Special inspection in cases of refunds of above Rs 0.5 million would now be undertaken by the Directorate of Internal Audit (Inland Revenue), Southern Region, Karachi. The Directorate-General of Internal Audit (Inland Revenue), has accorded fresh approval to the Directorate to conduct special inspection in cases of refunds of above Rs 0.5 million by the Enforcement & Collection Divisions, Regional Tax Office.
Karachi, Hyderabad, Sukkur and Quetta, and Large Taxpayers Unit, Karachi, under the heads of both income tax and sales tax, for the year ending June 30, 2010, to retrieve the loss caused to the revenue.
The Directorate had requested for approval to conduct special inspection after receiving complaints regarding fake refunds addressed to the Chairman, Federal Board of Revenue, Islamabad. The reason cited by the Directorate in its letter seeking fresh nod was that the earlier approval accorded by the Directorate-General of Internal Audit (Inland Revenue) was not fully understood and implemented by the Additional Directors.
All Additional Directors of Internal Audit were directed to carry out special inspection in the cases pertaining to the Large Tax Payers Unit, Karachi and the Regional Tax Office, Karachi but no report was ever submitted by them.
According to the refunds, tabulated by the Directorate of Internal Audit (Inland Revenue), Southern Region, Karachi, sales tax refunds to the tune of Rs 17,128.84 million in 5,273 cases were issued during the period ending June 30, 2010 by the Large Taxpayers Unit, Karachi and Regional tax offices, Karachi, Hyderabad, Sukkur, and Quetta without complying with the provisions of Sales Tax Act, 1990 and Sales Tax Rules, 2006.
The Directorate had observed: "Ostensibly, this all is being done under the premise of integration of three, ie Income Tax, Sales Tax and Federal Excise with the change of nomenclature, ie Inland Revenue whereas no change has been brought in the rules mentioned supra which are still operative and integration of three taxes does supersedes or violated law/rules."