A taxpayer knowingly reports a wholly personal motor-car expense as a business expense to reduce income tax. What does the conduct illustrate?

Deliberately claiming a personal cost as business expenditure reduces tax by misstating facts, which is tax evasion. Tax avoidance, by contrast, uses the law's own provisions, even if aggressively, without concealment or false entries. Under section 439(11) of the Income-tax Act, 2025 a claim of expenditure not substantiated by evidence and a false entry in the books are cases of misreporting of income.