394 entities, 36 professionals under scanner in IT dept's foreign remittance verification exercise

The Income Tax Department on Tuesday launched a nationwide verification exercise into suspicious foreign remittances involving nearly 400 entities and 36 professionals, the CBDT said.

The exercise, based on ground intelligence and analysis of data on outward foreign remittances, is focused on shell entities, the persons behind them and professionals who issued certificates for the remittances, the Central Board of Direct Taxes (CBDT) said in a statement.

The department has identified several entities that remitted large amounts of foreign exchange over the last three years despite either not filing income-tax returns or reporting very small turnovers.

"The turnovers had no apparent correlation with the large amounts of money being remitted abroad," the CBDT said.

The stated purposes of the remittances, including payments for freight, software imports and consulting services, also did not appear to match the transactions, it said.

Ground-level intelligence revealed that some of the entities were not operating from the addresses declared by them.

The department said its analysis also found that a large number of Form 15CB certificates were issued by a relatively small group of professionals, while the remitted funds were received by a clustered group of entities.

Form 15CB, read with Rule 37BB of the Income-tax Rules, 1962, requires an accountant certifying a foreign remittance to verify its taxability with reference to the books of account and other relevant documents.

The CBDT said the findings raised concerns over whether adequate due diligence was carried out by accountants before issuing such certificates.

The nationwide exercise launched on August 18 covers approximately 394 entities, including 117 located in states along India's land borders, and 36 professionals.

The investigation follows the uncovering of a nationwide network of entities during a search operation against a group of fictitious charitable trusts allegedly involved in providing accommodation entries against bogus donations and contributions.

The CBDT said accountants issuing Form 15CB/Form 146 certificates are expected to exercise due care, diligence and professional judgment and properly examine the underlying transactions and relevant facts before certifying remittances.

"Further investigations are currently underway," it said.