Meghalaya: CAG flags financial lapses & PT collection issues at KHADC

Guwahati: The Comptroller and Auditor General (CAG) of India’s report for the year ending March 31, 2020, has revealed significant financial irregularities within the Khasi Hills Autonomous District Council (KHADC).

The report, presented on the first day of the Council's budget session on Wednesday, highlighted issues including an improper payment of Rs 1.50 crore for consultancy services and systemic flaws in the collection of Professional Tax (PT).

The CAG pointed out that KHADC made an irregular payment to M/s TA Consultancy Services for project-related tasks.

The company was hired without clear terms or specified rates, raising concerns about the selection process.

The consultancy firm submitted an application in October 2018, offering services such as preparing Detailed Project Reports (DPRs) and monitoring civil works.

However, the offer lacked a defined timeline and cost structure. On January 18, 2019, the Executive Committee of the KHADC hired a firm and offered five percent of the total amount they would receive from Central or State Government funds, but they did not specify a timeline or specific deliverables.

Despite this, in May 2019, the firm requested payment for consultancy fees without detailing the number of DPRs or project specifics. Nevertheless, KHADC paid Rs 30.61 lakh in mobilization fees by July 18, 2019.

The report revealed that the government drew payments to the consultancy firm from administrative charges linked to a grant, even though it had not yet received the associated grants for those years.

The CAG raised concerns about the advance payments made without clarity on the project's progress and recommended an investigation into the selection process of the consultancy firm and those responsible for the payments.

The report also criticized the KHADC's handling of Professional Tax (PT) collection.

The increase in revenue from PT revealed systemic deficiencies and internal control lapses.

Inspectors assessed the tax owed by traders and shopkeepers inconsistently and failed to implement a mechanism to verify whether they had properly paid their taxes.

The CAG found that the KHADC lacked an updated and comprehensive database of PT assessments, which led to incomplete tax collection and potential revenue loss.

The text highlights that KHADC officers should collect PT only within the Khasi Hills Autonomous District and states that the Council should retain the revenue instead of sharing it with the state government.

Further review of the Council’s records revealed that several entities, including state government offices and traders, had failed to submit PT returns for the financial years 2017-18 to 2019-20.

The Assessing Authority also failed to issue notices for non-submission of returns, exacerbating the issue of incomplete and inaccurate assessments.

The report highlighted that officials did not create written guidelines for assessing individuals' tax obligations or for handling defaulters and that they accepted incomplete returns without following up for corrections.

The CAG highlighted that this practice violated tax assessment protocols, undermining the accuracy of the assessments and increasing the risk of fraud and tax evasion.

To address these issues, the CAG recommended that KHADC implement mechanisms to collect updated data on eligible taxpayers and conduct regular surveys to ensure proper registration of all PT payers.

It also called for the proper filing of returns, accurate tax assessments, and the systematic maintenance of assessment registers.

The CAG further urged the implementation of an IT system to improve data management and streamline the PT collection process.

The report underscores the need for immediate reforms to enhance financial transparency, improve tax collection efficiency, and prevent potential losses in revenue.