Tax evasion of Rs 5.5 billion by various sectors

The Direc-torate General of Intelligence and Investigation Federal Board of Revenue (FBR) has unearthed tax evasion worth Rs 5.5 billion by various sectors of the economy particularly by cable TV operators, illegal tax exemption issued in favour of Independent Power Producers (IPPs), holders of un-declared business bank accounts, including missing record of 350 taxpayers in illegal income tax refund, fraudulent income tax refunds at Faisalabad and individuals engaged in business of crockery, security services, etc.
Sources told Business Recorder here on Monday that the Vigilance Wing of the Directorate General of I&I-FBR is in process of conducting studies of various sectors to unearth evasion of duties and taxes. Recently, this Directorate has carried out in-depth investigation regarding following sectors/persons, which revealed that tax amounting to Rs 5.5 billion has been evaded/avoided.
Firstly, the directorate conducted a study on Cable TV operators in urban areas of Lahore. The tax department has not yet been able to estimate receipts of CTV operators and rely on their declared version. Study revealed huge suppression of receipts by cable TV operators. A method to estimate receipts/income of this class of persons has been proposed in the study.
According to the directorate, the tax implication of 2500 cable TV operators all over the country for the last two years may be upto Rs 2 billion and for 5 years would be approximately Rs 3 billion. Secondly, a case study of the directorate highlighted illegal tax exemption on capacity payments claimed by Independent Power Producers (IPPs). The IPPs are exempt from tax u/s 113 of the Income Tax Ordinance 2001 in respect of sale of electricity only whereas the units are claiming exemption in respect of capacity payments as well. The loss of revenue involved in case of IPPs comes to the tune of Rs 2.1 billion.
Thirdly, the directorate has also detected encashment of fraudulent income tax refunds at Faisalabad. In this case, 2064 bogus & fraudulent income tax refund vouchers encashed through six single customer bank accounts involving Rs 26 million. Fourthly, the directorate has unearthed fraudulent income tax refunds at Karachi by two companies providing security services. The refunds were created by giving credit against bogus tax deduction challans involving Rs 51 million.
Fifthly, in case of a gym, the directorate has obtained the computer files of the business which revealed suppression of receipts to the tune of Rs 10 million each for three years. The revenue loss comes to the tune of Rs 7.50 million. Sixthly, in another cases, for the tax year 2005, a developer had filed income tax return for "NIL' income, whereas, the taxpayer earned receipts of Rs 171 million, reflecting revenue loss.
Seventh, the directorate has also conducted inquiry into the complaint against issuance of illegal income tax refunds at Kamalia, T T Singh, Gojra etc. During inquiry it was revealed that case record of more than 350 taxpayers is missing to whom refunds of millions of rupees were issued.
Eight, the directorate has found issuance of bogus and fraudulent income tax refunds pertaining to RTO, Faisalabad. During investigation, the agency has found that 684 bogus refunds were issued. These 684 refund vouchers have been encashed through five bank accounts only involving Rs 18.53 million.
Nine, in case of a Weaving Factory, Rashidabad, Jhang Road, Faisalabad, the directorate has found that the declared version of income in tax returns does not match with bank credits of undeclared bank account. Tenth, in another case of tax evasion, it has been found that the taxpayers did not file income tax returns. No tax paid during last 5 years business bank accounts unearthed involving revenue loss of Rs 33.00 million.
Eleventh, the Vigilance Wing of the Directorate has detected that a registered person is running crockery business, which does not exist in the NTN Master Index. His one bank account has been detected containing business payments through banking channels involving Rs 11.00 million.
In view of the above, Vigilance Wing of the agency has recommended that the respective Large Taxpayer Unit (LTU) and Regional Tax Office (RTO) may be directed to conduct detailed audit of income tax affairs of the taxpayers to recover/retrieve the lost revenue, along with punitive action as required under the law. The Board may also like to initiate disciplinary proceedings against those involved in the sanctioning of bogus refund once these are established through audit.