CBI, Indian Revenue Services officers at loggerheads over fraud tax refunds

The probe initiated by the Central Bureau of Investigation (CBI) into the fraudulent tax refunds case has not gone down well with the Indian Revenue Services (IRS) officers. In a resolution passed against the central agency, IRS officers called the allegation against the tax sleuths baseless and demoralising. 

In an unprecedented move, the income-tax sleuths, particularly those in Bengaluru, assembled last week to discuss the CBI’s first information report. The CBI FIR was registered against Income-tax officers at the Central Processing Cell (CPC) for processing revised returns based on fake documents and subsequently issuing huge refunds. Revenue officers believe the move has resulted in mistrust regarding integrity and transparency of processes and procedures at CPC.   At the meeting which was called on April 3, after some of their colleagues were booked by CBI for causing losses to the exchequer, the revenue officers passed a resolution seeking intervention of the finance ministry and the Central Board of Direct Taxes (CBDT) in the matter. The CBI action has caused “mental agony” and harassment among the tax sleuths, the officers alleged. 

In an official statement issued on April 5, revenue officers had asked CBDT to take immediate action by putting out a detailed explanation through a press note about automated processes and procedures at CPC. They also asked CBDT to clarify that there’s no involvement of officials in the fraudulent act committed by assessees and unscrupulous tax practitioners.   “The matter should be taken up at the highest level to sensitise the CBI about the relevant provisions and limitation under the Income Tax (I-T) Act ....,’’ the statement said. The CBDT should take necessary steps to ensure that the investigation agencies do not subject CPC officials to unnecessary harassment in the name of enquiry or investigation, it had said. 

The resolution was followed by the CBI’s FIR against Nagesh Shashtri, partner, SSK Associates, Income-Tax department Bengaluru, unknown officials of CPC and Infosys Technologies, who were entrusted with the work of processing the return. 

CBI alleged that the I-T officials at CPC, Bengaluru, who were authorised to approve refunds, were suspected to have connived with Shastri in processing the revised return based on fake information and issuing refunds to the tune of Rs 50 million. This amount is alleged to have been shared among Shastri, I-T and Infosys officials,  thereby causing a loss to the exchequer through wrongful gains, CBI said in the FIR.   Countering the allegations, the IRS officers said the CBI report had created confusion in the minds of the public about timely processing of their returns and refund claims. This needed to be allayed immediately, they said.    Explaining the role of CPC, the IRS officers have said that the processing center is not a scrutiny center. Also, the I-T Act does not empower assessing officers at CPC to look into the genuineness of the claims made in the tax returns, they pointed out. The officers are not involved in routine refunds, they added.

The I-T department first detected the fraud involving 250 taxpayers in Bengaluru. Later, Mumbai witnessed the same pattern where around 17,000 revised returns were filed claiming refunds in billions. The probe in the matter is underway. 

The agitation by revenue officers has come at a time when the government wants enforcement agencies to fight against black money and bring more people under the tax net.

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