The Income Tax Department is set to establish a structured approach to assess ‘high-risk’ refund claims submitted for the assessment year (AY) 2024-25, aligning with the financial year concluding on March 31, 2024. In accordance with a standard operating procedure (SOP) released by the IT systems directorate within the Ministry of Finance, the department intends to detect and scrutinize fraudulent refund claims that could have been submitted either on an individual basis or as part of a coordinated scheme, according to CAclubIndia.
Officials have indicated that the verification process will specifically target instances where multiple income tax returns (ITRs) have been submitted using the same email address and exhibit a trend of fraudulent claims. Commonly observed fraudulent activities encompass false claims for House Rent Allowance (HRA), fictitious donations under Section 80G, and exaggerated expenses. Should these patterns be identified, a more in-depth investigation will be launched.
The Standard Operating Procedure (SOP) has been circulated among various authorities, including assessing officers, TDS charge officers, and personnel from the investigation division. These guidelines delineate the procedures for probing suspicious refund claims, particularly in cases where taxpayers have improperly claimed tax deductions or inflated their reported income or expenses.
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As per CAclubIndia, a fundamental component of the Standard Operating Procedure (SOP) is the identification of the individual or group associated with the common email address utilized for submitting these dubious returns. This identification process will leverage internal resources such as the Insight portal and the e-filing portal. Should these identification efforts prove unsuccessful, authorities may issue notices in accordance with Section 131 (1A) of the Income Tax Act, mandating taxpayers to furnish documentation and information that substantiates their claimed deductions and exemptions.
The primary objective of the SOP is to validate the authenticity of refund claims while minimizing undue pressure on taxpayers. A government representative stated, “If claims are determined to be legitimate, the investigation will be concluded. Conversely, if any fraudulent claims are detected, the case will proceed to further investigation.”
This initiative highlights the government’s dedication to combating tax fraud and ensuring adherence to income tax regulations, all while safeguarding honest taxpayers from unwarranted examination. Taxpayers are encouraged to verify that all claims made in their returns are valid and backed by appropriate documentation to prevent any potential legal issues.