Scrutiny on ITR Refunds if Claimed via Common Contact Details

Scrutiny on ITR Refunds is a process where the IT Department examines details of an Income Tax Return (ITR) to verify the accuracy of the refund claim.

Scrutiny on ITR Refunds may occur due to discrepancies, large refund amounts, or unusual claims.

CBDT’s Announcement Scrutiny of ITR Refunds

The Central Board of Direct Taxes (CBDT) has made an announcement regarding the scrutiny of Income Tax Return (ITR) refunds and TDS returns claimed using common contact details. This was introduced to reduce fraudulent claims and ensure the integrity of the entire tax refund process.

The Income Tax Authorities have decided to keep a close eye on the “high-risk refund” cases for the Financial year 2023-24 (Assessment year 2024-25) where such investigation will be held.

“Suspicious clusters, comprising of ITRs in which common email ID has been reported, have been identified based on certain rules. Details of such high-risk clusters are being disseminated to the respective CRU (Central Registry Unit) Nodal officer 1 for the purpose of verification of suspicion that false claims of refunds have been made in an organised manner or through a single key person,” said the Income Tax Department on the said internal order.

What’s in circular?

The income tax department said in the circular, “In the past, incidents were reported wherein wrong refunds had been claimed through various means such as wrong claim of TDS credit, under-reporting of income, overstating of deductions, claim of bogus expenses, etc. Accordingly, some cases have been identified based on certain rules….”

Points to Note

• The Income Tax Authorities have found out that the taxpayers have used the same mobile number or email address to file ITRs and claim refunds.
• The Department will conduct verification procedures for refunds claimed using the same mobile number or email address.
• This is done to ensure the authenticity of such refund claims.
• Due to the increased scrutiny process, there will be a delay in issuing refunds even for genuine taxpayers.
• This affects the genuine taxpayers who may have used the contacts of their family members or joint bank accounts.
• The Department has also found cases where taxpayers have wrongly claimed refunds by submitting fake documents, claiming fake expenses and understating income or overstating expenses.
• A special team (DCIT/ACIT/ITO) in the department will be looking after these refunds which require more focus.

Scrutiny Process

When the Income Tax Authorities find out those returns which are filed with a common mobile number or email address:

• Those returns are marked for further investigation
• Requesting additional information or inquiries
• Comparing information with other databases
• Conducting full-scale audits of financial records

Taxpayers to take note of –

• Taxpayers are advised to use unique mobile numbers and email addresses to file ITRs to avoid any further investigation.
• Information provided in the ITR must be accurate and complete.
• In case, CBDT arises any further investigation, the taxpayer must be ready with all the additional and necessary documents.
• It is also advisable for taxpayers to be aware of their rights and seek professional advice from a tax professional about these kinds of scrutiny.According to Chartered Accountant Deepak Chopra, Chairman of the Direct Tax Committee at the Karnataka State Chartered Accountants Association (KSCAA),

“If any taxpayer has made a false refund claim and is on the list, he/she will face consequences. To avoid penalties and interests, such assessee should take immediate action:

• Revise tax return
• Pay any owed taxes

Failure to comply will trigger scrutiny, as the tax department’s advanced data analytics will detect discrepancies, resulting in severe penalties and interest charges.

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