Insight Instruction No. 82, issued by the Directorate of Income Tax (Systems), outlines the procedure for investigating high-risk refund cases for Assessment Year 2024-25. Clusters of suspicious Income Tax Returns (ITRs), flagged based on common email IDs and refund claims, are being disseminated to the Principal Directors of Income Tax (Investigation) for verification. The Investigation Wing is tasked with identifying potential false refund claims, often made through organized efforts or by key individuals. A Standard Operating Procedure (SOP) has been provided to guide officers in verifying the authenticity of claims, with detailed instructions on how to allocate cases, conduct investigations, and report findings. The investigation is expected to be completed within three months, and verification reports must be uploaded through the Insight portal. In cases of technical difficulties, users are advised to contact the Insight helpdesk. The goal is to ensure thorough scrutiny of refund claims to detect any fraudulent activities and verify their legitimacy based on the provided evidence.
Insight Instruction No. 82
DIRECTORATE OF INCOME TAX (SYSTEMS)
ADDITIONAL DIRECTOR GENERAL OF INCOME TAX(SYSTEMS)-2
ARA Centre, Ground Floor, E-2, Jhandewalan Extension,
New Delhi-110055
F.No. DGIT(S)/ADG(S)-2/HRR/2024-25/620 Dated: 03.10.2024
To,
All DGsIT(Inv.)
Madam / Sir,
Sub.:- High Risk Refund Cases A.Y. 2024-25 disseminated for Investigation wing users at Insight – reg.
Kind reference is invited to the above subject.
2. Email based clusters of High-Risk refund ITRs for AN. 2024-25, identified based upon certain rules are being disseminated to the PDsIT (Investigation) for the purpose of verification of suspicion that false claims of refunds have been made in an organised manner or through a single key person.
3. Upon receiving the cluster, the jurisdictional PDIT(Inv.)-1 may preferably allocate one or more cluster to a particular DDIT(Inv.)/ADIT(Inv.) for integrated and comprehensive
4. In this regard, SOP for verification of High-Risk Refund (HRR) cases by Investigation wing officers is attached as Annexure-A_ All the aspects mentioned in the SOP have to be examined in detail before uploading verification report. Further, kindly refer to Annexure-B for Step-by-Step guidance on uploading of verification report on Insight portal.
5. In case of any technical difficulty being observed, users may contact or write to Insight help desk, (Helpdesk number-1800-103-4216, Email id: [email protected]).
Yours faithfully,
(Nikhil Varma)
ADG(Systems)-2, New Delhi.
Copy to:
PPS to the Chairman, Member (S&FS), Member (TPS), Member (L), Member (A&J), Member (Adm.) & Member (IT & Rev.), CBDT and DGIT(Systems), New Delhi for information.
ADG(Systems)-2, New Delhi.
Annexure A- Standard Operating Procedure (SOP) for Directorate of Investigation for verification of HighRisk Refund (HRR) cases (email-based clusters)
In the past, incidents were reported wherein wrong refunds had been claimed through various means such as wrong claim of TDS credit, under reporting of income, over stating of deductions, claim of bogus expenses etc. Accordingly, some cases have been identified based upon certain rules.
Suspicious clusters, comprising of ITRs in which common email ID has been reported, has been identified based on certain rules. Details of such high-risk clusters are being disseminated to the respective CRU [Central Registry Unit] Nodal officer1for the purpose of verification of suspicion that false claims of refunds have been made in an organised manner or through a single key person. Such cases should be dealt with as per the procedure prescribed below.
Guidelines for handling high risk refund cases disseminated by Pr. DGIT / DGIT (Systems) [e-mail-based Cluster] –
1. Upon receiving the cluster, the CRU Nodal officer concerned, with the prior approval of DGIT(Inv.)/PDIT(Inv.) as the case may be, may preferably allocate one or more cluster to a particular DDIT(Inv.)/ADIT(Inv.) [hereinafter referred to as the IO] for comprehensive investigation within a period of 7 days from receipt of information. The IO shall complete the Investigation within a period of 3 months from the date on which the case is allocated by CRU Nodal Officer1 to the IO.
2. Such case will be pushed to the IO in the Verification Module of the Insight Portal with a new case type- “High Risk Refund Cases-Inv.”2. The IO shall proceed for open enquiry only after administrative approval of the JDIT(Inv.)/Addl. DIT(Inv.).
3. BASIS FOR DETERMINATION OF SAMPLE: The Sample while Investigating the HRR cases would be top 10% of the Refund claimants in the cluster or Top 10 Refund claimants of the cluster, whichever is higher. For clusters containing less than 10 ITRs, all the ITRs present in the cluster are to be treated as Sample. The FIRST SAMPLE will contain the first top 10% of the Refund Claimants in the Cluster or Top 10 Refund claimants of the cluster, the SECOND SAMPLE will contain the next 10% of the refund claimants in the cluster or next top 10 refund claimants of the cluster. The same is illustrated with a few examples.
Example 1 – If the Cluster size is 85, then the FIRST SAMPLE will contain top 10 Refund Claimants as 10% of 85 is 8.5 which is less than 10, and the SECOND SAMPLE will contain next top 10 Refund Claimants.
Example 2 – If the Cluster size is 125, FIRST SAMPLE will contain Top 13 Refund Claimants and the SECOND SAMPLY will contain next 13 top Refund Claimants. Example 3 – If the Cluster size is 9, the FIRST SAMPLE will contain all 9 Refund Claimants.
4. While investigating, the IO will take care of following aspects:
I.(i)The IO concerned, who has been assigned the case, should first attempt to ascertain the identity of the natural person (Hereinafter referred to as the KEY PERSON] associated with the common email ID identified, by making use of internal database available with the Department like Insight / ITBA / e-filing portals etc. If such KEY PERSON could not be identified from the internal database, the IO may call for information under section 131 (1A) of the Act or by issuance of letter, requesting the FIRST SAMPLE (preferably within their jurisdiction) to furnish: –
(a) the details and identity of the KEY PERSON whose e-mail id has been furnished in their respective ITRs (including contact details and address of the person), and
(b) Submit supporting documents to substantiate the genuineness of claim made on account of exemption, deduction, expenses etc.
(ii) The information called for under section 131(1A) of the Act or through letter issued should mandatorily be delivered through registered post along with service of the same on all the registered e-mail ids. (These details should initially be called for without requiring personal appearance of the taxpayers in office.)
(iii) If from the FIRST SAMPLE no compliance is observed and no reply is received, their personal attendance may be ensured, and identity of the KEY PERSON associated with the common e-mail ID may be identified along with proofs to substantiate claim on account of expenses, exemptions, deductions etc. However, if from the reply received from the FIRST SAMPLE, the KEY PERSON can be identified, personal attendance of FIRST SAMPLE is not to be ensured at this stage.
(iv) If IO cannot identify the KEY PERSON associated with the common e-mail ID, then SECOND SAMPLE may be asked to provide the relevant details in the same manner as for the FIRST SAMPLE.
(v) However, if still IO is not able to ascertain the identity of the KEY PERSON associated with the common e-mail ID, the FIRST SAMPLE along with as many other ITRs from the cluster as deemed fit, may be examined in detail and requisite enquiries may be made & if required, statements of taxpayers may be recorded, to verify either the genuineness of claims made in the ITR or to strengthen the enquiry in terms of corroborative evidences for the false claim.
II. Once the KEY PERSON behind common e-mail Id is identified, the IO, under section 131 (1A) of the Act, may call for information / the documents from the KEY PERSON in support of the claim made on account of deduction, exemption, expenses etc. in the 20-30% of the Cluster size which shall include FIRST SAMPLE. (These details should initially be called for without requiring personal appearance of the KEY PERSON in the office)
I. If, as a result of the enquiry made with the KEY PERSON behind common e-mail Id, the claim of expenses, deductions, exemptions etc, in the enquiry undertaken as per 4.II is found to be genuine, then the IO may close the enquiries and submit the feedback in the feedback functionality present in “High Risk Refund Cases- Inv” case type with the prior approval of PDIT(Inv.).
II. However, if after verification carried out as per 4.II, it is found that the claims made on account of expenses, deductions, exemptions etc. are not genuine or that the KEY PERSON has failed to furnish sufficient evidence to support the claim of refund, the IO may record the statement of KEY PERSON. The IO should verify the veracity of the suspicion that false claims of refunds have been made in an organized manner or through a KEY PERSON. Also, the FIRST SAMPLE along with as many other ITRs from the cluster as deemed fit, may be examined in detail and requisite enquiries may be made & if required, statements of taxpayers may be recorded, to verify either the genuineness of claims made in the ITR or to strengthen the enquiry in terms of corroborative evidences for the false claim.
Intrusive Actions may be planned to unearth any systematic fraudulent claims depending upon the facts and circumstances of such enquiry.
Accordingly, the methodology adopted by the KEY PERSON while filing ITRs may be ascertained. It may include inquiring about the details of documents obtained by him from his clients before filing the ITRs. Moreover, if any patterns in claim of deductions like bulk of the clients claiming similar deductions are observed, the same may be confronted with the key person and the circumstances under which such individuals came in contact with him / her should be recorded clearly in the statement. Care must be taken not to disclose the source of intelligence in possession of the Investigation Directorate.
V. If the Investigation reveals that the KEY PERSON has NOT indulged in fraudulent practices and the claims of expenses, deductions, expenses made in the ITR are genuine, No Negative Inference may be drawn against the KEY PERSON and the ITRs of the Cluster and the IO may close the enquiries and submit the feedback in the feedback functionality present in “High Risk Refund Cases- Inv” case type with the prior approval of PDIT(Inv.).
I. However, if it is revealed that the KEY PERSON has indulged in fraudulent practices, the investigation reports as prepared by the IO, in the case of KEY PERSON and tax payers examined in 4.IV, be submitted in the feedback functionality present in “High Risk Refund Cases- Inv” case type with the prior approval of PDIT(Inv.) with the comments verification completed. For the remaining ITRs of the cluster, i.e., the ITRs/Assessees of the Cluster which have not been examined in 4.IV, based on findings of the enquiry and such other observations which might have material effect on the claim of deduction, exemption, expenses etc., the enquiry report is to be submitted with the comments ‘Further Verification Required’ quantifying the expenses, deduction, exemption claimed based on which the case was flagged in the Cluster.
For Example – In a Cluster of 85 ITRs, 19 ITRs have been examined in 4.IV and 66 have not been examined. Out of the 19 ITRs examined, it is revealed that 9 assessees have all the documents to substantiate the claim and 10 assessees do not have such documents. The enquiry report may be prepared as under: –
a) GENUINE CLAIM & NO ADVERSE VIEW: – for the 9 assessees, report shall mention NIL Income escapement in these cases and no adverse inference maybe drawn.
b) NON-GENUINE CLAIM & INCOME ESCAPEMENT QUANTIFIED: – For the 10 assessees, where the assessee could not substantiate the claim, report shall mention the quantum of Income escapement based on the risk rules as quantified by the IO.
c) Unexamined ITRs & further verification required: – For the remaining 66 ITRs of the cluster where no enquiry has been conducted but based on enquiry undertaken of the KEY PERSON and such other observations which might have material effect on the claims made, the IO will submit the report quantifying the expenses, deductions, exemption, etc. claimed based on the risk rules on which the case was flagged in the Cluster with the comments ‘Further Verification Required’.
5. The IO must submit timely feedback within an overall period of 4 months from the date on which thecase had been disseminated to the concerned CRU Nodal Officer in Insight Portal after thorough investigation.
4. During the enquiry, IO might come across cases where unsubstantiated claims of deductions, expenses, exemptions, etc. have been made in the previous years as well, i.e., for the year for which data has not been flagged in the Cluster. For the previous years, IO shall upload the findings on the VRU for each PAN year-wise separately.
Enclosed: – Flow Chart of the process
Notes:
1 CRU Nodal officer referred in the SOP shall be the same CRU Nodal Office as referred in the OM Dated 08/06/2022 Sub: – Revised guidelines for management of Suspicious Transaction Reports and exchange of information with Financial Intelligence Unit – India (FIU-IND)
2 The IO needs to refer to the relevant Insight Instruction for accessing the case type and related details in Insight Portal.
