The Directorate-General of Intelligence and Investigation has busted an organised gang comprising Karachi-based commercial importers and tax officials in Karachi involved in obtaining bogus income tax refunds of over Rs 90 million on forged documents.
An official of the DG Intelligence told Business Recorder on Sunday that the agency had unearthed an organised tax fraud in Karachi, where the racket had adopted a new modus operandi to hoodwink the authorities.
The seriousness of the tax fraud is evident from the fact that the DG Intelligence has asked the tax authorities to immediately conduct post-refund audit of commercial importers to unearth cases of similar nature in all major cities across the country.
The gang used a unique technique to misuse an important provision of law ie section 148 of the Income Tax Ordinance 2001. The adjustment facility available to the manufacturers-cum-importers under this provision was deliberately misused with the help of relevant tax officials. The cases related to the assessment years 2000-01; 2001-02; 2002-03 and 2003 and 2004. However, cases would be framed against the involved persons on confirmation of fraudulent activities through data verification by the agency.
The involved tax officials also changed the income tax database to facilitate the racket in obtaining fraudulent refunds through false verifications.
The agency has decided to provide necessary documents and evidence for analysis by the relevant commissioners of income tax to expand the scope of investigation.
The DG Intelligence would also take up the issue with the Director-General, RTO, Karachi for recovery of the lost revenue amounting to Rs 90.85 million. Sharing details of the case, sources said that the income tax deducted under section 148 of Income Tax Ordinance 2001 at import stage is non-adjustable/non-refundable in the cases of commercial importers. On the other hand, tax deducted is adjustable/refundable in case of manufacturers-cum-importers.
The gang operated under the cover manufacturers-cum-importers to avail the refund facility by using fraudulent methods. The agency verified information of these commercial importers from various departments like sales tax record and Export Promotion Bureau (EPB), etc, sources said.
The tax fraud case related to Karachi where a group of commercial importers with connivance of tax officials, caused loss to the national kitty through an engineered tax fraud by filing inadmissible refund claims, false particulars and by using improper National Tax Numbers (NTNs).
The involved tax officials, knowingly and wilfully, assisted the said fraudsters by making false verifications and by tampering tax record.
The agency was surprised to see that four NTNs were issued to the gang members in a strange pattern, having almost similar serial numbers.
As a result, the concerned tax officials sanctioned an amount of Rs 90.85 million and issued as inadmissible/bogus income tax refunds in four different cases.
In four different cases, bogus refunds were claimed to the tune of Rs35.41 million; Rs 29.37 million; Rs 21.89 million and Rs 4.18 million during the period under review.
The official said that the four tax fraud cases call for immediate initiation of prosecution proceedings under part XI of Income Tax Ordinance against the fraudsters and conniving tax officials. The role and details of offences committed by all concerned and action required thereon is annexed along with respective fact sheets.
DG Intelligence has recommended that prosecution proceedings be initiated against the concerned taxpayers and tax officers as provided under Income Tax Ordinance 2001.
Sources said that the agency would also circulate the fact sheets in all the four case to all field offices of DG, Internal Audit (Direct Taxes) with the instructions that random post-refund audits be conducted in their respective jurisdictions. To ensure transparent and professional handling of refund case, Direct Taxes Wing of FBR may issue detailed instructions for fixing specific responsibility of each of the involved Taxation Officer/Refund Officer, Additional Commissioner and Commissioner.
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