The Income Tax Department, in a big drive against tax evasion, has detected widespread fake receipt rackets in Ranchi and Patna involving claims of crores of rupees of donations by fraudsters. The fraud lies in the fact that persons involved in it falsified donation receipts, bills and bank transaction schemes by making false claims to tax refunds under provisions of the Income Tax Act, like section 80G and 80GGA and even under other exemptions such as 80E, 80EEE and subsections of section 80GGA. The magnitude of the fraud has also made the department issue notices to hundreds of people with people who are believed to have prepared or utilized these unauthentic documents so as to avoid paying taxes.
The inquiry started when authorities realized that there had been a sudden large increase in claims of refunds relating to a couple of chosen NGO and charitable trusts. When examined further, a number of these institutions were proved to be inactive or merely paper-oriented. Several sweeps of homes, business premises and banks have been conducted in Ranchi and Patna and have recovered records, false receipts, data trails and cash amounting to a systematic and organized modus operandi. It is believed that one of the main suspects, who was based in Ranchi, supplied the taxpayers with fake receipts at a commission. Such receipts were subsequently employed at the time of paying taxes to wrongfully report deductions and receive refunds in high amounts.
It is the feeling of authorities that it is possibly more than just a couple of years that the scam was operating, and crores and crores of rupees must have been taken out of the exchequer in manipulated returns. What is shocking is that a chain of professionals, accountants, agents, and perhaps insiders was involved that made the process go through without any hindrances, and most importantly, made the documents look genuine when they were checked. Refunded figures in a few were 1 lakh to more than 10 lakh per person, and in many instances, the refund claims indicated donations to unknown or unidentifiable charities.
A multi-tier verification drive has now been initiated by the Income Tax Department. The people who have particularly been receiving the notices are being requested to provide duplicates of original donation lists, bank account records, as well as confirmatory letters issued by the supposed donor agencies. Lack of proper evidence would result in fines, reopening of cases and even criminal charges under section 473 of the taxation act involving tax evasion and forgery. The department has also stated that action against those charitable institutions involved will take place, and this may result in the cancellation of tax exemption and registration.
This massive fraud has increased alarm over the loopholes in the tax refund system as well as the donation verification system. It has also culminated in the over-haul of the suspicious refund claims that have been made by all the past three years in Jharkhand and Bihar. It is not unlikely that the case will be expanded as the forensic audit teams will dig deeper into the digital and financial records.
The fraud is a lesson on how even genuine tax exemptions may be used by individuals out of greed to steal the trust of the people and government funds. The same wheel has to keep on turning as the police keep on investigating the claim of holding both the benefactors and the facilitators liable, so that the system does not only become punitive but also sends a message that it will not be followed in future.
