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Significant Tax Fraud Case involving fake invoices and inadmissible tax adjustments under the Sales Tax Act, 1990: Pre-Arrest Bail Declined --- Lahore High Court

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Significant Tax Fraud Case involving fake invoices and inadmissible tax adjustments under the Sales Tax Act, 1990: Pre-Arrest Bail Declined --- Lahore High Court

Islamabad 08-08-2024: The Lahore High Court, Bahawalpur Bench, has denied pre-arrest bail to Petitioner in a significant tax fraud case involving the issuance of fake invoices and inadmissible input tax adjustments under the Sales Tax Act, 1990. The judgment, delivered by Mr. Justice Asim Hafeez, emphasized several key legal principles.

The Court highlighted that the alleged offences did not fall within the prohibitory clause of Section 497(1) CrPC, thus allowing consideration for bail. However, under Section 2(37) of the Sales Tax Act, 1990, the burden of proof lies on the petitioner to demonstrate the legality of the entries in the sales tax returns. Petitioner failed to provide sufficient proof that the transactions were lawful, which played a critical role in the Court's decision.

The adjudicatory process under Section 11 of the Sales Tax Act, 1990, provisionally determined the financial loss caused by the tax fraud to be approximately Rs. 255 million. This substantial financial impact was a significant factor in the Court's analysis.

The Court underscored the importance of the accused’s custody for recovering further evidence, including electronic data and communications, which are fundamental in investigating white-collar financial crimes. The judgment stated that granting pre-arrest bail would likely result in tampering with evidence and frustrating the ongoing investigation.

The involvement of co-beneficiaries who received financial benefits through unwarranted tax adjustments was also noted. The Court found sufficient evidence connecting Petitioner to the offences, thereby justifying the denial of pre-arrest bail. The Court rejected the petitioner's claim that another individual, Muhammad Sibtain Abbas, was the actual culprit, emphasizing that this did not absolve the petitioner of responsibility.

Mr. Justice Asim Hafeez also clarified that the involvement of the accused in other criminal cases did not automatically establish their innocence in the present case, further strengthening the decision to deny bail.

In conclusion, the Lahore High Court dismissed Petitioner petition for pre-arrest bail, recalling the ad-interim bail previously granted. This decision reflects the Court's stringent approach towards tax fraud and the critical importance of preserving the integrity of the investigation process.

This landmark judgment reinforces the judiciary's commitment to addressing tax fraud and ensuring thorough investigations in financial crime cases.