Fake Tax Deductions: IT Dept. Prosecutes Two Hyderabad Techies for Misusing Updated Tax Return (ITR-U) Facility:

Fake Tax Deductions: IT Dept. Prosecutes Two Hyderabad Techies for Misusing Updated Tax Return (ITR-U) Facility Recently, in Hyderabad, the Income Tax Department has prosecuted two city-based software professionals, allegedly for defrauding the tax system, even after awarding them a chance to correct their tax return through the ITR-U facility. This facility allows taxpayers who have already filed their tax returns to correct their mistakes or discrepancies made in previous returns. This facility has helped taxpayers save themselves from harsh penalties and litigation. However, the tax department has claimed that both professionals had misused the provision.

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Originally, they both filed their tax returns claiming fake deductions under Section 80GGC; this section enables taxpayers to claim tax deductions on donations made to political parties or registered electoral trusts. This encourages individuals to support political transparency. When these returns were examined, they were identified as bogus, and as they were allowed to file an updated return via ITR-U, they filed an updated return. However, instead of completely correcting their tax filings, they reportedly just took out the deductions that had been pointed out by the tax department and further added new false claims. This way, they still reported less income than they actually made. One of the professionals is said to have claimed Rs. 1.2 crore in fake tax deductions over three financial years. These included false donations to political parties and exaggerated retirement-related exemptions. When he got notices from the tax department, he removed the flagged claims but then added new fake ones to continue hiding his actual income, officials said. His repeated actions showed that this wasn’t a mistake; it was a deliberate attempt to cheat.

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A second person reportedly did something similar, falsely claiming Rs. 1.02 crore in deductions over three financial years. Even after removing one fake claim, he added more bogus ones in his updated filings for previous years. Investigators found mobile chats between him and his auditor where they discussed making up claims to reduce his taxes. This evidence supports the case that the fraud was intentional. Officials said both taxpayers misused the ITR-U system, which is designed to help people fix honest mistakes in their tax returns. Instead, they used it to sneak in more fake claims. The tax department is now prosecuting both individuals under Sections 276C(1) and 277 of the Income Tax Act, 1961. Among these, Section 276C(1) is related to evading taxes and can lead to jail time between six months and seven years. While Section 277 is related to knowingly giving false information or documents, with a similar punishment.