Next time you file your income tax return and your chartered accountant (CA) suggests you do some income fudging here and there, beware. Until December 31, 2024, the Income Tax Department has identified 90,000 salaried taxpayers who wrongly claimed deductions amounting to approximately ₹1,070 crore in their income tax returns (ITRs). When confronted by the tax department, these individuals were required to pay back the taxes due to the government.
Sources shared that, “During various search and seizure and survey operations conducted by the Income Tax Department, it came to light that several individuals had claimed incorrect deductions under sections 80C, 80D, 80E, 80G, 80GGB, 80GGC, etc, in their ITRs, leading to a reduction in tax payable to the Government of India. Investigations revealed that these individuals were employees of organisations across various sectors, including PSUs, large corporations, MNCs, LLPs, and private limited companies. Furthermore, it was found that certain unscrupulous elements had misled taxpayers into claiming incorrect deductions/refunds.”
How did the IT department realise ₹1,070 crore was due?
The tax department’s findings stemmed from these investigations, and to plug this revenue leakage, the Income Tax Department reached out to these 90,000 individuals. They were informed that, under the provisions of Section 139(8A) of the Income-tax Act, 1961, taxpayers can file updated returns by paying some additional tax, as prescribed under the law, to rectify the errors of omission or commission. This correction can be made within two years from the end of the relevant assessment year, for AY 2022-23 to AY 2024-25.
“Thus, the additional taxes due to the government were realized under this provision. To intensify efforts to promote voluntary tax compliance and reduce litigation, an outreach program with employers is being launched,” said sources.
What was the red flag for these bogus claims?
Sources further revealed, “During the search and seizure operations, it was noticed that various individuals were claiming bogus deductions in their ITRs, leading to a reduction in tax payable to the Government of India. In response to these incidents, guidelines for verification by Investigation Directorates and SOPs for verification by TDS and JAO charges were issued.”
Moreover, “investigation by the CBDT uncovered fraudulent claims of deductions in ITRs. Analysis of the department’s data showed a vast mismatch between the total deductions claimed under sections 80GGB/80GGC by taxpayers and the total receipts shown by the donees in their ITRs. Similarly, deductions claimed under sections 80C, 80E, and 80G also appeared suspicious in nature,” sources added.
Based on this analysis, the tax department identified a list of common employers (i.e., TDS deductors). “The list was created to reach out to as many individuals as possible who are suspected of claiming bogus deductions under sections 80E, 80G, 80GGA, 80GGC, and other sections,” sources explained.
Who are these 90,000 individuals?
When asked about the identity of these individuals and their workplaces, sources told CNBC-TV18, “Upon investigation of email clusters, it was found that in most cases, these clusters were tied to individuals working in common organisations. These organisations operate in diverse fields, including PSUs, large corporations, MNCs, LLPs, private limited companies, and even government organisations and statutory bodies.”
Can the IT department prevent this in the future?
To avoid similar issues in the future, the Income Tax Department has been conducting outreach programs with employers to raise awareness about the consequences of claiming incorrect deductions in ITRs and the corrective measures taxpayers can take to rectify errors.
Additionally, sources mentioned that, in a letter dated December 12, 2024, the top brass of the Income Tax Department requested field formations to obtain a list of common employers identified during the investigation into email-based clusters. These field formations were tasked with conducting outreach programs to sensitise employers regarding incorrect claims of deductions in ITRs. So, next time, don’t fall prey to small gains, as the Income Tax Department is keeping a close watch.
