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Fraud

Income Tax Department Cracks Down on Tax Fraud by Chartered Accountants and Intermediaries

Strategic Insights

— 1 min read

The Income Tax Department has launched a nationwide crackdown on chartered accountants (CAs) and intermediaries who have been found running organised rackets that lure taxpayers with promises of inflated refunds in exchange for hefty commissions. Investigations have revealed that thousands of taxpayers have colluded with these professionals, who have filed returns claiming fictitious deductions and exemptions. The department has used data analytics, AI tools, and third-party sources to identify such cases and has initiated search and survey operations across the country.

Key Takeaways:

  • The Income Tax Department has targeted individuals and entities facilitating fraudulent claims of deductions and exemptions in ITRs.
  • Investigations have uncovered organised rackets operated by certain ITR preparers and intermediaries, who have been filing returns claiming fictitious deductions and exemptions.
  • The department has started questioning both agents and taxpayers by conducting search and survey operations in such cases.
  • Action has been taken at more than 150 places in many states, and the ongoing verification exercise is expected to yield crucial evidence.
  • Approximately 40,000 taxpayers have updated their returns in the last four months, voluntarily withdrawing false claims amounting to Rs 1,045 crore.
  • Many taxpayers have been sent notices asking them to update their ITR and withdraw the wrong claims.
  • The department has warned that if any taxpayer still does not remove the fake claim, action like penalty, prosecution, and refund withholding can be taken against them.
  • Names of employees of government, railways, banking, and private companies have been found involved in these frauds.

Statistics:

  • Thousands of taxpayers have colluded with chartered accountants and intermediaries to claim fictitious deductions and exemptions.
  • Action has been taken at more than 150 places in many states.
  • Approximately 40,000 taxpayers have updated their returns in the last four months, voluntarily withdrawing false claims amounting to Rs 1,045 crore.
  • The Income Tax Department has started questioning both agents and taxpayers by conducting search and survey operations in such cases.

Sources:

  • [Finance Ministry's Circular, dated July 14](https://archives.gov.in/Press%20Release-English-PressRelease_14july2022.pdf)
  • [Income Tax Department's Press Release, dated [July 2022](https://t2.incometax.gov.in_fcC7wP)]

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