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The Income Tax Department is examining 394 entities and 36 professionals over suspected irregularities in large-value foreign remittances made during the past three years, the Central Board of Direct Taxes (CBDT) said on Tuesday.

The verification exercise focuses on entities that reportedly transferred substantial amounts of money abroad despite showing limited business activity or not filing income tax returns.

The department is also looking into the professionals who certified the transactions before the money was remitted overseas.

117 Entities Located In Bordering States

According to the CBDT, 117 of the 394 entities under examination are based in states bordering other countries, reported Business Standard.

Data analysis carried out by the department flagged transactions involving payments for freight, software imports and consultancy services. In some cases, the amounts sent abroad appeared disproportionate to the business activity reported by the entities.

The department also found instances where entities were not operating from the addresses declared by them, the CBDT said.

The verification is aimed at examining whether the reported transactions were genuine and whether the foreign remittances were supported by the required business activity and documentation.

Professionals Issuing Form 15CB Certificates Under Lens

The department is separately examining a group of professionals who issued a large number of Form 15CB certificates linked to foreign payments.

Form 15CB is a certificate issued by an accountant that determines whether tax is payable on a particular payment being made to a person or entity outside India.

The CBDT said foreign remittances were received by a cluster of entities, prompting questions over the genuineness of the transactions and the checks conducted before the payments were certified.

The role of the professionals who issued the certificates is therefore also part of the ongoing verification.

Department Examines Transactions And Supporting Documents

The Income Tax Department said accountants issuing Form 15CB and other certificates are expected to examine the underlying transactions and supporting documents before certifying them.

The current exercise covers the entities involved in the foreign remittances, the individuals behind them and the professionals who certified the transactions.

The department's action follows an earlier search that uncovered a network allegedly involved in providing "accommodation entries" through bogus donations and contributions to fictitious charitable trusts.

An accommodation entry refers to a paper transaction used to make unaccounted money appear to have originated from a legitimate transaction. Such transactions can be presented as genuine donations, loans or investments despite the underlying activity not being genuine.

The department said further investigation into the foreign remittances and the parties involved is underway.