Tax Refund Mafia: The AI That Never Sleeps [Part II]
Last week, we explored how AI busted a capital gains claim using font forensics, and how 40,000 taxpayers are found out with bogus claims worth ₹1,045 crore. But trust me, that was just a trailer. This week, we enter the full feature film-a high-stakes thriller where AI meets Refund Mafia, Ghost Landlords, and rogue spreadsheet samurais.
Movie 1: From ₹ 2 Lakh to ₹ 45 Lakh – And a Tax Notice:
Meet a businessman from Indore who claimed he struck gold-his ₹2 lakh turned into ₹45 lakh via shares of a barely known listed company. The stock price zoomed from ₹7 to ₹158 in just 15 months. Jackpot? Not quite.
Sherlock AI got curious. And here’s what it found:
• The company had no revenue, no website, and just 4 employees. SEBI had already flagged it as a shell entity.
• Over 120 PAN holders claimed identical LTCG by selling the same stock.
• Most trades were routed via the same demat operator—located, of course, in Kolkata.
AI cross-checked:
• SEBI’s list of manipulated scripts.
• Suspicious trading volume spikes.
• And demat accounts with no other trades-except this one..
Result: The entire ₹400 crore penny stock LTCG scam is under probe. Notices have been sent, and exemptions under Section 10(38) are being denied where collusion is proven.
Lesson? Trying to turn black money into white through penny stocks? In the AI era, you’re not investing – you’re inviting scrutiny. If anyone is trying to get involved in getting low tax income by some script manipulator, the chances of getting caught is higher than ever.
Movie 2: The Curious Case of the Invisible Landlord:
Mr. Jugaadu Lal, from last week, wasn’t done yet. This time, he submitted a ₹ 3.60 Lakh rent receipt paid to his cousin’s wife’s uncle’s friend’s ghost landlord, complete with a PAN number lifted from someone else’s Aadhaar card. “Dekho na, sab kuch online hai, koi pakad nahi sakta..” he bragged before his tax counsel. AI disagreed. Not only did it flag the rent claim, but it also sent Mr. Jugaadu Lal’s entire ITR for manual verification-and he’s now Googling ‘how to sleep after refund freeze’. Several honest taxpayers are now receiving emails like:
– “Refund under verification due to risk parameters”
– “High-value deduction claim flagged for detailed processing”
– “Claim pending manual validation”
Similarly, one salaried taxpayer claimed ₹ 3.60 Lakh HRA exemption citing rent paid to “Mr. Rakesh Sharma.” Nothing unusual-until AI stepped in –
PAN missing. No bank transfer. Address? An empty plot.
AI used geo-tagging and PAN validation. Result? “Mr. Rakesh Sharma” rent didn’t exist in the income tax database. The rent receipt was as fake as a ₹ 3 coin.
Movie 3: When a Tax Advisor Turns Into a Refund Dealer:
In one of the cities, a well-known tax advisor is now facing heat for helping clients file fake claims to get higher refunds. According to reports, he has created entire refund ecosystems, collecting commission on refunds and producing documents on-demand. When AI detected 40+ refunds to taxpayers linked via IP & common email id, the department moved in. Raids revealed:
• Forged rent receipts
• Dummy donation receipts
• Pre-filled ITRs with unreal deductions
Remember: when advisors start offering “guaranteed refunds,” it’s often a trap-for you, not them.
What happened?
The AI has graded your return risk profile-and found anomalies. You may still get your refund, but not before a detailed second-level scrutiny.
Don’t panic. But don’t be casual either. Here’s what you should do:
• Keep rent agreements, payment proofs, PAN of landlord ready.
• Donation receipts must bear 80G details & match AIS.
• Don’t indulge in fake political donations or other fake claims in the ITR.
If you’ve played fair, you’ll be fine. But if you believed in jugaad more than judgment, you may need another appointment-this time with the income tax officer.
Movie 4: Cropless Land & Satellite Surprise:
Mr. Gyandev has shown an agricultural income of ₹ 42 Lakh in his ITR. The amount was received by cheque in his bank account and backed by bills for fertilizers, pesticides, crop sales, Revenue Records extracts, etc. However, his income has been taxed by the tax offices @ 78% by treating it as unexplained money plus interest and also initiated penalty proceedings.
Basis: The department didn’t visit his farm. It zoomed in-literally-using satellite images to confirm the land was untouched. The department has taken the satellite image of his agricultural land for the relevant period wherein the land is still lying uncultivated and without any plants.
Lesson: If you have genuine agricultural income, you need not worry. If not, time to go back to basics, there is no smoke without fire.
If your crops exist only in Excel, expect the harvest season to arrive-in the form of a tax notice.
How AI Builds Suspicion: The “Taxpayers Under Watch” List
AI doesn’t accuse but it investigates silently. The I-T Department has an evolving internal list where suspicious cases are flagged for enhanced scrutiny. Here’s what might put you on that list:
a) High refund Vs low salary: Possible fake TDS or inflated fake claims.
b) Repeated HRA claims with missing landlord PAN: Possible ghost landlord.
c) Bulk donation to un-recognized trust: Fake 80G.
d) Multiple claims from one IP address: Refund racket suspects.
e) Rental payments to family members: Also called ‘Ghar ka paisa, Ghar mein Ghoom raha hai’ scheme.
One AI pattern match and your client’s refund dreams can become your professional nightmare:
“Sir, humne to CA pe bharosa kiya tha…” – This one line was repeated by around 23 refund claimants caught in the fake refund claim fraud without even knowing that the return filer was not a CA but just a roadside accountant. Now, as a tax consultant,
• Verify all documents from clients. Don’t go by the quote “sir, aap kar lo, Mai dekh lunga…”
• Use proper trails of filing & communication.
• Never indulge in proxy filing without due authorization.
• Educate clients that refund is not a birth right-it’s a legal consequence of correct tax deduction.
Or else, one AI match and you’re on the radar.
How AI is making the difference:
Yes, AI has no emotions-just data hunger, pattern obsession, and zero tolerance for manipulation. What makes this different from earlier tax scrutiny is that it’s now relentless, real-time, and rule-based. The AI doesn’t wait for year-end assessments. It’s matching AIS data, TIS reports, donation records, and even PDF metadata. It’s not asking “what did you claim?” It’s asking “what patterns do your claims follow?” If 17 people from the same city use the same rent receipt template, that’s a pattern. If a trust receives ₹ 4 crore and makes cash withdrawals of ₹ 3 Cr – that’s a signal. The age of statistical suspicion is here.
Final Thoughts: The Age of Fearless Filing (and Sleepless Fraudsters)
We are in a new era. The Income Tax Department has stopped chasing evaders. Now, they’re inviting them-with irrefutable proof, digital fingerprints, and AI-powered audits. As I often say: “Filing honestly is not just a virtue now. It’s the only strategy that even AI can’t beat.
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]
