The Income Tax Department has launched a nationwide crackdown on suspicious outward foreign remittances, identifying 394 entities that transferred substantial amounts of money outside India over the past three years. The department has also placed 36 professionals, including chartered accountants, under scrutiny for their alleged role in facilitating or certifying certain transactions.
The action follows a search operation targeting a network of fictitious charitable trusts allegedly involved in providing accommodation entries against bogus donations and contributions. During the investigation, tax authorities identified a wider network of entities that had reportedly transferred significant amounts abroad despite showing little or no corresponding business activity in their income-tax records.
According to the Income Tax Department, 117 of the 394 identified entities are located in districts along India’s land borders. Preliminary ground verification found that several entities had either not filed income-tax returns or had declared only very small turnovers. In several cases, the reported financial activity appeared inconsistent with the large sums transferred overseas.
The department said the turnover declared by these entities had no apparent correlation with the amounts being remitted abroad. Investigators also found that the stated purposes of several remittances, including payments for freight, software imports and consulting services, did not appear to match the underlying transactions.
Several Entities Not Found at Declared Addresses
The tax authorities also discovered that some of the identified entities were not operating from the addresses declared in official records. The findings have raised concerns about the possible use of shell or fictitious entities to facilitate financial transactions and move funds outside the country.
The department is examining the financial trail of the entities as part of the wider investigation. Authorities are expected to verify the source of the funds, the beneficiaries of overseas transfers and whether the transactions were backed by genuine commercial activities.
The scrutiny also extends to a group of professionals, including chartered accountants who issued Form 15CB certificates. Form 15CB is a certificate issued by a chartered accountant regarding the taxability of certain foreign remittances.
CAs Under Scrutiny Over Form 15CB Certificates
The Income Tax Department said chartered accountants issuing Form 15CB certificates are required to properly examine the underlying transactions and relevant facts before certifying a remittance. Investigators are now examining whether the professionals involved carried out the required verification before issuing the certificates.
The investigation comes amid wider concerns over the movement of unaccounted funds abroad. A former Enforcement Directorate official said suspicious foreign remittances are already under scrutiny, particularly transactions involving the purchase of real estate overseas using cash.
According to the former official, one suspected method involves purchasing assets abroad in the names of drivers, domestic workers or other individuals to circumvent the Reserve Bank of India’s Liberalised Remittance Scheme. Under the scheme, individuals are currently permitted to remit up to $250,000 a year, subject to applicable rules and conditions.
Investigators have previously detected similar methods in cases involving under-invoicing, where the declared value of a transaction is allegedly kept below its actual value to facilitate the movement or concealment of funds.
Border Districts Also Under Focus
The identification of 117 entities located in districts along India’s land borders has added another layer to the investigation. Many of these entities reportedly transferred significant amounts abroad during the past three years, while some had either failed to file tax returns or reported minimal business activity.
The Income Tax Department is now examining whether the entities were genuinely engaged in the businesses they claimed to operate, whether their foreign remittances were supported by legitimate transactions and whether any professionals knowingly facilitated questionable transfers.
The nationwide campaign is part of a broader effort by tax authorities to identify financial structures that may be used for routing unaccounted money abroad. Further action will depend on the outcome of detailed scrutiny of financial records, transaction documents and the role of individuals and professionals associated with the flagged entities.
