TomorrowMakers

The IT department warns salaried taxpayers against claiming false deductions or under-reporting income. Read this piece to know more about it

 filing incorrect returns

Ever since e-filing of IT returns was made mandatory in the assessment year ending March 2013, individuals earning Rs 5 lakh or more have been filing returns online, with or without the help of a qualified chartered accountant. However, a recent survey by the Central Board of Direct Taxes (CBDT) indicates that the well-intentioned move has apparently backfired.

The rationale behind the move was manifold. Apart from the convenience that e-filing offers both the taxpayer and CBDT, it is eco-friendly (no paper) and reduces chances of errors. The process is sped up and refunds – if any – are faster, as are tax receipts. Taxpayers are relieved of the anxiety of constantly checking for their status.

 Like everything else though, the move had its downside as it uncovered several instances of false deductions for donations and contributions.

Cautionary warning

According to the discovery of malpractices and irregular filing of returns, the CBDT issued a cautionary advisory on 16 April 2018 stating that such malpractices are punishable offences under the Income Tax Act. The advice was issued with the rider that such cases would be referred to law enforcement agencies as well as to the employers of the fraudulent individuals for necessary action if the practice is not discontinued immediately.

What the survey showed

The random survey was conducted with the aid of technology in three metro cities – Delhi, Mumbai, and Bangalore. It revealed that deductions were claimed for donations or contributions where none were made, and claims for deduction for house property where none was owned.

In Bangalore, a man posing as a chartered accountant helped employees of a certain IT company to make fraudulent claims. Some of these cases have been referred to the CBI for further investigation. CBDT officials said that the advisory has been issued to warn individuals against malpractices and protect them from being defrauded by enterprising individuals such as the one in Bangalore.

The impact

The direct impact of the advisory falls on salaried individuals as the CBDT has warned that if it notices any fraudulent claims, the vigilance department of the employer shall be informed as well as law enforcement agencies. Many salaried individuals take the help of chartered accountants to file their returns.

The one case in Bangalore may have been replicated elsewhere and innocent persons targeted even though they may have had no intention to commit fraud. If the concerned employer takes action, the individual may be hard-pressed to find gainful employment. If they are the primary breadwinner of the family, the entire family may be impacted.

Conclusion

   

Following this negative fallout of the e-filing exercise, the Income Tax Office has issued a cautionary advice warning individuals against fraudulent e-filing of returns.

However, the authorities have warned that if in future such practices are detected, strict action will be taken, in the form of advising law enforcement agencies and employers. The proximate effect of this advice falls once again on the salaried individual. What the future holds remains to be seen.


Disclaimer: This article is intended for general information purposes only and should not be construed as tax or legal advice. You should separately obtain independent advice when making decisions in these areas.