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FBR unearths huge tax fraud involving spinning mills

By Mehtab Haider
December 17, 2019

ISLAMABAD: An FIR of tax fraud has been lodged with involvement of 25 spinning mills of Faisalabad that were allegedly becoming part of racket of flying invoices causing losses to the national worth billions of rupees.

The details available with The News revealed on Monday that the FBR’s Directorate Intelligence and Investigation, Inland Revenue (IR) Faisalabad got reliable information about substantial alleged Sales Tax evasion by Naeem by way of making taxable supplies without registering himself in sales tax and charging/ paying sales tax.

On the basis of information obtained from different banks, under section 38A of the Sales Tax Act 1990 revealed that the person has huge banking transactions of millions of rupees. Further, summon under section 37 of the Sales Tax 1990 was issued to Naeem vide this office letter through special messenger returned un-delivered with a report that the relevant person is not available on given address.

Subsequent investigations indicated that Naeem had allegedly frequently opened and operated different bank accounts by registering multiple businesses under an NTN number which he originally got in name of three firms.

The further investigations revealed that the accused got NTN on 22-09-2016 in the name of three companies and added businesses therein from time to time. However, these were detected from the NTN data after 28-02-2018 giving rise to suspicion about this involvement in fraudulent activities. It is also pertinent to mention here not a single businesses attributed to NTN exists at the address given. The further examination of bank accounts and other documents revealed that Naeem was allegedly part of a gang of fraudsters involved spinning mills and finished fabric traders using certain bank accounts involving Rs1,605.169 million.

The initial inquiry states that there were certain bank accounts maintained by Naeem in alleged collusion with certain units. Apparently, Naeem made payments to certain number of spinning mills against purchases to the tune of Rs1,239.60 million from them and supplied the same in the open market during tax period from 9/2016 to 03/2019 without getting sales tax registration and charging/ paying sales tax thereon. This means that the stated spinning mills actually made undeclared sales to Naeem and payments were made through the bank accounts.

Through this mechanism, around 25 spinning mills are allegedly involved in this business of flying/ fake invoices. It is expected that massive racket of alleged flying invoices will be unearthed in weeks and months ahead.