IT dept targets 394 entities over suspicious foreign remittances in 3 yrs: Official

The Income-Tax Department identified suspicious entities that remitted large amounts of foreign exchange over the last three years, it said in a statement.

The Income-Tax Department on Tuesday launched a nationwide exercise targeting suspicious foreign remittances made by unscrupulous elements and shell entities in the last three years, which covers approximately 394 entities, including 117 entities located in India’s land-border states, the Central Board of Direct Taxes (CBDT) said.

On August 18, the department launched a nationwide detailed verification exercise to verify these foreign remittances, focussing on shell entities. (Photo Credit: incometax.gov.in)

Based on ground intelligence and analysis of data on outward foreign remittances, the Income-Tax Department identified several suspicious entities that remitted large amounts of foreign exchange over the last three years, it said in a statement.

“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/contributions. Preliminary ground verification revealed that the entities making these remittances were either non-filers or were filing income-tax returns showing very small turnovers,” it said.

Form 15CB certificates

According to CBDT, 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, it said.

According to the law, the Form 15CB is required for payments made to non-resident, not being a company, or to a foreign company which are taxable and if the payment exceeds ₹5 lakh during financial year.

Form 15CB is an event-based form and is required for each remittance that satisfies the condition laid. In form 15CB, a CA certifies the details of the payment, TDS rate, TDS deduction and other details of nature and purpose of remittance.

CBDT said 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.

Nationwide verification exercise

On August 18, the department launched a nationwide detailed verification exercise to verify these foreign remittances, focussing on shell entities, the persons behind them, and the professionals who have issued Form 15CB certificates, it said.

“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,” it added.

Accountants to exercise due care

The department emphasises that accountants issuing certificates are expected to exercise due care, diligence and professional judgment. They 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, it said, adding that further investigations were underway.