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New Delhi: The Income Tax Department has revealed a network of agents. These agents used to file Income Tax Returns (ITR) of taxpayers and reduced the tax by showing fake deductions or exemptions. Due to this, people had to pay wrongly low taxes and also became eligible for illegal refunds. The investigation revealed that some brokers had created such a network across the country. They used to file returns by taking commission and used to exaggerate or falsify the deduction under the Income Tax Act. Most of the fake claims were related to donations made to registered Unrecognized Political Parties (RUPP) and some charitable organizations.'
It is clear from the recent CBDT advisory that the government wants to stop wrongful tax planning and tighten the fake claims. For this, provision of advanced data analytics, third party verification and severe punishment is being made. This will reduce the losses incurred by the government in the form of fake returns.
According to a report by ET, the Income Tax Department uses advanced data analytics and AI based risk profiling tools. This shows a certain type of deduction pattern that does not seem normal and claims related to brokers. These claims are cross-checked by third party data, such as bank records, trust filings, AIS or Form 26AS information, financial transactions and PAN related databases. Where errors are found, steps like search and survey are taken. This action is taken under sections 132 and 133A of the Income Tax Act.
Fake deduction claims are cancelled under section 80G or 80GGC. This raises the demand for additional taxes. In addition, interest and incorrect reporting under Section 270A may result in a penalty of up to 200 percent of the tax amount. If the search finds evidence that the return has been claimed wrongly, then it is considered as unexplained money under Section 69A. It is taxed up to 78 percent and an additional penalty of 10 percent is also levied under Section 271AAC. In serious cases where there has been deliberate tax evasion, an investigation can be started and imprisoned by running a criminal case.
Experts say that trusts or political parties may face delay or denial in issuing or renewing registration under sections 12AB and 80G. This reduces the trust of donors and affects funding. Banks and NBFCs can deny or prohibit loans to donors under RBI rules.
Under the Nudge Campaign, from 12 December 2025, SMS and emails are being sent to selected taxpayers on their registered mobile and email. It is being asked to check your returns and correct any wrongful claim.
