The Income Tax Department has launched a nationwide verification exercise into suspicious foreign remittances after identifying several entities that allegedly remitted large amounts of foreign exchange despite reporting little or no turnover, the Central Board of Direct Taxes (CBDT) said.

Key Highlights

• Income Tax Department launched a nationwide probe into 394 entities suspected of suspicious foreign remittances, CBDT said.
• Investigation found Form 15CB certificates issued by few professionals, raising concerns over due diligence in certifications.

According to a press release issued by the CBDT, the action followed ground intelligence and analysis of data relating to outward foreign remittances over the past three years. The department said it uncovered a network of entities allegedly involved in remitting funds abroad during a search operation targeting fictitious charitable trusts engaged in providing accommodation entries against bogus donations and contributions.

Discrepancies Found in Turnover and Remittance Purposes

Preliminary verification found that entities making the foreign remittances were either non-filers or had filed income-tax returns showing very small turnovers. The department noted that the reported turnovers had no apparent correlation with the large sums remitted overseas.

The stated purposes of the remittances - including payments for freight, import of software and consulting services - also did not appear to correspond with the entities' actual financial profiles, according to the CBDT. Further ground-level intelligence revealed that these entities were not actually operating from the addresses they had declared.

Concerns Raised Over Form 15CB Certification Process

The investigation also found that a large number of Form 15CB certificates had been issued by a relatively small group of professionals, while the remitted funds were received by a clustered group of entities.

Under Form 15CB, read with Rule 37BB of the Income-tax Rules, 1962, accountants certifying foreign remittances are required to verify their taxability with reference to books of account and other relevant documents. The department said the findings raised concerns over whether adequate due diligence had been undertaken by accountants before issuing such certificates.

Nationwide Exercise Covers Shell Entities and Professionals

On Tuesday, the department launched a detailed, nationwide verification exercise focusing on shell entities, the individuals behind them, and the professionals who issued the relevant Form 15CB certificates. Entities located in districts along India's land borders and remitting significant amounts of money abroad have also been brought under the scope of this exercise.

The verification has so far covered approximately 394 entities, including 117 entities located in land-border states, along with 36 professionals, the CBDT said.

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CBDT Stresses Due Diligence by Certifying Professionals

The IT department emphasised that accountants issuing certificates in Form 15CB or Form 15CA are expected to exercise due care, diligence and professional judgment while examining the underlying transactions and relevant facts before certifying foreign remittances. The CBDT noted that these certifications play an important role in maintaining trust in the overall tax and remittance system.

Further investigations into the suspicious foreign remittances remain ongoing, the CBDT said.