President directs FBR to submit report over leaking of whistle-blower’s identity

Islamabad, April 12, 2023 (PPI-OT): President Dr Arif Alvi has directed the Federal Board of Revenue (FBR) to submit a report to the Federal Tax Ombudsman (FTO) explaining how the identity of a whistle-blower, who had reported large scale tax-evasion/fraud by a private limited company, was leaked to his employer and consequently he had to face threats by the tax-evading company.

He further 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 that caused loss to the national exchequer.

The President gave these remarks while rejecting a representation filed by FBR against the order of FTO directing 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 President in his decision expressed displeasure that full advantage of the information about the various alleged financial irregularities by the company was not taken by FBR and even the identity of the whistle-blower was disclosed.

“This is abhorrent to the whistle-blower concept and legislation. Instead of taking advantage, the FBR has been very lax in its attitude”, he said. He further directed that a report must also be submitted to FTO within 60 days as to why this happened.

As per details, Mr Muhammad Ilyas (the complainant) was serving as an Accountant in M/s Northern Tooling’s (PVT) Ltd and reported to FBR that the company was indulging in various financial irregularities by maintaining bank accounts in the names of its employees, using fake and flying invoices for adjustments of Input Sales Tax, concealing warehouses with undeclared stock, less tax payment, and under-invoicing at import stage using similar names and style of another company, thus, resulting in huge loss to the national exchequer. The employee reported large-scale tax evasion/fraud to FBR, after which he was registered as a whistle-blower.

FBR initiated proceedings against the company and recovered Rs 15.251 million, however, the amount recovered was too short due to not properly utilizing all annexures provided by the complainant. FBR ignored and misread all annexures with definite calculations, reflecting the extent of evaded tax on various accounts.

Further, the staff of CTO Lahore disclosed the employee’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. Copy of the Assessment Order was denied to the whistle-blower and was only provided on the intervention of the Lahore High Court. 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.

FBR further contended that the whistle-blower had submitted his written statement regarding tax evasion of Rs 5 million and all the information provided by him was confronted and an appealable Assessment Order was also passed, therefore, the matter had already been finalized so a fresh round of complaint was unwarranted.

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.

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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