Income Tax Dept investigates outward remittances; shell entities, CSR expenses under scanner

The Income Tax Department is investigating allegations that 394 entities, including 117 located in land-border states, and 36 professionals were involved in sending large sums of money overseas, despite being non-filers or having small income tax turnovers. These entities are being scrutinized for diverting funds meant for corporate social responsibility (CSR) into international transactions, according to officials.

The department's investigation is based on ground intelligence and data analysis of outward foreign remittances over the past three years. Suspicious entities, some of which were revealed to be operating from addresses they did not declare, were found to have remitted large amounts of foreign exchange. A nationwide network of entities engaged in remitting funds abroad has reportedly been uncovered.

The investigations are currently focusing on shell entities and those who incorrectly claimed CSR as a reason for the remittances. The department has found a considerable number of Form 15CB certificates issued by a limited number of professionals, which are required for payments over Rs 5 lakh to non-residents. There are concerns about whether these accountants conducted sufficient due diligence before issuing the certificates.