18/07/2025
Income tax department expose fake deduction with the help of AI tools
A Hyderabad-based taxpayer sold an immovable property for Rs 1.4 crore and reduced the capital gains liability by claiming deductions of over Rs 68.7 lakh under the head 'cost of improvement' with indexation by way of bogus bills.
The Income Tax department, employing AI tools and generative AI forensics, detected discrepancies in the submitted documents, specifically forged photocopies of expenditure bills dated between 2002 and 2008. One notable bill, dated July 6, 2002, claimed an expense of Rs 7.68 lakh, which raised red flags due to inconsistencies.
Growing effectiveness of Artificial Intelligence in detecting tax evasion, ensuring compliance, and protecting revenue is seen in case of a taxpayer case in The AI-driven analysis focused on font forensics, revealing that the text in the documents was in 'Calibri' font. This font, designed between 2002 and 2004, was not released to the public until 2007, indicating the bills were fabricated post-2007. This discrepancy was critical, as it confirmed the documents were not authentic for the claimed period. The AI tools, including font analysis and potentially other digital forensics, played a pivotal role in flagging the fraud, showcasing the power of technology in scrutinizing historical financial claims.
Following the detection, the assessee was unable to produce original bills and claimed the photocopies were found in an old folder belonging to their late father. However, due to the evident discrepancy, the assessee withdrew the inflated claim, filed a revised return excluding the cost of improvement, and paid taxes based on the corrected capital gains.
This case highlights how technology can address financial fraud, particularly in complex cases involving historical data.