2020 PLP 1116 (PTD)

iii) ground check of declared premises revealed that there was no manufacturing facility rather a private residence; iv) refund claim for tax period February 2013 of Rs.2.107 million was dubious.

3. Thus, Red Alert was accordingly issued by the Directorate of I&I-IR Karachi vide letter dated 15.05.2013, followed by the Director General I&I-IR vide letter dated 17.05.2013, to investigate the refund claim for the tax period February 2013 and action against the concerned officer of LRO, RTO-II, Karachi who conducted physical verification of the premises and misled the Deptt by providing fake verification details about the installation of machinery, commercial electric connection, production of chemical products and fake tenancy agreement.

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, RTO-III, Karachi submitted comments vide letter dated 15.11.2019. It was contended that at the time of receipt of the Red Alert, the case fell under the jurisdiction of RTO-II, Karachi and as per Status Management Report, STRN of the RP was suspended by the then Commissioner-IR, Zone-I, RTO-II, Karachi vide order dated 06.06.2013. The jurisdiction of RP was transferred to its present jurisdiction in the light of Board's Jurisdiction Order dated 21.07.2016 and the original case record is not available due to transfer of jurisdiction. It was further informed that the STRN of RP is still suspended and three refund claims for tax period December 2012, January 2013 and February 2013 were filed but no refund was issued.

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

6. It has been noted that the RP was registered as manufacturer of chemical products on 13.04.2012, on the basis of fake verification with the active collusion of the LRO and this unit was one of the 42 units in which registration applications were emailed through a single e-mail address and as per Red Alert all these units were dubious and engaged in fraudulent activities. The Commissioner-IR, Zone-I, RTO-II, Karachi suspended STRN of the RP on 06.06.2013 but the Deptt failed to refer the matter to the Cyber Crime Wing of FIA despite recommendations conveyed in the Red Alert dated 17.05.2013. This is indeed a criminal negligence and a case of gross maladministration. Although after the receipt of Red Alert no refunds claims were processed but the Deptt failed to initiate any proceedings as recommended by I&I-IR. The outlaws, who were involved in registering the fake RP as no operational manufacturing facilities were found at the declared premises, were also not taken to task. Sadly, even during the instant investigation, the Deptt seems disinclined to take any action in this regard. It also sounds strange that the Directorate General of I&I-IR FBR, after conducting such laudable effort of detecting fraudulent activities and issued letters of Red Alerts to the filed formation, but did not pursue the matter to its fruition. FINDINGS:

7. Failure of the Deptt to initiate action against the person(s)/official(s) involved in registration of fake RP 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 identify the officials involved in registration of fake RP and initiate disciplinary/criminal action against those found involved; (ii) initiate investigative audit on the basis of income tax return filed with the Deptt; (iii) initiate appropriate action including criminal proceedings leading to prosecution of RP for fake registration; and (iv) report compliance within 45 days. KMZ/28/FTO Order accordingly.