PRAL & FBR staff found involved: A dormant account used for Rs1.625trn fake supplies?

ISLAMABAD: A gang of cybercriminals illegally used dormant account of a retired armed forces personnel and made fictitious supplies of worth Rs. 1.625 trillion, causing sales tax loss of Rs.292.549 billion and further tax of Rs235.340 billion.

During a press conference held at the FTO office on Wednesday, Almas Jovindah, Advisor Legal & Media Wing said the cybercrime involving huge loss of govt revenue has been conducted by a gang of cybercriminals facilitated by the employees (present and/or past) of PRAL & FBR who have direct or indirect access to the whole computerized system.

This gang operated in networks, initially spotted and extracted the Sales tax registered dormant persons from the FBR website, and used their password for bogus/fake transactions to benefit end consumers/manufacturers.

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In this case, the cyber-criminals with the active support of insiders used the sales tax account of Mrs. Firdous Anwar of Karachi, a 79-year-old living abroad with her children who had been filing “Null” sales tax returns for more than four years without any business transactions. They filed Annexure “C” declaring supplies of re-melting scrap ingots of iron or steel worth Rs. 1.625trillion with the impact of sales tax of Rs.292.549 billion and further tax of Rs.235.340 billion. It was subsequently transferred by the gang to the supply chain, the major portion, ie; Rs. 81.434 billion was supplied to a dormant account of Retired Armed Forces Personnel and later on, the supply chain ended with seven ultimate beneficiaries of taxpayers of Lahore & Faisalabad who were manufacturer of iron &steel.

After conducting the tax fraud, these cyber criminals changed the password and email address so that the original taxpayer cannot access their sales tax accounts.

FTO Advisor Legal & Media Wing said these were paper transactions without physical movement of any goods and without any banking transaction in terms of section 73 of the Act resulting in a huge loss of government revenue. All the beneficiaries knowingly and deliberately purchased fake invoices, without any actual physical movement/transaction of goods and without payment.

The present loose and liberal enforcement regime has emboldened these unscrupulous registered persons to indulge, without the fear of being caught, in the lucrative business of the use of fake/flying invoices.

The edifice of sales tax law is erected on the glorious principle of self-assessment where complete trust is reposed in the taxpayers for submitting true & faithful declarations. To deter misutilization of such trust, the law also has an in-built penal & prosecution mechanism but the “Check” imposed in web portal system in terms of Rule 18(5) of Sales Tax Rules 2006 to prevent tax fraud was disabled/deactivated for this purpose for that particular time.

The credibility of the FBR web portal especially on sales tax, security of the User ID/password, and sanctity of Taxpayers’ data were vandalized with impunity, eg; complainant filed NULL returns without transactions which were replaced with fake supplies in Trillion of Rs.

Secondly, the “Checks” incorporated in the web portal in terms of Rule 18(5) of Sales Tax Rules 2006 were disabled/deactivated to facilitate the transactions.

Thirdly, the particulars of the complainant in the web portal, ie; th mobile number and email address were changed so that the complainant could not take any remedial action

Sultan Ali, Prop of M/s New Metro Footwear Co. expired on 09.02.2017 as per the death certificate issued by Nadra. As a result, he was deregistered but the cybercriminals filed sales tax returns with fake supplies after six years of the death of the taxpayer.

The FTO official added that failure to provide the security and protection of the Complainant’s User ID/password and sanctity of the taxpayers' confidential data from misuse/hacking leading to a tax fraud case on behalf of the complainant causing administrative excesses tantamount to maladministration under section2(3)(i)(a)(b)(c) of FTO Ordinance, FTO official added.

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