Accounting scams with income tax laws explained up to the point!!!!!!!!!!!

2. What is income tax ??
• A tax that governments impose on financial income generated by all entities within their
jurisdiction. By law, businesses and individuals must file an income tax return every year to
determine whether they owe any taxes or are eligible for a tax refund. Income tax is a key source
of funds that the government uses to fund its activities and serve the public.

3. Income tax return
• The tax form or forms used to file income taxes with the Internal Revenue Service (IRS). Tax
returns often are set up in a worksheet format, where the income figures used to calculate the
tax liability are written into the documents themselves. Tax returns must be filed every year for
an individual or business that received income during the year, whether through regular income
(wages), interest, dividends, capital gains, or other profits.

4. What are scams ?????
• It is defined as obtaining money by means of deception including fake
personalities, fake photos, fake template letters, non-existent
addresses and phone numbers, forged documents.

6. List of few income tax scams….
• Saradha Group financial scandal
• Pan card scam
• Vodafone
• Reebok
• Mc Donald's

7. Vodafone tax dispute
• Taxability over Capital Gains on an overseas transaction between 2 foreign companies (having
non-residential status in India) of sale of investments comprising of shares of an Indian
Company.
• Withholding Tax obligations of the Non Resident Buyer while making payment of lump sum
consideration to Non Resident Seller under the provisions of the Income Tax Act, 1961 („Act‟) of
India.

8. Facts of the Case
• Vodafone International Holdings BV, Netherlands (“VIH“) entered into a Share Purchase Agreement (“SPA”)
with Hutchison Telecommunications International Limited, Cayman Islands (“HTIL”), for purchasing equity
share holding of its subsidiaries i.e. CGP Investment (Holdings) Ltd., Cayman Islands (“CGP”);
• CGP in turn, directly and indirectly, owned approximately 52% share capital of an Indian Company named as
Hutchison Essar Limited (“HEL"). The acquisition resulted in VIH acquiring control over CGP and its
subsidiaries, including HEL;
• The Revenue Authorities held that the gains were taxable in India as there was transfer of controlling stake
/ business situated in India and accordingly alleged failure on part of VIH to withhold tax on gains arising
to HTIL on the transfer of shares of CGP.

9. Pan card scam
•Generated forged Permanent Account Number (PAN) cards with the help of agents.
•Generated fake returns and tweaked refund amounts between Rs 50,000 and Rs 1 lakh.
•There filed returns were processed by the system and a cheques were issued.
•All the cheques were sent to a particular post office in Delhi with minor changes in the address
taxpayers.

10. FACTS AND FIGUREs
• sizure of Rs 1.25 crore in cash; properties worth Rs 1.5 crore
• IT officials handling assessments and refunds were found to be ill-equipped in system
management.

11. McDonald's vat scam
• McDonald's in Ludhiana
• The McDonald's pays about 10m rupees ($241,000) a year in VAT - some 90% of all
restaurant VAT collected in the district, but it has only 10% of sales.

12. • If the VAT revenues from one entity
which has 10% of the market is more
than that of 90% of the market,
there is an obvious discrepancy.
• Although government revenues in most
states have risen after the
introduction of VAT, Punjab seems to
be a sorry exception

13. Tax fraud in j & k
• Jammu and Kashmir Crime Branch (CB) presented a challan against a firm and a
goods carrier for misusing CST and GST numbers
• loss of Rs 1.20 crore to the State.
• Production of fake documents for obtaining registration from the Sales Tax
Department .

14. • Reyaz Ahmed had applied before the Sales Tax authorities for registration of a
fake firm namely HANAAN TRADERS
• Imported goods worth Rs 1.20 crore from outside the state by using fraudulently
obtaining CST/GST numbers.

15. Filing income tax return is a must
• 1. File returns on time
• 2. Filing before time is always better
• 3. Good financial records
• 4. Time is limited
• 5. Change of rules
• 6. Future investments

16. How to avoid fake it returns
•Taxpayers who decide they need assistance when preparing a tax return should choose a tax preparer with care and caution. Even if a
return was prepared by an outside individual or firm, taxpayers should remember that they are legally responsible for what they file with
the Internal Revenue Service.
•Most return preparers are professional, honest and provide excellent service to their clients, but some engage in fraud and other illegal
activities. Return preparer fraud involves the preparation and filing of false income tax returns by preparers who claim inflated personal
or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients.
•Preparers may, for example, manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit. In
some situations, the client, or taxpayer, may not even know of the false expenses, deductions, exemptions and/or credits shown on his
or her tax return.

17. courtesy
• 126 Tejal Viswekar
• 146 Shambhvi Gurung
• 176 Nishant M.B