I-T dept prosecutes 2 techies for misusing updated tax return provision
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Hyderabad: The investigation wing of the income tax department in Hyderabad has launched prosecution proceedings against two software professionals for allegedly attempting to defraud the tax system, even after being given a chance to correct their returns through the ITR-U provision, a facility meant for taxpayers to voluntarily correct omissions or errors and pay additional tax without facing harsh penalties.
The two individuals, employed in city-based IT companies, initially filed IT returns claiming fake deductions under section 80GGC, which allows deductions for political donations. On verification, these donations were found to be bogus. The department issued notices and allowed them to file updated returns under the ITR-U mechanism.
Instead of using the opportunity to correct their filings, both individuals allegedly withdrew the fake donation claims but introduced new bogus deductions in their updated returns, again under-reporting their taxable income and paying only a marginal increase in tax liability.
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₹1.2 crore fraud
In the first case, the taxpayer is accused of claiming ₹1.2 crore in false deductions over three years, including fraudulent political donations, exempt gratuity, and other retirement-related deductions. Upon receiving notice, he withdrew the flagged claims but replaced them with new deductions, slightly increasing his taxable income to appear compliant, while evading a significant portion of his tax dues.
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Department officials said the evasion occurred over four financial years and pointed to a pattern of deliberate manipulation rather than an unintentional mistake.
Fake claims by 2nd techie
The second individual followed a similar modus operandi, allegedly claiming ₹1.02 crore in bogus deductions over three years. After being flagged for fake political donations, he filed an updated return for that year removing the entry.
But when questioned for earlier years, he again filed revised returns with different fraudulent deductions, under-reporting income and paying minimal tax.
Investigators said they found mobile phone chats between the taxpayer and his auditor which explicitly discussed fabricating claims to reduce tax liability. This, the department said, confirms intentional evasion and misuse of the ITR-U facility.
Officials said both taxpayers abused the trust-based system and the updated return framework, which is intended for genuine rectifications—not for introducing new fraudulent claims.
The ITR-U provision, they clarified, is meant to report unintentional under-reporting of income and pay due taxes. Filing updated returns with new sets of bogus claims undermines the spirit of voluntary compliance and constitutes deliberate tax evasion.
Prosecution under Sec 276C, 277
Based on the evidence, the department has initiated prosecution under sections 276C(1) and 277 of the Income Tax Act, 1961.
Section 276C(1) deals with wilful attempts to evade tax, punishable by rigorous imprisonment of six months to seven years, along with a fine, if the evasion exceeds ₹1 lakh. Section 277 pertains to making false statements or submitting false accounts, carrying similar punishment.
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