Daijiworld Media Network - New Delhi

New Delhi, Aug 18: The Income Tax Department on Tuesday launched a nationwide verification exercise into suspicious foreign remittances after data analysis and ground intelligence indicated that entities with little or no reported business activity had remitted large amounts of money overseas over the past three years.

According to an official statement, the exercise is 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. The exercise has so far covered around 394 entities, including 117 entities located in land-border states, and 36 professionals, the statement said.

The Department has stressed the need for professionals to exercise due diligence and sound judgment while issuing certificates in Form 15CB/Form 146.

A nationwide network of entities involved in remitting funds abroad was uncovered during a search operation against a group of fictitious charitable trusts allegedly involved in providing accommodation entries against bogus donations, the statement said.

Preliminary ground verification found that the entities making the remittances were either non-filers or were filing income tax returns showing very small turnovers. The reported turnovers had no apparent correlation with the large sums being sent abroad.

The transactions also did not appear to match the stated purposes of the remittances, including payments for freight, software imports and consulting services. Further ground-level intelligence indicated that the entities were not actually operating from the addresses declared by them.

Further analysis of the data showed 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.

Form 15CB requires the accountant certifying a foreign remittance to verify its taxability with reference to the books of account and other relevant documents.

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

The Income Tax Department emphasised that accountants must properly examine the underlying transactions and relevant facts before certifying foreign remittances, noting that such certifications play an important role in maintaining trust in the system.

Further investigations are currently underway, the statement added.