FILE PHOTO: The Indian Rupee logo is seen inside the Reserve Bank of India (RBI) headquarters in Mumbai, India, December 6, 2024. REUTERS/Francis Mascarenhas/File Photo
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FRANCIS MASCARENHAS
The Income-Tax department, on Monday, carried out one of the biggest country-wide crackdown against around 125 donors, tax consultants and other entities for bringing back evaded tax money into government coffers.
The move came four months after businessline’s expose on abuse of registered unrecognised political parties (RUPPs) to launder electoral funding to the tune of ₹10,000 crore in just two years between 2022 and 23.
Sleuths from 14 Directorates of Income Tax (Investigation), spread across the country, swooped down on 125 persons in about 200 locations to simultaneously uncover fraudulent claims of misdeclarations, deductions and exemptions, other than those under the Section 80GGC of the Income Tax Act that involved political funding, said sources privy to the government’s coordinated action.
Through the use of data analytics and Artificial Intelligence (AI) tools, the Central Board of Direct Taxes (CBDT) processed information available from multiple sources about existence of organised rackets, which involved Chartered Accountants and false filing of IT returns.
Abuse of provisions
This large-scale verification follows detailed analysis of misuse of beneficial provisions such as deductions u/s 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA and 80DDB, often in collusion with professional intermediaries, said the CBDT in a statement on Monday.
Around six lakh taxpayers had claimed deductions under Section 80GGC of the Income-Tax Act over the last two years for donating to political parties, including RUPPs.
Political donations do not attract tax for both donors as well as parties. The series of investigative stories by businessline had also led to Election Commission of India (ECI) taking action against 354 ghost RUPPs by delisting them on June 26, as they did not exist on the addresses provided to Commission and Chief Electoral Officers (CEOs) of States and UTs since 2019. These did not contest Assembly polls either.
Before that, this newspaper also exclusively wrote on May 4 that the IT Department had recovered ₹1,400 crore from 63,000 donors who evaded large amounts of tax by making fraudulent donations to political parties.
The harvest was the outcome of a nudging initiative of the CBDT, with mails and other communication instruments used to inform tax payers about their liabilities which was much more than the declared figures, sources explained.
Those who did not come forward were subjected to searches and raids on Monday, they added. Over the past year, the I-T Department carried out extensive outreach efforts to encourage taxpayers to revise their returns and pay the correct tax. As a result, approximately 40,000 taxpayers have updated their returns in the last four months, voluntarily withdrawing false claims amounting to ₹1,045 crore, informed the CBDT.
On the overall raids, the CBDT said that investigations have uncovered organised rackets operated by certain persons and intermediaries, who have been filing IT returns claiming fictitious deductions and exemptions.
These fraudulent filings, taking advantage of self declaration in some schemes, are meant to abuse beneficial provisions, with some even submitting false TDS returns to claim excessive refunds.
The search and seizure operations were conducted in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh, where evidence of fraudulent claims were found to have been used by various groups and entities. The sleuths also examined and recorded statements of beneficiaries and those involved in the racket.
No valid justification
Exemptions, as per the CBDT readout, have been claimed without valid justification. “Employees of MNCs, PSUs, government bodies, academic institutions, and entrepreneurs are among those implicated. Taxpayers are often lured into these fraudulent schemes with promises of inflated refunds in return for a commission,” said the CBDT.
Despite a fully e-enabled tax administration system, ineffective communication remains a significant hurdle in assisting taxpayers. It has been observed that such ITR preparers often create temporary email IDs solely for filing bulk returns, which are later abandoned, resulting in official notices going unread, the statement read.
However, many still remain non-compliant, possibly under the influence of the masterminds behind these evasion rackets.
Published on July 14, 2025
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