Directorate of Intelligence & Investigation-Inland Revenue (IR), Islamabad has unearthed a case of developer and builder involved in massive tax evasion and concealment of income, causing huge revenue loss in property transactions.
According to sources, on the basis of credible information of tax evasion, Directorate of Intelligence & Investigation-IR, Islamabad initiated investigations in the subject case. The taxpayer purchases, develops and sells land to the general public. Key facts are that he is making business transactions in personal as well as business bank accounts, no audited accounts are maintained and no evidence of certification of business affairs from the registrar of cooperative societies furnished. Analysis of his tax declarations revealed huge amounts of business expense on account of "cost of sales/services" and "profit & loss expenses" every year. Quantum of business spending and revenues warrants taxpayer's status as withholding agent as well as withholder but analysis has revealed core weakness of the case on that account.
According to his e-payments against deductions as withholding agent during tax year 2012 to 2016, taxable amounts were Rs 274.92 million. However, his total cost of sales during the same period was declared at Rs 4852.33 million. Moreover, the taxpayer paid Rs 5.8 million u/s 236K (purchase of asset) @ 2% of the ITO, 2001 in tax year 2015 which works back to Rs 290.03 million for value of the asset but no such property has been declared in his wealth statement correspondingly. Hence, this amount warrants addition in his income under section 111 of ITO, 2001. The investigators of I&I-IR further found that the taxpayer has concealed closing balances in his tax declarations except closing balance of Rs 21.35 million in tax year 2013. Seven bank accounts of the taxpayer were traced out and their closing balances as on 30th June of tax years 2012 to 2016 are considered income from unexplained sources. The concealed balances are Rs 25.2 million for tax year 2012, Rs 20.24 million for tax year 2013, Rs 345.26 million for tax year 2014, Rs 169.31 million for tax year 2015 and Rs 499.95 million for tax year 2016. Legal action for addition the same is also warranted.
Further perusal of taxpayer's bank accounts statements reveals that taxpayer has excessively under-declared his business quantum because amounts of credits/deposits (bulk in cash) in his accounts far exceed his declared quantum of sales and other sources. The unexplained credits are Rs 301.56 million for tax year 2012, Rs 503.76 million for tax year 2013 and Rs 762.25 million for tax year 2016. The said unexplained credit also warrants legal action to include the same in his total income. The taxpayer, also, declared cash gifts of Rs 94.9 million in three tax years but is unable to produce any evidence against them. Accordingly, investigation report has been sent to Chief Commissioner-IR, RTO Rawalpindi to initiate legal action, they added.