Continuous rise in pendency of refund claims cost the exchequer interest of a whopping Rs 5,785 crore during 2008-09, the Comptroller and Auditor General of India said today.

A decade of computerisation by the Income Tax department has gone by but the pendency rate of refund claims is on risewe recommend that the department identify the gaps in automation, CAG said in a report on Income Tax Refunds tabled in Parliament.

During the four years from 2005-06 to 2008-09 reviewed by CAG for income tax refunds processed, the apex auditor said that it found procedural irregularities in refunds aggregating Rs 5,803.5 crore, the tax effect of erroneous refunds being Rs 135.8 crore.

The auditor also found that the timeliness in processing of refunds is much longer than international standards which range from 24 days to six weeks. Our analysis showed that the average time taken for processing of refund claims leading to issue of refund vouchers is 10 month. The average time taken for the assessee to receive the refund voucher after its issue is 40 days, CAG said.

CAG, in its recommendations to the finance ministry said that the ministry should conduct a review of gap in automation which are impeding the clearance of refund claims. It also suggested extension of the refund banker scheme that is only available in some cities now. Further, focusing on the inconvenience caused to senior citizens due to this, CAG said that the ministry should set up a mechanism for filtering refund claims of senior citizens.