‘CAs’ help you get fat income tax refunds, with a bit of fraud

New Delhi: As the July 31 deadline for filing income tax returns looms, some taxpayers are discovering that this can be an enriching affair. They have been promised fat tax refunds by conmen masquerading as chartered accountants. These fake CAs falsify the taxpayer’s income in the return, resulting in hefty tax refunds ranging from Rs 50,000 to Rs 2 lakh. They do so by either understating the taxable income of the individual or claiming certain tax deductions and exemptions.

This is easy because no documents have to be submitted to support deductions or exemptions claimed in a income tax return. “One can claim deduction for medical insurance, home loan or education loan or even disability of self or dependent without having to submit any evidence,” pointed out a Mumbai-based chartered accountant. For this, the fake CAs pocket 10-15% of the refund amount.

Thousands of taxpayers may already have filed their returns through these entities and claimed refunds. All one has to do is provide the Form 16 and other details such as the Aadhaar and bank account number and the return is prepared. ET sent a Form 16 and other details to one such ‘chartered accountant.’

Within five days, he had filed the return by deflating the gross income by Rs 1.9 lakh, resulting in a refund of over Rs 50,000 being sought. When asked how the gross income declared in the tax return was lower than that in the Form 16, the ‘chartered accountant’ explained that he took into account some allowances that were exempt under Section 10 but not mentioned in the Form 16.

However, tax experts warn that the discrepancy is likely to get detected when the return comes up for assessment. Until recently, tax deducted at source (TDS) details in an individual’s Form 26AS used to be reconciled with the tax declared in the return. “Now the tax department is also checking the Form 16 and reconciling it with the income declared in the return,” said Sudhir Kaushik, CFO and cofounder of tax filing portal Taxspanner.com.

Normally, if there is a mismatch in the income details, the return is rejected and the assessee is given a chance to rectify the mistake. But wilful falsification of information can have serious implications.

“If the assessing officer finds malafide intention in misreporting the income, he may slap a penalty and may also initiate prosecution of the taxpayer,” said Raj Khosla, chartered accountant and managing director of MyMoneyMantra.com.

“If a taxpayer has knowingly claimed a deduction or exemption and does not have the required documents, it is tantamount to tax concealment,” said Amit Maheshwari, partner, Ashok Maheshwary & Associates. “Under Section 270A, misreporting of income attracts a penalty of 200% of the tax sought to be evaded.”

“Fraudulent claims for refunds has become a big problem for the income tax department,” said chartered accountant Karan Batra.

A tax refund racket was busted in Bangalore earlier this year. A chartered accountant had filed returns for nearly 1,000 employees of top companies with inflated claims of loss from house property. Sources in the tax department said they recently unearthed a similar scam involving tax returns of defence personnel.