Income Tax Department launches nationwide verification of suspicious foreign remittances

New Delhi: 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.

According to a press release issued by CBDT, the action followed ground intelligence and analysis of data relating to outward foreign remittances over the last 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.

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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 said 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' financial profiles, the CBDT said.

"Further ground-level intelligence revealed that these entities were not actually operating from the addresses declared by them," the department said in its press release.

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 was undertaken by accountants before issuing such certificates.

On Tuesday, the department launched a nationwide detailed verification exercise focusing on shell entities, the persons behind them and professionals who issued Form 15CB certificates.

Entities located in districts along India's land borders and remitting significant amounts of money abroad have also been covered as part of the 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.

The department emphasised that accountants issuing certificates in Form 15CB/Form 146 are expected to exercise due care, diligence and professional judgment while examining underlying transactions and relevant facts before certifying foreign remittances.

"These certifications play an important role in maintaining trust in the system," the department said.

Further investigations into the suspicious foreign remittances are currently underway, the CBDT said.