Commissioner of Inland Revenue v Singh [1994] FJHC 174; Hbc0162j.94s (17 November 1994)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

CIVIL ACTION NO. 0162 OF 1994

Between:

THE COMMISSIONER OF INLAND REVENUE
Plaintiff

- and -

DALRAM SINGH
s/o Balram Singh
Defendant

CIVIL ACTION NO. 0163 OF 1994

Between:

THE COMMISSIONER OF INLAND REVENUE
Plaintiff

- and -

BAHADUR SINGH
s/o Jang Bahadur Singh
Defendant

Mr. A. Bale for Commissioner of Inland Revenue
Mr. H. Nagin for Defendants

JUDGMENT

Although there are 2 separate taxpayers involved in these 2 applications by the Commissioner of Inland Revenue (CIR), the issues are the same and therefore can be conveniently dealt with in a single judgment.

Very briefly the CIR's claims are based on assessments against each of the tax payers for arrears of income tax and late payment of penalties in respect of the years 1985 to 1990. No objections were lodged by either of the taxpayers against the assessments within the time permitted under the Income Tax Act (Cap. 201) and in terms of Section 62(8) of Cap. 201:

"... the assessment shall stand and shall be valid and binding upon the taxpayer ..."

The defendants for their part each filed on the 6th of May 1994, a two paragraph Statement of Defence denying that the assessments were "presently payable" and pleading the terms of an 'arrangement' entered into with the CIR for payment of the assessments by instalments. No reply has been filed by the CIR concerning 'the arrangement'. So much then for the state of the pleadings.

On 6th May 1994 the CIR issued a Summons to Strike Out Defence and for Leave to Enter Judgment against each of the taxpayers under Order 18 rule 18 of the High Court Rules on the principal ground that the Statement of Defence "discloses no reasonable defence".

Learned counsel for the CIR in advancing this ground referred to the provisions of Sections 62(1) and 62(8) of the Income Tax Act (Cap. 201) and a series of decisions of this Court, the Court of Appeal and the House of Lords in which it is clearly laid down that a taxpayer is debarred from challenging the merits of the assessment of the CIR if he has failed to avail himself of the objection procedure provided by the Income Tax Act.

Reference need only be made to the dictum of Diplock L.J. in In re Vandervell's Trust (1970) 3 W.L.R. 453 when he said at p.470:

"The decisive question, as I see it, is whether the Court has any jurisdiction, after an assessment to surtax has been made, to adjudicate between the taxpayer and the Commissioners of Inland Revenue upon the correctness of the assessment or upon any underlying issue of fact on which the correctness of the assessment depends ... I think the court has no such jurisdiction."

Learned counsel for the defendants says however:

"Defendants are not objecting to the CIR's assessments as such. We say there is a liability and we have paid but not been credited and thus it is an accounting exercise."

In this latter regard counsel referred to the "arrangement" contained in the CIR's letter of 11th December 1990 in which the tax liability of 4 named taxpayers including the 2 defendants are listed and followed by a 'payment clause' which reads:

"Because of your current financial difficulties, it is agreed that $10,000.00 is to be paid into this office by not later than Monday 17 December 1990, and the balance is to be settled in monthly instalments of not less than $5,000.00 each, beginning from 15 January 1991. Thereafter, each subsequent payment should be made on or before the 15th of each month. In respect of these monthly payments, please note that $3,000.00 will be utilised to reduce the above debt, while the balance of $2,000.00 will meet current tax obligations of the company."

In strict compliance of the above clause counsel claims the defendants made and have continued to make payments to the CIR under the 'arrangement' namely by the initial payment of a single good faith premium of $10,000 and thereafter monthly instalments of $5,000.00.

The CIR has deposed however to his clear understanding of the 'arrangement' which was to the effect that the defendants "should have paid $5,000.00 each, a total of $20,000.00 per month at $5,000 per month each."

Clearly the true meaning and effect of the 'arrangement' set out in the CIR's letter (op.cit) is a matter of some disagreement between the parties with the taxpayers maintaining that they have adhered to its terms and the CIR claiming that it has been breached and therefore no longer binding on the parties.

That the CIR is empowered at the request of a taxpayer to accept payment of assessed taxes and penalties by way of instalments is plain (See: Section 76(4) of Cap.201).

These present applications however raises the rather vexed question of how far (if at all) the CIR is bound or estopped by such an 'arrangement'.

To this question counsel for the CIR made the bald assertion that there can be no estoppel raised against a tax liability or assessment insofar as Section 76 declares:

"The taxes and all interests, penalties and costs assessed shall be recoverable as a debt due ... from the person on whom it is assessed or imposed."

Furthermore Section 77(1) provides:

"Where notice has been served on any person of any tax due under this Act ... and payment has not been made by the date specified in that notice, then the amount due by such person may be sued for and recovered as a ... debt in a court of competent jurisdiction by the Commissioner in his official name with full costs of suit from such person." and

(2) In any suit under subsection (1), the production of a certificate signed by the Commissioner giving the name and address of the defendant and the amount of tax due by him shall be sufficient evidence that such amount of tax is due by such person and sufficient authority for the court to give judgment for such amount."

In this latter regard although the CIR has deposed to the issue of "Notices of Assessment" to the defendant taxpayers in 1990, 91 and 92, none of the "Notices" have been produced nor has any certificate been provided by the CIR in terms of Section 77(2).

In the circumstances, even if I were minded to allow these applications, the evidence is quite insufficient in my view, to support the entry of 'summary judgment' on the basis of the Writ and the CIR's affidavits, but I am satisfied however that the Statements of Defence raise a triable factual issue as to the meaning and effect of the CIR's letter of 11th December 1990 as well as a legal question as to how far 'estoppel' can be raised in the exercise of a statutory discretion vested in the CIR.

This application must be and is hereby dismissed with costs to the taxpayers.

(D.V. Fatiaki)
JUDGE

At Suva,
17th November, 1994.

HBC0162J.94S