Tag: BLACK MONEY

Fake CA forms fuel the black money transfers abroad, the government is now working to close the gap

Under New System, CA Forms Will Be Linked to Banks; UDIN Checks to Become Mandatory

Mumbai: The government is set to close a loophole exploited by unscrupulous companies to illegally transfer significant amounts of foreign exchange overseas. Scammers have been manipulating certificates issued by chartered accountants with simple tools like PDF editors to deceive banks that handle cross-border transfers. Bankers who fall for these scams are either negligent or complicit. Tax authorities are taking measures to rectify this issue, as confirmed by a spokesperson from the Central Board of Direct Taxes (CBDT).

With the new system, it will be impossible for companies to forge a CA’s certificate, and banks can no longer claim ignorance. This gap, long believed to be misused by fraudsters and unreliable entities, came to light in a recent case where companies, connected to a single mastermind, used a large private sector bank to remit ₹700 crore to businesses in Singapore and Hong Kong.

The Process and the Gaps

The primary remittance document is Form 15CB, where the CA enters details, applies a digital signature, and generates a unique document identification number (UDIN)—an 18-digit alphanumeric code issued by the Institute of Chartered Accountants of India (ICAI). Once the CA files Form 15CB online with the Income Tax department, an acknowledgment number is generated. The CA then shares the PDF with the client, who logs into the tax portal to file Form 15CA by quoting the acknowledgment. This form is largely auto-filled, drawing data from Form 15CB. Finally, the PDFs are submitted to the bank to process the remittance.

The loophole lies in crude forgery: fraudsters falsify the Form 15CB PDF using editing software, create multiple certificates with the same or fake UDINs, and submit them to banks. This fraud can be discovered immediately if bankers verify the UDIN against the details on the ICAI portal. However, if they choose to be willfully ignorant or negligent, hundreds of millions can escape under the façade of legitimate import payments.

Scam Playbook

  1. Most forex remittances require a CA certificate.
  2. A CA fills a form and files it online with the Income Tax Department.
  3. The CA shares a PDF with the client.
  4. The client uses a PDF editor to falsify forms.
  5. The system can be abused if bankers are complicit.

The Income Tax Department is introducing changes to address this issue. The CBDT spokesperson confirmed that banks will soon be mandated to verify the validity of UDINs and check the amounts and other details on the ICAI’s portal against the PDFs submitted by clients. The Indian Banks’ Association (IBA) had urged banks to adopt this practice back in 2019, but many ignored the advice.

The Need for Accountability

Such remittance fraud is not just a fiction; it highlights a failure of verification and accountability,” said Ashish Karundia, founder of CA firm Ashish Karundia & Co. “When forged Form 15CBs and fabricated UDINs can bypass controls, it demonstrates weaknesses in compliance. Banks and regulators must transition from a box-ticking mentality to active verification. Real-time UDIN checks and source validation must be non-negotiable in the digital age; documents must be verified, not assumed.

Karundia emphasized that CAs should only issue Form 15CB after thorough due diligence, which includes checking the Tax Residency Certificate, Form 10F, and supporting documents. “Banks must not process remittances purely based on a certificate. They must authenticate the UDIN, confirm the client’s identity, and verify the documentation.

GST officers bought a mountain in Purvanchal to spend their black money

Investment in Dolostone, Sandstone, and Limestone in Mirzapur and Sonbhadra Raises Concerns

Lucknow – A significant controversy has emerged regarding the alleged investment of billions of rupees in land by officials from the State Tax Department. Reports indicate that in an effort to conceal undeclared income amounting to billions, these officials have acquired mountains rich in dolostone, sandstone, and limestone located in Mirzapur and Sonbhadra.

As investigations into land transactions involving a builder in Ambedkar Nagar gain momentum, several high-ranking officials are now under scrutiny. Each mountain reportedly generates an average annual royalty of between Rs 20 to 30 crore.

The introduction of the GST system in the latter half of 2017, coupled with the economic impact of demonetization, created a fertile ground for corruption. The two ensuing years presented an array of opportunities for illicit gain. Sources suggest that a builder from Awadh has been used as a front, while a powerful group within the department diverted profits into the mountains of Purvanchal.

Alarming reports state that this group has wreaked havoc in the hills of Sonbhadra and Mirzapur, engaging in the purchase of mountains featuring hollow stone, limestone used in cement production, and even coal deposits. Historically, dolostone in this region was priced at Rs 160 per cubic meter; however, land sales through tenders have recently soared to Rs 3000 per cubic meter.

The introduction of an e-tendering system has further escalated these rates, with royalty fees climbing from Rs 400 to Rs 1000 per cubic meter. The royalty for mining can range from 100,000 to 500,000 cubic meters annually, implying that a single mountain’s royalty could average between Rs 20 to 30 crore.

Syndicates have been reportedly acquiring mountains at inflated tender rates—raising prices ten to twenty times—while utilizing the facade of lawful business activities to launder significant amounts of black money. Within this scheme, the focus appears to be less on generating legitimate profits and more on squandering undeclared funds.

As more details emerge, the implications of this ongoing investigation could reveal a deeper network of corruption within the State Tax Department and highlight the urgent need for accountability in managing natural resources.

500 crore tax scam in Pune! Income Tax Department raids, black money hunters in the field

Income Tax Department Uncovers Massive Fraud Scheme Involving Tax Professionals

The Directorate of Income Tax (Investigations) has uncovered an elaborate nexus of fraudulent income tax returns, revealing that certain tax professionals exploited loopholes within the previous system to facilitate deductions based on unverified claims. This fraud, estimated to exceed Rs 500 crores, has raised significant concerns within the Income Tax department.

According to a senior officer in the Income Tax department, tax professionals operating in Pune and its surrounding regions presented themselves as “return specialists.” They offered their services to salaried individuals, promising unusually high returns on their income tax filings. Over a span of five years, these professionals filed more than 10,000 dubious claims.

Investigators have identified a consistent pattern in the returns submitted—deductions were claimed for items like housing loan interest and principal repayments, medical expenses, insurance payments, investments in savings instruments, educational loans, and house rent allowance (HRA), all without any supporting documentation. This critical error has since been rectified in the current system of filing returns.

The ongoing scrutiny of the filed returns indicates persistent issues, as claims for deductions were frequently made in violation of tax laws. We have already initiated action against the tax professionals involved and are now focusing on identifying individual taxpayers who benefited from these bogus returns, as they will now face penalties and possible prosecution,” the officer stated.

The officer further emphasized that taxpayers would not be able to escape responsibility by blaming their intermediaries. Any refunds claimed in their names will be subject to thorough reviews, and penalties will be enforced where applicable. This case is not isolated; it falls within a broader trend of fraudulent deductions being unearthed across various regions of the country. Previous investigations have revealed manipulations involving PAN numbers, TDS credits, and the creation of bogus trusts for deduction claims. However, officials involved in the Pune case have confirmed it to be the most significant fraud case encountered in recent years.

CBDT’s big change: Black money rules relaxed, taxpayers will get relief

Relaxation in Black Money Act: Key Changes and Implications

The Income Tax department has relaxed provisions under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA). Individuals holding small-value foreign assets will now be exempt from penalties or prosecution under certain conditions, as delineated in the latest instructions issued by the Central Board of Direct Taxes (CBDT).

What Has Changed

CBDT has clarified that prosecution under Sections 49 and 50 of the BMA will not be initiated if a penalty under Sections 42 and 43 is not imposed. This relief is applicable to undisclosed foreign assets, excluding immovable property, as long as their combined value does not exceed Rs 20 lakh during a financial year.

This amendment arises from the Finance (No. 2) Act, 2024, which revised the exemption threshold from Rs 5 lakh to Rs 20 lakh.

Broader Coverage of Assets

The new threshold offers practical relief, particularly for professionals with global financial exposure. Niyati Shah, chartered accountant and vertical head – personal tax at 1 Finance, stated, “The increase from Rs 5 lakh to Rs 20 lakh offers substantial relief for taxpayers, especially salaried professionals, NRIs, and globally mobile individuals.”

The relief primarily encompasses financial assets such as foreign bank accounts, ESOPs, mutual funds, and pension holdings, while immovable property remains outside the scope.

Compliance and Misuse Concerns

The higher limit is also expected to alleviate compliance burdens. “This relaxation will significantly reduce compliance stress and avoid minor litigation for individuals with small, unintentional non-disclosures of foreign assets,” Shah noted. Concerns that the rule might be misused by splitting assets were addressed, as Shah emphasized that the Rs 20 lakh cap applies to the aggregate peak value of all assets. Thus, “asset-splitting is ineffective.” However, she added that deliberate concealment or structuring can still attract penalties and prosecution.

Policy Intent

Experts believe this adjustment reflects a pragmatic rather than lenient approach from the government. “This move signals a pragmatic shift by the government, focusing on material tax evasion rather than penalising taxpayers for small oversights,” said Shah. However, she stressed that this should not be misconstrued as an amnesty. “Reporting foreign assets in ITR remains mandatory, but small, inadvertent lapses get breathing room.”

Why It Matters

By elevating the threshold to Rs 20 lakh and broadening the coverage of assets, the government aims to reduce compliance anxiety and prevent unnecessary litigation. This shift keeps the focus on significant, deliberate violations concerning black money, thereby fostering a more balanced approach to taxation and compliance in India.

Avoid Rs 10 lakh income tax penalty from income tax department

India’s tax department has clarified reporting rules for foreign income and assets. Non-disclosure invites penalties under the Black Money Act, including a potential Rs 10 lakh fine and legal action.

The enactment of the Black Money law has introduced severe penalties for taxpayers who provide insufficient disclosures regarding their foreign incomes, assets, and related information. Non-compliance now constitutes a violation of both income tax and black money regulations, resulting in dual legal consequences for individuals who fail to report their foreign income and assets within the stipulated timeframes.

Many taxpayers remain uncertain about the mandatory reporting requirements for foreign assets and income. To address this uncertainty, the Income Tax Department issued a brochure on December 11, 2024, clarifying which taxpayers must submit Schedule Foreign Assets (FA) and additional documentation in their Income Tax Return (ITR) by December 31, 2024, if not previously completed.

In my experience, I found many salaried-class taxpayers land in trouble unwittingly by not disclosing their foreign bank accounts opened during their on-site assignments abroad or shares received as Employee Stock Options (ESOP) during their employment with multinational companies. Non-disclosure of foreign accounts by resident taxpayers in the relevant schedule of ITR can trigger the initiation of penalties by the Tax Department,” said Ramakrishnan Srinivasan, former Chief Commissioner of Income Tax, as quoted by ET. The release of this e-brochure by the Income Tax Department goes a long way in creating awareness among taxpayers of their mandatory disclosure obligations beyond returning correct income.

Who Should Disclose Foreign Assets/Income?

All Indian residents with overseas income or assets are required to make declarations. The definition of residency encompasses individuals who have stayed in India for 182 days or more in any previous year, or those who have spent 365 days or more across four preceding years plus 60 days in the previous year.

The guidelines specify that Hindu Undivided Family (HUF), Firms, or Associations of Persons are considered resident entities unless their management and control operate entirely outside India. Additionally, Indian companies or those with effective management based in India fall under this category.

What is the Penalty for Non-Disclosure of Foreign Income and Assets?

Failing to disclose foreign income and assets can trigger serious legal consequences. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, authorizes the initiation of assessment proceedings against defaulters.

A monetary penalty of ₹10 lakh is applicable when the combined value of assets (excluding immovable property) surpasses ₹20 lakh in these situations:

  • Non-submission of income tax returns by individuals holding foreign assets and income, as stipulated in Section 42 of the Black Money Act, 2015.
  • Failure to provide information or providing incorrect details about assets (including financial interests in entities) situated outside India in the income tax return, according to Section 42 of the Black Money Act, 2015.

Legal prosecution can also be initiated under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

What is Defined as Foreign Income and Assets?

Foreign assets encompass bank accounts, equity and debt interests, business investments, property holdings, capital assets, and beneficial interests in overseas holdings. Income from foreign sources includes interest earnings, dividends, gross proceeds, redemption amounts, and other related earnings.

How to Disclose Foreign Income and Assets?

Declarations must be submitted using appropriate ITR forms, excluding ITR-1 and ITR-4, based on individual circumstances. It’s important to note that ITR-1 and ITR-4 do not contain Schedule FA, Schedule FSI, and Schedule TR sections.

Disclosure must be made in the Income Tax Return for the Assessment Year when the taxpayer holds resident status in India during the previous year. The applicable return of income should be submitted before the specified due date according to Section 139(9) of the Income Tax Act, 1961.

Location for Foreign Asset Disclosure in ITR

  • Schedule FA: For furnishing details of foreign assets and income from any source outside India.
  • Schedule FSI: For furnishing details of income from outside India and tax relief.
  • Schedule TR: For providing details of the summary of tax relief claimed for taxes paid outside India.

Gather comprehensive information about foreign assets, including asset type, country location, address details, acquisition date, and generated income. Compile information about all foreign income sources, including income type, earned amounts, country of origin, and taxes paid internationally.

Input the required information in appropriate schedules by following the detailed instructions available on income tax.gov.in. If eligible under the Double Tax Avoidance Agreement, submit Form 67 alongside Schedule TR to claim tax benefits.

Income tax department warning pay ₹10 lakh penalty; fail to disclose assets or income earned in their ITR

Income tax department warns: ‘Declare foreign assets or pay ₹10 lakh penalty’: The Income-Tax (I-T) department has today (November 17) launched a new campaign warning taxpayers of  ₹10 lakh penalty if they fail to disclose foreign held assets or income earned from abroad in their ITR, according to a PTI report.

The “compliance-cum-awareness campaign” aims to ensure that taxpayers report all information in their Income Tax Return (ITR) for assessment year (AY) 2024-25. Further, the penalty will be imposed under the Anti-Black Money Law, it added.

What Constitutes Foreign Asset?

According to the I-T department advisory, for Indian residents a foreign assetwould include bank accounts, cash value insurance contract or annuity contract, financial interest in any entity or business, immovable property, custodial account, equity and debt interest, trusts in which a person is a trustee, beneficiary of settlor, accounts with singing authority, any capital asset etc., held abroad.

It added that all eligible taxpayers “must mandatorily” fill the foreign asset (FA) or foreign source income (FSI) schedule in their ITR even if their income is “below the taxable limit” or the asset abroad was “acquired from disclosed sources”, the report said.

“Failure to disclose foreign asset/income in the ITR can attract a penalty of  ₹10 lakh under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015,” the advisory added.

Monetary Penalty To Be Imposed

As part of the awareness campaign, the I-T department’s administrative body, the Central Board of Direct Taxes (CBDT), will send “informational” SMS and email to those resident taxpayers who have already filed their ITR for AY 2024-25.

The communication will be sent to such persons who have been “identified” through information received under bilateral and multi-lateral agreements “suggesting” that these individuals may hold foreign accounts or assets, or have received income from foreign jurisdictions, the report said.

“The purpose of the campaign is to remind and guide those who may not have fully completed schedule foreign assets in their submitted ITR (AY 2024-25), especially in cases involving high-value foreign assets,” as per a statement from the CBDT.

The last date to file a belated and revised ITR is December 31, 2024.

Income Tax Department Sets Record-Breaking Cash Seizure of Rs 290 Crore: Highest-Ever Black Money Haul by Any Agency in a Single Operation

The Income Tax department is set to achieve a record-breaking cash seizure of Rs 290 crore following raids on an Odisha-based distillery group and its connected entities. This marks the “highest-ever” black money haul by any agency in a single operation, reported PTI, citing official sources on Saturday.

The tax department has mobilized approximately 40 large and small machines for counting currency notes, enlisting additional department and bank personnel to expedite the counting process initiated on December 6 during the raids on Boudh Distillery Pvt Ltd and others.

Moreover, the department has augmented its fleet with more vehicles to facilitate the transport of the seized cash to government banks in the state.

As part of the searches, premises linked to Congress’ Rajya Sabha MP from Jharkhand, Dhiraj Prasad Sahu, were also covered, according to sources. Despite efforts to obtain a response from the MP and an email sent by PTI to the distillery group, there has been no response.

Currently, tax officials are recording statements from various company officials and individuals involved. The counting of cash is expected to conclude by Saturday, with the total seizure anticipated to reach approximately Rs 290 crore, PTI reports.

With over Rs 250 crore already seized, cash continues to be deposited in government bank branches in Odisha, primarily in the form of Rs 500 denomination notes.

This unprecedented cash seizure is the highest-ever made by an agency in the country against a single group and its connected entities, the sources affirm. Nearly Rs 230 crore was confiscated from 8-10 almirahs at the company’s premises in Bolangir district, while the remainder was seized from locations in Titlagarh, Sambalpur, and Ranchi.

The raids were initiated following “actionable intelligence” regarding significant “out of book” sales and cash remittances by liquor distributors, sellers, and business groups.

Prime Minister Narendra Modi took note of the development, stating on Friday, “Countrymen should look at the pile of these notes and then listen to the honest ‘speeches’ of their leaders….Whatever has been looted from the public, every penny will have to be returned, this is Modi’s guarantee.”

Tax Authorities Detects Undisclosed Income of Several Crores Till 31st May 2021. See Details

In the recent years, the Government has taken a number of measures to bring back the black money stashed abroad ‘The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’. This was stated in a written reply by Union Minister of State for Finance Shri Pankaj Chaudhary to a question in Lok Sabha today.

The Minister stated that as a result of systematic actions by the Government, the following results have been achieved as on 31.05.2021:

As on 31.05.2021, assessment orders under section 10(3)/10(4) of the Black Money Act, 2015 have been passed in 166 cases, wherein demand of Rs. 8,216 crore has been raised.

Undisclosed income of Rs. 8,465 crore (approx.) has been brought to tax and penalty of Rs. 1,294 crore has been levied in HSBC cases.

Undisclosed income of Rs. 11,010 crore (approx.) has been detected in ICIJ (International Consortium of Investigative Journalists) cases.

In the Panama Papers Leaks cases, undisclosed credits of Rs. 20,078 crore (approx.) have been detected.

In the Paradise Papers Leaks cases, undisclosed credits of Rs. 246 crore (approx.) have been detected.

The Minister stated that Income Tax Department takes appropriate action under relevant laws against the tax evaders. Such action under direct tax laws includes searches, surveys, enquiries, assessment of income, levy of tax, interest, penalties, etc. and filing of prosecution complaints in criminal courts, wherever applicable.

Giving details of the number of people arrested/chargesheeted, the Minister tabled details of prosecution complaints filed during last 5 years by the Income Tax Department under Income Tax Act, 1961 are as under:

Further, more than 107 prosecution complaints have been filed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Minister stated.

Giving more details of the steps taken by the Government to bring back black money from outside the country to India, the Minister stated that the following number of measures have been taken:

nactment of ‘The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’ which has come into force w.e.f. 01.07.2015 to specifically and more effectively deal with the issue of black money stashed away abroad. Apart from prescribing more stringent penal consequences, this law has included the offence of willful attempt to evade tax etc. in relation to undisclosed foreign income/assets as a Scheduled Offence under the Prevention of Money- laundering Act, 2002 (PMLA).

Constitution of the Special Investigation Team (SIT) on Black Money under Chairmanship and Vice-Chairmanship of two former Judges of Hon’ble Supreme Court,

Proactively engaging with foreign governments with a view to facilitate and enhance the exchange of information under Double Taxation Avoidance Agreements (DTAAs)/Tax Information Exchange Agreements (TIEAs)/Multilateral Conventions.

India has been a leading force in the efforts to forge a multi-lateral regime for proactive sharing of financial information known as Automatic Exchange of Information which will greatly assist the global efforts to combat tax evasion. The Automatic Exchange of Information based on Common Reporting Standard has commenced from 2017 enabling India to receive financial account information of Indian residents in other countries.

India has entered into information sharing agreement with the USA under the Foreign Account Tax Compliance Act of USA.

Income Tax Department’s Search & Survey Operations on Real Estate Developers and Traders of Mobile Accessories Reveals 13 Secret Godowns and Many More

The Income Tax Department carried out searches on 17.03.2021 in the case of a prominent builder and developer group based in Mumbai. Searches were also conducted in the case of dealers engaged in the business of trading of mobiles accessories. In all, 29 premises located in Mumbai were covered under search operation, while 14 premises were covered under survey action.

The real estate group is developing a commercial Mall, having 950 units exclusively for the mobile accessories business. Of these, about 905 of the units have been sold starting from 2017 till date. The evidences stored in a pen drive found in the searched premises revealed that the builder group, has taken an amount of Rs. 150 crore as on-money receipts over and above the agreement value, which is not accounted for in the books of accounts on sale of such units. Further, similar evidence of on-money amounting to Rs. 70 crore has been found in the pen drive pertaining to a residential-cum-commercial project. Cash amounting to Rs. 5.50 crore has been found and seized from various premises of this group. The receipts of on-money for sale of shops/flats by the builder in various projects recorded in digital form have been seized.

In respect of the dealers engaged in the business of mobile accessories, various incriminating evidence has been found pertaining to out-of-books sales. The group imports goods from China and sells these goods to various parties all over India. The imports are under invoiced and payments are made through hawala channels. 13 secret godowns containing unaccounted stock have been discovered, wherein the stock is being inventorised and valuation is under progress.

Further, evidence of unaccounted investments in properties by the said dealers amounting to Rs. 40.5 crore has been detected. Out of this, unaccounted investments worth Rs. 21 crore are against the purchase of units in the said commercial Mall. Four undisclosed bank accounts in the names of employees have also been detected, which are used to collect the sale proceeds from the retail vendors of the groups. The total deposits in the bank accounts amount to Rs. 80 crore.

This operation has revealed that the entire sector of trading in mobile accessories is largely unaccounted. The main components are imported from China through Mumbai and Chennai ports. Search has revealed that the dealers are undervaluing the sales and purchases in a major way. The transactions with Chinese counterparts take place through the We-Chat app. The Department has recovered the We-chat messages using forensics. The information pieces are being verified and collated to extract information regarding the quantum and cost of Chinese imports.

Unaccounted cash of Rs. 5.89 crore has been seized, so far, in this operation. The searches, as yet, have resulted in the detection of undisclosed income of around Rs. 270 crore. Further investigations and the exercise of valuation of unaccounted stock are in progress.