The Income Tax Department in Hyderabad has launched prosecution proceedings against two city-based software professionals for allegedly attempting to evade taxes by repeatedly making bogus deduction claims — even after being given a chance to correct their filings.
According to officials, both individuals had falsely claimed deductions under Section 80GGC of the Income-tax Act, 1961, which allows tax relief on donations to political parties. Upon scrutiny, these donations were found to be fictitious.
Instead of immediately imposing penalties, the department allowed the taxpayers to use the updated return facility (ITR-U) — a provision meant for correcting genuine mistakes or missed disclosures. However, in their revised filings, the two allegedly replaced the withdrawn claims with another set of questionable deductions to again lower their tax liabilities.
Bogus Claims Worth Over ₹2 Crore
Investigations revealed that one taxpayer had made false claims amounting to about ₹1.20 crore over three years, including deductions for political donations and exemptions on gratuity and retirement benefits that were never paid. The revised return showed only a marginal increase in taxable income, keeping most of the alleged evasion intact.
The second professional is accused of making bogus claims of ₹1.02 crore over the same period. Officials reportedly recovered mobile chats between the taxpayer and his auditor discussing ways to inflate deductions, undermining any claim of an innocent error.
Criminal Charges Filed
The department has filed prosecution under Sections 276C(1) and 277 of the Income-tax Act. If convicted, the accused could face imprisonment ranging from six months to seven years, along with fines, since the alleged evasion exceeds ₹1 lakh.
Rising Crackdown on Fake Deductions
In recent months, the Income Tax Department has intensified its crackdown on inflated and fraudulent claims, particularly under popular sections such as 80C, 80D, 80G, and 80GGC. Officials have warned taxpayers that ITR-U is not a loophole for introducing fresh false claims and that misuse can escalate into criminal prosecution.
Tips to Avoid Wrong Claims
Tax experts advise taxpayers to:
- Match deduction claims with the Annual Information Statement (AIS) and Form 26AS before filing.
- Keep all supporting documents for at least six years.
- Avoid claiming deductions without complete documentation.
- Seek professional advice when in doubt.
Officials caution that while inflating expenses or maximising deductions without proof may seem tempting, the department’s automated verification systems will likely detect such discrepancies, leading to penalties, prosecution, and lasting financial consequences.
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Amit Sharma is the Content Editor at JurisHour. He has been writing about the Indian legal market. He has covered tax & company litigation stories from the Supreme Court, High Courts and Various Tribunals. Amit graduated from MLSU Law College with B.A.LL.B. and also holds an LL.M. from MLSU, Udaipur, Rajasthan. An Advocate in Taxation, and practised in Tribunals as well as Rajasthan High Court and pursued Masters in Constitutional Law. He started out small with little resources but a big plan to take tax legal education to the remotest locations across India and eventually to the world. His vision is to make tax related legal developments accessible to the masses.
