FTO terms forced tax registration, fraud allegations maladministration

LAHORE: Federal Tax Ombudsman (FTO) Dr Asif Mahmood Jah has held that illegal compulsory sales tax registration of a taxpayer without his knowledge is tantamount to maladministration.

He has further maintained that filing of sales tax returns on behalf of taxpayer by the cyber criminals and accusing the taxpayer of alleged tax fraud leading to suspension and blacklisting of sales tax registration and finally issuing show-cause notice to impose sales tax liability were also equal to administrative excesses.

As per details, a taxpayer had approached the FTO complaining against his illegal compulsory registration in sales tax by a Regional Tax Office when he was deriving his income on account of rental property and share income from an Association of Persons. Electronically filed income tax returns for the relevant tax year by him had further confirmed that he was not liable for sales tax registration. Further from the detailed investigation, it was observed that the ultimate beneficiaries of these fake transactions as confirmed by the Directorate of Intelligence & Investigation were registered persons from RTOs Gujranwala, Lahore, Multan, Sialkot, and RTO-I Karachi. The IP address from where the return was filed introducing fake supplies had been traced to an ex-employee of PRAL Islamabad posted as a Facilitation Officer at PRAL Help Line Centre, Islamabad. Therefore, the offense framed against the taxpayer was not committed by him and he was innocent; hence the blacklisting listing order against him was required to be revoked.

The FTO pointed out that the whole tax fraud was well planned before its execution in three phases. In the first phase, several units all over the country were registered in sales tax including the complainant. In the second phase, the dormant sales tax registered units were identified. There has been no activity till a certain period after sales tax registration and the cybercriminal filed nine nil sales tax returns after a lapse of eight months. In the third phase, the cybercriminals started criminal activities and introduced output tax against fake sales and claimed an input tax against a fake purchase.

The FTO ordered the concerned FTO to withdraw the show cause notice to impose tax liability along with default surcharge and penalty.

Copyright Business Recorder, 2025