Fake PANs and Bogus Returns: Inside Maharashtra’s Growing TDS Refund Scam

In the last few days, three significant cases of TDS (tax deducted at source) refund fraud have been uncovered in Maharashtra state (Gondia and Nagpur). In each case, the fraudsters misappropriated PAN (Permanent Account Number) details in order to wrongly claim income tax refunds.

Here is a comprehensive summary of how these fraudulent transactions were executed:

The first case took place in Gondia, Maharashtra. In this case, a local tax practitioner cheated several Zilla Parishad schools in the area. He filed TDS (Tax Deducted at Source) returns for these schools, but instead of using the PAN details of school staff members, he used his own PAN details to file the return. This transferred all the credit to himself, hence claiming wrongful TDS returns of staff members. In total, he benefited a total of Rs. 36 lakh using this trick.

The second case took place in Nagpur, Maharashtra. In fraud, a former employee of an agency who used to work in the Canara Bank, identified old and inactive bank accounts that had fixed deposits. These accounts earned interest and had TDS deducted, but did not have PAN numbers linked to them. The ex-employee manually added real PAN numbers from other people to these records, making it appear like the TDS belonged to them. Refunds were then claimed using these fake connections, often without the real account holders even knowing.

The third fraud occurred in Nagpur, Maharashtra. Here, income tax return (ITR) filers wrongfully identified themselves as foreign employees while filing ITRs with a tick-box under the Income Tax Act, Section 10(6) in the forms, which is an income tax exemption for a few foreign employees working in India. When they claim this section, no income tax is deducted from it, and they declared it as “tax-free”, thereby bypassing greater scrutiny and receiving their refunds sooner. Once again, it makes it easier to assume someone else’s identity without being uncovered.

All these fake income tax returns were filed under the jurisdiction of the Chief Commissioner of Income Tax in Nagpur, who is now investigating the cases further.