Recently, the High Court had in the case of Kerajaan Malaysia v Mohamad Nizar bin Mohamad Najib [2021] 4 AMR 255 ruled in no uncertain terms that in claims filed in Court by the Government of Malaysia (“the Government”) to recover taxes, it is not open to the taxpayer to challenge the correctness of the amount claimed, nor raise the plea of limitation.
 
In arriving at this decision, the High Court applied established cases that have consistently held that the law favours the entering of a summary judgement in tax recovery matters and that a taxpayer must pay his taxes first regardless of his dissatisfaction with the amount or for any other reason. The rights of the taxpayer are however protected and guaranteed by section 99 of the Income Tax Act 1967 (“ITA”) in that an appeal may be lodged with the Special Commissioners of Income Tax ("SCIT").
 
Background
 
On 15 March 2019, the Plaintiff issued notices of additional assessment (“Forms JA”) amounting to RM11,486,063.14 (“Disputed Sum”) for the years of assessment of 2011 to 2017 against the Defendant. It is undisputed that the Forms JA were duly served and received by the Defendant.
 
Although the Defendant had filed notices of appeal to the IRB against the Forms JA subsequently, the Disputed Sum remained outstanding and resulted in the imposition of late payment penalties.
 
As such, the Plaintiff filed an application for summary judgment to recover the Disputed Sum (together with the late payment penalties) plus interest and costs.
 
The Court allowed the Plaintiff’s application.
 
Issues
 

Reasons for the Decision
 
‘Normal’ defences/triable issues do not apply
 
The Defendant submitted that there is a triable issue because the assessments are erroneous and grossly inaccurate. The Court held that normal defences do not apply where a summary judgment application is made by the Government in tax claims because section 106(4) of the ITA clearly provides that the court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased.
 
Plea of limitation does not apply
 
The Defendant’s argument that the Plaintiff’s claim was statute-barred was also rejected by the Court on the grounds that a plea of limitation under sub-sections 91(1) and 91(3) of the ITA does not apply to the commencement of proceedings by the Government for the recovery of any tax from a taxpayer because the question of limitation can and should be decided by the SCIT.
 
Judicial power of the Court and its inherent jurisdiction to prevent abuse of process not usurped
 
The Court rejected the argument that section 106 of the ITA usurps the judicial power of the court. The argument advanced was that section 106 of the ITA contradicts with Articles 13 and 121 of the FC. The Court was of the view that the taxpayers’ rights to appeal are well safeguarded as taxpayers can file an appeal against a notice of assessment to the SCIT by virtue of section 99 of the ITA. As such, Article 121 of the FC cannot be said to have been contravened because the Court can still deal with the tax appeal by way of an appeal once the matter has been decided by the SCIT. An appeal to the SCIT cannot be regarded as preventing the taxpayer from having access to justice.
 
Comments
 
Defences/triable issues which are normally available to a defendant in a claim for money, i.e. that the amount claimed is erroneous and/or without basis and/or that the claim is time barred are not available in tax recovery claims filed by the Government.
 
The only defence currently available in resisting a tax recovery claim is to challenge the formal requirements to file such a claim, for instance, the Government must provide sufficient evidence to prove the amount of tax due and payable by exhibiting a certificate duly signed by the Director General of Inland Revenue or an officer gazetted under section 132 of the ITA (see Kerajaan Malaysia v Nooryana Najwa Dato Sri Mohd Najib [2020] 9 CLJ 414).
 
It will be interesting to observe the future development of available defences in tax recovery proceedings.
 
Case commentary by Preetha Pillai (Partner, Head of Tax), Desmond Liew (Associate) and Dickson Chia Chung Ming (Associate) of the Tax Practice Group of Skrine.