same period for the same AYs.

Audit requisitioned information along with the records of the assessee for
AYs 1987-88 to 2003-04, 2006-07 to 2011-12, 2013-14 to 2015-16 and
2017-18 to 2019-20 against which records relating to H3 for the AYs 1988-89
to 2003-04, 2006-07 to 2009-10 and 2018-19 involving 22 cases of Sections
143(1), 143(1a) and 143(3) were not produced to Audit. In respect of A2,
records for AYs 1987-88 to 2003-04, 2008-09 to 2011-12, 2013-14 to 2017-18
involving 29 cases of 143(1), 143(1a), 143(3), 220(2) and 250 were not
produced to Audit.

Audit noticed from the demand analysis and recoverability statement of the
ITBA that the following demands were outstanding from H3 and A2, as on
31 March 2020:

46 The Bombay High Court and the Supreme Court of India convicted him for his part in a financial scam
valued at ` 10,000 crore (US$1.3 billion) that took place in the Bombay Stock Exchange (BSE). A2 is
the brother of H3.

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Table 5.4: Outstanding Demands as on March 2020

Name of Total no. of Related AYs Total outstanding
the demands demand
assessee pending ` In crore)
(`
H3 25 1988-89 to 2003-04, 2006-07 to 29,407.76
2009-10, 2018-19
A2 31 1987-88 to 2003-04, 2008-09 to 3,474.80
2011-12, 2013-14 to 2015-16,
2017-18 to 2019-20
Source: ITBA portal of ITD

Audit observed from the assessment records that no dossier report was
prepared in respect to these cases, and demand was also not reported to the
Tax Recovery Officer. Audit noticed various other issues, viz. the inability of
the ITD to arrive at the actual outstanding demand, besides delay in giving the
appeal effect, non-updation of the e-filing data and non-reporting of updated
demand to the Custodian, which has been discussed in the subsequent
paragraphs:
1. Recovery process in the case of H3
On examination of the records, Audit noticed that the assesse was a notified
party notified by the custodian under Section 3(2) of the Special Court
(TORTS)47 Act, 1992.
Audit observed that the Custodian had attached all the properties (movable
and immovable) belonging to the notified parties. After attachments and
recoveries, the liabilities were discharged, wherein revenue/taxes to the
Central Government were given preference. Thus, any demand to be
recovered from the assessee and group was required to be done through the
Special Court. Further, it was observed that a total amount of ` 3,286.08 crore
was recovered and adjusted against the principal amount of the demands
raised in various cases, and the last payment was received in 2011.
2. Raising of demand under Section 263 by PCIT on the issue settled by
the ITAT
On examination of the records, Audit observed that for the AY 1992-93, the
Tribunal passed an order (January 2019) in favour of the assessee, J148. The
ITD preferred an appeal against the Tribunal's order before the Hon'ble High
Court, Mumbai, and the same was adjourned till 18 March 2020. Meanwhile,

47 Trial of Offences Relating to Transactions in Securities (TORTS). A special court established under the
TORTS Acts 1992 to deal with matters relating to attachment, disbursement and recovery of the
money and assets of all affected parties. As per Section 11 of the TORTS Act, the Special Court, by
order, may direct the Custodian for disposal of properties under attachment and liabilities, viz. all
revenues, taxes, cesses, and all amounts due from the person so notified by the Custodian to any
bank etc. shall be paid or discharged in full.
48 The legal heir of H3

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 Report No. 14 of 2024 (Direct Taxes)

the assessment was revised (July 2019), and a refund of ` 472.58 crore was
issued to J1 based on the ITAT orders.
Audit observed that PCIT, Central Circle 2, Mumbai issued orders
(January 2020) under Section 263, which was against the order of ITAT
(January 2019). Effect to the order was given (March 2020), determining a
total income of ` 2,237.55 crore, and a tax demand of ` 6,357.12 crore was
raised against the assessee. Subsequently, the assessee again filed an appeal
with ITAT Mumbai, which was partly allowed by ITAT Mumbai in March 2021.
Further details were not available on record.
Audit observed that the order under Section 263 passed by the PCIT, on the
issue which was already settled by ITAT vide order dated 14 January 2019,
appears to be erroneous and resulted in overstatement of demand. Audit also
observed that the above order being pending revision resulted in
overstatement of outstanding demand of ` 6,357.12 crore as of
November 2021.
As per the Demand analysis and recoverability status as on 16 November 2021
for AY 1992-93 in respect of H3, the following demands were pending, as
shown in Table 5.5 below:
Table 5.5: Demands pending for AY 1992-93 as on November 2021
Section Date of Assessment Outstanding demand
` in crore)
(`
143(1) 21 March 2007 6,100.37
143(3) 31 March 2010 7,442.52
263 11 March 2020 6,357.12
Source- ITBA portal of ITD

Audit called for the records relating to the demands pertaining to AY 1992-93
raised under Section 143(3) and 143(1) of the Act, which were not produced
by the ITD. Thus, in the absence of complete records, the demands raised
under Sections 143(3) and 143(1) for AY 1992-93 could not be verified by Audit.
3. Mismatch in figures reported to the Custodian, Demand Outstanding
in the e-filing system, demand outstanding as per the ITBA
Audit noted that as per the report sent to the Custodian by the ITD, the
demand of ` 13,868.77 crore (including tax, interest, penalty and interest
under Section 220(2)) for AYs 1988-89 to 2013-14 was pending as on
January 2021, while, as per the e-filing portal, a demand of ` 28,791.38 crore
for AY 1988-89 to 2018-19 was shown as outstanding as on 31 March 2020 in
respect of H3. As per the ITBA, the outstanding demand was ` 29,407.76 crore
as on 31 March 2020. The Assessment year-wise details are given in
Appendix 8.

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On being called for the details of total demands, viz. total demands raised by
the ITD, year-wise demand pending recovery along with current position and
details of the amount released to the ITD, from the Custodian, it was intimated
that the said information may be obtained from the ITD, which maintains the
records. The Custodian further informed that as the correct and updated
outstanding dues of the assessee (H3 and Group) were pending from the ITD
to the Special Court, the extent of liability of the assessee could not be
examined by the Special Court.
The audit observed that the mismatch in the amounts of outstanding demand
in the above three sources has not been reconciled (November 2021). The
audit could not ascertain the reasons for differences in the figures reported to
the Custodian and shown on the e-filing portal and the ITBA portal regarding
outstanding demand in the assessee's case.
Thus, it could be seen that the ITD raised a demand under Section 263 in the
case that had already been settled by ITAT. Further, there was a mismatch in
the reporting of figures to the Custodian and the Demand shown outstanding
in the e-filing system and the ITBA, which may cause difficulty in the follow-up
of the recovery of demands and also an incorrect projection of outstanding
demands. Furthermore, if the figure for outstanding demand is incorrect,
fixing the target for reduction of outstanding demand would be difficult for
CBDT, and the target so fixed may not be achieved.
Reply of the Ministry is awaited (March 2024).

Recommendation 4:
The CBDT may
(i) ensure fixing realistic targets for cash collection and reduction in
arrear demand as fixing a uniform percentage of 40 percent for reduction
in arrear demand as per the Central Action Plans does not appear to be
realistic or practical.
(ii) consider devising a fast-track process periodically to resolve and
settle the high outstanding demand cases under dispute pending in the
courts for years.
The Ministry, in its reply, stated (June 2023) that the targets for the reduction of
arrear demand are fixed after due deliberation and on the basis of
recommendations of a High-level task force headed by an officer, not below the
rank of Pr CCIT. These targets are fixed after taking into consideration various
factors like age and amount of demand, status of pendency in appeals, etc., which
impact the reduction and recovery of tax arrears. The same is worked on a formula
devised in this regard, which is applied to all Pr CCIT regions. The measures for
recovery of taxes were detrimentally impacted due to covid pandemic in FY 2020-21

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and 2021-22, wherein adverse coercive actions were not taken in view of the
severity of the pandemic. Further, the states like Tamil Nadu, Mumbai, Orissa,
Rajasthan and Delhi have either achieved the target or reached close to the target
for reduction of outstanding demand in the year 2017-18.
The reply furnished by the Ministry is not acceptable, as the audit noted that in
19 regions, targets could not be achieved. In 2018-19, the achievement of many
regions was far from the target. Whereas in some regions, the achievement
vis-à-vis targets were very high, indicative that while fixing a uniform target of
40 per cent for a reduction in arrear demand, the risk factors involved were not
adequately analysed. It is noticed from the Central Action Plan of 2022-23 that the
uniform target of 40 per cent for a reduction in arrear demand has been continued.

5.3.4 Assessee: H2, C3 and K1

Charge: PCIT Central 1, Mumbai
During the course of search proceedings on 06 January 2007 in respect of H2
and associates, it was found that H249, an individual, was in possession of a
foreign asset, in the form of a bank balance and funds/money of USD 740.65
million and USD 976 million, lying in the accounts with Union Bank of
Switzerland, taxable in India. The assessee did not disclose this in his return of
income. Subsequently, the assessee's case was reopened under Section 147
of the Act.
Audit observed from the e-filing portal data as on 31 March 2020 that the ITD
had raised 92 demands totalling ` 2,22,729.84 crore under various Sections
viz. 143(1), 143(3), 144, 147, 148, 220(2), 254 and 271(1)(c) against the
assessees, H2 and associate assessees during the period from March 2008 to
December 2017 for AYs 1999-2000 to 2016-17 which were outstanding as
detailed below in Table 5.6:
Table 5.6: Outstanding Demands of H2 and associate assessees as on March 2020
` in crore)
(`
Name of the Total no. of Related AYs Total demand
assessee demands raised and
pending outstanding
H2 34 1999-2000 to 2016-17 1,37,563.48
C3 31 2001-02, 2002-03, 2004-05 to 82,959.40
2010-11 and 2013-14
K1 27 2000-01 to 2008-09, 2010-11 2,206.96
and 2012-13
Total 92 2,22,729.84
Source: e-filing data ending March 2020

49 H2 is an Indian businessman who was investigated (2007) for suspected money laundering. He had
a Swiss bank account with $8 billion in deposits. He had allegedly stashed away billions into Swiss
bank accounts with the help of Kolkata-based businessman K1, Delhi-based businessman P4 and C3,
wife of K1, who were all associated with the business of H2.

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Audit requisitioned the information along with the records of the above
assessee for AYs 1999- 2000 to 2016-17 against which records relating to C3
for the AY 2009-10 pertaining to demands raised (` 0.11 crore) under Section
143(3) and 271(1)(C) were not produced to Audit.

H2 and associate assessees

Assessment Years: 1999-2000 to 2016-17
Audit examined 90 cases of H2 and associate assessees pertaining to
AYs 1999-2000 to 2016-17 involving a total outstanding demand of ` 2.23 lakh
crore as on 31 March 2020. The ITD conducted search and seizure in 2007 in
the premises of the assessee and his associates for the block period of
AYs 2001-02 to 2007-08 on account of undisclosed income in foreign bank
account, deposits or transfer instructions, unexplained expenses, loans, etc.
H2
H2 claimed to be into owning and maintaining racehorses. The assessee was
accused of committing an offence punishable under the Prevention of Money
Laundering Act. In the assessee's case, a search was conducted in January 2007
by the ITD.
In the case of an individual, H2, the Department completed the assessments
for the AY 2001-02 to 2007-08 and raised the demand of ` 50,329.08 crore
(December 2008). The assessee filed an appeal before the ITAT, Mumbai,
which, in its order, set aside the demand made (2017). After completing the
de novo assessment, the AO raised a fresh demand of ` 1,06,565.55 crore
(December 2017).
1. Non-recovery of outstanding demand from property attached
On examination of the assessment and other orders issued and records
relating to the TRO, Audit observed that the ITD provisionally attached (2007)
32 horses of the assessee under Section 281B of the IT Act, 1961. Of these, as
of June 2010, seven horses were in the race, 15 horses had retired from racing,
and 10 horses had died. Audit further observed that the TRO attached four
horses in June 2010, which was after the lapse of three years of provisional
attachment. The ITD also seized wristwatches valued at ` 19.97 lakhs (as per
the dossier report quarter ending September 2011). Audit could not ascertain
whether the assessee had disposed of the part of the livestock during the
intervening period. Further, Audit noticed that the ITD had not taken any
action to auction the horses to recover a part of the total block period demand
of ` 1,06,565.55 crore. Audit called for reasons for not auctioning the property
(horses) to recover the demand. Further, no detail was available in the records
regarding attachment of any other property by the ITD.

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The TRO Central I, Mumbai stated (December 2021) that the property was
attached provisionally under Section 281B by the Assessing Officer in 2007,
and the TRO attachment was done in 2010 after a lapse of three years during
which the horses might have been sold or died. The reply was silent on the
issue of auctioning the horses, which were attached in June 2010.
Reply of the Ministry is awaited (March 2024).
2. Non-levy of interest under Section 220(2)
The DCIT, Central Circle 1(2), Mumbai, while finalising the assessments
(December 2017) under Section 143(3) read with Section 147/153A for AYs
1999-2000 to 2007-08 in respect of the assessee, raised a demand of
` 1,13,540.48 crore. Audit examination of the assessment records revealed
that the ITD did not levy interest under Section 220(2) of ` 43,951.99 crore as
on 31 March 2021 for AYs 1999-2000 to 2007-08 at the end of each financial
year as required by the CBDT’s instruction dated 07 June 1991. Audit called
for reasons for non-levy of interest under Section 220(2) of the Act.
Reply of the Ministry is awaited. (March 2024).
3. Excess levy of interest under Section 234B
The AO, while finalising the assessments of the assessee for the AYs 1999-2000
to 2002-03, between December 2008 and December 2017 under Section
143(3) read with Section 147/153A, raised interest under Section 234B
aggregating ` 13,643.27 crore. The audit examined computation sheets for
assessment years 1999-2000 to 2007-08, which revealed that the ITD levied
interest under Section 234B of ` 55,732.05 crore instead of the correct leviable
interest of ` 51,927.28 crore. This resulted in excess levy of interest of
` 3,804.76 crore, which led to an overstatement of arrears of demand.
The reply of the Ministry is awaited (March 2024).
4. Improper monitoring and preparation of Dossier Reports
Audit noticed during the examination of the dossier report for the quarter
ending September 2021 and analysis of the assessment records with demands
outstanding in the e-filing portal that the arrears of demand had been
reduced/increased due to rectification/revision of assessment orders and
orders giving effect of appellate orders, but these were not updated in e-filing
portal resulting in understatement of demand of ` 28,362.88 crore in the
dossier report. Further, dossier reports for quarterly periods ending December
2020, March 2021 and July 2021 were not furnished to Audit.
In absence of the said dossier reports, Audit could not ascertain the veracity of
outstanding demand. Further, incorrect exhibition of outstanding demand

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figures in the dossiers resulted in incorrect portrayal of tax dues to the

stakeholders and may hamper the recovery of demands.
In the CAG’s Report No. 23 of 2011 also, it was reported that H2 alone
accounted for 43 per cent of total arrear demand.
Reply from the Ministry is awaited (March 2024).
C3
In the case of an assessee, C3, Audit noticed from the e-filing portal data as on
31 March 2020 that the ITD had raised 31 demands totalling ` 82,959.41 crore
under Sections 143(1a), 143(3), 220(2), 254 and 271(1)(c) for AYs 2001-02,
2002-03, 2004-05 to 2010-11 and 2013-14.
Audit noticed from the Dossier report of quarter ending September 2021 that
the demand, in this case, for all the years, was categorized by the ITD as
Demand Difficult to recover due to insufficient assets.
In Pr. CIT, Central-1, Mumbai charge, the demand of ` 0.20 crore was shown
as outstanding against C3 for AY 2010-11 under Section 143(3) in the e-filing
portal. Examination of assessment records revealed that the assessee had filed
an appeal in the ITAT, Mumbai, which issued the order in favour of the
assessee in September 2016. Audit noted that the ITD had not given effect to
the appeal order. Audit observed that even after a lapse of five years, the
demand was shown as outstanding in the e-filing portal as well as in the dossier
report. This resulted in an overstatement of demand by ` 0.20 crore.
Reply of the Ministry is awaited (March 2024).
K1
K1 was a co-accused in the money-laundering case against Pune-based
businessman H2. K1 was arrested in 2011 by the Enforcement Directorate on
allegations that he had helped H2 to launder money and open bank accounts
abroad.
Audit noticed from the e-filing portal data as on 31 March 2020 that the ITD
had raised 27 demands totaling ` 2,206.97 crore under Sections 143(3), 148,
220(2), 254 and 271(1)(C) for AYs 2000-01 to 2008-09, 2010-11 and 2012-13.
Further, Audit noticed from the ITBA portal (Dossier report) as on
30th September 2021 that ITD had raised 27 demands totaling ` 2,503.78 crore
against the assessee for AYs 2000-01 to 2008-09, 2010-11 to 2012-13.
Audit noted on examination of the assessment records that the ITD had
conducted the search and seizure operation in January 2007; assessment for
the block period AYs 2001-02 to 2007-08 was completed in December 2008,
and the demand of ` 593.68 crore was raised. The main issues of addition

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were undisclosed foreign bank account deposits through transfer instructions,

unexplained expenses, loans, etc. The demand, in this case, for all the years,
was categorized by ITD as 'demand difficult to recover' due to insufficient
assets.
The assessees approached ITAT, Mumbai, and the Tribunal vide order dated
April 2016, had set aside the CIT(A) order. In this case, as directed by ITAT
Mumbai, fresh assessment orders were passed by ITD in December 2017 for
AYs 2001-02 to 2007-08. In the fresh assessment under Section 254, ITD had
raised a demand of ` 1,409.74 crore in December 2017.
The case was transferred to the TRO, Kolkata, which attached two immovable
properties owned jointly by the assessees. However, the TRO Kolkata, on
confirmation from M/s. K2 Ltd., stated that these properties did not belong to
the assessees. The ITD had seized one locker with Standard Chartered Bank,
Kolkata, jointly owned by both assessees. However, no recovery was made.
The assessee died in August 2015, and his wife, C3, the legal heir, is handling
all the pending cases. Details of the final status of the case are awaited.
Thus, it is evident that the ITD did not take effective steps timely to collect the
demand even after the provisional attachment of the property. Further, delay
in invoking specific powers as per Schedule II to the Act in attaching and
disposing of the property also resulted in non-recovery of the demand.

Reply of the Ministry is awaited (March 2024).

Recommendation 5:
The CBDT may consider speeding up the recovery process where the
provisions of Section 281B of the Act were invoked, taking into account the
nature of the asset attached and the volume of outstanding demand.
The Ministry, in its reply, stated that (May 2023) the CBDT has issued various
instructions in this regard. The legislative intent of the provision is that by
provisionally attaching the assets for the specified time in suitable cases, the
assessee is prevented from thwarting the ultimate collection of tax demand. As
there are elaborate checks and balances embedded in the provisions itself, any
further restriction on the action of AO is likely to defeat the legislative intent.

The reply of the Ministry is not tenable as the intent of the Audit was not to restrict
the action of AO; rather, it was the time gap observed between provisional
attachment by AO and regular attachment by TRO. As a result, the property was
found not available when proceedings were initiated for regular attachment.

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5.3.5 Assessee: M/s C2 Ltd.

Charge: PCIT 1 Kolkata
M/s. C2 Ltd. is a public limited company incorporated in June 1995. It is
classified as a Non-governmental company registered with the Registrar of
Companies, Kolkata.
Audit noticed from the e-filing portal data as on 31 March 2020 that the ITD
had raised 11 demands totaling ` 742.13 crore relating to AYs 2008-09 to
2013-14 and 2017-18, and out of these outstanding demands, a demand of
` 653.10 crore related to AY 2017-18 only. Whereas, as per the ITBA portal as
of 15 November 2021, the demands were ` 806.62 crore for the same AYs.

Audit requisitioned records for the above AYs, against which records relating
to three demand cases for AYs 2012-13 and 2013-14 (two cases) were not
produced for Audit.

The AY-wise details of the outstanding demand as per the e-filing portal and
ITBA are given in Table 5.7 below:
Table 5.7: e-filing and ITBA Outstanding Demand
AY Section Data as per e-filing as on Data as per ITBA as on
March 2020 November 2021
Date of Demand Date of Demand raised
Demand raised and Demand and outstanding
outstanding ` in crore)
(`
` in crore)
(`
2008-09 154 22/02/2017 2.76 22/02/2017 2.73
2008-09 115WE50 11/10/2010 0.07 11/10/2010 0.07
2009-10 115WE 17/03/2011 0.01 17/03/2011 0.01
2009-10 143(3) 23/12/2011 0.01 23/12/2011 0.01
2010-11 143(3) 26/06/2012 0.00 26/06/2012 0.00
2011-12 144 26/12/2018 13.33 26/12/2018 13.33
2011-12 271(1)(c) 26/06/2019 3.64 26/06/2019 3.64
(Penalty)
2012-13 144 24/12/2019 25.89 24/12/2019 25.89
2013-14 271(1)(c) 28/02/2019 22.10 28/02/2019 22.10
(Penalty)
2013-14 154 17/06/2019 21.22 17/06/2019 21.22
2017-18 144 28/12/2019 653.10 28/12/2019 653.10
- - - - 03/11/2021 64.52
Total 742.13 806.62
Source- e-filing and ITBA portal of ITD

As evident from the table above, the outstanding demands against the
Assessee have been pending since 2010 and demands aggregating to

50 Processing and assessment of Return of fringe benefits.

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` 0.09 crore were pending for more than ten years. Out of which, a demand
of ` 0.08 crore was related to Fringe Benefits Tax (Section 115WE), which was
abolished in the Finance Act 2009 with effect from AY 2010-11.
Status of Demand: The Assessee filed an insolvency petition before NCLT,
Kolkata Branch, wherein NCLT ordered the commencement of M/s. C2 Ltd.'s
corporate insolvency resolution process vide order dated 07 November 2017
and called upon the company's creditors to submit proof of their claims by
05 December 2017. No further information was found available on record.
However, the Audit observed from the Dossier report of the third quarter
ending December 2020 that the ITD lodged a claim before the NCLT for
` 292.59 crore as against the total outstanding demand of ` 806.62 crore
(including demand for the AY 2020-21). Audit further observed that the
assessee company was under liquidation process, even though the ITD had
classified the entire demand of ` 742.10 crore (excluding the demand relating
to AY 2020-21) as collectible in the Dossier Report. Audit could not ascertain
whether any demand was recovered consequent to the NCLT notification.
Reply of the Ministry is awaited (March 2024).
5.3.6 Assessee: M/s R1
Charge: PCIT Exemption, Jaipur
The Assessee, registered as a Society under the Registration of Societies Act,
1958, is engaged in the printing, publication, distribution and sale of
textbooks/workbooks, etc., to the Rajasthan State Government on a charges
basis. The Government distributes the books free of cost. Audit noted that
the Assessee was seeking exemption from income tax under Section
10(23C)(iiiab)51 of the Act.
Audit examined data of outstanding demands in four cases from various
sources, viz. e-filing portal as on March 2020 and physical records as on
December 2019, and ITBA as on October 2021 pertaining to AYs 2012-13, 2015-
16 to 2018-19.
For the AYs 2012-13, 2015-16, 2016-17 and 2017-18, the DCIT Exemption
Circle, Jaipur, had completed the assessments under Section 143(3) read with
Section 147 in December 2019, wherein the AO had disallowed the Assessee's
claim of exemption under Section 10(23C)(iiiab) of the Act on the grounds that
"the institution existing solely for educational purpose is only eligible for
exemption and that R1 was not functioning solely for the purpose specified

51 According to this section, while computing the total income of a previous year of any person, any
income of any university or other educational institution existing solely for educational purposes and
not for purposes of profit and which is wholly or substantially financed by the Government shall not
form part of the total income.

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under Section 10(23C)(iiiab). Since the Board has been charging the price from
the Government for supplying books, it can be treated as business and
commercial activity between the Board and the Government. Further, it was
neither an educational institute nor wholly or substantially financed by the
Government; as such, the Assessee was not entitled to claim exemption under
Section 10(23C)(iiiab) of the Act." The assessment was completed in December
2019 by treating the Assessee as AOP. The assessee preferred an appeal which
is pending before the CIT(A)-3, Jaipur.
Discrepancy among ITBA, e-filing portal and physical records
Audit observed discrepancies in the amounts of outstanding demand between
the ITBA and the e-filing portals as well as the physical records, as given in
Table 5.8 below:
Table 5.8: Status of Outstanding Demand
` in crore)
(`
AY Outstanding demand as Outstanding Outstanding demand as
per the e-filing portal demand as per ITBA per physical records
(as on March 2020) (as October 2021) (as on December 2019)
2012-13 40.31 NIL 40.40
2015-16 43.19 34.55 43.19
2016-17 17.31 13.85 17.31
2017-18 17.55 5.74 28.69
2018-19 - 25.36 -
Total 118.36 79.59 129.59
Source: e-filing, ITBA portal and physical records of ITD

Audit noted variations/ discrepancies in outstanding demand, as shown in the

e-filing portal, ITBA portal, and physical records. On being pointed out by
Audit, the ACIT (Exemptions) Circle, Jaipur, stated (January 2022) that for
AY 2012-13, no demand was reflected in the e-filing portal due to some
technical issue and that the same was being taken up with their 'systems
officials'. For AYs 2015-16 and 2016-17, the ITD stated that the figures shown
as outstanding earlier in the e-filing portal as of 31 March 2020 did not appear
in the e-filing portal as of January 2022.
The ACIT (Exemptions) Circle, Jaipur, stated (December 2021) that the order
for AY 2017-18 was passed on 10 December 2019, creating a demand of
` 28.69 crore, out of which, as per the OLTAS module of the ITBA System, the
Assessee had paid ` 5.59 crore till 14 December 2021 and that the outstanding
demand was ` 23.10 crore only.
ITD's reply is not tenable as the outstanding demand for AY 2012-13 was
` 40.40 crore as per physical records and ` 40.31 crore as per the e-filing
portal, whereas no demand was reflected on the ITBA Portal. The Demand
Analysis and Recoverability Status Report did not show the demand for

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AY 2012-13. The ITD needs to reconcile the inconsistencies in the data in these
portals to ensure the correct reporting of the outstanding demands.
Audit also observed that in respect of AYs 2016-17 and 2017-18, the Assessee
had preferred appeals (December 2019) with the CIT(A), the outcome of which
was awaited.
Reply of the Ministry is awaited (March 2024).
5.3.7 Assessee: M/s. K3 Pvt. Ltd.
Charge: PCIT 2 Hyderabad
The assessee company is engaged in the execution of contract works. Audit
noticed from the e-filing portal data as of 31 March 2020 that outstanding
demands aggregating to ` 278.44 crore in seven cases were pending collection.
Details of outstanding demand as per the e-filing portal and the ITBA depict
the following trend, as shown in Table 5.9 below:
Table 5.9 : Status of Outstanding Demand
` in crore)
(`
AY Assessment Data as per the e-filing portal as Data as per the ITBA
details on March 2020 ‘demand recoverability
status as on October 2021'
Date of raising Demand raised Date of Demand
the demand and outstanding raising the raised and
demand outstanding
2010-11 154 04/04/2014 5.69 04/04/2014 5.69
2010-11 144 28/12/2017 5.79 28/12/2017 5.78
2011-12 147 26/12/2018 18.68 26/12/2018 18.14
2011-12 271(1)( c) 27/06/2019 6.45 27/06/2019 6.45
(Penalty)
2012-13 147/154 30/12/2019 213.06 02/08/2021 200.78
2013-14 144 29/03/2016 14.65 29/03/2016 14.65
2017-18 144 31/12/2019 14.12 31/12/2019 14.12
Total 278.44 265.61
Source- e-filing and ITBA portal of ITD

As evident from the above table, there were notable differences

between-e-filing portal and ITBA demand and recoverability statement, and
Audit could not verify the reasons for the same.
As per the dossier report for the second quarter ending September 2020 of
FY 2020-21, Audit noted that the Assessee had stopped its operation and there
were no assets for recovery. Audit also noted that the last return of income
filed by the Assessee was for AY 2017-18.
Audit noticed certain issues relating to non-updation of data in ITBA, delay in
the attachment of properties, and non-notification of the attached properties
to the CERSAI in this case, as discussed below:

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i. Non-updation of data in ITBA

For AY 2010-11, the Assessee filed a return of income in October 2010,
declaring income of ` 4.31 crore. The original assessment was completed
under Section 143(3) with a taxable income of ` 16.32 crore in March 2013,
and a demand of ` 5.76 crore was raised. Subsequently, the assessment was
revised (December 2017) under Section 144 read with Section 254 and a
demand of ` 5.79 crore was raised.
Audit observed from the ‘Demand recoverability status’ in the ITBA as of
November 2021 as well as the e-filing portal that two demands, i.e. ` 5.69 crore
raised under Section 154 in April 2014 and ` 5.79 crore raised under Section
144 in December 2017 were pending. However, Audit noticed from the
assessment records that only the latest demand of ` 5.79 crore, raised under
Section 144 in December 2017, was actually pending collection from the
Assessee. The demand raised under Section 154 was subsumed in the
subsequent order. This resulted in an overstatement of demand of
` 5.69 crore. The ACIT, Circle 2(1), Hyderabad, accepted the audit observation
(December 2021). However, details of remedial action taken are awaited
(March 2024).
For AY 2011-12, the Assessee filed a return of income in January 2012,
declaring an income of ` 22.87 crore. The assessment was completed in
December 2018 under Section 147, read with Section 144 by making additions
based on the information received from ADIT (Inv) Unit 2(4), Kolkata and ITO
10(2), Kolkata, on account of sub-contract transactions with Kolkata based
bogus companies to the tune of ` 19.41 crore. The income was assessed at
` 43.23 crore, and a demand of ` 18.68 crore was raised. Audit examination
of the demand analysis statement of ITBA for AY 2011-12 revealed that the
demand was reported as ` 18.14 crore instead of ` 18.68 crore, which resulted
in a short reporting of demand by ` 0.54 crore. The ITD accepted the audit
observation (December 2021). However, the details of the action taken are
awaited (March 2024).
Further, the assessment for the AY 2013-14 under Section 144 was finalized in
March 2016 at an income of ` 33.32 crore, and a demand of ` 14.70 crore was
raised. Subsequently, an order giving effect to the CIT(Appeals) Hyderabad
was passed in October 2017, and a revised demand of ` 6.75 crore was raised.
Audit observed from the demand analysis report dated November 2021 that
the demand of ` 14.65 crore was still reflected instead of the revised demand
of ` 6.75 crore. The non-updation of revised demand resulted in incorrect
reporting of demand by ` 7.95 crore besides communicating the incorrect
amount of demand to the concerned TRO. The ITD accepted the audit
observation (December 2021) and updated the demand in the ITBA portal.

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However, details of the updation made in the e-filing portal are awaited
(March 2024).
ii. Delay in Attachment of Properties
Audit noticed that the TRO-Central, Hyderabad drew a Tax Recovery certificate
(TRC) in July 2015 for a total outstanding demand of ` 206.04 crore relating to
AYs 2010-11 to 2012-13. Details of movable and immovable assets were called
for from the Assessee (June 2017). Order under Section 17952 was issued
(December 2017) to the directors/partners of the company, and in response,
replies were received that no balance was available in their bank accounts.
TRO-Central, Hyderabad addressed the Sub-Registrar (March 2018) for the
attachment of immovable assets and issued notice under Section 226(3) to the
banks for the attachment of bank accounts in February 2016. Further, PCIT-2,
Hyderabad instructed DCIT-2, Hyderabad, to coordinate with the TRO to write
to CIBIL authorities for details of collateral given for loans and the latest
addresses of the director. As seen from the Dossier Report for the second
quarter of FY 2020-21, the AO had recorded that “debtors were attached and
replies were received that no balance amount had to be paid to the assessee
company’’. Thus, because of the long gap between drawing TRC and attaching
the immovable assets, the Assessee might have disposed of their assets or part
of their assets, which could eventually affect the recovery of tax demand.
Further action taken by the ITD to recover the demand is awaited
(March 2024).
iii. Attachment not registered with CERSAI
Sub-Section 2 of Section 26C of SARFAESI Act, 2002 lays down that a registered
security interest shall have priority over any subsequent security interest
created upon such property in any fashion like sale, lease or attachment by
any other authority/person. The DIT (recovery) in September 2017
communicated to all Pr. CCsIT inviting relevant amendments to SARFAESI
Act, 2002, stating that "it has become very important for the field authorities
to notify CERSAI of any attachment order as soon as it is issued under the
Income Tax Act, so that not only the value of the attached property remains
intact but also the right of the ITD over the attached property remains at the
top. The field officers may be instructed to approach CERSAI to get information
regarding properties already attached by other creditors for not only exploring
the collection out of the same but also to find out the hidden and undeclared
assets of the tax defaulters."

52 Section 179 of the IT Act provides that if the tax dues of a Private company in respect of any income
of any previous year cannot be recovered, then every person who was a director of the private
company at any time during the relevant Previous Year shall be jointly and severally liable for the
payment of tax dues.

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Audit noticed that in the instant case, the TRO-Central Hyderabad issued
notice under Section 226(3) to the banks for attachment of bank accounts
(February 2016) and addressed Sub-Registrar (March 2018) for attachment of
immovable assets. However, audit observed that the said attachment was not
notified to the CERSAI which may result in non-fulfillment of purpose of the
attachment.
Reply of the Ministry is awaited (March 2024).
5.3.8 Assessee: M/s D1 Ltd
Charge: PCIT Chennai
M/s S16 Ltd was incorporated (1992) in Chennai, which later changed (1997)
its name to M/s. D1 Ltd. D2 was the Company's Chief promoter and Managing
Director. The Assessee indulged in stock market manipulation during the
financial year 2000-01. On account of various irregularities, the assessee
company was delisted from BSE/NSE and banned by SEBI from accessing the
Capital market.
Audit noticed from the e-filing portal data as on 31st March 2020 that the ITD
had raised 10 demands totalling ` 1,128.61 crore under Sections 143(3), 148,
154, 271(1)(c) and 271E against the Assessee during the period from April 2001
to September 2015 for the AYs 1995-96, 1996-97, 2000-01 to 2003-04. As per
the ITBA portal, as of 4th October 2021 also, the demands of ` 1,128.61 crore
were raised for the Assessee pertaining to aforesaid AYs.

Audit requisitioned information along with the records of the Assessee for
AYs 1995-96, 1996-97, 2000-01 to 2003-04 against which records relating to
two demand cases for the AY 1995-96 were not produced to Audit.

The assessee company was a 100 per cent Export Oriented Undertaking
engaged in the production and export of software. For AY 1996-97, the
assessment was initially completed after scrutiny under Section 143(3).
Subsequently, the assessment was revised twice under Sections 147 and 263
in March 2002 and December 2004, respectively, and finally, a demand of
` 6.55 crore was raised. Out of this demand, ` 4.08 crore was adjusted from
the AY 2001-02 refund. The case was forwarded to the TRO in September 2005
for the remaining demand of ` 2.50 crore along with interest of ` 0.20 crore
under Section 220(2).
Audit observed that the TRO had served (January 2006) notice to the Assessee
and to the Principal Officer, D2.
For AY 2000-01, the Assessee filed its Return of Income in November 2007,
disclosing profit from the business of ` 11.41 crore and claiming exemption of

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the entire income under Section 10B53 of the Act. Meanwhile, the Central
Bureau of Investigation (CBI) made a raid (January 2004) on the assesse
company and arrested the MD of the company. The company is in liquidation.
Subsequently, the assessment was completed under Section 143(3), read with
Section 147 in December 2007, disallowing the Section 10B claim and raising a
demand of ` 8.69 crore. Thereafter, as per Section 263 order (March 2010),
the assessment was set aside, and a fresh assessment was completed in
December 2010 under Section 144 read, with Section 263 disallowing the
excess claim of depreciation on software and interest receipts of the company.
The taxable income arrived at ` 67.09 crore, and a demand of ` 62.55 crore
was raised, including interest.
Similarly, assessments for AYs 2001-02 and 2002-03 were completed, and the
ITD issued demand notices for tax of ` 733.05 crore, penalty of ` 292.66 crore
for AY 2001-02, and wealth tax of ` 0.025 lakh for AY 2002-03. All the demand
notices were issued to the company's Principal Officer through the prison
authorities, but the Principal Officer did not receive them.
The case relating to AYs 2000-01 and 2003-04 was referred (March 2011) to
TRO after interest under Section 220(2) of ` 1.25 crore was worked out. In
April 2011, TRO addressed the Assessee and the Principal Officer for the tax
arrears of ` 63.81 crore.
Audit further noticed that with respect to AYs 1995-96 and 1996-97, the
matter was pending before the ITAT, Chennai. In respect of AYs 2001-02 and
2002-03, it was also observed that the ITAT, Chennai, had stayed (July 2005)
the proceedings against the orders of the AO in conducting a special audit
under Section 142(2A), where tax demand of ` 733.05 crore (March 2013) and
thereafter a penalty of ` 291.92 crore (September 2013) respectively had been
imposed originally. Audit noticed attachment of encumbered properties, lack
of coordination between the AO and the TRO and incorrect dossier reporting
as discussed below:
(i) Attachment of already encumbered Immovable Property
On examination of the records maintained by the Tax Recovery Officer 1,
Chennai Commissionerate, Audit noted that the Assessee had obtained a loan
from IDBI / SASF (Stressed Assets Stabilisation Fund) and pledged a plot in
Mehsana, Gujarat, on first charge basis for financial assistance granted to the
company and second charge basis to IndusInd Bank for working capital
assistance. Accordingly, the ITD had addressed the TRO, Mehsana, for creating

53 Exclusion of the profits and gains derived by an assessee from a 100 per cent Export Oriented
Undertaking from the total income of the Assessee, subject to fulfilment of conditions specified in
the Act.

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a charge on the property based on which the TRO, Mehsana, attached the
property. It also came to the notice of the TRO that IDBI/SASF had filed a suit
against the Assessee with the Debt Recovery Tribunal II, Chennai, vide OA
No.303/2002. TRO, Chennai filed a petition on 26 September 2011 to implead
itself in the petition in OA No. 303/2002 and requested settlement of the claim
of ` 63.81 crore. It is, however, observed from the letter from IDBI/SASF that
the immovable property stood unattached by SASF (March 2012), and the debt
recovery certificate was issued in favour of IDBI/SASF for ` 108.82 crore, which
was pending execution.
(ii) Absence of coordination between the AO and the TRO
To ensure speedy disposal of arrears of tax demand, coordination between the
AO and the TRO is essential. The TRO is specially empowered to initiate
recovery proceedings against assessees in all cases where demand is more
than one year old. Therefore, all the cases involving demand outstanding for
more than a year are required to be transferred by the AOs to the TROs for
effective pursuance. At the same time, the TRO also needs to inform the AO
of the disposals made from time to time.
Audit noted differences in outstanding demands in the dossiers maintained by
the AO and the TRO, as indicated in Table 5.10 below:
Table 5.10: Discrepancies between the AO and the TRO records
AY As per Dossier Report - Cor. As Per Dossier Report – Difference
Circle 1(1) TRO-1 (2014) in `
Tax / Penalty Amount in ` Tax / Penalty Amount in `
1996-97 Tax 2,23,35,614 Tax & Interest 2,71,08,038 46,72,424
2000-01 Penalty 5,53,47,600 Penalty 0 5,53,47,600
2003-04 Penalty 31,85,53,752 Penalty 45,000 31,85,08,752
Source- Dossier report as on July 2022

Audit could not ascertain the reasons for variations in the demand as no reply
has been received from the DCIT, Corporate Circle-1 (1) (March 2024)
(III) Inconsistencies in the outstanding demand figures between the data
as per assessment records and the Dossier report
For the AY 2001-02, the outstanding demand in respect of Penalty under
Section 271(1)(c) as per the assessment records stood at ` 291.92 crore.
However, as per the dossier report for the quarter ending June 2021, an
outstanding amount of ` 292.67 crore was shown, leaving a difference of
` 0.75 crore, which required reconciliation.
Reply of the Ministry is awaited (March 2024).

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5.3.9 Assessee: M/s T2 Ltd

Charge: PCIT-2, Hyderabad
M/s. T2 Ltd. is an unlisted public limited company incorporated in Hyderabad
on November 7, 1997.
Audit noticed from the e-filing portal data as on 31st March 2020 that the ITD
had raised eight demands involving ` 388.74 crore under Sections 143(1a),
143(3), 144, 154, 115 WE and 115 WE(3) against the assessee during the period
from March 2011 to November 2019 for AYs 2006-07, 2007-08 and 2009-10 to
2012-13.

The audit requisitioned information along with the assessee's records for AYs
2006-07, 2007-08, 2009-10, and 2012-13, against which records relating to
AY 2009-10, in which demand was raised under Section 115WE(3), were not
produced to the Audit.

Table 5.11: Status of Outstanding Demand

` in crore)
(`
AY Assessment Data as per the e-filing Data as per the ITBA’s
details portal as on March 2020 demand recoverability status
as on November 2021
Date of raising Demand Date of Demand
the demand raised and raising the raised and
outstanding demand outstanding
2006-07 143(3) 22/03/2013 0.98 22/03/2013 0.98
2006-07 115WE(3) 22/03/2013 0.02 22/03/2013 0.02
2007-08 143(3) 25/03/2013 4.72 25/03/2013 4.72
2009-10 1431a 05/03/2011 0.75 05/03/2011 0.75
2009-10 115WE 05/03/2011 0.01 05/03/2011 0.01
2010-11 143(3) 30/03/2013 87.99 30/03/2013 87.99
2011-12 154 03/08/2016 293.01 03/08/2016 293.01
2012-13 144 28/11/2019 1.26 28/11/2019 1.26
Total 388.74 388.74
Source: e-filing and ITBA portal of ITD

Further, Audit noticed from the ITBA portal as on 23 November 2021 that the
ITD had raised eight demands totaling ` 388.72 crore against the assessee for
AYs 2006-07, 2007-08, 2009-10 to 2012-13. The audit also noticed that
demands of ` 0.03 crore pertaining to Fringe Benefits Tax (Section 115WE),
abolished by the Finance Act 2009 with effect from AY 2010-11, were pending
recovery since 2013. Further, the Audit observed that the amount of
outstanding demand as per the ITBA portal as of November 2021 matched the
outstanding demand as per the e-filing portal as of March 2020, indicating that
interest under section 220(2) of the Act was not included in the outstanding
demand on the ITBA portal.

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Audit noted from the Dossier report for the second quarter ending
30 September of FY 2020-21 that the assessee was not traceable (a company
not existing on the given address). However, the assessee's bank accounts and
immovable properties were attached, and orders were issued in February 2016
to the Director to clear the dues. It is also gathered that CBI had arrested the
MD of the assessee company. Union Bank claimed a lien on the attached
property, which was auctioned by the bank, and filed a writ petition against
the order of attachment of the Property. It was also noted that the ITD was
yet to file a counter affidavit in the High Court. The CCIT instructed to write a
fresh letter to CBI to ascertain the directors' properties. Presently, all the
demands were categorised as "demands difficult to recover" by the ITD.
Audit noticed that the ITBA data was not updated, as discussed below:
Non-updation of data in ITBA
Assessment for AY 2009-10 was completed in December 2011 under Section
143(3), and a net demand of ` 10.59 crore was raised after taking into account
the demand of ` 0.75 crore raised under Section 143(1). Audit, however,
noticed that the demand of ` 0.75 crore raised under Section 143(1) was still
reflected in the demand analysis report, and no demand was reflected in
respect of the order under Section 143(3). Non-updating the revised order
under Section 143(3) resulted in an understatement of demand of ` 9.84 crore.
ACIT, Circle 2(1), Hyderabad accepted (December 2021) the audit observation
and stated that the order under Section 143(3), passed in the AST54, was not
uploaded in ITBA. Further, the case was referred (December 2021) to the ITBA
helpdesk to resolve the issue.
Reply of the Ministry is awaited (March 2024).
5.3.10 Assessee: M/s P2 Ltd.
Charge: PCIT –2, Hyderabad
M/s. P2 Ltd. is located in Hyderabad, Telangana and is part of the Computer
Systems Design and Related Services Industry.
The audit noticed from the e-filing portal data as of 31 March 2020 that the
ITD had raised 11 demands totalling ` 275.65 crore under Sections 143(3), 154,
220 (2) and 115 WE (3) against the assesse company during the period from
August 2012 to May 2019 for AYs 2002-03, 2004-05, 2006-07 and 2008-09 to
2013-14. As per the ITBA's demand recoverability status, the demand was
` 275.10 crore for the same AYs.

54 The Assessment Information System (AST) was used in the Income Tax Department before ITBA for
assessment functions, such as return processing, regular assessment, appeal and rectification, etc.

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The audit requisitioned information along with the assessee's records for
these AYs. Records relating to interest under Section 220(2) for the
AYs 2002-03, 2004-05, and 2008-09 were not produced for the Audit.

Details of the outstanding demands as per the e-filing portal and the ITBA’s
demand recoverability status, are given in Table 5.12 below:
Table 5.12: Status of Outstanding Demand
(` in crore)
AY Assessme Data as per the e-filing portal Data as per the ITBA’s
nt details as on March 2020 ‘demand recoverability
status’ as on October 2021
Date of raising Demand Date of Demand
the demand raised and raising the raised and
outstanding demand outstanding
2002-03 220(2) 15/08/2012 0.0067 15/08/2012 0.0067
(interest)
2004-05 220(2) 15/08/2012 0.0085 15/08/2012 0.0085
(interest)
2006-07 154 23/07/2014 1.38 23/07/2014 1.38
2008-09 154 11/04/2017 9.89 11/04/2017 9.89
2008-09 220(2) 26/03/2014 0.0013 26/03/2014 0.0013
(interest)
2009-10 143(3) 31/01/2014 150.83 31/01/2014 150.58
2009-10 115WE(3) 31/01/2014 0.25 31/01/2014 0.25
2010-11 154 29/03/2017 11.33 29/03/2017 11.21
2011-12 143(3) 30/04/2015 42.39 30/04/2015 42.21
2012-13 154 20/05/2019 15.41 20/05/2019 15.41
2013-14 143(3) 03/10/2017 44.16 03/10/2017 44.16
Total 275.65 275.10
Source- e-filing and ITBA portal of ITD

As evident from the Table above, the demand of ` 150.83 crore raised under
Section 143(3) in January 2014 for AY 2009-10 was the highest, representing
54.7 per cent of the total demand raised between AY 2002-03 and AY 2013-14.
Further, demands for AYs 2002-03 and 2004-05 related to interest levied under
Section 220(2) aggregating to ` 1.5 lakh have been pending since 2012. It
could also be seen that demand relating to the Fringe Benefits Tax (Section
115WE), abolished by the Finance Act 2009 with effect from AY 2010-11, was
pending recovery since 2014.
Audit noticed that the AO did not include the demand in the statement of
arrears of tax while communicating it to the TRO, which is discussed in detail
below:

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Lack of coordination between the AO and the TRO

DCIT Circle 5(1), Hyderabad, while finalising the assessment for AY 2011-12
under Section 143(3) read with Section 92CA read with Section 144 in
April 2015, disallowed the assessee’s claim of deduction of ` 10.80 crore under
Section 10A55of the Act, depreciation of ` 5.62 crore and made addition of
` 58.13 crore under Section 92 CA (3)56 of the Act and assessed an income of
` 90.98 crore, and a demand of ` 42.39 crore was raised. Audit examination
revealed that while communicating the statement of tax arrears to the TRO,
the AO did not include the said demand. This incorrect reporting of demand to
the TRO resulted in the non-pursuance of timely recovery of the said demand,
which might adversely impact revenue to the exchequer.
Further, the Audit noted from the Dossier report of the assessee for the second
quarter of FY 2021-22 and a letter dated June 2017 by the DCIT Circle-16(2),
Hyderabad, that this case was transferred to the TRO (June 2017). However,
the collection of demand could not be pursued as the assessee was not
traceable. The assessee had not filed a return of income after AY 2013-14. All
the demands were classified as 'Demands difficult to recover'. Details of action
taken by the ITD to recover the demands are awaited. (March 2024).
Reply of the Ministry is awaited (March 2024).
5.3.11 Assessee: M/s. N3 Ltd.
Charge: PCIT Guwahati
M/s. N3 Ltd., located at Morangi, Golaghat district, Assam, opened in 1999 and
is jointly owned by the Ministry of Petroleum and Natural Gas of the
Government of India and Assam Oil, Ministry of Mineral and Petroleum,
Government of Assam.
The audit identified from the e-filing portal data and demand recoverability
status as on 31 March of 2020 that three demands totalling ` 125.78 crore
relating to AYs 2009-10, 2015-16 and 2017-18 were pending recovery.
Audit noticed certain issues relating to overstatement of demand in the e-filing
portal & the ITBA, short demand and incorrect reporting, as discussed below:
Overstatement of demand in the e-filing portal & the ITBA
For AY 2017-18, a demand of ` 125.35 crore under Section 143(3) was shown
outstanding in the e-filing portal as on March 2020. Audit observed that the

55 There is a special provision with respect to newly established undertakings in the free trade zone.
The deduction is allowed for profits and gains derived by the undertaking from the export of articles
or things or computer software for 10 consecutive AYs relevant to the previous year in which the
undertaking begins to manufacture or produce such articles or things.
56 Refer to the Transfer Pricing Officer to determine the arm's length price in relation to international
transactions.

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assessee paid an amount of ` 0.17 crore and ` 108.73 crore in January 2020
and March 2020, respectively, against this demand, and a balance of
` 16.45 crore was pending recovery. Further, this demand was also
outstanding in the ITBA system as of November 2021.
Audit further observed that, as per the order of rectification under Section 154
passed in December 2021, no demand was outstanding against the assessee
for the AY 2017-18, and a refund was also proposed.
For the AY 2009-10, the Fringe benefit tax return was processed under Section
115WE(1) in January 2011, assessing a total fringe benefit of ` 2.66 crore and
a demand of ` 0.43 crore was raised, which was reflected pending on both the
e-filing portal and the ITBA portal. Audit observed that the said demand was
worked out after considering the assessee's payment of ` 0.57 crore.
However, Audit noticed from the OLTAS payment details in the ITBA that the
assessee had paid ` 0.91 crore during the period from June 2008 to September
2009 instead of ` 0.57 crore, which resulted in raising of excess demand of
` 0.34 crore.
Reply of the Ministry is awaited (March 2024).
5.3.12 Assessee: A3
Charge: PCIT Guwahati
A357, an Artificial Juridical Person (AJP) is established to maintain the welfare
of the labour force with harmonious industrial relations to achieve a
sustainable economy.
Audit noticed from the e-filing portal data as on 31 March 2020 that the ITD
had raised a demand of ` 79.24 crore under Section 143(3) against the
assessee in December 2019 for AY 2017-18. Details of demands outstanding
of this assessee in the ITBA portal and Dossier reports were not made available
to Audit. Therefore, Audit could not verify the outstanding demand reported
in the dossier report and the ITBA portal. Audit could not also ascertain
whether the dossier report was prepared in this case.
ITO Ward 1(2), Guwahati, while finalising the assessment for AY 2017-18 under
Section 143(3) in December 2019 at an income of ` 160.31 crore, made
additions, which included Cess Fund deposited for the welfare of the
construction workers and FD interest earned out of such funds deposited in
various banks, due to non-adherence of statutory filing of an application for

57 The notification no. 131/2021 dated 10 November 2021, relates only to the A3 and shall apply to the
Financial years 2021-22, 2022-23, 2023-24, 2024-25, and 2025-26.

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availing exemption under Section 10(46)58 of the Act by the assesse and raised
a demand of ` 79.24 crore against it.
The audit also noted that the case was sub-judice in the Guwahati High Court,
with a stay on the realisation of such a demand.
Audit noticed that the assessee had not filed the return of income for AYs
2014-15 to 2016-17. However, CBDT vide notification 131/2021 dated 10
November 2021 had notified exemption for the assessee from income tax for
FYs 2021-22 to 2025-26.
Audit could not ascertain whether the ITD had initiated any action against the
assessee for not filing the return of income for the aforesaid AYs.
Reply of the Ministry is awaited (March 2024).
5.3.13 Assessee: M/s S1 Ltd.
Charge: PCIT- Central 1, Delhi
M/s. S1 Ltd. is a publicly incorporated company registered with the Registrar
of Companies, Kolkata. It is involved in real estate activities with owned or
leased property, broadcasting and telecasting of TV programs, etc.
Audit identified 10 assessment records of the assessee for AYs 1999-2000,
2001-02, 2002-03, 2004-05, 2008-09, 2015-16, and 2017-18 from the e-filing
portal involving a net aggregate outstanding demand of ` 23,473.43 crore as
detailed below in Table 5.13:
Table 5.13: Demands pending in respect of the assessee
` in crore)
(`
AYs Assessed under Date of Order Demand as per Demand as per
Section e-filing portal physical records
1999-00 220(2) (interest) 22/01/2020 0.001 Records not
produced
2001-02 153C/143(3) 05/02/2019 2,364.12 2,366.84
271(1)(C)(penalty) 30/03/2007 0.22
2002-03 153C/143(3) 16/04/2019 2,999.77 2,992.21
2003-04 153C/143(3) 03/07/2019 - 4,336.38
2004-05 153C/143(3) 20/09/2019 9,915.86 9,890.85
2007-08 153C/143(3) 09/12/2019 - 4,771.79
2008-09 143(3) 06/03/2020 7,389.75 7,389.75
2015-16 143(3) 19/03/2019 1.03 -
2015-16 154 r.w.s.250 16/03/2018 - Nil
r.w.s.143(3)
2017-18 143(3) 18/12/2019 802.68 802.68
Total 23,473.43 32,549.47
Source- e-filing portal and physical records of ITD

58 Any specified income arising to a body or authority or CBDT or Trust or Commission established or
constituted by or under a Central, State, or Provincial Act for the benefit of the general public shall
not form part of the Total Income.

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Records relating to AY 1999-2000 were not produced for audit by the DCIT,
Central Circle 1, Delhi.

As evident from the above table, there were notable differences between the
e-filing portal and physical records, and Audit could not verify the reasons for
the same.
Audit examination of the assessment records revealed that the major
additions in the assessments of AYs 2001-02 to 2004-05, 2007-08 to 2008-09,
2015-16 and 2017-18 were due to disallowance of unclaimed amounts of
Optionally Fully Convertible Debentures (OFCD), interest paid on account of
OFCDs, compensation paid for violation of agreement condition, interest
payment on loan utilised for non-business purposes, expenditure incurred
against exempted income.
In pursuance of the search and seizure conducted on the premises of R2 Group
companies, Ahmedabad, in August/September 2006, the DCIT, Central Circle
1, Delhi, completed assessments of the assessee under Section 143(3) read
with Sections 153C and 153A from February to December 2019 for AYs 2001-
02 to 2004-05 and 2007-08. Consequently, the total demand for these five AYs
was revised to ` 24,358.07 crore, which was pending. Details of action taken
to collect these demands are awaited (March 2024).
For AY 2015-16, search and seizures were conducted on the assessee's
premises on 22 and 23 November 2014. The AO, while completing the
assessment under Section 143(3) on 21/11/2016 based on the above search,
determined an income of ` 2,217.60 crore on account of additions amounting
to ` 3367.73 crore and raised a tax demand of ` 902.09 crore. The assessee
appealed against the order of the AO (December 2016), which was partly
allowed (January 2018) by the CIT(A). The assessee had preferred a second
appeal (February 2018) against the additions upheld by the CIT(Appeal). The
appeal was also filed by the ITD (April 2018) with the ITAT, New Delhi, against
the CIT(A) order. The outcome of appeals before ITAT was awaited.
Meanwhile, the DCIT, Central Circle 1 passed a rectification order under
Section 154 (March 2019). After considering setting off earlier AY losses, the
assessee was refunded ` 1.03 crore, including interest. However, the above
refund of ` 1.03 crore was incorrectly reported as outstanding on the e-filing
portal.
Audit further noticed certain other issues such as non-issuance of notice for
interest under Section 220(2), non-preparation of dossier report and
non-allowance of TDS claim as discussed below:

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1. Non-issuance of notice for interest under Section 220(2) at the end

of financial year
Audit examination of the assessment records revealed that interest under
Section 220(2) was not le vied at the end of each financial year. This resulted
in understating the outstanding demand for six AYs (2002-03 to 2004-05,
2007-08 to 2008-09 and 2017-18), aggregating to ` 5,058.78 crore.
2. Non-preparation of dossier report
As per the CBDT instructions (September 2015), the AO must prepare a Dossier
Report to monitor outstanding demand cases effectively.
Dossier reports regarding the assessee were not made available to the audit.
Thus, the audit could not verify the recovery process and effective monitoring
of outstanding demand.
3. Non-allowance of TDS claim
Audit noticed that the assessee was not allowed TDS/TCS claims during the AYs
shown in Table 5.14 below:
Table 5.14: Mismatch of TDS claim
` in crore)
(`
Assessment Assessment made Date of original TDS/TCS TDS/TCS Difference
Year under Section Assessment claimed by allowed by
Order the assessee the ITD
2001-02 153C/143(3) 02/05/2019 3.42 0 3.42
2003-04 153C r.w.s. 143(3) 07/03/2019 9.04 0 9.04
2004-05 153C 20/09/2019 21.20 0 21.20
2007-08 153C/143(3) 12/09/2019 17.63 0 17.63
2008-09 143(3) 03/06/2020 39.41 37.95 1.46
Total 90.70 37.95 52.75
Source: Physical records of the ITD

As evident from the table above, the assessee claimed TDS/TCS of

` 90.70 crore for the above AYs; however, the ITD allowed ` 37.95 crore only,
resulting in a difference of ` 52.75 crore. Non-reconciliation of TDS might lead
to incorrect reporting of the outstanding demand.
Reply of the Ministry is awaited (March 2024).
5.3.14 Assessee: M/s C5 Ltd.
Charge: PCIT Ranchi
M/s C5 Ltd. is a subsidiary of M/s C6 Ltd., an undertaking of the Government
of India. M/s C5 Ltd was established in 1956 as M/s. N7 Ltd. and has been a

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Category-I Mini Ratna company since October 2007. It manages the

nationalized coal mines of the Coal Mines Authority, Central Division.
Audit identified seven assessment records of the assessee for AYs 2007-08,
2014-15 to 2016-17, and 2018-19 from the e-filing portal involving aggregate
outstanding demands of ` 283.13 crore.
A comparison of outstanding demand as per the e-filing portal and the ITBA’s
'demand recoverability’, along with related AYs and Sections under which the
demands were raised are given in Table 5.15 below:
Table 5.15: Status of Outstanding Demand
` in crore)
(`
AY Assessment Data as per the e-filing Data as per the ITBA’s
details portal as on March 2020 ‘demand recoverability
status’ on November 2021
Date of Demand Date of Demand
raising the raised and raising the raised and
demand outstanding demand outstanding
2007-08 220(2) 14/03/2019 1.47 14/03/2019 1.47
(interest)
2014-15 Not available 16/10/2015 0.00 16/10/2015 0.00
2015-16 220(2) 27/03/2019 0.19 27/03/2019 0.19
(interest)
2015-16 263 - - 20/04/2021 1822.03
2016-17 154 14/01/2020 54.27 14/01/2020 54.27
2016-17 154 14/01/2020 85.13 14/01/2020 85.13
2018-19 143(3) 16/03/2020 142.06 16/03/2020 142.06
Total 283.13 2,105.16
Source- e-filing and ITBA portal of the ITD

As evident from the above table, interest aggregating to ` 1.66 crore was
levied under Section 220(2) relating to AYs 2007-08 and 2015-16 in March 2019
and was still pending collection as of the date of Audit (December 2021).
Further, notable differences pertaining to AY 2015-16 in the outstanding
demand amounts between the e-filing portal and the ITBA system could not
be verified by Audit as data up to March 2020 was taken from the e-filing portal
whereas the demand of ` 1,822.03 crore raised under section 263 was passed
on 20 April 2021 which was reflected in the ITBA’s demand recoverability
status as on November 2021. Further, the Audit also could not ascertain from
the records produced whether the AO had made any effort to collect the
aforesaid interest from the assessee.

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Audit further observed that the assessee filed a return of income for
AY 2016-17 in November 2016, declaring a total income of ` 3,585.45 crore.
Assessment under Section 143 (3) was completed in March 2018, determining
the income of ` 3,891.76 crore after making the addition of ` 306.31 crore,
and a net demand of ` 96.53 crore was raised. The assessee preferred an
appeal against the additions made by the AO, and the CIT(A) had allowed
(March 2019) relief to the assessee to the extent of ` 231.97 crore and made
a further addition of ` 100.78 crore. An order giving effect to CIT(A) was
passed in March 2019 at an income of ` 3,760.57 crore, which resulted in a net
demand of ` 40.20 crore. Subsequently, a rectification order under Section
154 was passed in January 2020, resulting in nil demand.
However, as per the ‘Demand and Recovery Status Report’ (November 2021)
in the ITBA and on the e-filing portal as of 31 March 2020, two demands of
` 85.14 crore and ` 54.27 crore were shown as pending recovery. This showed
an overreporting of an outstanding demand of ` 139.41 crore.

Reply of the Ministry is awaited (March 2024).

5.3.15 Assessee: L1
Charge: PCIT 1, Hyderabad
L1, an individual, was assessed in Circle 6(1) Hyderabad. Examination of
assessment records revealed that in anticipation of receiving huge money, the
assessee declared an income of ` 9,800 crore under the Income Declaration
Scheme 2016. The assessee had made the declaration in anticipation of
receiving a sum of ` 10,000 crore from S5 of Belgaum, Karnataka. The assessee
had invested ` 38 lakh in the 'Rice Pulling device'.59. In return, he anticipated
receiving the said ` 10,000 crore as his share. He subsequently admitted that
he was cheated on in this transaction and didn't receive the money. A search
operation was also conducted on the assessee's premises in December 2016.
No cash or any undisclosed assets were found during the search operation.
Audit identified seven assessment records of the assessee as per the e-filing
portal and the ITBA’s ‘demand recoverability status’ as on 31 March 2020
relating to AYs 2011-12 to 2017-18, with a total demand amounting to
` 7,572.70 crore as given in Table 5.16 below:

59 Rice pulling has been reported to be a scam in many newspaper reports:

(https://www.thehindu.com/news/national/andhra-pradesh/rice-pulling-scam-bigger-than-what-
meets-the-eye/article29913142.ece).

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Table 5.16: Status of Outstanding Demand

` in crore)
(`
AY Assessment Data as per the e-filing Data as per the ITBA’s ‘demand
details portal recoverability status’
Date of raising Demand Date of raising Demand
the demand outstanding the demand outstanding
2011-12 153A 23/08/2019 0.0049 23/08/2019 0.0049
2012-13 153A 23/08/2019 0.18 23/08/2019 0.18
2013-14 153A 23/08/2019 0.21 23/08/2019 0.21
2014-15 153A 23/08/2019 1.05 23/08/2019 1.05
2015-16 153A 23/08/2019 0.36 23/08/2019 0.36
2016-17 153A 23/08/2019 0.11 23/08/2019 0.11
2017-18 143(3) 23/08/2019 7,570.79 23/08/2019 7,570.79
Total 7,572.70 7,572.20
Source: e-filing and ITBA portal of ITD

As evident from the table above, the demand raised aggregated

` 7,572.70 crore for AYs 2011-12 to AY 2017-18 under Section 143(3) and
153A, wherein the highest demand of ` 7,570.79 pertained to AY 2017-18
raised under Section 143(3) of the Act.
The assessment for AY 2017-18 was completed under Section 143(3) at
` 7,570.79 crore by the AO, even though no cash or any undisclosed assets
were found during the search operation of the assessee.
The audit noted that as the assessee expired on 24 February 2017, his legal
heir(s) preferred an appeal before CIT (A) in September 2019. The outcome of
the appeal and the status of recovery are awaited (March 2024) in Audit.
Audit noticed that the case was transferred to the TRO in December 2019 for
recovery. Nearly ten movable and immovable properties were identified for
attachment. However, all were already mortgaged with M/s. L2 Ltd. as a
security towards loans obtained by the assessee in 2016 towards construction
purposes. Audit further noticed from the Demand analysis statement that all
the pending demands were categorised as ‘demands difficult to recover’.
Reply of the Ministry is awaited (March 2024).
5.3.16 Assessee: M/s. D3 Pvt. Ltd.
Charge: PCIT 1, Hyderabad
The assessee is a private company engaged in printing and publications. D7 is
an Indian English-language daily newspaper published by M/s. D3 Pvt. Ltd. in
Hyderabad, Telangana.
From the e-filing portal, Audit noted 09 assessment records of the assessee
relating to AYs 2008-09, 2010-11 to 2013-14, 2015-16 to 2018-19, where total
outstanding demand was shown as ` 3,043.43 crore as on 31 March 2020,

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whereas as per the ITBA’s demand recoverability status’, total outstanding

demand was ` 3,044.05 crore for the same AYs. Details of which are given in
Table 5.17 below:

The ITD did not produce records for audit for AYs 2008-09, 2011-12, and
2015-16.

Table 5.17: Status of Demand as per e-filing and ITBA

` in crore)
(`
AY Assessment Data as per the e-filing Data as per ITBA as on
details portal as on March 2020 October 2021
Date of Outstanding Date of Outstanding
Demand Demand Demand Demand
2008-09 220(2) 06/08/2019 0.29 08/06/2019 0.29
(interest)
2010-11 154 24/04/2018 1,239.15 24/04/2018 1,239.15
2011-12 250 06/01/2017 1,421.65 01/06/2017 1,421.35
2012-13 143(1(a) 26/03/2014 6.51 26/03/2014 6.51
2012-13 143(3) 08/06/2016 202.09 08/06/2016 202.09
2013-14 143(3) 24/11/2016 171.54 24/11/2016 171.54
2015-16 154 23/10/2017 0.0058 23/10/2017 0.0058
2016-17 143(3) 29/12/2018 1.22 29/12/2018 1.22
2016-17 143(3) NA NA 29/12/2018 0.91
2017-18 143(3) 21/12/2019 0.98 21/12/2019 0.98
2018-19 143(3) Not Not 18/04/2021 0.00
Available Available
Total 3,043.43 3,044.05
Source- e-filing and ITBA portal of ITD

As evident from the table above, the demand raised as per the ITBA aggregated
to ` 3,044.05 crore for AYs 2008-09, 2010-11 to 2013-14, 2015-16 to 2018-19
under Sections 143(1)(a), 143(3), 154, 220(2), 250, 254 and 153A and the
highest demand of ` 1,421.65 crore pertained to AY 2011-12 raised under
Section 250 of the Act. Audit observed that these additions were made on
account of unexplained cash deposits and unaccounted sale proceeds.
Audit also noted from the dossier report for the quarter ending September
2021-22 that for the AY 2010-11, the appeal was pending before ITAT, and for
AYs 2011-12 to 2012-13, the recovery of demand of ` 1623.44 crore was
stayed by the ITAT.
The current status of the demands
Audit noted from the dossier report for the quarter ending September 2021-22
that the Hon'ble National Company Law Tribunal (NCLT), Hyderabad, vide its
order dated 03 June 2019, had approved the liquidation process. The ITD filed
an appeal before the Hon'ble NCLAT New Delhi against the NCLT's order as the

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NCLT did not admit the ITD's claim. The NCLAT dismissed the ITD's appeal due
to the delay in filing the appeal. Subsequently, the ITD filed a rectification
application before the NCLT.
Audit further noted that as per the Demand Analysis statement, all the
demands were categorised as ‘demands difficult to recover’. For the
AYs 2010-11, 2011-12 and 2012-13, the AO drew a Tax recovery certificate in
December 2015 for ` 3,301.17 crore and transferred the case to the TRO for
recovery. The TRO prepared ITCP-1 in December 2015 and served to the
assessee. The TRO requested the AO for the details of movable and immovable
assets and sundry creditors list pertaining to the defaulter in December 2015,
which was responded to by the AO in May 2017, after one and a half years,
stating the no liquid assets/inadequate assets from the AY 2008-09. However,
Audit noted that the TRO issued a summons to the Principal Officer in
June 2017 for furnishing documentary evidence for immovable assets and
receivables of the company. The TRO also addressed the sub-registrar for
providing the latest market/registered value and encumbrance statement for
properties in June 2017.
The audit observed that a lack of information about the assessee's movable
and immovable assets resulted in the non-recovery of outstanding demand as
of the audit date. It also observed that the AO did not follow the CBDT's
instructions60, regarding collecting information on the assessee's movable and
immovable assets during the assessment proceedings for the early recovery of
tax dues.
For the AY 2016-17, Audit noticed that two separate demands (i.e., ` 1.22 crore
and ` 0.91 crore) for the same assessment order under Section 143(3) were
shown pending as per the Demand Analysis and Recoverability Status Report
dated 29 October 2021 generated by the ITBA portal. The audit could not
ascertain the reasons for the reflection of two different demands under the
same Section with the same DIN and date of demand in the ITBA portal.

It shows that the CBDT’s instruction no. 1937, dated 25 March 1996, regarding
obtaining particulars of assets, including debtors, bank accounts/bank
deposits, etc., was not followed, which eventually resulted in the accumulation
of outstanding demand and the non-fulfilment of the objective of the aforesaid
instruction for early recovery of tax dues.
Reply of the Ministry is awaited (March 2024).

60 CBDT instruction No.1937 dtd. 25 March 1996

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5.3.17 Assessee: S3 Ltd.

Charge: PCIT 1, Hyderabad
S3 Ltd.61 has been registered as a Multi-State Co-operative Society in 2014,
under the provisions of the Multi-State Co-operative Societies Act (39 of 2002),
2002, and the Multi State Credit Co-operative Society Rules, 2002, made there
under.
From the e-filing portal, Audit identified four assessment records of the
assessee relating to AYs 2016-17 to 2018-19 with a total outstanding demand
of ` 5,982.24 crore as of 31 March 2020. As per the ITBA portal, the
outstanding demand was ` 7,804.22 crore for the aforesaid AYs. Details of the
outstanding demand are given in Table 5.18 below:

Table 5.18: Status of Demand

` in crore)
(`
Assessment Demand Data as per the e-filing Data as per the ITBA as on
Year raised under portal as on March 2020 October 2021
Section Date of Outstanding Date of Outstanding
Demand Demand Demand demand
2016-17 143(3) 31/12/2018 1,351.55 31/12/2018 1,351.55
2016-17 271B 26/06/2019 0.02 Not available 0.02
(penalty)
2017-18 143(3) 31/12/2019 4,630.61 31/12/2019 4,630.61
2018-19 143(1a) 22/10/2019 0.06 -- --
143(3) - - 24/09/2021 1,822.04
Total 5,982.24 7,804.22

As evident from the above table, the highest demand of ` 4,630.61 crore
pertained to AY 2017-18. Audit noted that the major additions were on
account of unexplained share capital raised from the members and
unexplained expenditure during AYs 2016-17 and 2017-18.
Audit noticed discrepancies in reporting outstanding demand between
physical records and the e-filing portal/the ITBA's Recovery statement/dossier
report for the AY 2016-17. The assessment for the AY 2016-17 was completed
under Section 143(3) in December 2018, determining income of
` 2817.93 crore, and a net demand of ` 1355.57 crore was issued to the
assessee in December 2018. However, the same was reflected as
` 1351.57 crore on the e-filing portal in the ITBA's demand recoverability
status and the dossier report, which indicated the incorrect reporting of the
outstanding demand in the systems.

61 http://S3.in/about.html

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(i) Current Status of the Demands:

Audit noted from the dossier report quarter ending September 2021 that the
assessee preferred an appeal before CIT (A) for AYs 2016-17 and 2017-18 in
January 2019, and both were pending. Meanwhile, the PCCIT AP and
Telangana stayed the demand for AY 2016-17 on payment of ` one crore.
The case was transferred to the TRO for recovery in October 2019. In
November 2019, the TRO prepared ITCP-1 and sent it to the assessee.
As per the Demand analysis statement, ITD categorised demands for
AYs 2016-17 and 2017-18 as' difficult to recover'. For AY 2016-17, the PCIT
showed that the demand stayed. However, for 2017-18, the demand was
termed 'difficult to recover' due to no assets or inadequate assets for recovery.
For the AY 2017-18, the AO attached the bank accounts that had no balances.
(ii) Incorrect Computation of Business Income
For AY 2017-18, the assessment was completed under Section 143(3) in
December 2019, determining income of ` 4704.59 crore after making the
addition of ` 3988.81 crore towards unexplained cash credit and
` 357.86 crore towards unexplained expenditure. Further interest income of
` 357.91 crore shown in the Profit and Loss Account was also brought to tax.
Audit observed that as the total receipt of ` 357.91 crore was already taxed,
disallowance of expenses of ` 357.86 crore resulted in overassessment of
income by ` 357.86 crore and consequent excess demand of ` 367.68 crore,
including interest.
The ITD accepted the audit observation and took remedial action under
Section 154 in September 2022. Thus, the outstanding demand of ` 4630.61
crore for AY 2017-18 was reduced to ` 4262.94 crore after the rectification
order.
Details of recovery and reply of the Ministry are awaited (March 2024).
5.3.18 Assessee: M/s. N1 Ltd.
Charge: PCIT - 4, New Delhi
M/s N1 Ltd.62 has been promoted by M/s. I3 Ltd. as a special purpose vehicle
(SPV) to develop, construct, operate, and maintain the DND Flyway on a Build
Own Operate Transfer (BOOT) basis. M/s N1. Ltd. is a publicly listed company,
incorporated in Uttar Pradesh, India, in 1996 and operates only in India.

62 https://N1.com/company-info.php

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From the e-filing portal, Audit noted 23 cases relating to AYs 2006-07 to
2014-15, 2016-17, and 2017-18. The total demand of ` 23,837.90 crore was
outstanding on the e-filing portal as of 31 March 2020.

The ITD produced records of 20 cases relating to AYs 2006-07 to 2014-15 and
2017-18, with an aggregated demand of ` 23,441.86 crore. However, the
records relating to two cases for AY 2016-17 for an outstanding demand
aggregating to ` 349.81 crore were not produced to Audit. Apart from that,
consequential giving effect to the appellate orders, status of demand as per
ITBA, and Dossier reports were also not produced for audit.

Audit noticed from the appeal order under section 250 of the Act that the
assessments for the AY 2006-07 to 2014-15 were completed under section
143(3) and section 143(3) read with section 147 of the Act.
The assessee preferred an appeal with the CIT (A) against the assessments and
penalty proceedings for the AYs 2006-07 to 2014-15. The appeal cases were
disposed of in March 2018 and September 2018 for AYs 2006-07 to 2014-15,
and the additions were upheld by the CIT(A).
Audit noticed that the demands raised as per the original assessment
order/reassessment orders completed in the years 2014, 2015 and 2016 and
upheld by the CIT (A) in March 2018 were the 'demands difficult to recover' as
per the ITBA demand and recoverability status report dated December 2023.
Due to the non-production of the orders, dossier reports and other details, the
Audit could not verify the effectiveness of control mechanisms such as
maintenance of dossiers reports, transfer of the case to the TRO, payment of
minimum amount of demand by the assessee before filing an appeal, any stay
granted on collection of demand, etc.
Current status of the assessee: As per ITBA demand and recoverability status
report dated December 2023, the demands admitted before BIFR/NCLT for
AY 2006-07 to 2014-15 and AY 2016-17 to 2018-19 amounted to
` 16,704.40 crore and these demands have been classified as demands difficult
to recover.
Reply of the Ministry is awaited (March 2024).
5.3.19 Assessee: M/s. C1 Pvt. Ltd.
Charge: PCIT-International Taxation
M/s. C1 Pvt. Ltd. is a foreign company incorporated (June 2006) in Scotland as
a private limited company. M/s. C1 Pvt. Ltd. incorporated (August 2006) a
subsidiary company called M/s. C7 Ltd. transferred its shareholding in many
foreign and Indian companies to M/s. C7 Ltd. in return for acquiring ordinary
shares in M/s. C7 Ltd.

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On 21 August 2006, M/s. C1 Pvt. Ltd. incorporated one Indian subsidiary

company, namely, M/s. C8 Ltd. On 15 September 2006, M/s. C1 Pvt. Ltd.
entered into a subscription and share purchase agreement with M/s. C7 Ltd.
and M/s. C8 Ltd., i.e., with both of its subsidiaries. As per this agreement,
M/s. C8 Ltd. has to acquire 21.85 per cent of the share capital of M/s. C7 Ltd.
The said shares of M/s. C7 Ltd. derive all their value from assets located in
India, thus indirectly resulting in the transfer of capital assets situated in India
and triggering the conditions laid down in Section 9(1)(i) of the Act.63, making
the capital gains taxable in the hands of M/s. C1 Pvt. Ltd..
Audit noted a total demand aggregating to ` 14,423.50 crore outstanding
against the assessee, as per the e-filing portal relating to three cases for AYs
2007-08 and 2018-19. However, details of outstanding demand as per the
ITBA portal were not made available to Audit. Details of outstanding demand
as per the e-filing portal and the physical records are given in Table 5.19 below:
Table 5.19: Status of Outstanding Demand
` in crore)
(`
AYs Assessment Date of Outstanding Demand as Demand as
Under Section Demand per the e-filing Portal as per physical
on March 2020 records
2007-08 143(3) r.w.s. 148 25/01/2016 4,111.47 29,102.51
r.w.s. 144C(13)
2007-08 254 31/03/2017 Not Available 11,681.99
2007-08 271(1)(c)(penalty) 29/09/2017 10,247.36 10,247.36
2018-19 143(1a) 11/02/2019 64.65 Not Available

2018-19 143(3) 20/09/2021 Not Available 75.93

2018-19 154 23/10/2021 Not Available -92.87
Total 14,423.48 51,014.92
Source: e-filing portal and physical records of ITD

In respect of AY 2007-08, the assessee did not file any return of income.
Assessment under Section 143(3) r.w.s. 148 r.w.s. 144C (13) was completed in
January 2016, determining the total income of ` 24,503.50 crore after adding
an amount of ` 24,503.50 crore towards short-term capital gains arising out of
the transfer of shares in the hands of the assessee. The ITD raised a demand
of ` 29,102.51 crore, including interest under Sections 234A and 234B.
M/s. C1 Pvt. Ltd. appealed in ITAT, stating that interest levied under Sections
234A and 234B did not apply in their case. ITAT partly allowed (March 2017)
the case in the assessee's favour by waiving the interest levied under Sections

63 As per the Income Tax Act, 1961, income accruing or arising, whether directly or indirectly, through
or from any business connection in India, or through or from any property in India, or through or
from any asset or source of income in India or through the transfer of a capital asset situated in India,
shall be deemed to accrue or arise in India.

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234A and 234B, and the aggregate demand in the appeal effect order
(March 2017) was assessed as ` 11,681.99 crore, including interest of
` 1,434.63 crore under Section 220(2) for 14 months.
Meanwhile, in March 2015, M/s. C9 Ltd. also initiated international arbitration
proceedings in International Arbitral Tribunal64 by relying upon the India- UK
Bilateral Investment Treaty.
For AY 2018-19, the scrutiny assessment was completed in September 2021,
assessing the income of ` 341.95 crore. TDS of ` 143.70 crore was disallowed
in the assessment, resulting in a demand of ` 75.93 crore. ITD had passed
(October 2021) a rectification order under Section 154 of the Act nullifying the
original tax demand of ` 75.93 crore after allowing TDS of ` 143.70 crore,
which was disallowed in the original assessment and an amount of
` 92.87 crore was determined as refundable to the assessee. However,
payment/adjustment of the refund of ` 92.87 crore for AY 2018-19 was not
available on record.
The Government vide 'Taxation Laws (Amendment) Bill, 2021' notified on
1 October 2021, withdrew the retrospective tax demand provisions with the
specific conditions that the companies withdraw or undertake to withdraw
arbitration, conciliation, or mediation initiated under any law for the time
being in force, the companies are also required to waive the right to seek or
pursue any remedy or any claim, no interest would be payable while refunding
taxes that the company would have earlier paid under protest.
Pursuant to this, the order giving effect to this amendment was given by the
PCIT, International Taxation-1, New Delhi, in February 2022, allowing a refund
due to the assessee.

The reply of the Ministry is awaited (March 2024).

5.3.20 Assessee: M/s. I2 Pvt. Ltd.
Charge: PCIT-2, Bengaluru
The company manufactures, trades, leases, and finances computer hardware,
maintains computer equipment, and renders IT-enabled services.
From the e-filing portal, Audit noted that ten demands aggregating
` 6,188.72 crore (AYs 2005-06 to 2007-08, 2009-10 to 2012-13, 2014-15,
2016-17 and 2017-18) were pending against the assessee. The details as per
the e-filing portal and the physical records verified by Audit are shown in Table
5.20 below:

64 ITAT’s order in ITA No./1669/2016 dated.09 March 2017

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Table 5.20: Status of Outstanding Demand

` in crore)
(`
AYs Assessment Details Date of Outstanding Demand
Demand Demand as per the as per the
e-filling Portal as physical
on 31 March 2020 records
2005-06 143(3) 26/12/2008 - 230.53
2005-06 220(2) (interest) 19/11/2019 166.24 Not
Available
2006-07 143(3) rws 144C(13) & 254 18/10/2010 71.38 335.08
2007-08 143(3) rws 144C 15/02/2011 208.47 371.16
2009-10 143(3) rws 144C 05/02/2018 Not Available Not
Available
2009-10 154 15/06/2018 1,626.95 1,626.95
2010-11 143(3) rws 144C rws 92CD 08/01/2018 Not Available 130.05
2010-11 154 15/06/2018 442.15 677.74
2011-12 143(3) rws 144C rws 92CD 08/01/2018 196.36 43.09
2011-12 154 15/06/2018 Not Available 245.35
2012-13 143(3) rws 144C rws 92CD 08/01/2018 425.67 671.81
2012-13 154 15/06/2018 Not Available 652.03
2014-15 143(3) rws 144C(13) 28/03/2019 722.13 943.33
2014-15 154 14/05/2019 Not Available 985.81
2016-17 143(1) 28/03/2018 47.96 47.96
2017-18 143(1) 28/03/2019 2,281.40 2,281.40
Total 6,188.71 9,242.29

For AY 2006-07, Audit noticed that a rectification order was passed

(January 2020) determining a refund of ` 173.68 crore, and the aforesaid
refund was to be adjusted against the tax dues of AY 2014-15. However, the
same was not updated in the e-filing portal for the AY 2014-15. Audit further
noticed that a demand of ` 71.38 crore was shown outstanding against the
assessee for AY 2006-07.
For assessment years 2007-08 and 2009-10, the assessee preferred settlement
through Mutual Agreement Procedure (MAP)65 The original demand of
` 371.15 crore for AY 2007-08 was reduced (February 2018) to ` 209.44 crore
after completion of the MAP proceedings. However, Audit noticed that an
amount of ` 208.47 crore was shown as pending in the e-filing portal. Audit
could not ascertain the action taken by the ITD to recover the agreed demand66
from the records produced. For AY 2009-10, the MAP was not completed, and
demand collection was kept abeyance after collecting a bank guarantee of
` 445.14 crore.

65 An alternate tax dispute resolution mechanism available to the taxpayers under the DTAAs for
resolving disputes giving rise to double taxation or taxation not in accordance with DTAAs.
66 TP adjustment of ` 116.60 crore sustained, and the assessee needs to pay 30 per cent (` 34.98 crore)
of the demand.

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In respect of AYs 2010-11 to 2018-19, the assessee entered into an Advance

Pricing Agreement under Sections 92CC and 92CD of the Act with the CBDT in
February 2013 and June 2015, determining the arm’s length price of the
international transactions to be declared. Audit observed that the demands
pending for AYs 2010-11 to 2012-13 and 2014-15 of ` 2,560.97 crore67
pertained to additions other than transfer pricing issues. Audit further
observed that the demands pertaining to AYs 2010-11 to 2012-13 were stayed
by the Hon'ble ITAT, Bengaluru, up to February 2020. Action taken, if any, to
recover the dues thereafter was not available on record. Further, for
AYs 2016-17 and 2017-18, demand of ` 47.96 crore and ` 2,281.40 crore were
determined summarily by CPC, Bengaluru due to disallowance of TDS claimed
by the assessee for ` 35.59 crore for AY 2016-17 and for AY 2017-18 the entire
prepaid taxes were disallowed (TDS - ` 599.32 crore, AT - ` 1171.65 crore and
SAT - ` 17.42 crore) in March 2019.
As per demand analysis and recoverability status report of ITBA, the demand
for AY 2017-18 was reduced from ` 2,281.40 crore to 766.67 crore through a
rectification order passed under Section 154 on 03/11/2021. As per demand
analysis and recoverability status report, all the demands were reported as
‘collectible’ except demand of ` 208.47 crore (AY 2007-08) which was reported
as ‘demand difficult to recover’. However, these demands were pending
collection (March 2023).
Reply of the Ministry is awaited (March 2024).
5.3.21 Assessee: A4
Charge : PCIT(Central), Ahmedabad
The assessee was involved in investment and trading in shares and securities.
As per the e-filing portal, a total demand of ` 2445.27 crore in 11 cases
pertaining to AYs 2008-09 to 2016-17 was outstanding against the assessee as
of 31 March 2020. Audit examined all the 11 selected cases of the assessee for
the AYs 2008-09 to 2016-17. Audit noted that additions were made under
Section 69 of the Act, considering unexplained cash credit and unexplained
expenditure in the assessments and total demands of ` 2,445.27 crore were
raised.
An audit examination of assessment records revealed that an arrear demand
of ` 1,788.40 crore relating to AYs 2009-10 to 2015-16 was rectified under
Section 154 and revised to ` 2,328.14 crore. However, a revised demand was
not forwarded to the TRO, resulting in a short reporting of a demand of
` 539.74 crore to the TRO. On being pointed out by Audit, the ITD took

67 ` 677.75 crore (AY 2010-11), ` 245.36 crore (AY 2011-12), ` 652.04 crore (AY 2012-13) after passing
of rectification orders on 15/06/2018 and ` 985.82 crore (AY 2014-15)

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remedial action, and the demand was updated in TRC in May 2021. Audit
observed that the assesse filed an appeal for the demands of AY 2009-10 to
2015-16 and the same is pending before CIT(Appeals).
Further, a demand of ` 117.11 crore was raised for AY 2008-09 under Section
154 in July 2017. Thereafter, the revised demand of ` 118.19 crore was raised
after passing an order under Section 250 in March 2018. However, the latest
demand was not updated in the arrear demand register and dossier report.
The audit noted that the demands had been pending since August 2016. The
details of the action taken by the DCIT, Central Circle 1(2) Ahmadabad, to
recover the amount could not be ascertained.
Reply of the Ministry is awaited (March 2024).
5.3.22 Assessee: A5
Charge: PCIT(Central), Ahmedabad
The assessee was involved in the investment and trading of shares and
securities.
Audit noticed from the e-filing portal data as on 31 March 2020 that nine
demands involving ` 2,485.45 crore were pending against the assessee
relating to the AYs 2008-09 to 2015-16 and 2017-18.
Details of demands as per the ITBA portal were not furnished to Audit.
Assessments were finalised under Section 143(3) read with Section 153(A) for
the AYs 2009-10 to 2015-16. Additions were made to total income on account
of unexplained credit entries in the bank, unexplained commission on credit
entries, etc., and a total demand of ` 2,485.45 crore was raised. Audit further
observed that the assesse filed an appeal for the demands of AY 2009-10 to
2015-16 and the same is pending before CIT(Appeals).
The audit observed that the arrear demand of ` 2,184.68 crore relating to AYs
2009-10 to 2015-16 was rectified under Section 154 in May 2019 and revised
to ` 2,367.72 crore. The revised demand was not forwarded to the TRO,
resulting in a short reporting of demand of ` 183.04 crore to the TRO. As
pointed out by the Audit, the ITD took remedial action, and the demand was
updated in TRC in May 2021.
The audit also noticed that the demands had been pending since May 2019.
Details of the action taken by the DCIT Central Circle 1(2), Ahmedabad, to
recover the amount could not be ascertained.
Reply of the Ministry is awaited (March 2024).

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5.3.23 Assessee: S4
Charge: PCIT 1, Ahmedabad
The assessee is an Association of Persons. Audit noticed from the e-filing portal
data as on 31 March 2020 that the total demand pending against the assessee
was ` 2,772.55 crore in nine cases relating to AYs 2007-08 and 2009-10 to
2016-17.
Records relating to AY 2007-08 and details of demand as per the ITBA portal
were not produced for audit.
Audit noticed from the physical records that the assessments were completed
under Section 143(3) read with Sections 250/154 and 147 for the AYs 2009-10
to 2016-17 after making additions to total income on account of unexplained
income, receipt, fund, bank balance, expenditure, benami investment, etc.,
and a total demand of ` 3,122.34 crore was raised. Demand notices were
issued in July 2017. However, as per the e-filing portal, a total demand of
` 2,772.55 crore was outstanding as of 31 March 2020, resulting in a difference
of outstanding demand of ` 349.79 crore. Thus, Audit could not ascertain the
reasons for the difference in outstanding demand as the required documents
were not made available.
Reply of the Ministry is awaited (March 2024).
5.3.24 Assessee: D4
Charge: PCIT Exemptions, Chandigarh
The assessee is a registered trust in Sirsa, assessed under Exemption Circle 1
Chandigarh.
The audit noticed from the e-filing portal data as of 31 March 2020 that there
were outstanding demands aggregating ` 410.09 crore in seven cases relating
to AYs 2011-12 to 2017-18. As per the ITBA portal, the same demands were
shown outstanding.

Audit noticed from the dossier report ending September 2021 that while
completing the assessment in respect of all the AYs in August 2019/December
2019, the assessee was observed to be carrying commercial activities rather
than pursuing charitable activities covered under section 2(15) of the IT Act.
Exemption under Section 11 was denied, treating the assessee’s activity as
normal business. The assessee preferred an appeal against these assessments
before CIT (A) in September 2019/January 2020, and the outcome of the
appeal was awaited. Outstanding demand was categorised as ‘Unrealisable
and uncollectible demand’ in the Dossier Reports. As seen from the Dossier
Report, the aforesaid demand was shown as stayed by the High Court. Punjab
and Haryana High Court directed (August 2017) that the properties of the

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assessee were not to be sold, transferred, alienated or encumbered, including

bank accounts.
Punjab and Haryana High Court had issued directions to the ITD to investigate
the accounts and submit a report. Multiple reports were stated to have been
submitted. However, details/ findings thereof were not recorded in the dossier
reports.
Further, action taken by the AO in the recovery process and the current status
of the case are awaited (March 2024).
Reply of the Ministry is awaited (March 2024).
5.3.25 Assessee: C4
Charge: PCIT 1, Ahmedabad
The assessee was involved in cheque discounting. A survey under Section 133A
was conducted at the premises of M/s S6 Ltd., which the assessee managed
and controlled.
Audit noticed from the e-filing portal data as on 31 March 2020 that the ITD
had raised seven demands involving ` 3,074.32 crore against the assessee
relating to AYs 2011-12 to 2017-18. Further, Audit noticed from the ITBA portal
as on 16 November 2021 that demands totalling ` 3074.33 crore were pending
against the assessee for these AYs.
Audit requisitioned information along with the records of the assessee for AYs
2011-12 to 2017-18. Details relating to the ITAT appeal preferred by the
assessee were not produced for Audit.
Reply of the Ministry is awaited (March 2024).
5.3.26 Assessee: M2 and A6
Charge: PCIT Central-4, Mumbai
These assessees are related to associates of the M3 Group. Audit noticed from
the e-filing portal data as on 31 March 2020 that in respect of M2, the ITD had
raised 11 demands involving ` 2,818.17 crore for AYs 2004-05 to 2012-13 and
in respect of A6, 10 demands involving ` 2,042.92 crore for AYs 2004-05 to
2011-12.
Audit requisitioned information along with the records of the assessees for AYs
2004-05 to 2012-13. All the records were produced to Audit.
Even though the e-filing portal showed a total demand of ` 4,861.09 crore in
respect of these two assessees, the actual demand as per assessment
records was only ` 2,170.60 crore (` 1,377.70 crore in the case of M2 and
` 792.90 crore in the case of A6).

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In the dossier report of both the assessees, the ITD had classified the demand
as “Net Realizable Demand”. Cases relating to both the assessees were
transferred to TRO in March 2012.
In the case of M2, the ITD attached immovable property, i.e., one shop in
March 2012 and shares in February 2013. Being a protective demand
(` 1,341.31 crore in the case of M2 and ` 764.37 crore in the case of A6) (as
per dossier report), no recovery has been made by the ITD. In the case of A6,
no action has been taken by the ITD to attach any property or to recover the
demand.
Audit could not ascertain action taken by the ITD to reconcile the differences,
to reflect the correct status of the Outstanding demand while preparing the
CAP-I statement.
Reply of the Ministry is awaited (March 2024).

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Chapter 6 Compliance Issues

6.1 Introduction:
Determination of outstanding demands accurately, issue of demand notice to
the assessee within the due date and taking appropriate action as per the
provisions of the Act, Rules and the CBDT’s instructions are essential
components towards reduction of outstanding demand. Functions of
Assessing Officer with regard to recovery of arrear demand include attachment
of bank accounts of assessee, attachment of salary and other dues receivable
by assessee, maintenance of Dossier Reports and transfer of unrecoverable
cases to TRO for attachment/disposal of movable and immovable assets.
Functions of Assessing Officers and Tax Recovery Officers are interlinked and
they have to work in tandem with each other to reduce the outstanding
demand.
This chapter deals with compliance issues noticed while scrutinising the
records of AOs and TROs. The errors noticed fell into the following categories
(i) Discrepancies in maintenance of Dossier Reports; (ii) Raising of inaccurate
Demands; (iii) Inordinate delay in issuing of consequential orders after appeal;
(iv) Delay in clearance of TRCs by the TROs; (v) Non-attachment of Properties,
etc.
Audit observed discrepancies in dossier reports which indicated that the AOs
did not pay requisite attention while preparing dossier reports even though
dossier reports serve as a significant tool to the monitoring authorities for
analysis of outstanding demands and for formulation of policies and setting up
of targets for collection/recovery. Also, in certain cases, the dossier reports
were not prepared.
Excess demands were raised against the assessees due to not allowing credit
for taxes already paid and mistakes in giving effect to the appeal orders. This,
besides, reporting inflated demand, also causes harassment and hardships to
the assessees. Further, delay in giving effect to the appeal orders by the AO
resulted in avoidable payment of interest under Section 244A.
Delay in giving effect to the appeal orders by the Assessing Officers results in
display of demands as outstanding in records, even after the same had been
set aside by the appellate authorities /judicial forums. In cases where issue of
refund was delayed, the ITD had to issue interest under Section 244A, which
was otherwise avoidable. Further, various appeal effect orders were either not
passed by the Assessing Officers or passed with delays ranging up to over 11
years.
The AOs were not following the CBDT’s instructions on stay of demand which
resulted in piling up of outstanding demand. Further, there is not any

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mechanism in place to ensure the compliance of such instructions. Further,

Audit noticed instances of default in payment of instalments where the
assessees were allowed to pay 15 or 20 per cent of outstanding demand in
instalments.
Audit observed that there was delay in issue of demand notices to assessees
ranging from 16 days to 48 days after the relevant order was passed.
Moreover, in some cases, demand had either not been issued or issued with
incorrect amount of demand.
It was observed in some cases that ITD either did not submit or submitted claim
for incorrect amount of demand before the official liquidator or custodian.
TROs could not achieve the target for disposal of TRCs even though in certain
instances, the number of cases transferred from JAOs to TROs was less than
the yearly reduction target of 150 TRCs. TROs failed to exercise special powers
vested in them to attach property owned by the assessee. Requisite registers
were not maintained and updated by the TROs. The internal audit of TROs
were not conducted as a regular basis in all regions which was not in
conformity with CBDT’s instruction issued in July 2017.
There were deficiencies in internal Control mechanism in the ITD as evident by
non-maintenance/non-updation of statutory registers by TROs, prescribed by
the ITD, which, in turn, hampered recovery of outstanding demand. Further,
CBDT’s instruction to conduct internal audit of TROs also has not been carried
out effectively.
Audit observed instances of delay in transfer of cases by JAO to TRO as there
was no prescribed timeframe by the ITD for drawing TRCs. Such delays slowed
down the process of recovery of outstanding demand. All these issues have
been discussed in detail in the following paragraphs.
During this audit, 10,896 sampled cases in 270 selected assessment units were
test-checked to verify whether the Assessing Officers were discharging their
functions effectively in compliance to the provisions of the Income Tax Act,
Rules and the CBDT’s Circulars / Instructions. Audit observations are discussed
in the subsequent paragraphs.
6.2 Preparation of Dossier Reports by the Assessing Officer
The AOs are vested with the powers and responsibilities68 with respect to
assessment of direct taxes and collection of demands.

68 These include (i) assessment of income and / tax; (ii) issue of demand notice to the assessee; (iii)
collection and recovery of outstanding demands; (iv) regular monitoring of demands locked up at
appellate authorities; (v) invoking penal provisions if payment is not made within due date; (vi)
ensuring completion of all penalty and recovery proceedings under Section 221 and 226 of the Act;
(vii) sending intimation to the TRO with details of assets of defaulter and draw up Form 57 with details
of arrears; and (viii) preparation of Dossier Reports.

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The AO is required to prepare a Dossier Report69 every quarter in respect of

every assessee in default, meeting the prescribed monetary limits; its objective
is to facilitate effective monitoring of cases of outstanding demand by the
designated authorities. As per the Central Action Plan, the AOs are required to
prepare Dossier Reports based on data available in CPC-FAS70.
The monetary limits are shown in Table 6.1 below
Table 6.1: Monitoring Authorities and Monetary Limits of Dossier Reports71
Monitoring Authority Monetary limit
Range Head Up to ` 30 lakh
Pr. CIT Above ` 30 lakh to ` 3 crore
CCIT Above ` 3 crore to ` 15 crore
Pr. CCIT Above ` 15 crore to ` 25 crore
Pr. DGIT (Admin) All dossiers above ` 25 crore by DGIT (Admin) with
assistance of ADG (Recovery).
Member (Revenue), CBDT Pr. DGIT (Admin) to monitor specific very high demand
cases on the directions of Member (Revenue) with
assistance of ADG (Recovery).

Subsequently in November 2022, the CBDT revised72 threshold limit of the

dossiers on outstanding demands to be monitored by different authorities.
The AO and the TRO are required to execute the instructions/directions given
by the CCIT/PCIT with results of action taken being reported upon in the
subsequent report.

6.2.1 Non maintenance of Dossier Reports

On verification of data obtained from the 279 sampled assessment units from
the e-filing portal relating to 12,73,527 assessees, Audit observed that there
were 42,258 assessees from whom outstanding demand was more than
` 30.00 lakh.
Audit test checked 5,321 assessees and observed that dossiers were prepared
only in respect of 603 assessees (11.33 per cent). In the case of 87 assessees
(1.64 per cent), dossiers were not prepared; in the remaining 4,631 assessees
(87 per cent), details regarding preparation of dossiers were not made

69 The Dossier Report plays a very significant role in reporting the amount of outstanding demand of an
assessee, its nature, reasons for non-collection including information regarding grant of stay, if any;
and the efforts undertaken by the AO and Tax Recovery Officer (TRO) towards recovery of the same.
70 It interacts with all the front end systems i.e. CPC-ITR Portal, ITBA Portal, OLTAS portal, AST portal for
processing of data, calculation of demand, refund and sends the data to the required front end
system.
71 Re-fixation of monetary limits for various Income Tax Authorities (Instruction No.10 of 2015 dated 16
September 2015)
72 The monetary limits for various income tax authorities have been revised (CBDT Instruction No.
1/2022 dated 3rd November 2022).

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available, including a few cases having high outstanding demands, as discussed

in Chapter 5.
Region-wise status on maintenance of Dossier Reports in respect of
5,321 assessees, with an outstanding demand of more than ` 30 lakh test
checked by audit, are detailed in Table 6.2 below:
Table 6.2: Region-wise details of maintenance of dossiers
` in crore)
(`
Sl. Region Dossiers not Dossiers Prepared Details not made Total
No. prepared available
No. of Amount No. of Amount No. of Amount No. of Amount
Asse- Asse- Assessees Assessees
ssees ssees
Andhra Pradesh &
1 - - 7 157.99 502 33,294.49 509 33,452.48
Telangana
2 Bengaluru - - 21 414.41 493 45,897.66 514 46,312.08
3 Bhubaneswar - - 2 39.74 122 1,347.97 124 1,387.71
Bihar and
4 - - 80 517.99 131 1,169.47 211 1,687.46
Jharkhand
5 Delhi - - 8 32.15 742 20,552.31 750 20,584.46
6 Gujarat - - 83 3,064.08 375 14,767.82 458 17,831.90
International
7 13 48.64 - - 96 4,607.31 109 4,655.96
Taxation, Delhi
8 Kerala - - - - 75 443.47 75 443.47
9 Lucknow, UP East - - - - 20 48.97 20 48.97
Madhya Pradesh
10 25 299.8 5 23.84 153 1,349.56 183 1,673.20
& Chhattisgarh
11 Mumbai 17 42 121 21,918.93 509 28,430.62 647 50,391.56
12 North East Region - - 63 442.09 12 29.71 75 471.8
North West
13 - - 40 791.34 196 5,009.95 236 5,801.29
Region
14 Rajasthan 32 61.13 87 902.61 102 846.33 221 1,810.07
15 Tamil Nadu - - 46 1,100.85 215 3,953.23 261 5,054.08
UP West &
16 - - 21 3,800.09 18 170.31 39 3,970.39
Uttarakhand
West Bengal &
17 - - 19 398.29 870 17,648.50 889 18,046.79
Sikkim
Total 87 451.57 603 33,604.40 4,631 1,79,567.70 5321 2,13,623.67
Source: Department replies and assessment records of ITD

As seen from Table 6.2 above, in majority of cases (4,631), the ITD did not
furnish the details of maintenance of dossiers. In the absence of information
in respect of 4,631 cases involving outstanding demand of ` 1,79,567.70 crore,
Audit could not ascertain the status of preparation of Dossier Reports.
Non-maintenance of Dossier Report hinders proper monitoring of tax
defaulters by the higher authorities and also hampers the pace of the recovery
proceeding. In the absence of Dossier reports, Audit could not ascertain as to
how the ITD was ensuring effective monitoring of outstanding demand cases

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by the designated authorities. This issue was raised with the ITD in
June/July 2021.
Reply of the Ministry is awaited (March 2024).
6.2.2 Discrepancies noticed in maintenance of Dossiers
Out of 603 assessees where dossiers were prepared, Audit noticed
discrepancies in respect of 31 assessees (57 cases) involving difference in
amount aggregating to ` 32,524.08 crore between the amount reported in
dossiers and the actual outstanding demand as per the physical records. The
reason of such discrepancy could be attributed to capturing of incorrect
amount in the dossier, failure to record the changes of tax demand arising on
account of rectification/revision, recording of non-existent demands, etc. The
region-wise details of discrepancies in dossier reports, are given in Table 6.3
below:
Table 6.3: Discrepancies noticed in Dossier Reports
` in crore)
(`
Sl. Region No of Total outstanding demand under/over
No. Cases reported
1 Delhi 3 35.27
2 Gujarat 1 1.08
3 Bengaluru 2 14.67
4 West Bengal & Sikkim 1 77.35
5 Madhya Pradesh & 1 3.04
Chhattisgarh
6 Mumbai 15 29,699.14
7 Rajasthan 7 294.40
8 Tamil Nadu 27 2,399.13
Total 57 32,524.08
Source: On the basis of physical records examined by FAOs

The above table indicates that while Tamil Nadu and Puducherry region has
the maximum number of cases (27) involving discrepancy of ` 2,399.13 crore,
Mumbai region has the highest amount of discrepancy of ` 29,699.14 crore
involving 15 cases. A single assessee (H2) of Mumbai region involving seven
assessment years alone accounted for discrepancy of ` 28,362.88 crore.

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Illustrative cases:
Three other illustrative cases are discussed below:
Box 6.1
(i) Assessee: M/s I4 Ltd.
Charge : PCIT-4, Chennai
The return of Income for AY 2016-17 was filed in November 2016 at a loss
of ` 480.17 crore. Assessment under Section 143(3) was completed in
December 2018 determining an income of ` 2,730.84 crore and a tax of
` 1,165.41 crore thereon, after making disallowances on account of
provisions for bad debts, bad debts recovered etc.
For AY 2017-18, original return of income was filed in October 2017 at a loss
of ` 659.45 crore, and subsequently, a revised return in March 2019 was
filed declaring a loss of ` 9.80 crore. Assessment under Section 143(3) was
completed in December 2019 determining an income of ` 3,193.31 crore
and tax of ` 931.72 crore thereon, after making major disallowances under
Section 36(1)(vii), 14A read with rule 8D etc.
As per the data available in the e-filing portal, the demands outstanding
against the assessee, as of November 2020, were ` 115.82 crore and
` 931.72 crore in respect of AY 2016-17 and AY 2017-18 respectively. The
total outstanding demand aggregated to ` 1,047.54 crore. Audit, however,
noticed that in the dossier report for the third quarter (October-December
2019) of FY 2019-20, the net demand at the end of quarter was reported as
` 1,121.78 crore and the opening balance in the dossier for the next quarter
was reported as ` 249.67 crore resulting in a difference of ` 872.11 crore.
Further, the dossier report for the first quarter of the year 2020-21 indicated
an outstanding demand of ` 175.43 crore, while the outstanding demand as
per the e-filing portal was ` 1,047.54 crore as of November 2020 also
resulted in a difference of ` 872.11 crore between the e-filing portal and
dossier report.
The errors/mistakes in recording of outstanding demands in the dossier and
the discrepancies with the amount of outstanding demand as per the e-filing
portal was brought to the notice of the DCIT Non-Corporate Circle-8 in
May 2021.
Reply of the Ministry is awaited. (March 2024)
(ii) Assessee: V2
Charge: PCIT-1, Bengaluru
The assessee filed return of income for AY 2017-18 in October 2017
declaring a loss of ` 14.78 crore. The assessment was completed under

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Section 143(3) in December 2019, making an addition of ` 11.84 crore under

Section 68. On the basis of this addition, a tax demand of ` 11.92 crore was
raised under Section 115BBE.
From the dossier report for the fourth quarter of FY 2019-20, it was observed
that the DCIT, Circle 1(1)(1), Bengaluru had provisionally attached
(March 2020) the immovable property of the assessee at Malleswaram,
Bengaluru under Section 281B and the case was proposed to be referred to
the TRO for regular attachment. However, in the same Dossier Report, the
DCIT, Circle 1(1)(1) had remarked that the assessee did not have any asset;
and categorised the demand as ‘difficult to recover’. An error in the dossier
report not only would result in incorrect classification of category of demand
but also would cause difficulty in monitoring and taking action for recovery
of outstanding demand.
The Ministry accepted the audit observation (May 2023).
(iii) Assessee: M/s. M4 Ltd.
Charge: PCIT-4, Chennai
The return for AY 2008-09 was filed in September 2008 declaring a loss of
` 17.58 crore. The assessment under Section 143(3) was completed in
December 2011 at a loss of ` 22.84 crore. Subsequently, a reassessment was
done under Section 147 in December 2014, determining an income of
` 52.25 crore and a tax of ` 20.70 crore thereon.
For the AY 2009-10, the return of income was filed in September 2009 at a
loss of ` 11.80 crore. The assessment was completed under Section 143(3)
read with Section 92CA in March 2013 at a ‘Nil’ income. Subsequently, the
case was reassessed under Section 147 in December 2014 and the assessed
income was revised to ` 79.01 crore and a demand of ` 49.29 crore was
raised.
The assessee filed writ petitions in High Court, Chennai, challenging the
orders of reassessment passed for AYs 2008-09 and 2009-10. On being
informed (August 2015) that the High Court, Chennai had dismissed the writ
petitions of the assessee, the Jurisdictional AO communicated (August 2015)
the same to the assessee and asked for payment of tax. However, in the
dossier report for the first quarter FY 2020-21 (April-June), the demands
amounting to ` 20.87 crore and ` 42.29 crore relating to AYs 2008-09 and
2009-10 respectively were reported as “Demand covered by stay”. The AO
had not initiated any action for recovery of outstanding demand, even after
the dismissal of the assessee’s writ petitions by the High Court in
August 2015. Further, for AY 2009-10, there was a difference of ` 7 crore as

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reported in dossier (` 42.29 crore) and that found in demand notice

(` 49.29 crore). The issue was pointed out to the ITD (January 2021).
Reply of the Ministry is awaited. (March 2024).

Audit observed that though the dossier reports serve as a significant tool to
the monitoring authorities for analysis of outstanding demands and for
formulation of policies and setting up of targets for collection/recovery:
requisite attention in several cases, was not paid by the AOs.

Recommendation 6:
The CBDT may ensure preparation of the dossiers for all cases of
outstanding demands exceeding the specified threshold limit, and monitor
compliance of its instruction no. 10/2015 dated 16/09/2015.
The Ministry, in its reply, stated (May 2023) that a mechanism to monitor the
dossier cases at different levels according to the threshold limit of dossier cases is
already in place. CBDT through Pr. DGIT (Admn. & TPS)/ADG TPS-II/Addl. CIT
(Recovery) is monitoring compliance with CBDT Instruction 10/2015. This is being
regularly done as per the ITBA algorithm. Every quarter AOs are required to initiate
dossier cases and mention the present status of the same along with action taken
for recovery of demand.

The Ministry's reply is not tenable, as audit analysis revealed that dossiers were
not found prepared in many cases. The Ministry may consider reiterating its own
instructions and monitoring compliance with those instructions, especially,
where there is an uncertainty about the availability of the immovable
assets for attachment. Non-maintenance of dossiers may results in
non-monitoring of outstanding demand by designated authorities and might
impact the chances of early recovery.

6.2.3 Raising excess demands

Audit noticed instances where the ITD had raised inflated tax demands, by
either not allowing full credit of the prepaid taxes in the assessment order or
by delaying giving the effect of appeal orders. There were also cases of undue
levy of interest under Sections 234A, 234B or 234C, etc. by the ITD. Eventually,
the ITD had either refunded or was likely to refund the excess demands
collected, along with the interest under Section 244A, involving avoidable loss
of revenue and causing hardship to the assessee.
Audit noticed that in 345 cases, out of 10,818 test checked cases in 16 Regions,
the ITD had raised excess demands aggregating to ` 2,549.77 crore, which
resulted in inflated amount of outstanding demand being reported in ITBA as
well as in the e-filing portal, causing hardship and harassment to the assessees,
who had already paid the tax.

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Region-wise details of cases of raising of excess demands noticed by Audit are

given in Table 6.4 below:
Table 6.4: Raising of excess demands – region-wise analysis
Sl. Region No. of cases No. of Aggregate Excess
No. test checked mistakes Amount charged
noticed ` in crore)
(`
1 AP & Telangana 960 14 560.61
2 Bihar & Jharkhand 437 41 260.10
3 Gujarat 1,404 63 203.91
4 Bengaluru 1,038 12 109.63
5 Kerala 155 5 68.58
6 MP & Chhattisgarh 501 9 0.84
7 Mumbai 1,410 29 778.89
8 Delhi 740 42 44.31
9 North East Region 220 7 15.81
10 North West Region 510 12 109.59
11 International Taxation, Delhi 377 6 3.65
12 Rajasthan 575 79 78.97
13 Tamil Nadu 671 8 265.63
14 Lucknow, UP East 99 1 1.99
15 West Bengal & Sikkim 1,288 10 42.34
16 Bhubaneswar 433 07 4.92
Total 10,818 345 2,549.77
Source: On the basis of physical records examined by FAOs

The table above indicates that Rajasthan region has the maximum number of
cases (79), followed by Gujarat in 63 cases. Whereas Mumbai region has the
highest amount (` 778.89 crore) involving 29 cases.
Audit analysis revealed that incorrect/excess levy of interest accounted for
raising of excess demands against the assessees in 253 out of 345 cases. In
terms of outstanding demands mistakes due to non-verification of
rectifications and revisions while raising demands accounted for excess of
` 579.91 crore, category-wise details of excess demands are given in Table 6.5
below:
Table 6.5: Category-wise analysis of excess demands
Sl. Category No. of Amount
No. cases ` in crore)
(`
1 Incorrect Adoption of Assessed Income 19 180.76
2 Discrepancies or Delay in giving effect of Appeal Order 20 284.53
3 Excess levy of interest under various sections 253 604.62
4 Raising of demand without verifying 14 579.91
rectifications/revision orders
5 Other Issues like incorrect tax rate, computation etc. 39 899.95
Total 345 2,549.77
Source: On the basis of physical records examined by FAOs

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From the above table, it is evident that maximum cases of over reporting has
occurred owing to adoption of incorrect tax rate, incorrect computation of tax,
excess levy of interest under various sections, etc.
Four illustrative cases are discussed below:
Box 6.2
(i) Assessee: M/s. N4 Ltd.
Charge: PCIT-3, Ahmedabad
The assessee filed (September 2008) a return of income for AY 2008-09
declaring ‘Nil’ income. The assessment was completed under Section 143(3)
in May 2010, determining total income of ` 285.00 crore and a tax of
` 98.58 crore thereon, by making major additions on account of disallowance
of claim of sales tax and withdrawal of excess claim of depreciation on
intangible assets.
The demand was reduced to ‘Nil’ after giving effect to the appeal order in
November 2018. On verification of details, it was noticed that the assessee
had paid ` 4.51 lakh through challan and refund of ` 12.01 crore due for
AY 2002-03 was adjusted (October 2020) against the demand for AY 2008-09.
Since, after giving effect of appeal order, no tax demand was outstanding, a
refund of ` 12.06 crore was required to be issued by the AO. However, in the
e-filing portal, original demand of ` 98.58 crore in November 2020 was
shown outstanding. Whereas Audit noted that as per the application for
rectification submitted by the assessee, a demand of 41.29 crore was
outstanding for which the assessee had filed a grievance on 03 November
2020 for rectification u/s 154 of the IT Act. Audit could not ascertain the basis
of aforesaid demand still being shown as outstanding.
Reply of the Ministry is awaited (March 2024).
(ii) Assessee: M/s H4
Charge: Pr. CIT Chandigarh
The assesse filed (September 2014) a return of income for the AY 2014-15
declaring ‘Nil’ income. The assessment under Section 143(3) was completed
in December 2016 determining an income of ` 317.26 crore and a tax of
` 130.39 crore thereon. The addition was made as the accumulated income
was not utilised, as per the specified objective of the Trust. Subsequently,
the demand was increased to ` 155.38 crore under Section 154
(January 2018). After the appeal of the assessee was dismissed by CIT(A) in
January 2020, the AO directed the assessee to pay arrear demand of
` 73.64 crore after adjustment of tax already paid. The assessee paid
` 73.64 crore, through challan in February 2020. However Audit noticed that

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a demand of ` 35.11 crore was shown as outstanding as on November 2020,

in the e-filing portal. This was brought to the notice of the ITD in June 2021.
Reply of the Ministry is awaited. (March 2024).
(iii) Assessee: D5
Charge: PCIT-1, Bengaluru
The assessee filed (October 2005) a return of income for AY 2005-06 at an
income of ` 39.98 crore. The assessment was completed under Section 153A
read with Section 143(3), in March 2013, determining an income of
` 131.01 crore, and a tax of ` 47.85 crore thereon. The appeal of the assessee
against the additions made by AO was dismissed by CIT(A) in February 2015.
Subsequently, the ITAT deleted (April 2018) the additions made by the AO.
The order giving effect to orders of the ITAT was passed in June 2018,
determining a refund of ` 20.36 crore. However, a fresh demand of
` 18.08 crore was raised as interest under Section 220(2) (levied for delay in
payment of tax demand) in September 2019. No records were available in
the assessment folder regarding filing of further appeal by the ITD; and Audit
noticed that levy of interest of ` 18.08 crore was without any basis. This was
communicated to the Assessing Officer in June 2021.
The Ministry accepted (May 2023) the audit observation.
(iv) Assessee: M/s. N5 Pvt. Ltd.
Charge: Pr. CIT Central-4, Mumbai
The assessee filed (October 2005) a return of income for AY 2005-06,
declaring a business loss of ` 3.45 lakh, and Long-term capital loss of
` 4.12 crore. The assessment under Section 143(3) was completed in
December 2007, determining an income of ` 35.40 crore, (the share
application money along with premium for allotment of cumulative
redeemable preference shares were treated as unexplained money under
Section 69A), and a tax of ` 17.31 crore thereon. In addition to that, business
loss of ` 3.45 lakh was treated as speculation loss, and was allowed to be
carried forward. Moreover, a penalty of ` 12.95 crore was levied under
Section 271(1) (C) in March 2010 for the incorrect claim of loss and tax sought
to be evaded by the assessee. The assessee preferred an appeal against the
assessment order, but both the appellate authorities CIT(A) and ITAT upheld
the addition of ` 35.40 crore. Subsequently, the ITD re-opened the case and
assessment was completed under Section 144/147 in December 2011, and
income was assessed at ` 36.03 crore, after disallowing set off of long-term
capital loss of ` 0.63 crore against short term capital gain. Assessee preferred
an appeal before the CIT(A), which was dismissed in March 2013.

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Against the order of CIT(A), the assessee filed an appeal in ITAT. The ITAT,
Mumbai ‘G’ Bench delivered a decision in August 2017, partly allowing the
appeal for set off of capital loss with capital gain. Audit, however, noticed
that by an order passed (July 2018) under Section 254 {to give effect to the
orders of ITAT against the assessment made under Section 143(3)}, the ITD
allowed a relief of ` 35.40 crore to the assessee, though the orders of ITAT
dated 5 October 2011 (against Section 143(3) order) and 23 August 2017
(against Section147 order), did not provide any relief against such addition to
the assessee.
Audit examination of both the ITAT orders dated 05 October 2011 {against
Section 143(3) order} and 23 August 2017 (against Section 147 order)
revealed that the Appellate Authority had not given any relief to the assessee
on addition of ` 35.40 crore; as such, the demand of ` 17.31 crore was still
outstanding. The penalty of ` 12.95 crore was also outstanding against the
assessee. Thus, an apparent mistake in the order passed by the ITD, to give
effect to the ITAT order nullified the tax demand of ` 17.31 crore and
simultaneously resulted in understatement of outstanding demand by the
same amount. On this being pointed out by Audit (June 2021), the PCIT,
Central-4, Mumbai stated (June 2022) that ITAT vide Order dated 05 October
2011 on ITA No. 1716/MUM/2009 did not give any relief to the assessee
regarding addition of ` 35.40 crore. However, on verification it was found
that on a subsequent date, a Miscellaneous Application (MA) was filed before
the ITAT by the assessee; and consequent to the MA order, ITAT passed
(September 2017) an order and relief was provided by the ITAT.
However, the demand related to penalty amount of ` 12.95 crore was still
being shown as outstanding on the e-filing portal although it related to the
additions which were subsequently deleted by the ITD.
Reply of the Ministry is awaited (March 2024).
Thus non due-diligence of the AOs in not allowing credit for taxes already paid
by the assessees and the mistakes committed while giving effect to the appeal
orders resulted in raising excess demands against the assessees. This, besides,
reporting inflated demand, also, causes harassment and hardships to the
assessees. Further, in view of the judgment73 imposing cost of ` 50 lakh on
the ITD for creating illegal income tax demand was passed by the Honourable
Allahabad High Court (August 2022), the ITD may issue suitable instructions to
ensure that the AO, while computing tax liability of the assessee, may exercise
due diligence to avoid raising of incorrect demand.

73 S R Cold Storage vs Union of India and Three Others (Allahabad High Court), date of judgement 11th
August 2022, Appeal number: Writ Tax number 723 of 2022

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6.2.4 Inordinate delay in giving effect to appellate orders

Section 153(5) of the Income Tax Act provides that appeal orders not involving
making of fresh assessment or reassessment shall be given effect to by the AO
within a period of three months from the end of the month in which the order
was received.
Audit checked 727 appeal revision orders passed during the financial year
2017-18 to 2019-20 pertaining to assessment years 2000-01 to 2017-18. Audit
noticed that in 79 cases relating to CIT(A)/ITAT, the AO passed appeal effect
order after a delay ranging from 4 to 2,725 days.

Audit further noticed that in 173 cases, orders to give effect of appeal orders
were not passed by the AO till the date of audit (July 2021). The delay (beyond
the threshold of 3 months) ranged from 90 to 4,230 days. The Pr. CCIT-wise
details of number of cases are given in Table 6.6 below:

Table 6.6: Delay in Giving Effect to Appellate Orders – Region wise

` in crore)
(`
Sl. Region Delay in giving effect to Delay in giving No. of Total Total Range of
No. the Order of CIT(A) effect to the Order Cases No. of Demand Delay
of ITAT where ` crore) (in days)
Cases (`

No. of Demand as per No. Demand as Appeal

Cases the of per the Effect
Consequential Cases Consequen- Order not
Order tial Order passed
1 Mumbai 13 3,766.15 6 31.59 20 39 3,797.74 26-4230
2 West Bengal & 20 493.84 - - 108 128 493.84 5-4139
Sikkim
3 International 5 298.50 2 7.23 - 7 305.74 53-1298
Taxation, Delhi
4 Tamil Nadu 7 151.94 6 56.26 3 16 208.20 15-596
5 Bengaluru 12 104.12 - - 19 31 104.12 11-3347
6 Delhi 6 96.78 2 0.21 - 8 97.00 4-2280
7 AP & Telangana - - - - 3 3 - 335-1186
8 Bhubaneshwar - - - - 4 4 - 335-1308
9 Bihar & Jharkhand - - - - 3 3 - 365-365
10 Gujarat - - - - 5 5 - 425-1431
11 MP & Chhattisgarh - - - - 4 4 - 1066-1066
12 Rajasthan - - - 4 4 - 517-3653
Total 63 4,911.34 16 95.29 173 252 5,006.63
Source: As data collected by FAOs during field audit.
No comments offered in respect of Kerala, North East Region, North West Region, UP East, UP West and Uttarakhand, Pune and Nagpur

As evident from the table above, out of the total 252 cases, in 173 cases, the
ITD did not give effect to the order of appellate authority till the date of audit
(July 2021). Out of these 173 cases, 108 cases pertained to West Bengal and

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Sikkim region only. Further, in Mumbai and West Bengal & Sikkim region,
there were inordinate delays up to 4,230 days and 4,139 days respectively.
Audit made age-wise analysis of the delay in giving effect to appeal orders, and
the results have been reflected in Table 6.7 below:

Table 6.7: Age-wise analysis of delay in giving effect order/giving effect order not passed

Period of delay No. of cases Cases in Percentage

less than 1 year 71 28.17

from 1 to 3 years 93 36.90
from 3 to 5 years 67 26.59
more than 5 years 21 8.33
Total 252 100.00
Source: On the basis of physical records examined by FAOs

It could be seen from the above table, in 181 cases, delay was more than one
year; and in 21 cases, delay was even more than five years. Audit could not
ascertain the veracity of outstanding demand being reported in different
portals, in cases, where effect of appeal orders was not given during the period
of Audit.
Audit also noticed that the original outstanding demand of ` 17,839.74 crore,
as per the e-filing portal, in respect of 63 cases had been reduced to
` 4,911.34 crore by the CIT(A). Delay in giving effect to consequential orders
resulted in exhibiting excess demand of ` 12,928.40 crore in the ITBA and the
e-filing portals.

Reply of the Ministry is awaited (March 2024).

Three illustrative cases are discussed below:

Box 6.3
(i) Assessee: R3
Charge: Pr. CIT-Gwalior
Based on the search operation conducted under Section 132 on
28 March 2008, returns of income were filed for AYs 2005-06 to 2008-09 in
October 2009. The assessments for AYs 2005-06 to 2008-09 were completed
under Section 144/153A of the Act, in December 2009, determining income
of ` 17.67 crore, ` 31.50 crore, ` 23.99 crore and ` 39.56 crore respectively,
after making addition on account of deposits in bank from unexplained
sources. The tax demand for AYs 2005-06, 2006-07, 2007-08 and 2008-09
was raised at ` 10.08 crore, ` 17.06 crore, ` 12.02 crore and ` 18.24 crore,

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respectively. The assessee had preferred an appeal before CIT(A), and CIT(A)
deleted additions made by the AO. The order of CIT(A) was received by the
AO in February 2018; however, the same was not given effect to as of
December 2020. This resulted in depicting excess demand of ` 57.40 crore
on the e filing portal.
Reply of the Ministry is awaited. (March 2024).
(ii) Assessee: A7
Charge: PCIT 1, Patna
A Return of Income for AY 2017-18 was filed by the Assessee in March 2018,
at an income of ` 2.30 crore. The assessment under Section 143(3) was
completed in December 2019, determining an income of ` 28.89 crore, and
a demand of ` 24.69 crore thereon, after making an addition of ` 26.59
crore. The assessee preferred an appeal before the CIT(A) and all the major
additions were deleted in the order passed by CIT(A). However, no order was
passed to give effect to the order of CIT (A). As a result, demand of
` 23.51 crore continued to be shown incorrectly as outstanding in ‘Demand
and Recovery Status Report’ of ITBA, as on 27 January 2021.
The Ministry accepted the audit observation (May 2023).
(iii) Assessee: M/s. M5 Ltd.
Charge: Pr.CIT-7, New Delhi
For AY 2009-10, the assessee claimed a TDS credit of ` 54.08 crore in the
revised return filed in March 2011. While completing the assessment under
Section 143(3) in December 2011, the AO did not allow the entire amount of
TDS of ` 54.08 crore, which resulted in levy of interest under Section 234B
of ` 11.18 crore. The interest levied under section 234B was deleted by the
CIT(A) in September 2013. The order of appeal was received in the
assessment charge in October 2013; however, the AO passed the order giving
effect to the order of CIT(A) under Section 250 in May 2015 i.e., after a delay
of 16 months. This resulted in avoidable payment of interest of ` 0.28 crore
under Section 244A. The matter was reported to the ITD (July 2021).
Reply of the Ministry is awaited (March 2024).

Thus, delay in giving effect to the appeal orders by the AO resulted in avoidable
payment of interest under Section 244A and also incorrect portrayal of figure
of outstanding demand which would eventually result in wastage of resources
in monitoring of such demand.

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Recommendation 7:
The CBDT may ensure that the time limit prescribed under Section 153 of
the Income Tax Act in giving effect to Appellate Orders is strictly adhered
to and adherence thereto is monitored. The CBDT may consider taking
action in cases where inordinate delay(s) have been noticed without any
justification.
The Ministry stated (June 2023) that in order to ensure compliance with the time
limit prescribed under Section 153(5) of the IT Act, a specific key result area related
to giving effect to all appellate orders has been included in the interim Action Plan
for the FY 2023-24. With this, performance of JAOs will be effectively monitored by
supervisory authorities to ensure strict compliance to section 153(5) of the Act.
The Audit will await the progress made in this regard.

6.2.5 Non-collection of requisite payment on filing appeal

The CBDT’s instructions74 prescribed that the AO shall grant stay of demand till
disposal of first appeal on payment of 15 per cent or 20 per cent of the disputed
demand, as may be applicable.
Out of 10,896 cases test checked, Audit noticed that in 3,403 cases, assessees
had preferred an appeal. In 4,140 cases, appeal was not preferred. In respect
of the remaining 3,353 cases no details were available on record.
Out of 3,403 appeal preferred cases, Audit observed that assessees had paid
the prescribed amount of 15 per cent/20 per cent of the demand only in 382
cases and in 1328 cases, the assessees had not paid the minimum amount
aggregating to ` 5,920.86 crore (as detailed in below Table 6.8) and the ITD
had not initiated any action for recovery. In respect of the remaining 1,693
cases details were not made available. Category-wise details are shown in
Table.6.8 below:
Table 6.8: Non-collection of requisite payment as on 31 March 2020 – category wise
` in crore)
(`
Status/Category No. of Demand Minimum requisite payment
cases raised not made

Company 773 13,399.35 2,009.90

Individual 332 22,708.97 3,406.35
AOP/Trust/BOI 141 2,431.13 364.67
HUF 8 28.6 4.29
Firm 44 260.14 39.02
Local Authority 12 317.16 47.57

74 CBDT Instructions no. F.No.404/72/93-ITCC dated 29 February 2016 and F.No.404/72/93-ITCC dated
31 July 2017

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Table 6.8: Non-collection of requisite payment as on 31 March 2020 – category wise

` in crore)
(`
Status/Category No. of Demand Minimum requisite payment
cases raised not made

Artificial Judicial Person 17 321.09 48.16

Government 1 6.02 0.9
Total 1,328 39,472.46 5,920.86
Source: On the basis of physical records examined by FAOs

Three such cases are illustrated below:

Box 6.4
(i) Assessee: S7
Charge: PCIT 3, Chennai
The assessee did not file his return of Income for AY 2011-12. The
assessment was completed under Section 144/147 in December 2018,
determining an income of ` 67.35 crore, and a net tax demand of
` 58.65 crore thereon. The assessee filed an appeal (25 June 2019) against
the aforesaid assessment order. However, no details were found on record
with regard to payment of 15 per cent of outstanding demand. It was also
verified from the dossier reports (II and III Quarter of FY 2019-20) that no
collection was made and a demand of ` 58.65 crore was still outstanding.
Audit could not ascertain the action taken by the ITD to collect the prescribed
percentage of disputed demand (June 2021).
Reply of the Ministry is awaited (March 2024).
(ii) Assessee: M/s. S8 Pvt. Ltd
Charge: PCIT Central, Patna
The return of income for AY 2017-18 was filed (October 2017) admitting ‘Nil’
income. The assessment was completed under Section 143(3) in December
2019 at ` 5.21 crore and a tax demand of ` 5.36 crore thereon. As the
assessee preferred an appeal against the assessment order, he was required
to deposit 20 per cent of outstanding demand. However, the assessee
deposited only ` 0.27 crore (i.e. five per cent of the demand) at the time of
filing an appeal (January 2020) before CIT(A). The ITD granted a stay
(February 2020) on demand even though, there was a short payment of the
prescribed amount by ` 0.80 crore (20 per cent of ` 5.36 crore, i.e.
` 1.07 crore less ` 0.27 crore).
The Ministry accepted the audit observation (May 2023).

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(iii) Assessee: V3
Charge: PCIT (Intl Taxation), Rajasthan
The assessee filed (December 2017) her return of income for AY 2017-18,
admitting an income of ` 0.04 crore. The assessment was completed under
Section 143(3) in December 2019, after making an addition of ` 3.42 crore
towards unexplained cash deposit under Section 69A, and a tax demand of
` 3.64 crore was raised. The AO allowed stay of demand on the condition
that 20 per cent of arrear demand shall be paid by the assessee in ten equal
installments. Besides this, as per the order, a suitable security (bank
guarantee etc.) was also required to be offered by the assessee to safeguard
the interest of the revenue. It was noticed that the assessee neither offered
any security (bank guarantee) nor paid any instalment; however, the AO did
not initiate any action to recover 20 per cent of outstanding demand.
On being pointed out, the ACIT (International Taxation, Jaipur) stated
(March 2021) that since the assessee had failed to pay 20 per cent of the
demand by way of instalments, the stay granted to assessee was suo motu
vacated, and necessary recovery proceedings would be initiated. Details of
the further action taken by the ITD and reply of the Ministry are awaited
(March 2024).

Audit noted that the AOs are not following the CBDT’s instructions on stay of
demand which resulted in piling up of outstanding demand. Further, there is
no mechanism in ITD to ensure the compliance to such instructions.
Recommendation 8:
The CBDT’s instruction for collection of the minimum prescribed limit for
the disputed demand for granting a stay of demand may be enforced for
scaling down outstanding demand. The CBDT may consider taking action
for non-compliance without justification.
The Ministry in its reply stated (May 2023) that instructions containing guidelines
regarding the procedure to be followed for recovery of outstanding demand
including the procedure for grant of stay on demand was already in force. The
Ministry further stated that the AOs/TROs carry out the functions of collection of
outstanding demand as per the provisions of Income Tax Act and their functions
are duly supervised by higher authorities.
The Ministry may reiterate the adherence to the instructions of the CBDT as
collection of 15/20 per cent of demand would reduce the outstanding demand
significantly.

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6.2.6 Delay/mistakes in issue of Demand Notice

Section 156 of the IT Act prescribes that when any tax, interest, penalty, fine
or any other sum is payable in consequence of any order passed under the Act,
the AO shall serve upon the assessee, a notice of demand in the prescribed
form specifying the sum so payable. Where any sum is determined in
preliminary assessment (processing) by the ITD, the intimation issued under
Section 143(1) shall be deemed to be a notice of demand. The demand so
raised is payable by the assessee within a period of 30 days from the date of
receipt of the notice. The Supreme Court has held75 that service of notice of
demand on the assessee under Section 156 of the Act is mandatory before
taking steps for recovery under second schedule; and non-service of notice of
demand goes to the root of the validity of subsequent proceedings for
recovery. In cases of failure to serve the notice of demand or where the
demand notice is not received by the assesse, the Courts have held the
recovery proceedings to be invalid.
6.2.6.1 Delay in issue of Demand Notice
Audit noticed delays in issue of Demand Notices in the following test-checked
cases:
Table 6.9: Delay in issue of demand notice under Section 156 of IT Act
` in crore)
(`
Sl. Pr. CCIT Assessm Name of AY Amount Date of Date of Delay in
No. Region ent Unit Assessee demanded Assessment issue of number
as per / Revision notice of days
Notice Order under
Section 156
1 Kerala Central M/s. M6 2011-12 12.81 04/02/2020 26/02/2020 22
Circle 1 Ltd.
2 Kerala Central M/s. M6 2012-13 47.87 04/02/2020 26/02/2020 22
Circle 1 Ltd.
3 Kerala Central M/s. M6 2014-15 70.56 04/02/2020 26/02/2020 22
Circle 1 Ltd.
4 Kerala Central V4 2013-14 15.14 06/02/2019 26/03/019 48
Circle 1
5 Kerala Central S9 2012-13 0.34 24/02/2016 11/03/2016 16
Circle 1
6 Kerala Central S9 2011-12 0.21 24/02/2016 11/03/2016 16
Circle 1
7 MP & Circle 1(1) R4 2011-12 0.001 20/05/2019 22/06/2019 33
Chhattisgarh Raipur
8 MP & Circle 1(1) R4 2011-12 0.0005 20/05/2019 22/06/2019 33
Chhattisgarh Raipur
9 MP & Ward 3(1) A8 2011-12 0.05 20/10/2018 09/11/2018 20
Chhattisgarh Raipur
10 MP & Ward 3(1) D6 2011-12 0.01 23/10/2018 09/11/2018 17
Chhattisgarh Raipur
Source: On the basis of physical records examined by FAOs

75 Sri Mohan Wahi Vs. Commissioner of Income Tax (2001) - 240 ITR 799(SC)

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It can be seen from the above table that demand notices were issued delayed
ranging from 16 days to 48 days after the assessment/revision order was
passed. Delay in issue of notice under Section 156 to the assessee may lead to
loss of revenue in terms of interest under Section 220(2) of the Act and also
delayed recovery of tax demand.
Reply of the Ministry is awaited (March 2024).
6.2.6.2 Non-issue of Demand Notices/Incorrect reporting of demands
In PCIT, Bengaluru charge, Audit observed that in four cases involving net
demand of ` 937.21 crore, notices of demand under Section 156 were either
not issued or were issued for a lesser amount, while in two other cases (One
in PCIT, Bengaluru and another in PCIT, Chandigarh), the amounts mentioned
in the demand notices were in excess of the actual demand by ` 0.96 crore.
Details are given in Table 6.10 below.
Table 6.10: Non-issue of demand notices / incorrect reporting of demands
` in crore)
(`
Sl. AO charge Name of the AY Date of Net Demand Demand Difference
No. assessee order as per the as per
assessment Notice
order issued
1 Circle 2(1)(1), M/s. S10 Ltd. 2017-18 30/12/2019 933.16 Not 933.16
Bengaluru issued
2 Circle 2(1)(1), M/s. E1 Pvt. Ltd. 2011-12 19/03/2020 2.12 Not 2.12
Bengaluru issued

3 Ward 4(1)(1), M/s. L3 Ltd 2007-08 13/09/2017 1.50 0 1.50

Bengaluru
4 Ward 4(3)(1), C10 & B1 2012-13 27/12/2019 11.36 11.77 (-)0.41
Bengaluru
5 Circle 7(1)(1), M/s. U1 Pvt. 2014-15 26/12/2017 32.92 32.49 0.43
Bengaluru Ltd.
6 ACIT/DCIT M/s. J2 Ltd. 2014-15 30/12/2019 3.56 4.11 (-)0.55
Central Circle-
2 Chandigarh
Source: On the basis of physical records examined by FAOs

Since an assessee is required to pay the amount of tax as shown in the notice
issued under Section 156, any mistake in the notice may result in
non-collection of tax, short collection of tax or harassment to the assessee.
Reply of the Ministry is awaited (March 2024).
6.2.6.3 Issue of demand notice quoting incorrect PAN to the assessee
Further, Audit observed that in one case, the demand notice was issued to a
person other than the assessee for whom demand was raised, as detailed
below:

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Box 6.5
Assessee: M/s. S11 Ltd
Charge: PCIT Central-4, Mumbai
The return of income for AY 2011-12 was filed (March 2013) declaring an
income of ` 90.42 crore; and the assessment was completed in February 2014
accepting the returned income. Subsequently, a survey was conducted and
assessment was completed under Section 143(3) /153C, in March 2015,
determining an income of ` 86.72 crore, and a tax demand of ` 6.88 crore
thereon.
Audit noticed that in the demand notice under Section 156 for ` 6.88 crore
was issued to the assessee quoting PAN of some other assessee, M/s. S12 Pvt.
Ltd, whose demand was nil for the AY 2011-12. Since PAN is only valid source
for the Department by which demand could be pursued and monitored,
quoting of incorrect PAN resulted in raising of incorrect demand which might
eventually cause non realisation of demand.
The ITD rectified the error by order under Section 154 dated 11 July 2023 by
issuing a fresh demand notice to the correct PAN.

6.2.7. Incorrect Claims submitted to Official Liquidator/Custodian

In the case of a company under liquidation, Section 178 of the Act provides
that the Assessing Officer shall, after making such enquiries or calling for such
information as he may deem fit, notify to the liquidator within three months
from the date on which he receives notice of the appointment of the liquidator
the amount which, in the opinion of the Assessing Officer, would be sufficient
to provide for any tax which is then, or is likely thereafter to become, payable
by the company.
According to this provision, whenever a company having pending arrear tax
demand goes for liquidation, the ITD has to send the arrear demand claim in
respect of company to the authority, which is handling the liquidation process.
Audit noticed that in respect of one assessee, H3 (Demand relating to two AYs
amounting to ` 128.29 crore), whose assets were under the custody of a
custodian appointed by a special court, an arrear demand was not submitted
by the ITD to the Custodian; whereas for the three assessees namely M/s. C2
Ltd., M/s P3 Ltd. and M/s S13 Ltd. (as shown in Table 6.11 below) under
liquidation, a total demand of ` 1,480.07 crore was outstanding. However, the
amount notified to the official liquidator was only ` 911.94 crore. Audit could
not ascertain reasons for non-reporting/short reporting of demand by
` 696.42 crore to the liquidating authority, as detailed in Table 6.11 below:

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Table 6.11: Claims short/not reported to Liquidating Authority/Custodian

` in crore)
(`
Assessment Name of the Assessment Year Outstanding Amount Amount
Unit/PCIT/ Assessee Demand reported short/non
Region reported
Cir 1(1) M/s C2 Ltd. 2008-09 (2), 2009-10 (2), 742.13 292.59 449.54
PCIT -1 2010-11, 2011-12(2),
Kolkata 2012-13, 2013-14(2) and
2017-18
(11 cases)
CC-2.2 M/s P3 Ltd. 2006-07, 2007-08, 143.82 28.81 115.01
PCIT- Central 1 2009-10, 2012-13 and
Kolkata 2017-18
(05 cases)
CC-1(1) M/s S13 Ltd. 2013-14, 2015-16 to 594.12 590.54 3.58
PCIT 1 2017-18
Chennai ( 04 cases)
Central Circle H3 1990-1991, 2018-19 128.29 0 128.29
4(1), (02 cases)
PCIT Central 2
Mumbai
Source: On the basis of physical records examined by FAOs

One case is illustrated below:

Box 6.6
Assessee: M/s. P3 Ltd.
Charge: PCIT Central-1, Kolkata
For AY 2012-13, the assessee did not file the return of income. However, the
assessment was completed under Section 144/147, in December 2019
determining an income of ` 33.49 crore and a tax demand of ` 30.42 crore
thereon.
For AY 2017-18, the return of income was filed (August 2017) declaring an
income of ` 65.01 crore. The assessment was completed under Section
144/143(3) in December 2019, determining an income of ` 344.27 crore and
a tax demand of ` 307.07 crore thereon. The assessment was rectified under
Section 154 in August 2021 and income was determined at ` 147.47 crore
and a tax demand of ` 113.38 crore thereon.
Further, the National Company Law Tribunal (NCLT), Kolkata allowed
(September 2019) the liquidation of the company. Audit examination
revealed that the ITD while submitting the arrear demand claim against the
company before the liquidator in November 2019, claimed ` 28.81 crore only
instead of an outstanding tax demand of ` 113.38 crore in respect of
AY 2017-18. Further, ITD did not claim any amount against the outstanding

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demand aggregating to ` 30.44 crore pertaining to AYs 2006-07, 2007-08,

2009-10 and AY 2012-13.
Incorrect claim of arrear demand before official liquidator would affect the
recovery of tax dues. The discrepancies in notifying the arrear demand to
official liquidator was communicated to the ITD (July 2021).
Reply of the Ministry is awaited (March 2024).
6.2.8 Recovery in instalments
Section 220(3) of the Act empowers the Assessing Officers to recover the
demand in installments, and the procedure for the same has been explained
in Para 4 of Manual of Office Procedure (Consolidated) 2019. While allowing
the taxpayers to pay the tax demand in instalments, the Assessing Officers
have to ensure that the amount of installment granted is commensurate with
the total arrear and that the instalment is not of a meagre amount. In cases,
where there is a default in payment of instalments, pre-emptive action should
be taken to recover the balance pending.
In Bengaluru region, Audit noticed that in four cases, assessees defaulted in
payment amounting to ` 33.50 crore of instalment as shown in Table 6.12
below:
Table 6.12: Discrepancies noticed in recovery of demands in installments
` in crore)
(`
AO charge/PCIT Name of the AY Assessment Date of Demand Default in
charge assessee made under order outstanding payment of
Section instalment
Circle 3(1)(1), M/s I5 Pvt. Ltd. 2016-17 143(3) r.w.s. 29/01/2010 38.34 6.07
Bengaluru, PCIT III 144C
Bengaluru
Circle 7(1)(1), PCIT II M/s U2 Ltd 2010-11 271(1)(C) 29/03/2019 62.77 24.00
Bengaluru

Circle 6(1)(1), PCIT I M/s S14 Ltd. 2017-18 154 20/03/2020 10.16 2.03
Bengaluru
Circle 3(1)(1), PCIT III A9 2017-18 143(3) 15/12/2019 2.06 1.40
Bengaluru

Total 33.50
Source: On the basis of physical records examined by FAOs

Audit could not find any evidence of action taken by the ITD for recovery of
defaulted instalments.

Reply of the Ministry is awaited (March 2024).

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6.3 Functioning of Tax Recovery Officer

Tax recovery Officer (TRO)76 assumes the most important function involved in
monitoring and recovery of arrear demand. Presently, one TRO is deployed per
commissionarate with assessment charge which is the same as in pre-
reorganization period of the ITD. In case of a defaulter, TRO gets jurisdiction
the moment a demand is certified by him by drawing a statement under
Section 222(1) of the Act with or without a proposal from an AO. The TRO has
to draw up a Tax Recovery Certificate (TRC), whenever an assessee is in default
or is deemed to be in default in making a payment of tax. The JAO is required
to draw a statement containing details of arrears and forward it to TRO to
enable him to draw a TRC.
Separation of assessment and collection function is one of the focus points of
Vision 2020, and the Central Action Plans are drawn to fulfill such vision.
The powers and functions of TROs have been described in detail in the
Appendix 1 of the Report.
In order to assess the effective functioning of the TROs in collection of
outstanding demands, Audit selected 74 TROs (Appendix 5) relating to the
jurisdictional assessment units selected for audit examination. Audit findings
are discussed in the following paragraphs:

6.3.1 Clearance of TRC 77

As per the Central Action Plan 2016-17, progressive disposal of the Tax
Recovery Certificates (TRC) by the TROs has to be monitored and achievements
projected quarterly for status review by the CBDT. TRCs pending for more than
two years should be disposed of on priority basis. The CBDT in its Central Action
Plan for 2017-18, 2018-19, and 2019-20 fixed target for disposal of 20 per cent
of brought forward TRCs or 150 TRCs by each TRO. Details of TRCs related
information were requisitioned from 74 TROs. However, only 30 TROs
responded and the details of disposal of TRCs during the years 2017-18 to
2019-20, provided by these 30 TROs, have been shown in Table 6.13 below:

76 As per Section 2(44) of the Income Tax Act, 1961, “Tax Recovery Officer” (TRO) means any Income-
tax Officer who may be authorized by the Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner by general or special order in writing, to exercise the powers of a TRO and
also to exercise or perform such power and functions which are conferred on or assigned to an
Assessing Officer (hereinafter referred as AO) under the Act and which may be prescribed.
77 A statement drawn by the TRO, under his signature in the prescribed Form no.57 whenever an
assessee is in default or is deemed to be in default in making a payment of tax.

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Table 6.13: Details of TRCs for the three years period 2017-18, 2018-19 and 2019-20
Year Opening Balance Issued by TRO Received from Cleared Transferred to Written Off Closing Balance
Other TROs Other TROs
1 2 3 4 5 6 (7)=(1)+(2)+(3)-
(4)-(5)-(6)
Number Outstanding Number Outstanding Number Outstanding Number Outstanding Number Outstanding Number Outstanding Number Outstanding
of TRCs Amount of TRCs Amount of TRCs Amount of TRCs Amount of TRCs Amount of TRCs Amount of TRCs Amount
(₹ in crore) (₹ in crore) (₹ in crore) (₹ in crore) (₹ in crore) (₹ in crore) (₹ in crore)

2017-18 9,671 4,52,561 1,157 1,17,354 71 4,808 2,194 56,616 199 1,23,639 1,214 10,879 7,292 3,83,588
2018-19 10,240 4,06,698 884 74,361 115 5,646 1,457 81,071 87 17,767 402 15,473 9,293 3,72,392
2019-20 10,052 6,75,826 905 2,08,135 996 42,676 1,819 53,144 78 13,149 319 10,914 9,737 8,49,431
Source: Data furnished by TROs

As evident from the table above, 9,737 TRCs involving arear demand of
` 8,49,431 crore pertaining to 30 TROs were pending for disposal for the year
ending 2019-20. Total TRCs drawn, disposed of and the pendency of these
TROs, are detailed in Appendix 9 of the Report.
Audit observed that out of 30 TROs, only eight TROs in the year 2017-18, seven
TROs in the year 2018-19 and four TROs in 2019-20 achieved their targets in
respect of disposal of TRCs (Appendix 9). Reasons for shortfall in targets could
not be ascertained from the records.
Reply of the Ministry is awaited (March 2024).
Further, it was also observed that in 41 cases, the TRO cleared less than
prescribed percentage i.e. 20 per cent of brought forward TRCs whereas in 21
cases, the TRO did not clear even a single TRC during the year. Reply of the
Ministry is awaited (March 2024).
TROs could not achieve the target for disposal of TRCs even though in certain
instances, the number of cases transferred from JAOs to TROs was less than
the yearly reduction target of 150 TRCs. Since, the basis of fixing target was not
available in the records Audit could not ascertain as to how a uniform target
was fixed for all regions with varying number of TRCs.
Recommendation 9 :
The CBDT may issue suitable Instructions and follow-up procedures to
ensure faster clearance of TRCs and strengthen the recovery process. The
CBDT may consider taking action in cases where inordinate delay(s) have
been noticed without justification.
The Ministry, in its reply, referring to the Tax Recovery Officer's Manual 2007,
stated (May 2023) that all the instructions, guidelines, and format regarding
drawing/following up a Tax Recovery Certificate (TRC) are provided in the Tax
Recovery Officer’s Manual 2007.
The Ministry’s reply is focused on the procedures/ systems put in place. However,
Audit noted that the reporting, monitoring, and follow-up actions in clearing TRCs

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were not adequate. The Ministry may review the effectiveness of the existing
systems and reiterate its instructions to strengthen the monitoring mechanism at
the level of TROs.

6.3.2 Survey by TRO

The CBDT’s annual Central Action Plans for the years 2017-18, 2018-19 and
2019-20 envisage that each TRO shall conduct at least 10 surveys in a year for
recovery of demand, in suitable cases. Such surveys for recovery of demands
should preferably be conducted in each quarter and not left to the fag-end of
the financial year.
Audit called for the details of number of surveys conducted by each TRO, and
amount realised as a result of the surveys during the period from 2017-18,
2018-19 and 2019-20.
Out of 74 TROs selected, records related to 52 TROs were not produced to
Audit. Audit observed that 22 TROs as against the target of 660 surveys
conducted total 202 surveys during for the period from 2017-18 to 2019-20
and recovered a total tax amount of ` 62.41 crore. Further, of 22 TROs, four
TROs achieved their target in one of the aforesaid financial years whereas one
TRO achieved the target in two financial years. Audit also observed that
remaining 17 TROs could not achieve their target in any of the financial years,
as detailed in Appendix 10.
Audit could not analyse adequacy of the target vis-a-vis achievement due to
partial response from the ITD or due to non-availability of requisite
information.

6.3.3 Mistakes noticed in issue of Demand Notice by TRO

As per second schedule of the Act, when a TRC is drawn, TRO shall cause to be
served upon the defaulter a notice78 in ITCP79-1 requiring him to pay the
amount specified in the TRC within fifteen days of service of such notice
intimating that steps would be taken as per the Second Schedule of the IT Act
to recover the amount. Further, duplicate of Notice of Demand (ITCP-1) for
each certificate is to be dispatched to the concerned Assessing Officers for
information80.
On verification of 44 TRCs pertaining to two regions produced to Audit, it was
noticed that in respect of 24 TRCs, TROs did not issue demand notice to the

78 Para C.1 of Chapter IV of TRO Manual 2014

79 Form ITCP-1 is the statement through which actual demand is communicated to the assessee in
default, after a TRC has been drawn.
80 Para 2(iii) of Chapter II of TRO Manual 2014

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assessees and intimation to the Assessing Officer. Region-wise details are

given in Table 6.14 below:
Table 6.14: Non-issuance of demand notice by TRO to Assessee and Assessing Officer
Sl. Region TRO Charge Number of Outstanding Demand
No. Cases ` in crore)
(`
1 Madhya Pradesh and TRO Gwalior 18 383.66
Chhattisgarh TRO Raipur 5 35.16
2 Bengaluru TRO-2 1 106.72
Source: On the basis of physical records examined by FAOs

Two cases, one each of non-issue and excess issue of demand in Form ITCP 1
have been illustrated below:
Box 6.7
(i) Assessee: M/s B2 Pvt. Ltd.
Charge: PCIT-1, Gwalior
The assessee filed a return of income for AY 2013-14 in September 2013
declaring an income of ` 1.49 crore. The assessment was completed under
Section 143(3) in March 2016, determining an income of ` 404.53 crore and
a tax demand of ` 177.83 crore thereon. Audit noticed that the assessee had
made a payment of ` 0.08 crore; as such, the net demand of ` 177.75 crore
was still outstanding (March 2023).
The Assessing Officer intimated the TRO (October 2017) that a demand of
` 177.75 crore was to be recovered. The TRO after drawing the Tax Recovery
certificate, did not issue notice of demand in Form ITCP-1. Non-issue of the
said form indicates non-compliance to the procedure laid for TROs in the
Manual. Reason for non-issuance of demands in form ITCP-1 was also not
found recorded in the records made available to Audit.
Reply of the Ministry is awaited (March 2024).
(ii) Assessee: V2
Charge: PCIT-2, Bengaluru
The Assessing Officer prepared the TRC in Form 57 indicating the outstanding
demand of ` 21.78 crore, pertaining to AYs 2009-10 to 2017-18, for the
assessee and forwarded the same to the TRO in November 2020. However,
the TRO issued notice of ITCP 1 for a demand of ` 63.68 crore (November
2020) instead of ` 21.78 crore, which resulted in issuance of excess demand
by ` 41.90 crore by the TRO. As per e-filing portal and ITBA, an amount of
` 28.78 crore was pending, as on 30 November 2020. Reply of the Ministry is
awaited (March 2024).

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6.3.4 Non levy/short levy of interest

Rule 5 of the Second Schedule to the Act provides that interest, upon the
amount of tax or penalty or other sum to which the certificate relates as is
payable, shall be recoverable in accordance with sub-section (2) of Section 220
of the Act.
Out of 31 TRCs produced and verified by Audit in two regions, it was observed
that in 22 cases, the ITD either did not levy interest or short levied under Rule
5 under Second Schedule of the Act.
The region-wise number of cases, where interest under Section 220(2) was not
levied/short levied and the outstanding demand, have been shown in Table
6.15 below:
Table 6.15: Interest under Section 220(2) not/short levied
Sl. Region No. of Outstanding Interest Amount
No. Cases Demand non/short levied
` in crore)
(` ` in crore)
(`
1 Tamil Nadu 10 333.46 109.39
2 UP West and Uttarakhand 12 55.31 25.40
Total 22 388.77 134.79
Source: On the basis of physical records examined by FAOs

Thus, failure to levy/short levy of interest by the TRO resulted in loss of

revenue to the exchequer.

Reply of the Ministry is awaited (March 2024).

6.3.5 Non-Attachment of property

TROs are equipped with special powers for recovery of demands under
Sections 222, 226 and 227 of the Act. They are empowered to recover the
outstanding demand by way of attachment of properties, attachment of bank
accounts and arrest of the defaulter.
Audit noticed that no property was attached in 34 cases of default in Mumbai
region. Audit further noticed that in Tamil Nadu region, PCIT-3, Chennai
attached properties in one case, but no further action was taken to recover the
amount. In Bengaluru region, PCIT-2, Bengaluru, in one case, the ITD failed to
convert the provisional attachment into regular attachment. The total
outstanding demand in respect of 45 cases was ` 1,38,724.61 crore, as shown
in Table 6.16 below:

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Table 6.16 : Non Attachment of Property

Sl. Region PCIT TRO Number Outstanding
No. of Cases Demand Amount
` in crore)
(`
1 Mumbai Pr. CIT (Central)- TRO-Central, 34 1,37,563.48
1, Mumbai Mumbai
2 Bengaluru PCIT-1 TRO-1, Bengaluru 1 1.95
3 Bengaluru PCIT-2 TRO-2, Bengaluru 1 11.92
4 Tamil Nadu PCIT-3 TRO-3, Chennai 8 1,129.91
5 Tamil Nadu PCIT-4 TRO-4, Chennai 1 17.34
Total 45 1,38,724.61
Source: On the basis of physical records examined by FAOs

In respect of Mumbai region, Audit noticed that total demand aggregating to

` 1,37,563.48 crore in respect of the 34 cases was related to H2, however, in
these cases, attachment of property was not done. Complete details are
elaborated in Para 5.3.4 of Chapter-5 of this Report.
Two cases are illustrated below:
Box 6.8
(i) Assessee: M/s. N6 Ltd.
Charge: PCIT-4, Chennai
The Assessing Officer prepared a TRC in Form 57 and the case was transferred
to TRO-4 in February 2017 with an outstanding demand of ` 38.42 crore
pertaining to AYs 2011-12 to 2013-14. On verification of attachment to Form
57, Audit noticed that at the time of preparing TRC, the assessee owned
properties aggregating to ` 3,065.72 crore. However, the TRO did not initiate
any action to attach the properties since February 2017 and the assessee
went into liquidation in December 2018. No further information was
available on record. This was communicated to the ITD in June 2021. Reply
of the Ministry is awaited (March 2024).
(ii) Assessee: V2
Charge: PCIT-2, Bengaluru
The Assessing Officer prepared the TRC in Form 57 at an outstanding demand
of ` 21.78 crore pertaining to AYs 2009-10 to 2017-18, and intimated the
same to TRO (November 2020). From the dossier report of the fourth quarter
of FY 2019-20, Audit observed that the Assessing Officer had provisionally
attached immovable property of the assessee under Section 281B (during the
third quarter of 2019-20) at Malleswaram, Bengaluru. The information
regarding provisional attachment was required to be informed (in the
dossier) to the TRO; however, it was not done. Meanwhile, the period of

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provisional attachment lapsed automatically after six months. The TRO did
not initiate any action to attach the property in possession of the assessee If
timely action is not taken, risk of assessee disposing of the property cannot
be ruled out.
Further, from the Dossier Report for the quarter ending September 2022, it
was noticed that the TRO commented that recovery action could not be
initiated as no movable and immovable properties could be identified in this
case. Reminders are being issued to the defaulter to pay the outstanding
demand through mail. Reply of the Ministry is awaited (March 2024).
Thus, there were instances when the TROs had not exercised the special
powers vested in them by the Act although the same was required in the
interest of revenue. The issue of non-attachment of property for recovery of
outstanding demand by TROs was also reported in the CAG’s Performance
Audit Report No. 23 of 2011.

6.3.6 Non/irregular maintenance of Registers

Para 3 of Chapter 2 of Tax Recovery Officer’s Manual 2014 prescribes

13 Registers81 to be maintained by the TRO’s office with a view to facilitate
control over the tax arrears, their clearance and the effective monitoring of
disposal of arrear cases by various supervisory Authorities.
Audit sought information on maintenance of the prescribed Registers from
74 TROs. Of these, only 31 TROs responded giving register-wise details
(Appendix 11). Out of these 31 TROs, 12 TROs maintained and updated the
prescribed registers whereas seven TROs maintained the registers but
updation details were not made available to Audit. In remaining 12 TROs,
registers were maintained partially.
Further, while comparing Quarterly Progress Report for the quarter ending
31 March 2020 with Register of immovable properties attached by the TRO, in
PCIT, Central, Ahmedabad charge, Audit noticed mismatch with regard to
number of assessees in default and immovable properties attached against
these assessees. Audit also noticed that there was no entry in the Register for
the value of attached property.
Non-maintenance/partially maintenance of aforesaid statutory registers by
TROs would result in inadequate monitoring of the case which would
eventually affect the recovery of demands. Further, in absence of response

81 Inward Register for Certificates, Cash Book, Register of movable and immovable property attached
and sold, Execution Register, Register of Daily Reduction/collection of certified demand, Stay
Register, Instalments Register, Disposal Register for certificates finally disposed of, Closed Certificates
Register, Custody Register, Daily Diary, Register of Recovery in case of Companies in liquidation BIFR
& Sick companies, TRO’s Control Register

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from the ITD, Audit could not ascertain details of alternate mechanism
available in ITD to monitor timely recovery of Government dues.
Reply of the Ministry is awaited (March 2024).
Recommendation 10:
Since the prescribed registers are critical for recovery and monitoring of
outstanding demands, the CBDT may ensure that all the prescribed
registers are maintained and updated periodically by TROs and consider
taking action in the non-compliant cases.
The Ministry, in its reply stated (May 2023) that procedure and instructions for
maintenance of various registers, including register of movable and immovable
property attached and sold, Execution register, register of daily
Reduction/collection of certified demand, Stay register, Instalment Register,
disposal Register for certificates finally disposed of, Closed Certificates register,
custody Register, daily Diary & Register of Recovery in case of Companies in
liquidation, BIFR & Sick companies etc. are provided in the Tax Recovery Officer’s
Manual 2007. Institutional mechanism to supervise and inspect the work of TRO is
in place.
Though institutional mechanism to supervise and inspect the work of TROs are in
place, Audit examination has brought out large number of cases of non-
maintenance/non updation of prescribed registers. To ensure the recovery of
outstanding demands in a timely manner, the Ministry may reiterate its
instructions and monitor compliance with them.

6.3.7 Lack of inter-departmental coordination

Section 26B (4) of SARFAESI82 Act enjoins every authority or officer of the
Central Government or any State Government or local authority entrusted
with the function of recovery of tax or other Government dues and for issuing
any order for attachment of any property of any person liable to pay the tax or
Government dues, to file with the Central Registry (CERSAI83) any order or
attachment of any property issued by them’.
Further, the Board instructed (September 2017)84 all its field formation to
notify CERSAI of any attachment order as soon as it is issued under the Income
Tax Act, so that not only the value of the attached property remains intact but
also the right of the ITD over the attached property remains at the top.

82 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI)
Act, 2002
83 Central Registry of Securitization Asset Reconstruction and Security Interest
84 Instructions from the Board’s Directorate of Income Tax (Recovery & TDS) vide letter dated 06
September 2017

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Furthermore, the AO is required to record information regarding notification

of all property attached to CERSAI in Dossier Report85.
In Pr. CCIT, Tamil Nadu Region, for the 592 sampled cases, the AOs did not
furnish information as to how many cases were transferred to the TROs. The
TROs also did not provide information/data on cases of attachment that were
registered with CERSAI Hence, Audit could not ascertain whether the cases of
attachment of property were being registered with CERSAI or not.
In Pr. CCIT, Madhya Pradesh and Chhattisgarh Region, examination of the
Register of "Movable and Immovable property attached and sold" revealed
that in five cases, movable and immovable properties were attached by the
TRO office. However, the status about registration with CERSAI or other
registering authorities was not found on record.
In Pr. CCIT, Mumbai Region, Audit noted that in case of M/s. G2 Ltd and M6,
the TRO, Thane attached properties in March 2019 but no evidence was found
on record whether this was notified to CERSAI.
Audit sought information from CERSAI, New Delhi (Head Office) also regarding
registration of properties attached by ITD. CERSAI stated (February 2022) that
no attachment order was filed by Income Tax Authorities with CERSAI till
February 2022.
Registration of attachment of properties with CERSAI is an essential part of the
recovery mechanism to keep ITDs claim over other creditors intact. Failure to
register of attachment with CERSAI, despite instructions by DIT (Recovery and
TDS), shows non-compliance by the field formations in ITD. Such
non-compliance may result in issuing orders of attachment for properties
already mortgaged by other financial institutions which eventually result in
non-fulfilment of objective of attachment.

Reply of the Ministry is awaited (March 2024).

6.4 Lack of co-ordination between the AO and the TRO
Tax recovery mechanism involves intimation of arrear demands by the AO to
the TRO, drawal of TRC and finally disposal of TRCs. It is absolutely crucial to
have utmost coordination between the AO and the TRO to ensure speedy
recovery of outstanding tax demand. After referring the arrears of tax demand
cases to the TRO, it becomes imperative for the AO to keep the TRO informed
of any subsequent revisions, reductions etc. made to the original demand.
Similarly, the TRO also needs to intimate the AO, disposals made from time to
time.

85 Column No.12 C(i) of the Dossier Report

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Demand outstanding for more than one year is referred to the TRO, if the
Assessing Officer feels that coercive action is required to effect its recovery.
The TRO communicates the outstanding demand to the taxpayer to pay the
dues within the stipulated period of 15 days, failing which the taxpayer would
be treated as defaulter. TRO is empowered by the Act to take coercive
measures like attachment, and subsequent disposal of the taxpayer’s movable
or immovable property or arrest, and detain the taxpayer in prison.
6.4.1 Cases not transferred to the TRO by JAO
On a substantive check of 10,896 cases, Audit observed that 1,218 cases with
outstanding demand of ` 18,722.94 crore were more than one year old and
no appeals were pending on these cases. These cases were not transferred to
the TROs. However, details of actual number of cases not transferred to the
TROs were not provided to Audit by the ITD in all Regions. Age-wise analysis
of 1,218 cases not transferred to the TRO in each Pr. CCIT region is given, in
Table 6.17 below:
Table 6.17: Details of cases not transferred to TRO
` in crore)
(`
Sl. Regions 3 years and less between 3 years between 5 years More than Total
No. and 5 years and 10 years 10 years
No of Amount No of Amount No of Amount No of Amount No of Amount
Cases Cases Cases Cases Cases
1 Bengaluru 6 53.54 4 22.66 2 1.82 1 0.07 13 78.09

2 Bhubaneswar 32 231.96 52 469.33 38 370.36 14 0.15 136 1,071.81

3 Bihar & Jharkhand 10 15.85 2 0.18 9 68.73 7 0.18 28 84.94

4 Gujarat 142 7,830.17 100 1,423.44 49 393.94 11 116.79 302 9,764.34

5 International 19 69.18 7 9.73 15 25.73 0 0.00 41 104.64

Taxation, Delhi
6 Madhya Pradesh & 48 165.70 16 31.48 28 15.15 4 1.67 96 214.01
Chhattisgarh
7 Mumbai 76 2,122.47 41 183.39 52 328.50 11 1.95 180 2,636.32

8 North East Region 7 7.08 2 0.20 24 11.77 8 1.55 41 20.61

9 North West Region 35 247.39 43 442.27 33 150.45 2 1.33 113 841.44

10 Rajasthan 28 104.96 15 15.26 33 83.04 2 0.03 78 203.29

11 Tamil Nadu 7 693.59 8 784.72 13 488.48 0 0.00 28 1,966.78

12 UP West & 5 3.45 1 0.00 2 0.01 0 0.00 8 3.45

Uttarakhand
13 West Bengal & 56 532.25 22 160.86 71 1,038.29 5 1.81 154 1,733.21
Sikkim
Total 471 12,077.59 313 3,543.53 369 2,976.27 65 125.55 1,218 18,722.94
Source: Physical records produced by ITD
#No cases are observed in respect of Delhi, Kerala, UP East and AP & Telangana region.

From the above table, it could be seen that 65 cases with total outstanding
demand of ` 125.55 crore which were more than 10 years old but were not
transferred to the TROs for initiating action for recovery of demands. Further,
among the 13 Pr. CCIT regions, Pr. CCIT Gujarat region accounted for maximum

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number of cases (302), followed by Pr. CCIT Mumbai (180) not transferred to
the TRO for recovery. Furthermore, Audit could not ascertain from the records
that the Jurisdictional AOs had exercised all options for recovery in these cases
and the reasons for not transferring these cases to the TRO, indicating lack of
coordination between the TRO and the JAO with remote possibility of recovery
of the demand.
6.4.2 Over/under reporting of arrear demand by the AO to the TRO-
Audit noticed that the AOs omitted to communicate the appeal effect/
rectification orders to the concerned TROs in 238 cases out of 10,896 cases
test-checked. Details of consequent over-reporting of arrear demand of
` 2,555.39 crore and under-reporting of ` 1,321.59 crore, are given in Table
6.18 below:
Table 6.18: Over/Under reporting of Demand by the AO to the TRO
` in crore)
(`
Sl. Pr. CCIT Region No. of Amount Over Number Amount Under
No. Cases reported by AO of Cases reported by AO
1 Gujarat - - 15 729.64
2 Karnataka - - 3 112.93
3 Kerala 20 228.68 8 30.04
4 Mumbai 1 2.00 12 12.35
5 MP & Chhattisgarh 0 0 4 17.44
6 North West Region - - 1 3.64
7 Tamil Nadu & 2 19.95 - -
Puducherry
8 West Bengal & Sikkim 150 2,304.76 21 415.55
Total 173 2,555.39 64 1,321.59
Source: On the basis of physical records examined by FAOs

Two cases are illustrated below:

Box 6.9
(i) Assessee: V5
Charge : PCIT- 1, Chennai
From the records maintained by TRO-1, Chennai, Audit observed that the AO
[ITO, Corporate Ward 2(4), Chennai] transferred (June 2019) the case to
TRO-1, Chennai, intimating the demand of ` 16.19 crore pertaining to
AY 2005-06. However, based on the CIT(Appeals) order (September 2020)
allowed in favour of assessee, the demand got reduced to ` 0.03 lakh and
appeal effect order was issued (November 2020) by the AO, but the same
was not informed to the TRO. This resulted in reporting inflated demand to
the extent of ` 16.16 crore in the TRO records.
Reply of the Ministry is awaited (March 2024).

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(ii) Assessee: M/s. S15 Ltd.

Charge: PCIT, Central 4, Mumbai
Audit observed that in the dossier report prepared by AO for the quarter
ending December 2020, a demand of ` 11.24 crore pertaining to AY 2010-11
was shown as outstanding for the assessee. Audit noticed that in the ADCR
of the TRO for the year 2020-21, an amount of ` 9.73 crore was shown as
arrears of tax demand outstanding for the same assessee and same
assessment year. Thus, due to absence of communication between the TRO
and the AO, the amount of outstanding demand exhibited in the records by
two authorities was different, which was required to be reconciled and
pursued for recovery.
On being pointed out, the PCIT, Central-4, Mumbai stated (June 2022) that
as per the last order passed (February 2019) under Section 250 read with
Section 143(3) for AY 2010-11, demand determined was ` 11.95 crore, and
after payment of certain amount, demand outstanding as on date was
` 11.24 crore. Mismatch of the TRO data with Assessing Officer's data is
because of the clerical error. The ITD accepted the audit observation and
rectified the error.

6.5 Non transfer of TRO Records

Audit noticed in Jaipur region that an assessee, R5 who had an outstanding
demand of ` 16.46 crore for AY 2011-12 was migrated (December 2019) from
DCIT, Circle-4, Jaipur to DCIT, International Circle, Jaipur. Though the assessee
was migrated from one AO to another AO, the consequent transfer of recovery
files from the erstwhile TRO of Circle-4 to the TRO of International taxation
circle, Jaipur was not ensured. On being pointed out (February 2021), TRO-2,
Jaipur stated (June 2021) that efforts were being made to send the TRC and
concerned recovery folder to the TRO of the International Circle.
Reply of the Ministry is awaited (March 2024)
6.6 Internal Audit of TROs
With a view to strengthening Internal Audit of the post-assessment collection
process and to effectively monitor the recovery of tax arrears, the Comptroller
and Auditor General had, in the Performance Audit Report No. 23 of 2011-12
(Direct Taxes), had recommended that a minimum number of TROs should be
covered for audit by the Internal Audit wing of the ITD, every year. These
recommendations were reiterated in the CAG’s Compliance Audit Report No.3
of 2016 (Direct Taxes). In compliance to the Audit recommendations, the CBDT

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had instructed86 (July 2017) the Pr. CCsIT to put in place a system of audit of
one TRO by another TRO; and the audit objections raised shall be followed up
by CIT (Audit), as in the case of other audit objections.
Audit sought information from the ITD in respect of the number of TRO units
planned and covered in Internal Audit during the years 2017-18 to 2019-20,
and the number of audit observations issued and settled.
It was stated by ITO (Hqrs), O/o the CIT(Audit) -I, Chennai (July 2021) that as
per the CBDT’s instructions, a ‘chain audit’ of one TRO unit by another TRO was
taken up for the eight sampled TROs by the Internal Audit wing for the year
2018-19, and no observations were raised in any of the eight TROs. In Pr.CCIT,
New Delhi, Audit noticed that in all 11 Pr.CsIT in Delhi, including Gwalior and
Raipur, Audit of TRO for the years 2017-18 to 2019-20 was not conducted by
the Internal Audit wing of the ITD. In Pr.CCIT, Gujarat Region, four TROs stated
that no internal audit was conducted during the last four years. The details
from one TRO87 are awaited (March 2024). In Pr.CCIT, Rajasthan Region, two
TROs88 stated that internal audit was not conducted by the Internal Audit Wing
during the period whereas information was not provided for the remaining
two TROs89.
The internal audit of TROs were not being conducted as a regular exercise in
all regions which shows that CBDT’s instruction issued in July 2017 in this
regard is not being adhered to by the ITD.
Reply of the Ministry is awaited (March 2024).
Recommendation 11 :
The CBDT's instructions on conducting internal audits of TROs need to be
reiterated, and action taken to ensure effective compliance with them in
a timely manner.

86 CBDT Instructions No. 6 of 2017 dated 21 July 2017

87 TRO – 3, Ahmedabad
88 TRO-2 Jaipur and TRO Central Jaipur
89 TRO-1 Jaipur and TRO Exemption Jaipur

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Chapter 7 - Analysis of Reporting system and accumulation of

outstanding demand

Accurate reporting of the outstanding demand is essential to enable fixing of

target for reduction of arrear demand in a realistic manner. One of the
objectives of this audit was to ascertain whether arrear demand has been
properly drawn and reported to stakeholders and to ascertain the reasons for
huge amounts of outstanding demand and to analyse the reasons for the year
on year increase in its quantum.
Audit observed deficiencies in reporting system, inadequacies in taking appropriate
action resulting in accumulation of huge outstanding demand over the period. This
Chapter contains audit findings regarding the reporting of outstanding demand in
various reporting systems / tools like e-filing portal, ITBA, Central Action Plan, etc.
and the measures taken by the department to reduce the outstanding demand.
The Central Board of Direct Taxes (CBDT) sets yearly targets for reducing arrear
demand and increasing cash collection through Annual Central Action Plans. Since
2017-18, the CBDT has aimed to reduce arrear demand by 40% annually. However,
audit revealed discrepancies in data between CAP statements and the e-filing
portal, including duplications, mismatches in TDS reconciliation, and exclusion of
certain outstanding demands. The CAP statements lack detailed granular data,
hindering validation.
Generation of CAP data involves both automated processes and manual
adjustments. Audit examination of CAP-I, CAP-II statements and data from the e-
filing portal relating to outstanding demands pending recovery up to the date of
audit revealed inconsistencies such as, duplication in reporting, mismatches in TDS
reconciliation and non-inclusion of outstanding demand of summary assessments,
etc. Data accessible to the AOs through ITBA portal is assessee-wise, whereas the
CAP Statements exhibit only consolidated demand without indicating assesse-wise
granular details. Without granular data for CAP-I statement, the sources for the
CAP-I statement could not be validated in audit.
CAP-I statements lack case numbers, making it difficult to compute differences in
outstanding demand. Inaccurate reporting of outstanding demands was noted due
to duplicate entries across different ITD data sources. Failure to levy interest on
outstanding demand contribued to underreporting. As the ITD is not maintaining
granular data for various categories of demand in CAP-I statement, the details
furnished by the various authorities in Annual Information System remained
unmapped, resulting in non-identification of assessees under the category
‘assessees not traceable’.
Despite CBDT's targets, arrear demands have increased annually, with new unpaid
demands accumulating. Fixing of the same percentage of target year after year in a
routine way, without any analysis of reasons for shortfall in achievement, has not
been effective in ensuring a reduction in arrears of demands. Outstanding demand
against "assessees not traceable" has risen despite mandatory PAN-Aadhar linkage.

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The inclusion of protective demands in outstanding demand figures inflates the

numbers inaccurately. Mismatches in TDS reconciliation and ineffective procedures
for identifying uncollectible demands were observed. Audit observed that the
procedures for write-off, prescribed in the ITD’s Manual of Office Procedure
(Consolidated) 2019, to identify and dispose of uncollectible demands were not
followed effectively.
Summary assessments by CPC-ITR, Bengaluru, result in demands reflected in AO
portals for recovery. However, recovery efforts for demands from summary
assessments were deemed inadequate, despite similarities in recovery procedures
between summary and scrutiny assessments.

To conclude, outstanding arrears of demand has been increasing year after year due
to fixing of targets mechanically, under achievement of targets fixed, demands
locked up in appeals, assessees not traceable, TDS/Prepaid taxes mismatch, not
considering the system of write-off as provided in ITD Manual of Office Procedure,
non-recovery of undisputed demand and not taking appropriate action against
demands raised under summary assessments.

No effective follow-up action

During the Performance Audit on ‘Recovery of arrears of Direct Tax Demand’
(Report No. 23 of 2011), there were recommendations on
a) “preparation of a robust and reliable database of arrear demand by
reconciling the data maintained by different wings of the ITD” and
b) modification of the CAP-I statements to “facilitate correlation of the
number of cases with the total outstanding demand to ensure better
monitoring”.
Audit, however, observed that the ITD has not taken effective follow-up action
on the recommendations. Deficiencies in the reporting system are discussed
in detail in the following paragraphs.
7.1 Reporting of outstanding demand through CAP-I Statements
CAP-I and CAP-II statements90 are two primary MIS reports generated monthly
by the Jurisdictional Assessing Officers and consolidated at PCIT/ Pr. CCIT/CBDT
level, depicting the outstanding demand and collection statistics.
The format of CAP-I and CAP-II statements prepared by ITD is given in
Appendix 12A and 12B. Audit noted that the format of these statements does
not capture granular (assessee-wise) data.

90 CAP-I is a statement regarding the monthly progress of collection and balance of outstanding
demand. It classifies the outstanding demand into two major heads (i) demand difficult to recover,
which is further classified into 19 categories and (ii) collectible demand.
CAP-II statement provides details of the number of returns processed, number of scrutiny
assessments completed, appeal effects, penalty proceedings, refunds, write-off of arrear demand,
etc.

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7.1.1 Inconsistencies in CAP-I statement

The inconsistencies in CAP-I statements have been noticed in all regions.
Details in respect of one of the regions (Pr.CCIT, Delhi) is discussed below:
Audit noticed that the closing balance of outstanding demand at the end of the
year did not match with the opening balance of the next year. The total
demand pending collection as per CAP-I Statement for the year ended
March 2019 was ` 2,41,741.90 crore; whereas, the opening balance as on
01 April 2019 was shown as ` 1,91,362.69 crore.
Further, there were arithmetical inaccuracies in the figures of CAP-I statement.
To illustrate that for the year ending March 2020, the demand as on
1 April 2019 was ` 1,91,362.69 crore. Demand raised during the year was
` 1,42,306.90 and reduction by the way of prepaid taxes was ` 120.14 crore.
Thus, as against the correct figure of ` 3,33,549.45 crore, (1,91,362.69 +
1,42,306.90 - 120.14), a demand closing balance of ` 3,49,811.09 crore has
been indicated at the end of the year, which resulted in excess reporting of
` 16,261.64 crore.
As per the Central Action Plan of 2019-20, for Pr.CCIT, Delhi region, the
CBDT had fixed a target of cash collection of ` 18,513.00 crore of the arrear
demand, whereas, in CAP-I statement (S.No.13) of the same region for March
2020, the target for cash collection was exhibited as ` 30,226.21 crore.
From the above, it is apparent that the composite arrear demand details
derived by CBDT by consolidating the CAP-I statements of all regions are not
reliable. Hence, fixation of various annual targets for reduction of arrear
demand, reduction of cases pending in appeals, etc., may not yield the desired
results.
Reply of the Ministry is awaited (April 2024).
7.1.2 Source for CAP-I Statement

Audit requisitioned the 16 Pr.CCsIT91 to furnish the source for preparation of

CAP-I statement and granular data for the figures depicted in CAP-I statement.
Pr.CCIT, Guwahati stated that the data for CAP-I statement is captured from
past Arrear Demand & Collection Registers uploaded to systems, demands
raised through ITD and ITBA systems. Pr.CCIT, Rajasthan stated that the data
for CAP-I Statement is entered manually by the AOs in the system / i-taxnet92
and compiled by the respective superior authorities. Reply from the remaining
14 Pr.CCsIT is awaited (April 2024).

91 Except International Taxation, Pune and Nagpur regions.

92 i-taxnet module was basically utilised for CAP-I & II Reports as part of erstwhile ITD/BCP applications.

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Further, from West Bengal region Assessing Officers, in general, have stated
that no data from ITBA module is required for preparing CAP-I statement, but
DCIT, Circle1(1), Kolkata has stated that ITBA-Recovery module is being used
for CAP-I report, indicating that different methodologies are being adopted
across different regions.
The ITO, Ward 4(1) (1), Bengaluru and ACIT Circle 1(1), Kolkata in their reply to
explain the cause of difference in amount of demand as per CPC-ITR portal and
CAP-I statement have stated that demand raised on account of summary
assessment is not included in CAP-I report and the ITO, Ward 4(1)(1) also
stated that interest under Section 220(2) was not included in the CAP-I
statement. Audit could not verify if this statement is true for all assessment
units across all regions. Non-inclusion of outstanding demand on account of
summary assessments in CAP-I report indicates, that a part of outstanding
demand is not being monitored through CAP-I reports.
Audit also noticed that the AOs are not maintaining a list of assessees (granular
data) against whom the aggregate outstanding demand is being reported
through CAP-I statements.
Thus, Audit observed that there was no uniformity in the source for capturing
data for CAP-I Statement and the authenticity of figures reflected in CAP-I
statement, therefore, remains doubtful. Audit could not ascertain whether
specific guidelines/instructions for capturing data and preparing CAP-I
statement at AO level have been issued by the CBDT to ensure uniformity as
due to non-standardisation of format such inconsistencies may occur.
The CAP-I and II data being a combination of automated process and manual
adjustment, and in the absence of granular data for CAP-I statement and the
sources for the CAP-I statement, Audit’s attempt to derive an assurance with
regard to the accuracy of the data was limited. CAP-I statement contains data
on amount of outstanding demand but the number of cases is not reported.
The ITD did not take necessary follow up action on the basis of Performance
Audit Report (PA Report No. 23 of 2011) on “Recovery of arrears of tax
demand”, which reported the discrepancies, when ITD was on manual process.
CAG’s recommendation Included in the PA Report No. 23 of 2011 to modify
the CAP-I Statement “to facilitate correlation of the number of cases with the
total outstanding demand to ensure better monitoring” has not been
addressed.

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Recommendation 12:
The CBDT may
(i) review and streamline the system process to maintain accurate,
granular data for the CAP-I statement at each Assessment unit level
to facilitate extraction of assesse-wise details from CAP-I and CAP-II
statements at all PCsIT, Pr.CCsIT level for better coordination and
monitoring of recovery of demands.
(ii) consider issuing/ reiterating instructions for preparing these
statements uniformly across all regions and data sources;
(iii) further, training may also be considered to avoid inconsistency in
preparation of MIS reports.
In May 2023, the Ministry stated that CAP-I & II are statistical reports
prepared in i-Taxnet. These are filled manually by JAOs. Hence, the granular
data comes from JAOs who initiate the report and this is compiled up the
hierarchy till Pr. CCIT. Compiled CAP Statements are visible to DIT (O&M)
Services who is tasked with analysis of the same. It was further stated that
CAPI & II is a standalone module, and AO is responsible for uploading the
data. The Systems Directorate is in the process of developing e-MIS on Insight
Portal/ITBA by merging multiple reports (including CAP-I & II) into a single
integrated online and IT enabled system.
Maintenance of granular data is fundamental to the Management
Information System. Non-maintenance of the same renders the efforts for
reduction of arrear demand ineffective. Since the granular data for CAP-I
and Arrear Demand Register (ADR) were not provided during the field
audit, the Audit could not verify the completeness and authenticity of the
consolidated CAP-I report or the effectiveness of the existing monitoring
mechanism in ITD in the absence of granular data in MIS reports.

7.2 Incorrect reporting

Based on the data collected from e-filing portal and substantive check of cases
undertaken in 270 sampled assessment units, Audit found instances of
incorrect reporting of outstanding demand, which are discussed in detail, in
the following paragraphs. On verification of the assessment records of 10,896
test checked cases, Audit noticed mistakes in 747 cases, as discussed in Para
7.2.1 and Para 7.2.2 below:
7.2.1 Erroneous reporting of outstanding demands
On verification of the assessment records of 10,896 test checked cases, Audit
noticed mistakes in 27 cases, amounting to ` 7,885.96 crore, related to failure
to give effect of appeal orders by the AOs after the appellate authorities either

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set aside, reduce or enhance the demand. Consequently, the demand in the
e-filing /ITBA portal was not updated. The region- wise details are given in the
Table 7.1 below:
Table 7.1: Erroneous reporting of outstanding demand (Region-wise)
` in crore)
(`
Sl. Region Total Under Reporting Over Reporting
No. No. of No. of Amount No. of Amount
cases cases cases
1 Andhra Pradesh & Telangana 1 - - 1 0.95
2 Bengaluru 1 1 1.37 - -
3 Bihar and Jharkhand 7 - - 7 73.42
4 Mumbai 4 - - 4 7,150.67
5 North West Region 2 - - 2 60.01
6 Tamil Nadu 12 - - 12 599.54
Total 27 1 1.37 26 7,884.59
Source: Assessment records furnished by ITD Note: In remaining 11 regions no such mistake was noticed

7.2.2 Non updation of Outstanding Demand in the e-filing portal/ITBA

The demand as per physical records, viz., assessment orders and notice of
demand issued under Section 156 was compared with the outstanding
demand in ITBA / e-filing portal as of March 2020. Such verification revealed
that even though Assessment order/ revision/ penalty/ giving effect orders
were passed, or notice issued for revised demand, the original demand
continued to be exhibited in the system (ITBA/e-filing). Such differences in
outstanding demand in respect of 720 cases (over and under-statement)
pertaining to 17 regions aggregated to ` 67,383.33 crore, as detailed in
Table 7.2 below:
Table 7.2: Difference in Outstanding demand between e-filing portal/ITBA Portal and Assessment records
(Region-wise) ` in crore)
(`
Sl. Region Total No. of Under Reporting Over Reporting cases
No. cases cases with cases
test discrepan- Number Amount Number Amount
checked cies
1 Andhra Pradesh & Telangana 960 38 15 1,595.73 23 230.19
2 Bengaluru 1,038 35 4 34.14 31 2,883.45
3 Bhubaneswar 433 6 4 65.77 2 0.02
4 Bihar and Jharkhand 437 56 15 36.06 41 221.5
5 Delhi 740 23 - - 23 1,372.17
6 Gujarat 1,404 3 1 1.06 2 172.14
7 International Taxation, Delhi 377 39 25 84.67 14 1,394.51
8 Kerala 155 67 60 69.23 7 230.31
9 Lucknow, UP East 99 24 24 8.16 - -
10 MP & Chhattisgarh 501 11 - - 11 140.30
11 Mumbai 1,410 249 90 34,404.25 159 23,485.58
12 North East Region 220 10 - - 10 64.86
13 North West Region 510 55 38 160.54 17 134.73

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Table 7.2: Difference in Outstanding demand between e-filing portal/ITBA Portal and Assessment records
(Region-wise) ` in crore)
(`
Sl. Region Total No. of Under Reporting Over Reporting cases
No. cases cases with cases
test discrepan- Number Amount Number Amount
checked cies
14 Rajasthan 575 3 1 0.82 2 66.91
15 Tamil Nadu 671 59 40 43.17 19 253.61
16 UP West & Uttarakhand 78 26 21 8.88 5 16.29
17 West Bengal and Sikkim 1,288 16 2 1.90 14 202.38
Total 10,896 720 340 36,514.38 380 30,868.95
Source: Assessment records furnished by ITD. Audit not conducted for Pune and Nagpur Regions.

From the above tables 7.1 and 7.2, Audit noticed that non-giving of effect of
appellate orders and non updation of amount of demand in the ITBA/ e-filing
portals have resulted in incorrect reporting (either over reporting or under
reporting) of outstanding demand by ` 75,269.29 crore in 747 cases.
Reply of Ministry is awaited (April 2024).
7.2.3 Difference between demand as per the CPC portal and CAP-I
Statement
A comparative study of the demand figures as of March 2016 undertaken by
the DIT (O&M) Services revealed marked variations in the amount of
outstanding demand reported in the CAP-I statements of all the Pr. CCIT
regions vis-à-vis the data obtained from CPC-ITR, Bengaluru. The DIT (O&M)
stressed (October 2016) the necessity for reconciliation of the demands
appearing in CAP-I statement of each Pr. CCIT region with the e-portal
database.
All the AOs were advised to follow the CBDT guidelines/instructions93 issued
for uploading and rectification of demand on CPC.
The CBDT in its Central Action Plans of 2018-19 and 2019-20 also stressed to
reconcile arrear demand by 31 August 2018 and 31 August 2019 respectively.
Audit called for the details of action taken by all the Pr. CCsIT/ PCIT and the
AOs of the selected 270 Assessment units to verify the compliance to the
CBDT’s instructions and analyse the reasons for such differences. Reply from
Pr. CCsIT/PCsIT is awaited (April 2024).
Thus, Audit could not ascertain how far the ITD has succeeded in removing the
discrepancy in reporting of outstanding demands identified by the DIT(O&M)
Services in October 2016.

93 AST Instruction No.82 Instruction dated 13 August 2010, CBDT Instructions No.4/2014 dated
07 April 2014 and CBDT Circular No.8/2015 dated 14 May 2015

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Audit could not compute the quantum of difference between the outstanding
demand on the CPC portal and CAP-I statement due to non-sharing/non
availability of granular details of pending demands in CAP-I statement and lack
of response from the ITD. However, Audit noted from the replies received
from some AOs, discrepancy was on account of non-inclusion of outstanding
demand in respect of summary assessments, or interest due under
Section 220(2) in CAP-I report.

Recommendation 13:
The CBDT may ensure effective reconciliation of arrear demand reflected
on the CPC-ITR portal with the CAP-I statement to enable uniformity and
correctness in reporting on priority to enable recovery of the correct
outstanding demands and monitor reduction in the actual arrear demand.
The Ministry in its reply stated (May 2023) that CAP-I & II reports are
statistical reports prepared on i-taxnet. These are filled manually by JAOs,
hence the granular data comes from JAOs who initiate the report and this is
compiled up the hierarchy till Pr. CCIT, from where it is compiled. Compiled
CAP is visible to DOMS who is tasked with analysis of the same.
CAPI and CAP-II are standalone modules, and the AO is responsible for
uploading the data. The AO has assessee-wise granular data. CAP-I and II are
generated from data uploaded by the AO and compiled at every supervisory
level. The Systems Directorate is in the process of developing e-MIS on
Insight Portal/ITBA by merging multiple reports (including CAP-I and II) into
a single integrated online and IT-enabled system.
The Ministry further stated that a study titled "Discrepancy in the statistics"
undertaken in 2016 and approved by the Board had concluded the major
reasons for the difference in the demand figure as reported in CAP-I vis-à-vis
demand as reported in the CPC portal to be non-uploading of the assessment
orders, penalty orders and appeal effect orders passed manually, demand
without PAN, under-reporting of demand in CAP-I etc., on the system. It was
further stated that with the introduction of e-assessment, faceless
assessments, faceless appeals, and most of the work being done on ITBA, the
above issues will be addressed.
The reply furnished by the Ministry is not tenable. Even though the Directorate of
Income Tax (Organisation & Management) identified reasons for discrepancy in
its comparative study in 2016, the reconciliation of differences in demand figures
as per CAP-I statement vis-à-vis CPC portal has yet to be done even after a lapse
of eight years, for which the Ministry is required to issue necessary instructions for
strict compliance on priority. Further, there is need of a uniform method/
instruction for preparing MIS reports to avoid discrepancies in statements.

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7.2.4 Data duplication

Audit checked the outstanding demand as per e-filing portal, as on 31 March
2020 in respect of 279 sampled assessment units. Out of total 21,58,443
cases, in 279 sampled assessment units, Audit noticed 7,341 duplicate cases
i.e., demand raised for the same assessee under same section for the same
Assessment Year with same Document Identification Number (DIN)94 twice or
more. The duplication in 7,341 cases resulted in overstatement of outstanding
demand of ` 15,652.51 crore. Audit also noticed that duplicate entries are
reported in the CAP-I Statement under the head ‘Rectification pending on
account of duplicate entries’.
The region-wise details of duplicate demands for selected units as per e-filing
portal for the period ended March 2020 and the duplicate entries as per CAP-I
statement for the corresponding regions (considering all assessment units),
are given in Table 7.3 below:
Table 7.3: Region wise data on Duplicate cases as per e-filing portal and CAP-I statement
` in crore)
(`
Sl. Region As per e filing portal Amount as per
No. Number Number of Amount CAP-I
of Units duplicate Statement (For
selected cases entire Pr.CCIT
Region)
1 Andhra Pradesh & Telangana 29 556 1,648.97 442.28
2 Bengaluru 21 1150 2,118.71 1,380.53
3 Bhubaneswar 10 145 43.37 46.18
4 Bihar & Jharkhand 15 804 159.48 26.35
5 Delhi 23 830 6,446.01 456.58
6 Gujarat 23 409 1,241.94 2,203.49
7 International Taxation, Delhi 21 52 126.93 486.82
8 Kerala 9 104 42.61 186.78
9 Lucknow, UP East 4 164 18.45 52.5
10 MP & Chhattisgarh 9 439 126.02 281.87
11 Mumbai 27 528 858.48 5,638.03
12 North East Region 5 239 69.98 5.31
13 North West Region 8 31 77.14 60.87
14 Rajasthan 14 405 170.49 1.96
15 Tamil Nadu 28 579 1,330.46 833.34
16 UP West & Uttarakhand 3 193 42.09 3.47
17 West Bengal & Sikkim 30 713 1,131.38 2,109.93
Total 279 7,341 15,652.51 14,216.29
Source: CAP-I Statement and e-filing portal data

The above table indicates that the figures as per the CAP-I statement, which
pertained to all assessment units under the regions was less than the figures

94 A unique, computer generated 20-digit alpha-numeric code allotted by the ITD in respect of every
notice, order, letter or any correspondence without which such notice, order, letter or any
correspondence is treated is invalid or deemed never to have been issued.

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as per the e-filing portal, which pertained to selected assessment units. The
discrepancy confirms non-reliability of the figures included in the MIS
statements of the ITD.
Details of duplicate cases of outstanding demands for the financial year ended
March 2018/ 2019/ 2020/ 2021 and 2022 in respect of entire 19 Regions are
shown in Table 7.4 below:
Table 7.4: Duplication of Outstanding Demand as per CAP-I Statement (Region wise)
` in crore)
(`
Sl. Region Duplicate Outstanding Demand for the year ended March
No. 2018 2019 2020 2021 2022
1 Andhra Pradesh &
217.56 269.05 442.28 1,616.17 2,345.85
Telangana
2 Bengaluru 985.35 655.78 1,380.53 1,139.72 1,968.02
3 Bhubaneswar 3.1 22 46.18 22.43 39.66
4 Bihar & Jharkhand 26.97 30.05 26.35 3.14 3.17
5 Delhi 406.45 6,908.50 456.58 265.66 867.14
6 Gujarat 151.69 1,458.70 2,203.49 3,590.89 2,932.72
7 International Taxation,
253.46 793.31 486.82 309.76 829.62
Delhi
8 Kerala 63.23 136.82 186.78 120.37 419.32
9 Lucknow, UP East 82.53 54.53 52.5 47.22 47.32
10 MP & Chhattisgarh 11.65 24.11 281.87 289.63 128.29
11 Mumbai 1,519.18 3,059.43 5,638.03 3,367.69 7,324.10
12 Nagpur 1.63 43.29 8.77 8.77 7.29
13 North-East Region 2.76 2.13 5.31 6.55 1.6
14 North-West Region* 10.32 23.64 60.87 NA NA
15 Pune 240.53 298.82 861.33 580.73 1,582.46
16 Rajasthan 0.46 1.34 1.96 2.22 9.32
17 Tamil Nadu 807.96 598.63 833.34 609.44 537.65
18 UP West & Uttarakhand 4.07 4.27 3.47 3.09 3.27
19 West Bengal & Sikkim 54.66 749.48 2,109.93 1,648.66 1,557.10
Total 4,843.46 15,133.88 15,086.65 13,632.14 20,603.90
Source: S. No. 9(p) of CAP-I statement of all regions for March 2018, 2019, 2020, 2021 & 2022
*North West region CAP-I statement for 2021 and 2022 were not furnished to audit.

The above table indicates that ITD had not taken effective action to rectify the
error of duplicate entries as evident from the increase of the monetary value
of duplicate entries, 325 per cent during the period 2017-18 to 2021-22.
Further, Audit noticed that, the CBDT in its Central Action Plan for the year
2021-22, had identified duplicate cases as one of the key areas for action to be
taken and fixed a target to check all demand PAN-wise and year-wise from

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Systems, AST / TMS95 or Manual demand, wherever remaining, and instructed

all Pr. CCsIT for removal of all duplicate entries by 31 August 2021.
Audit called for the action report from all Pr. CCsIT in compliance with target
fixed in interim action plan by the ITD; reply is awaited (March 2024). As such,
Audit could not ascertain the efforts made by the ITD to reconcile and remove
the duplicate cases. The duplicate entries continue to exist, and also fresh
duplicate cases are being added every year.
Audit observed that there was difference in number and amount of duplicate
demands in different data sources of the ITD, resulting in incorrect reporting
of outstanding demand. The reason for occurrence of duplicate entries
appears to be systemic in nature.
No information was provided by the ITD on the action taken, in compliance to
specific instructions issued by the CBDT in its Interim Central Action Plan for
the year 2021-22, on reconciliation of figures and removing duplicate entries.
Recommendation 14:
The CBDT may monitor and ensure that there are no duplicate entries in
the system and that the existing duplicate entries are eliminated in a
time-bound manner. Further, reasons for the originating of duplicate
demands may be identified, and rectification required is carried out at a
granular level, on priority.
The Ministry, in its reply, stated (June 2023) that demand verification and
clean-up have been key result areas in the Central Action Plan for FY 2022-23
by CBDT. The supervisory authorities are monitoring this area of work.
Audit will await the details of the action taken and progress made.

7.2.5 Non-levy of interest under Section 220(2)

Section 220(2) of the Income Tax Act provides for levy of interest for delay in
payment of tax demand. Accordingly, if the amount specified in the notice of
demand issued under Section 156 is not paid within thirty days (since
April 1989), the assessee shall be liable to pay interest at one per cent for every
month or part thereof, for the entire period of default. Interest under
Section 220(2) is not to be levied in cases where the demand is pending in
appeal, and stay has been granted.
The CBDT issued instructions96 (June 1991) consequent to the Audit comments
in Para 2.1.17 of the Report (No. 06 of 1989)of the Comptroller and Auditor

95 Assessment Information System / Tax Managed Services

96 Instruction no.1883 dated 07 June 1991

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General for the year ended March 1988 that AOs should calculate the interest
payable under Section 220(2) at the end of each financial year, if the amount
of tax, etc., in respect of which such interest is payable, has not been paid in
full before the end of any such financial year and issue a demand notice within
30 days from the end of the financial year. It was also clarified in the said
instructions that Section 220(2) does not say that the interest is not to be
charged or realised till the tax is paid.
Para 14 of Chapter 24 of the ITD Manual of Office Procedure (Consolidated)
2019 also reiterates the instructions of the CBDT. The instructions further
emphasized that the supervisory officers (Viz.CsIT or DCsIT) should carry out
half-yearly review of the work of AO and TROs in this regard and send a report
thereon to their CCsIT or CsIT.
Audit verification of the data on outstanding demands as on 31 March 2020,
relating to 27097 sampled assessment units, revealed that the AOs did not levy
interest under Section 220(2) at the end of each financial year and failed to
issue any demand notice, including cases, where the demands were pending
for many years. Audit sought (May 2021) information from the AOs regarding
levy of interest annually for all eligible cases (i.e. other than cases pending in
appeals or demand stayed), as per the CBDT’s instructions. Reply of the ITD is
awaited (March 2024). This issue was raised also in CAG’s Performance Audit
Report No. 23 of 2011
The review work done by the Pr. CsIT / Pr. DCsIT, if any, could not be verified
by Audit in the absence of any supporting documents/details or any reply from
the ITD.
From the outstanding demand details of CAP-I statement, Audit attempted to
work out the minimum interest leviable under Section 220(2). From CAP-I
statements for 31 March 2019 of all 19 regions, Audit noticed aggregate net
collectible demand of ` 14,593.00 crore (Table 7.11) was shown as
outstanding. On this net collectable demand, interest under Section 220(2) for
one year works out to ` 1,751.16 crore (one per cent for every month or part
thereof).
Audit made test check of 8,965 cases in the 11 regions mentioned in Table 7.5
and found that in 3,498 cases, the ITD had not levied interest under Section
220(2) aggregating to ` 69,303.34 crore as of March 2021 excluding cases
involving non levy of interest less than ` 10,000. The region-wise details are
mentioned in Table 7.5 below:

97 Nine units in Tamil Nadu region could not be taken up for audit due to Covid.

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Table 7.5: Interest not levied under Section 220(2) - Region wise details
` in crore)
(`
Sl. Region Total No. of Cases Outstanding Chargeable
No. number of where Demand Interest
cases test interest not
checked levied
1 Andhra Pradesh & Telangana 960 760 8,730.67 3,214.10
2 Bengaluru 1,038 4 26.04 3.93
3 Delhi 740 432 13,696.47 3,861.61
4 Gujarat 1,404 766 18,071.45 7,020.83
5 International Taxation, Delhi 377 127 3,628.96 1,257.31
6 MP & Chhattisgarh 501 232 1,035.32 315.88
7 Mumbai 1,410 11 1,13,540.60 43,952.12
8 Rajasthan 575 118 843.6 239.43
9 Tamil Nadu 671 163 1,927.38 572.19
10 UP West & Uttarakhand 78 17 175.28 32.22
11 West Bengal & Sikkim 1,288 868 21,398.66 8,833.72
Total 8,965 3,498 1,83,074.42 69,303.34
Source: Assessment records furnished by ITD
Note: Interest has been calculated up to 31st March 2021. No comment offered in respect of other six regions

Audit further observed from the analysis of the outstanding demand data, as
per e-filing portal as on 31 March 2020, that in 2,12,789 cases (pertaining to
1,60,247 assessees), the ITD had already levied interest of ` 18,922 crore
under Section 220(2), but were pending collection. Out of this, in 1,84,241
cases, the amount of interest levied was below ` 10,000 constituting
86 per cent of cases with the total amount being 24 crore. The remaining
14 per cent of 28,548 cases with the interest amount of ` 18,898 crore
constitute 99.8 per cent of the total interest levied. The region wise and age
wise details of the interest pertaining to 28,548 cases are given in Table 7.6
below:

Table 7.6: Age wise analysis - Interest levied but remains outstanding - Region wise
` in crore)
(`
Sl. Region Less than 1 Year Between 1 and Between 3 and Between 5 and More than 10 Total Total
No. 3 Years 5 Years 10 Years Years Cases Amount
No. Amount No. Amount No. Amount No. Amount No. Amount
1 Andhra 1,449 40.39 1,662 48.36 857 11.81 466 10.1 36 34.94 4,470 145.61
Pradesh &
Telangana
2 Bengaluru 1,322 328.29 1,595 59.34 818 24.77 500 6.15 3 0.08 4,238 418.63
3 Bhubaneswar 297 6.92 285 14.83 145 18.03 45 0.93 - - 772 40.71
4 Bihar and 589 4.01 593 3.67 213 0.79 70 0.41 - - 1,465 8.88
Jharkhand
5 Gujarat 593 11.53 693 14.67 312 3.53 154 7.15 59 6.66 1,811 43.55
6 International 18 0.29 27 2.91 10 0.31 5 1.01 - - 60 4.52
Taxation, Delhi
7 Kerala 144 3.57 210 5.64 112 4.17 116 9.4 - - 582 22.77

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Table 7.6: Age wise analysis - Interest levied but remains outstanding - Region wise
` in crore)
(`
Sl. Region Less than 1 Year Between 1 and Between 3 and Between 5 and More than 10 Total Total
No. 3 Years 5 Years 10 Years Years Cases Amount
No. Amount No. Amount No. Amount No. Amount No. Amount
8 Lucknow, UP 180 0.91 136 0.44 46 0.17 20 0.07 - - 382 1.59
East
9 MP & 317 3.52 327 2.09 134 0.75 33 0.3 - - 811 6.67
Chhattisgarh
10 Mumbai 799 127.81 842 47.31 471 8.66 296 17,500.59 2 0.06 2,410 17,684.44
11 New Delhi 904 125.42 797 46.83 505 28.15 258 78.74 - - 2,464 279.15
12 North East 377 2.92 415 15.18 159 0.82 75 0.43 - - 1,026 19.35
Region
13 North West 82 0.74 82 10.36 51 1.83 47 1.05 - - 262 13.98
Region
14 Rajasthan 280 6 222 2.16 118 1.23 39 0.25 - - 659 9.64
15 Tamil Nadu 1,163 33.68 1,632 50.72 692 14.02 373 8.68 30 13.17 3,890 120.27
16 UP West & 143 0.78 140 2.98 45 0.53 21 0.17 - - 349 4.46
Uttarakhand
17 West Bengal & 856 15.5 1,042 26.53 638 11.09 361 21.06 - - 2,897 74.19
Sikkim
Total 9,513 712.29 10,700 354.05 5,326 130.66 2,879 17,646.49 130 54.92 28,548 18,898.42
Source: E-filing portal Data. Pune and Nagpur regions not covered.

Andhra Pradesh and Telangana region had the highest number of cases (4,470)
with outstanding interest of ` 145.61 crore, while Mumbai region had the
highest amount of outstanding interest with ` 17,684.44 crore representing
93 per cent of total interest. Further, of the total number of cases test checked,
interest remained outstanding for less than three years in 70 per cent cases,
whereas of the total outstanding interest of ` 18,898.42 crore, 93 per cent
amounting to ` 17,646.49 crore remained outstanding for the period ranging
five to ten years.
The monetary wise analysis of 28,548 cases, as discussed above, where the
interest under section 220(2) was levied by ITD but remained outstanding as
on 31 March 2020 is given in Table 7.7 below:
Table 7.7: Monetary wise analysis – Interest levied under Section 220(2) but remaining outstanding – Region wise
(`` in crore)
Sl. Region Interest levied
No. ` 10,000 to 1 lakh ` 1 Lakh to 10 lakh ` 10 lakh to 1 cr ` 1cr to 10 cr More than ` 10 cr Total
No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount
1 Andhra Pradesh 3,267 10.20 1,004 29.75 187 47.71 11 27.19 1 30.75 4,470 145.61
& Telangana
2 Bengaluru 3,281 9.97 770 22.07 151 45.74 30 57.59 6 283.27 4,238 418.63
3 Bhubaneswar 651 1.72 105 2.67 12 2.92 3 16.12 1 17.28 772 40.71
4 Bihar and 1,311 3.44 146 3.53 8 1.91 - - - - 1,465 8.88
Jharkhand
5 Gujarat 1,345 4.33 396 11.39 65 20.77 5 7.07 - - 1,811 43.55
6 International 36 0.12 15 0.52 8 2.71 1 1.16 - - 60 4.52
Taxation, Delhi
7 Kerala 421 1.24 134 3.95 22 6.41 5 11.17 - - 582 22.77
8 Lucknow, UP 359 0.84 22 0.65 1 0.10 - - - - 382 1.59
East
9 MP & 702 1.89 97 2.29 12 2.49 - - - - 811 6.67
Chhattisgarh

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Table 7.7: Monetary wise analysis – Interest levied under Section 220(2) but remaining outstanding – Region wise
(`` in crore)
Sl. Region Interest levied
No. ` 10,000 to 1 lakh ` 1 Lakh to 10 lakh ` 10 lakh to 1 cr ` 1cr to 10 cr More than ` 10 cr Total
No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount
10 Mumbai 1,673 5.61 591 17.66 112 29.01 20 72.06 14 17,560.10 2,410 17,684.44
11 Delhi 1,550 5.33 709 22.72 166 49.99 33 78.36 6 122.74 2,464 279.15
12 North East 894 2.37 116 3.02 15 2.89 - - 1 11.07 1,026 19.35
Region
13 North West 205 0.62 50 1.51 5 1.13 2 10.72 - - 262 13.98
Region
14 Rajasthan 529 1.71 117 2.72 12 3.66 1 1.56 - - 659 9.64
15 Tamil Nadu 2,871 9.44 848 23.63 154 43.69 17 43.51 - - 3,890 120.27
16 UP West & 313 0.86 30 0.70 5 1.36 1 1.55 - - 349 4.46
Uttarakhand
17 West Bengal & 2,215 7.28 579 16.81 95 23.58 8 26.52 - - 2,897 74.19
Sikkim
Total 21,623 66.96 5,729 165.58 1,030 286.07 137 354.60 29 18,025.21 28,548 18,898.42
Source: E-filing portal data. Pune and Nagpur regions not covered.

In the category of ` 10 crore and above, the total amount of interest under
Section 220(2) was ` 18,025 crore (29 cases), which represented 95 per cent
of the total. Out of which ` 17,560 crore (14 cases) pertained to Mumbai region
alone, and in which ` 10,193.28 crore related to 6 AYs of one assessee i.e. H2
alone. Bengaluru (` 418.63 crore) and Delhi (` 279.15 crore) follow Mumbai
region in terms of the highest amount, where interest under Section 220(2)
was levied, but not collected.
One AO from Andhra Pradesh region has stated that as per the existing
computerized system in the ITD, interest under Section 220(2) is calculated by
the system itself after the full and final settlement of arrear amount from the
assessee for each arrear item. However, if interest is levied by the ITBA after
payment of last currency of outstanding demands it may result in indefinite
postponement of the levy of interest for the period of delay. Thus, the process
of levy of interest under Section 220(2) in ITBA system needed to be aligned
with the CBDT’s extant instructions, as levy of interest only at the time of final
payment of the tax dues was in contravention of the CBDT’s instruction. Non-
levy of interest under Section 220(2) also had its cascading effect on non-levy
of penalty under Section 221(1)98.
Audit noticed that non-levy of interest under Section 220(2) for delay in
payment of tax demand resulted in under reporting of outstanding demand.
The CBDT had not ensured implementation of necessary provision in the
current system to levy interest on outstanding demand annually deviating
from its own instructions.

98 Section 221 (1): When an assessee is in default in making a payment of tax, he shall, in addition to
the amount of the arrears and the amount of interest payable under sub-section (2) of Section 220,
be liable, by way of penalty, to pay such amount as the AO may direct.

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The ITO 4(1)(1), Bengaluru stated that interest under Section 220(2) was not
included in the amount of demand shown in the CAP-I statement. Due to the
lack of responses from other AOs or regions, the Audit could not determine if
this exclusion of interest was consistent across all regions.

The CBDT’s instructions to levy interest periodically is not backed by any

statutory amendments to the Income Tax Act. This issue was raised also in the
CAG’s Performance Audit Report No. 23 of 2011.
Non-levy of interest periodically also results in the assessee not being aware
about the increased amount he has to pay due to non-payment of tax.
7.3 Accumulation of demand
The trend of arrears of demand pending during the period FY 2016-17 to
2020-21 and figures of outstanding demand as a per-centage of total demand,
is shown in Table 3.1, Chapter 3 which indicates that outstanding demand in
terms of amount is increasing year after year and the percentage of ‘demand
difficult to recover’ is around 98 per cent (approx.).
Based on the consolidated CAP-I and CAP-II statements data of all the regions,
the CBDT fixes targets through its annual Central Action Plans, for reduction in
arrear demand, cash collection, reduction in TDS mismatches, management of
cases pending with various appellate authorities, which have impact on
reduction in total outstanding demand.
Audit analysed the norms for fixation of target for reduction in arrear demand,
achievement against the target, causative factors for accumulation of
outstanding demand. The results of the analyses are discussed in the
subsequent paragraphs.
7.3.1 Target and achievement as per the Central Action Plans
The CBDT in the annual Central Action Plans99 reiterates that concerted efforts
be made to reverse the trend of increasing arrear demand and process be
initiated for reducing the figure to more manageable levels. Accordingly, the
target for reduction in arrear demand has been fixed every year uniformly at
the rate of 40 per cent of the total arrear demand outstanding as on 01 April
of that year. The target fixed for reduction in arrear demand also includes a
target of cash collection100, which was required to be achieved independently.
The targets for reduction in arrear demand and the target of cash collection
have been specified at the level of Pr. CCsIT, who are required to further
allocate these targets in accordance with a specified formula (given in the

99 Central Action Plans documents for the years 2017-18, 2018-19 and 2019-20 – Chapter II
100 A distinct target, required to be achieved independently, included in the overall target for reduction
in arrear demand.

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Central Action Plan) to the respective CCsIT/DGsIT of their region. At the AO

level, the target for cash collection in respect of arrears of demand has been
fixed by using the formula, while for the current demand it was 20 per cent of
demand. The allocation of targets was required to be completed by 31 July of
every year and intimated to the Directorate of Income Tax (Recovery) for
monitoring purposes.
The targets fixed for reduction in arrears of demand / cash collection as per
the Central Action Plans for the years from 2016-17 to 2019-20 and the
achievements made against them are given in Table 7.8 below:
Table 7.8: Target and Achievement in reduction of arrears of demand and Cash collection
` in crore)
(`
Financial Arrear Target for Actual Target Actual Accretion Actual Actual Net As on
Year demand as reduction in Reduction for Cash of Reduction Cash accretion 31 March
on 01 April arrear in arrear cash collection current in current collection [Col.2 +
demand demand collection demand demand of current Col.10]101
(40% of col.2) demand
1 2 3 4 5 6 7 8 9 10 11
=(7)-(4)-(8)
2016-17 9,29,972 3,71,989 1,99,490 53,981 38,944 3,79,548 60,731 36,905 1,19,327 10,49,299
2017-18 10,52,084 4,20,834 3,24,528 71,513 44,633 4,62,412 76,641 52,537 61,243 11,13,327
2018-19 11,22,750 4,49,100 1,98,815 68,885 40,599 4,22,625 91,173 59,660 1,32,637 12,77,644
2019-20 12,77,644 5,11,058 Data not 83,689 Data not available # 16,18,954
available
Source: Chapter II of Central Action Plan of CBDT for the respective years.
# The details of achievement for cols.4,6,7,8,9 and 10 for the year 2019-20 could not be ascertained as the same were not available in CBDT’s
Interim Action plan for 2020-21. Closing Balance computed by Audit.

The above table shows that target has not been achieved in any of the
years, thereby suggesting that either the fixation of uniform target of
40 per cent reduction of demand was unrealistic and was without any
detailed analysis or the ways and means applied to achieve the target was
inadequate.
Table above further shows that the targets for cash collection in respect of
both arrear demand and current demand have not been achieved in any of the
years. Thus, the closing balance of arrears of demand have shown an
increasing trend.
Audit noted that the Central Action Plans for the years 2020-21 and 2021-22
were interim plans and did not specify any target for reduction in arrear
demand or cash collection. For the year 2019-20 also, analysis of achievement
could not be made for want of sufficient data. The analysis of comparable
achievement for the FYs 2019-20 to 2021-22 with the earlier periods could not
be made in view of the Covid pandemic.

101 Provisional figures as mentioned in the Central Action Plans of the CBDT

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On the basis of CAP-I statement of all the 19 regions for years 2017-18, 2018-19
and 2019-20, an analysis of region-wise target and achievement of reduction
in demand was done, as shown in Table 7.9 below:
Table 7.9: Target and Achievement in Reduction of Arrear Demand (Region Wise)
` in crore)
(`
Sl. Region 2017-18 2018-19 2019-20 2020-21 2021-22
No. Target for Actual Achieve Target for Actual Achieve Target for Actual Achieve- Actual Actual
Reduction Reduction ment Reduction Reduc- ment Reduction Reduc- ment Reduc- Reduc-
in Arrear (as % of in Arrear tion (as % of in Arrear tion (as % of tion tion
Demand Target) Demand Target) Demand Target)
1 Andhra Pradesh & 11,998 6,480 54.01 11,481 5,786 50.40 12,228 5,075 41.50 10,297 6,117
Telangana
2 Bengaluru 14,332 13,133 91.63 16,341 11,397 69.74 17,813 8,024 45.05 4,993 7,520
3 Bhubaneswar 1,886 1,861 98.67 2,166 2,015 93.03 2,399 474 19.76 543 977
4 Bihar & Jharkhand 3,418 2,068 60.50 3,469 1,350 38.92 3,564 879 24.66 748 712
5 Delhi 81,247 48,579 59.79 92,645 85,603 92.40 1,07,405 30,211 28.13 20,267 22,677
6 Gujarat 16,264 9,346 57.46 23,179 10,461 45.13 28,354 9,405 33.17 4,115 6,869
7 International 49,873 17,437 34.96 54,202 10,551 19.47 53,532 8,099 15.13 7,448 42,645
Taxation, Delhi
8 Kerala 2,423 1,421 58.65 2,912 2,144 73.63 3,699 1,720 46.50 1,680 979
9 Lucknow, UP East 8,789 1,513 17.21 10,973 2,619 23.87 11,391 1643 14.42 742 1,000
10 MP & Chhattisgarh 5,773 3,514 60.87 7,205 1,435 19.92 9,963 3,197 32.09 3,452 2,890
11 Mumbai 1,42,122 156,789 110.32 156,124 34,751 22.26 1,81,985 54,661 30.04 16,560 25,692
12 Nagpur 615 463 75.28 610 415 68.03 755 493 65.30 334 221
13 North-East Region 463 352 76.03 468 386 82.48 497 344 69.22 289 290
14 North-West Region 8,250 5,333 64.64 9,281 3,843 41.41 12,383 6,101 49.27 NA NA
15 Pune 13,214 9,901 74.93 11,311 6,537 57.79 13,973 8,505 60.87 4,994 6,109
16 Rajasthan 2,815 1,900 67.50 2,568 3,120 121.50 2,581 1,301 50.41 737 854
17 Tamil Nadu 16,115 22,277 138.24 10,587 8,885 83.92 11,660 6,864 58.87 3,994 9,914
18 UP West & 9,710 3,543 36.49 3,302 1,169 35.40 4,438 784 17.67 819 1,229
Uttarakhand
19 West Bengal & 31,527 18,155 57.59 30,276 6,345 20.96 32,438 4,749 14.64 2,249 4,244
Sikkim
Total 4,20,834 3,24,065 77.01 4,49,100 1,98,812 44.27 5,11,058 1,52,529 29.85 84,261 1,40,939
Source for Target: Chapter II of Central Action Plan of CBDT for 2017-18, 2018-19 & 2019-20.
Source for Achievement: Sl. No. 6 & 7, Col 4 & 5 i.e. IT & CT of arrear in CAP-I of respective region.

The analysis of above table showed the following facts in respect of 19 regions:
1. Mumbai & Tamil Nadu regions achieved target in 2017-18 and
Rajasthan region achieved target in 2018-19.
2. The percentage of shortfall in achievement of targets ranged from
1.33 per cent (Bhubaneswar) to 82.79 per cent (UP East) in the year
2017-18; 6.97 per cent (Bhubaneswar) to 80.53 per cent (International
Taxation) in 2018-19 and 30.78 percent (North East Region) to
85.58 per cent (UP East) in 2019-20.

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3. Shortfall in achievement of target was more than 50 per cent in three

regions102 (2017-18), nine regions103 (2018-19) and 14 regions104
(2019-20).
4. The shortfall in overall achievement of the targets (for the 19 regions)
increased from 23 per cent in 2017-18 to 70.15 per cent in 2019-20.
5. The CBDT has not fixed any region-wise target for 2020-21 and
2021-22.
On the basis of CAP-I statement of all the 19 regions for years 2017-18, 2018-19
and 2019-20, an analysis of region-wise target and achievement of cash
collection, is shown in Table 7.10 below:
Table 7.10: Target and Achievement of cash collection out of arrear demand (Region-wise)
` in crore)
(`
Sl. Pr. CCIT Region 2017-18 2018-19 2019-20 2020-21 2021-22
No.
Target Actual Achiev Target Actual Achiev Target Actual Achieve Actual Actual
for Collec- ement for Collec- ement for Collec- ment as Collec- Collec-
cash tion as % of cash tion as % cash tion % of tion tion
collec- Target collec- of collec- Target
tion tion Target tion
1 Andhra Pradesh & 2,341 1,645 70.27 1,678 853 50.83 2,488 1,197 48.11 1,431 1,804
Telangana
2 Bengaluru 3,431 6,479 188.84 3,507 6,043 172.31 4,211 2,045 48.56 2,942 3,641
3 Bhubaneswar 469 362 77.19 769 707 91.94 2,281 259 11.35 376 802
4 Bihar & Jharkhand 456 776 170.18 684 420 61.40 679 327 48.16 252 372
5 Delhi 16,715 5,134 30.71 11,885 6,502 54.71 18,513 4,194 22.65 4,187 4,388
6 Gujarat 2,379 1,893 79.57 2,718 1,963 72.22 3,081 1,385 44.95 1,767 1,352
7 Kerala 702 393 55.98 782 911 116.50 1,005 436 43.38 576 476
8 Lucknow, UP East 3,701 412 11.13 2,366 431 18.22 1,570 292 18.60 364 480
9 MP & Chhattisgarh 1,045 1,379 131.96 1,421 411 28.92 2,987 1,201 40.21 635 1,206
10 Mumbai 18,923 9,224 48.74 20,906 8,543 40.86 24,684 7,080 28.68 7,993 10,574
11 Nagpur 90 69 76.67 134 90 67.16 81 60 74.07 85 81
12 North-East Region 79 91 115.19 91 93 102.20 91 79 86.81 127 113
13 North-West Region 1,543 1,089 70.58 1,563 755 48.30 2,540 1,143 45.00 NA NA
14 Pr. CCIT (Intl. Tax.) 7,208 4,311 59.81 11,685 6,045 51.73 8,257 1,199 14.52 2,430 1,955
15 Pune 1,343 1,643 122.34 1,062 1,790 168.55 1,674 1,153 68.88 1,370 1,624
16 Rajasthan 651 809 124.27 552 862 156.16 575 576 100.17 491 369
17 Tamil Nadu 4,297 4,882 113.61 1,784 2,374 133.07 2,853 3,013 105.61 1,880 3,779
18 UP West & 1,737 2,252 129.65 604 247 40.89 1,317 405 30.75 305 927
Uttarakhand
19 WB & Sikkim 4,402 1,642 37.30 4,694 1,560 33.23 4,802 1,100 22.91 1,396 1,930
Total 71,512 44,485 62.21 68,885 40,600 58.94 83,689 27,144 32.43 28,607 35,873
Source for Target: Chapter II of Central Action Plan of CBDT for years 2017-18, 2018-19 & 2019-20.
Source for Achievement: Sl. No. 6, Col 4 & 5 i.e. IT & CT of arrear in CAP-I of respective region.

102 International Taxation, UP East, UP West

103 Bihar & Jharkhand, Gujarat, International Taxation, UP East, MP & Chhattisgarh, Mumbai, NWR, UP
West, West Bengal & Sikkim
104 AP& Telangana, Bengaluru, Bhubaneswar, Bihar & Jharkhand, Delhi, Gujarat, International Taxation,
Kerala, UP East, MP & Chhattisgarh, Mumbai, NWR, UP West, West Bengal & Sikkim

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On the basis of the above table, the following observations are made:
1. Targets fixed for cash collection were not achieved by 11 regions105 in
the year 2017-18, 13 regions106 in the year 2018-19 and 17 regions107
in the year 2019-20.
2. The shortfall in achievement of cash collection was above 50 per cent
in three regions viz., Mumbai, UP (East) and West Bengal & Sikkim for
all the three years.
3. The shortfall in overall cash collection target for pan-India was
increased year after year from 37.79 per cent in 2017-18, to
41.06 per cent in 2018-19 and to 67.57 per cent in 2019-20.
4. The CBDT has not fixed any region-wise target for 2020-21 and
2021-22.
Details of outstanding demand, targets fixed by the CBDT and reduction of
outstanding demand from the year ending 31st March 2018 to 31st March 2022
as per CAP-I statement have been presented through Chart 7.1 below:

Chart 7.1: Trend of Outstanding Demand Vs Target and Reduction in

Outstanding Demand
(₹
₹ in crore)
₹ 17,90,159

₹ 15,28,818
₹ 13,87,230
₹ 12,34,078
₹ 11,13,320

₹ 6,11,527 ₹ 5,54,892
₹ 5,11,058
₹ 4,20,834 ₹ 4,49,100

₹ 1,98,812 ₹ 1,52,529 ₹ 1,40,939

₹ 84,261
₹ 3,24,065

2018 2019 2020 2021 2022

Reduction in Outstanding Demand Total Outstanding Demand
Target of reduction as per Central Action Plan

Source: Total Outstanding Demand & Reduction in Outstanding Demand from the CAP-Statements from all
regions. Target for reduction in Outstanding Demand from Annual Central Action Plans of CBDT

105 AP & Telangana, Bhubaneswar, Delhi, Gujarat, Kerala, UP East, Mumbai, Nagpur, NWR, International
Taxation, West Bengal & Sikkim
106 AP & Telangana, Bhubaneswar, Bihar & Jharkhand, Delhi, Gujarat, UP East, MP & Chhattisgarh,
Mumbai, Nagpur, NWR, International Taxation, UP West, West Bengal & Sikkim
107 AP & Telangana, Bengaluru, Bhubaneswar, Bihar & Jharkhand, Delhi, Gujarat, Kerala, UP East, MP &
Chhattisgarh, Mumbai, Nagpur, NER, NWR, International Taxation, Pune, UP West, West Bengal &
Sikkim

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From the above Chart, it can be seen that the total outstanding demand has
been increasing constantly over the years except in the year ending
March 2021. It can be seen that target of 40 per cent has never been achieved.

Results of analysis

1. The CBDT had been fixing target for cash collection alone till 2016-17,
and no target for reduction in arrear demand were fixed. It was with
effect from 2017-18, that the CBDT has started fixing target for
reduction in arrear demand in addition to cash collection. As per the
CAP-I statement provided by the CBDT, cash collection for the Year
ending March 2021 and March 2022 was ` 32,025 crore (96.69%) and
` 38,555 crore (71.15%) respectively against the arrear demand,
whereas cash collection was ` 1,095 crore (3.31%) and ` 15,628 crore
(28.84%) respectively against the current demand.
2. For the years 2017-18 to 2019-20, the CBDT fixed the target for
reduction in arrear demand at an overall uniform rate of 40 per cent
across all the regions.
3. No targets were fixed for reduction of outstanding demand for the
years 2020-21 and 2021-22. Achievements for the year 2019-20 and
2020-21 were not reported to the CBDT, as no full-fledged Central
Action Plans were prepared during these years.
4. The CBDT, on the one hand categorised 97 to 98 per cent of its total
arrears as “demand difficult to recover”, and on the other hand fixes a
target of 40 per cent for reduction in arrear demand in its annual CAPs.
Thus, categorisation of major part of arrears of demand as “demand
difficult to recover” and uniform fixation of targt at 40 per cent for
reduction in arrears of demand remained unrealistic.
5. Targets were being fixed without considering any risk profiling, as
envisaged in the Vision 2020 document - Strategic Plan 2011-15. The
uniform target of 40 per cent reduction of arrear demand by the CBDT
suggested that ageing, monetary, category, assessee profile or other
factors were not considered while fixing the targets.
The analysis showed there was really no reduction in arrear demands
as envisaged by the CBDT in its CAPs; rather there had been an increase
year on year owing to non-achievement of targets and addition of new
unpaid demands every year. The fixing of uniform percentage year
after year, without any analysis of reasons for shortfall in achievement,
was not effective in ensuring reduction in arrears of demands.

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Recommendation 15:
The CBDT may ensure that:-
(i) Realistic targets for reducing outstanding demand may be fixed
considering risk factors like age, amount of demand, possession of
assets by assessee, status of pendency in appeals, assessee not
traceability, etc. Clearing arrear demand should be prioritised.
(ii) Risk-profiling techniques adopted by the CBDT to fix targets for
cash collections may also used to fix targets for reducing arrear
demands with appropriate changes.
(iii) Targets for reduction in arrear demand are fixed after considering
various aspects on a Region-wise/jurisdiction-wise basis including
past performance, nature/ type of assesse, etc. Fixing uniform
targets without considering factors specific to the jurisdiction,
assessments, etc., is not logical.
The Ministry, in its reply, stated (June 2023) that the targets for the
reduction of arrear demand are fixed after due deliberation and based on
recommendations of a High-level Taskforce headed by an officer, not below
the rank of Pr CCIT. These targets are fixed after taking into consideration
various factors like age and amount of demand, status of pendency in
appeals, etc., which impact the reduction and recovery of tax arrears. The
same is worked on a formula devised in this regard, which is applied to all Pr
CCIT regions. The measures for recovery of taxes were detrimentally
impacted due to covid pandemic in FY 2020-21 and 2021-22, wherein
adverse coercive actions were not taken in view of the severity of the
pandemic. The Ministry, while referring to some of the states like Tamil
Nadu, Mumbai, Orissa, Rajasthan and Delhi, stated that these states either
achieved the target or reached close to the target for reduction of
outstanding demand in the year 2018-19. Further, all regions might not
demonstrate the same achievement, the overall target does not seem to be
impractical or unrealistic.
The reply furnished by the Ministry is not tenable, as achievement in some
regions was nowhere close to the target whereas, in some regions,
achievement was very high vis-à-vis target fixed, which is indicative of the
fact that the risk factors involved were not properly analysed while fixing
a uniform target of 40 per cent for reduction in arrear demand.

7.3.2 Demand difficult to recover

Audit analysed the pan-India outstanding demand and its classification by the
ITD to ascertain its correctness, especially, the ‘demand classified as difficult

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to recover’ for the years 2017-18 to 2021-22. The trend analysis of demand
difficult to recover are shown in Chart 7.2 below:

Chart 7.2 : Trend of Demand difficult to recover out of total outstanding

demand
(₹ in crore)
97.4%
₹ 17,43,057
97.5%
₹ 14,91,276 98.3%

₹ 17,90,159
98.8% ₹ 13,63,081
98.2% ₹ 12,19,485

₹ 15,28,818
₹ 10,93,377

₹ 13,87,230
₹ 12,34,078
₹ 11,13,320

2017-18 2018-19 2019-20 2020-21* 2021-22*

Total outstanding demand Demand classified by ITD as ‘difficult to recover’

Source: Summary of CAP-I statements of all 19 regions.

* Data of North West Region (Chandigarh) was not made available to Audit.

The above chart shows that more than 97 per cent of the outstanding demand
had been classified as ‘demand difficult to recover’ by the ITD.
In the CAG’s Performance Audit Report No. 23 of 2011 also, it was reported
that out of ` 1,96,092.07 crore of arrear demand reported by DIT(Recovery),
an amount of ` 1,65,337.42 crore (84.3 per cent) was categorized as
unrealizable.
Audit analysed the ‘outstanding demand’ and ‘demand difficult to recover’
from the CAP-I data of all 19 Pr. CCIT regions, for the financial years ended in
March 2018, 2019, 2020, 2021 and 2022. Details of analysis are shown in
Table 7.11 below:
Table 7.11: Trend analysis on Outstanding Demands Vs Demand difficult to recover
` in crore)
(`
For the Total Outstanding Demand Demand Difficult to Recover Net Collectible Demand
year
ended DIT CAP-I Difference DIT CAP-I Difference DIT CAP-I Difference
(O&M) (O&M) (O&M)
Mar-18 11,14,182 11,13,320 862 10,94,023 10,93,377 646 20,159 19,943 216
Mar-19 12,34,078 12,34,078 Nil 12,19,485 12,19,485 Nil 14,593 14,593 Nil
Mar-20 16,18,954 15,28,818 90,136 15,80,220 14,91,276 88,944 38,734 37,542 1,192
Mar-21 15,11,618 13,87,230 1,24,388 14,85,289 13,63,081 1,22,208 26,473 24,149 2,324
Mar-22* -- 17,90,159 -- -- 17,43,057 -- -- 47,102 --
Source: DIT (O&M) Figures adopted from Table 1.21 of CAG’s AR 29/2022
Source: Summary of CAP-I statements of all 19 regions.
* Data of Pr.CCIT North West Region (Chandigarh) not included as not made available to Audit.

The above table indicates variation in the figures of outstanding demand

furnished by the Directorate of Income Tax (Organisation & Management)

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Services and the consolidated data of outstanding demand taken from CAP-I
statements of all Pr. CCsIT regions in respect of the years ended March 2018
and March 2020.
The details of all the factors, which provide for such categorization are given in
Appendix 13. The major factors that cause the outstanding demand to be
categorized as ‘demand difficult to recover’ are given in Chart 7.3 below:
Chart 7.3 : Major factors contributing to demand difficult to recover
(percentage out of the total of six factors)

2021-22* 57% 20% 9% 10% 3% 2%

2020-21* 63% 19% 8% 5% 4% 2%

2019-20 63% 19% 7% 6% 4% 2%

2018-19 71% 12% 6% 5% 4% 2%

2017-18 70% 12% 6% 7% 4% 1%

(a) No assets/inadequate assets (b) Assessees not traceable

(c) TDS mismatch (d) Any other reason as classified in CAP
(e) Protective Demand (f) Duplicate entries

Source: Summary of CAP-I statements of all regions (except NWR for 2020-21 and 2021-22)
* Data of Pr. CCIT North-West Region (Chandigarh) not included as not made available to Audit.

7.3.3 Demands locked up in appeals

Audit requested statistical details of demands pending with various appellate
authorities as on 31 March of the years 2018, 2019, 2020, 2021 and 2022 from
the ITD. The requisite details were not furnished by the ITD (February 2024).
The required details were extracted by Audit from the CAP-I statement in
respect of all the 19 Pr. CCsIT for analysis (except North West Region for the
years 2021 and 2022), as shown in Table 7.12 below:
Table 7.12: Details of demands locked up in appeals
` in crore)
(`
Description 2017-18 2018-19 2019-20 2020-21* 2021-22*
Total Outstanding Demand 11,13,319.63 12,34,078.22 15,28,817.81 13,87,229.61 17,90,159.39
Amount locked up in 4,08,117.63 6,24,726.98 6,51,225.76 6,91,780.43 7,53,377.63
litigation with (CIT(A) – (a)
Amount locked up in 2,91,110.46 3,27,824.85 2,93,235.86 3,14,591.54 2,99,212.32
litigation with (ITAT, High
Court/Supreme Court) – (b)
Total amount locked up in 6,99,228.09 9,52,551.83 9,44,461.62 10,06,371.97 10,52,589.95
appeal (a) + (b)
Percentage of amount 62.81 77.19 61.77 72.55 58.80
locked up In litigation
Source: Summary of CAP-I statements of all regions
* Data of Pr. CCIT North West Region (Chandigarh) not included as not made available to Audit.

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The above table indicates that the amounts locked up in litigation ranges from
59 per cent to 77 per cent and is a major cause for non-achievement of the
targets for reduction of outstanding demand.
The region-wise details of total amount pending at various levels of appeal are
given in Appendix 14.
Initiatives taken by the CBDT
The CBDT has recognised the impact of high number of litigations and made a
series of policy decisions108 like substantial increase in monetary limits for filing
appeals, committees for minimizing and strengthening management of cases
pending with various appellate authorities etc. In order to reduce the
demand pending in appeal cases, Government of India announced the
Vivad-se-Vishwas Scheme in the Budget 2020.
Vivad se Vishwas Scheme
The Government announced Vivad-se-Vishwas Scheme in the Budget 2020 for
settling tax disputes between assessees and ITD. The scheme offered complete
waiver of interest and penalty to the taxpayers with a full and final settlement
of the disputed tax, if availed by 31 March 2020. The scheme was applicable to
all appeals/petitions filed by the taxpayers or ITD, which were pending until
31 January 2020, before any appellate forum. In essence, it offered complete
waiver of interest and penalty if the taxpayer agreed to pay the disputed
tax amount by 31 March 2020. The scheme aimed at reducing 4,83,000 direct
tax-related cases pending in various appellate forums. The Government
extended the deadline for making payment under the scheme till
31 October 2021.
With a view to ascertain the tax-payers response to the scheme, Audit sought
(May 2021) the data on the total number of assessees who opted for the
Scheme, total amount realised, the amount of penalty and interest waived,
etc., as on 31 March 2021. The response from the Pr. CCsIT is still awaited
(March 2024).
In a written reply to the Lok Sabha, (August 2021) it was stated that over
1.32 lakh declarations, entailing disputed tax of ` 99,756 crore, had been filed
under the scheme, and the government had received ` 53,684 crore through
Vivad-se-Vishwas Scheme.

108 Office Memoranda dated 17 July 2014 and 05 September 2016

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7.3.4 Assessees not traceable

The CBDT envisaged109 urgent review of the cases of ‘assessees not traceable’
or ‘No assets for recovery’ to see whether further efforts can locate the
assessee or assets besides exploring all avenues of available information to act
as per the procedures laid down.
The CBDT in its Central Action Plan 2019-20 had stated that the assessees could
be traced with concerted efforts, including internet search and enquiries
through banks. For ‘Assessees not traceable’ cases, the Central Action Plan
fixes uniform five per cent target per year for recovery of tax demand, through
cash collection from assessees.
Analysis of CAP-I statements for the period 2017-18 to 2021-22 showed that
the demand outstanding against this category had more than doubled from
` 85,337.15 crore in 2017-18 to ` 1,77,938.44 crore in 2019-20, and nearly
tripled to ` 2,26,019.26 crore in 2021-22.
In this regard, during Exit Conference, the PCIT, Chennai I Commissionerate,
which had ` 6,497 crores against ‘assessee not traceable’ for the year ending
March 2022, attributed (May 2022) the increase to ‘Operation Clean Money’
cases consequent to demonetisation in 2016. It was stated that the ITD did not
get identity of assessees from the banks. Further, there was a time gap
between deposits and reopening of cases by the ITD during which period, the
assessees had already vacated the premises and could not be traced. In many
cases, the assessees were benamies and the assets and the real wealth did not
belong to them. In these circumstances, the ITD observed that it would be
difficult to collect the tax.
Audit noted that three regions, viz., Delhi, West Bengal & Sikkim and Mumbai
contributed for more than 60 per cent of the pan-India demand classified as
‘demand difficult to recover’ due to Assessees not traceable. A depiction of the
total demand outstanding and outstanding demand of assessee not traceable
in respect of three regions for the period from 2017-18 to 2021-22 is shown in
chart 7.4 below:

109 CBDT’s Central Action Plan 2016-17

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Chart 7.4 : Outstanding Demand of Assessee not traceable

(₹ in crore)

₹ 2,26,019

₹ 1,77,938
₹ 1,63,880
67%

61% 64%

₹ 85,337 ₹ 89,422

29.1%
60% 61% 24.5% 26.6%
22.8%
30.0% 27.9% 15.6%
19.1% 20.4%
17.0% 17.3%
17.5% 16.6% 17.2%
12.5%
2017-18 2018-19 2019-20 2020-21* 2021-22*

Assessees not traceable Pan-India Delhi West Bengal & Sikkim Mumbai Total of 3 regions

Source: Col. 9(b) of CAP-I statements of the respective regions.

* Data of North West Region (Chandigarh) not included as CAP-I statement was not made available to Audit.

The figure of outstanding demand against the ‘assessees not traceable ‘had
more than doubled in 2019-20 and nearly tripled in 2021-22 from 2017-18,
despite the fact, that the linking of PAN with Aadhar had been made
mandatory, since July 2017.
As the ITD was not maintaining granular data for various categories of demand
in CAP-I statement, the details furnished by the various authorities in AIS
remained unmapped, resulting in non-identification of assessees under
‘assessees not traceable’.

Recommendation 16:
The CBDT needs to develop a mechanism of mapping the PAN details
obtained from the various authorities in the AIS with the PAN details of
demands categorised under 'Assessees not traceable' to identify and track
the assessees, either at the time of assessment or after the completion of
the assessment.

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7.3.5 Protective Demand

In Column 9(d) of CAP-I statement, the ITD exhibits a data of Outstanding
Protective Demand under the head ‘Demand difficult to recover’. Out of total
demand difficult to recover of ` 17,43,057.13 crore, an amount of
` 34,627.71 crore was categorised under protective demand category for the
year ended March 2022.
A Protective assessment is done when there is doubt regarding the ownership
of an income. In such cases, the income is assessed in the substantive manner
in the hands of the person who is strongly believed to be the recipient. If there
is any other person who may be a likely recipient of the same income, a
protective assessment is made in his hands as well as a matter of caution. This
is to eliminate the chance of the assessment getting time barred by limitation.
The demand relatable to protective assessment is not to be enforced and
should be kept in abeyance. This demand should be shown as ‘demand not
collectible’ in the statements. The protective assessment becomes infructuous
once the appellate authorities confirm the substantive assessment. If the
substantive assessment gets knocked off in appeal, the protective assessment
becomes substantive. Under these circumstances, inclusion of protective
demand in the figure of outstanding demand is creating duplication as both
substantive demand and protective demand are computed on the same
income.
Thus, the practice of categorization of protective demands under the
‘demands difficult to recover’ requires to be reviewed and remedial action
taken to reflect the correct status of the arrear demand.
Reply of the Ministry is awaited (March 2024).

7.3.6 TDS/ Pre-paid Taxes Mismatch

Mismatch of TDS and other pre-paid taxes was one of the reasons attributed
by the ITD for classifying a demand as ‘demand difficult to recover’. Audit
observed that the outstanding demand under “TDS / Pre-paid Taxes
mismatch” had increased from ` 40,555.36 crore to ` 99,658.33 crore during
the period March 2018 to March 2022.
During the test check of records in selected assessment units, Audit observed
in 966 cases that the assessees had claimed the tax credit of ` 15,512.79 crore
as TDS, Advance Tax and Self-Assessment Tax as of March 2020. However, the
ITD allowed only an amount of ` 12,840.70 crore of tax credit to the assessees
because of mismatch in figures of prepaid taxes. Since, the ITD could not
reconcile the balance of pre-paid taxes of ` 2,672.09 crore, this was
categorised as ‘demand difficult to recover’ at Sl. No. 9(n) of CAP-I statement.

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The total number of instances of such mismatches found and pending

reconciliation are consolidated Pr.CCIT wise, as shown in the Table 7.13 below:
Table 7.13: Region wise analysis of short allowances TDS/Prepaid Taxes
Sl. Region No. of TDS/TCS/SAT/Advance Tax ` in crore)
(`
No. Cases Claimed by Allowed by Short Allowed
Assessee Dept.
1 Andhra Pradesh & 47 58.16 37.48 20.68
Telangana
2 Bihar & Jharkhand 6 11.03 0.01 11.02
3 Tamil Nādu 4 185.25 41.73 143.52
4 Kerala 2 2.29 2.11 0.18
5 Gujarat 77 592.75 574.59 18.16
6 Rajasthan 42 11.93 4.34 7.59
7 North West Region 13 9.50 0 9.50
8 North Eastern Region 34 11.98 6.89 5.09
9 West Bengal & Sikkim 103 118.49 91.97 26.52
10 Lucknow, UP East 5 1.97 1.87 0.10
11 UP West & 8 5.97 3.94 2.03
Uttarakhand
12 Mumbai 234 7,750.95 7,200.76 550.19
13 Bengaluru 121 2,698.46 1,839.32 859.14
14 Delhi 142 2,178.14 1,982.91 195.23
15 International 64 1,856.84 1,039.47 817.37
Taxation, New Delhi
16 MP & Chhattisgarh 59 12.81 12.26 0.55
Total 961 15,506.52 12,839.65 2,666.87
Source: Assessment Records from ITD. No comments offered in respect of Bhubaneswar region. Pune and Nagpur
regions not selected.

Thus categorisation of TDS credits not allowed, as ‘demand difficult to recover’

in CAP-I statement is not reflective of the actual status because, taxes
deducted at source and paid into Government account by the deductors or tax
deposited by the assessee himself form part of pre-assessment collections,
which have been credited to the government account.
Reply of the Ministry is awaited (March 2024).
The inclusion of protective demand in the figure of outstanding demand was
not correct because both protective and substantive tax were charged on same
income and inclusion of both taxes in the outstanding demand, will inflate the
figure of outstanding demand.
Further, inclusion of cases where tax deducted at source had been deposited
into Government account but, the deductee was yet to get the credit of TDS
claimed, cannot be classified as ‘demand difficult to recover’ or outstanding
demand.

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Recommendation 17 :
The CBDT may review the classification of factors shown under the
category 'demand difficult to recover', so that only actual outstanding
demands are reflected in the CAP-I report. Capturing figures of protective
demand and cases of TDS mismatch under ‘demand difficult to recover’
gives an incorrect picture of the status of outstanding demand.

7.3.7 ‘Any other reason’ as classified in CAP-I

A review of the total outstanding demand shown as ‘demand difficult to
recover’ in the CAP-I Statement and the reasons thereof, as per CAP-I
statement of all the Pr.CCIT regions, showed that outstanding demands
aggregating to ` 1,14,818.16 crore were categorised under ‘any other reason’
for the year ended 31 March 2022.
The ITD could not attribute any specific reason for classification of the above
outstanding demand as ‘demand difficult to recover’. Audit noticed that the
quantum of arrear demand under this category had increased from
` 48,569.57 crore in 2018 to ` 1,14,818.16 crore in 2022, and the percentage
of demand pending in CAP-I under ‘any other reasons’ had more than doubled
compared to the previous years. The chances of recovery of these outstanding
demands seem remote, as effective action depends on identifying initially the
reasons for which the demand remained uncollected. In the absence of
granular data, Audit could not test check any case to find the reason why
demand has remained outstanding under this category for a long period.
Reply of the Ministry is awaited (March 2024).
7.3.8 Write-off of uncollectable demand
The ITD’s Manual of Office Procedure (Consolidated) 2019 issued by CBDT
contains the provisions of law relating to write-off of arrears of tax demand.
The CBDT had issued instructions/guidelines from time to time on powers and
monetary limits for write-off of arrears of tax demand. Tax arrears may be
written-off by any one of the procedures: (i) Regular procedure for write-off
(ii) Ad-hoc procedure and (iii) Summary procedure for write-off, as detailed in
Appendix 3A.
As per the Manual of Office Procedure (Consolidated) 2019 Para 2.1 of Chapter
13 of MOP Volume-II (Technical) of CBDT, small demands not exceeding
` 1,000 in each case can be summarily written-off by the AOs without any
further enquiry if the amount is outstanding for more than five years and the
amount does not relate to any live case. Again arrears of tax up to ` 10,000
may be written-off under the ‘adhoc’ procedure provided they have been
outstanding against each assessee for non-availability of assessment records

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and detailed address of the assessee for at least three years immediately
preceding the financial year during which they are proposed to be written-off.
Out of 18,88,365 outstanding demand cases pertaining to 262 units (out of
sampled 279 units, as in 17 units of three regions details were not furnished),
Audit observed that there were 8,43,190 eligible cases for Summary and
Ad-hoc write-off and the total outstanding amount of such cases aggregated
to ` 267.84 crore. Audit made an age-wise analysis of such cases and observed
that 83 per cent of the cases were more than five years old, as shown in
Table 7.14 below:
Table 7.14: Age-wise analysis of outstanding demand not written-off
` in crore)
(`
Category Summary Write off Ad-hoc Write off Total
No. of Money No. of Money No. of Money
Cases Value Cases value Cases value
3 to 5 Years Not Not 92,900 32.12 92,900 32.12
Applicable* Applicable*
5 to 10 years 1,92,968 68.15 2,80,457 97.44 4,73,425 165.59
More than 10 1,23,593 26.24 1,53,272 43.89 2,76,865 70.13
years
Total 3,16,561 94.39 5,26,629 173.45 8,43,190 267.84
* Demands pending for more than 05 years only eligible for Summary write off.

These cases had not been considered for write off either under summary or
ad-hoc write off procedure. The pan-India status of outstanding demand
‘pending write-off’ (region wise) as per CAP-I Statement for the period ending
March 2018, 2019, 2020, 2021 and 2022 have been shown in Table 7.15
below:
Table 7.15: Details of total outstanding demand ‘pending write off’, as per CAP-I Statement
(Region wise)
` in crore)
(`
Sl. Region Year ended March
No. 2018 2019 2020 2021* 2022*
1 Andhra Pradesh &Telangana 105.2 186 185.11 184.28 183.34
2 Bengaluru 25.7 24.61 24.72 24.07 23.69
3 Bhubaneswar 0.17 0.17 0.17 0.17 0.17
4 Bihar & Jharkhand 6.67 5.81 5.66 5.39 5.22
5 Delhi 150.04 154.37 166.86 131.14 130.35
6 Gujarat 217.57 217.06 187.21 187 186.65
7 Guwahati 13.21 12.69 8.13 8.13 8
8 International Taxation, 18.58 0 0 0 0
Delhi
9 Kerala 10.93 10.6 10.54 9.41 9.28
10 Lucknow, UP East 17.63 71.96 71.86 78.35 75.39
11 MP & Chhattisgarh 85.81 85.78 84.91 85.57 86.99

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Table 7.15: Details of total outstanding demand ‘pending write off’, as per CAP-I Statement
(Region wise)
` in crore)
(`
Sl. Region Year ended March
No. 2018 2019 2020 2021* 2022*
12 Mumbai 1,447.15 1,574.76 1,890.68 1,145.29 1928.18
13 Nagpur 7.31 3.25 1.84 1.77 1.68
14 North West Region 39.55 27.19 21.62 NA NA
15 Pune 17.61 81.91 81.35 79.02 78.26
16 Rajasthan 20.05 20.29 20.26 20.25 19.93
17 Tamil Nadu 61.89 59 1,233.88 594.34 441.78
18 UP West & Uttarakhand 688.52 688.15 73.67 65.62 65.62
19 West Bengal & Sikkim 207.72 208.14 200.89 168.96 167.4
Total 3,141.31 3,431.74 4,269.36 2,788.76 3,411.93
Source: CAP-I statement of all regions
* Data of North-West Region (Chandigarh) not included as CAP-I statement was not made available to Audit.

The ITD had formed110 a three-tier structure (local/regional/zonal committees)

and fixed monetary ceilings for each authority to consider and recommend
write-off as detailed in Appendix 3B. Details of functioning of these
Committees and the number of cases considered by these Committees, were
sought for from the ITD. Reply is awaited (February 2024).
The audit of the CAP-II statement for 16 regions revealed inefficiencies in the
write-off process by the Departmental committees i.e. Local, Regional & Zonal
committees. In four regions (Pr.CCsIT North East, Bhubaneswar, Bhopal, and
Lucknow), no proposals were made to any of the three committees between
the financial years ending March 2018 and March 2020. Further, only one
proposal was made to the Regional committee by the Pr CCIT Bengaluru region
from the year ending March 2018 to March 2020. In the Pr.CCIT Rajasthan
region, seven proposals involving demand of ` 18.20 crore made during the
year ending March 2018, remained unapproved by March 2020. Other regions
also had pending proposals. Additionally, the format of CAP-II reflects both the
number of proposals made and amount involved, but for information on
‘approval received’ the amount for which approval has been given for write off
is not reflected, thus lacking complete information.
The audit noted that the ITD had not effectively monitored write-off of
long-pending eligible arrears, which requires reviewing and strengthening the
working of these committees (Appendix 15).

110 Instruction No. 14/2003 dated 06 November 2003 read with F.NO.375/3/2002-IT(B) dated 18
November 2003

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Thus, Audit observed that the ITD had not taken effective action to write off
eligible arrear demand cases, which are pending for a long time. This issue was
also raised in the CAG’s Performance Audit Report No. 23 of 2011. The ITD may
review the effectiveness of these committees and strengthen them.
The procedures for write-off prescribed in the ITD’s Manual of Office
Procedure (Consolidated) 2019 to identify and dispose of uncollectible
demands were not followed effectively.

Recommendation 18:
The CBDT may ensure that:-
(i) The format of the CAP-II statement with regard to write-off cases is
suitably modified to give adequate and correct information.
(ii) The formation of various committees and their functioning regarding
the timely disposal of write-off cases are effectively monitored.
(iii) A periodical review of the outstanding demand to identify
unrealisable demands is assessed and necessary action is taken in a
timely manner to get these demands written off. The write-off of
small money value cases should be taken up as a priority as it would
result in a significant reduction in terms of the number of cases, if not
in terms of money value.
The Ministry in its reply stated (May 2023) that as per the existing CAP-II
statement, the relevant information is adequately captured. The
mechanism of formation of various committees depending upon the
quantum of demand to be written off is already in place to examine the
potential proposal for write-off as moved by the AOs. As per existing
provisions, a mechanism is in place for time-to-time monitoring of write-off
of demand, which is described elaborately in the TRO manual. Further, as
per the existing arrangement as notified in the TRO Manual, local/regional
committees are formed depending upon the quantum of outstanding
demand involved.
The Ministry's reply is not tenable as the CAP-II statement does not capture
the opening balance and the amount approved by the committee for write-
off. Further, in many regions, no proposal for write-off was made to the
committee in selected years. The timely write-off of eligible cases can
significantly reduce outstanding demand. ITD may review and consider the
effectiveness of the committees' functioning.

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7.4 Non-recovery of undisputed demand

Audit summarised age-wise details of ‘undisputed demand’ as per CAP-I
statement, of all the regions, for the period ended March 2018, 2019, 2020,
2021 and 2022. Details are enclosed in the Appendix 16. The analysis for the
year March 2022 is shown in Table 7.16 below:
Table 7.16: Age-wise analysis of 'Demand not under Dispute' for the year ended March 2022 (Region Wise)
` in crore)
(`
Sl. Pr. CCIT Region For the year ended March, 2022 Percentage
No. > 1Yr and >2 Yrs and > 5 Yrs > 10 Yrs Total to Total
<= 2 Yrs <= 5 Yrs and Undisputed
<=10 Yrs demand
1 Andhra Pradesh &
12,799.96 3,843.30 1,180.95 186.4 18,010.61 5.42
Telangana
2 Bengaluru 10,643.96 3,485.52 391.26 44.99 14,565.73 4.38
3 Bhubaneswar 2,235.46 331.81 39.07 3.56 2,609.90 0.79
4 Bihar & Jharkhand 2,760.98 2,379.14 317.34 104.3 5,561.76 1.67
5 Delhi 40,604.90 51,153.64 925.18 5,850.92 98,534.64 29.66
6 Gujarat 21,838.58 10,460.19 884.9 253.8 33,437.47 10.06
7 Kerala 1,115.88 724.74 224.95 20.08 2,085.65 0.63
8 Lucknow, UP East 7,643.59 1,526.32 180.9 44.78 9,395.59 2.83
9 MP & Chhattisgarh 4,680.03 1,558.19 597.92 81.93 6,918.07 2.08
10 Mumbai 33,460.97 14,824.88 1,046.92 196.4 49,529.17 14.91
11 Nagpur 1,407.77 358.95 323.36 9.42 2,099.50 0.63
12 North-East Region 529.74 352.72 45.9 10.02 938.38 0.28
13 North-West Region - - - - - -
14 Pr. CCIT (Intl. Tax.) 4,961.36 4,932.53 194.36 13.16 10,101.41 3.04
15 Pune 6,063.30 3,667.25 355.95 157.29 10,243.79 3.08
16 Rajasthan 1,922.31 748.15 83.23 7.78 2,761.47 0.83
17 Tamil Nadu 13,665.30 5,962.99 347.72 52.91 20,028.92 6.03
18 UP West &
8,782.75 2,869.65 685.57 85.39 12,423.36 3.74
Uttarakhand
19 West Bengal & Sikkim 19,159.97 13,276.43 494.79 62.55 32,993.74 9.93
Total 1,94,276.81 1,22,456.40 8,320.27 7,185.68 3,32,239.16 -
Source: Col.12 of CAP-I statement of all regions for the period March 2022 (except NWR)

The above table indicates, that pan-India, outstanding demand of

` 3,32,239.16 crore was classified by the ITD as ‘demand not under dispute’
for the period ended March 2022. Out of this demand, more than 50 per cent
of the demand, amounting to ` 1.38 lakh crore was pending unrealized for
over two years. Delhi region alone (` 98,534.00 crore) accounted for
30 per cent of the total undisputed demands pending realization as on
31/03/2022.

Reply of the Ministry is awaited (March 2024).

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7.5 Demand raised under Summary assessments111

After an Income Tax Return has been filed by the assessee, the Return is
processed by CPC-ITR, Bengaluru, according to the provisions of Section 143(1)
of the Act (since 2010). This is also called Summary Assessment by the ITD.
The Act provides where any sum is determined to be payable by the assessee
on the basis of summary assessment, the intimation issued under Section
143(1) is to be treated as a notice of demand under Section 156 of the Act.
Hence, a demand raised or refund issued on the basis of summary assessment
is final, if the case is not selected for scrutiny or not re-opened for any reason.
The Jurisdictional AOs are supposed to pursue the demand raised in summary
assessment like demand raised under any other section of the Act. The JAOs
have to exercise same procedure for collection of all kinds of outstanding
demand. Hence, the demands arising from summary assessments112 (raised by
CPC-ITR, Bengaluru), also have to be pursued/collected by the respective JAOs.
However, Audit could not ascertain whether outstanding demand in respect of
summary assessments are being pursued by JAOs; and such cases after
exhausting the modes of demand recovery by JAOs, are being transferred to
TRO for further action like attachment of property, etc.
From the outstanding demand details for the year ended March 2020,
collected from 279 selected assessment units, Audit extracted the age-wise
cases of demands, which were raised by CPC-ITR, Bengaluru under summary
assessment, as detailed in Table 7.17 below:

Table 7.17: Age-wise depiction of total demand raised by CPC under Summary Assessment and pending recovery as
on 31 March 2020 ` in crore)
(`
Sl. Region Less than three Between three More than five Total Percentage
No. Years and five Years Years
No. of Outstan- No. of Outstan No. of Outstan No. of Outstan- Number Amount
Cases ding Cases -ding Cases -ding Cases ding
Amount Amount Amount Amount
1 2 3 4 5 6 7 8 9 10 11 12
1 Andhra 33,280 2,280 16,020 123 1,10,737 1,491 1,60,037 3,894 10.5 6.7
Pradesh &
Telangana
2 Bengaluru 51,586 5,918 23,558 447 1,62,142 3,183 2,37,286 9,548 15.6 16.3
3 Bhubaneswar 11,359 580 5,400 53 45,188 123 61,947 757 4.1 1.3
4 Bihar & 31,964 337 18,465 86 1,24,728 296 1,75,157 719 11.5 1.2
Jharkhand
5 Delhi 15,098 9,313 3,384 271 23,936 1,457 42,418 11,041 2.8 18.9
6 Gujarat 28,201 2,686 12,940 222 60,378 189 1,01,519 3,097 6.7 5.3

111 Assessments where ITRs are checked for arithmetical accuracy, internal consistency, etc. Further,
addition of income appearing in Form 26AS or Form 16A or Form 16, which has not been included in
computing the total income in the return is also made. The process takes place with the available
data in the ITR and without calling for records and information from the Assessee. This is non-
intrusive in nature. After processing, if there is any demand due from the Assessee, it is
communicated through a Demand Notice.
112 Processing a case under Section 143(1) of the Act

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Table 7.17: Age-wise depiction of total demand raised by CPC under Summary Assessment and pending recovery as
on 31 March 2020 ` in crore)
(`
Sl. Region Less than three Between three More than five Total Percentage
No. Years and five Years Years
No. of Outstan- No. of Outstan No. of Outstan No. of Outstan- Number Amount
Cases ding Cases -ding Cases -ding Cases ding
Amount Amount Amount Amount
1 2 3 4 5 6 7 8 9 10 11 12
7 International 1,247 156 2,439 372 3,201 517 6,887 1,046 0.5 1.8
Taxation, Delhi
8 Kerala 8,261 88 4,060 55 23,499 74 35,820 217 2.3 0.4
9 MP & 36,115 226 16,210 27 60,162 132 1,12,487 384 7.4 0.7
Chhattisgarh
10 Mumbai 20,244 1,950 9,325 62 49,964 11,665 79,533 13,677 5.2 23.4
11 North East 18,077 100 9,565 19 71,057 133 98,699 252 6.5 0.4
Region
12 North West 7,072 715 3,006 118 11,443 37 21,521 869 1.4 1.5
Region
13 Rajasthan 18,500 90 6,772 11 49,899 64 75,171 165 4.9 0.3
14 Tamil Nadu 15,312 1,850 6,519 152 56,465 741 78,296 2,743 5.1 4.7
15 Lucknow, UP 22,292 139 8,661 43 37,437 91 68,390 272 4.5 0.5
East
16 UP West & 15,008 151 7,221 13 23,071 41 45,300 204 3.0 0.3
Uttarakhand
17 West Bengal & 23,744 8,997 12,186 80 89,237 562 1,25,167 9,640 8.2 16.5
Sikkim
Total 3,57,360 35,574 1,65,731 2,155 10,02,544 20,796 15,25,635 58,525
Source: the e-filing portal data.

From the above table, Audit observed that the outstanding demand in respect
of 15.26 lakh cases of summary assessment, aggregating to ` 58,525 crore for
the year ended March 2020, had remained outstanding till November 2020.
Out of this, ` 20,796 crore was pending for more than five years.
Audit further observed that Mumbai region alone accounted for 23.37 per cent
(` 13,677 crore) of Pan-India overall outstanding amount of ` 58,525 crore
from summary assessments. Bengaluru region had the highest number of
cases with 2,37,286 cases, which was 15.60 per cent of 15.26 lakh cases
Pan-India.
Audit observed that though the CBDT has been fixing every year a target of
40 per cent for collection / reduction of the outstanding demands, with regard
to demand pending under summary assessments, the ITD is not taking any
effective follow up action to reduce outstanding demands of this category.
Further, in 164 assessment units, Audit selected exclusive cases of assessees
for whom demands raised under summary assessment alone is outstanding as
on 31 March 2020. Out of the selected cases, Audit test checked (August 2022)
the status of 1,715 cases of demands, and the details of these cases are given
in Table 7.18 below:

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Table 7.18: Status of Demands pending under Summary Assessment (Region-wise), as on August 2022
` in crore)
(`
Sl. Region No of Details of Demands revised Section 143(1) Cases Percentage of
No. Assess- Assessees Test due to scrutiny/ Demand transferred to Summary Cases Not
ment Checked rectification/part remained TRO Transferred to TRO
Units payment, etc. outstanding
Test No. Amount No. Amount No. Amount No Amount No./ % age of
Checked (No. in %) Amount
1 Andhra Pradesh 28 234 495.44 43 400.89 191 94.55 2 0.12 189/ 99.9
& Telangana (99.0)
2 Bihar & 12 66 34.45 19 19.82 47 14.64 47/ 100.0
Jharkhand (100.0)
3 Delhi 6 97 561.30 19 385.70 78 175.59 1 1.52 77/ 99.1
(98.7)
4 Gujarat 5 9 6.19 2 1.07 7 5.12 7/ 100.0
(100.0)
5 International 8 64 83.32 14 30.70 50 52.62 50/ 100.0
Taxation, Delhi (100.0)
6 Bengaluru 3 46 7.92 5 3.76 41 4.16 41/ 100.0
(100.0)
7 MP & 9 181 156.83 24 3.06 157 153.77 157/ 100.0
Chhattisgarh (100.0)
8 Mumbai 13 146 2,040.55 41 818.05 105 1,222.50 3 1,171.54 102/ 4.2
(97.1)
9 North East 4 7 5.16 2 1.45 5 3.71 5/ 100.0
Region (100.0)
10 North West 11 163 1,093.42 44 808.53 119 284.89 119/ 100.0
Region (100.0)
11 Bhubaneswar 9 187 434.01 60 369.32 127 64.69 127/ 100.0
(100.0)
12 Rajasthan 6 20 151.85 13 151.28 7 0.57 7/ 100.0
(100.0)
13 Tamil Nadu 14 142 64.30 17 25.91 125 38.40 1 27.82 124/ 27.6
(99.2)
14 Lucknow, UP 3 30 7.50 9 5.04 21 2.46 21/ 100.0
East (100.0)
15 UP West & 3 24 94.57 3 5.08 21 89.49 21/ 100.0
Uttarakhand (100.0)
16 West Bengal & 22 238 8,247.33 46 8,219.09 192 28.24 192/ 100.0
Sikkim (100.0)
17 Kerala 8 61 29.29 9 3.89 52 25.39 52/ 100.0
(100.0)
Total 164 1,715 13,513.43 370 11,252.64 1,345 2,260.79 07 1,201 1,338/ 46.9
(99.5)
Source: Statistical details furnished by ITD

As per the above table, out of 1,715 cases with outstanding demand of
` 13,513.43 crore raised under summary assessments, 1,345 cases with
outstanding demand of ` 2,260.79 crore remained outstanding, as of
August 2022. In respect of the remaining 370 cases with outstanding demand
of ` 11,252.64 crore, Audit noted that the cases were subsequently either
selected for scrutiny or rectification, which resulted in change in amount of
demands.
In regard to the 1,345 cases referred above, the action taken by AOs to recover
these demands were not available on record. Audit further noticed that since
details of pendency of summary assessment cases with any appellate authorities
were not available on record, the demands were ‘collectible’ in nature.

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Out of 1,345 pending summary cases, only seven high value cases (Outstanding
Demand ` 1,201 crore) were transferred to TROs for further necessary action
to recover the dues through sale of movable/immovable properties of
assessees, and 1,338 cases (Outstanding Demand ` 1,059.79 crore) were not
transferred to TROs.
Audit further noted that in 533 cases (Outstanding demand of ` 235 crore) out
of 1,338 cases pending with AOs and six (Outstanding demand of ` 1,197 crore)
out of seven cases pending with TROs, were more than ten years old. These
demands were outstanding (August 2022). Action taken by the ITD could not
be ascertained by audit.
In this regard, AOs from Gujarat region have stated (February 2024) that there
is no specific SOP for collection of outstanding demand in respect of summary
assessment cases.
Summary assessments are made by CPC-ITR, Bengaluru and the demands
raised are reflected in the respective AO’s portal for recovery. However,
effective action like transfer to TROs had not been taken by the ITD to recover
the demands raised under summary assessment.
On completion of processing of returns under Section 143(1) of IT Act, the
demand intimation notice was issued by the CPC-ITR Bengaluru to assessees.
Afterwards, no periodical reminders were issued to the assessees though the
demand was pending for a long period. In view of that, it was doubtful
whether the assessees were aware of their pending outstanding demand.
Reply is awaited from the Ministry (March 2024).
Recommendation 19:
The CBDT may
(i) prioritise recovery of outstanding demands under summary
assessments as those are not pending with any appellate
authorities, and are collectible.
(ii) issue periodical alerts to remind the assessees of their outstanding
demands and while issuing an intimation of the assessment order,
the pending demands for earlier years, if any, may also be
mentioned.
(iii) monitor compliance by Jurisdictional AO, especially when demands
are raised summarily under section 143(1) of the Act, should be
effective, and such cases may be referred to TRO if required after
JAO has exhausted all the options available in the provisions of the
Income Tax Act.
The Ministry, in its reply, stated (June 2023) that demand, whether arising
out of summary assessment or otherwise, is recovered/collected on the

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basis of demand covered under the 'Net Collectible Demand', as reported in

the monthly CAP-I statement. Targets for collection of the net collectible
demand are set in every year's Central Acton Plan and the same are
regularly monitored by supervisory authorities at all levels. As per the
Income Tax Act, no distinction is made w.r.t. recovery/collection procedure
between demand raised on account of summary assessment or otherwise.
In response to (iii) above, the Ministry stated (May 2023) JAO/TRO are
required to take necessary action to recover the outstanding demand as per
the Income Tax Act, 1961 and instructions/circulars issued by the CBDT.
Their functions are duly supervised by the higher authorities.
Reply furnished by the Ministry (June 2023) is not tenable as the AOs are
adopting different practices for inclusion of demand raised on account of
143(1) and 220(2) in CAP Report. The Ministry may review the effectiveness
of the system and consider reiterating its instructions to strengthen the
monitoring mechanism to ensure the timely recovery of outstanding
demand.

New Delhi (Monika Verma)

Dated: 16 November 2024 Director General (Direct Taxes-I)

Countersigned

New Delhi (Girish Chandra Murmu)

Dated: 18 November 2024 Comptroller and Auditor General of India

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Appendices

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Appendix 1

I. Powers and functions of Assessing Officer113 – (Ref.: Para 1.3)

Sl. Powers and functions of Assessing Officer114

No.
1 The main functions of the Assessing officers include, but are not limited to the
following:
(a) Ensuring processing of returns on AST module.
(b) Allotting PANs wherever required.
(c) Making IRLA operational and ensuring that all demands are entered into this
system.
(d) Ensuring that all the software packages prescribed by the Systems are made
operational.
(e) Seeing that all tax-payers’ grievances are attended in time and redressed in a
fixed time bound manner.
(f) Ensuring timely collection of demands and issue of refunds.
(g) Selection of cases for scrutiny in time and ensuring their timely disposal.
(h) Controlling all computer hardware and software of the range and ensuring its
maintenance, replacement and updating. Providing technical support and guidance
for operation of the computer system.
(i) Taking all necessary steps for widening of the tax base.
(j) Internal Audit functions.
(k) Ensuring that appeal effects are given and central scrutiny reports are submitted
in time.
(l) Statutory functions

113 As per Section 2(7A) of the Income Tax Act, 1961, “Assessing Officer” means the Assistant
Commissioner or Deputy Commissioner or the Income-tax Officer who is vested with the relevant
jurisdiction by virtue of directions or orders issued under sub-section (1) or sub section (2) of section
120 or any other provision of this Act, and the Additional Commissioner or Joint Commissioner who
is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the
powers and functions conferred on, or assigned to, an Assessing Officer under this Act.
114 ITDs Manual of Office Procedure (Consolidated) 2019.

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II. Powers and functions of Tax Recovery Officer (TRO)115

Sl. Description of the powers of TRO116

No.
1 Exercise of Authority by the Tax Recovery Officer
TRO’s authority is derived from Sections 222 to 232 of the Act, Schedule II and III of
the Act and ITCP Rules117 ; they constitute a self-contained code prescribing the
procedure to be followed for collection and recovery of taxes and the various modes
of recovery of arrears of taxes under the Act to be applied against defaulter.
In addition, TRO in accordance with Rule 117C of the Income Tax Rules, 1962 has been
empowered to carry out rectification under Section 154 of the Act.
2 Role of the Tax Recovery Officer
After assessments are made and demands are raised by proper service of demand
notice, especially after appeal is decided up to the level of Income-tax Appellate
Tribunal and demands against an assessee are still pending, recovery of such demands
assumes much significance and since the AO is already burdened with other action
plan targets of passing of assessment orders and budget collection, the role of TRO
becomes very important in recovery of such difficult demands. For this purpose, TROs
have been provided with extensive powers under the Income Tax Act and it is
expected from an Income-tax Officer posted as TRO to. invoke such powers judiciously
and properly to create a deterrent effect against defaulters.
3 Section 222: Tax Recovery Certificate
(1) When an assessee is in default or is deemed to be in default in making a
payment of tax, the Tax Recovery Officer may draw up under his signature a
statement in the prescribed form 44 specifying the amount of arrears due from the
assessee (such statement being hereafter in this Chapter and in the Second Schedule
referred to as “certificate”) and shall proceed to recover from such assessee the
amount specified in the certificate by one or more of the modes mentioned below, in
accordance with the rules laid down in the Second Schedule—] (a) attachment and
sale of the assessee’s movable property ; (b) attachment and sale of the assessee’s
immovable property ; (c) arrest of the assessee and his detention in prison ; (d)
appointing a receiver for the management of the assessee’s movable and immovable
properties.
(2) The Tax Recovery Officer may take action under sub-section (1),
notwithstanding that proceedings for recovery of the arrears by any other mode
have been taken.
4 Section 223: Jurisdiction
(1) The Tax Recovery Officer competent to take action under section 222 shall be—
(a) the Tax Recovery Officer within whose jurisdiction the assessee carries on his
business or profession or within whose jurisdiction the principal place of his business
or profession is situate, or (b) the Tax Recovery Officer within whose jurisdiction the
assessee resides or any movable or immovable property of the assessee is situate, the

115 As per Section 2(44) of the Income Tax Act, 1961, “Tax Recovery Officer” (TRO) means any Income-tax Officer
who may be authorized by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner
by general or special order in writing, to exercise the powers of a TRO and also to exercise or perform such
power and functions which are conferred on or assigned to an Assessing Officer (hereinafter referred as AO)
under the Act and which may be prescribed.
116 Various Rules, Sections and Paragraphs of the Income Tax Rules, 1962; Income Tax Act, 1961 and Tax Recovery
Officers’ Manual 2014 and the ITDs Manual of Office Procedure (Consolidated) 2019.
117 Income Tax (Certificate Proceedings) Rules, 1962

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No.
jurisdiction for this purpose being the jurisdiction assigned to the Tax Recovery Officer
under the orders or directions issued by the Board, or by the Chief Commissioner or
Commissioner who is authorised in this behalf by the Board in pursuance of
section 120.
(2) Where an assessee has property within the jurisdiction of more than one Tax
Recovery Officer and the Tax Recovery Officer by whom the certificate is drawn up—
(a) is not able to recover the entire amount by sale of the property, movable or
immovable, within his jurisdiction, or (b) is of the opinion that, for the purpose of
expediting or securing the recovery of the whole or any part of the amount under this
Chapter, it is necessary so to do, he may send the certificate or, where only a part of
the amount is to be recovered, a copy of the certificate certified in the prescribed
manner and specifying the amount to be recovered to a Tax Recovery Officer within
whose jurisdiction the assessee resides or has property and, thereupon, that Tax
Recovery Officer shall also proceed to recover the amount under this Chapter as if the
certificate or copy thereof had been drawn up by him.
5 Section 224: General Powers of TRO
It shall not be open to the assessee to dispute the correctness of any certificate drawn
up by the Tax Recovery Officer on any ground whatsoever, but it shall be lawful for
the Tax Recovery Officer to cancel the certificate if, for any reason, he thinks it
necessary so to do, or to correct any clerical or arithmetical mistake therein.
6 Section 225: Stay of proceedings in pursuance of certificate and amendment or
cancellation thereof
(1). It shall be lawful for the Tax Recovery Officer to grant time for the payment of any
tax and when he does so, he shall stay the proceedings for the recovery of such tax
until the expiry of the time so granted.
(2) Where the order giving rise to a demand of tax for which a certificate has been
drawn up is modified in appeal or other proceeding under this Act, and, as a
consequence thereof, the demand is reduced but the order is the subject-matter of
further proceeding under this Act, the Tax Recovery Officer shall stay the recovery of
such part of the amount specified in the certificate as pertains to the said reduction
for the period for which the appeal or other proceeding remains pending.
(3) Where a certificate has been drawn up and subsequently the amount of the
outstanding demand is reduced as a result of an appeal or other proceeding under
this Act, the Tax Recovery Officer shall, when the order which was the subject-matter
of such appeal or other proceeding has become final and conclusive, amend the
certificate, or cancel it, as the case may be.
7 Section 226: Modes of Recovery
(1) Where no certificate has been drawn up under section 222, the Assessing
Officer may recover the tax by any one or more of the modes provided in this
section.
(1A) Where a certificate has been drawn up under section 222, the Tax Recovery
may, without prejudice to the modes of recovery specified in that section,
recover the tax by any one or more of the modes provided in this section.
(2) If any assessee is in receipt of any income chargeable under the head
“Salaries”, the Assessing Officer or Tax Recovery Officer may require any
person paying the same to deduct from any payment subsequent to the date
of such requisition any arrears of tax due from such assessee, and such person
shall comply with any such requisition and shall pay the sum so deducted to
the credit of the Central Government or as the Board directs : Provided that

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No.
any part of the salary exempt from attachment in execution of a decree of a
civil court under Section 60 of the Code of Civil Procedure, 1908 (5 of 1908)55,
shall be exempt from any requisition made under this sub-section.
(3) (i) The Assessing Officer or Tax Recovery Officer may, at any time or from time
to time, by notice in writing require any person from whom money is due or may
become due to the assessee or any person who holds or may subsequently hold
money for or on account of the assessee to pay to the Assessing Officer or Tax
Recovery Officer either forthwith upon the money becoming due or being held
or at or within the time specified in the notice (not being before the money
becomes due or is held) so much of the money as is sufficient to pay the amount
due by the assessee in respect of arrears or the whole of the money when it is
equal to or less than that amount. (ii) A notice under this sub-section may be
issued to any person who holds or may subsequently hold any money for or on
account of the assessee jointly with any other person and for the purposes of
this sub-section, the shares of the joint holders in such account shall be
presumed, until the contrary is proved, to be equal. (iii) A copy of the notice shall
be forwarded to the assessee at his last address known to the Assessing Officer
or Tax Recovery Officer, and in the case of a joint account to all the joint holders
at their last addresses known to the Assessing Officer or Tax Recovery Officer.
(iv) Save as otherwise provided in this sub-section, every person to whom a
notice is issued under this sub-section shall be bound to comply with such notice,
and, in particular, where any such notice is issued to a post office, banking
company or an insurer, it shall not be necessary for any pass book, deposit
receipt, policy or any other document to be produced for the purpose of any
entry, endorsement or the like being made before payment is made,
notwithstanding any rule, practice or requirement to the contrary. (v) Any claim
respecting any property in relation to which a notice under this sub section has
been issued arising after the date of the notice shall be void as against any
demand contained in the notice. (vi) Where a person to whom a notice under
this sub-section is sent objects to it by a statement on oath that the sum
demanded or any part thereof is not due to the assessee or that he does not hold
any money for or on account of the assessee, then nothing contained in this sub-
section shall be deemed to require such person to pay any such sum or part
thereof, as the case may be, but if it is discovered that such statement was false
in any material particular, such person shall be personally liable to the Assessing
Officer Tax Recovery Officer to the extent of his own liability to the assessee on
the date of the notice, or to the extent of the assessee’s liability for any sum due
under this Act, whichever is less. (vii) The Assessing Officer or Tax Recovery
Officer may, at any time or from time to time, amend or revoke any notice issued
under this sub-section or extend the time for making any payment in pursuance
of such notice. (viii) The Assessing Officer or Tax Recovery Officer shall grant a
receipt for any amount paid in compliance with a notice issued under this sub-
section, and the person so paying shall be fully discharged from his liability to the
assessee to the extent of the amount so paid. (ix) Any person discharging any
liability to the assessee after receipt of a notice under this sub-section shall be
personally liable to the Assessing Officer or Tax Recovery Officer to the extent of
his own liability to the assessee so discharged or to the extent of the assessee’s
liability for any sum due under this Act, whichever is less. (x) If the person to
whom a notice under this sub-section is sent fails to make payment in pursuance

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No.
thereof to the Assessing Officer or Tax Recovery Officer, he shall be deemed to
be an assessee in default in respect of the amount specified in the notice and
further proceedings may be taken against him for the realisation of the amount
as if it were an arrear of tax due from him, in the manner provided in Sections
222 to 225 and the notice shall have the same effect as an attachment of a debt
by the Tax Recovery Officer in exercise of his powers under Section 222.
(4) The Assessing Officer or Tax Recovery Officer may apply to the court in whose
custody there is money belonging to the assessee for payment to him of the
entire amount of such money, or, if it is more than the tax due, an amount
sufficient to discharge the tax.
(5) The Assessing Officer or Tax Recovery Officer may, if so authorised by the Chief
Commissioner or Commissioner by general or special order, recover any arrears
of tax due from an assessee by distraint and sale of his movable property in the
manner laid down in the Third Schedule.
8 Broad-based functions of Tax Recovery Officer
The jurisdiction of the Tax Recovery Officer (TRO) commences when an assessee is in
default or is deemed to be in default in making payment of tax. The Tax Recovery
Officer may draw up under his signature a statement in the prescribed form specifying
the amount of arrears due from the assessee under Section 222(1) of the Income-tax
Act, 1961. The procedure for recovery of tax is stipulated in the Second Schedule to
the Income-tax Act, 1961.
Rule 4 of the Second Schedule lays down the following modes of recovery of arrears
of tax:
(a) Attachment and sale of the assessee’s movable property.
(b) Attachment and sale of his immovable property.
(c) Arrest of the assessee and his detention in prison.
(d) Appointing a receiver for the management of his movable and immovable
properties.
The Tax Recovery Officer has to exercise his powers in accordance with Income-tax
(Certificate Proceedings) Rules (ITCP Rules), 1962 and the Second Schedule to the
Income-tax Act. The Tax Recovery Officer is primarily responsible for effecting
recovery of the arrears of tax. If at any time, after drawing the tax certificate, the
higher authority treats the assessee as not being in default for a particular period for
a certain demand, the TRO is bound to stay his recovery proceedings for that demand
for the particular period. He should liaise with the Assessing Officer so that details of
movable and immovable property and also the correct position of demand can be
ascertained.

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Appendix 2
(Ref: Para 1.5)
Flow of information regarding demand/refund etc. through the systems
existing in the ITD

E-filing portal

• Assessee files an ITR

CPC-ITR
• Processing of IT returns u/s 143(1)
• Rectification
• Issue of Demand/Refund

CPC-FAS

ITBA AST (Old System)

Similar to ITBA, but being used
for rectification of old
Functions: Modules assessments

Scrutiny Assessment Assessment

Rectification Modules
Appeal Effect order Recovery
Issue of Rectification ITD
Demand/Refund
Demand Analysis OLTAS
ITR processing and
Report assessment
360 degree Analysis
Recovery Module

• Recovery of tax BCP

dues
Collection and Refund
• Demand Analysis
• Dossier Report
• 360 degree
profile
• Generate TRC

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Details of the IT Systems mentioned in the flow chart above have been
described below:
CPC-ITR Portal – It is involved in processing of returns under Section 143(1),
making rectifications under Section 154, issue of demand notice/refund order.
It interacts with the back end CPC-FAS system for calculations and other
process and also interacts with the e-filing portal.
ITBA – Income Tax Business Application is the front end system used by the
Assessing officers for assessments, is used to prepare demand calculations
arising out of assessment orders, rectifications, reassessment orders, appeal
revisions by the Assessing officers and interacts with CPC-FAS.
CPC-FAS – It works as the back end system and interacts with all the front end
systems i.e. CPC-ITR Portal, ITBA Portal, OLTAS portal, AST portal legacy for
processing of data, calculation of demand, refund and sends the data required
to the front end system118.
AST- ‘Assessment Information System’ is the legacy system prior to ITBA.
Revision/ rectification of assessments completed in the erstwhile AST are at
present manually uploaded by the Assessing officers in the ITBA.
OLTAS- Online Tax Accounting System is the system application through which
the challan details for payment of tax, penalty, interest, refunds etc. are dealt
with.
i-taxnet- is the reporting system through which the CAP-I and CAP-II reports
are internally generated and submitted to the appropriated authorities.
BCP – Business Continuity Plan is a data centre of ITD to ensure the resumption
of information system operations for critical business functions within
specified period in terms of information based on business requirements,
when primary processing facilities are not available.

118 It enables users to access and request the features and services of the underlying information
system.

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Appendix 3 A
(Ref: Para 7.3.8)
Procedures for writing off uncollectible demands
Sl. Procedures
No.
1. Regular Procedure for Write off
Only tax arrears that are over three years old and have become “clearly
irrecoverable” can be considered for write off. Tax arrears may
become irrecoverable on account of (a) The assessee has died; (b) The
assesse has become insolvent; (c) He is not traceable; (d) He has left
India; (e) The company has gone into liquidation; (f) The firm is
dissolved and its business has discontinued; (g) The assessee has no
attachable assets; and (h) When all the modes of recovery in
accordance with the rules laid down in the Second Schedule to the Act
including the recourse to civil imprisonment of the defaulter are
exhausted and the arrears still remain.
Before recommending a case for write-off, the concerned authority
should satisfy itself as to whether adequate and timely steps were
taken for recovery in the case. If, after scrutinising the records and
conducting enquiries, the AO is satisfied that it is a fit case for write-
off, a self-explanatory note indicating the steps taken for recovery and
justifying the need for write-off should be prepared. A certificate of
irrecoverability should also be taken from the TRO. If the arrears have
to be written off by authorities other than the ACIT or ITO, Form B
(Annexure-I) should be filled in and submitted to the CIT/ Additional
CIT with a self-explanatory brief.
2. Ad-hoc procedure for Write off
Para 7 of Chapter-27 of the ITD Manual of Office Procedure
(Consolidated) 2019 lays down the ad-hoc procedure to write-off
outstanding demands. Under this procedure, amounts up to ` 10,000
may be written off by ITD, provided they have been outstanding
against the assessee for non-availability of assessment records and
detailed address of the assessee for at least three years immediately
preceding the financial year during which they are proposed to be
written-off.
3. Summary Procedure for Write off
The concerns of the Public Accounts Committee (PAC) over the process
of recovery and write-off of tax demand arrears were highlighted in
Chapter 6 (Write-off arrears of tax demand) of C & AG’s Report No. 3
CA of 2016. Audit had recommended to the CBDT to prescribe a
definite timeline by the ITD, to be observed by TROs and other

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Sl. Procedures
No.
authorities to avoid indefinite delay in deciding the possibility of
recovery of tax arrears and speedy disposal of write off cases.
Para 8 of Chapter-27 of the ITD Manual of Office Procedure
(Consolidated) 2019 provides for procedure for Summary Write-off
which says that small demands not exceeding ` 1,000 in each case can
summarily be written-off by the AO without any further enquiry if the
amount is outstanding for more than five years and the amount does
not relate to any live case.

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Appendix 3 B
(Ref.: Para 2.2.5 & 7.3.8)
Monetary powers for Write-off
Name of the Constitution To be Notified Order of Write- Monetary Ceilings
Committee by off by for
Write-off
Local 3 officers of CCIT ITO/TRO Demand up to
Committee the level of ` 5,000/-
Addl.CIT
DCIT/ACIT Demand over
` 5,000/- and
upto
` 25,000/-
Addl.CIT/JCIT Demand over
` 25,000/-and
upto
` 1 Lac
Sub-Zonal or 3 officers of Cadre CIT Subject to Demand over
Regional the Controlling report to the next ` 1 Lakh and up to
Committee level of CIT CCIT (under higher authority ` 10 Lacs
intimation to
CBDT)
Zonal 3 officers of CBDT CCIT Subject to Demand over
Committee the report to ` 10 Lacs
level of CCIT the next higher and upto
authority ` 25 Lacs
CCIT with the Demand over
approval of ` 25 Lacs
Full CBDT and upto
` 50 Lacs
CCIT with the Demand over
approval ` 50 Lacs
of Full CBDT and
the
Finance Minister
Source: ITD’s Manual of Office Procedure 2019 (consolidated)

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Appendix 4
Audit criteria for selection of units and cases (Ref. Para 3.4)
Level-1: Selection of Units Criteria
For Category A States (units located at Mumbai, Delhi, Chennai, Kolkata, Bengaluru,
Hyderabad and Ahmedabad)
Circles Top 16 Circles and 04 Circles from the bottom on
the basis of total open demand as per AO wise
aggregated data
Wards Top 08 Wards and 02 Wards from the bottom on
the basis of total open demand as per AO wise
aggregated data
For Category B States (units located at Kochi, Bhubaneswar, Guwahati, Allahabad, Patna,
Ranchi, Gwalior, Raipur and Jaipur)
Circles Actual number of units maximum of 10 units
(Percentage of top and bottom units of the total
selected units, as per open demand, 80% and 20%
respectively)
Wards 05 Wards (Percentage of top and bottom units of
the total selected units, as per open demand 80%
and 20% respectively)

Level-2 (i): Selection of cases for Percentage

examination-Arrear demand as on
31 March 2020 but pending recovery till
the date of audit
Arrear demand exceeding ` 10 crore 100 %
Arrear demand between ` 1 crore to 10 % restricted to Maximum 50 cases and
` 10 crore minimum 20 cases
Arrear demand below ` 1 crore 5% restricted to Maximum 25 cases and minimum
10 cases
Level-2 (ii): Selection of cases for Percentage
examination-Arrear demand closed or
cancelled since 01-Apr-2020 due to
collection or subsequent order
Amount of original demand exceeding 100 %
` 1 crore
Amount of original demand between 10 % restricted to Maximum 20 cases and
` 10 lakh to ` 1 crore minimum 10 cases
Arrear demand below ` 10 lakh 5% restricted to Maximum 10 cases and minimum
05 cases
Note: While applying percentage (5% or 10%) specified above for selection of cases (unique
Assessee and AY combination) in different strata, simple random sample was employed on entire
population of records in a particular stratum.

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Appendix 5
(Ref.: Para 3.4)
Region-wise total of units selected for sampling

Sl. Region Number of No. of TRO Units

No. Assessing Units selected
selected
1 Andhra Pradesh & Telangana 29 5
2 Bengaluru 21 5
3 Bhubaneswar 10 1
4 Bihar & Jharkhand 15 4
5 Gujarat 23 4
6 International Taxation, Delhi 21 9
7 Kerala 9 3
8 Lucknow, UP East 4 1
9 MP & Chhattisgarh 9 2
10 Mumbai 27 11
11 Delhi 23 6
12 North East Region 5 1
13 North West Region 8 2
14 Rajasthan 14 4
15 Tamil Nadu 28 7
16 UP West & Uttarakhand 3 1
17 West Bengal & Sikkim 30 8
TOTAL 279 74

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Appendix 6
(Ref: Para 3.5)

Non-production of records in high value cases

Sl. Assessee Name Assessment List of Records not produced

No. Years
1 M/s M1 Ltd. 1994-95 to Assessment records were not
2015-16 produced in respect of all 8 cases
citing physical records were not
transferred post restructuring.
2 M/s V1 Ltd. 2010-11 & Assessment files/records were
2011-12 not produced citing many
records were destroyed in a fire
accident.
3 M/s H1 Ltd. 2011-12 & Assessment files/records were
2012-13 not produced citing many
records were destroyed in a fire
accident.

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Appendix 7
(Ref: Para 3.5)
Details of non-production of records/details by the ITD as on March 2023
Sl. Region Assessment Records Statistical Audit Memos/Observations
No. Information vide
Annexures
Requisi Received Not Req Rec Not Issued Reply Reply not
tion produ uisit eive pro receiv received
ced ion d duc ed
ed
1 AP & Telangana 1,573 960 613 34 14 20 79 35 44
2 Bengaluru 1,515 1,038 477 49 0 49 300 1 299
3 Bhubaneswar 646 433 213 17 2 15 19 3 16
4 Bihar & 487 437 50 54 19 35 143 31 112
Jharkhand
5 Delhi 3,008 740 2,268 63 20 43 36 0 36
6 Gujarat 1,640 1,404 236 35 16 19 225 97 128
7 International 698 377 321 23 17 6 64 17 47
Taxation, Delhi
8 Kerala 362 155 207 44 24 20 63 12 51
9 Lucknow, UP 103 99 4 14 0 14 19 4 15
East
10 MP & 575 501 74 38 9 29 62 6 56
Chhattisgarh
11 Mumbai 2,218 1,410 808 46 20 26 214 5 209
12 North East 237 220 17 16 3 13 63 6 57
Region
13 North West 513 510 3 24 11 13 269 2 267
Region
14 Rajasthan 662 575 87 43 29 14 201 130 71
15 Tamil Nadu 1,347 671 676 58 11 47 204 32 172

16 UP West & 88 78 10 20 1 19 20 6 14
Uttarakhand
17 West Bengal & 3,198 1,288 1,910 75 22 53 175 23 152
Sikkim
Total 18,870 10,896 7,974 653 218 435 2,156 410 1,746

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Appendix 8
(Reference Para 5.3.3)
Mismatch in figures reported to the Custodian, Outstanding Demand as per
ITBA and Demands as per the e-filing systems
` in crore)
(`
AY Demand as per Details of the demand outstanding Demand as per ITBA
the e-filing forwarded to the Custodian (recovery analysis
portal as on (including 220(2) interest) statement) as on
31 March 2020 (November 2021) 31 March 2020
1988-89 3.89 3.89 3.89
1989-90 9.14 31.69 9.14
1990-91 127.23 0 127.23
BLOCK 0 190.62 Not mentioned in
records
1991-92 897.75 3,249.53 897.75
1992-93 6,826.13 0 7,442.51
1992-93 6,357.12 0 6,357.12
1992-93 6,100.36 0 6,100.36
1993-94 4,369.17 0 4,369.17
1993-94 3,307.39 0 3,307.39
1994-95 20.32 75.82 20.32
1995-96 58.37 111.49 58.37
1996-97 10.56 35.03 10.56
1997-98 7.28 13.9 7.28
1998-99 2.61 7.91 2.61
1999-00 49.46 149.86 49.46
2000-01 15.88 46.2 15.88
2001-02 39.42 114.72 39.42
2002-03 97.74 9,469.23 97.74
2003-04 412.41 35.61 412.41
2004-05 0 0.65 0
2005-06 0 20.27 0
2006-07 11.59 0 11.59
2006-07 11.24 12.78 11.24
2007-08 10.46 22.89 10.46
2008-09 10.9 10.89 10.9
2009-10 33.89 39 33.89
2010-11 0 21.03 0
2011-12 0 16.98 0
2012-13 0 4.68 0
2013-14 0 4.61 0
2018-19 1.07 0 0
Total 28,791.38 13,868.76 29,407.76
Source: e-filing and ITBA portal of ITD

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Appendix 9
(Para. Ref. 6.3.1)
Issued and Clearance of TRC

Region Name of TRO Year Number of Tax Recovery Clearance Tax Recovery Tax Recovery Demands * Number of Percentage Whether
Charge Tax Recovery certificates made certificates certificates written Tax Recovery Clearance 20 per cent
certificates issued during during received from transferred off, if any certificates Target
pending the year the year other to other pending Achieved
clearance/ Juridictinal Juridictinal clearance
collection TRO's TRO's (Closing
(Opening Balance)
Balance)
Delhi TRO, Pr. CIT -7 2017-18 24 1 0 3 0 0 28 0
2018-19 28 1 4 1 0 0 26 14.29
2019-20 50 28 31 2 0 0 49 62 Achieved
TRO, Pr. CIT -1 2017-18 250 2 28 2 0 0 226 11.2
2018-19 224 0 10 0 0 0 214 4.46
2019-20 214 4 24 4 0 0 198 11.21
TRO, Pr. CIT -20 2017-18 35 12 6 0 0 0 41 17.14
2018-19 41 5 0 1 0 0 47 0
2019-20 46 36 5 57 5 0 129 10.87
TRO, CIT 2017-18 65 69 27 0 14 0 93 41.54
(Central)-01 2018-19 93 16 27 1 1 0 82 29.03 Achieved
2019-20 81 40 13 8 8 0 108 16.05
MP & TRO-Gwalior 2017-18 210 8 0 0 0 0 218 0
Chhattisgarh 2018-19 218 0 140 2 0 0 80 64.22 Achieved
2019-20 80 0 9 0 0 0 71 11.25
MP & TRO Raipur 2017-18 37 14 18 0 4 0 29 48.65 Achieved
Chhattisgarh 2018-19 29 38 19 0 0 0 48 65.52 Achieved
2019-20 48 23 9 0 0 0 62 18.75
Rajasthan TRO, Exemption, 2017-18 1 0 0 0 0 0 1 0
Jaipur 2018-19 1 2 1 0 0 0 2 100 Achieved
2019-20 2 1 0 0 0 0 3 0
Bhubaneswar TRO Bhubaneshwar 2017-18 275 0 0 0 0 0 275 0
2018-19 275 0 11 0 0 0 264 4
2019-20 264 18 0 1 0 0 283 0
North East TRO Guwahati 2017-18 971 7 616 0 0 0 362 63.44 Achieved
Region 2018-19 362 45 154 42 0 0 295 42.54 Achieved
2019-20 253 172 35 165 1 0 554 13.83

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Region Name of TRO Year Number of Tax Recovery Clearance Tax Recovery Tax Recovery Demands * Number of Percentage Whether
Charge Tax Recovery certificates made certificates certificates written Tax Recovery Clearance 20 per cent
certificates issued during during received from transferred off, if any certificates Target
pending the year the year other to other pending Achieved
clearance/ Juridictinal Juridictinal clearance
collection TRO's TRO's (Closing
(Opening Balance)
Balance)
Kerala TRO, Kochi 2017-18 381 108 6 0 0 0 483 1.57
2018-19 483 168 0 0 0 0 651 0
2019-20 651 28 9 6 14 0 662 1.38
International TRO (Int. Taxn.), 2017-18 0 1 0 6 0 0 7 0
Taxation, Bengaluru 2018-19 7 2 0 0 6 0 3 0
Delhi 2019-20 3 0 0 0 0 0 3 0
Bengaluru TRO-1 , PCIT-1 2017-18 287 62 26 8 35 11 285 9.06
2018-19 252 82 31 12 32 22 261 12.3
2019-20 362 112 59 16 29 19 383 16.3
TRO-2 , PCIT-2 2017-18 94 11 0 1 8 0 98 0
2018-19 84 1 2 2 0 0 85 2.38
2019-20 573 0 0 0 0 0 573 0
TRO-3 , PCIT-3 2017-18 123 0 0 10 10 0 123 0
2018-19 123 7 11 14 2 0 131 8.94
2019-20 125 11 10 7 10 0 123 8
TRO Exemptions 2017-18 6 0 0 0 0 0 6 0
2018-19 6 6 0 1 0 0 13 0
2019-20 13 0 0 1 0 0 14 0
TRO TDS, CIT-TDS 2017-18 229 4 46 0 0 0 187 20.09 Achieved
2018-19 186 1 26 10 5 0 166 13.98
2019-20 76 6 0 0 0 0 82 0
Lucknow, UP TRO, Allahabad 2017-18 477 161 0 0 0 0 638 0
East 2018-19 638 0 15 0 0 0 623 2.35
2019-20 623 30 0 0 0 0 653 0
Bihar & TRO-1, O/o PCIT-1 2017-18 324 0 16 0 0 147 161 4.94
Jharkhand Patna 2018-19 161 5 6 0 0 0 160 3.73
2019-20 160 6 8 0 0 0 158 5
TRO Central, O/o 2017-18 489 49 40 0 0 0 498 8.18
PCIT Central Patna 2018-19 498 131 11 2 11 0 609 2.21
2019-20 533 2 47 0 0 0 488 8.82

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Report No. 14 of 2024 (Direct Taxes)

Region Name of TRO Year Number of Tax Recovery Clearance Tax Recovery Tax Recovery Demands * Number of Percentage Whether
Charge Tax Recovery certificates made certificates certificates written Tax Recovery Clearance 20 per cent
certificates issued during during received from transferred off, if any certificates Target
pending the year the year other to other pending Achieved
clearance/ Juridictinal Juridictinal clearance
collection TRO's TRO's (Closing
(Opening Balance)
Balance)
UP West & CCIT 2017-18 995 25 6 25 0 0 1,039 0.6
Uttarakhand 2018-19 1,014 21 5 21 0 0 1,051 0.49
2019-20 1,030 3 0 3 0 0 1,036 0
Mumbai CIT central 4, 2017-18 586 224 190 10 95 0 535 32.42 Achieved
Mumbai 2018-19 535 109 89 3 1 0 557 16.64
2019-20 557 118 91 10 0 0 594 16.34
International TRO-International 2017-18 13 0 3 0 0 0 10 23.08 Achieved
Taxation, Taxation, 2018-19 10 0 1 0 0 0 9 10
Delhi Ahmedabad 2019-20 9 4 2 0 0 0 11 22.22 Achieved
Gujarat TRO-3, Ahmedabad 2017-18 399 50 83 0 0 0 366 20.8 Achieved
2018-19 366 25 17 0 0 0 374 4.64
2019-20 374 6 62 0 0 0 318 16.58
TRO- Central, 2017-18 102 55 11 5 32 0 119 10.78
Ahmedabad 2018-19 119 25 10 0 23 0 111 8.4
2019-20 111 13 6 0 9 0 109 5.41
TRO(Exemption), 2017-18 0 0 0 0 0 0 0 0
Ahmedabad 2018-19 0 0 0 1 0 0 1 0
2019-20 1 0 0 0 0 0 1 0
TRO-1, Ahmedabad 2017-18 2,758 67 1063 1 1 1,056 706 38.54 Achieved
2018-19 1,762 75 390 2 5 380 1,064 22.13 Achieved
2019-20 1,447 69 305 2 1 300 912 21.08 Achieved
Tamil Nadu TRO Exemption 2017-18 14 7 0 0 0 0 21 0
2018-19 21 4 1 0 1 0 23 4.76
2019-20 23 0 1 0 1 0 21 4.35
TRO Central 2 2017-18 206 184 8 0 0 0 382 3.88
2018-19 382 90 39 0 0 0 433 10.21
2019-20 433 65 33 0 0 0 465 7.62
TRO 8 2017-18 0 0 0 0 0 0 0 0
2018-19 1,967 10 437 0 0 0 1,540 22.22 Achieved
2019-20 1,540 110 1,040 0 0 0 610 67.53 Achieved

180
 Report No. 14 of 2024 (Direct Taxes)

Region Name of TRO Year Number of Tax Recovery Clearance Tax Recovery Tax Recovery Demands * Number of Percentage Whether
Charge Tax Recovery certificates made certificates certificates written Tax Recovery Clearance 20 per cent
certificates issued during during received from transferred off, if any certificates Target
pending the year the year other to other pending Achieved
clearance/ Juridictinal Juridictinal clearance
collection TRO's TRO's (Closing
(Opening Balance)
Balance)
TRO 3 2017-18 320 36 1 0 0 0 355 0.31
2018-19 355 15 0 0 0 0 370 0
2019-20 370 0 20 714 0 0 1064 5.41
TOTAL 30 TROs 2017-18 9,671 1,157 2,194 71 199 1214 7,292
2018-19 10,240 884 1,457 115 87 402 9,293
2019-20 10,052 905 1,819 996 78 319 9,737
* Closing Balance has been calculated as per the formula

181
 Report No. 14 of 2024 (Direct Taxes)

Appendix 10
(Ref. Para 6.3.2)
Survey conducted by TROs
Sl. Region TROs Year Target Survey conducted Shortfall Remarks
No. fixed during the FY
No. of Amount of
cases recovery
` in Lakhs)
(`
2017-18 10 6 620.00 4
1 Gujarat TRO-3 2018-19 10 0 0.00 10
2019-20 10 0 0.00 10
2017-18 10 3 70.00 7
2 Gujarat TRO Central 2018-19 10 7 350.00 3
2019-20 10 3 0.75 7
Target
2017-18 10 11 154.56 -1
Achieved
3 Gujarat TRO-1
2018-19 10 8 115.60 2
2019-20 10 3 46.98 7
2017-18 10 1 0.00 9
Target
4 Rajasthan TRO Central 2018-19 10 18 0.00 -8
Achieved
2019-20 10 2 4.60 8
North 2017-18 10 0 0.00 10
TRO
5 Eastern 2018-19 10 0 0.00 10
Guwahati
Region 2019-20 10 1 4.15 9
Andhra 2017-18 10 0 0.00 10
6 Pradesh & TRO-PCIT-2 2018-19 10 2 50.00 8
Telangana 2019-20 10 5 16.00 5
2017-18 10 0 0.00 10
AP & TRO-
7 2018-19 10 3 1972.00 7
Telangana Central,
2019-20 10 6 15.00 4
2017-18 10 0 0.00 10
Lucknow, TRO,
8 2018-19 10 0 0.00 10
UP East Allahabad
2019-20 10 1 31.86 9
2017-18 10 1 0.00 9
Bihar &
9 TRO Ranchi 2018-19 10 0 0.00 10
Jharkhand
2019-20 10 0 0.00 10
2017-18 10 6 6.50 4
Bihar & TRO Central
10 2018-19 10 2 2.00 8
Jharkhand Patna
2019-20 10 3 10.10 7
2017-18 10 8 102.13 2
TRO Central Target
11 Tamil Nadu 2018-19 10 15 1676.58 -5
2 Achieved
2019-20 10 3 7.28 7
2017-18 10 0 0.00 10
12 Tamil Nadu TRO 3 2018-19 10 5 19.02 5
2019-20 10 9 278.10 1
Target
2017-18 10 10 75.99 0
Achieved
13 Tamil Nadu TRO 8
2018-19 10 3 20.86 7
2019-20 10 1 1.50 9
2017-18 10 1 0.00 9
TRO
14 Tamil Nadu 2018-19 10 0 0.00 10
Exemptions
2019-20 10 0 0.00 10

182
 Report No. 14 of 2024 (Direct Taxes)

Sl. Region TROs Year Target Survey conducted Shortfall Remarks

No. fixed during the FY
No. of Amount of
cases recovery
` in Lakhs)
(`
2017-18 10 1 133.00 9
TRO Central
15 Mumbai 2018-19 10 0 0.00 10
4
2019-20 10 0 0.00 10
2017-18 10 3 214.00 7
16 Kerala TRO Central 2018-19 10 4 61.00 6
2019-20 10 2 13.00 8
2017-18 10 0 0.00 10
17 Kerala TRO, Kochi 2018-19 10 1 1.00 9
2019-20 10 4 74.00 6
2017-18 10 0 0.00 10
MP &
18 TRO, Raipur 2018-19 10 0 0.00 10
Chhattisgarh
2019-20 10 2 0.00 8
2017-18 10 0 0.00 10
West Bengal TRO-2
19 2018-19 10 0 0.00 10
& Sikkim Kolkata
2019-20 10 3 20.00 7
2017-18 10 0 0.00 10
TRO- Target
West Bengal 2018-19 10 12 19.89 -2
20 Central 1 Achieved
& Sikkim
Kolkata Target
2019-20 10 10 14.00 0
Achieved
TRO- 2017-18 10 0 0.00 10
West Bengal
21 Central 2 2018-19 10 0 0.00 10
& Sikkim
Kolkata 2019-20 10 9 30.00 1
2017-18 10 1 2.25 9
West Bengal TRO-5
22 2018-19 10 0 0.00 10
& Sikkim Kolkata
2019-20 10 1 1.50 9
Total 660 200 6235.68 6 TROs
achieved
target of
at least 10
Surveys in
a year
*Target of 22 TROs for 3 years is 22x10x3 = 660

183
Report No. 14 of 2024 (Direct Taxes)

Appendix 11
(Ref.: Para 6.3.6)
Maintenance/Non maintenance of Registers by TROs
Sl. Region Name of the TRO Status of Registers Maintenance
No & Updation
1 Andhra Pradesh & TRO-Central, Maintained & Updated
Telangana Hyderabad
2 Andhra Pradesh & TRO-PCIT-4- Hyderabad Maintained & Updated
Telangana
3 Andhra Pradesh & TRO-PCIT-2 Hyderabad Maintained & Updated
Telangana
4 Bengaluru TRO Exemption, Blore Maintained but updation details
not available
5 Bengaluru TRO-2 Bangalore Maintained but updation details
not available
6 Bengaluru TRO-3 Banglauru One or two Registers not
maintained out of 11 Registers
7 Bengaluru TRO-TDS, Bangalore One or two Registers not
maintained out of 11 Registers
8 Bhubaneswar TRO Bhubaneswar Maintained & Updated
9 Bihar & Jharkhand TRO, Ranchi Only a few Registers were
maintained by TROs
10 Delhi TRO, PCIT-7 Delhi Maintained and few are updated
& one Register Details Not
Available
11 Delhi TRO (Central)-1 One or two Registers not
maintained out of 11 Registers
12 Delhi TRO, PCIT -20 Maintained and few are updated
& one Register Details Not
Available
13 Gujarat TRO Central, Maintained & Updated
Ahmedabad
14 Gujarat TRO- 1, Ahmedabad Only a few Registers were
maintained by TROs
15 Gujarat TRO- Exemption, One or two Registers not
Ahmedabad) maintained out of 11 Registers
16 International TRO- IT & TP, Maintained & Updated
Taxation, Delhi Ahmedabad
17 International TRO, Pr. CIT
Taxation, Delhi (International Maintained but updation details
Taxation)-3 not available
18 International TRO-International Maintained & Updated
Taxation, Delhi Taxation Hyderabad
19 MP & Chhattisgarh TRO, Raipur One or two Registers not
maintained out of 11 Registers
20 MP & Chhattisgarh TRO, Gwalior Only a few Registers were
maintained by TROs

184
 Report No. 14 of 2024 (Direct Taxes)

Sl. Region Name of the TRO Status of Registers Maintenance

No & Updation
21 North East Region TRO Guwahati Maintained and few are updated
& one Register Details Not
Available
22 Rajasthan TRO, PCIT-1, Jaipur. Only a few Registers were
maintained by TROs
23 Rajasthan TRO, PCIT-II, Jaipur. Maintained & Updated
24 Rajasthan TRO, Exemption, Jaipur. Maintained but updation details
not available
25 Rajasthan TRO, Central, Jaipur. Only a few Registers were
maintained by TROs
26 West Bengal & TRO - Central 1, Kolkata One or two Registers not
Sikkim maintained out of 11 Registers
27 West Bengal & TRO - Central 2, Kolkata
Sikkim Maintained & Updated
28 West Bengal & TRO -18, Kolkata
Sikkim Maintained & Updated
29 West Bengal & TRO Exemption,
Sikkim Kolkata Maintained & Updated
30 West Bengal & TRO-5, Kolkata
Sikkim Maintained & Updated
31 West Bengal & TRO-2, Kolkata One or two Registers not
Sikkim maintained out of 11 Registers

185
 Report No. 14 of 2024 (Direct Taxes)

Appendix -12A
(Ref.: Paragraph 7.1)
STRUCTURE OF CAP-I
CAP-I Report for Pr. CCIT………..March 20...
` in crores)
(`
Sl. DescripVon Code Arrear Current Total
No. demand Demand Demand
I.T. C.T. I.T. C.T. I.T. C.T.
1 Demand as on 1st April of the year AD
2 Demand raised from 1st April CD
3 Reduc_on by way of prepaid taxes (-) CA
4 Total Demand at the end of the month a`er ADV
adjustments on account of transfers/verifica_on
etc.
5 Demand not fallen due (-) NFD
6 Cash Collec_on (-) CCOL
7 Reduc_on due to
(a) Appeal Effect
(b) Rec_fica_on
(c) Others
Total Reduc_on [(a) to (c)] DS
8 Total Demand for Collec_on at the month end NOD
9 Demand Difficult to recover
(a) Pending write off PWO
(b) Assessees not traceable (to the extent it is ANT
likely to affect recovery)
(c) No assets/inadequate assets for recovery (to NAR
the extent of inadequacy)
(d) Protec_ve Demand PD
(e) Cases where the Department has lost in DLA
appeal but the demand is outstanding for other
years or is con_nuing to be raised to keep the
issue alive as the Department is in further appeal
(f) No_fied persons under the Special Court (Trial NP
of offences rela_ng to Securi_es Act, 1992)
(g) Cases pending before NCLT under IBC-2016 BB
(h) Companies in Liquida_on CIL
(i) Cases before Sedlement Commission BSC
(j) Demand stayed by Courts/ITAT DSC
(k) Demand stayed by I T Authori_es DSIT
(l) Demand covered by installments (only to the INST
extent not recoverable during the month)
(m) Demand, the recovery of which is not being SP
pursued on account of assessee's stay pe__on
pending considera_on by I. T. Authori_es.

186
 Report No. 14 of 2024 (Direct Taxes)

Sl. DescripUon Code Arrear Current Total

No. demand Demand Demand
I.T. C.T. I.T. C.T. I.T. C.T.
(n)TDS / Prepaid taxes mismatch TDS
(o)Demand not enforceable as Bank Guarantees GRT
obtained under MAP process
(p) Rec_fica_on pending on account of DPL
duplica_on of entries
(q) Assets jointly adached with other agencies OAG
except BIFR
(r) Appeal pending against adachment of PRP
proper_es
(s) Any other reasons (to be specified in a OR
separate Annexure) for which the demand is
considered difficult to recover
Total Demand Difficult to Recover [(a) to (s)] DIFF
10 Net Collec_ble Demand (8-9) NCOL
11 Analysis of Disputed Demand
(a) CIT (A) DCIT
(b) ITAT DITAT
(c) High Court/Supreme Court DIC
(d) Rec_fica_on/Revision/Waiver pending before DID
I.T. Authori_es
Total Disputed Demand TDD
12 Tax revenues raised but not realized (FRBM Act) >1 >2 >5 >10 Tota
yr yrs yrs yrs l
and and and
<=2 <=5 <=10
yrs yrs yrs
0020 - Corpora_on Tax under Dispute
021 - Income Tax under Dispute
Disputed Demand
020 - Corpora_on Tax not under Dispute
021 - Income Tax not under Dispute
Demand not under Dispute
020 - Corpora_on Tax not realized
021 - Income Tax not realized
Total Tax Revenues not realized
13 Target of Cash Collec_on TCC
14 (6/13) Collec_on by Target Ra_o in % (6/13) CTR
15 (6/10) Collec_on as of net collec_ble demand in CNCD
% (6/10)
Annexure: DescripUon of other reasons for demand difficult to collect -9(s)

187
 Report No. 14 of 2024 (Direct Taxes)

Appendix 12B
(Ref. Paragraph 7.1)
STRUCTURE OF CAP-II Report
1. Tax base
Area of On 1st On 1st day VariaUons During the Month on a/c of On Last CorrecUons to Remarks
AcUvity April - of the Day of be Applied to (in Case of
Brought Month the Closing of CorrecUon based
Forward - Brought Month Previous Month on
from Forward (ii) + (iii) (As per Errors of
Closing from + (iv) - Remarks in Previous
of (v) - (vi) ix) Months)
Closing of
March of Previous
Previous Month
Year (AWer New Transfer in Transfer Struck
Applying
CorrecUons Assessees (+) Out (-) Off (-)
if any) (+)
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix)
Assessees
on Record

2. Returns
Area of Returns Filed up to the End of the Month AcUon Against Stop Filers up to the End of the Month
AcUvity
(a) By (b) By New (c) Total (i) + Out of (iii) On A/C of on A/C of Total (v) + (vi)
ExisUng Assessees (ii) Returns NoUces under NoUces under
Assessees showing SecUon SecUon 148
Income above 142(1)
Rs. 10 lacs
(i) (ii) (iii) (iv) (v) (vi) (vii)
a. Receipt
of returns
(on paper)
b. Receipt
of returns
(in
Electronic
Form)

188
 Report No. 14 of 2024 (Direct Taxes)

3. Functions Relating to the Assessing Officers

(A) Functions other than Survey Work

month from closing of previous month

the month (After applying corrections,

Corrections to be applied to closing of

Disposal/Reduction during the month

Disposal/Reduction Corrections to be
Transfer in/out/Struck off during the

Disposal/Reduction up to the end of

Brought forward as on 1st April from

Brought forward on first day of the

(After applying corrections, if any

closing of March of previous year

applied to the end of the month

Addition during the month

Balance carried forward =

Critical Pendency*

previous month
Area of Activity

(ii)+(iii)+(iv)-(v)
month (+/-)

if any)
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x)
(i) Processing of Returns
(a) Paper Returns
(b) e-Filed Returns
(ii) Refunds
(a) No. of Refunds
under Section 143(1)
(b) No. of Other
Refunds
(iii) Scrutiny
Assessments-Company
Cases
(a) under Section
143(3)
(b) under Section
143(3) r.w.s other
sections
(c) Time barring out of
(a) & (b) above
(iv) Scrutiny
Assessments-Non-
Company Cases
(a) under Section
143(3)
(b) under Section
143(3) r.w other
sections
(c) Time barring out of
(a) & (b) above
(v) Search Assessments
(a) Search
Assessments under
Section 153A

189
 Report No. 14 of 2024 (Direct Taxes)

(b) Search
Assessments under
Section 153C
(c) Other Search
Assessments
(vi) Grievances
(vii) Rectification
Applications
(viii) Appeal Effects
(a) Appeal Effects -
CIT(A) order
(b) Appeal Effects -
ITAT order
(c) Appeal Effects -
HC/SC order
(ix) Penalty Proceedings
(a) Penalty
Proceedings initiated
under Section
271(1)(c)
(b) Other Penalty
Proceedings initiated
(x) Prosecutions
(a) Prosecutions under
Section 276C launched
(b) Other Prosecution
Cases launched
(xi) Revenue Audit
Objections
(a) Revenue Audit -
Major Objection
(Arrear)
(b) Revenue Audit -
Major Objection
(Current)
(c) Revenue Audit -
Draft Para
(xii) Internal Audit
Objection
(a) Internal Audit -
Major Objection
(Arrear)
(b) Internal Audit -
Major Objection
(Current)
(xiii) Age-wise Breakup 1–6 Months 6–12 Months More than one Year Total
of Pendency of Refunds
(i) (ii) (iii) (iv)
(a) Refunds under
Section 143(1)

190
 months)

Committee
(ii) Regional
Section 143(1)

Arrear Demand
(xv) Write off of
is received Paper

(i) Local committee

(c) Other Refunds
(b) Refunds under

date on which the

is received e filed)

(xiv) Appeals to High

1-9 months & 9-12

(Reckoned from the

(Reckoned from the
(Reckoned from the

refund is determined)
Return) (to be read as

month in which return

month in which return

Court under Section 260A

No. of demands written off during

(i)
Appeals authorized brought
the month

(i)
forward as on 1st April – from
closing of March of previous
Amount (`
` in lakh)

(ii)
Brought forward
yearon first day of
During the month the month from closing of

(ii)

(iii)
No. of proposals previous month (After applying
Upto the end of the submitted to local/regional/zonal corrections, if any)
month (After applying committee(s) for write off Transfer in/out/struck off during

(iv)
(iii)
corrections if any) the month (+/-)
During the month Amount involved in such proposals

(v)
(`
` in Lakh) Appeals authorized during the

(iv)

191
Upto the end of the month
month (After applying

(vi)
corrections if any) Appeals filed during the month

(v)
During the month No. of proposal received Appeals filed up to the end of
the month (After applying
Upto the end of the (vi) corrections, if any)

(vii) (viii)
month (After applying
corrections if any) Balance carried forward
(ii)+(iii)+(iv)-(v)
No. of proposals submitted
Corrections to be applied to the end

(ix)
(vii) (viii)

of the month Critical Pendency*

Amount involved Corrections to be Corrections to be applied to

(x)
(ix)

applied to the end of the month closing of previous month

Report No. 14 of 2024 (Direct Taxes)

No. of proposals received

Appeals Corrections to be
(x)

Corrections to be applied to the end

(xi)
applied to the end of the month
of the month
 off
Total

lakhs)
Lakhs)

133A(5)
in Lakhs)
Area of Activity
(v) Summary Write

(i) Survey under

Section 133 A(1)
(iv) Ad hoc Write off

found (Amount in
(iii) Zonal Committee

(b) Discrepancy in

noticed (Amount in

Survey under Section

Stock found (Amount

(c) Other Discrepancy

(a) Discrepancy in Cash
(i)
No. of surveys during the month

(ii)
No. of surveys upto the end of
the month (After applying
corrections if any)
Report No. 14 of 2024 (Direct Taxes)

(iii)
Corresponding period of last
year (upto the end of the
month)
During the month

(iv)

192
Amount of undisclosed income
detected (Rs. In lakhs)

(v)
upto the end of the
3(B) Survey Work

month (After applying

corrections if any)
During the month

(vi)
upto the end of the Survey reports submitted

(vii)
month (After applying
corrections if any)

No. of surveys Corrections to be

(viii)
applied to the end of the month
(ix)
Amount of undisclosed to be
applied to the end of the month
(x)

Survey reports submitted to be

applied to the end of the month
 Report No. 14 of 2024 (Direct Taxes)

Appendix 13
(Ref.: Para 7.3.2)
Demand Difficult to Recover Categorised under 19 reasons for the years ended from March 2018 to March 2022

` in crore)
(`
Sl. For the Year ended March 18 March 19 March 20 March 21 March 22
No.
1 Pending Write-off 9(a) 3,141.31 3,431.76 4,269.36 2,788.76 3,411.93
2 Assessee not traceable 9(b) 85,337.15 89,421.79 1,77,938.44 1,63,880.00 2,26,019.26
3 No assets/inadequate assets 9(c) 4,89,328.80 5,45,081.39 6,04,374.72 5,50,442.06 6,49,420.29
4 protective demand 9(d) 28,051.27 31,951.63 35,153.80 32,695.03 34,627.71
5 Department lost in appeal but demand 9(e) 55,703.34 67,180.71 38,587.24 39,685.44 36,192.91
outstanding for other years or continuing to be
raised to keep the issue alive as department is in
further appeal
6 Notified persons under the Special Court (Trial of 9(f) 28,997.81 30,801.24 28,324.99 34,702.17 34,433.46
offences relating to Securities Act, 1992)
7 Cases pending before NCLT under IBC-2016 9(g) 14,097.00 20,652.96 55,111.41 48,069.37 62,429.75
8 Companies in Liquidation 9(h) 25,695.71 32,605.62 39,254.28 30,470.17 60,453.28
9 Cases before Settlement Commission 9(i) 307.80 341.68 673.67 358.47 547.93
10 Demand stayed by Courts/ITAT 9(j) 85,958.79 1,15,836.76 1,28,106.58 1,19,950.59 1,19,751.85
11 Demand stayed by IT Authorities 9(k) 85,508.66 87,961.00 1,18,593.48 98,052.61 1,42,608.23
12 Demand covered by installments (to the extent 9(l) 4,418.66 3,935.47 2,871.15 2,536.75 3,066.95
not recoverable)
13 Demand , the recovery of which is not being 9(m) 18,364.45 20,385.84 19,094.52 11,186.05 34,918.21
pursued on account of assessee's stay petition
pending consideration by I.T. Authorities
14 TDS/Prepaid taxes mismatch 9(n) 40,555.36 47,917.54 64,093.82 65,569.86 99,658.33
15 Demand not enforceable as Bank Guarantees 9(o) 11,500.61 18,395.74 8,600.91 7,271.49 6,600.01
obtained under MAP process
16 Rectification pending on account of duplication of 9(p) 4,843.56 15,133.88 15,086.38 13,632.14 20,603.90
entries

193
Report No. 14 of 2024 (Direct Taxes)

Sl. For the Year ended March 18 March 19 March 20 March 21 March 22
No.
17 Assets jointly attached with other agencies 9(q) 61,718.20 47,878.15 94,481.21 96,024.62 92,689.44
except BIFR
18 Appeal pending against attachment of properties 9(r) 1,279.31 1,906.06 870.94 870.69 805.53
19 Any other reason (to be specified in separate 9(s) 48,569.57 38,665.18 55,788.94 44,894.63 1,14,818.16
annexure)
20 Total Demand Difficult to Recover 10,93,377.36 12,19,484.40 14,91,275.84 13,63,080.90 17,43,057.13

194
 Report No. 14 of 2024 (Direct Taxes)

Appendix 14
(Ref.: Para 7.3.3)
Statement showing Outstanding Demand Pending at Various stages of Appeal - Region wise
` in crore)
(`
Sl. Pr. CCIT March 2018 March 2019
No. CIT(A) ITAT High Rectification/ Total CIT(A) ITAT High Rectification/ Total
Court/ revision/ Court/ revision/
Supreme waiver Supreme waiver
Court pending Court pending
before IT before IT
Authorities Authorities
1 Mumbai 75,379.04 99,407.09 7,457.70 5,014.10 1,87,257.93 2,70,500.11 95,230.87 7,275.98 5,714.65 3,78,721.61
AP &
2 10,099.96 5,634.98 2,457.78 712.45 18,905.17 11,611.51 5,931.56 2,549.91 638.45 20,731.43
Telangana
3 Rajasthan 3,023.41 200.2 91.62 128.96 3,444.19 3,002.99 229.85 95.21 84.22 3,412.27
4 Nagpur 386.52 42.51 4.4 200.22 633.65 381.46 55.48 4.61 371.7 813.25
5 Pune 13,613.49 3,169.52 593.02 3,947.24 21,323.27 15,749.61 2,798.97 700.02 4,393.90 23,642.50
UP West &
6 1,951.66 1,265.38 11.59 319.36 3,547.99 2,470.49 1,336.92 13.49 385.04 4,205.94
Uttarakhand
UP East
7 17,151.23 639.73 214.56 182.63 18,188.15 21,100.62 759.92 242.88 234.06 22,337.48
(Lucknow)
Bhopal (MP &
8 12,682.31 595.91 394.73 380.03 14,052.98 14,280.36 747.32 411.35 312.46 15,751.49
Chhattisgarh)
9 Bengaluru 15,134.71 5,039.20 767.59 2,385.31 23,326.81 18,198.18 10,382.26 2,264.54 1,973.73 32,818.71
10 Tamil Nadu 11,393.31 1,482.62 1,667.29 1,593.65 16,136.87 13,597.68 1,526.41 2,499.44 1,192.24 18,815.77
11 Kerala 3,670.72 589.57 476.78 195.91 4,932.98 4,145.47 630.82 1,463.43 232.18 6,471.90
12 Bhubaneswar 2,745.83 139.54 588.47 163.22 3,637.06 1,594.19 379.07 94.19 36.98 2,104.43
North-East
13 394.06 71.8 0.33 146.34 612.53 338.91 95.35 3.91 120.5 558.67
Region
West Bengal &
14 43,182.32 3,370.45 285.57 711.2 47,549.54 44,936.18 5,051.85 295 789.38 51,072.41
Sikkim

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Sl. Pr. CCIT March 2018 March 2019

No. CIT(A) ITAT High Rectification/ Total CIT(A) ITAT High Rectification/ Total
Court/ revision/ Court/ revision/
Supreme waiver Supreme waiver
Court pending Court pending
before IT before IT
Authorities Authorities
Bihar &
15 4,508.28 381.11 50.96 152.93 5,093.28 4,704.57 423.55 220.31 242.85 5,591.28
Jharkhand
16 Delhi 1,19,086.67 40,302.94 11,329.09 5,075.72 1,75,794.42 1,10,145.08 60,205.08 11,846.45 7,806.80 1,90,003.41
North-West
17 8,104.74 2,765.47 664.29 395.57 11,930.07 9,776.00 2,428.71 375.33 660.78 13,240.82
Region
Pr. CCIT (Intl.
18 45,147.00 11,246.40 61,825.78 1,830.66 1,20,049.84 43,352.02 10,247.57 60,918.37 10,352.56 1,24,870.52
Tax.)
19 Gujarat 20,462.37 1,280.08 226.11 842.8 22,811.36 34,841.55 1,224.76 356.37 965.26 37,387.94
Total 4,08,117.63 1,77,624.50 89,107.66 24,378.30 6,99,228.09 6,24,726.98 1,99,686.32 91,630.79 36,507.74 9,52,551.83

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Appendix 14 (Contd..)
(Ref.: Para 7.3.3)
Statement showing Outstanding Demand Pending at Various stages of Appeal - Region wise
` in crore)
(`
Sl. Pr. CCIT March 2020 March 2021
No. CIT(A) ITAT High Rectification/ Total CIT(A) ITAT High Court/ Rectification Total
Court/ revision/ Supreme / revision/
Supreme waiver Court waiver
Court pending pending
before IT before IT
Authorities Authorities
1 Mumbai 2,84,809.04 71,375.09 9,120.60 6,640.30 3,71,945.03 2,83,154.58 70,162.08 8,172.91 7,799.18 3,69,288.75
AP &
2 18,299.62 5,614.96 2,587.79 590 27,092.37 18,429.26 5,392.10 2,633.77 579.05 27,034.18
Telangana
3 Rajasthan 4,639.22 215.56 112.5 163.6 5,130.88 6,403.78 228.79 252.78 298.72 7,184.07
4 Nagpur 488.36 44.71 4.61 460.44 998.12 477.75 33.16 1.66 505.09 1,017.66
5 Pune 17,536.08 2,277.69 580.55 4,184.49 24,578.81 18,422.12 4,022.03 638.55 6,721.36 29,804.06
UP West &
6 3,775.58 1,442.28 27.55 410.15 5,655.56 3,765.34 1,765.03 22.19 400.28 5,952.84
Uttarakhand
UP East
7 24,069.87 1,839.58 241.74 346.96 26,498.15 23,975.20 1,856.12 238.68 349.47 26,419.47
(Lucknow)
Bhopal (MP &
8 16,876.47 759.52 393.09 749.83 18,778.91 17,340.62 875.56 2,971.33 552.54 21,740.05
Chhattisgarh)
9 Bengaluru 23,783.39 13,267.21 1,384.20 2,693.50 41,128.30 24,395.01 11,652.51 2,607.41 2,689.16 41,344.09
10 Tamil Nadu 17,256.13 1,677.77 2,713.27 1,526.28 23,173.45 21,762.82 1,559.41 4,608.62 1,326.29 29,257.14
11 Kerala 4,990.65 421.21 1,742.41 412.91 7,567.18 6,822.66 946.56 2,103.94 937.44 10,810.60
12 Bhubaneswar 3,225.74 377.45 96.77 28.93 3,728.89 2,761.92 67 325.94 76.81 3,231.67
North-East
13 1,198.55 122.7 0.9 84.21 1,406.36 1,139.45 109.23 79.29 83 1,410.97
Region
West Bengal &
14 49,326.06 3,356.54 576.85 821.08 54,080.53 56,268.75 2,866.79 537.47 2,309.86 61,982.87
Sikkim
Bihar &
15 5,744.48 501.21 244.4 203.6 6,693.69 5,901.34 543.95 249.05 303.44 6,997.78
Jharkhand

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Sl. Pr. CCIT March 2020 March 2021

No. CIT(A) ITAT High Rectification/ Total CIT(A) ITAT High Court/ Rectification Total
Court/ revision/ Supreme / revision/
Supreme waiver Court waiver
Court pending pending
before IT before IT
Authorities Authorities
16 Delhi 73,510.68 46,630.46 5,798.37 3,012.72 1,28,952.23 112,874.12 62,596.70 7,009.63 2,826.35 1,85,306.80
North-West
17 14,139.90 4,333.79 383.26 816.96 19,673.91 0.00 0 0 0 0
Region
Pr. CCIT (Intl.
18 47,732.95 11,964.71 59,832.40 11,126.23 1,30,656.29 45,854.48 11,892.80 59,047.36 13,839.34 1,30,633.98
Tax.)
19 Gujarat 39,822.99 5,607.46 329.17 963.34 46,722.96 42,031.23 3,246.35 321.34 1,356.07 46,954.99
Total 6,51,225.76 1,71,829.90 86,170.43 35,235.53 9,44,461.62 691,780.43 1,79,816.17 91,821.92 42,953.45 10,06,371.97

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Appendix 14 (Contd..)
(Ref.: Para 7.3.3)
Statement showing Outstanding Demand Pending at Various stages of Appeal - Region wise
` in crore)
(`
Sl. Pr. CCIT March 2022
No. CIT(A) ITAT High Rectification/ Total
Court/Supreme revision/
Court waiver pending before
IT Authorities
1 Mumbai 3,06,921.50 71,908.50 8,428.72 9,787.04 3,97,045.76
2 AP & Telangana 29,902.77 6,301.94 3,412.12 2,893.60 42,510.43
3 Rajasthan 7,519.26 412.17 300.92 444.61 8,676.96
4 Nagpur 1,067.85 32.96 1.73 639.91 1,742.45
5 Pune 19,120.99 1,627.74 703.14 9,020.53 30,472.40
6 UP West & Uttarakhand 3,112.83 1,714.65 42.92 357.68 5,228.08
7 UP East (Lucknow) 26,666.62 1,844.47 238.52 297.73 29,047.34
8 Bhopal (MP & Chhattisgarh) 20,657.06 700.77 5,748.88 490.85 27,597.56
9 Bengaluru 22,605.53 10,598.72 4,748.90 6,950.33 44,903.48
10 Tamil Nadu 30,981.56 2,194.61 7,472.56 1,494.35 42,143.08
11 Kerala 7,758.44 1,451.79 755.2 421.92 10,387.35
12 Bhubaneswar 2,794.19 61.28 325.79 57.63 3,238.89
13 North-East Region 1,136.06 94.82 169.49 95.6 1,495.97
14 West Bengal & Sikkim 54,893.94 2,851.35 541.7 2,518.27 60,805.26
15 Bihar & Jharkhand 6,483.47 613.95 249.19 314.1 7,660.71
16 Delhi 1,26,600.30 56,893.08 6,872.32 2,687.57 1,93,053.27
17 North-West Region 0 0 0 0 0
18 Pr. CCIT (Intl. Tax.) 39,614.78 12,308.18 27,593.99 12,193.00 91,709.95
19 Gujarat 45,540.48 7,665.85 346.6 1,318.08 54,871.01
Total 7,53,377.63 1,79,276.83 67,952.69 51,982.80 10,52,589.95

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Appendix 15
(Ref.: Para 7.3.8)

Statement showing write off Proposals and Approvals by departmental committees in 16 Regions as per CAP-II statement for the year ended
March 2018, 2019 & 2020
Sl. Name of the Pr. Type of As on 31 March 2018 As on 31 March 2019 As on 31 March 2020
No. CCIT Region Committee No. of Amount No. of No. of Amount No. of No. of Amount No. of
proposals ` In lakh)
(` Approval proposals ` in
(` Approval proposals ` in
(` Approval
Received lakh) Received lakh) Received
1 Tamil Nadu Local 62 1 62 0 0 0 0 0 0
Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 3 2,742 2,167 3 575 0 2 1,036 0
Committee
2 Lucknow, UP East Local 7 162 0 7 162 0 0 0 0
Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 2 93 0 2 93 0 0 0 0
Committee
3 UP West, Local 22 2,53,703 0 22 2,53,793 0 22 2,53,793 0
Uttarakhand Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 19 66,679 0 19 66,679 0 19 66,679 0
Committee
4 Delhi Local 5 2,506 970 3 2,085 0 1 452 0
Committee
Regional 0 0 0 0 0 0 0 0 0
Committee

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Sl. Name of the Pr. Type of As on 31 March 2018 As on 31 March 2019 As on 31 March 2020
No. CCIT Region Committee No. of Amount No. of No. of Amount No. of No. of Amount No. of
proposals ` In lakh)
(` Approval proposals ` in
(` Approval proposals ` in
(` Approval
Received lakh) Received lakh) Received
Zonal 1 28 0 1 28 0 0 0 0
Committee
5 Andhra Pradesh & Local 0 0 0 0 0 0 0 0 0
Telangana Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 183 0 0 1 334 0 0 0 0
Committee
6 Rajasthan Local 0 0 0 0 0 0 0 0 0
Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 7 1,820 0 7 1,734 0 7 1,734 0
Committee
7 Kerala Local 0 0 0 0 0 0 0 0 0
Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 1 32 0 1 32 0 0 0 0
Committee
8 Bhopal (MP & CG Local 0 0 0 0 0 0 0 0 0
Region) Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 0 0 0 0 0 0 0 0 0
Committee

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Sl. Name of the Pr. Type of As on 31 March 2018 As on 31 March 2019 As on 31 March 2020
No. CCIT Region Committee No. of Amount No. of No. of Amount No. of No. of Amount No. of
proposals ` In lakh)
(` Approval proposals ` in
(` Approval proposals ` in
(` Approval
Received lakh) Received lakh) Received
9 Mumbai Local 1 39 1 0 39 0 0 0
Committee
Regional 0 0 0 0 0 0 1 0 39
Committee
Zonal 5 2,220 115 5 2,220 0 7 2,783 0
Committee
10 West Bengal & Local 90 438 0 94 12 95 94 11 0
Sikkim Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 4 5,078 0 2 680 4,915 2 677 0
Committee
11 Bengaluru Local 216 3 0 213 2 0 0 0 0
Committee
Regional 1 1 0 0 0 0 0 0 0
Committee
Zonal 1 3 0 0 0 0 0 0 0
Committee
12 North East Region Local 0 0 0 0 0 0 0 0 0
Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 0 0 0 0 0 0 0 0 0
Committee

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Sl. Name of the Pr. Type of As on 31 March 2018 As on 31 March 2019 As on 31 March 2020
No. CCIT Region Committee No. of Amount No. of No. of Amount No. of No. of Amount No. of
proposals ` In lakh)
(` Approval proposals ` in
(` Approval proposals ` in
(` Approval
Received lakh) Received lakh) Received
13 Bhubaneswar Local 0 0 0 0 0 0 0 0 0
Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 0 0 0 0 0 0 0 0 0
Committee
14 North West Region Local 0 0 0 Not Not Not 0 0 0
Committee available available available
Regional 0 0 0 Not Not Not 0 0 0
Committee available available available
Zonal 3 107 0 Not Not Not 2 100 0
Committee available available available
15 Gujarat Local 5 319 1 1 313 1 2 633 1
Committee
Regional 0 0 0 0 0 0 0 0 0
Committee
Zonal 6 1,693 1 7 1,252 0 5 918 0
Committee
16 International Local 0 0 0 Not Not Not 0 0 0
Taxation, New Committee available available available
Delhi Regional 0 0 0 Not Not Not 0 0 0
Committee available available available

Zonal 0 0 0 Not Not Not 0 0 0

Committee available available available

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Appendix 16
(Refer Para 7.4)
Age-wise analysis of 'Demand not under Dispute' for the years ended March 2018 to March 2022
(Region Wise)
` in crore)
(`
Sl. Pr.CCIT Region/Year For the year ended March, 2022
No. ending
> 1Yr and <= >2 Yrs and > 5 Yrs and > 10 Yrs Total
2 Yrs <= 5 Yrs <=10 Yrs
1 MUMBAI
(i) March 2018 18,736.36 7,254.85 501.33 451.05 26,943.59
(ii) March 2019 24,057.70 10,476.93 397.99 448.52 35,381.14
(iii) March 2020 22,884.73 15,881.31 1,088.12 412.57 40,266.73
(iv) March 2021 35,836.54 14,867.50 277.26 249.82 51,231.12
(v) March 2022 33,460.97 14,824.88 1,046.92 196.40 49,529.17
2 Andhra Pradesh &
Telangana
(i) March 2018 3,407.60 2,451.23 453.92 104.42 6,417.17
(ii) March 2019 3,787.11 2,874.48 558.58 94.62 7,314.79
(iii) March 2020 12,015.71 3,468.66 760.35 91.07 16,335.79
(iv) March 2021 21,279.04 4,079.52 1,270.86 134.36 26,763.78
(v) March 2022 12,799.96 3,843.30 1,180.95 186.40 18,010.61
3 Rajasthan
(i) March 2018 423.35 115.76 42.11 20.06 601.28
(ii) March 2019 719.17 171.88 42.07 18.70 951.82
(iii) March 2020 1,093.15 277.73 41.99 22.52 1,435.39
(iv) March 2021 2,615.73 756.46 92.29 23.88 3,488.36
(v) March 2022 1,922.31 748.15 83.23 7.78 2,761.47
4 Nagpur
(i) March 2018 214.30 138.27 300.18 1.30 654.05
(ii) March 2019 224.51 148.26 300.84 0.94 674.55
(iii) March 2020 259.30 198.57 302.61 0.56 761.04
(iv) March 2021 1,302.67 280.94 317.10 4.39 1,905.10
(v) March 2022 1,407.77 358.95 323.36 9.42 2,099.50
5 Pune
(i) March 2018 1,943.28 717.62 117.99 34.65 2,813.54
(ii) March 2019 2,328.52 1,561.75 192.18 95.31 4,177.76
(iii) March 2020 3,416.96 2,079.35 252.91 128.94 5,878.16
(iv) March 2021 6,493.25 3,386.76 477.38 1,649.33 12,006.72
(v) March 2022 6,063.30 3,667.25 355.95 157.29 10,243.79
6 UP West &
Uttarakhand
(i) March 2018 1437.89 283.67 850.84 73.48 2645.88
(ii) March 2019 2192.52 553.41 1110.36 79.85 3936.14

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Sl. Pr.CCIT Region/Year For the year ended March, 2022

No. ending
> 1Yr and <= >2 Yrs and > 5 Yrs and > 10 Yrs Total
2 Yrs <= 5 Yrs <=10 Yrs
(iii) March 2020 3443.44 1531.34 1146.43 88.55 6209.76
(iv) March 2021 8973.63 2,440.02 1,565.07 85.78 13,064.50
(v) March 2022 8,782.75 2,869.65 685.57 85.39 12,423.36
7 Lucknow, UP East
(i) March 2018 848.01 252.54 86.60 54.21 1241.36
(ii) March 2019 1121.87 374.50 93.54 49.38 1639.29
(iii) March 2020 4196.27 330.85 91.82 53.00 4671.94
(iv) March 2021 8019.39 989.27 241.97 39.62 9290.25
(v) March 2022 7643.59 1526.32 180.90 44.78 9395.59
8 MP & Chhattisgarh
(i) March 2018 1,197.87 587.36 317.26 83.54 2,186.03
(ii) March 2019 2,041.87 848.69 315.27 80.66 3,286.49
(iii) March 2020 5,236.73 991.65 337.24 75.70 6,641.32
(iv) March 2021 5,095.30 1,756.70 426.47 76.97 7,355.44
(v) March 2022 4,680.03 1,558.19 597.92 81.93 6,918.07
9 Bengaluru
(i) March 2018 4,266.25 1,093.67 117.21 46.66 5,523.79
(ii) March 2019 3,828.49 1,031.20 358.84 58.01 5,276.54
(iii) March 2020 3,982.90 3,702.08 850.51 65.43 8,600.92
(iv) March 2021 9,188.08 3,769.84 463.86 53.66 13,475.44
(v) March 2022 10,643.96 3,485.52 391.26 44.99 14,565.73
10 Tamil Nadu
(i) March 2018 2,540.60 2,498.10 104.38 236.33 5,379.41
(ii) March 2019 2,799.08 2,140.07 119.62 80.50 5,139.27
(iii) March 2020 5,111.55 2,209.09 132.87 39.44 7,492.95
(iv) March 2021 16,779.96 4,571.33 312.99 36.29 21,700.57
(v) March 2022 13,665.30 5,962.99 347.72 52.91 20,028.92
11 Kerala
(i) March 2018 783.38 279.58 52.59 10.04 1,125.59
(ii) March 2019 876.89 732.63 138.65 32.22 1,780.39
(iii) March 2020 928.34 848.25 153.86 30.62 1,961.07
(iv) March 2021 961.83 1,187.68 202.42 22.17 2,374.10
(v) March 2022 1,115.88 724.74 224.95 20.08 2,085.65
12 Bhubaneswar
(i) March 2018 600.71 200.50 23.97 4.83 830.01
(ii) March 2019 1,025.64 534.19 28.16 2.45 1,590.44
(iii) March 2020 1,356.27 253.78 41.23 2.75 1,654.03
(iv) March 2021 2385.58 440.88 48.56 3.25 2878.27
(v) March 2022 2,235.46 331.81 39.07 3.56 2,609.90

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Sl. Pr.CCIT Region/Year For the year ended March, 2022

No. ending
> 1Yr and <= >2 Yrs and > 5 Yrs and > 10 Yrs Total
2 Yrs <= 5 Yrs <=10 Yrs
13 North-East Region119
(i) March 2018 185.85 152.84 32.69 34.06 405.44
(ii) March 2019 193.93 140.86 20.95 33.34 389.08
(iii) March 2020 245.01 176.58 48.69 9.86 480.14
(iv) March 2021 747.37 222.49 39.99 8.49 1,018.34
(v) March 2022 529.74 352.72 45.90 10.02 938.38
14 West Bengal & Sikkim
(i) March 2018 10,920.29 5,043.10 448.10 782.47 17,193.96
(ii) March 2019 13,158.13 6,179.59 360.74 781.72 20,480.18
(iii) March 2020 13,529.89 8,294.82 425.51 764.85 23,015.07
(iv) March 2021 19,298.84 12,553.53 432.51 127.55 32,412.43
(v) March 2022 19,159.97 13,276.43 494.79 62.55 32,993.74
15 Bihar & Jharkhand
(i) March 2018 1,293.33 821.59 237.46 83.58 2,435.96
(ii) March 2019 1,333.70 752.82 269.64 74.85 2,431.01
(iii) March 2020 1,452.54 783.77 304.66 98.41 2,639.38
(iv) March 2021 3,191.04 857.36 359.77 117.21 4,525.38
(v) March 2022 2,760.98 2,379.14 317.34 104.30 5,561.76
16 Delhi
(i) March 2018 7,725.50 3,227.19 975.70 302.92 12,231.31
(ii) March 2019 12,442.29 5,220.69 774.84 122.49 18,560.31
(iii) March 2020 12,122.84 56,006.86 1,058.25 119.82 69,307.77
(iv) March 2021 40,684.93 56,405.88 730.84 4,114.55 101,936.20
(v) March 2022 40,604.90 51,153.64 925.18 5,850.92 98,534.64
17 North-West Region120
(i) March 2018 5,381.22 1,106.63 203.56 89.69 6,781.10
(ii) March 2019 5,720.98 1,635.04 230.91 172.72 7,759.65
(iii) March 2020 8,356.40 2,034.37 559.01 162.20 11,111.98
(iv) March 2021 0.00 0.00 0.00 0.00 0.00
(v) March 2022 - - - - -
18 Pr. CCIT (Intl. Tax.)
(i) March 2018 1,177.27 682.11 196.38 70.65 2,126.41
(ii) March 2019 2,103.21 1,096.15 210.14 75.28 3,484.78
(iii) March 2020 1,646.49 3,143.41 142.06 7.21 4,939.17
(iv) March 2021 1,543.82 2,200.49 90.07 4.62 3,839.00
(v) March 2022 4,961.36 4,932.53 194.36 13.16 10,101.41
19 Gujarat
(i) March 2018 8,827.87 1,623.74 313.95 254.95 11,020.51

119 Meghalaya, Arunachal Pradesh, Assam, Mizoram, Manipur, Nagaland and Tripura
120 Punjab, J&K, Himachal Pradesh, Haryana

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Sl. Pr.CCIT Region/Year For the year ended March, 2022

No. ending
> 1Yr and <= >2 Yrs and > 5 Yrs and > 10 Yrs Total
2 Yrs <= 5 Yrs <=10 Yrs
(ii) March 2019 11,509.19 2,068.14 404.83 235.37 14,217.53
(iii) March 2020 16,445.17 3,770.82 479.66 262.12 20,957.77
(iv) March 2021 25,901.18 11,160.91 1,968.16 292.17 39,322.42
(v) March 2022 21,838.58 10,460.19 884.90 253.80 33,437.47
Total 6,85,674.41 4,17,438.88 37,159.99 21,941.23 11,62,214.51
Source: Col.12 of CAP-I statement of all regions for the period March 2022 (except North West Regions)

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Abbreviations
ACIT Assistant Commissioner of Income Tax
Act The Income Tax Act, 1961
AI Assessed Income
AIR Annual Information Return
ALP Arm’s Length Price
AO Assessing Officer
AOP Association of Person
AST Assessment Information System
AY Assessment Year
CASS Computer Aided Scrutiny Selection
CBDT Central Board of Direct Taxes
CCIT Chief Commissioner of Income Tax
CIT Commissioner of Income Tax
CIT(A) Commissioner of Income Tax (Appeals)
CPC-ITR Centralized Processing Centre – Income Tax Return
CPC-TDS Centralized Processing Centre – Tax Deducted at Source
CT Corporation Tax
DCIT Deputy Commissioner of Income Tax
DGIT (Systems) Director General of Income Tax (Systems)
DOR Department of Revenue
DT Direct Taxes
FY Financial Year
GDP Gross Domestic Product
GTR Gross Tax Receipts
IT Income Tax
ITAT Income Tax Appellate Tribunal
ITBA Income Tax Business Application
ITD Income Tax Department
ITO Income Tax Officer
ITR/Return Income Tax Return
JCIT Joint Commissioner of Income Tax
LTCG Long term capital Gain
PAN Permanent Account Number
Pr. CCA Principal Chief Controller of Accounts
Pr. CCIT Principal Chief Commissioner of Income Tax
MAT Minimum Alternate Tax
MOP Manual of Office Procedure
NSDL National Securities Depository Limited
OLTAS Online Tax Accounting System
Pr. DGIT Principal Director General of Income Tax
Rules The Income Tax Rules, 1962
STT Securities Transaction Tax
TCS Tax Collected at Source
TDS Tax Deducted at Source
TP Transfer Pricing
TPO Transfer Pricing Officer

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