IT Department Ordered Scrutiny on ‘High-Risk’ Income Tax Refund Claims

The verification of ‘high-risk’ refund claims in income tax returns for the assessment year 2024-25 (financial year ending March 31, 2024) shall be carried out systematically, in accordance with a standard operating procedure (SOP). The purpose is to determine whether bogus refund claims were made in a coordinated manner or by a single key person.

“If numerous Income Tax Returns have been filed using a common email, and there is an apparent 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,” stated a government official.

The Directorate of I-T Systems, a division of the Ministry of Finance, has issued standard operating procedures (SOP) for dealing with ‘high-risk’ income tax refund cases. These have been distributed to the relevant evaluating officers, TDS charge officers, and investigation wing personnel.

For example, the SOP instruction sent to the investigation wing officials states, “In the past, incidents were reported where wrong refunds had been claimed through various means such as an incorrect claim of TDS credits, under-reporting of income, overstating of deductions, claim of bogus expenses, etc. Cases highlighted based on specific regulations, such as suspicious clusters of returns filed using the same email, have been forwarded to nodal authorities at the Central Registry Unit for further action.”

The SOP instructs authorities engaged to first determine the identification of the key person linked with the common email using the internal databases accessible, such as the Insight portal, e-filing portal, etc. If this fails, notices can be issued to the appropriate taxpayers under section 131 (1A), demanding information and supporting documents to verify claims for exemptions, deductions, and expenses.

“The goal is not to harass taxpayers. If the claims are real, the case is closed. If not, additional inquiry in accordance with the SOP shall be conducted.” the government official explained.