The Income Tax Department has uncovered a tax evasion attempt involving forged improvement bills submitted to claim false deductions under capital gains.
The case pertains to a Hyderabad-based taxpayer who sold an immovable property for Rs 1.4 crore. However, in his Income Tax Return (ITR), he reported an unusually low Long-Term Capital Gain (LTCG) of just Rs 24,774, after claiming inflated deductions under 'cost of improvement with indexation' amounting to Rs 68.7 lakh, in addition to an indexed acquisition cost of Rs 73 lakh.
How AI Uncovered the Fraud
The breakthrough came when investigators flagged inconsistencies in the improvement bills dated between 2002 and 2008. One particular bill, dated July 6, 2002, claimed an expense of Rs 7.68 lakh.
However, forensic analysis using AI-powered tools revealed that the bill's text was typed in the Calibri (Body) font. This font, though designed between 2002-2004, was only released to the public in 2006 and became the default font for Microsoft Office in 2007.
The use of a non-existent font in the claimed year prompted the department to classify the document as fabricated.
Assessee Admits Error, Pays Tax
When questioned, the taxpayer admitted the documents were photocopies found in an old folder belonging to his late father and claimed he could not verify their authenticity. Upon being presented with the forensic findings, he withdrew the cost of improvement claim, filed a revised return, and paid the applicable taxes based on corrected capital gains.
A New Era of Tax Enforcement
This case exemplifies how generative AI and digital forensics are revolutionizing the detection of tax fraud and document forgery. By analyzing metadata, fonts, image inconsistencies, and document structure, AI tools can uncover subtle discrepancies that manual checks may overlook.
Tax officials noted that such technology-driven scrutiny will be increasingly deployed, especially in high-value property transactions and capital gains claims, to ensure compliance and deter fraud.
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