The Central Board of Direct Taxes (CBDT) has initiated a nationwide verification exercise into potentially suspicious foreign remittances, following data analysis that identified entities sending substantial amounts of foreign exchange despite reporting negligible turnover or not filing income-tax returns.
The exercise is based on intelligence and analysis of outward foreign remittance data covering the past three years. According to the CBDT, the investigation emerged during action against allegedly fictitious charitable trusts suspected of facilitating accommodation entries through bogus donations and contributions.
During preliminary verification, several entities found to have made significant overseas remittances were either non-filers or taxpayers reporting very low turnover in their income-tax returns. The department observed that the scale of foreign exchange remitted did not appear consistent with the financial position disclosed by these entities.
The stated purposes of certain transactions, including freight payments, software imports and consultancy services, were also found to require further verification in view of the entities' reported financial profiles. Field-level inquiries further indicated that some entities were allegedly not operating from their declared business addresses.
The CBDT has also identified a concentration of Form 15CB certificates issued by a limited group of professionals in relation to remittances involving a clustered set of recipient entities. Form 15CB, read with Rule 37BB of the Income-tax Rules, 1962, requires the certifying accountant to examine the taxability of a foreign remittance with reference to the books of account and relevant supporting documents.
Against this background, the department is examining whether appropriate due diligence, professional care and independent verification were undertaken before the certificates were issued.
The nationwide verification covers shell entities, persons associated with such entities and professionals involved in issuing Form 15CB/Form 146 certificates. Entities situated in districts along India's land borders and undertaking substantial outward remittances have also been included within the scope of the exercise.
As per the CBDT, verification has so far covered approximately 394 entities, including 117 entities situated in land-border States, along with 36 professionals.
The tax department has reiterated that professionals issuing certificates for foreign remittances are expected to carefully examine the underlying transactions, supporting records and relevant facts before providing certification. The CBDT stated that such certifications are an important component of the tax compliance framework.
Further investigation and verification into the identified foreign remittance transactions are continuing. CA Sansaar