According to sources, the credible information was received that a paper & paper board mill Gujranwala is involved in tax evasion on account of suppression of sales by using an illegal method. Investigation in the case was initiated and e-portal record shows that taxpayer got registration for income tax on 02.12.2004 and for sales tax w.e.f. 31.12.2004. Taxpayer has not e-filed its complete return for tax year 2011, however in response to the notice u/s 176 of the Income Tax Ordinance, the taxpayer provided the copies of return along with audited accounts.
During course of investigation, it is observed that taxpayer company is involved in use of concealed/undeclared bank account of its Director Ayub (major shareholder of the company) to park it's out of books sales and purchase as well as payment of company's electricity bills and evading its income.
It is pertinent to mention here that income tax registration of director shows that he is registered as a salaried individual and drawing salary as director of unit with 60 percent shares.
It is clear that Ayub has no other source of income except from salary being paid to him as director by the unit. Whereas bank credits amounting to Rs 95,824,827 for the tax year under consideration show that mill is using bank accounts of its director to park its sales proceeds of out of books untaxed income. Information obtained from account opening forms of concealed bank accounts maintained by the taxpayer in the name of its director also shows that although accounts are in the name of Ayub yet the business mentioned is of manufacturing of paper and board in the name of unit. This further shows that these accounts were used by unit to conduct business transactions as evident from the information extracted from account opening forms.
To meet the ends of justice, further information was gathered by the agency about the nature and sources of credits being deposited in these undeclared/concealed bank accounts. All the parties depositing money in concealed bank accounts of director relate to paper and board, which is in fact the main business activity of unit ie manufacturer of pulp, paper & board, which further gives credence to the stance of the department that the company is using concealed/ undeclared bank accounts of its director to conduct out of books sales and purchase. A list of 80 parties along with their bank accounts, businesses and evidence of depositing money in these undeclared/concealed bank accounts.
In addition to payments received from parties dealing in paper and board in the concealed bank accounts, these concealed bank accounts of director have been used by the taxpayer to make payments of electricity bills of the company and payments have also been made to its suppliers. A major supplier of taxpayer is a packaging company and payments to this party have been made through concealed/ undeclared account of Ayub maintained at a bank of Gujranwala.
It is pertinent to mention here that the total sales (inclusive of sales tax) declared by the taxpayer company as per income tax return for the period July 2010 to June 2011 is amounting to Rs 45,941,390 which has already been accounted for in the declared bank accounts therefore credits received in the abovementioned concealed banks accounts (herein after the bank account of the company) against concealed/ undeclared sales relating to business transactions conducted by the taxpayer company are over and above the declared sales of the taxpayer company and are undeclared sales on which due taxes under the provision of sections of Income Tax Ordinance, 2001 have not been paid. On the basis of facts and circumstances, it is concluded that taxpayer has concealed the sales of Rs 95,824,827 for the tax year 2011 which indicate the violation of section 111(1) of the Income Tax Ordinance, 2001.
Therefore agency has proposed that, if deemed fit, actions may be taken that u/s 122(5) and 111(1) of the Income Tax Ordinance 2001. The penalty u/s 182(1) may also be imposed as per law and default surcharge may be calculated at the time of payment, sources added.
Copyright Business Recorder, 2017