Income Tax dept busts major refund fraud in 19 districts of Tamil Nadu

The Income Tax Department has said that it has uncovered and thwarted a large-scale tax refund fraud involving filing of fabricated tax returns in Tamil Nadu.

Investigations and search operations were carried out across 19 districts in Tamil Nadu, including Tiruchi, Pudukottai, Salem, Madurai, Sivaganga, Theni, Virudhunagar and Tirunelveli. These operations were conducted under the leadership of Michael Jerald, Additional Director of Income Tax (Investigation), Madurai, with the support of officers from Tiruchi, Madurai and Tirunelveli.

The department initiated inquiries under various provisions of the Income Tax Act into the fraudulent claims of tax deductions that were falsely declared in order to obtain undue tax refunds.  Preliminary findings revealed that several tax professionals and intermediaries across Tamil Nadu had been facilitating thousands of taxpayers to file fake refund claims by submitting fabricated details in their tax returns. As a result, widespread searches and inquiries were being conducted across south Tamil Nadu.

The fraudulent claims predominantly involved claiming fake deductions under various sections such as Section 80GGC (donations to political parties), Section 80D (Medical insurance premiums), Section 80 C (Tuition fees) and Section 10 (13 A) House Rent Allowance along with other deduction clauses, a press release from the Income Department said here on Monday.

Through these deceitful methods, tax payers were assisted in falsely enhancing their tax deductions enabling them to claim illegitimate refunds. The fraudulent refund amount is estimated to be approximately ₹500 crore.

Investigations have unearthed that dedicated email IDs were created specifically by these agents to file fraudulent tax returns on behalf of taxpayers. Thousands of returns were filed through these email IDs resulting in crores of rupees being refunded wrongfully. During the course of the search operations, incriminating evidence had been recovered and seized.

The Income Tax department continues to conduct investigations across all its offices. Taxpayers had been cautioned to remain vigilant and refrain from engaging in such unethical and illegal practices that not only cause revenue loss to the government but expose them to penal consequences.

All taxpayers who may have filed incorrect or fraudulent tax returns during the current or previous financial years had been advised to voluntarily come forward and file revised or updated returns. This would not only help in building trust between the taxpayers and the department but also help them avoid penalties, legal proceedings, and prosecution, the release added.