The Directorate General Intelligence & Investigation Inland Revenue (IR) Faisalabad has issued a ''red alert'' against a textile mill, which caused huge loss of revenue on account of fake declarations by making zero rated supplies to suspended/black-listed units, claiming input tax. Sources told Business Recorder here on Saturday that the Director General Intelligence & Investigation (IR) FBR Khawaja Tanveer Ahmed has submitted a report on ''red alert'' to the FBR Chairman Nisar Muhammad Khan, appreciating the performance of the DG I&I IR Faisalabad.
In the past, the concept of red alert was introduced when the said directorate was established. The DG I&I IR had identified cases of ''red alerts'' on the basis of high-risk areas identified on the basis of monthly sales tax analysis and federal excise returns being filed by the registered persons. The agency has picked high-risk areas which formed basis for issuing ''Red Alerts'' in case of filing of sales tax claims. The cases falling within the category of ''red alerts'' would be subjected to computerised analysis using the refund software of the FBR to check the authenticity of the data electronically maintained by the department. The purpose of the ''Red Alerts'' is to check the claims internally by the department without stopping the routine procedure for processing of refund claims.
The concept of ''red alerts'' would make the tax officials vigilant to check cases where refund claims are under process but some information has been received which makes such claims doubtful. ''Red alerts'' constitute an advisory instrument and shall be confined only to statement of facts and brief reasons which necessitated the generation of the said alerts. The ''red alerts'' shall be generated on the basis of information received vis-à-vis case facts and the additional information gathered by the vigilance cells of regional tax offices. These self-contained Alerts shall be transmitted directly to the concerned Chief Commissioners/Commissioners and Centralised Sales Tax Refund Office (CSTRO) and Director HQ I&I-IR.
According to the DG, the I & I-IR in the subject case had issued a red alert. The investigation detected loss of revenue on account of using fake declarations in violation of section 3 of the Sales Tax Act, 1990 by making zero rated supplies valuing Rs 198,569,327/- to suspended/black-listed units, claiming input tax on the goods of consumer nature in violation of section 8(1)(a) of the Sales Tax Act, 1990. In light of the I & l-IR''s red alert issued vide No 1946 dated 20.01 .2016 RTO, Faisalabad has passed order in original No152/2016 dated 25.07.2016 creating demand of Rs 57,934,131. Out of this demand the taxpayer has made payment of Rs 33,000,000 on account of Sales Tax and Rs 7,160,000/- on account of Income Tax. As such loss of revenue amounting to Rs 40,160,000/- stands recovered in this case.
The regional directorate scrutinized data of filers of multiple sales tax returns in a single day and a report was communicated to your good sell vide (No 1679 dated 01.01.2016. During scrutiny it transpired that Textile Mills, Khurrianwala Juhmra Road, Faisalabad filed 14 sales tax returns in a single day ie 06.10.2015 which is quite unusual.
During the exercise, it transpired that the taxpayer has purchased goods from the suspended units having value of Rs 5,145,600/-. On the strength of fake declarations with the collusion of its buyers, Textile Mills, Faisalabad has violated the provision of'' section 3 read with SRO 283(l)2011 dated 01.04.2011, SRO 1012(1)2011 dated 04.11.2011, SRO 1058(1)2011 dated 23.11.2011 and SRO 1125(1)2012 dated 31.12.2012.
Further, scrutiny of soft data revealed that the alleged unit has made zero rated supplies from July-2010 to December-2012 having value of Rs 198,569,327/- to Suspended/blacklisted units to avoid/evade payment of Sales tax chargeable thereon. The said Textile Mills, Faisalabad has also made taxable supplies from February-2013 to June-20l5 to suspended/blacklisted units having value of Rs 122,528,282/- and output tax of Rs 2,450,578/-. It is most likely that no physical transfer of goods took place to these units and the registered person fabricated paper transactions to cause loss to national exchequer.
During analysis of purchase summary, it was observed that the registered person has claimed input tax against some other goods of consumer nature which are not admissible under section 8(1)a of the Sales Tax Act, 1990 read with SRO 450(1)2013 dated 27/05/2013.
Furthermore, Textile Mills Faisalabad has declared huge supplies in the income tax returns for the tax year 2011 and 2012 as compared to sales declared in the sales tax returns of corresponding tax periods.
Accordingly, the Deputy Director -III, I & 1-IR. Faisalabad initiated Red Alert which was issued vide C.No 1946 dated 20.01.2016. The Commissioner-IR, Zone-III, Regional lax Office, Faisalabad took up the case on the basis of Red Alert and consequently ONO No 152/2016 dated 25.07.2016 was passed creating demand of Rs 57,934,131/-.Out of this demand, an amount of Rs 33,000,000/- has been recovered by Zone-III, RTO, Faisalabad and recovery proceeding of Rs 24,934,131/- have been initiated by Enforcement & Collection Unit-02. Zone-III, RTO, Faisalabad. Further, income tax amounting Rs 7.160 million has also been deposited.
The report of RTO Faisalabad revealed that subsequent to receipt of red alert from Intelligence & investigation (IR), Faisalabad''s letter No 1964, investigative audit under Section 38 of the Sales Tax Act, 1990 for the tax period from 01-2011 to 12-2015 of the registered person has been conducted. Resultantly, a show cause notice was issued and after initiation of proceedings, the concerned Unit has issued ONO bearing number 152/2016 dated 25.07.2016 through which an amount of Rs 57,934,131/- has been established against the registered person and out of which Rs 33,000,000/- has been recovered. The balance demand of Rs 24,934,131/- has been transferred to the Enforcement & Collection Unit-02, Zone-ITT, RTO, Faisalabad for initiation of recovery proceedings under the relevant provisions of law. In addition to that, Textile Unit and members of the AOP have also paid Rs 7.160 million against revised income tax returns.
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