By IndiaHub 
According to an Income Tax Department statement, investigations revealed that some intermediaries had created pan-India agent networks that filed returns on a commission basis by inflating or fabricating deductions under the Income Tax Act. A large number of these bogus claims were linked to donations made to Registered Unrecognised Political Parties (RUPPs) and certain charitable institutions, as per the Income Tax Department.
What does Income Tax Department’s action against such offenders mean?
“Recent CBDT advisories reflect a clear policy intent to curb artificial tax planning and deter bogus claims through an integrated approach combining advanced data analytics, third-party verification, and stringent penal measures,” says Sandeep Bhalla, Partner, Dhruva Advisors.
Against this backdrop, the manner of detection, the consequences for offenders, and the resultant impact on credit and commercial standing assume critical relevance for industry stakeholders,” says Bhalla.
How does the Income Tax Department track fake claims to catch such offenders?
Bhalla says that the Income Tax Department deploys sophisticated data analytics and AI-based risk-profiling tools to identify abnormal deduction patterns and intermediary-driven claims. Such claims are cross-verified using third-party data sources, including banking records, trust filings, AIS/Form 26AS information, financial transaction trails, and PAN-linked databases.
“Where discrepancies are detected, follow-up enforcement actions — including searches and surveys under Sections 132 and 133A of the Income ax Act — are undertaken to gather incriminating evidence of bogus donation receipts, hawala or routed funds, and fictitious CSR expenditure,” Bhalla says.
What are the consequences if the Income Tax Department catches an offender for submitting fake claims?
Bhalla says that bogus deduction claims u/s 80G/80GGC are liable to be disallowed, resulting in consequential tax demands along with applicable interest and penalties of up to 200% of the tax amount for misreporting under Section 270A.
“Where incriminating material unearthed during searches or other enforcement actions evidences the routing back of funds, the Department may treat such amounts as unexplained money under Section 69A of the Income ax Act, taxable at an effective rate of up to 78% (with additional penalty of 10% under Section 271AAC). In serious cases involving wilful tax evasion, the Department may initiate reassessment proceedings and criminal prosecution, which may include imprisonment,” Bhalla added.
What can be consequences for unrecognised political parties, trusts under Income Tax Department’s investigation?
Bhalla says ntities such as trusts or political parties under investigation may face delays or denial in the issuance or renewal of registrations under Sections 12AB and 80G, directly impacting donor confidence and funding inflows.
“While there is no statutory automatic prohibition on availing credit facilities, adverse tax findings can materially impair the entity’s creditworthiness and risk profile, prompting banks and NBFCs to deny or restrict lending under applicable RBI risk-assessment and KYC norms,” says Bhalla.
Accordingly, donors are strongly advised to undertake comprehensive due diligence of the donee’s 12AB/80G registration status, compliance track record, and any pending litigation or allegations of non-genuine activities before making contributions.
What is the Nudge campaign?
As a taxpayer-friendly measure, the Income Tax Department has launched a targeted “Nudge” campaign, offering taxpayers an opportunity to correct their filings before coercive action is taken.
Last date to review ITR under Nudge
Under this initiative, SMS and email advisories are being sent to identified taxpayers from December 12, 2025, urging them to review their returns and update them if they have made any wrong claims.