New Delhi: The Income Tax Department has launched a nationwide verification exercise into suspected irregularities involving foreign remittances made by entities that reported little or no business activity.
The action follows the identification of several entities that allegedly transferred substantial amounts of foreign exchange abroad over the past three years despite declaring very low turnover or failing to file income tax returns. The entities were identified through ground intelligence and detailed analysis of outward remittance data.
The probe gained momentum after a search operation uncovered a network of fictitious charitable trusts allegedly engaged in providing accommodation entries against bogus donations and contributions. The investigation subsequently pointed to a wider network of entities involved in sending funds overseas.
Initial verification found that the amounts remitted were significantly disproportionate to the turnovers reported by the entities. In several cases, the stated purposes for the payments, including freight, software imports and consultancy services, did not appear consistent with the transactions under scrutiny.
Investigators also found indications that some entities were not operating from their declared addresses. Data analysis further revealed that a relatively small group of professionals had issued a large number of Form 15CB certificates, while the remitted funds were received by a clustered set of entities.
The department has raised questions over whether sufficient due diligence was conducted before these certificates were issued. Under the applicable income tax rules, accountants certifying foreign remittances are required to examine the taxability of transactions and verify relevant books and supporting documents.
The verification exercise, launched on August 18, covers around 394 entities, including 117 located in states bordering countries that share land boundaries with India. It also covers 36 professionals associated with the certification process.
The department has emphasised that professionals issuing Form 15CB or Form 146 must exercise due care, diligence and independent professional judgment. Further investigation into the entities, individuals behind them and the professionals involved is underway.
