2020 PLP 435 (PTD)

(ii) The recovery proceedings be initiated for recovery of refund aggregating amounting to Rs. 5.458 million already issued in the light of findings above.

3. For failure of the Deptt to sleep over such an important anti tax evasion exercise carried out by the I&I-IR led to serious instances of maladministration on account of certain acts of omission and commission, reflecting improper motives, jeopardizing good governance and transparency in tax administration.

4. Comments of the Secretary, Revenue Division, Islamabad were sought in terms of Section 10(4) of the FTO Ordinance read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013. In response thereto, the Chief Commissioner-IR (CCIR), RTO-III, Karachi submitted parawise comments vide letter dated 19.11.2019. It was contented that case of the RP was transferred from RTO Karachi (defunct) to RTO-III vide FBR's Jurisdiction order dated 21.07.2016. The Commissioner-IR-Zone-II defunct RTO Karachi had already blacklisted the RP vide order dated 30.09.2014. However, while transferring the RP's case record, the defunct RTO Karachi did not send copy of the Red Alert letter. It was further contended that after the Red Alert was issued by Directorate of l&I-IR, Karachi vide letter dated 16.06.2012, refund of Rs.0.904 million for tax period March 2012 claimed by RP had not been issued and till to date its status is blacklisted.

5. The averments of the Deptt considered and case record perused.

6. It is observed that a country wide investigation against issuance of bogus refunds was carried out by the Directorate General I&I-IR FBR. After painstaking exercise, the I&I-IR unearthed copious cases, where fake RPs registered with the connivance of the staff, claimed refunds on the basis of fake and flying vouchers and in many cases get away with fraudulent refund, causing colossal loss to already cash starved exchequer. In the case of instant RP also, on the basis of investigation Red Alert was issued by the Director I&I-IR Karachi vide letter dated 16.06.2012 with specific recommendations. Unfortunately, the Deptt did not realize the gravity of the situation and except blacklisting status of the RP, no effort appears to had been made for retrieving loss of revenue incurred on account of issuance of refund amounting to Rs.5.458 million. The Deptt also did not make any effort to unearth the culprits from within and out, who were involved and connived in the sales tax registration of the fake RP. Obviously, the registration and issuance of refund was not a simple task but a team work, involving not only the main beneficiaries but also having connivers in the Deptt and bank officials who opened the bank accounts through which refund cheques were drawn. The CCIR RTO-III Karachi had tried to absolve himself from the responsibility by simply stating that Red Alert letter was not in the record received from the defunct RTO. His studied silence of the part of CCIR RTO-III Karachi regarding failure to retrieve huge loss of revenue and not initiating action against the culprits is also very strange. This is evidently a case of gross maladministration where, except blacklisting the RP, the Deptt had failed to initiate proceedings for retrieval of bogus refunds amounting to Rs.5.458 million, pertaining to tax period January and February 2012. The culprits who were involved in registering the fake RP and issuance of refund cheques were also not taken to task. Sadly, even after filing of the instant complaint, the Deptt seems disinclined to take any action in this regard. It also sounds strange that the Directorate General I&I-R FBR and its field offices, after conducting such laudable effort of detecting fraudulent activities and issued letters of Red Alerts to the field formation but did not pursue the matter to its fruition. FINDINGS:

7. Failure of the Deptt to initiate action against the person(s)/officials(s) involved in registration of fake RP and retrieval of refund already issued prior to issuance of Red Alert, is tantamount to maladministration in terms of Section 2(3)(i)(d) and (ii) of the FTO Ordinance. RECOMMENDATIONS:

8. FBR to- (i) direct the Chief Commissioner-IR, RTO-III, Karachi to investigate and indentify the officials involved in registration of fake RP and initiate disciplinary/criminal action against those found involved; (ii) identify the officers/officials who were involved in processing on the basis of fake and flying vouchers and issuing refund of sales tax pertaining to tax period January and February 2012, amounting to Rs.5.458 million and take appropriate criminal/disciplinary action against them; (iii) initiate appropriate action including criminal proceedings leading to prosecution of RP and recovery of amount of Rs.5.458 million, swindled from public exchequer; (iv) report compliance within 45 days. KMZ/174/FTO Order accordingly.