Beware! Legal experts say they are encountering an increasing number of cases where individuals use someone else’s PAN to claim fake HRA.
Sunaina Mittal has never let out any property to anyone in her entire life. But last year, while checking details on the income tax portal, she found that her Permanent Account Number (PAN) was misused by someone to claim fake HRA tax exemption. Surprised, she filed an RTI application before the Central Public Information Officer (CPIO) of the Income Tax (IT) Department to find out details of the person who had wrongly used her PAN to claim HRA.
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“I observed that someone has shown me as his landlord and claimed that he paid rent to me for Rs. 1,49,826/- for last year. But I have never ever let out any accommodation on rent in my entire life. I observed that when I logged into my own details on the Income Tax website,” Sunaina wrote in her application while seeking the following details:
- Full name, address and father’s name of this person who has shown her as his landlord.
- Details of years that he showed her as his landlord.
- A copy of any rent receipt or rent agreement that he may have presented to claim this rent.
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However, Sunaina couldn’t get the desired response from the CPIO, who held that the information sought was not maintained/available. The CPIO further said that the compilation of such information would result in the “disappropriate diversion” of office resources. “Therefore, it cannot be provided.”
Being dissatisfied with the CPIO’s response, Sunaina filed a First Appeal. However, the First Appellate Authority (FAA) also upheld the CPIO’s decision. Following this, Sunaina approached the Central Information Commission (CIC) with an instant Second Appeal but failed to get the desired information.
In his order dated 27-09-2023, Infomation Commissioner Saroj Punhani said no further relief can be granted in the matter. However, he advised Sunaina to pursue the matter through an “appropriate channel”.
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What is the appropriate channel?
While the CIC advised Sunaina to go through the “appropriate channel”, the RTI Act doesn’t mention such a channel.
“Under the Right to Information Act, 2005 (‘RTI Act’), one can demand information only for oneself or some public matter but not specific to some other person. Therefore, CPIO has rightly denied information. The ‘appropriate channel’ referred by CIC is not mentioned in the RTI Act, but for all intents and purposes, refers to the tax authorities/ judicial channels etc,” says Ritika Nayyar, Partner, Singhania & Co.
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She further says that the misuse of PAN has inconvenienced the appellant to the extent of harassment/injustice for acts done by other persons. In this case, therefore, the appellant may approach the Grievance Redressal platform of the IT Department. If it doesn’t work then approaching a civil court may be the last option.
“Simultaneously one may consider taking recourse to the Grievance Redressal Mechanism of the Income Tax Department/ CPC / specific AO, explaining the matter and requesting them to let him know who is the person harassing the wronged person. If he still doesn’t get information, this can be taken up in civil court against the Income Tax Dept for justice in this matter,” says Ritika.
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Not a one-off case
The above is not a one-off case. Tax experts say they are encountering an increasing number of cases where individuals use someone else’s PAN to claim fake HRA.
“Increasingly, we are encountering cases where individuals falsely use someone else’s PAN to claim tax deductions for rent payments. The IT department cross-references such information with the tax return of the person whose PAN is used. If discrepancies are found, the individual receives a notice, requiring them to prove that they did not receive the claimed rent, which can be both time-consuming and stressful,” says Ankit Jain, Partner, Ved Jain & Associates.
In many cases, taxpayers learn about the misuse of their PANs upon receiving notices from the Income Tax Department, experts say.
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How to find out if your PAN has been misused or not
Ankit says a taxpayer can check if anyone has falsely claimed to have paid rent to him by reviewing his Tax Information Statement. Although this statement may not provide the individual’s name, it usually reveals the name of the company where the false claim was made.
Adithya Reddy, an International Tax Lawyer, says if the PAN is wrongly quoted, the errors will be reflected in Form 26AS. You can then provide a correction statement (via the NSDL website) for the PAN details that require correction.
“Alternatively, if you want to make corrections in e-TDS statements/returns where the PAN information needs to be corrected, the deductor (employer) can visit the CPC-TDS portal (www.tdscpc.gov.in) and can make online corrections of the PAN information,” says Adithya.
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What are the steps you can take
Upon discovering such an error, experts say you have two main courses of action:
- Contact the person or company who made the false claim and request a correction. Once rectified, the corrected details will be updated in the tax department’s records.
- If direct correction isn’t possible, you can log into the income tax portal and submit a response against the incorrect tax summary. By doing so, you notify the tax department that you dispute the false rent claim.
Maneet Pal Singh, Partner at I.P. Pasricha & Co, says that wronged taxpayers can take actions such as informing the tax department or their employers. “The employer may guide you on the next steps and make necessary corrections in your TDS (Tax Deducted at Source) to avoid any adverse consequences for you.”
Further, you should keep copies of all communication and documents related to this issue. “It’s important to address this issue promptly to avoid any potential tax or legal consequences for you. Always consult with a tax advisor or legal expert for guidance tailored to your specific situation,” says Maneet.
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What to do if you receive a tax notice for fake rent received?
“If you receive a tax notice due to this kind of discrepancy, it’s crucial to provide clear evidence that you did not receive the rent claimed. In such scenarios, it’s advisable to consult a tax professional for guidance,” says Ankit.
Ritika also says that the first course of action would be to reply to the tax authorities in a stout manner that you are not the owner of that property. And if the department has evidence to prove otherwise, then such evidence should be brought to your notice.
Incidentally, you may not have such income in earlier years. Therefore, you should offer due cooperation to the Income Tax Department till the matter is resolved.
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