How the government is catching the tax frauds?

Fraud occurs in various ways in various fields. In this article, we will deal with the Tax frauds which government is able to catch it.

Tax Fraud

It occurs when an individual or business entity willfully and intentionally give false information on a tax return to limit the amount of tax liability. Tax fraud essentially entails cheating on a tax return in an attempt to avoid paying the entire tax obligation.

Procedure :-

For this crime the government has set up the tax departments like income tax, sales tax, GST, etc which look at the fraud process. It depends on the fraud that which type of fraud has happened, and which department would come into the action. Also sometimes, two or more departments of tax comes together to solve the case of fraud, the tax issues are related to each other.

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This is how the government catches the wrongly filled ITRs-

Through cross verifying the Income disclosed in 26AS and Income tax returns filled by assessee

The is the crucial point through which government catches the wrong fillers of income tax return. 26AS form is an annual consolidated tax statement that can be accessed from the income-tax website by all taxpayers using their Permanent Account Number (PAN). It shows how much of your tax has been received by the government and is consolidated from multiple sources like your salary / pension / interest income etc. If you have paid taxes on your income or tax has been deducted from your income, the Income tax department already has these details in their database. When the assessee files return without disclosing the income showing in 26AS in their returns, it becomes the undisclosed income whose proof the government is already having. This raises notices and demands for the assessee.

Penalty for not showing the income in Income Tax Return

This is how the government catches the wrongly filled GST Returns-

Through cross verifying the GST Returns filled by the suppliers and recipient.

People do not have the knowledge of power of GSTN. This network is drastically catching the frauds of GST evasion. In many cases, people are claiming GST ITC without paying the GST. While in other cases, the suppliers are charging GST from the customers but not paying to the government. GSTN is crossing the details furnished by the supplier with the same furnished by the recipient of goods or services, which produces the discrepancies, if any. This raises the penalties and demands.


Corporate Fraud

The Corporate fraud consists of activities undertaken by an individual or company that are done in a dishonest or illegal manner, and are designed to give an advantage to the perpetrating individual or company. Such fraud schemes go beyond the scope of an employee’s stated position, and are marked by their complexity and economic impact on the business, other employees and outside parties.

Procedure :-

This type of fraud are comes under the SERIOUS FRAUD INVESTIGATION OFFICE(SFIO). SFIO is the government organization that looks upon the various activities of the  corporate. Its is a multidisciplinary organization to investigate corporate frauds. This organization investigates and make the report and according to that the decision is taken by the organization.

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Bank fraud

In this type of frauds, the use of potentially illegal means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently posing as a bank or other financial institution are being done. It is an illegal activity and also consider as criminal offence.

Procedure :-

The tax departments and the police comes into the action when the fraud is happen. Also the IT departments of government are involved in this. By the actions of these above government departments, the fraud person may be fined or imprisoned and also in some cases if the fraud person left the country the assets of that person are to be seized and sold by the government, to recover the amount of loss to the bank.

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The author of above article is Sameer Batra, BBA Professional. 

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