CBDT Launches Drive to Curb Fake Deductions in ITR Filings

Press Release, dated 14-07-2025

1. Nationwide Verification Drive Initiated by the Income Tax Department

The Income Tax Department has launched a comprehensive nationwide verification operation targeting multiple locations across India. This initiative is aimed at cracking down on fraudulent practices related to deductions and exemptions claimed in Income Tax Returns (ITRs).

2. Focus on Fraudulent Claims and Intermediary Involvement

The verification drive specifically targets individuals and entities that have facilitated false claims of tax benefits under the Income-tax Act, 1961. A major area of concern is the role of professional intermediaries and ITR preparers, who have allegedly colluded with taxpayers to exploit beneficial provisions of the Act for unlawful gains.

3. Uncovering Organised Tax Evasion Rackets

Investigations conducted by the Department have uncovered organised rackets operated by certain tax return preparers. These individuals and firms are suspected of:

• Filing returns with fictitious deductions and exemptions
• Abusing sections of the Income-tax Act to illegitimately reduce tax liability
• Submitting false TDS returns to claim inflated or excessive refunds

Such practices not only compromise the integrity of the tax system but also lead to significant revenue losses for the government.

4. Use of Advanced Technology for Detection

To combat these activities, the Department has adopted a tech-driven approach. The verification operation is backed by:

• Financial data from third-party sources
• Ground-level intelligence inputs
• Advanced artificial intelligence and analytics tools

These technologies help in identifying suspicious filing patterns, inconsistencies, and unusual refund claims with greater precision and efficiency.

5. Evidence from Search and Seizure Operations

The Department’s recent search and seizure operations conducted across key states such as Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh have provided substantial evidence of tax benefit misuse. These findings validate the Department’s data-driven approach and reinforce the need for continued vigilance.

6. Conclusion

This verification drive marks a significant step by the Income Tax Department in strengthening compliance and curbing tax fraud. Taxpayers are advised to ensure accuracy and transparency in their filings, and intermediaries must adhere strictly to ethical standards and professional responsibilities under the law.

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