I-T department sends notices using AI to tax evaders for fake donations

The income tax notices were issued to evaders under Section 138 and 148(A); individuals have to submit proof of donation within 30 days of receiving the notice

The Income Tax (I-T) department has sent notices to tax evaders after reassessing several income tax returns, especially those in which deductions have been claimed for donations made to charitable trusts and political parties during FY19.

Paras Savla, partner at KPB & Associates, a chartered accountancy firm, said, “Using artificial intelligence (AI), the I-T department has identified people whose ratio of donation against income earned is skewed for the financial year 2018-19.”

Hundreds of notices were issued to salaried individuals from March 20 to June 10 this year, according to a report in Moneycontrol.

One can claim deductions of 50 per cent to 100 per cent for donations to political parties and charitable trusts under Section 80G.

The notices were issued by the I-T department under Section 138 and 148(A). In many cases, inaccurate deductions have been raised in the notice. But in a few cases where a higher sum of donation has been claimed, a reassessment notice has been sent. Reassessment of I-T returns can be done at any time within 10 years for those with an income above Rs 50 lakh and within eight years for those earning less than Rs 50 lakh. Returns for transactions in FY19 can be reassessed until March 31, 2029, according to the Moneycontrol report.

What should you do if you have received such a notice?

Karan Batra, co-founder of tax advisory CharteredClub.com, said, "One would have to respond to the notice sent under Section 148(A). If the individual has proof of the donation, then the same can be produced in response. Else, the liable tax along with the penalty mentioned in the notice would have to be paid.”

Penalties of 50 per cent to 200 per cent are applicable if one is found to have evaded tax. The proof needs to be submitted within 30 days of receiving the notice.

If you haven’t received a notice yet but have realised that you wrongfully claimed Section 80G tax deduction, then you can update your returns.

“One can update the returns within two years by bearing a 25 per cent to 50 per cent higher taxation,” said Batra.

Avoid fake links

While responding to the notice, do check your account on the income tax portal.

“To avoid fake links and sharing essential information, one should check the portal. Every notice issued against your permanent account number (PAN) would be listed in the ‘Respond’ tab under your account,” added Batra.