Official auditor CAG on Friday pulled up the Income Tax department for not being able to retain the existing tax base in 2008-09, particularly among corporate taxpayers.
"The number of assessees declined by 3 per cent compared to an increase by 7.6 per cent in 2007-08. The decline was sharper among corporate assessees, indicating, inter alia, stop-filing which would nee to be reviewed by the Board (Central Board of Direct Taxes)," the Comptroller and Auditor General (CAG) said in a report tabled in Parliament today.
The decline was at variance from the accepted notion that simple tax laws and lower tax rates promote better tax compliance, CAG said.
"It is a matter of concern that the Department which is otherwise aiming towards widening the tax base had not managed to retain the existing tax base.
Evidently, the department is not utilising the mechanisms available to widen the tax base," it said.
Though the taxpayer base grew from 271.8 lakh in 2004-05 to 326.5 lakh tax payers over the last five years, the number of tax assessees fell by 3 per cent in 2008-09.
The report also pointed out that of the 7.5 lakh companies registered with the Registrar of Companies as on March 31, 2009, only 3.3 lakh are recorded with the Income Tax department as corporate assessees, leaving a filing gap of 4.2 lakh companies.
"The Board would be advised to reconcile the discrepancy for accurate assessment of filing gap," CAG said.