In a major nationwide crackdown, the Income Tax Department has turned its attention to employees of multinational companies (MNCs), public sector undertakings (PSUs), and even government departments, who have allegedly been misusing deduction provisions under the Income Tax Act to claim undue tax refunds.
The department’s findings reveal that several salaried individuals submitted inflated or fictitious claims, the Finance Ministry said in a release on Monday.
Investigations reveal rampant misuse of deductions under sections 10(14), 80GG, 80E, 80D, 80EE, 80EEA, 80G, 80GGA, and exemptions u/s 10(13A) and others, without actual eligibility, the release said. Employees of MNCs, PSUs, and government entities have also been identified as wrongfully claiming these benefits, according to the government.
“Investigations have uncovered organised rackets operated by certain ITR preparers and intermediaries, who have been filing returns claiming fictitious deductions and exemptions. These fraudulent filings involve the abuse of beneficial provisions, with some even submitting false TDS returns to claim excessive refunds,” the release said.
This large-scale verification drive has exposed not only the taxpayers but also professional intermediaries who facilitated these bogus claims.
Large-scale verification operation launched
On July 14, the Income Tax Department initiated a large-scale verification operation across multiple locations in the country, targeting individuals and entities facilitating fraudulent claims of deductions and exemptions in Income Tax Returns (ITRs).
This action follows a detailed analysis of the misuse of tax benefits under the Income Tax Act, 1961, often in collusion with professional intermediaries.
Organised rackets of CAs and fake refund filings uncovered
Investigations have uncovered organised rackets operated by certain ITR preparers and intermediaries, who have been filing returns claiming fictitious deductions and exemptions. These fraudulent filings involve the abuse of beneficial provisions, with some even submitting false TDS returns to claim excessive refunds.
Use of AI and analytics to track fraud
The Income Tax Department has used data analytics and advanced artificial intelligence tools to identify such irregularities. It has also deployed third-party sources to detect fraudulent claims.
“These findings have further substantiated by recent search and seizure operations conducted in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Karnataka. In these cases, evidence of fraudulent tax claims has also been unearthed via various groups and persons,” the ministry said.
Refunds withheld; penalties and prosecution on the cards
Under the continuing theme of ‘Trust Taxpayers First’, the Central Board of Direct Taxes (CBDT) has constantly emphasised maintaining taxpayer confidence while ensuring strict action against wilful tax evaders.
The I-T department has now taken steps to ensure the perpetrators are identified and appropriate action under the law is initiated. This includes scrutiny of the concerned ITRs, withholding of refunds, and initiation of penalty and prosecution proceedings in appropriate cases.
Crackdown to intensify further
The department is also poised to take stern action against continued fraudulent claims, including penalties and prosecution, wherever deliberate attempts to claim undue benefits are established under the law. These operations and investigations are likely to widen further. This will aid in dismantling the networks behind these schemes and ensure accountability under the law.
