The Income Tax Department has discovered a massive tax refund fraud to the tune of Rs 40 crore involving tax consultants, numerous railway and police department employees and software professionals in Hyderabad and Vijayawada, according to a Times of India report.
At least eight tax consultants are being investigated in the matter as each of them submitted as many as 500 to 1,000 I-T returns with false documents of contribution to pension funds and under Section 80DD which gives exemption on income tax for taking care of disabled dependents.
The consultants approached the government department employees and offered to submit their returns and get them a tax refund in return for a 10% commission on the amount. Some employees were unaware that it was a fraudulent scheme and were ready to give their details as they would get a tax refund in exchange for a commission, according to an investigating official.
Section 80CCC allows for a tax exemption of up to Rs 1.5 lakh for investment in pension funds and these tax consultants attached false documents to claim a refund under this clause.
Income Tax Department officials are of the view that this is merely a tip of the proverbial iceberg and the actual fraud may turn out to be much bigger as a full scale investigations have been launched into the racket in both Hyderabad and Vijayawada.
Notices of prosecution will be sent to government officials and software professionals involved and criminal cases will be filed after the investigations are completed.