By Our Reporter
SHILLONG, March 26: The Comptroller and Auditor General of India (CAG) report for the year ending March 31, 2020, has unearthed financial lapses in the KHADC including an irregular payment of Rs 1.50 crore by the Council for consultancy services. It has also identified systemic deficiencies and a lack of internal controls in the collection of Professional Tax by the KHADC.
The report was presented on the first day of the council’s budget session on Wednesday.
The report recommended an investigation into the selection process of M/s TA Consultancy Services and the individuals responsible for the payment, particularly since the work was carried out by the council’s technical branch.
According to the CAG, M/s TA Consultancy Services, Shillong, submitted an application on October 10, 2018, offering consultancy services for project-related tasks such as preparing Detailed Project Reports (DPRs), monitoring civil works, drafting concept papers, and project execution. However, the offer did not specify rates or terms of engagement.
On January 18, 2019, the Secretary of the Executive Committee engaged the firm for preparing DPRs, plans, estimates, and architectural drawings. The firm was offered five percent of the total amount to be received from the Central/State Government, without a defined timeline. M/s TA Consultancy Services accepted this offer on February 8, 2019.
In May 2019, the firm requested the Deputy Chief Executive Member of KHADC to release consultancy fees, but the request did not specify the number of DPRs, project details, or fee amount. Despite this, the Council paid Rs 30.61 lakh on July 18, 2019, as a mobilisation fee.
The CAG noted that the consultancy fees were drawn from the five percent administrative charges on a Rs 123.45 crore government grant from 2016-17, with the condition that the amount would be recouped when grants for “Areas Not Included in Part IX and IXA of the Constitution” for 2018-19 were received.
“Even though the grants under ‘Areas Not Included in Part IX and IXA of the Constitution’ had not yet been received, the Council paid the firm in advance by utilising scheme funds from a different financial year,” the report stated. In August 2019, KHADC received Rs 50.18 crore in grants-in-aid for “Areas Not Included in Part IX and IXA of the Constitution” from the Central Government, through the State Government, for the financial year 2018-19.
On September 13, 2019, the Council paid an additional Rs 61.22 lakh as an advance payment to M/s TA Consultancy Services for preparing DPRs, proposals, plans, and estimates from this grant-in-aid.
A third and final payment of Rs 58.16 lakh was made on April 24, 2020, to M/s TA Consultancy Services as the full consultancy fee for the preparation of DPRs, proposed plans, and estimates from the Rs 15.30 crore grant received.
Professional tax
On irregularities in Professional Tax (PT) collection, the CAG report said that despite growth in the Council’s revenue from PT, there are various systemic deficiencies and internal control issues.
The CAG highlighted inconsistencies in how Inspectors and Sub-Inspectors assessed PT payable by traders and shopkeepers. Additionally, no mechanism was in place to verify whether assessees had actually deposited their taxes.
Due to the absence of an updated and comprehensive database of assessees, PT collection was incomplete, leading to potential revenue loss, fraud risks, and budget shortfalls.
The report clarified that PT should be collected by KHADC officers only within the jurisdiction of the Khasi Hills Autonomous District, excluding cantonment and non-scheduled areas of Shillong. It further emphasised that PT collection should be based on the assessee’s place of work or business address, and the revenue must remain with the Council, rather than being shared with the state government.
Upon reviewing Council records, the CAG discovered major deficiencies in the internal control mechanisms for PT collection. The report noted that state government offices, traders, and other entities failed to submit returns for the financial years 2017-18 to 2019-20. Moreover, the Assessing Authority had not issued notices for non-submission of returns.
According to the CAG, the Council lacked crucial data on the number of assessees, their gross annual income, and the actual PT amounts deposited by state government offices. This incomplete database negatively impacted revenue collection, reporting accuracy, budgeting, and compliance enforcement, increasing the risk of tax evasion.
The report further observed that returns submitted by Probationary Officers (POs) from government offices and banks were not in the prescribed format. Additionally, the Assessing Authority failed to issue written orders assessing individuals and determining their tax obligations based on submitted returns, as required under Section 7 of the Act. There were also no written orders issued for defaulters, preventing tax liabilities from being determined through best judgment assessment.
The CAG raised concerns that incomplete returns were accepted without follow-up for corrections, increasing the risk of inaccurate assessments, reconciliation challenges, and tax evasion. Accepting returns without proper assessment violated Section 8 of the Act, leading to issues such as missing audit trails, weak oversight, potential fraud, and inefficiencies in completing assessments.
The report also pointed out that assessment registers were not maintained in the prescribed format, and no system was in place to monitor PT realisation or track the number of assessees. This lack of oversight increased the risk of tax assessment errors, tracking difficulties, and lost revenue from unassessed individuals.
To address these issues, the CAG recommended that the KHADC implement mechanisms to collect updated data on eligible taxpayers. It also suggested that the Council conduct regular surveys through inspection officers to ensure all eligible taxpayers are registered.
Additionally, the Council was urged to enforce the proper filing of returns in accordance with the Act, assess returns accurately, and maintain assessment registers systematically. The CAG emphasized the need to implement an IT system to improve the assessee database and enhance the overall tax collection process.