CAG frowns over tax refund claim delays

For instance, pendency of direct tax refund cases has increased from 5.7 lakh in 2005-06 to 19.4 lakh in 2009-10 registering an increase of 240 per cent, CAG noted in its report tabled in Parliament.

As per the Income Tax (IT) Act, assesses are entitled to refund of the excess amount when the amount of tax paid exceeds the amount of tax payable. As per the IT rule, if the refund is not made to the assesses within four months of filing of the IT return, the Department will have to pay simple interest at the prescribed rate on the amount of such refund.

The CAG report shows out of total 48 lakh direct refund claims, the IT  Department has disposed off only 28.6 lakh (59.6 per cent) claims in 2009-10.

Thus the pendency rate has increased to 40.4 per cent in 2009-10 from 22.5 per cent in 2005-06 increasing the interest burden. The government has refunded a sum of Rs 57,101 crore, which includes interest of Rs 12,951 crore (22.7 per cent) from gross collection of Corporation Tax and Income Tax of Rs 4,24,713 crore in 2009-10.

The interest paid on refunds in 2008-09 was Rs 5778 crore, which accounts for 14.8 per cent of Rs 39,097 crore—the amount refunded, the CAG pointed out saying pendency of refund claims results in outflow of revenue from the government by way of interest.

In view of growing pendency of refund cases as pointed out by the CAG, Central Board of Direct Taxes (CBDT) has issued instructions to all the Commissioners of Income Tax across the country to expedite process of disposal of refund cases. All IT officers have been advised to issue all pending refunds of assessment years 2009-10 and 2010-11 by March 28 this year, CBDT said.