Shortage of manpower in the income tax department has affected the scrutiny of tax returns leading to loss of revenue worth hundreds of crores as large number of tax payers are not reporting their total income in returns.

"Over five lakh tax returns were pending for scrutiny at the beginning of current financial year. About 3.5 lakh returns have been added this year for scrutiny. But with a meagre strength of about 2,600 officials, these are unlikely to be scrutinised," a senior income tax department official said.

At present, about one per cent of total returns are selected through the Computer Aided Scrutiny Selection (CASS) for scrutiny, besides some returns selected manually. Over three crore returns are expected to be filed this year.

Sources said lack of adequate number of returns for scrutiny could result in revenue loss amounting to hundreds of crores as large number of taxpayers are not reporting their total income in returns.

If a return has not been selected for scrutiny within one year after filing the return, it implies that a tax evader could rest in peace and the evasion simply goes unreported, sources said.

The department has pointed out that as against the international norm of processing 60 returns per official, an assessing officer in India is expected to scrutinise over 200 returns every year apart from handling other administrative responsibilities.

"It's impossible for one person to assess so many cases in a year," an official source pointed out.

Sources said since the direct collections are growing by over 40 per cent, there is slight complacency to increase the number of returns for scrutiny. Direct tax collections stood at Rs 57,373 crore in the first quarter this fiscal.