Karachi, March 7, 2025 – In a significant move to tackle tax fraud and enhance investigative procedures, the Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to access internet protocol (IP) data older than one year. This measure aligns with the powers granted to various agencies under the Investigation for Fair Trial Act, 2013 (IFTA) and aims to overcome technical challenges in probing tax fraud cases. The FTO’s directive is aimed at ensuring more effective scrutiny of fraudulent tax registration activities, which have become increasingly sophisticated in recent years. With cybercriminals exploiting technological loopholes, this new measure seeks to ensure that the FBR can trace back fraudulent activities more thoroughly.
Additionally, the FTO has ordered the Member (Operations)/Director General IT-DT of the FBR to investigate the fraudulent online registration of a complainant under Section 181. This case involves an unidentified officer’s actions, which led to the illegal tax registration of the individual. The investigation is set to address this issue and set a framework to prevent similar fraudulent tax registrations in the future.
The issue of cybercrime and its impact on tax fraud is highlighted in a recently uncovered case, where cybercriminals misused a junior clerk’s Computerized National Identity Card (CNIC) in Sindh to fraudulently file income tax returns. The fraudulent registration resulted in a fake tax liability based on non-existent property. The case came to light following the FTO’s investigation, which revealed that Pakistan Revenue Automation Limited (PRAL) had failed to provide crucial data like the cell number and email address associated with the fraudulent registration. This information is essential for identifying the perpetrators behind such cybercrimes.
In this particular instance, the complainant, a junior clerk working in the Sindh Government’s S&GAD & Coordination Department, was unknowingly registered for income tax in 2019. Fraudulent tax returns for the years 2014 and 2015 were filed, showing an income of Rs 6.5 million from a salary, although the complainant’s actual monthly income was only Rs 20,000—far below the taxable threshold at that time.
As a result of the fraudulent filings, a tax liability of Rs 63.03 million was unfairly imposed on the complainant through an ex-parte Section 122(5A) assessment order on August 7, 2024. To recover this amount, the tax department attached the complainant’s bank accounts, including his salary account. This caused severe hardship for the complainant, who was unable to support his family of five, including three children.
The FTO has outlined several critical steps to address this issue and prevent similar occurrences in the future. The Commissioner-IR, Zone-I, RTO-II Karachi, has been directed to immediately detach the complainant’s salary account. This action must be completed within 15 days, as there is no evidence indicating the complainant’s involvement in the fraud. The Director General, Intelligence & Investigation (I&I) Inland Revenue (IR), is instructed to initiate an inquiry into the IP address and cell number associated with the fraudulent registration. This investigation aims to track down the cybercriminals responsible for the fraud. The Commissioner, Zone-I, RTO-II Karachi, has been instructed to suspend any further recovery proceedings until the DG I&I completes the investigation. If the complainant is found to be innocent, the ex-parte assessment order from August 2024 will be revisited under Section 122A.
These directives emphasize the FTO’s commitment to improving the integrity of tax registration systems and ensuring accountability in cases involving fraudulent tax assessments. The FTO also stressed the need for enhanced cybersecurity measures within the tax administration to safeguard against similar fraudulent activities in the future. The FTO’s actions are expected to set a critical precedent for handling cyber fraud cases within the tax system, offering a clearer framework for investigating and addressing online fraud. The use of IP tracking and the investigation into digital fraud will likely serve as a model for future cases, making it harder for cybercriminals to exploit vulnerabilities in Pakistan’s tax registration processes. With the rise of cybercrime in various sectors, the FTO’s move to mandate the use of IP tracking is a proactive measure to safeguard the integrity of Pakistan’s tax system. These actions are vital in ensuring that the tax administration remains robust, transparent, and accountable in the face of evolving technological threats.