Taxpayers Who Show Less Income Or “Inflating” Deductions Would Be Prosecuted: IT Dept Warns Taxpayers

The Income Tax department has given a warning to salaried class taxpayers against using illegal methods while filing returns. The officials reportedly stated that taxpayers who show less income or “inflating” deductions would be prosecuted and their employers would be asked to take strict action against them.

To control the unscrupulous tax planners and advisors, Bengaluru’s Central Processing Centre (CPC) department has issued advisory asking taxpayers not to use dubious ways to access tax benefits. Moreover, CPC is liable to receives and processes Income Tax Returns (ITRs).

Major highlights of CPC advisory

Terming it as a “cautionary advisory” against inflating deductions or exemptions by salaried taxpayers, the department said that such attempts “aided and abetted by unscrupulous intermediaries had been noted with concern”.

According to Business Standard, wrong claims in ITRs will be considered as cases of tax evasion. The advisory directs that taxpayers should not “fall prey” to fake promises or wrong advice by deceitful mediators. “Such offences are punishable under various penal and prosecution provisions of the Income Tax Act, and this may also delay issuance of their refunds.”

Further, if employees with wrong claims are caught, the I-T department would notify their employers’ vigilance division which will take stringent action under conduct rules, as reported by India today. “In the cases of such wrong claims by the government/PSU employees, a reference would be made to the concerned vigilance division for action under conduct rules,” it says.

It also asked advisors and tax planners to “confine their advice to taxpayers within the four corners of the IT Act” and cautioned that legal actions would be taken against the violators. These cases of criminal prosecution will be handled by agencies like the Enforcement Directorate (ED) and CBI.

According to NDTV, to catch the wrong information filed in ITR, the I-T department owns an automated “extensive risk analysis system” with no human interface. While processing ITRs, it recognises individuals who are disobedient and using incorrect means to destabilise the trust based system. Following the processing of returns, in such cases that involved high risk, the department could monitor and validate the information submitted by taxpayers in their ITR.

The backdrop of the new initiative

According to The Economic Times, in January, the investigating team of the department busted a racket receiving fraudulent tax refunds by the employees working in reputed information technology companies based out of Bengaluru. Notably, the CBI also filed a criminal case to investigate this nexus.

The season of tax filing for salaried class taxpayers has just started with the Central Board of Direct Taxes (CBDT) that draws the policies for the department introducing new ITRs.

Break-up of salary in ITR

For the assessment of 2018-19, the new ITR forms ask business people and salaried class to provide their salary breakup with correct GST number and turnover.

According to the reports received from the last financial year, 30 million taxpayers filled the most basic form, ITR-1 or Sahaj.

However, this time the form seeks more and clear salary details in various fields and that too in a breakup format such as a value of perquisites, grants that are not free from profit instead of salary and deductions claimed under section 16.

All these details can be accessed through Form 16 of a salaried employee.

According to Business Standard, a senior tax official said that these are now meant to be mentioned in the ITR for clarity of deductions.

As per CBDT, the ITR-1 can be filed by a person who is a resident, other than not ordinarily resident, and get an income of up to Rs 5 million.

Any changes in the methods of filing ITRs?

According to Business Standard, CBDT has not introduced any major change in the method of filing ITRs. Further, the CBDT had said that only a few fields have been “rationalized” in the new forms and there is no modification in the approach of filing ITRs. The method is similar to that of last year.