The Income Tax Department has launched a nationwide verification exercise to examine suspicious foreign remittances made by entities whose overseas transfers appear disproportionate to their reported business activity.
The exercise, launched on August 18, follows intelligence gathering and analysis of data on outward foreign remittances over the past three years. Officials have identified entities that allegedly transferred substantial amounts of foreign exchange despite reporting little or no turnover.
394 Entities Under Scrutiny
The verification drive covers approximately 394 entities, including 117 entities located in states along India’s land borders. The Income Tax Department is also examining the role of 36 professionals who issued certificates linked to the foreign remittances.
The exercise is focused on suspected shell entities, the individuals associated with them and professionals who issued Form 15CB certificates for the transactions.
Remittances Did Not Match Reported Business Activity
According to the department, initial intelligence showed that several entities had sent significant amounts of money abroad despite being non-filers or reporting very low turnover in their income-tax returns.
In some cases, the amounts remitted overseas appeared inconsistent with the entities’ reported financial activity. The stated purposes of the payments included expenses such as freight, software imports and consulting services.
Ground-level verification also indicated that some entities were not operating from the addresses declared in official records.
Network Linked To Fictitious Charitable Trusts
The investigation followed the discovery of a wider network during a search operation involving fictitious charitable trusts.
The trusts were allegedly involved in providing accommodation entries against bogus donations or contributions. Subsequent intelligence and data analysis helped authorities identify entities connected with potentially suspicious overseas fund transfers.
Professionals Issuing Form 15CB Also Under Scanner
The Income Tax Department is also examining professionals who issued Form 15CB certificates for the remittances.
Form 15CB is used by an accountant to certify the taxability of certain payments being sent outside India. The department has raised concerns over whether adequate due diligence was conducted before some of these certificates were issued.
The department has advised professionals issuing Form 15CB or Form 146 to exercise appropriate care, diligence and professional judgment and to properly examine the underlying transactions and supporting documents before certifying them.
Border-State Entities Included
The nationwide exercise also includes entities located in districts along India’s land borders that were found to have made significant overseas remittances.
Of the approximately 394 entities under verification, 117 are located in states sharing India’s land borders.
The inclusion of these entities is part of the department’s broader effort to examine potentially irregular cross-border financial transactions.
Further Investigation Underway
The Income Tax Department’s verification is currently focused on understanding the nature of the transactions, the entities involved and the role of professionals who certified the remittances.
The department has emphasised that accountants and other professionals involved in certifying foreign remittances must conduct proper verification before issuing certificates.
Further investigation into the suspicious transactions and the entities involved is underway.
