Individuals filing their Income Tax Returns (ITR) should now be more aware and careful after the Income Tax Department on Monday, 14 July 2025, conducted a “large-scale” verification operation cracking down on individuals and entities facilitating fraudulent claims of deductions and exemptions in their filings, according to the official statement.
The tax department investigations revealed that the fraudulent filings involved abuse of beneficial provisions, with some even submitting false TDS returns to claim excessive refunds.
The authorities also reportedly uncovered ‘organised rackets’ operated by certain ITR preparers and intermediaries, who have been filing ITR claims with ‘fictitious deductions and exemptions.
How did the Tax Dept. conduct search operations?
The Income Tax Department leveraged financial data received from third-party sources, ground-level intelligence, and advanced artificial intelligence tools to identify suspicious patterns in the filings.
Based on the findings of its preliminary investigation, the tax department then conducted “search and seizure” operations across the states of Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh and found evidence of fraudulent claims used by various groups and entities, according to the official filing.
These groups misused the deductions under Sections 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB of the Income Tax Act, and these exemptions were claimed “without” a valid justification.
Who was found guilty?
After the large-scale verification operation, the Tax Department found that employees of MNCs, PSUs, government bodies, academic institutions, and entrepreneurs were ‘lured’ into these fraudulent schemes with the promise of “inflated refunds” in exchange for commission for the service.
“Despite a fully e-enabled tax administration system, ineffective communication remains a significant hurdle in assisting taxpayers,” said the Tax Department in the official filing.
The Department also mentioned that the ‘ITR preparers’ often create temporary email IDs to file bulk returns, which are then later abandoned, making the official notices sent unread.
Stern action against fraudulent claims
According to the official filing, the Tax Department is now set to take ‘stern action’ against continued fraudulent claims, including penalties and prosecution wherever applicable.
The ongoing verification programme across 150 locations is expected to provide “crucial evidence,” including the digital records, which will help the authority crack down on and ‘dismantle’ the networks behind these fraudulent schemes as per the law.
The Income Tax department said further investigations are underway on the matter, while advising people to file the correct particulars of their income and communication coordinates and not be influenced by advice from unauthorised agents or intermediaries promisingunduerefunds.
“Approximately 40,000 taxpayers have updated their returns in the last four months, voluntarily withdrawing false claims amounting to 1,045 crore. However, many remain non-compliant, possibly under the influence of the masterminds behind these evasion rackets,” said the Income Tax Department in the official filing on Monday.
Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Readers are advised to consult a qualified tax professional or chartered accountant for guidance specific to their financial situation and tax obligations under the Income Tax Act, 1961.