The Comptroller and Auditor General (CAG) has raised concern about the Central Board of Direct Taxes (CBDT) incurring expenditure to the tune of Rs 37,000 crore over the last five years without taking approval of Parliament.

In its report on the Union Accounts tabled in Parliament on Tuesday, CAG has pointed out how the CBDT, under the department of revenue in the finance ministry, has violated provisions of Article 114(3) of the Constitution which stipulates that no money shall be withdrawn from the Consolidated Fund of India except under appropriation made by law.

The auditor has argued that the payment of interest on refunds of excess tax is a charge on the Consolidated Fund of India and is therefore payable only after having been authorized by Parliament.

The excess expenditure, as pointed out by the auditor, works out to over 2.3 times the total expenditure budget of CBDT (Rs 4,522 crore) for 2010-11.

A senior CAG official said it would be untenable for the CBDT to show an expenditure on only refunds of interest of such magnitude, and hence to avoid any questions from MPs on the subject it has taken the safe route of concealing an accepted expenditure item by netting it off from collections of revenue.

"The CBDT has been classifying the interest on refunds of excess tax as reduction in revenue and this incorrect practice has been commented upon in the last two years' CAG report on Union Accounts as well as in the CAG's report on direct taxes for 2008 and in earlier years also, but no corrective action has been taken by the department," CAG observes.

Audit scrutiny revealed that as in the past, no budget provision for interest on refunds was made in the budget estimates for the fiscal 2010-11 and an expenditure on interest on refunds amounting to Rs 10,499 crore was incurred by the department in contravention of the Constitutional provision.

"Expenditure of the order of Rs 37,365 crore on interest payments had been incurred over a period of the last five years without obtaining approval of Parliament through the necessary appropriations," the report says.

Expenditure on interest on refunds of taxes

Years-----------Expenditure (In Rs Crore)

2006-07-------------3,693

2007-08-------------4,444

2008-09---------5,778

2009-10---------12,951

2010-11--------10,499

Total----------37,365

Source: CAG