Income Tax probe reveals bogus refund racket spread from TN to Jharkhand

CHENNAI: A sprawling network of tax practitioners and intermediaries operating across Tamil Nadu and Jharkhand has been exposed for orchestrating fraudulent income tax refund claims, according to ongoing investigations by tax authorities.

Over the past few days, the Income Tax Department's probe revealed a coordinated scheme involving thousands of taxpayers, including government employees and defense personnel, who illegitimately claimed crores of rupees in refunds through fabricated documents.

Investigative surveys conducted in Krishnagiri, Salem, and Coimbatore in Tamil Nadu, alongside Dhanbad and Deoghar in Jharkhand, uncovered a well-organised racket. Tax professionals and middlemen colluded to file false claims under various sections of the Income Tax Act, leveraging bogus donation receipts, inflated medical expenses, forged rental agreements, and fictitious allowances. Several evidence, including digital records and manipulated filings, was seized during raids, pointing to the scale of the operation, officials claimed.

According to sources, intermediaries lured taxpayers through advertisements promising "maximum refunds", targeting individuals across Tamil Nadu, Delhi, Jharkhand, Jammu and Kashmir, Assam, and Bihar. In one instance, a Dhanbad-based agent created shared email IDs to file fraudulent claims for more than 4,000 taxpayers in specific regions, streamlining the submission of falsified returns.

This crackdown follows a similar revelation in March 2025, when the department identified more than 3,000 public sector undertakings (PSU) and corporate employees who illicitly obtained hefty refunds by manipulating tax returns. Collaborating with unscrupulous practitioners, these individuals exploited loopholes to evade taxes, prompting the department to intensify scrutiny.

The racket's reach extended to employees of public sector undertakings and private firms, with notable entities like Bharat Heavy Electricals Ltd; Ordnance Factory, Tiruchy; and Tamil Nadu State Transport Corporation implicated. Retired and serving defense personnel were also among those implicated.

The Investigation Wing of the Income Tax Department (Tamil Nadu and Puducherry) said that the racket relied on a nexus of chartered accountants, tax consultants, and middlemen who fabricated financial documents. Such schemes not only defraud the exchequer but also undermine trust in the tax system, officials noted.

Tax experts have urged individuals involved in dubious claims to voluntarily disclose discrepancies by filing updated returns with due penalties, thereby avoiding prosecution. The department warned that non-compliance could lead to severe legal consequences, including fines and criminal charges.