The Income Tax Department has launched a nationwide verification exercise into suspicious foreign remittances, following ground intelligence and an analysis of data on outward transfers of foreign exchange.
The exercise, announced on August 18, covers entities suspected of sending unusually large sums overseas over the past three years.
The department said the verification is focused on suspected shell entities, the individuals operating them and professionals who issued Form 15CB certificates.
Around 394 entities, including 117 located in states along India's land borders, and 36 professionals have been covered. Further investigations are underway.
Suspicious Remittances Under Department Scanner
The investigation follows a search operation involving a network of fictitious charitable trusts allegedly engaged in providing accommodation entries against bogus donations and contributions.
Subsequent ground-level verification indicated that several entities involved in overseas remittances were either non-filers or had reported very low turnover in their income-tax returns.
According to the department, the financial profile of these entities appeared inconsistent with the large amounts they sent abroad.
The stated purposes of some remittances, including freight payments, software imports and consulting services, also did not appear to correspond with the entities' reported activities.
Officials further found that some of the entities were not operating from the addresses declared in their records.
Data analysis also showed that a relatively small group of professionals had issued a large number of Form 15CB certificates, while the remitted funds were received by a concentrated group of entities.
Income Tax Department Flags Form 15CB Due Diligence
Form 15CB, along with the applicable rules, requires chartered accountants to examine the tax implications of foreign remittances using books of account and other relevant documents.
The department has therefore raised concerns about whether adequate due diligence was undertaken before certain certificates were issued.
The tax authority has urged CAs to exercise caution, professional judgment and due diligence while issuing Form 15CB or the corresponding Form 146.
Professionals have been advised to examine the underlying transactions and supporting facts before certifying foreign remittances.
Taxpayers receiving notices should not ignore them. They should compile source-of-funds documents, previous ITRs and relevant Form 15CB/CA or Form 145/146 paperwork, and respond within the stipulated period.
