Karachi, March 7, 2025 – The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to seek access to internet protocol (IP) data older than one year, similar to the access granted to other agencies under the Investigation for Fair Trial Act, 2013 (IFTA).
This directive aims to overcome technical limitations in tax fraud investigations and ensure necessary scrutiny in fraudulent tax registration cases.
The FTO has further instructed the Member (Operations)/Director General IT-DT, FBR to conduct an inquiry into the fraudulent online registration of a complainant under Section 181 by an unidentified officer. The investigation is expected to rectify the matter and prevent similar tax frauds in the future.
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Cyber Criminals Exploit CNIC for Tax Fraud
In a recently unearthed case, the FTO has uncovered a significant tax fraud where cybercriminals misused the computerized national identity card (CNIC) of a junior clerk in Sindh to file fraudulent income tax returns. This led to the creation of a fake tax liability based on a non-existent immovable property.
The FTO’s report highlighted that Pakistan Revenue Automation Limited (PRAL) failed to provide essential data, such as the cell number and email address linked to the fraudulent registration. This information is crucial for identifying the cybercriminals involved in the case.
The complainant, a junior clerk in the Sindh Government’s S&GAD & Coordination Department, was illegally registered for income tax in 2019 without his knowledge. Fake tax returns were then filed for tax years 2014 and 2015, falsely declaring an income of Rs 6.5 million from salary, despite his actual monthly earnings being around Rs 20,000, well below the taxable income threshold at the time.
Unlawful Tax Liability and Account Attachment
The fraudulent tax filings resulted in an unlawful tax liability of Rs 63.03 million, imposed on August 7, 2024, through an ex-parte Section 122(5A) assessment order. The tax department subsequently enforced recovery by attaching the complainant’s bank accounts, including his salary account, making it difficult for him to support his family of five, including three children.
FTO’s Directives for Immediate Action
The FTO has issued the following directives to the FBR:
1. Immediate Detachment of Salary Account – The Commissioner-IR, Zone-I, RTO-II Karachi must detach the complainant’s salary account immediately, as no evidence suggests his involvement in the fraud. Compliance is required within 15 days.
2. Investigation into IP Address and Cell Number – The Director General, Intelligence & Investigation (I&I) Inland Revenue (IR) must initiate a fact-finding inquiry to trace the cybercriminals by tracking the IP address and cell number linked to the fraudulent registration.
3. Suspension of Recovery Proceedings – The Commissioner, Zone-I, RTO-II Karachi has been instructed not to pursue recovery proceedings until the DG I&I’s investigation is completed. If the complainant is found innocent, the ex-parte assessment order dated August 7, 2024, must be revisited under Section 122A.
The FTO’s directives emphasize the need for enhanced cybersecurity measures in tax registration and strict accountability in cases of fraudulent tax assessments. The investigation is expected to set a precedent for handling cyber fraud cases in tax administration effectively.