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Revenue Sector Andhra Pradesh Report of the Comptroller and Auditor General of India on Revenue Sector for the year ended March 2016 Government of Andhra Pradesh Report No. 7 of 2016 TABLE OF CONTENTS Reference to Paragraph Page Preface v Overview vii CHAPTER – I : GENERAL Revenue Receipts 1.1 1 Analysis of Arrears of Revenue 1.2 3 Arrears in Assessments 1.3 3 Evasion of Tax detected by the Department 1.4 3 Pendency of Refund cases 1.5 4 Response of the Government/Departments 1.6 4 towards Audit Analysis of the mechanism for dealing with the 1.7 7 issues raised by Audit Audit Planning 1.8 10 Results of Audit 1.9 11 CHAPTER – II : VALUE ADDED TAX AND CENTRAL SALES TAX Tax Administration 2.1 13 Internal Audit 2.2 13 Results of Audit 2.3 14 Input Tax Credit 2.4 14 Levy of Penalty 2.5 17 Non-levy of interest and penalty for belated 2.6 19 payment of Tax VAT on Works Contracts 2.7 20 Tax on interstate sales 2.8 23 Non-levy of tax due to incorrect exemption of 2.9 27 turnover s Short levy of VAT due to incorrect determination 2.10 28 of taxable turnover Under-declaration of tax due to application of 2.11 29 incorrect rate of tax Non-levy of interest on belated payment of 2.12 30 deferred tax i Reference to Paragraph Page Short payment of tax and non-levy of penalty due 2.13 31 to non-conversion as VAT dealer Non-levy/Short levy of tax on transfer of right to 2.14 32 use goods Non-levy of purchase tax 2.15 32 CHAPTER – III : STATE EXCISE DUTY Tax Administration 3.1 35 Internal Audit 3.2 35 Results of Audit 3.3 36 Non-levy of Additional Licence Fee on 3.4 36 non-contiguous additional enclosures Short levy of annual Licence Fee on retail liquor 3.5 37 shops Non-levy of permit room Licence Fee 3.6 37 CHAPTER – IV : STAMP DUTY AND REGISTRATION FEE Tax Administration 4.1 39 Internal Audit 4.2 39 Results of Audit 4.3 40 Performance Audit on “Revision and 4.4 40 Implementation of Market Value Guidelines” Short levy of Stamp Duty and Registration Fee on Agricultural Lands converted to 4.5 55 Non-agricultural use Short levy of Stamp Duty and Registration Fee due to delay in implementation of revised rates 4.6 57 from the effective date Short levy of Stamp Duty due to 4.7 58 misclassification of documents Short levy of Stamp Duty and Registration Fee 4.8 59 on Leases Non-levy/ Short levy of Duties and Fees due to 4.9 60 under-valuation of properties CHAPTER – V : TAXES ON VEHICLES Tax Administration 5.1 63 Internal Audit 5.2 63 Results of Audit 5.3 64 ii Reference to Paragraph Page Non-realisation of Quarterly Tax and penalty 5.4 64 Non-monitoring of renewal of Fitness 5.5 65 Certificates Non-levy of Green Tax 5.6 66 Non-realisation of Compounding Fee 5.7 67 Non-realisation of Bilateral Tax and penalty 5.8 67 Short levy of tax on non-transport vehicles 5.9 68 Arrears of revenue in Transport Department 5.10 69 CHAPTER – VI : LAND REVENUE Tax Administration 6.1 71 Internal Audit 6.2 71 Results of Audit 6.3 72 Maintenance of Land Records 6.4 72 Levy of conversion tax and penalty 6.5 83 CHAPTER – VII : OTHER TAX AND NON-TAX RECEIPTS Results of Audit 7.1 87 REVENUE DEPARTMENT Land Revenue Non-levy of interest on arrears of water tax 7.2 88 collected INDUSTRIES AND COMMERCE DEPARTMENT Mines and Minerals Short levies on mineral revenue 7.3 88 CHAPTER – VIII : FOLLOW-UP AUDIT Follow-up Audit on the Audit recommendations pertaining to the Performance Audit on 8.1 91 “Functioning of the Prohibition and Excise Department” ANNEXURES AND GLOSSARY Annexure-I 6.4.5 97 Annexure-II 6.4.6 98 Annexure-III (a), (b), (c) 6.4.9.4 99 Annexure-IV 6.4.13 100 Glossary 102 iii P R E F A C E This Report of the Comptroller and Auditor General of India for the year ended 31 March 2016 has been prepared for submission to the Governor of Andhra Pradesh under Article 151 of the Constitution of India. The Report contains significant findings of audit of Receipts and Expenditure of major revenue earning Departments under Revenue Sector conducted under the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971. The instances mentioned in this Report are those, which came to notice in the course of test audit during the period 2015-16 as well as those which came to notice in earlier years but could not be reported in the previous Audit Reports. Instances relating to the period subsequent to 2015-16 have also been included, wherever necessary. The audit has been conducted in conformity with the Auditing Standards issued by the Comptroller and Auditor General of India. v OVERVIEW The Report contains 33 paragraphs involving 54.46 crore relating to non-levy / short levy of taxes, interest, penalty etc., including a Performance Audit on “Revision and Implementation of Market Value Guidelines” with financial impact of 2.95 crore and a Follow-up of Performance Audit on “Functioning of the Prohibition and Excise Department”. Some of the significant audit findings are mentioned below: I GENERAL • The total revenue receipts of the State Government for the year 2015-16 amounted to 88,648 crore. Of this, Tax Revenue ( 39,907 crore) and Non-Tax Revenue ( 4,920 crore) accounted for 51 per cent of the total revenue receipts of the State. The remaining 49 per cent was received from Government of India as State’s share of divisible Union Taxes ( 21,894 crore) and Grants-in-Aid ( 21,927 crore). (Paragraph 1.1.1) • Test-check of 443 units relating to Value Added Tax, State Excise, Motor Vehicles Tax, Land Revenue, Stamp Duty and Registration Fee etc., conducted during 2015-16, showed preliminary audit findings involving non-levy / short levy of taxes, duties etc. amounting to 689.02 crore in 1,870 cases. (Paragraph 1.9.1) II VALUE ADDED TAX AND CENTRAL SALES TAX • In nine offices, Input Tax Credit (ITC) of 10.25 crore was incorrectly allowed to 10 dealers. (Paragraph 2.4.1) • In five offices, the Department allowed ITC of 30.07 lakh to six dealers on ineligible items. (Paragraph 2.4.2) • In eight offices, the Assessing Authorities did not levy / short levied penalty of 6.24 crore on under-declared tax in 14 cases. (Paragraph 2.5.1) • In four offices, the Assessing Authorities did not levy / short levied penalty of 2.20 crore on wilful under-declaration of tax by five dealers. (Paragraph 2.5.2) vii Audit Report (Revenue Sector) for the year ended 31 March 2016 • In 32 offices, interest of 1.40 crore and penalty of 3.54 crore were not levied by the Assessing Authorities though 142 dealers had paid tax with delays ranging from 1 to 1,315 days. (Paragraph 2.6) • In four offices, the taxable turnover of seven works contractors was determined incorrectly by the Assessing Authorities resulting in short levy of tax of 1.81 crore. (Paragraph 2.7.1) • In five offices, the Assessing Authorities short levied tax of 69.33 lakh on five works contractors who opted to pay tax under composition scheme. (Paragraph 2.7.2) • In two offices, the Assessing Authorities failed to levy tax of 50.70 lakh on two works contractors who did not maintain detailed accounts. (Paragraph 2.7.3) • In four offices, the Assessing Authorities had short levied / not levied tax of 1.42 crore in five cases due to acceptance of invalid statutory forms towards interstate sales. (Paragraph 2.8.1) • In nine offices, the Assessing Authorities had incorrectly determined taxable turnover under CST Act in 11 cases, which resulted in short levy of tax of 92.18 lakh. (Paragraph 2.8.2) • In one office, the Assessing Authority allowed concessional rate of tax on the interstate sales turnover based on counterfeit 'C' forms, which resulted in short levy of tax of 6.77 lakh and non-levy of penalty of 25.88 lakh. (Paragraph 2.8.3) • In five offices, the Assessing Authorities incorrectly exempted sales turnover of 'textiles and fabrics' in nine cases, which resulted in non-levy of tax of 1.86 crore. (Paragraph 2.9) • In 16 offices, incorrect determination of taxable turnover by the Assessing Authorities resulted in short levy of VAT of 73.84 lakh in 27 cases. (Paragraph 2.10) viii Overview • In 11 offices, application of incorrect rates of tax resulted in under declaration of tax and consequential short levy of tax of 66.02 lakh in 13 cases. (Paragraph 2.11) • In five offices, the Assessing Authorities had not levied interest of 64.46 lakh on six dealers who paid deferred tax of 3 crore with delays ranging from 57 to 1,089 days. (Paragraph 2.12) III STATE EXCISE DUTY • In an office of Prohibition and Excise Superintendent, additional licence fee of 36.90 lakh was not levied on additional enclosures in nine restaurant and bars for the licence period 2014-15. (Paragraph 3.4) • In two offices of Prohibition and Excise Superintendents, licence fee of 14 lakh was short levied on four retail liquor shops for the licence period 2014-15.
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