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September 24, 2020

FBR unearths Rs1.8bln tax evasion by shell companies

Business

September 24, 2020

KARACHI: The Federal Board of Revenue (FBR) has unearthed tax evasion worth Rs1.8 billion by shell companies owned by a company listed on the stock exchange, sources said on Wednesday.

The sources said the FBR found a network of shell companies involved in income tax evasion and owned by a Pakistan Stock Exchange-listed company.

“The listed company has been found engaged in the business of liquefied petroleum gas and involved in smuggling of the LPG from Taftan border,” a source said, requesting the company name to remain undisclosed.

The sources said the Directorate of Intelligence and Investigation of Inland Revenue discovered properties worth billions of rupees acquired from illegal funds.

An official at the Directorate said the case is extremely organised. There was a complex structure of various bank accounts and banking transactions conducted by the company officials for laundering of illegal money.

“The accused persons have also established various shell companies in which illegal money has been injected as equity against issuance of shares,” said the official. “The shell companies also declared salaries to directors and various expenses, and declared loss even before commencement of operations.”

In the tax year 2005, the company was acquired by another private limited company by financing from National Bank of Pakistan on the basis of defective land Khata (account).

The official said the fraudulent merger violated the provisions of Section 97A of the Income Tax Ordinance 2001, resulting in evasion of capital gains of around Rs1 billion.

The company also concealed heavy investments of around Rs240 million in a private limited company and also concealed acquisition of the company in the name of chief executive officer. Moreover, the personal bank accounts of the CEO and other directors indicated huge case transactions in their personal bank accounts from undisclosed sources, and hefty credits from another listed company, which were apparently from the proceeds of smuggled LPG sold in the market.

The official said initial findings of the investigation in two years revealed that the company concealed sales of Rs726 million and Rs828 million. It was also identified that the company had unexplained and out of book movement of funds of Rs389 million and Rs396 million in the tax year 2018 and tax year 2019, respectively, which might be from sale of smuggled LPG in the market.

The official said the case was registered against the company before the court and the court allowed freezing of nine bank accounts of the company for 90 days.

The official further said the court also issued non-bailable warrants of CEO, chief financial officer and other two directors of the company. The role of chartered account firm is also under investigation in this case, the official added.