Old Tax Cases Reopened, I-T Crackdown On Trading, Electronics & Construction Firms Over Fake Invoices

New Delhi: The Income Tax (I-T) Department has started reopening old tax assessment cases. The main aim is to catch businesses that reduced their profits by showing fake or inflated expenses and avoided paying the correct amount of tax.

According to sources, the department is even looking into tax records that are five years old. These cases mostly involve clear signs of tax evasion. Companies from sectors such as trading, electronics, and construction are being closely examined. The I-T team suspects that many of these companies used fake bills from non-existent suppliers to increase their expenses.

Fake Suppliers and Entry Operators

Some companies used fake suppliers to show purchases that never really happened. These fake suppliers are often managed by people known as "entry operators." Their only job is to issue fake bills so companies can show higher expenses, reduce taxable income, and wrongly claim GST input tax credit (ITC).

Assessment Cases Reopened Under Section 147

Earlier, some of these tax returns were accepted without any issues. But now, based on new data from the GST Department, the I-T Department has found strong proof of fake transactions. This has led to a fresh investigation under Section 147 of the Income Tax Act.

This law allows the department to reassess any return if they believe income was wrongly reported or hidden.

Section 148 Allows a 5-Year Window

Under Section 148, the department can reopen tax cases going back up to 3 years. In cases where the hidden income is more than Rs 50 lakh and linked to assets, expenses, or fake accounting entries, the window extends up to 5 years.

Strict Action and Penalties Likely

If a taxpayer cannot prove with proper documents that a purchase is real, the I-T Department may call the expenses fake. This could lead to additional tax demand and heavy penalties.

Even if GST officers already reversed the ITC, the Income Tax Department is conducting its own investigations. Experts say that simply reversing ITC is not enough proof that a purchase is fake—businesses must show solid documents.

Honest Businesses Also Affected

Tax experts believe that many honest businesses are also being affected. Sometimes just one fake supplier in the supply chain leads to trouble for everyone involved. Authorities then deny expense claims even if the rest of the chain is genuine.

Documents That Can Help

To prove that a purchase is real, businesses must show:

- GST invoices

- E-way bills

- Goods receipt notes

- Transport records

These documents are important to show that the goods were actually received and the purchase was not fake.

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