CAG report reveals ₹7-cr loss due to Chandigarh MC’s laxity in recovering parking licence fee
According to CAG’s report, in January 2020, the Chandigarh MC had allotted 32 parking areas in Zone 1 and 57 in Zone 2 to two contractors
The Comptroller and Auditor General of India (CAG) has issued a special report highlighting three main issues in Chandigarh, including the municipal corporation’s undue benefit to a parking contractor, resulting in a ₹7.26-crore loss.
The CAG’s report for the year ending March 2022 will be submitted to the President of India under Article 151 of the Constitution. It contains compliance audit results of 23 Union ministries and departments, including Union territories without legislatures. The report has already been presented in the recent sessions of Lok Sabha and Rajya Sabha.
According to the report, in January 2020, the Chandigarh MC allotted 32 parking areas in Zone 1 and 57 in Zone 2 to contractors Ram Sunder Prasad Singh and Pashchatya Entertainment (P) Limited for an annual licence fee of ₹5 crore and ₹5.51 crore, respectively, for three years (extendable by two years from January 23, 2020).
However, the contractors deposited only ₹7.01 lakh in stamp duty instead of the required ₹23.67 lakh, causing a revenue loss of ₹16.66 lakh. Additionally, ₹7.26 crore in licence fees remains unpaid (as of January 2023) by the Zone 2 contractor, due to MC’s failure to forfeit the bank guarantee.
The issue was reported to the corporation in September 2020. In December 2022, MC responded, stating that it lacked authority over registration fees and stamp duty, which was handled by the UT sub-registrar. However, this reply was deemed unacceptable, as MC failed to verify and report the contractors’ misrepresentation in their Lease Licence Deed.
In April 2023, MC stated it had taken corrective actions: officials were charge-sheeted and a letter was sent to the collector, Stamp Duty, Chandigarh, to recover the deficient amount as arrears of land revenue.
Short levy of tax due to wrong calculation
The report further detailed that the excise and taxation officer, Ward-9, Chandigarh, incorrectly calculated tax under the Punjab VAT Act, 2005, assessing ₹ 23,68,010 instead of ₹ 26,30,333. This error led to a shortfall of ₹2,62,313 in tax and ₹2,95,102 in interest, totaling ₹5,57,415.
According to Section 26 (1) & (2) of the Punjab VAT Act, 2005, every taxable person must self-assess and file returns within the prescribed time and form. Section 29 (1) states that if tax or interest is due based on the return, a notice of demand will be issued. Section 29 (11) mandates the designated officer to serve a demand notice for any due amount.
An audit of M/s VP Singh Construction Company for 2013-14 revealed that the officer miscalculated the tax. This resulted in a short levy of ₹5,57,415, excluding penalties. The department informed (in November 2022) that the case was referred to the Revisional Authority under Section 65 of the Punjab VAT Act, 2005. The final decision is still pending. Action to fix the responsibility of the officer involved has been recommended.
Suppression of sale resulted in loss of ₹24.68 lakh
The audit report also listed how the officer also failed to cross-check the closing and opening stocks in the assessment cases of M/s Shiva Remedies for AY 2015-16 and 2016-17. A review of the trading accounts revealed a ₹1 crore discrepancy between the closing stock for 2015-16 and the opening stock for 2016-17, resulting in a revenue loss of ₹24.68 lakh.
As per Section 42 (1) of the Punjab VAT Act, 2005, every taxable or registered person must maintain accurate records of goods sold and purchased. Section 47(1) allows the commissioner or designated officer to cross-check sales and purchases to prevent tax evasion. Section 28 (1) and (2) empower the commissioner or designated officer to audit returns and examine records. Additionally, Section 32 (3) imposes 1.5% monthly interest on undeclared tax amounts from the due date until payment.