Para 7.3.21 — This paragraph provides an exhaustive list of issu
Original Rule Text
7.3.21 The following are some of the other issues dealt with in this chapter:
(i) Variations between budget estimates and actuals: Reasons for substantial variations should be brought out clearly in the Audit Report. Decline in collections attributable to evasion or avoidance of tax, nonpursuance of claims, reduction of claims without adequate justification or authority, double or fraudulent refunds, reliefs, exemptions and concessions allowed on extraneous considerations, etc. may be commented upon in the section dealing with variations provided these have had a significant impact on revenues. Instances of fictitious inflation of revenue receipts by resorting, say, to collection of large sums from assessees at the close of the financial year and to the refund of such sums at the beginning of the next year noticed should be specifically commented upon.
Note: In respect of any new tax imposed by Government in the year to which the Report relates, the receipts estimated from the tax should be compared with the actual yield and the reasons for variations analysed.
(ii) Analysis of collections: The total collections of tax may be broken up into its components and analysed under the following broad heads:
(a) Amount collected at pre-assessment stage.
(b) Amount collected after regular assessment.
(c) Amount refunded.
(d) Net collection of tax.
If any penalties were imposed on the assessees for belated payments of tax, the amounts levied and actually recovered should also be analysed.
(iii) Refunds: Information on the volume of refund applications handled and the interest paid during the year on belated refunds and due to other reasons may be analysed in relation to the comparative position during the preceding one or two years.
(iv) Number of Assessees: Statistical data in regard to the number of assessees and their break-up based on their legal status, income, etc. will be exhibited under this head.
(v) Assessments in arrears: Statistics in regard to the number of assessments due to be completed during the year, those completed and those yet to be finalised at the end of the year (with the corresponding figures for the preceding year) are to be incorporated.
(vi) Arrears of revenue: Break-up of the arrears, year-wise, should be presented, indicating separately those outstanding for more than five years. Few individual cases of substantial arrears should be examined and interesting features, if any, noticed should be brought out. Delays in initiating recovery proceedings, absence of adequate pursuance, lack of coordination between the assessing and recovery officers, etc. may also be commented upon.
(vii) Frauds and evasions: Information on cases of frauds and evasions pending at the beginning of the year, cases detected during the year, cases where investigations and/or assessments were completed and those pending at the end of the year should be incorporated. In cases where the investigations and assessments have been completed, details of the additional demands raised and penalties imposed or prosecutions launched may also be mentioned.
(viii) Write-off and remissions of revenue: The number of cases and the amount involved should be furnished under this category indicating the broad reasons for the write-off or waiver. The cases may be grouped under the following broad categories:
(a) Whereabouts of defaulters are not known.
(b) Defaulters are no longer alive.
(c) Defaulters did not own any property.
(d) Defaulters had been adjudged insolvent.
(e) Records not traceable.
Departmental files relating to cases involving large amounts should be examined and irregularities, if any, brought out.
(ix) Cost of collection: In cases where cost of collection of a particular tax is not separately ascertainable from the accounts, pro rata distribution of the expenditure should be made under orders of Government between (1) collection of revenues; and (2) other administrative functions and the percentage of expenditure to gross collection should be worked out on that basis.
(x) Specific audit observations: Audit observations specific to the statistical information relating to the functioning of the revenue collecting departments in general should be grouped under broad categories and should be based on the totality of test audit to include the following:
(a) Analysis, head-wise and year-wise, of outstanding revenues.
(b) Detailed study of units where the outstandings are particularly heavy.
(c) Mention of cases where remedial action is likely to become time barred.
(d) Brief resume of the steps taken by departmental authorities and Government to settle objections.
Cases where remedial action has become time barred entailing considerable loss of revenue, or that present interesting features should be considered for specific mention.
(xi) Internal Control and Internal Audit: In order to highlight the effectiveness of the internal audit organisation, interesting features relating to the internal audit systems may be mentioned including inter alia the following:
(a) Analysis, year-wise, of objections raised in internal audit, those settled and those outstanding and of the revenue implications.
(b) Serious irregularities noticed in statutory audit in cases initially scrutinised in internal audit. A few high-value cases may be examined for this purpose.
(c) Departments in which machinery for internal audit has not been established.
What This Means
This paragraph provides an exhaustive list of issues to be covered in Chapter I of the Revenue Receipts Audit Report, including: budget vs. actual variations, analysis of collections, refund volumes, number of assessees, assessments in arrears, revenue arrears with age analysis, frauds and evasions, write-offs and remissions, cost of collection, specific audit observations on revenue administration, and the effectiveness of internal audit systems.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Budget estimate vs. actual variations must be analysed with reasons
- 2Collections are broken into pre-assessment, post-assessment, refunds, and net
- 3Outstanding revenue arrears are presented with year-wise and five-year breakups
- 4Frauds, evasions, write-offs, and cost of collection are reported
- 5Internal audit effectiveness is evaluated, including unsettled objections
- 6Specific audit observations are grouped under broad categories
Practical Example
In Chapter I, the AG reports that the State's commercial tax department has Rs 8,000 crore in revenue arrears, of which Rs 3,200 crore (40%) is outstanding for more than five years. The cost of tax collection is 1.8% of gross collections. Internal audit raised 5,000 objections but 3,200 remain unsettled. Ten fraud cases were detected during the year involving Rs 45 crore, with prosecutions launched in only two cases.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why are revenue arrears over five years reported separately?▼
What is the significance of reporting the cost of collection?▼
Why is internal audit effectiveness evaluated in the external audit report?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.