Income Tax Department Launches Nationwide Probe Into Suspicious Foreign Remittances

The Income Tax Department on Tuesday launched a nationwide verification exercise into suspicious foreign remittances, following data analysis and ground intelligence indicating large amounts of overseas remittances over the last three years by entities with little or no reported business activity, according to an official statement. The verification exercise is focusing on shell entities, the persons behind them, and the professionals who have issued Form 15CB certificates. Entities located in districts along the country's land borders and remitting significant amounts of money abroad have also been covered in the exercise.

The exercise has covered approximately 394 entities, including 117 entities located in land-border states, and 36 professionals, the statement said. The Department has emphasised the importance of exercising due diligence and sound judgment by professionals while issuing certificates in Form 15CB/Form 146. A nationwide network of entities engaged in remitting funds abroad was uncovered during a search operation conducted on a group of fictitious charitable trusts involved in providing accommodation entries against bogus donations, the statement said.

Preliminary ground verification revealed that the entities making these remittances were either non-filers or were filing income tax returns showing very small turnovers. The turnovers had no apparent correlation with the large amounts of money being remitted abroad. They also did not appear to match the stated purpose of the remittances, such as payment for freight, import of software, or import of consulting services. Further ground-level intelligence revealed that these entities were not actually operating from the addresses declared by them. Further analysis of the data also revealed that a large number of Form 15CB certificates were issued by a relatively small group of professionals.

The remitted funds were also received by a clustered group of entities. Form 15CB requires the accountant certifying a foreign remittance to verify its taxability with reference to the books of account and other relevant documents. However, the findings raise concerns about whether adequate due diligence was carried out by the accountants before issuing these certificates, the statement said. The Income Tax Department emphasised that accountants should properly examine the underlying transactions and relevant facts before certifying the remittances, as these certifications play an important role in maintaining trust in the system. Further investigations are currently underway, the statement added.

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