Purchase of items in excess of two-and-half times the income filed under annual information return (AIR) may become one of the criteria for selecting cases for scrutiny assessment by the income tax department.

During a meeting with the Central Board of Direct Taxes, the income tax department, Mumbai division, suggested this as one of the measures to bolster tax collection in 2006-07.

Levying of tax on co-operative banks and raising the ceiling of minimum alternate tax are likely to help in boosting collections.

However, the department has suggested lowering of 2006-07 target for Mumbai to Rs 64,000 crore (Rs 640 billion) from Rs 69,548 crore (Rs 695.48 billion).

This is because, with banks and oil companies not expected to do well, the tax collection this year in all probability would fall short of the target, said official sources. These sectors make up for more than 80 per cent of the total tax collection from Mumbai circle.

The expectations of subdued performance is also reflected in the dismal performance of corporates and banks in the first quarter advance tax payments, he added.

Indian Oil Corporation [Get Quote], which used to be the lead tax payer, is understood to have not paid advance taxes in the first quarter of 2006-07 following a loss of around Rs 5,000 crore (Rs 50 billion).

Oil companies are suffering losses as the rise in international crude prices has not been fully passed on to retail customers.

The Mumbai zone of the Income tax department had collected Rs 53,000 crore (Rs 530 billion) in 2005-06 against a target of Rs 57,700 crore (Rs 577 billion). It had collected around Rs 42,000 crore (Rs 420 billion) in 2004-05.

In 2005-06, advance tax payments for the fourth quarter was a major contributor to the total annual collections. Indian Oil Corporation paid Rs 542 crore (Rs 5.42 billion), next only to Rs 655 crore (Rs 6.55 billion) by Life Insurance Corporation.

IOC had not paid advance tax in the first and the third quarters of 2005-06. It paid a small amount of Rs 67 crore (Rs 670 million) in the second quarter of 2005-06.

The country's largest oil marketing company had paid Rs 1,384 crore (Rs 13.84 billion) as tax in 2004-05.