The tax season seems to be at its peak as FBR, and the provincial tax authorities are cracking down to break the net of tax violators and recover what they have been hiding. In a recent episode, Orient Electronics, one of the leading consumer electronic goods company in the country has also faced the wrath of Federal Board of Revenue (FBR). Its Lahore Directorate arrested the top management of Orient Electronics Pvt Ltd on May 8, 2017, on the charges of tax evasion, under invoicing and underpricing of worth billion of rupees.
As per details, Talat Mehmood, Managing Director and Abdul Rehman Talat, Director and Chief Financial Officer of Orient Electronics Pvt Ltd were arrested and produced before the Honorable Court of Special Judge Customs Excise and Taxation, Lahore. The court has granted a three days remand for the recovery of material evidence.
Charges on Orient Electronics Pvt Ltd
After getting information from credible sources, Directorate of Intelligence and Investigation of FBR found out that Orient Electronics committed massive sales tax evasion by under-declaring the value of taxable goods it imported. However, the company parked the additional amount of consideration received against the actual value of the goods in a separate bank account titled M/s Bismillah Trading Corporation through account number 02011477019 at Soneri Bank.
Upon investigation, the authority came to know that the above account was being maintained in the name of two company employees; however, it was actually operated by Talat Mehmood, MD of the company. Furthermore, the investigation team also found out that there were several other bank accounts which were being maintained in the name of various employees but the operations were being handled by the MD himself.
The documents which FBR investigated from 2008 till 2013, revealed that Orient Electronics suppressed the value goods and declared them under value and paid the sales tax, extra tax and special excise duty on the suppressed value and hence committed huge tax evasion during the mentioned period.
During the said period, Orient Electronics declared the value of supply as Rs. 33,617,059,899 in its sales tax return against the actual value of the goods amounting to Rs. 56,299,214,332 (assessed on the basis of the available price list of its products). In this way, the company suppressed the value of its products/goods by Rs. 22,682,154,433.
As per assessment order #03/2016 dated 16/3/2016 passed by DCIR LTU Lahore, Orient Electronics has been directed to pay evaded sales tax amounting to Rs. 3,710,295,446, extra tax Rs 171,857,553 and special excise duty Rs 150,296,736 (Rs. 4.03 billion). Furthermore, a penalty of 100 percent amount of sales tax involved has also been imposed.
A FIR has been registered against Talat Mehmood, MD, Ahmed Fazil and Mian Abdul Rehmat Talat Directors, Aleem Amin CFO. Other people named in the FIR are the managers of the company along with the buyers, abettors, and connivers. The investigation is underway, and the arrested people are being questioned for more material.