While deciding on an Own Motion investigation on April 28, 2022, the Federal Tax Ombudsman (FTO) authorised the Federal Bureau of Revenue (FBR) to form a high-powered inquiry committee into a flagrant and eye-opening income tax refund fraud of Rs. 123.364 million.
According to the information, when examining the issuing of a fake refund of Rs. 123.364 million for Tax Years 2007 to 2009 and 2011 in an earlier own motion case (0200/OM/2019), certain more anomalies were discovered, necessitating the immediate inquiry.
Furthermore, this motion investigation was initiated under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 to determine whether the irregularities committed earlier in the cases of M/s China National Electric Wire & Cable Import & Export Corporation and its associates (M/s Sinotec Co., the main shareholder of AOP) continued in subsequent years.
M/s China National Electric Wire & Cable Import & Export Corporation did not submit returns for Tax Years 2013 and onwards, according to preceding proceedings. On the other hand, on November 1, 2011, a sibling AOP, M/s Sinotec Co., was registered on the FBR site, with the primary shareholder (common member in both AOPs) owning a 99 percent stake.
In the cases of these enterprises, the current investigations have shown major discrepancies/maladministration on the side of FBR. Action u/s 182,184 & 187 for Tax Years 2007 to 2009 & 2011 & 2012 could not be taken earlier, hence it was initiated now, resulting in a demand of Rs. 569.989 million, which has yet to be collected. Despite the fact that the primary shareholder and partner of M/s China National Electric Wire & Cable Import & Export Corporation & M/s Sinotec Co was present in Pakistan till 2019, he was not issued with a demand notice.
Similarly, arrear registrations for demand raised u/s 122(5A) of the Ordinance in the years 2007 to 2009, 2011 and 2012 could not be found. Furthermore, refund voucher counterfoils are untraceable. M/s Sino-Tec Co submitted returns for several years stating Non-Resident status, as opposed to Resident status as per the registration profile in ITMS.