At a time when direct tax collections increased 19%, the tax department has failed to adhere to its own compliance when it comes to tax refunds of salaried employees, with the backlog of 2007-08 still not cleared. Mumbai, which contributes close to 40% of the overall tax collections, is the worse-affected.

NDTV has learnt that due to technological & internal delays, the Income Tax Circle of Mumbai is yet to clear the backlog of cases pertaining to assessment year of 2008-09.

These refunds pertain primarily to the salaried employees involving refunds below Rs. 1 lakh. Of the total of 76,459 cases pending, only 28,080 has been processed till September 27, 2010.

The picture for assessment year 09-10 is not any better, with only 50,351 returns being processesed from a total of 7,10,703 till the same date. Of the total returns filed in Mumbai, 30% are for tax refunds.

"In 2007, we started the process of moving towards a paperless regime. There were some technical problems that emerged and hence there is a backlog.

By March end, we will clear a majority of the backlog, if not 100%, said CBDT chairman SSN Moorthy.