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FBR unearths fake firm committing Rs134m tax fraud

By Mehtab Haider
December 25, 2019

ISLAMABAD: After withdrawal of zero rating regime for five export oriented sector, the FBR has caught a firm from Faisalabad involved in an alleged business of flying/fake invoices and committing tax fraud of Rs134.4 million.

The FBR’s Directorate of Intelligence & Investigation (Inland Revenue), Faisalabad has unearthed a big scam of issuing/adjusting fake and flying invoices involving tax fraud of millions of rupees.

Accordingly, tax fraud proceedings against the sales tax fraudsters have been initiated and the First Information Report (FIR) has been lodged against M/s Arrow International, its buyers, suppliers and other beneficiaries under section 37A of the Sales Tax Act, 1990.

According to the FIR, the directorate has reliable information about substantial tax evasion of firm’s Office No.5, 2nd floor, Marhaba Kareem Block A.I.T, Lahore with NTN-7392206-2 by way of issuing fake/flying invoices and facilitating others to declare supplies to it and to avoid the actual payment of tax including further tax. The physical verification of the declared premises revealed that the unit is non-existent at the given address.

The brief facts of the case revealed that aforementioned an individual firm was registered into Sales Tax on 21-02-2017 with principal activity of “Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles/Wholesale of Household/Goods/Wholesale of textiles, clothing and footwear.

Further income tax returns filed by the registered person for tax year 2016, 2017 & 2018 revealed that the registered person filed “Nil” returns for the year 2016 & 2017 and declared Rs385,400/income year 2018 with a business capital of Rs920243 only. Whereas the sale tax profile of the registered person revealed huge supplies of Rs1,401, 562,923 out of which Rs493,583, 967 as exports and Nil tax payment during the period of 02-2017 to 10-2017. The registered person also declared Rs1,321, 868, 074 purchases from 65 different textile units to facilitate them to avoid the payment of due tax.

The investigation revealed the firm is a non-existent and a dummy unit, which is registered for the purpose of issuance of fake/flying invoices and to facilitate buyers and suppliers to avoid payment of due sales tax, including further tax.

Given the facts tax fraud case under section 37A read with section 2(37) of the Sales Tax Act 1990 has been registered against the firm M/s Arrow International, its buyers and suppliers and other beneficiaries involved in defrauding national exchequer from tax revenue of Rs134 million. Further investigations are underway, which are expected to lead to busting a racket involved in issuing/adjusting fake/flying invoices.