Department begins detailed investigation into suspicious foreign fund transfers, focusing on shell entities, their beneficiaries and professionals issuing tax certificates
New Delhi: The Income Tax Department has launched a nationwide investigation into suspected remittances of funds abroad, focusing on entities with little or no reported business activity, the individuals behind them and chartered accountants who issued tax certificates for the transactions.
The department said the investigation also covers entities located in districts bordering India’s land boundaries that have transferred large amounts of money overseas. In a post on social media platform X, the Income Tax Department said around 394 entities and 36 professionals have been brought under the scope of the exercise, including 117 entities located in border states.
The detailed nationwide investigation was initiated on August 18 following data analysis and information gathered from the field regarding potentially suspicious foreign remittances. The probe is examining suspected shell entities, their beneficial owners and professionals who issued Form 15CB/Form 146 certificates.
Suspicious Remittances Under Scanner
According to the department, data analysis indicated that several entities reporting little or no business activity had remitted substantial amounts of money abroad. Many of these entities either did not file income-tax returns or reported very low turnover that appeared inconsistent with the large sums transferred overseas.
The department also found that several remittances did not appear to correspond with the stated purposes of payments, such as freight charges, software imports or consultancy services. In some cases, the entities were reportedly not operating from their declared addresses.
The investigation follows the detection of a nationwide network of entities involved in overseas remittances during a search operation against a group of suspected bogus charitable trusts. These trusts were allegedly involved in providing accounting entries against fake donations and contributions.
Chartered Accountants Asked to Exercise Greater Caution
The Income Tax Department has also raised concerns over the role of professionals issuing tax certificates for overseas remittances.
It said data analysis showed that a large number of Form 15CB certificates were issued by a relatively small group of professionals, while the overseas remittances themselves were concentrated among a limited number of entities.
The department has advised chartered accountants to exercise due diligence and professional judgment while issuing Form 15CB/Form 146 certificates. They have been asked to properly examine the underlying transactions and related facts before certifying them.
The department said such certificates play an important role in maintaining confidence in the tax-compliance system.
What Are Form 15CB and Form 146?
Form 15CB/Form 146 is a tax determination certificate issued by a chartered accountant in connection with certain payments or remittances being made from India to non-residents or foreign companies.
The certificate helps determine the applicable tax treatment, including Tax Deducted at Source (TDS) and compliance with provisions of the Double Taxation Avoidance Agreement (DTAA), wherever applicable.
The department said CAs certifying overseas remittances are required under the tax framework to examine books of accounts and other relevant documents to determine whether tax is applicable.
Concerns Over Adequate Verification
The department said the facts emerging from the investigation have raised questions about whether adequate verification was carried out before some of the certificates were issued.
The investigation will therefore examine the transactions, entities involved, individuals behind them and the professionals who certified the remittances.
The Income Tax Department said the exercise is based on a combination of data analytics and field intelligence, with the objective of identifying suspicious overseas fund transfers and strengthening compliance with tax laws.
The nationwide probe is expected to provide greater clarity on the flow of funds abroad and the mechanisms allegedly used by entities with little or no genuine business activity to transfer substantial amounts overseas.
