Client taking inpur vat credit on fake invoices.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2012 Dear professionals & experts

Please help me sorting out a situation facing by me while doing tax audit of one of my client.

The client is a trading prop. firm and deals in product which is taxable as VAT @14%.

The product sold by him does not cover up by valid input purchase invoice, to cover up this, he make an arrangement to purchase the fake purchase bill from some other trader (who also not genuine).

There is probability that, Client will take guard of claiming genuine purchase as the payment of purchase made by cheque & blaming on other trader for fraud with him.

Since being the auditor for Tax Audit, what can i do in these case as i cannot reject to audit without having evidence.
i.e I don't have proof of such tax fraudulent activity by client.

Please guide the suitable course of action to be taken in these case. I personally believe that only rejecting the audit is not the right solution of this case.

Please advice at the earliest

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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29 July 2012 Mr Author,
As you do not have enough evidence to reject the documents in audit you have accept them and close the audit. The only way open to you to refer this case with reference to their TIN nos to the vigilance/intelligence wing your VAT department,who have the power to investigate all the links and take necessary action, if you can.