I-T dept probes suspicious foreign remittances

The Income Tax Department in India has initiated a nationwide investigation into potentially suspicious foreign remittances, according to the Central Board of Direct Taxes (CBDT). The probe follows intelligence and data analysis revealing entities that allegedly sent large amounts of money overseas despite showing minimal to no local activity, the CBDT announced in a press release.

The investigation targeted fictitious charitable trusts suspected of receiving donations in exchange for accommodation entries, a practice known as 'donation-for-service'. The preliminary findings showed that the entities involved were either non-filers or filed income-tax returns with very minimal turnovers, despite the large sums they sent abroad, said the press release.

The reported purposes of these remittances, such as payment for freight, import of software, and consulting services, did not align with the financial profiles of the entities, suggesting a mismatch, according to the CBDT. Intelligence gathered during the investigation also revealed that these entities were not physically present at the addresses they claimed to operate from.

Additionally, the investigation uncovered that a small number of professionals issued a large number of Form 15CB certificates, which are required to verify the taxability of foreign remittances. Form 15CB is issued under Rule 37BB of the Income-tax Rules, 1962.

The findings have raised concerns about whether these accountants conducted adequate due diligence before issuing the certificates. As part of the investigation, the department has launched a detailed verification exercise focusing on shell entities, their owners, and the accountants who issued the certificates.

Entities located near India's land borders, which had remitted significant amounts of money overseas, were specifically targeted. So far, the investigation has covered around 394 entities, including 117 in land-border States, along with 36 accountants. The department stressed that accountants issuing Form 15CB/Form 146 certificates must exercise due care, diligence, and professional judgment when examining transactions and relevant facts. The CBDT is currently conducting further investigations into the suspicious foreign remittances.