The Income Tax Department has flagged a growing trend of fraudulent tax deduction claims, prompting over 90,000 salaried employees across PSUs and private companies to withdraw false claims amounting to Rs 1,070 crore as of December 31, 2024. These revelations emerged from search and survey operations, where officials discovered a pattern of inflated deductions filed under various sections like 80C, 80D, 80E, 80G, 80GGB, and 80GGC.
What’s startling is the scale and consistency of the issue, many of these cases were traced back to individuals employed at the same companies, often linked to large firms, multinational corporations, LLPs, private limited companies, and even PSUs.
While tax fraud often conjures images of intentional deceit, a recent case illustrates how many salaried individuals were unwitting participants. An tax expert point out with the example of Santosh, an employee of Bosch Ltd., who was penalised Rs 1,15,938 by the Income Tax Department after his tax consultant filed inflated deductions on his behalf, without his knowledge.
The consultant, widely known for securing large refunds, exploited trust and technical inaccessibility to file doctored ITRs at scale. By collecting login credentials from clients, bypassing transparency, and discouraging taxpayers from reviewing their returns, he managed to operate a refund racket under the guise of professional expertise. In many cases, refunds were deposited directly into taxpayers’ accounts, further masking the fraud.
Santosh, like many others, assumed his tax savings were legitimate—until a survey under Section 133A of the Income Tax Act unearthed the irregularities. He then filed a corrected return after receiving a notice under Section 148 and paid the full tax and applicable interest. Despite his cooperation, the Assessing Officer imposed a penalty under Section 270A(9), citing misreporting of income.
However, the Income Tax Appellate Tribunal (ITAT) Pune stepped in and reversed the penalty. The tribunal found that the AO had failed to mention the specific clause under Section 270A(9)(a to f) for misreporting—a technical lapse deemed a “fatal defect.” More importantly, Santosh was found to have acted in good faith, taken prompt corrective action, and been misled by a fraudulent advisor.
This case underscores the importance of taxpayer awareness and accountability—even when outsourcing tax filing to professionals. The government is stepping up enforcement, but as Bangar notes, “blind trust in consultants without cross-verifying your return is no longer an option.”
As tax season approaches, experts urge individuals to thoroughly review their ITRs, demand computation sheets from consultants, and rely on official portals. After all, poor advice can cost you more than just money—it can damage your compliance record.
