FTO directs FBR to probe officials involved in registration of fake registered persons

ISLAMABAD: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to investigate the matter of registration of fake registered persons (RP). 

The sources concerned said that FTO has directed the Chief Commissioner-Inland Revenue(IR), corporate RTO Karachi to investigate and identify the officials involved in registration of fake registered persons and initiate a criminal action against those who are found involved.    

The FTO has initiated the investigations into irregularities committed by the FBR field formations in processing and sanctioning of bogus sales tax refund during the period 2011-14 identified by Directorate General Intelligence and Investigation (I&I), FBR. The tax department has also issued red alerts in such cases to field formations concerned but neither any action was initiated against the fake claimants and their concerns in the department who were involved in bogus registration, processing and sanctioning of fraudulent refund and issuance of refund cheques nor was any action proposed against the relevant officers of bank branches concerned and management of the Pakistan Revenue Automation Limited (PRAL). 

Sources said that in the case of M/s S.S Packages & Garments Sales tax registration number 1700590019428, NTNo.3396503-0 Registered person engaged in the manufacturing of other textile, the investigation conducted by I&I-IR karachi revealed that a PR was registered as manufacturers of other textile on 9-2-2010 but input against utilities was not claimed. In addition to this, during the tax period February 2010 to June 2011 the RP claimed input tax adjustment of Rs14.491 million on the basis of invoices of Rs 118.112 million, mostly against local zero rated supplies and more than 50 percent of the declared supplies were fake and paper transactions. 

Most of the purchase by the RP was suspicious having no relevance with the business activity of the unit which was import and supply of yarn, besides this, the RP was found engaged in imports and supply of yarn amounting to Rs651 million and suspicious purchases of Rs 412 million to illegal refund. The RP made supplies of Rs 1.755 billion to blacklisted units and the said RP misused SRO 1125(1)/2011 dated 31-12-2011 and availed benefit of manufacturing status without having such facility and caused loss to national exchequer of Rs 13.021 million. 

Sources further said that DG I&I-IR had also issued the red alerts in 2014 for conducting physical verification to verify the manufacturing facility of the unit and other unlawful activity. The FBR in its reply to FTO stated that the Director I&I-IR Karachi had blocked input refund caes til the completion of preceding as the department had also blacklisted Sales Tax Registration Number(STRN) as the RP found non-existent at the declared address. It has been learnt that RP approached the court for restoration of STRN which was restored however the tax department had conducted the audit and recommended for recovery of inadmissible input tax of Rs 410 million along with the penalty was adjudged against the RP. Moreover, tax officials also said that RP had filed five refunds claim for the tax period February, March, May, June and April 2010 were processed and three claims were deferred. Only one claim for the tax period May 2010 of Rs0.453 million was sanctioned but cheque was not issued. 

The FTO in its findings said that the tax department had failed to initiate action against the person involved in registration of fake RP and retrieval of refund already issued prior to issuance of red alert, is tantamount to maladministration in terms of rules.

They also directed the Chief Commissioner-IR, corporate RTO Karachi to investigate and identify the officials who failed to take timely action to recover tax evaded through misuse of SRO 1125(1)/2011 and take appropriate criminal action against them besides initiate criminal proceedings leading to prosecution of RP and recovery of evaded amount, swindled from public exchequer. 

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