Can a school look at your tax returns?

I guess they could ask them to confirm your salary, but it's up to your HR reps whether they will divulge this information. It seems really unlikely that they'll check. I also can't imagine they would look at your tax returns. There are just too many applicants. That certainly doesn't mean you should lie. You do sign a statement attesting that the information in your application is true.

In case of Job application, HR can look at your Tax return to ensure your salary but I never heard about a school which looks at tax returns till now.

OMG, this is another level of paranoia

Most schools ask for tax information through the Financial Aid sector to confirm financial burden. They do request that you know your your last years total income gross and if you filed your previous years tax returns. When applying for admissions it is possible that they could ask for copies of your previous years tax documents as proof. I would count on having them in case you may need them, or else ask the college you are applying for if there is a way to work around that process.