Business Standard

I-T probes ~10-bn tax refund fraud

Govt and PSU employees claimed refunds by filing revised tax returns using forged papers

- SHRIMI CHOUDHARY

With less than a month left for revising income-tax (I-T) returns for 2016-17, the I-T department has unearthed a giant fraud in multiple cities, where government employees allegedly claimed huge tax refunds forging documents, inflating expenses and not revealing complete informatio­n.

In Mumbai alone, around 17,000 revised returns have been filed claiming refunds. Similarly, in Bengaluru, the I-T department has found over 1,000 returns filed with inflated claims on account of payments towards home loans.

Since the I-T department is still investigat­ing the matter, the loss to the department could not be ascertaine­d, but it could go up to over ~10 billion, sources said.

They added most of these refunds were being claimed by employees working for the government or in public sector undertakin­gs (PSUs).

“These assessees’ original returns were already processed by the centralise­d processing centre of the I-T department. But they filed revised returns, claiming refunds with supporting documents,” said an I-T official.

A red flag was raised when the tax department noticed a pattern over three years. “The rate of revised tax returns filing has seen a significan­t rise in the last three years. We have identified these assessees from our data mining system. We were able to find how people claimed refunds by furnishing forged documents,” said a senior I-T official privy to the developmen­t.

“Assessees can file revised or deferred returns for the previous two financial years. For instance, a taxpayer can revise returns for 2015-16 and 2016-17 till March 31, 2018,” explained a tax assessment officer.

Explaining the modus operandi, an I-T official said some of these assessees showed no income in their original tax returns under the head ‘income from house property’, but claimed losses in revised returns.

Under Section 24 of the I-T Act, home loan interest is allowed as a deduction. In the absence of income from house property, it becomes a loss from house property, leading to a refund. I-T officers claim the tax evasion takes place by inflating expenses, not revealing complete informatio­n and forging documents.

Since most of these revised returns were being filed by government and PSU employees, the tax department had shared the informatio­n with the Central Bureau of Investigat­ion to examine whether the people under scrutiny had unaccounte­d wealth and also to probe potential connivance of some of the tax sleuths and chartered accountant­s.

Tax officials said that in case of revised returns, the system automatica­lly generates amessage that draws the attention of the person processing the refunds and also assessing officers who approve the refunds. The I-T department had till February 10 issued refunds to the tune of ~1.42 trillion. Over 41.9 million I-T returns were processed and refunds were issued to 16.2 million taxpayers till February 10.

Typically, the I-T department gives priority to small taxpayers who claim refunds below ~50,000. Official data suggest of all the refunds issued so far in this fiscal year, 90 per cent were to small taxpayers and the salaried class.

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