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January 25, 2015

Man involved in Sales Tax fraud arrested in Karachi


January 25, 2015

ISLAMABAD: The Directorate General of Inland Revenue, FBR, has unearthed a mega scandal of Sales Tax worth billions of rupees in Karachi. The beneficiaries of this mega scandal are in Sindh, Punjab and other provinces of the country.
The Directorate of Intelligence and Investigation (Inland Revenue) received information regarding a registered person at Karachi who was involved in issuance of fake/flying invoices for the purpose of illegal input tax adjustment. During preliminary investigation it was revealed that M/s. Kotila Corporation was involved in generation and issuance of fake sales tax invoices to several registered persons which were being adjusted as input tax against the output tax and getting benefit of millions of rupees and causing loss to the government exchequer.
Legal notice (under section 37 of the Sales Tax Act) sent to the firm located at 106, Windsong Palace KCHS Plot No. A-16-17 Block 7 Karachi, was returned back undelivered with the remarks that consignee/office shifted. Similar notice dated 14.6.2012 was sent on declared residential address of the firm’s proprietor, situated at 66 B-1, Khayaban-e-Behria Phase-VII DHA, Karachi and in response to said notice the counsel of the firm appeared in this office and stated that the proprietor of the accused firm (late) Muhammad Noor Muhammad had expired in February 2007 and the department was accordingly intimated vide letter dated 08.6.2008 copy of which along with death certificate submitted for record.
It was also stated that request for cancellation of sales tax registration of Kotila Corporation was also submitted on 23.02.2010 in the office of Commissioner IR RTO Karachi. It was further stated that no business activity was done after the demise of the deceased as such no documents for the period July 2008 onwards are available.
It was observed that sales tax returns in the name of M/s. Kotila Corporation for the period from July 2011 and onwards was continuously been filed by

some unknown person by using their e-filing user ID and password from undisclosed premises and generating fake input tax credit through fake invoices.
Investigations were, therefore, conducted in the case, which revealed that sales tax invoices were issued to M/s Packages Ltd. during the period July 2011 to June 2012. M/s. Packages made payments to M/s Kotila Corporation through banking channel (NIB Bank Ltd, Packages Ltd Branch Lahore). Further verification from buyer’s bank revealed that thirty four (34) cheques worth Rs79.167 million were issued to M/s Kotila Corporation which were cleared/credited in the bank account No.10533473 maintained fraudulently in the name of M/s. Kotila Corporation at NIB Bank Nagan Chorangi Branch Karachi.
Investigation further revealed that a person namely Arshad Ali Khan s/o Sher Ali Khan holding CNIC 42101-7234548-7, opened a fake bank account No.10533473 at NIB Bank Ltd Nagan Chorangi by claiming himself as the proprietor of M/s Kotila Corporation and maintaining / operating such bank account from his office at House No D-91 Block B, North Nazimabad, Karachi. On scrutiny of bank details it was confirmed that all above mentioned 34 cheques were credited in the aforesaid bank account operated by Arshad Ali Khan (accused No.1) who fraudulently declared himself as Proprietor and Tousif Ahmed bearing CNIC No. 42401-9358221-1 (accused No.2) was declared as mandated in bank account No.10533473 at NIB Bank Ltd Nagan Chorangi fraudulently maintained by Arshad Ali Khan in the name of M/s. Kotila Corporation. It is further revealed that the above named accused is also running dummy business in the name of ZM Traders, Al Hamra Traders and Arshad & Company against his own CNIC.
In view of the above it became clear that the accused person Arshad Ali Khan CNIC 42101-7234548-7, was the actual culprit who was fraudulently operating M/s Kotila Corporation as Proprietor and was involved in using the password for e filing of sales tax returns along with beneficiaries/buyers who had individually and jointly committed the tax fraud by way of issuing fake sales tax invoices and adjusting illegal/inadmissible input tax on the basis of fake sales tax invoices. By committing this tax fraud they had deprived the national exchequer of its legitimate revenue to the tune of Rs40 million (approximately as the exact figures will be determined through detailed investigations which are underway) and have violated the provisions of Sales Tax Act, 1990.
Arshad Ali Khan, accused person was accordingly traced out and a team was constituted which was headed by Deputy Director of Karachi Directorate to arrest the accused person.
Arshad Ali Khan was arrested on 19.01.2015 and was presented next date before the court of the learned Special Judge of Customs and Taxation Court, Karachi who granted 14 days’ remand of the accused person for further investigation.

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