The Income Tax Department has launched a nationwide verification exercise into suspicious foreign remittances after identifying entities that allegedly transferred large amounts of foreign exchange despite reporting little or no turnover, the Central Board of Direct Taxes (CBDT) said on Wednesday.
According to a CBDT press release, the action followed ground intelligence and analysis of data on outward foreign remittances over the past three years. The department said it uncovered a network of entities allegedly involved in remitting funds abroad during a search operation targeting fictitious charitable trusts allegedly engaged in providing accommodation entries against bogus donations and contributions.
Preliminary verification found that the entities making the foreign remittances were either non-filers or had filed income-tax returns showing very low turnover. The department said there appeared to be no correlation between their reported turnover and the large sums remitted overseas.
The stated purposes of the remittances, including payments for freight, imports of software and consulting services, also did not appear to correspond with the entities’ financial profiles, the CBDT said.
“Further ground-level intelligence revealed that these entities were not actually operating from the addresses declared by them,” the department said.
The investigation also found that a large number of Form 15CB certificates had been issued by a relatively small group of professionals, while the remitted funds were received by a clustered group of entities.
Under Form 15CB read with Rule 37BB of the Income-tax Rules, 1962, accountants certifying foreign remittances are required to verify their taxability with reference to books of account and other relevant documents. The department said the findings raised concerns over whether adequate due diligence had been undertaken by accountants before issuing such certificates.
On Tuesday, the department launched a nationwide detailed verification exercise focusing on shell entities, the persons behind them and professionals who issued Form 15CB certificates.
Entities located in districts along India’s land borders and remitting significant amounts of money abroad have also been covered under the exercise.
The verification has so far covered approximately 394 entities, including 117 entities located in States along India’s land borders, as well as 36 professionals, the CBDT said.
The department emphasised that accountants issuing certificates in Form 15CB/Form 146 are expected to exercise due care, diligence and professional judgment while examining underlying transactions and relevant facts before certifying foreign remittances.
“These certifications play an important role in maintaining trust in the system,” the department said.
Further investigations into the suspicious foreign remittances are underway, the CBDT said.
-ANI
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