New Delhi: The Income Tax Department has launched a nationwide verification drive into suspicious foreign remittances after identifying entities that allegedly sent large amounts of money overseas despite reporting little or no business activity. The exercise, launched on August 18, is focused on shell entities, the people behind them and professionals who issued tax certificates for the transactions.
According to the Central Board of Direct Taxes (CBDT), the department identified several entities that had remitted substantial amounts of foreign exchange over the past three years. Preliminary verification found that some of these entities were either not filing income-tax returns or were declaring very low turnovers. Officials found that the reported business activity did not appear to match the large sums being transferred abroad.
The department has so far brought around 394 entities under the verification exercise. Of these, 117 are located in states along India's land borders. The scrutiny also covers 36 professionals who issued Form 15CB certificates linked to the remittances.
Officials said some of the transactions were described as payments for freight, software imports and consulting services. However, the stated purposes did not appear to correspond with the financial profiles of the entities involved. In some cases, preliminary checks also reportedly found that the entities were not operating from the addresses declared by them.
The investigation was triggered by ground intelligence and analysis of data relating to outward foreign remittances. The department said a wider network came to light during a search operation involving fictitious charitable trusts allegedly engaged in providing accommodation entries against bogus donations and contributions.
A key part of the exercise is the scrutiny of Form 15CB certificates issued by chartered accountants. The department has advised professionals issuing such certificates to exercise proper care, diligence and professional judgment. They have been asked to examine the underlying transactions and relevant documents before certifying the tax treatment of foreign remittances.
The latest nationwide exercise signals tighter scrutiny of overseas money transfers, particularly where declared business activity does not support the scale or purpose of the remittances. The department's verification will examine the entities, individuals connected to them and professionals involved in certifying the transactions.
