Income Tax department launches nationwide verification to combat fraudulent claims in I-T returns

NEW DELHI: The income tax department Monday launched a nationwide verification operation targeting individuals and entities facilitating fraudulent claims of deductions and exemptions in I-T returns.

The exercise is not limited to deductions for donations to little-known political parties and charities but also those related to health insurance and medical expenses (Sec 80D and 80DDB of I-T Act), HRA (Sec 10(13A), interest on education and home loans and for purchase of vehicles (Sec 80E, 80EE and 80EEB), CBDT said.

Those under lens are MNC staff, public sector companies, government bodies, academic institutions and entrepreneurs who have claimed deductions without valid justification, it said.

I-T department tapped many databases to identify likely offenders
The I-T department is now poised to 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 networks behind these schemes and ensure accountability," the I-T dept said.

This action follows a detailed analysis of "misuse of tax benefits under I-T Act, 1961, often in collusion with professional intermediaries", it said. It said that investigations have uncovered "organised rackets" operated by certain ITR preparers and intermediaries, who have been filing returns claiming fictitious deductions and exemptions. The move is a signal to individuals who take shortcuts and make claims without having evidence of deductions or expenses shown in returns.

Tax authorities tapped multiple databases to identify likely offenders. It conducted search and seizures in several states, including Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and MP, where it found evidence of fraudulent claims.

CBDT said the actions follow an outreach conducted programme, asking taxpayers to revise their returns in case discrepancies were noticed. "As a result, around 40,000 taxpayers have updated their returns in last four months, voluntarily withdrawing false claims amounting to Rs 1,045 crore. However, many remain non-compliant, possibly under influence of masterminds behind these evasion rackets," it said.