CBDT needs to shed inertia to reap full benefits of IT
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Regards,
MAY 04, 2013
By TIOL Edit Team
THE more Income Tax Department (ITD) computerizes; the more it falters in cashing on information technology (IT) as means to widen the tax base, check tax evasion and improve tax collection efficiency.
One is bound to come such a conclusion after go through two latest performance audit reports of Comptroller and Auditor General (CAG) on ITD and the recent report of Parliamentary Standing Committee (PSC) on Department of Revenue's (DOR's) Demand for Grants for 2013-14.
One would arrive at the same conclusion by flipping through IT tender documents issued by ITD over the last five years or so. For instance,in a tendering invitation issued in October 2010 for procurement of hardware and software for data extraction and analysis, ITD said:"Search & survey operations of tax payers are an important part of investigation units of the Income Tax Department (ITD) in India. In the course of search & survey operations at the premises of tax payers, digital evidence stored on hard drives of computers & laptops, USB flash drives, USB hard drives, iPods, optical media, mobile phones etc. are found.Specialized forensic labs exist only at Mumbai and Delhi. Therefore, the examination of such digital storage across the length and breadth of the country is mostly manual."
The reasons why ITD is unable to reap full benefits of Information Technology are several. One major factor is its inability to optimally utilize all the modules and application software that have been inducted in its computer network over the years.
The second cause is over-dependence on outsourcing of services such as installing, operating and managing IT networks to outside agencies. ITD is also heavily dependent on additional outsourcing of manpower for different jobs varying from data entry to removing the technical glitches.
The third reason is the IT advances especially the development of new applications is outpacing the development of IT skills within ITD.
The fourth reason, perhaps not articulated by CAG, appears to be lack of motivation and conviction among a section of staff to embrace IT whole-heartedly.
The fall-out of such fundamental deficiencies has been studied by CAG in its Performance Audit of IT Applications in ITD. No one knows how thousands of crore of revenue ITD is forgoing because of its failure to tap IT in an efficient and integrated manner.
CAG found that Assessing Officers (AOs) do not record details of scrutiny assessment in Assessment Information System (AST) module. This makes scrutiny process incomplete and affects systemic monitoring of tax collections and refunds.
It is disgusting to learn from the report that monitoring feature of AST remains inoperative as AOs do not record details of penalty and appeals proceedings in it.
As put by CAG, "ITD did not maintain legacy data linkages with current assessment, leaving the possibility open that assesses could avail themselves of undue benefits."
ITD's computer network is unable to generate important management information system (MIS) reports, thereby hampering effective tax planning.
The report says that "huge amounts of TDS are lying unclaimed in ITD system which indicates that all corresponding income of assesses has not been offered to tax."
Turn now to another CAG report on Performance Audit of Strengthening the Tax base through use of Information. It focuses on the working of ITD's Central Information Branch (CIB), which is supposed to play vital role in strengthening and widening tax base.
CIB did not collect information from all the compulsory source codes and approved optional sources codes. It did not upload collected information in a timely and complete manner to CIB module. It faced problems in this due to technical reasons. It uploaded information of earlier years as information of current year. CIB also defaulted in classifying and maintaining the data and did not utilize the full functionalities of CIB module.
CAG has thus rightly recommended that ITD may devise a suitable mechanism including induction of business intelligence tools to ensure effective utilization of collected information. ITD these issues would get addressed through its separate data warehousing project and a module named Income Tax Business Application.
One does not know what happened to ITD's proposal on these as elucidated in its tender document issued in 2008for setting up an Integrated TaxpayerData Management System (ITDMS).
ITD had then stated that it was looking for an integrated solution that will build a data bank of millions ofrecords, trace relations/ associations (family tree) between the data andentities, and track transactions of each of the entity using identity searchtechnologies in general and approximate name search and addressmatching technologies in particular with specific reference to the Indiannames and addresses.
When next time CAG does performance audit of ITD's IT applications, it should cover each and every application and not restrict audit to a few modules as it this time. That apart, it should also find gaps in human resource development of both IT-dedicated staff and other officials who have to use IT as tool to perform their diverse jobs.
As noted by PSC, "computerization has actually increased the workload, as the availability of information through usage of technology throws up more areas of investigation for preventing revenue leakage."
It has cited certain specific cases to drive home the ITD's contention that computerization increases IT officials' workload. A case in point is receipt of 4 lakh pieces of information involving a whopping Rs 106 lakh crore through Annual Information Return (AIR). These pertain to suspected unreported income. In about 30% of these cases, the transactions reported do not contain valid PAN. The requisite follow-up of such cases is not possible for paucity of manpower.
PAC thus advised DOR to promptly appoint staff at "cutting edge levels"and rationalize and re-deploy manpower according to changing priorities and technological requirements.
The Finance Ministry must pay special attention to manpower requirements of ITD to increase direct taxes receipts by leaps and bounds.
Regards,
Pawan Singla
BA (Hon's), LLB
Audit Officer
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