Rapping the Government for the shortcomings, the national auditor said the tax collection would improve significantly if these deficiencies are addressed.

"Test checks of records of the departments during local audit conducted during the year 2009-10 revealed under assessment/short payment/loss of revenue aggregating Rs 3,140 crore in 2,696 cases," the CAG said in its report for the year ending March 31, 2010.

The CAG said it found under assessment of VAT to the tune of Rs 2,672 crore while pointing towards several cases of tax evasion and other irregularities.

"We noticed during the test check of the records of 68 units relating to VAT, an underassessment of tax and other irregularities involving Rs 2,672 crore in 2579 cases."

The report said the review on levy and collection of stamp duty and registration fee revealed a "number of system and compliance deficiencies" which had a total revenue implication of Rs 467 crore.

About collection of the stamp duty and registration fees, the auditor said there was no mechanism to ensure that both the fees are levied on all instruments which are due for registration as per provision of the laws.

On collection of stamp duty and registration fees, the concerned department has failed to coordinate with various offices to stop the leakage in tax collection system, the Comptroller and Auditor General said.

The auditor also asked the government to consider fixing time frame for finalisation of cases of undervaluation.

The report said application of incorrect rate of tax resulted in short payment of Rs 10.41 crore, including interest of Rs 2.82 crore.

It also pointed towards failure of tax department to recover additional luxury tax and interest which resulted in short recovery of Rs 12.34 lakh.

As per the report, the fiscal deficit of Delhi has soared significantly touching nearly Rs 3,550 crore in the financial year 2009-10 as compared to Rs 245 crore in 2005-06, the CAG said in its latest report.

The auditor said the fiscal deficit has increased in the year 2009-10 by 25.70 per cent as compared to the previous year.

Officials in finance department said the fiscal deficit has gone up primarily due to increased spending on account of preparation for the Commonwealth Games.

On revenue generation by the Delhi government in 2009-10, the auditor said a total of Rs 16,915 crore was collected as tax revenue while Rs 3,536 crore was given by the Centre.