The income tax department is likely to be holding back the refunds to exhibit a high tax collection figure.
The Income Tax (I-T) Department is holding back tax refunds of many private and public sector enterprises, likely equaling to 5-10 percent of total tax collection in 2017-18, sources in the department told Moneycontrol. The delay in some cases extends up to four years.
Direct tax collection in 2017-18 was Rs 9.95 lakh crore, exceeding the revised budgeted target of Rs 9.8 lakh crore.
The I-T Department is likely to be holding the refunds to exhibit a high tax collection figure. An additional commissioner in the department told Moneycontrol, "We have not received any formal communication from Central Board of Direct Taxes to delay tax refund to corporates. However, we are also not giving approval for any major tax refund to corporates."
Speaking about the volume of the pending refunds, the source said, "About Rs 1 lakh crore of tax refund is stuck at this point of time across the country, which is almost 10 percent of tax collection. In my circle alone, thousands of crore of tax refund is pending. In some companies, the tax refund is pending for the last 3-4 years."
Another officer at Aaykar Bhavan in Delhi told Moneycontrol, “The delay is creating pressure on us and we have shared this concern in one of the meetings of the unions of Indian Revenue Services, Mumbai, in October."
Withholding the refund can be expensive for the government.
As per the Income Tax Act, we have to pay an interest on delayed tax refund at the rate of six percent after 90 days in the case of an appeal. However, the department has held back the refund to show a good number in tax collections, another source said.
Aarti Sathe, an Independent Counsel who deals in income tax cases told Moneycontrol “The department has shown a very lackadaisical attitude towards issuing refunds. In most cases, it amounts to denying the assessee the money which rightfully belongs to them. The Dept is bound to refund delayed money with interest as per section 244A of the act. With the present amendments of digitising filing returns and refunds without human interface, hopefully, this problem will be resolved."
Revenue from direct tax grew 13.6 percent to Rs 7.43 lakh crore in the first nine months of the current financial year 2018-19 (April-March. The tax receipt figures indicate net direct tax collection, which is arrived after adjusting refunds.
Following is the response of the CBDT to a query sent by Moneycontrol:
"It is stated that the Department has been focusing on issuing refunds expeditiously. It is pertinent to state that during F.Y. 2018-19, over 2.57 crore refunds have been issued as against 1.75 crore refunds during the corresponding period of F.Y. 2017-18, marking, not only an increase of 47% but also representing more than 94% of all refund claims.""In fact, the total amount of refunds issued during F.Y. 2018-19 stands at Rs.1.42 lakh crore as compared to refunds of Rs. 1.26 lakh crore issued in the corresponding period of the immediately preceding year. This translates into an increase of 12.5% over the preceding year. The balance refund claims pertain to such cases as were either selected under scrutiny or awaiting response from taxpayers on defective returns or are under processing as the income tax returns claiming such refunds have been filed only in the past few months."