The Income Tax department is planning to start internal audits for its various tax collection arms after it was rapped by the CAG recently for non-recovery of tax arrears worth over Rs 4,500 crore from various entities.

The tax department's idea through these audits is to plug any leakages owing to various reasons and better its revenue collection.

The department would study the norms and practices followed for internal audit by diamond, construction, pharma and banking sectors in this regard.

The frequency of the audits could be annually or twice in an year.

The discussions were part of the deliberations during the recently concluded conference of I-T Chief Commissioners and Director Generals in the national capital here.

The Comptroller and Auditor General (CAG), in its report tabled in Parliament in December last year, had said that it had "found several cases where the Assessing Officers (AOs) did not communicate updated information relating to demands to Tax Recovery Officers (TROs)."

"We noticed 1,54,198 cases involving outstanding demands of Rs 4,543.83 crore where the demand was not transferred to the TROs inspite of non-recovery for more than one year," the CAG report said.

The report on 'recovery of arrears of tax demand' also "noticed instances of non-disposal of arrear cases and differences in the figures of arrear demand in the books of the AOs versus TROs due to the lack of coordination between them."

Accordingly, the CAG had also recommended that the Finance Ministry "may consider working out appropriate modalities for improving the liaison between AOs and TROs under supervision of the higher authorities to ensure better coordination and speedy disposal of cases."

"The AO may ensure timely transfer of the undisputed cases of unrealised demand to the TRO," it added.

"Internal audits by chartered accountants and our own officials will also help us in plugging the leakages which could identify the reasons responsible for it including as what was suggested by the CAG," a senior I-T official said.

Calling TROs the "most important functionary" in monitoring and recovery of I-T arrear demands, the CAG also asked the Central Board of Direct Taxes (CBDT) to make the roles of TROs independent from that of AOs. (Economic Times)