High-risk income tax refund claims under scanner

Verification of ‘high-risk’ refund claims in Income-tax (I-T) returns for A.Y. 2024-25 (F.Y. 2023-24) will be conducted systematically, following a standard operating procedure (SOP). The goal is to verify whether false refund claims have been made in an organised manner or by a single key person.

“If multiple I-T returns have been filed using a common email, and there is a clear pattern of false claims – such as false house rent allowance, bogus donations falsely shown as eligible for deduction under section 80G or inflated expenses – further verification and investigation is required,” said a govt. official.

The Directorate of I-T Systems, a unit under the ministry of finance, has issued SOP instructions for handling ‘high-risk’ income tax refund cases. These have been disseminated to concerned assessing officers, TDS charge officers, and officials in the investigation wing.

For instance, the instruction relating to the SOP sent to the investigation wing officials says: “In the past, incidents were reported where wrong refunds had been claimed through various means such as wrong claim of TDS credits, under reporting of income, overstating of deductions, claim of bogus expenses etc. Cases flagged based on certain rules, including suspicious clusters of returns filed using a common email, have been forwarded to nodal officers at the Central Registry Unit for further action.”

The SOP directs officials involved to first ascertain the identity of the key person associated with the common email through the internal data bases available – such Insight portal, e-filing portal etc. If this fails, notices can be issued under section 131(1A) to the relevant taxpayers, requesting information and supporting documents to verify claims related to exemptions, deductions and expenses.

“The objective is not to harass taxpayers,” the govt officials added. “If the claims are genuine, the matter is closed. If not, further investigation according to the SOP will proceed.”

Source; The Times of India