Lacuna in ROC's database



“RoC had no information about PAN of 95% real estate companies” – CAG

The ROC maintains a database of all companies that register with them at the time of their incorporation. The companies are required to file annual returns with them. Form MGT-7, prescribed in the Companies (Management and Administration) Rules, 2014, requires a company to file its annual report mentioning its PAN compulsorily.

In one of the inspection by CAG, insufficient information with ROC about real estate companies was observed.

CAG focused on the issue whether or not all the developers/ builders/real estate agents dealing in real estate sector are in the tax net and filing income tax returns.

For this purpose, CAG collected information from the Registrar of Companies (ROC), Real Estate Regulatory Authority (RERA) and Confederation of Real Estate Developers’ Associations of India (CREDAI) regarding details of entities engaged in real estate sector registered with them and Registrar/sub-registrar of properties and compared it with the tax database with the Income Tax Department.




From above picture it can be seen that ROCs did not have information about PAN in respect of 51,670 (95 per cent) of a total of 54,578 companies for which data was made available to CAG. It was difficult for CAG to ascertain from the information obtained from ROCs whether these companies were in the tax net of the ITD or not except in case of Andhra Pradesh & Telangana where CAG could identify PAN in respect of 147 of these companies. Audit forwarded the information received from ROCs without PAN data to ITD to ascertain whether these companies were filing ITRs. However, no reply was received from ITD.

All corporate assessee are compulsorily required to file their ITRs with ITD irrespective of income or loss. Audit attempted to ascertain whether the companies in ROC data with PAN were regular in filing their ITRs. In respect of 840 companies1 with PAN coming under selected assessment charges, we noticed that 159 companies2 (19 per cent) were not filing their ITRs. From the above, it can be concluded that there is no mechanism with ITD to ensure that all the registered companies have PAN and are filing their ITRs regularly.

 Recommendation by CAG:  The CBDT, Ministry of Finance and Ministry of Corporate Affairs may have inter-ministerial arrangement to their mutual benefit where there is an interface between the ITD and ROC so that when a company is registered with ROC, the application for PAN is submitted automatically with the ITD.

When PAN is issued to the newly incorporated company, it will automatically be sent to ROC Systems for updating. Further, the companies should be compulsorily required to submit a copy of acknowledgement of ITR while furnishing their annual reports in Form MGT-7. This will ensure that companies file their ITRs and at the same time the data of ROC will be in sync with that of ITD.

The CBDT stated (July 2018) that system of applying for PAN at the time of applying for registration of a company is already in vogue. The CBDT agreed (July 2018) to examine the feasibility of requiring a company to compulsorily submit a copy of acknowledgement of ITR while filing their annual reports in Form MGT-7.

To conclude it should be noted that-

All Companies and LLP registered in MCA / ROC should compulsorily submit ITR Copy filed with ITD to MCA so that there is an up to date data base and will ensure timely compliance.