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The Directorate of Income Tax (Investigations) has unearthed an elaborate nexus of fraudulent income tax returns where tax professionals took advantage of the loopholes in the earlier system of filing returns to provide for deductions on the basis of unverified claims. The fraud executed is estimated to be over Rs 500 crores, said a senior officer from the Income Tax department.
According to the officer, tax professionals who operated in Pune and its surrounding regions lent their services to salaried professionals as “return specialist’’ and promised to provide the taxpayers unusually high returns.
Over a period of five years, these tax professionals filed over 10,000 claims. Investigators said they saw a similar pattern in the returns filed—deductions were claimed for housing loan interest and principal repayment, medical and insurance payment, investments into saving instruments, educational loans and house rent allowance, HRA, without any supporting documents—an error that has now been fixed under the current system of filing returns.
The officer said the scrutiny of the returns, which is still ongoing, shows a consistent pattern—claims were made for deductions which were not lawfully done. “We have already taken action against tax professionals who indulged in the and are now working to identify individual taxpayers who have benefited from the bogus returns and will now face penalty and prosecution,” said the officer.
“Tax payers would not be able to claim indemnity by blaming intermediaries. Any refund claimed in their name would be reviewed and penal provisions would be applied,’’ said the officer. This would be one of the many cases of bogus deductions being unearthed in other parts of the country.
Earlier, the Income Tax department has come across manipulation of PAN, TDS credit or bogus trusts by way of deduction claims. However, officials investigating the Pune case said this is the largest fraud they have come across in recent years.
