Income tax department unearths deductions and refund racket | Mumbai News

Mumbai: The income tax department has unearthed a racket where certain income tax return preparers and intermediaries have been filing returns claiming fictitious deductions and exemptions by abuse of beneficial provisions, with some even submitting false TDS returns to claim excessive refunds.Employees of MNCs, PSUs, govt bodies, academic institutions and entrepreneurs are among those implicated, a press release issued by the department said. Taxpayers are often lured into these fraudulent schemes with promises of inflated refunds in return for a commission. Despite a fully e-enabled tax administration system, ineffective communication remains a significant hurdle in assisting taxpayers. 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 I-T department has also found individuals and entities who submit fraudulent tax returns and seek exemptions by declaring high donations to registered unrecognised political parties (RUPPs) or making false claims in their return filings. In the past, I-T department had found these parties often operated from slums where party chiefs collected donations in the name of the party from individuals and returned the funds in cash after deducting commissions. The I-T department analysis revealed rampant misuse of tax deductions provisions meant for house rent allowance, interest paid on education loans, payments made towards health insurance premiums, certain medical expenses, interest paid on home loans, interest paid on loans taken to purchase electric vehicles and donations made to relief funds-charitable institutions, among others. The department stated that it would take stern action against continued fraudulent claims, including penalties and prosecution where applicable. The I-T department carried out search and seizure operations 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. Sources stated that with the assistance of modern technical tools, the I-T department identified many intermediaries and CAs who facilitated such activities for the large number of individuals or employees of major companies.I-T department has carried out extensive outreach efforts, including SMS and email advisories, asking suspect taxpayers to revise their returns and pay the correct tax. Physical outreach programmes, both on and off campus, have also been conducted. “As a result, approximately 40,000 taxpayers have updated their returns in the last four months, voluntarily withdrawing false claims amounting to Rs 1,045 crore,” the release said.