Tax refunds via common email, mobile ID face scrutiny: Key actions to take

Income Tax department's internal says that only high risk refund cases will be investigated

The Income Tax department will examine "high-risk refund" cases for Financial Year 2023-24 (Assessment Year 2024-25) by using statistical analysis, said a news report on Tuesday.

 

According to the 'Economic Times' (ET) newspaper, an internal directive issued on October 3 asked tax officers to take up the task. The document has not been made public.

 

This implies that even if a person has received a refund for FY24, her case could still be subject to investigation if the tax department identifies any suspected irregularities.

 

When multiple returns are associated with a common mobile number or email, it raises red flags about potential fraud, including duplicate claims. "This may trigger a review or inquiry to verify the authenticity of the refund and tax deductions claimed. Consequently, taxpayers may experience delayed refunds as their claims are subjected to manual scrutiny. If discrepancies are identified, the refund may be withheld or adjusted against any outstanding liabilities. Moreover, taxpayers face the risk of penalties if the department concludes that a refund or TDS credit claim is invalid, with fines imposed for misreporting income or fraudulent claims under relevant sections,” said Amit Bansal, partner, Singhania & Co.

 

 

The Income Tax department has issued an internal circular regarding the identification of high-risk refund cases for investigation, according to ET. The circular says:

 

The subject of high-risk refund cases for AY 2024-25, as identified through specific rules, is being brought to the attention of investigation wing users via the Insight system.

 

Email-based clusters of high-risk refund Income Tax Returns (ITRs) for AY 2024-25 have been identified and sent to the Principal Director of Income Tax (Investigation) [PDsIT(Inv.)]. These cases are flagged for verification, as there is suspicion that fraudulent refund claims may have been made in an organised manner or through a single key individual.

 

Upon receiving the clusters, the jurisdictional Principal Director of Income Tax (Investigation)-1 [PDIT(Inv.)] may assign one or more clusters to a specific Deputy Director of Income Tax (Investigation) [DDIT(Inv.)] or Assistant Director of Income Tax (Investigation) [ADIT(Inv.)] to conduct thorough and integrated inquiries.

 

If a taxpayer feels her name may be on the list, what should she do?

 

“To address a false refund claim, it is advisable to take corrective measures immediately. One option is to file a revised return under Section 139(5) if the original ITR contains incorrect claims. Doing so voluntarily before receiving a notice from the department shows good faith and can help avoid penalties," said Bansal.

 

"If a notice has already been issued, it is important to respond promptly through the Income Tax portal, providing supporting documents to either validate the claim or explain any errors that were made unintentionally. In cases where the taxpayer is found ineligible for the claimed refund, it is crucial to pay the excess amount along with any applicable interest to reduce the overall liability and avoid further complications."