April 01, 2008	Tuesday	Rabi-ul-Awwal 23, 1429

KARACHI, March 31: The Regional Tax Office, Karachi, has unearthed a big scam in income tax refunds resulting in millions of rupees revenue loss to the national exchequer. According to the inspection report prepared by the RTO around 4,486 bogus refunds were issued causing a revenue loss to the tune of Rs74.429 million. These cases were mostly related to mismatched identity of National Tax Numbers, names of the taxpayers and addresses. The tax office has further disclosed that 153 taxpayers, who never existed on master index, were allowed refunds to the tune of Rs4.014 million.

The report further disclosed that about 10,050 refund cases involving an amount of Rs244.925 million were cleared by the State Bank of Pakistan and credited to the claimants’ account during the current year. But the department believes that around 8,417 of these refund cases were processed by violating normal office procedures and that due diligence was not exercised.

The Federal Board of Revenue (FBR), in order to facilitate the taxpayers, issued directives in 2003 to do away with the process of refund advice or order and the subsequent submission of schedule to the State Bank in case of refunds wherein amounts were less than Rs10,000. The RTO in its report pointed out that this facility had been grossly misused with malafide intention, since no further deterrence existed.

The report in its finding further said that non-incorporation of security checks such as three dimensional or embossed seal on NTN certificate, absence of serial number and signatures of the issuing authority lead to parallel NTN issuing system and resulted in obtaining “fake certificates” by the alleged claimants through greasing of palms of the data processing centre and the NTN cell staff.

The inspection conducted by the RTO in respect of refund cheques of each refund voucher book (less than Rs10,000) revealed that out of 96 refund claims processed, 89 were allegedly found to be bogus.

Among many discrepancies noted by the RTO it was also observed that refund applications were being received directly at the Enforcement and Collection units, instead of Tax facilitation division.

Similarly, refund process was being initiated and completed on the basis of photo copies, instead of original returns. The record was neither being called from information processing department to verify taxpayers’ profile and other particulars nor was the status of claimant and his existence verified from Master Index.

The most startling disclosure of the report is that only photo copies of the defaced multiple challans submitted as evidence of tax deduction or collection were being accepted by the taxation officers, and no sufficient proof was required and third party verification was carried out despite the fact that original deduction certificates were not being brought on record.

Moreover, photo copy of the data processing cell (DPC) verification sheets, signed and stamped by a single person were being accepted without any cross verification.

The report has categorically alleged that the existence of a single (non entity) authorised representative (M/s Rana Associates, advocates & Income Tax Consultants, 207, Aziz Chamber, Liaquatabad), could not be verified, since there exists no such building on the given address. He was involved in the refund process and was also receiving the refund cheques.

The RTO report disclosed that out of 96 refunds, 40 processed by Ishrat Ali, (taxation officer) pertained to one single locality of Saddar, Karachi, (Ghafoor Chamber or Hayat Chamber), while addresses given on many of the returns did not bear the shop or office number.

Citing another fraud refund case the RTO said another 28 refunds processed by Safdar Hussain (Taxation Officer) contained incomplete addresses of North Nazimabad or North Karachi, where only blocks or sectors of the area were mentioned.