TLDR: The Income Tax department in Hyderabad has successfully busted a Rs 68.7 lakh Long Term Capital Gains (LTCG) fraud by utilizing AI-powered font forensics. The technology exposed a forged document submitted by a taxpayer, leading to the withdrawal of the fraudulent claim and payment of corrected taxes.
In a significant development highlighting the growing role of advanced technology in tax enforcement, the Income Tax (I-T) department in Hyderabad has unearthed a substantial tax evasion case amounting to Rs 68.7 lakh. The fraud, involving Long Term Capital Gains (LTCG), was detected through the innovative application of AI-powered font forensics.
The case centered on a Hyderabad-based taxpayer who sold an immovable property for Rs 1.4 crore. In their I-T returns, the individual drastically reduced their capital gains liability by claiming deductions of Rs 68.7 lakh under ‘cost of improvement with indexation,’ in addition to an indexed acquisition cost of Rs 73 lakh. This resulted in a declared LTCG of a mere Rs 24,774.
The breakthrough came when the I-T department employed generative AI tools for forensic analysis of the documents submitted by the assessee. Among the photocopies of expenditure bills, purportedly dated between 2002 and 2008, one particular bill from July 6, 2002, claiming an expense of Rs 7.68 lakh, raised red flags.
Forensic examination by the AI tools revealed that the text on this suspicious document was rendered in ‘Calibri (body)’ font. Investigators subsequently confirmed that while Calibri was designed between 2002 and 2004, it was not publicly released until 2006 and only became the default font for Microsoft Office in 2007. Since the bill was dated 2002, the presence of Calibri font conclusively proved the document was fabricated, as the font did not exist for public use at the time the bill was purportedly issued.
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Confronted with this evidence, the assessee claimed the copies were found in an old folder belonging to their late father and admitted an inability to verify their authenticity. Following the exposure, the taxpayer withdrew the fraudulent claim, filed a revised return excluding the cost of improvement, and paid taxes based on the corrected capital gains. This incident underscores how digital forensics and generative AI tools are increasingly transforming the landscape of tax enforcement, providing powerful new means to combat financial fraud.
