Questioning the assessment of profits of six companies, including two each of Reliance and Videocon, the Comptroller and Auditor General has pulled up tax authorities for lapses causing revenue loss of Rs 521 crore (Rs 5.21 billion) to the government.
"Audit scrutiny of assessments revealed loss of revenue of Rs 521.51 crore on account of incorrect application of the special provisions while computing book profit," CAG said in its 13th report 'Systems Appraisal', presented in Parliament earlier this week.
Reliance Industries alone accounted for revenue loss of Rs 498 crore (Rs 4.98 billion) during a six-year period beginning 1997-98, the CAG report pointed out.
CAG said: ". . . the department did not accept the observations in the case of Reliance Industries Ltd on the ground that revaluation was done in compliance with accounting standards. . ."
In the light of the above, CAG said the reply was not 'tenable' as the claim of deduction was in 'clear contravention' of the letter and spirit of the Special Provisions of the Act.
"Assessing officers irregularly allowed deduction of amounts depicted as withdrawn from reserves against which additional depreciation arising from selective revaluation of assets was set off in case of RIL, Videocon International, Videocon Appliances, Reliance Industrial Infrastructure, SPIC and Janpath Investment, while computing book profit," CAG said.
Besides RIL, incorrect assessment of book profits of Reliance Industrial Infrastructure led to revenue loss of Rs 1.78 crore (Rs 17.8 million) during 2000-01, the report said.
Elaborating on the nature of mistake in the case of Reliance, CAG said: "The assessing officer accepted set off of additional depreciation, which was depicted as withdrawal from the 'General Reserve' account."
"Profit and loss account was not credited with the withdrawal. The amount of set off was incorrectly reduced in computation of book profit which was not in accordance with special provisions. Accretion to reserve was not added to book profit of relevant year," it said.
The revenue loss was Rs 11.85 crore (Rs 118.5 million) in the case of SPIC, Rs 3.97 crore (Rs 39.7 million) for Videocon International and Rs 2.91 crore (Rs 29.1 million) for Videocon Appliance, CAG said.
It said the tax department accepted the audit observation in the case of SPIC and took remedial action to disallow the incorrect deduction from book profit.
