Income Tax Notice for Bogus Deductions Claimed by Consultant or Intermediary? A Complete PAN-India Guide for Taxpayers
Have you received an Income Tax notice stating that your return contains bogus or incorrect deductions such as Section 80G donation, 80C investments, 80D medical insurance, HRA exemption, or home loan interest—even though your return was filed by a consultant, agent, or intermediary?
If yes, this is a serious but completely manageable compliance issue, provided it is handled correctly and at the right time.
Across India, a large number of taxpayers are now facing Income Tax scrutiny because returns were filed using artificial or unsupported deductions without their full knowledge or understanding. Refunds may have been issued earlier, but subsequent verification has now triggered notices.
This article explains:
Why these notices are being issued
What intermediaries did wrong
What risks taxpayers actually face
The safest legal approach to resolve the issue
Why professional handling is critical
Why the Income Tax Department Is Issuing These Notices Now
The Income Tax Department has significantly strengthened its verification systems through data analytics and third-party reporting.
Income Tax Returns are now automatically cross-verified with:
Form 16 and employer payroll data
AIS (Annual Information Statement)
TIS (Taxpayer Information Summary)
Bank, insurance, and housing finance company records
Trust and NGO databases (for 80G donations)
As a result, incorrect deductions that earlier went unnoticed are now being detected, even for returns filed in past years.
A refund received earlier does not mean the return was correct.
Bogus Deductions Commonly Claimed by Consultants & Intermediaries
Most notices relate to deductions that were inserted by intermediaries without genuine eligibility or documentation, including:
1. Bogus Donation Deduction – Section 80G
Donation arranged by an agent or consultant
Amount returned in cash after commission
Trust later found non-genuine or deregistered
No real charitable intent or involvement
These cases are currently under nationwide scrutiny.
2. Fake or Inflated Investment – Section 80C
LIC / PPF / ELSS shown without actual investment
Backdated or non-existent policies
No reflection in bank records or AIS
3. Incorrect Medical Insurance Claim – Section 80D
Premium never paid
Policy not in assessee’s name
Deduction exceeding statutory limits
4. Wrong HRA Exemption
No rent agreement
No rent payment proof
PAN of landlord missing or invalid
Self-owned property in same city ignored
5. Non-Genuine Home Loan Interest
No sanctioned housing loan
Property not in possession
Interest claimed without lender confirmation
Such deductions are often added purely to inflate refunds, without explaining long-term consequences to the taxpayer.
The Real Issue: Intermediaries Disappear, Liability Remains
A consistent pattern is seen in these cases:
Returns filed by unauthorised or unregulated agents
“Maximum refund guaranteed” promises
Minimal document collection
No post-filing support
No accountability once notice is issued
However, under income tax law:
The taxpayer is fully responsible for incorrect claims, irrespective of who filed the return.
Types of Income Tax Notices Being Issued
Depending on the nature of discrepancy, taxpayers may receive:
📌 Notice under Section 133(6)
Seeking documentary evidence
Initial verification stage
Improper reply can escalate the case
📌 Intimation under Section 143(1)(a)
Automated disallowance of deductions
Tax demand generated
📌 Show Cause Notice under Section 148A(b)
Pre-reassessment notice
Department already possesses adverse material
High-risk notice requiring expert handling
Each notice has different legal implications and response strategy.
Defend or Correct? The Most Important Decision
This decision must be taken objectively and professionally.
When Defence Is Weak
Deduction arranged by intermediary
No genuine supporting documents
Clear mismatch with AIS / Form 16
Trust, insurer, or lender under scrutiny
In such cases, aggressive defence may result in:
Heavy penalties
Reassessment proceedings
Prolonged litigation
The Safer & Legally Sound Approach
Withdraw incorrect deductions
Regularise the return through ITR-U (Updated Return) or during notice proceedings
Demonstrate voluntary compliance
In most cases, early correction is cheaper, faster, and safer than prolonged dispute.
Why Early Professional Action Is Critical
Timely expert handling can:
Prevent reopening under Section 148
Reduce interest and penalty exposure
Avoid prosecution risk
Achieve clean and final closure
Delays often convert correctable mistakes into expensive disputes.
Why Professional Handling Makes a Difference
Replies to Income Tax notices must:
Be factually accurate
Avoid self-incriminating statements
Align with departmental data
Comply strictly with ICAI Code of Ethics
Generic replies, copied formats, or fabricated explanations often irreversibly damage the case.
How We Assist Taxpayers Across India
As Chartered Accountants, we provide PAN-India Income Tax Notice & Compliance Support, including:
Detailed review of original Income Tax Return
Deduction-wise risk assessment
AIS / TIS / Form 16 reconciliation
Advice on ITR-U eligibility
Drafting replies to 133(6), 143(1), and 148A notices
End-to-end compliance support till closure
Our approach is based on:
Correction over confrontation
Compliance over shortcuts
Certainty over litigation
Important Advisory for Taxpayers
If your Income Tax return contains deductions claimed by a consultant or intermediary without proper evidence,
correcting the mistake at the earliest stage is always the safest option.
Each case is unique and should be handled with customised professional evaluation.
Received an Income Tax Notice? Act Before It Escalates
If you or a family member has received a notice relating to:
Bogus 80G donation
Fake 80C / 80D deductions
Incorrect HRA exemption
Home loan interest issues
Returns filed by agents or intermediaries
Timely professional advice can prevent serious financial and legal consequences.
📞 PAN-India Consultation Available
📑 Confidential | Ethical | Professional Handling
