I-T Department Seeks to Cancel CA Licenses in ₹2,000 Crore Tax Evasion Scam

I-T Department Targets CAs in Massive Tax Evasion Scheme

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The Income Tax (I-T) Department’s Jharkhand unit has asked the Central Board of Direct Taxes (CBDT) for permission to cancel the licenses of several chartered accountants (CAs). These CAs are accused of helping hundreds of people evade taxes through a large-scale scheme involving fake political donations.

How the Scheme Worked

The fraudulent operation exploited Section 80GGC of the Income Tax Act, which allows individuals to claim a 100% tax deduction for donations to political parties.

1. Fake Donations: Hundreds of people, including professionals from Jharkhand and Bihar, “donated” around ₹2,000 crore to a political party, the Aam Janmat Party.
2. Money Returned: The party then secretly returned the money to the donors, keeping a five percent fee. This made the “donations” a sham, as the money was never a genuine contribution.
3. CAs’ Role: The CAs involved certified the party’s balance sheets without proper auditing, effectively giving a stamp of approval to the fraudulent transactions.

Consequences for Chartered Accountants

The CAs’ actions are a direct violation of the ethical and professional standards set by the Institute of Chartered Accountants of India (ICAI), the governing body for CAs. By helping to facilitate this tax evasion, they engaged in serious professional misconduct.

Once the CBDT approves the request, the I-T Department will formally ask the ICAI to cancel the licenses of these CAs. Some of the CAs involved were also among the tax evaders themselves.

The I-T investigation, which began with a search of the Aam Janmat Party’s offices, is still ongoing. The number of people and the total amount of money involved are expected to increase as the investigation progresses. The department has already started issuing notices to those who participated, urging them to withdraw their fraudulent claims and update their tax returns. Many have already agreed to do so.