Income Tax Department Cracks Down On Bogus Refund Claims Ahead Of Filing Deadline

The Income Tax Department has launched a nationwide crackdown on fraudulent exemption and deduction claims as the deadline for filing returns approaches. A letter issued by the Central Board of Direct Taxes (CBDT), the apex policy-making body for direct taxes, has directed tax officials to flag suspicious refund claims and suspend processing of such returns pending investigation.

The move comes amid a noticeable spike in bogus refund and exemption filings this season, prompting the department to tighten its scrutiny mechanisms. According to a CBDT communication reviewed by NDTV Profit, investigating officers have been instructed to actively identify and halt questionable claims, with recovery action to follow in cases where refunds have already been disbursed.

The CBDT, which functions under the Ministry of Finance, oversees the administration of direct taxes in India and sets policy guidelines for the Income Tax Department. In an earlier communication, the board emphasised the need for effective supervision by regional heads, Principal Chief Commissioners of Income Tax (PCCITs), to ensure that queries raised during assessments are relevant and justified.

Due application of mind must be ensured while issuing notices for scrutiny, the CBDT stated, adding that irrelevant queries must be completely avoided, it said earlier.

The crackdown is expected to impact returns where deductions appear inflated or unsupported by documentation.

As the July 31 deadline for filing income tax returns nears, taxpayers are advised to ensure accuracy and transparency in their filings to avoid delays or legal complications.