Income Tax Department Cracks Down on Fake Refund Claims: J&K Government Employees Face Legal Consequences

04-06-2023 : According to official sources, the Income Tax department is currently looking into more than 28,000 government employees in Jammu and Kashmir, including 8,000 police and paramilitary personnel, for allegedly filing false refund claims totaling several crores of rupees on their Income Tax Returns (ITRs).

During the ITR filing periods in 2020–21 and 2021–22, the allegedly fraudulent operations were discovered. In cooperation with the crime branch of the Jammu and Kashmir Police, the Income Tax department has already filed two criminal First Information Reports (FIRs) against a Chartered Accountant (CA) and 404 other people. After learning about a similar fraud that occurred in past fiscal years, this action was taken.

The irregularities were brought to light when the TDS wing of the Income Tax department in Srinagar found that a significant number of individuals in the Union Territory of Jammu and Kashmir had made excessive and ineligible deductions, leading to the submission of false refund claims.

The Principal Director of Income Tax (Jammu and Kashmir and Ladakh) sanctioned the filing of police FIRs against the CA and the 404 other individuals, including questionable tax advisors and filers, for their involvement in a conspiracy to defraud the exchequer of approximately Rs 16.72 crore during the financial years 2017-18, 2018-19, and 2019-20.

It was discovered that many of these individuals had filed incorrect or false ITRs and had fraudulently claimed refunds of around Rs 4 lakh each. The Income Tax department has shared the names, addresses, PAN numbers, and bank account details of these 405 individuals with the police, leading to the freezing of their bank deposits.

The accused individuals have been charged under various sections of the Indian Penal Code (IPC), including cheating, forgery, using forged documents, criminal conspiracy, and section 66D of the Information Technology Act for cheating by impersonation. Additionally, the department has also written to the Institute of Chartered Accountants of India (ICAI), seeking the cancellation of the CA’s license, as they consider them the prime accused in the case.

Following this development, the Income Tax department conducted a thorough check in November of the previous year, specifically targeting ITRs filed by salaried employees in Jammu and Kashmir. They discovered similar instances of fraudulent deduction claims made by employees from various sectors, such as power development, health, tourism, education, banking, and universities, as well as police and Central Armed Police Forces (CAPFs) personnel deployed in the Union Territory.

In March, the Principal Commissioner of Income Tax notified the heads of these organizations, informing them about the provision to rectify or update the ITRs by filing an ITR-U to avoid legal consequences. By the end of March, over 9,000 employees had filed their ITR-U, resulting in the collection of additional tax amounting to more than Rs 56 crore.

However, some employees did not take advantage of this opportunity to correct their ITRs, and as a result, they will now receive penalty notices. In certain cases, FIRs will be filed against them, similar to the one filed against the initial 405 individuals.

More than 28,000 government employees may have illegally requested refunds for the fiscal years 2020–2020 and 2021–2022. By sending out notices for their ITRs to be scrutinized, the Income Tax department will shortly begin taking action against them.

Individuals who violate the law and omit to record their income on their ITRs or escape paying taxes may be charged under Section 276C of the Income Tax Act and sentenced to six months to seven years in prison, depending on the specifics of the case.