Income Tax cracks down on bogus claims of deductions & exemptions claimed in ITR

Income Tax launched verification operation to investigate fraudulent claims of deductions and exemptions claimed in Income Tax Returns.

Income Tax Department cracks down on bogus claims of deductions & exemptions. Investigations uncover organised rackets operated by certain ITR preparers and intermediaries filing returns, claiming fictitious deductions and exemptions

The Income Tax Department conducted a large-scale verification operation across multiple locations in the country today, targeting individuals and entities involved in facilitating fraudulent claims of various deductions and exemptions in Income Tax Returns (ITRs). As per Press Release issued by Income Tax Department the verification operation shall be followed by a detailed analysis of the misuse of tax benefits which are usually done in collusion with professional intermediaries.

It is stated that the 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.

To identify such kind of suspicious claims, the IT Department had leveraged financial data received from third-party sources, ground-level intelligence, and advanced artificial intelligence tools. These findings are further substantiated by recent search and seizure operations conducted in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh, where evidence of fraudulent claims was found to have been used by various groups and entities.

Analysis revealed misuse of deductions under sections 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB. Exemptions have been claimed without valid justification. Employees of MNCs, PSUs, government bodies, academic institutions, and entrepreneurs are among those implicated.

Taxpayers are often lured by those intermediaries or so called tax professionals with promises of inflated refunds in return for a commission. It has been observed that such ITR preparers often create temporary email IDs solely for filing bulk returns, which are later abandoned, resulting in official notices going unread.

The Income Tax Department  has identified the ineffective communication which remains a significant hurdle in assisting taxpayers. In line with its guiding principle of ‘Trust Taxpayers First’, the IT Department has emphasised voluntary compliance. Over the past year, the IT Department had carried out extensive outreach efforts, including SMS and email advisories, nudging suspected taxpayers to revise their returns and pay the correct tax. Physical outreach programs, both on and off campus, have also been conducted.

In view of the efforts of the Department, approximately 40,000 taxpayers have updated their returns in the last four months, voluntarily withdrawing false claims amounting to ₹1,045 crore. However, many remain non-compliant, possibly under the influence of the masterminds behind these evasion rackets.

It is stated that Income Tax Department shall take stern action against continued fraudulent claims, including penalties and prosecution wherever applicable. The ongoing verification exercise across 150 premises is expected to yield crucial evidence, including digital records, that will aid in dismantling the networks behind these schemes and ensure accountability under the law.

Taxpayers have been advised to file correct particulars of their income and communication coordinates and not be influenced by advice from unauthorised agents or intermediaries promising undue refunds.

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