CAG audit exposes major financial lapses in J&K

Srinagar, Apr 8: The Comptroller and Auditor General’s (CAG) Compliance Audit of revenue receipts and Public Sector Undertakings (PSUs) in Jammu and Kashmir has flagged deep-rooted systemic failures in financial oversight, exposing significant revenue leakages, weak enforcement under GST, and serious irregularities in public sector operations.
The report points to a doubtful recovery of Rs 104.51 crore, wrongful disbursal of Rs 59.21 crore, and blocking of Rs 85.75 crore in funds. It also highlights a five-year delay in the implementation of GST scrutiny mechanisms and extremely low compliance in the submission of PSU accounts, raising serious concerns over transparency and fiscal accountability in the Union Territory.
According to the audit, there was a delay of over five years in issuing the Standard Operating Procedure (SOP) for scrutiny of returns for the financial years 2017–18 and 2018–19, which resulted in minimal scrutiny being conducted. The Special Investigation Unit (SIU), tasked with providing inputs for scrutiny and enabling necessary action by the State Taxes Officer (STO), was constituted only in 2022–23.
The audit found that intelligence inputs meant to be shared with jurisdictional authorities between 2017–18 and 2020–21 were not forwarded, raising the risk of undetected revenue losses.
It noted that minimal scrutiny of returns such as GSTR-3B and GSTR-9 led to mismatches in turnover, tax paid, and ITC going unnoticed. The report also flagged inaction against non-filers, failure to cancel registrations of defaulters, and non-levy of penalties and interest.
Additionally, discrepancies were observed between MIS reports and data provided by State Taxes Officers (STOs), indicating gaps in monitoring and enforcement.
The audit observed that administrative inaction led to the delayed issuance of the SOP for scrutiny of returns and the late constitution of the internal audit wing. It also noted that key records, including GSTN red-flag reports and year-wise scrutiny details, were not produced to the audit despite repeated requests.
The CAG has recommended strengthening scrutiny through risk-based analysis and fixing year-wise targets to address discrepancies highlighted in the audit.
As of March 31, 2022, 42 PSUs were under CAG audit in Jammu and Kashmir, including 39 government companies, two statutory corporations, and one government-controlled entity. Six PSUs were inactive, with investments of Rs 57.57 crore and outstanding loans of Rs 0.83 crore. Only three out of 34 government companies submitted their accounts for 2021–22 within the stipulated timeline, while accounts of key entities like J&K Road Transport Corporation and J&K Financial Corporation remained pending.
The audit also flagged irregularities in the interest subvention scheme approved in October 2020, noting that Rs 85.75 crore remained unutilised for nearly a year. Ineligible benefits amounting to Rs 59.21 crore were extended to over 39,000 accounts, including those not covered under the scheme.
Further, Rs 104.51 crore became doubtful due to irregular credit sanctioning by J&K Bank Limited, while failure to operationalise J&K Asset Reconstruction Limited led to wasteful expenditure of Rs 82.18 lakh. Additionally, improper parking of surplus funds caused a loss of Rs 2.65 crore to J&K IT Infrastructure Development Private Limited.
The audit also found that non-deposit of advance tax on taxable income by Jammu and Kashmir State Power Development Corporation Limited during the financial years 2015–16, 2017–18, and 2019–20, in violation of provisions of the Income Tax Act, 1961, led to an avoidable interest burden of Rs 6.88 crore.
Similarly, the failure of Jammu and Kashmir Projects Construction Corporation Limited to deposit advance tax on time for the financial year 2017–18 resulted in additional avoidable interest of Rs 0.32 crore. (KNO)