Income Tax Department launches nationwide verification of suspicious foreign remittances

The Income Tax Department has initiated a nationwide verification process targeting suspicious foreign remittances, according to a statement from the Central Board of Direct Taxes (CBDT). This move follows the identification of several entities that allegedly remitted significant sums of foreign exchange despite showing minimal or no taxable turnover, the CBDT revealed in a press release.

The investigation was sparked by intelligence gathered on the ground and an analysis of data concerning outward foreign remittances over the past three years.

The CBDT uncovered a network of entities that appeared to be involved in transferring funds abroad through a series of operations focusing on fictitious charitable trusts that purportedly provided accommodation entries against bogus donations and contributions. During these operations, the department found that the entities making the remittances were either non-filers or had filed income-tax returns indicating small turnovers, with no clear link between the reported turnovers and the large sums sent overseas.

Additionally, the stated purposes of these remittances, such as payments for freight, software imports, and consulting services, did not align with the entities' financial profiles, the CBDT noted.

Ground-level intelligence revealed that these entities were not operating from the addresses they declared, further indicating a lack of transparency. The investigation also discovered that a significant number of Form 15CB certificates had been issued by a small group of professionals, while the remitted funds were received by a cluster of entities.

According to Section 15CB of the Income-tax Rules, 1962, accountants certifying foreign remittances are required to verify their taxability based on the entities' books of account and other relevant documents. The department's findings raised concerns about whether these professionals conducted adequate due diligence before issuing such certificates.

The CBDT launched the nationwide verification exercise on Tuesday, focusing on shell entities, their owners, and the professionals who issued Form 15CB certificates. Entities located along India's land borders, which have been remitting substantial amounts of money abroad, were also included in the exercise. So far, the verification process has covered approximately 394 entities, including 117 located in land-border States, and 36 professionals.

The department stressed that accountants issuing certificates in Form 15CB/146 are expected to exercise due care, diligence, and professional judgment while examining the underlying transactions and relevant facts before certifying foreign remittances. These certifications are crucial for maintaining trust in the system, the department emphasized.

Further investigations into the suspicious foreign remittances are currently underway, as the CBDT works to unravel the intricacies of this financial network.