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Govt. Investigates Income Tax Returns and GST Claims Discrepancy: Identifies Thousands of shell Firms

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The Govt. is now fully prepared to take adequate action against tax and money laundering with the help of data analysis to detect overstated Goods and Services Tax claims that do not match up with Income Tax Returns.

The action against these entities is being launched through notices. This clean-up operation is followed by the past exercise where potential shell firms were identified and their Managers/Directors were found fake. As per a report by TOI, most of these firms were struck off.

Senior officials told the national publication that this is the first time when the Govt. is matching the records of Income Tax Returns of taxpayers with those of GST returns. The initial findings indicated the overstatement of GST claims and understatement of IT Returns. However, the action against these entities might get harsh as recently the Supreme Court of India has refused to protect the GST violators from arrest.

In the coming few months, the revenue department’s core focus is seen to be on data analytics as some of the analysis has hinted at discrepancy on the customs front. For example, in order to claim exports, some traders have shown inflated imports and remitted the funds overseas beyond the requirement. But these exports proceeds are not reflected in their IT Returns.

The national daily quoted an official as saying, “So far, various tax agencies were working in silos but now it’s possible to tally data and go after evaders.”  Moreover, he added further that based on preliminary data mapping, thousands of companies were identified.

The tax authorities have complained of leakages in GST but the state and the Centre’s political leadership demanded more time for the new tax regime to settle down. Now when the election is over, in several cases arrests have begun where Manpasand Beverages is a prime example. 

Shell companies are accustomed to making bogus claims. The tax officials have come across with surprising instances where drivers, gardeners or even slum-dwellers were found as managers/directors of these companies.

As a matter of fact, authorities have identified such cases where the slum-dwellers have been made to fill the form to join a delivery service and details like Aadhaar numbers were collected. After that, this information was utilized to open new bank accounts and establish companies. 

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