In a striking example of how artificial intelligence (AI) and digital forensics are revolutionising tax enforcement, the Income Tax Department has detected a fraudulent claim involving fake improvement bills used to evade capital gains tax. The case centres on a Hyderabad-based taxpayer who sold an immovable property for Rs 1.4 crore, but dramatically slashed his tax liability using falsified documents, according to TOI report.
Suspicion raised over 2002 expense bill
According to officials, the taxpayer claimed Rs 68.7 lakh as the indexed “cost of improvement” between 2002–03 and 2007–08, along with an indexed acquisition cost of Rs 73 lakh. As a result, he reported a long-term capital gain (LTCG) of just Rs 24,774 in his income tax return.
However, a forensic analysis triggered by suspicions over one expense bill dated July 6, 2002 — allegedly for Rs 7.68 lakh — led to the unravelling of the fraud. Advanced AI tools detected that the bill was written in ‘Calibri (body)’ font, which raised immediate red flags. Investigators pointed out that although the font was designed between 2002 and 2004, it was only publicly released by Microsoft in 2006 and became the default font for Office in 2007.
Since the font did not exist at the time the bill was supposedly issued, the document was deemed fake.
Taxpayer admits documents came from late father’s folder
The taxpayer, when confronted, claimed the bills were found in an old folder belonging to his late father and admitted he could not verify their authenticity. He eventually withdrew the Rs 68.7 lakh improvement claim, filed a revised return, and paid the correct tax amount based on actual capital gains.
Font forensics set to reshape digital tax policing
Officials highlighted this case as a landmark example of how generative AI and font analysis are increasingly playing a role in tax forensics, warning taxpayers against attempts to forge documents in the digital era.