Directorate General of Intelligence and Investigation Inland Revenue (IR) has picked a mega tax scam of Faisalabad as a test case to determine the role of tax officers, gangs of fraudsters, banks staff and others for taking appropriate countermeasures in controlling fraudulent income tax refunds payment and similar nature of organised financial crimes in future.

Sources told Business Recorder here on Tuesday that the findings of the investigation would be circulated to the field formations to inform regional officials to place checks to avoid such kind of scams in future.

The seriousness of the case is evident from the fact the directorate of intelligence has strongly recommended to take up the matter with the Economic Crime Wing of the Federal Investigation Agency (FIA) and State Bank of Pakistan for completion of investigation in the mega fraud.

The directorate of intelligence IR has thoroughly securitised the tax records and other data available in Faisalabad, which revealed dubious ways' have been adopted by refund claimants to open bank accounts by presenting themselves as business individuals before the bank authorities.

A fake supply chain has been weaved by the refund beneficiaries by opening banks accounts in the name of fake business units and original refund books and voucher books were used to claim fraudulent refunds.

The beneficiaries of illegal income tax claims have shown themselves manufacturers of cloth, businesses individuals of yarn market, grey cloth, traders of yarn and other business of the supply chain to evade the authorities.

Fake National Tax Numbers (NTNs) and inactive tax registration numbers have been used by the gang to obtain illegal income tax refunds.

A large number of genuine refund voucher books, which were got printed by Income tax Authorities at Faisalabad from Printing Corporation of Pakistan Press, Karachi have fraudulently been misused for issuance of bogus refunds with the active connivance of tax officials.

The intelligence arm of the FBR has also decided to approach the State Bank of Pakistan (SBP) to inform the authorities about the blatant tax fraud committed in convenience with the concerned bank officials and conduct special inspection of bank branches wherein various single bank accounts have been used for encashment of hundreds of fraudulent income tax refund vouchers/cheques.

The SBP should also initiate action against those involved in taking punitive action against them under the provisions of Banking Companies Ordinance.

Sources said that the agency has unearthed a mega tax scam in Faisalabad involving issuance of fraudulent income tax refunds by an organised gang of tax officials of Faisalabad and a bank, causing huge loss to the national exchequer.

The directorate is probing this tax scam where unauthorised use of 100 refund vouchers, refund books and other official documents has been misused for committing this tax fraud.

The purpose of the investigation is plug in the loopholes in the income tax refund payment system for placing preventive measures to avert such fraudulent activities in future.

The directorate of IR is analysing the scam from all aspects to check such kinds of fraudulent payments of income tax refunds in future.

The directorate of intelligence IR has picked this scam as an example to thoroughly investigate the matter and propose measures to check such kind of fraudulent activities in future.

The cases mainly related to the massive loss of revenue (Rs 74,630,504) fraudulent income tax refunds at the said city.

On the basis of authentic facts, the intelligence arm of the FBR would be able to inform the field formations about the techniques used by the gangs for claiming illegal income tax refunds.

This would be instrumental in controlling such frauds in Large Taxpayer Units and Regional Tax Offices across the country.

The investigation conducted by the DG I&I IR revealed that the matter pertains to encashment of fraudulent income tax refunds in July 2007 from single bank account maintained at a bank in Faisalabad.

The Directorate General IR has been discreetly investigating this matter to bring forth authentic facts for the field formation.

The information given as under may kindly be examined and necessary action under the law may be taken to unearth the fraud of millions of rupees.

The details of investigation further revealed that the dubious activity was noticed regarding encashment of all the 100 refund vouchers of refund book No 16582, at Faisalabad.

Director General RTO, Faisalabad after initial examination, referred the matter to FBR for information/necessary action.

While intimating encashment of bogus refund vouchers by an employee of a bank at Faisalabad, no adverse inference was drawn against any of Tax Officer/official involved in this bogus refunds issuance.

Sources further said that the Directorate General of Internal Audit (Direct Taxes), Islamabad after conducting inquiry through Additional Director (Internal Audit), Faisalabad recommended initiation of criminal proceedings against the bank employee by FIA or NAB.

Later, the DG RTO Faisalabad referred the matter to NAB authorities.

The outcome of NAB proceedings is unknown.

However, Ahsan Raza, the then DCIT, Faisalabad who was nominated as departmental representative in this case had informed the RTO, Faisalabad that NAB authorities at Lahore had pointed out that SBP, Faisalabad made a recovery of almost Rs 900,000/- Nadeem, beneficiary in this case for which department may contact SBP.

FIA has also investigated this matter; however, outcome of the same is unknown.

In the light of above background the subject matter has been probed into at length.

Hectic efforts have been made to procure relevant record from concerned authorities including Regional Tax Office, Faisalabad (Partial record made available); Federal Treasury Office, Faisalabad (partial record made available); PRAL, Faisalabad & Islamabad (Complete partial record made available); Printing Corporation of Pakistan Press (Complete partial record made available) and two banks of Faisalabad (partial record made available).

The record made available by the above referred authorities has thoroughly been examined and following findings are made in this regards:

In addition to bank account maintained by Nadeem at the banks of Faisalabad, three additional bank accounts wherein 1274 refund vouchers of bogus and fraudulent refunds amounting to Rs 38,465,3901 has been encashed, have been unearthed.

This is not the end of the story as in addition to the above some more bogus/fraudulent refunds have also been unearthed.

The directorate of intelligence IR has also detected that numerous refund vouchers of freaky amounts issued in various names with NTNs not matching it with the NTN master Index in itself speak of bogus refund issues.

Directorate General of Intelligence and Investigation Inland Revenue (IR) has recommended the Directorate General of RTO Faisalabad to obtain details of 2544 bogus income tax refund vouchers deposited in bank accounts.

The RTO would carry out detailed scrutiny of record pertaining to said 2544 bogus refunds (including missing information) to find out all the tax officers/officials involved in this fraud.

The directorate has further directed the RTO to scrutinise posting profile of officers who remained posted at Faisalabad during 2006-2007, to identify culprits involved in misuse of refund books of Lahore, Gujranwala, and Sargodha at Faisalabad.

It has been further recommended that the SBP may be apprised of this blatant tax fraud committed in convenience with the concerned bank authorities for taking appropriate actions.

Copyright Business Recorder, 2011

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