A whopping 88.8 per cent increase has been seen in cases relating to “high-risk refund” and “high-refund” claims under scrutiny of the Income Tax Department in financial year 2018-19, Finance Ministry data showed. The tax department has detected 20,874 suspicious refund claims in 2018-19 as against 11,059 in 2017-18 and 9,856 in 2016-17.
Scrutiny assessments have been initiated against taxpayers claiming high refunds inconsistent with the pattern of income and investments. Wherever the claim of refund was found to be inadmissible after scrutiny, it was denied and the department levied penalty or undertook action of prosecution.
The Income Tax Department, in some cases, has also reopened already accepted returns to re-examine the claim of refund based on local intelligence and surveys and searches conducted by field units of the tax department. The jurisdiction-wise breakup of data showed that the highest number of such suspicious refund claims were detected in Mumbai (3,009), followed by Delhi (1,850) out of the total 20,874 claims under scrutiny in 2018-19. This is sharply higher than 1,585 suspicious refund claims detected in Mumbai and 1,029 in Delhi in 2017-18.
Higher number of cases involving high-risk refunds have been selected for scrutiny, with the tax returns filed from a single IP address or from a single locality or by a single intermediary being scrutinised or being electronically verified with the taxpayer.
However, the revenue impact of such claims have not been ascertained by the tax department as the assessments and re-assessments of cases involving high-risk refunds are being undertaken by various field officers and it is an ongoing process. The Income-Tax Department has incorporated certain risk parameters in its system to prevent refunds from being automatically cleared in cases where suspicious refund claims are made in Income Tax Returns (ITRs).
The tax department has also informed the field officers about the increasing trend of high-risk refunds and directed them to take all “necessary precautions” and conduct “necessary due diligence” before admitting a claim of high refund. In December, Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra, at an industry event, had said that the tax department has introduced additional checks to prevent bogus refund claims based on fraudulent investments shown in tax returns. Chandra had cited example of search operations in Mumbai, Bengaluru and certain parts of Punjab, where the tax department had discovered that some fraudsters were encouraging taxpayers to claim refunds based on false investments under 80C and for housing loans.
“When we took that risk parameter and found from one IP address so many refunds are being filed which are of same pattern, so some searches took place. So we have put another risk parameter into our system that if some fraudulent return is being filed then that refund has to be stopped,” Chandra had said.