Confidential

Annexure B

Reasons for uploading of information on VRW/CRIU:

1. During FY 2022-23, the PCCIT (AP &TS) charge witnessed

a n unprecedented increase in personal income tax refunds, mostly
out of the ITRs processed by the CPC. Preliminary analysi s
show ed that some assessees having salary income were claiming
excessive and ineligible deductions and exemptions leading to huge
refunds. On further analysis of the data obtained from
DGIT(Systems),it was found that 6,23,918 returns filed in ITR-1 & 2
for AY 2022-23 by the assessee of AP&TS charge, refund of more than
Rs.25,000/- was claimed and the refund amount was more than
25% of prepaid taxes in each case and in some cases, the refund
claim was exceeding 75% to 90% of the prepaid taxes.

2. Deeper study of some sample cases revealed that the refund of

prepaid
taxes was because of the claim of certain exemptions
U / S 10(13A),10(14),10(15), and deductions u/s 24(b), 80CCD(1B),
80D, 80DD, 80DDB, 80E, 80EEA, 80EEB, 80GGC etc. In some cases,
it was also found that the total spending/investment supposedly
made to become eligible for the exemptions claimed in the return
far exceeded the salary income itself. It was also noticed that none
of these claims were made by the employees before the respective
DDOs and no details/proof for claim of deduction/exemption was
submitted with the ROI.

3. It is found that eight intermediaries have filed ITRs of more

than 3000
taxpayers, whose refund claims exceeded 25% of their prepaid taxes.
DGIT(Inv) Hyderabad conducted survey operations on these
intermediaries, during which the intermediaries admitted on oath
that they have neither verified nor have any proof of the
deduction/exemption claims of their clients and that wrongful
refunds were claimed in the returns filed by them for their clients
based on ineligible deduction/exemption. As per their admission,
they have cumulatively
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Annexure B

filed 20,891 ITRs across various A.Y's, with a total wrongful refund claim of
Rs. 1 3 9 . 3 0 Cr (approx.). Their clientele included employees from
C e n t r a l a n d State Governments, Banks, reputed tech Companies, etc.
Subsequently, some of their clients were summoned by the Investigation
Wing and they admitted on oath that the deduction/exemption claim ed
by t hem w as unsubstantiated and they agreed to update their returns.

4.D a t a r e g a r d i n g c a s e s o f r e f u n d s > R s . 2 5 0 0 0 / - a n d r e f u n d a m o u n t s
exceeding 25% of prepaid taxes, covering a total refund of Rs. 4631.36 Cr
was segregated and forwarded to the jurisdictional PCslT which identified
cases with red flags such as substantially higher deductions and directed
the JAOs to issue notices u/s 133(6) of the Act, calling for information
and proof regarding the e x e m p t i o n s / d e d u c t i o n s c l a i m e d i n t h e r e t u r n .
T h e d e t a i l s o f t h e n u m b e r o f notices issued, number of responses
received, number of persons who did not respond/ responded
p a r t i a l l y , a n d n u m b e r o f u p d a t e d r e t u r n s f i l e d withdrawing the
claim of refunds are tabulated as under:
PCIT CHARGE Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative
(1) number of number of number of number of number of cases number of number of taxes
Notices No response cases where Final where final updated updated paid (in ELL
issued cases sent for adjournment responses Response is returns return Lakhs)
u/s 133(6) E-verification Sought/ Received till satisfactory/ no required to filed (9)
till date (3) PartialReply date updated return be (8)
(2) received/other (5) required/ case filed
till 01.01.2024 dropped (7)
(4) (6)

PCIT-1, 1716 679 406 731 42 560 432 132155

Hyderabad
PCIT-2 4843 1926 1082 1934 265 1731 1297 2343.8
Hyderabad
PCIT-4 4006 1765 642 1104 101 597 556 1483.17
Hyderabad
PCIT, Tirupati 16506 5320 5037 8433 99 8334 7351 12833.05
POT, Vizag 7789 2552 1640 3961 517 3509 2712 4177.01
PCIT, 9028 2181 1761 5249 595 4654 2732 3795.17
Vijayawada
TOTAL 43888 14418 10568 21412 1619 19385 15080 25954.75
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Annexure B

5. From the above table it is seen that in response to the notices

issued, 15,080 assessees admitted that they made wrong claims, filed
updated returns, and withdrew their claims for refunds. However, as can
be seen from the above d a t a , n o t a l l t h e a s s e s s e e s r e s p o n d e d t o t h e
n o t i c e s . D e s p i t e n o t i c e s a n d reminders being served, almost 33% of the
assessors chose not to respond. The D e p a r t m e n t a l s o c o n d u c t e d 1 8 5
o u t r e a c h p r o g r a m s w i t h D D O / Z A O s o f Multinational organizations.
The public sector organizations were also covered in these outreach
programs with wide publicity. The Department also issued approx.
63,474of advisories for taking remedial action where the claims of
deductions are suspicious in nature. Accordingly, a total of 14418
nonresponsive cases have been sent to the DG System for taking these
cases in the Risk Management System (RMS) module for e-verification.

6. S o m e of the assessees partially

responded by seeking a d j o u r n m e n t s / r e q u e s t i n g f u r t h e r
t i m e t o f u r n i s h p r o o f / d e t a i l s o f t h e exemptions/deductions claimed
but chose not to respond thereafter. From the data, it can be seen that
some of the assessees have not been responding to the n o t i c e s i s s u e d /
p o s t p o n i n g t h e p r o c e e d i n g s b e c a u s e t h e y d o n o t h a v e a n y evidence in
support of their wrong claims. The Department was contemplating
launching prosecution u/s 276C(1) or u/s 277 of the Income Tax Act
on the a s s e s s e e w h o i s c l a i m i n g w r o n g d e d u c t i o n s / e x e m p t i o n s .
A d d i t i o n a l l y , Department was considering launching prosecution on the
individuals working a s I n c o m e - t a x c o n s u l t a n t s u / s 2 7 8 o f t h e
I n c o m e - t a x A c t a s a b e t t o r s (abatement of false returns).

7. However, the offence of abetment/ inducement to file false returns

against t h e c o n s u l t a n t s c a n o n l y b e e s t a b l i s h e d i f t h e o f f e n s e b y t h e
individual assessees u/s.276C(1) or Sec.277 is proved. Further,
Sec.278 specifies the a m o u n t o f t a x e v a d e d b a s e d o n w h i c h t h e
quantum of punishment is to be
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Annexure B

decided. Hence, the prerequisites for launching prosecution

u/s.278 against the consultants for abetting/inducing the filing of
false returns are:

i.Prosecution against the individual assessees u/s.277 or

269C(1) are launched and the offences are proved
ii.Arriving at the amount of tax evaded to decide the
quantum of punishment.

7. T o i n i t i a t e p r o s e c u t i o n p r o c e e d i n g s o n u / s 2 7 6 C ( 1 ) o r u / s
277, the

quantum of tax evasion is necessary and that can be done only

a f t e r t h e Assessment proceedings are initiated on these assessees.
As mentioned earlier, a total of 14418 cases have been sent to the
DO System for taking these cases in the Risk Management System
(RMS) module. Additionally, it is imperative that the cases in which
assessees have submitted partial responses and are not submitting
complete details, those cases need to be uploaded in VRU/CRIU for
their inclusion in the RMS module. Once the quantum of tax
e v a s i o n i s established, the consequent prosecution proceedings
can be initiated by the competent Authority. Hence, this case is
uploaded in the CRIU/NTRU module of Insight.