40,000 Taxpayers Withdraw Fraudulent Claims Worth Rs 1,045 Cr After Taxman Cracks Down

40,000 taxpayers have revised their income tax (I-T) returns and withdrawn claims worth Rs 1,045 Crore in the past four months, following a large scale crackdown by the Income Tax Department, the Central Board of Direct Taxes (CBDT) said on Monday. The move comes after the I-T department cracked down on bogus claims of deductions and exemptions across multiple locations in the country.

According to the department, the action came after it carried out a set of outreach efforts through SMS and email advisories, nudging suspected taxpayers to revise their returns and pay the correct tax. 

“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 CBDT said in a statement.

Analysis undertaken by the tax department has thrown up misuse of deduction provisions under sections 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA and 80DDB. Among those whose tax filings have been flagged in the drive are employees of multinational companies (MNCs), public sector undertakings (PSUs), government bodies, academic institutions and entrepreneurs.

In a media release, the department further stated that many times taxpayers are lured into these fraudulent filings or schemes with promises of inflated refunds in return for a commission. They also stated that ineffective communication remains a significant hurdle in assisting taxpayers, despite a fully e-enabled system of tax administration.

“To identify suspicious patterns, the department has leveraged financial data received from third-party sources, ground-level intelligence, and advanced artificial intelligence (AI) tools. These findings have been further substantiated by recent search operations in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab as well as Madhya Pradesh, where evidence of fraudulent claims was found to have been used by various groups and entities," the CBDT further stated.

However despite its efforts, the department has observed that taxpayers remain under the influence of organised rackets of certain intermediaries and ITR preparers. These rackets promise inflated refunds in return for commissions and often file returns using temporary email IDs, which are later abandoned, leading to official notices going unread.

The I-T department has also warned of tough measures against the ones who continue to make fraudulent claims, including penalties and prosecution wherever applicable. Currently, operations for verification are underway across 150 premises.

The CBDT has further advised taxpayers to file accurate particulars of their income and contact details so that they do not victims of agents or intermediaries promising undue refunds. Further investigations are underway, it added.