President Dr Arif Alvi has ordered the Federal Board of Revenue (FBR) to explain how the identity of a whistle-blower who reported large-scale tax evasion/fraud by a private limited company was leaked to his employer, resulting in threats to the whistle-blower by the tax-evading company.
The President also directed FBR to explain why it could not fully utilize the information provided by the whistle-blower to recover the maximum sales tax amount from the company, which caused a loss to the national exchequer.
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The President expressed his displeasure that the FBR did not take full advantage of the information provided by the whistle-blower about the alleged financial irregularities by the company and disclosed his identity. He rejected a representation filed by the FBR against the order of the Federal Tax Ombudsman (FTO) directing the FBR to revisit its relevant Assessment Order, provide an opportunity for hearing to the whistle-blower, and fully utilize the information provided by him for the recovery of the evaded sales tax.
The complainant, Muhammad Ilyas, an Accountant in M/s Northern Toolings (PVT) Ltd, reported to FBR that the company was indulging in various financial irregularities, resulting in a huge loss to the national exchequer. After reporting large-scale tax evasion/fraud to FBR, the complainant was registered as a whistle-blower. FBR initiated proceedings against the company and recovered Rs 15.251 million, but the amount recovered was too short due to not properly utilizing all annexures provided by the complainant.
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FBR ignored and misread all annexures with definite calculations, reflecting the extent of evaded tax on various accounts. The staff of CTO Lahore disclosed the whistle-blower’s identity to the owner of the tax-evading company, and resultantly, the company threatened him physically and mentally through police and other criminal proceedings. The employee filed complaints to the Chairman FBR regarding less assessment, but without any result. Feeling aggrieved, he took up the matter with FTO.
During the proceedings of the Ombudsman, FBR raised objections over the jurisdiction of FTO on the ground that the issue related to the determination of liability of tax and interpretation of laws, rules and regulations with respect to which legal remedies were available. FTO rejected the stance of FBR and stated that it was a case of not fully utilizing the information in a matter where duty and taxes were evaded by using various tactics.
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FTO further held that the complainant’s contention regarding tax fraud by the company carried weight and therefore, it was in the interest of justice that he be given another opportunity to present his viewpoint before FBR. It further directed to revisit the Assessment Order, dated 30.12.2016 under Section 45A(4) of the Sales Tax Act, 1990, and pass a fresh speaking appealable order after affording the opportunity of hearing to the complainant and after fully utilizing the information provided by him and submit a compliance report.
Instead of complying with the order, FBR chose to file a representation with the President against the order of the FTO. In his decision, the President observed that FTO’s order was merely a reiteration of the duty of FBR to conduct reaudit proceedings for the recovery of the alleged huge amount of evaded Sales Tax by fully utilizing the information provided by the complainant and affording him another opportunity to explain his point of view in this regard. He, therefore, rejected the representation with the added direction to FBR to submit a report to FTO on the matter within 60 days.
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