Journalism of Courage
Tax Dept probes outward remittances; shell entities, CSR expenses under scanner
Some entities were showing such transactions as CSR expenses while diverting funds abroad
The investigations have been underway for a while, and now a nationwide verification exercise has been launched by the department to verify these outward foreign remittances.
Around 394 entities, including 117 entities located in land-border states, and 36 professionals were found to have been allegedly involved in sending large amounts of remittances abroad despite them being non-filers or having filed income tax returns showing very small turnovers, the Income Tax Department said in a statement on Tuesday. Some of these entities were also showing such transactions as expenses for corporate social responsibility (CSR) but were instead diverting the money abroad, officials told The Indian Express.
“The turnovers had no apparent correlation with the large amounts of money being remitted abroad. They also did not appear to match the stated purpose of the remittances, such as payment for freight, import of software, or import of consulting services. Further ground-level intelligence revealed that these entities were not actually operating from the addresses declared by them,” the statement said.
The nationwide detailed verification exercise was carried out by the department based on “ground intelligence and analysis of data on outward foreign remittances” as several suspicious entities were found to have remitted large amounts of foreign exchange over the last three years, the department said.
“A nationwide network of entities engaged in remitting funds abroad was uncovered during a search operation conducted on a group of fictitious charitable trusts involved in providing accommodation entries against bogus donations/contributions. Preliminary ground verification revealed that the entities making these remittances were either non-filers or were filing income-tax returns showing very small turnovers,” it said.
The investigations have been underway for a while, and now a nationwide verification exercise has been launched by the department to verify these outward foreign remittances. “The investigations are being carried out against entities in Mumbai, Delhi-NCR, Ahmedabad, Jaipur, Kolkata, among others. The focus is on shell entities and those who incorrectly claimed these transfers as CSR, or have done it disproportionately to their disclosed turnover,” an official familiar with the investigations told this newspaper.
The department said that its data analysis has revealed a large number of Form 15CB certificates issued by a relatively small group of professionals. Form 15CB is required for payments made to non-resident, not being a company, or to a foreign company which are taxable and if the payment exceeds Rs 5 lakh during a financial year. “Form 15CB, read with Rule 37BB of the Income-tax Rules, 1962 (Form 146 read with Rule 220 of the Income-tax Rules, 2026), requires the accountant certifying a foreign remittance to verify its taxability with reference to the books of account and other relevant documents. However, the findings raise concerns about whether adequate due diligence was carried out by the accountants before issuing these certificates,” it said.
The department said the accountants issuing certificates in Form15CB or Form 146 are “expected to exercise due care, diligence and professional judgment”.
© The Indian Express Pvt Ltd
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