Federal Tax Ombudsman (FTO) has expressed displeasure over the lack of coordination between Regional Directorates of Intelligence and Investigation (l&I), Inland Revenue Karachi and Lahore and concerned Regional Tax Offices (RTOs) of Karachi and Lahore.
In this regard, the FTO issued an order on Tuesday. The order says that FBR should direct the Directorate General of l&I-IR, Islamabad to expeditiously extend full cooperation to CCIR, RTO Lahore in determining civil/criminal liability against fraudsters, involved in claiming fraudulent/inadmissible input tax adjustment.
The FTO has also directed Member-IT, FBR/PRAL to conduct a forensic audit in the matter to assist in meaningful outcome of investigations; investigate the role of Central Registration Office (CRO)/Local Registration Offices (LROs) in allowing change of name and address of registered person, purportedly without knowledge of the complainant.
The FBR should direct concerned formations to expeditiously provide the outcome of investigations on the above lines to CCIR, RTO Lahore to assist adjudication authority to determine the true merits of the case; and (v) report compliance within 45 days.
This complaint was filed against Deputy Commissioner-IR, Zone-I, RTO Lahore, in terms of Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance), for issuance of Show Cause Notice dated 14.05.2022 against the complainant.
There is a huge disconnect between Regional Directorates l&I-lR, Karachi and Lahore, and concerned RTOs of Karachi and Lahore while issuing a show cause notice to the complainant without appreciating the holistic picture of the case. The investigation conducted in the matter is half-cooked and the real culprits, who actually claimed inadmissible/fraudulent input tax adjustment, are yet to be determined.
Keeping in view RTO Lahore’s serious capacity issues/lack of human resources, as expressed by RTO Lahore’s DR during the hearing, to effectively conduct investigation/coordination across the country, it is critical that Directorate General of 1&1-IR, Islamabad extends its due assistance/cooperation to RTO Lahore to investigate this case of big tax fraud to which Director, I&I-IR, Karachi and Lahore are in agreement with.
Further, forensic audit in the matter is of paramount importance, therefore, Member-IT, FBR, and PRAL need to contribute their due role to assist in a meaningful outcome of the investigation. The recurrent systemic misuse of input tax adjustment by fraudsters is due to inefficient Central Registration Office (CRO)/Local Registration Offices (LRO5) which needs serious detailed evaluation for corrective measures as all fake/fraudulent sales tax persons are registered/get registered due to weaker regulatory controls by CRO/LROs which may well include incapacity, negligence, omissions, and commissions.
In the above context, the role of the complainant regarding civil/criminal liability needs to be carefully determined while keeping in view Section 73 of the Sales Tax Act, 1990 to decide the fate of the case, through show-cause notice dated 14.05.2022 on its true merits, the FTO added.
