Report No.23 of 2018 - Performance Audit on Assessment of Assessees in Real Estate Sector, Union Government, Department of Revenue - Direct Taxes

Overview

Real estate can be segregated into three broad categories - i) Residential comprising developed land, residential houses and condominiums; ii) Commercial comprising office buildings, warehouses and retail store buildings and iii) Industrial which includes factories, mines and farms, on the basis of its use.  There are various players involved in this sector such as land owners, developers, contractors, sellers/buyers and real estate agents etc. 

The performance audit covered the scrutiny assessments completed during the financial years 2013-14 to 2016-17.  Audit checked 17,155 assessment records (approx. 22 per cent) with assessed income of ` 1,02,106 crore.  Audit noticed 1,183 mistakes (approx. 7 per cent of the audited sample) having tax effect of ` 6,093.71 crore, thus causing loss of revenue to the Government. 

Audit noticed several companies outside the tax net.  There is no mechanism with ITD to ensure that all the registered companies have PAN and are filing their ITRs regularly.  The system in the ITD to ensure compliance of filing of ITRs by the sellers of high value immovable properties was not effective.  The enforcement of provisions of the Act in respect of filing AIRs by Registrar/Sub-Registrar of properties in respect of sale or purchase of an immovable property by the ITD was weak.

There is no provision in the Income Tax Act to deal with the share application money which is pending for allotment of shares for long period which is a lacunae in the Act.  The assessing officers were not following the provisions of the Act meticulously and committed mistakes in adopting the correct figures, applying provisions of the Act and in admitting expenditures/ deductions/ exemptions.   

Enforcement of conditions for allowing deductions under section 80‑IB(10) was weak, leading to benefits being availed by non-eligible persons/ unintended groups.  Thus, the targeted groups could not be benefited and the revenue foregone on this count year after year by the Government may have benefitted unintended persons.

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