ECO BANK PLC v. ABIA STATE, IRS
(2022)LCN/16396(CA)
In The Court Of Appeal
(OWERRI JUDICIAL DIVISION)
On Friday, July 15, 2022
CA/OW/263/2019
Before Our Lordships:
Rita Nosakhare Pemu Justice of the Court of Appeal
Oludotun Adebola Adefope-Okojie Justice of the Court of Appeal
Ibrahim Wakili Jauro Justice of the Court of Appeal
Between
ECO BANK PLC APPELANT(S)
And
ABIA STATE INTERNAL REVENUE SERVICE RESPONDENT(S)
RATIO:
OPTIONS OPENED TO AN AGGRIEVED TAXPAYER
The options open to an aggrieved taxpayer, as stated in Section 13 of the 5th Schedule of the Federal Inland Revenue Service (Establishment) Act, 2007 are as follow:
“(1) A person aggrieved by an assessment or demand notice made upon him by the Service or aggrieved by any action or decision of the Service under the provisions of the tax laws referred to in paragraph 11, may appeal against such decision or assessment or demand notice within the period stipulated under this Schedule to the Tribunal.
(2) An appeal under this schedule shall be filed within a period of 30 days from the date on which a copy of the order or decision which is being appealed against is made, or deemed to have been made by the Service and it shall be in such form and be accompanied by such fee as may be prescribed provided that the Tribunal may entertain an appeal after the expiry of the said period of 30 days if it is satisfied that there was sufficient cause for the delay.
(3) Where a notice of appeal is not given by the appellant as required under subparagraph (1) of this paragraph within the period specified, the assessment or demand notices shall become final and conclusive and the Service may charge interests and penalties in addition to recovering the outstanding tax liabilities which remain unpaid from any person through proceedings at the Tribunal.
Underlining Mine. OLUDOTUN ADEBOLA ADEFOPE-OKOJIE, J.C.A.
OLUDOTUN ADEBOLA ADEFOPE-OKOJIE, J.C.A. (Delivering the Leading Judgment): This is an appeal against the judgment of the High Court of Abia State, Umuahia Judicial Division, delivered on the 20th day of May, 2019 by Hon. Justice Onuoha A.K. Ogwe (Chief Judge) in favour of the Respondent.
The Respondent, as Claimant before the lower Court, commenced the action leading to this appeal, by an Originating Motion filed on 21/03/2019, seeking the following reliefs against the Appellant:
1. An order of Court mandating the Defendant to remit to the claimant the sum of N14,732,161.72 being withholding taxes on interest deducted from the interest paid by the defendant to individual depositors with the defendant, penalty of 10% and interest on the prevailing CBN MPR for 2014-2015.
2. An order issuing warrant of distress against the premises of the defendant or other property of the defendant in Abia State or any other place in Nigeria for failure to remit the said sum of money in No 1 above.
3. And for such further or other orders as the honourable Court may dream (sic) fit in the circumstances.
It is was the Respondent’s case at the lower Court that the Appellant was liable to pay the sum claimed being withholding taxes on interest deducted from interest paid by the Appellant to individual depositors with the Appellant for the year 2014 – 2015 inclusive of a penalty of 10% and interest. It alleged that it (the Respondent) had on 21/06/2018 written a demand notice to the Appellant for the sum of N19, 805, 175.66 (Nineteen Million, Eight Hundred and Five Thousand, One Hundred and Seventy-five Naira, Sixty-Six Kobo) being withholding taxes on interest transactions for the years 2014 to 2015. Upon receipt of this, the Appellant objected to the demand notice via a letter dated 25/06/2018 asserting its non-indebtedness to the said withholding taxes and attaching documents/receipts in proof of its payment of withholding taxes within the year 2014-2015. It then served on the Appellant a Revised Notice dated 22nd November, 2018 for the sum of N14, 732, 161.72 (Fourteen Million, Seven Hundred and Thirty-Two Thousand, One Hundred and Sixty-One Naira, Seventy-Two Kobo) and a Final warning Notice dated 21st December, 2018. When the Appellant failed to comply with the said demand notices, the Respondent instituted this suit.
The Appellant, in its Counter-Affidavit deposed to by Ezeoba Chidi, Customer Service Manager of the Appellant, denied receipt of the Revised Demand Notice of 22nd November, 2018, also contending that it was not liable for the claimed sum or any other amount as withholding taxes. It annexed documents and receipts in evidence of payment of the withholding taxes for the year 2014-2015. It was also the Appellant’s contention that this suit is incompetent as the Respondent failed to comply with “Sections 58(3) and 68(2) of the Personal Income Tax, 2011 (as Amended) (sic), as regard reconciliation of assessment and service of the requisite notice’’.
On 21st May, 2019, the lower Court, delivering its judgment, held in favour of the Respondent, reasoning that following the response of the Respondent in reducing the amount assessed, it was incumbent on the Appellant to pay, with no further requirement for the setting up of a committee by the Respondent, as the revised assessment was based on the documents made available by the Appellant. It pointed out that no appeal was lodged against this revised assessment to the Tax Appeal Tribunal, Enugu. It consequently granted all the reliefs sought by the Respondent.
Dissatisfied, the Appellant filed two Notices of Appeal, one on 21/05/2019 and the other on 18/06/2019. On 8/06/2022, at the hearing of the appeal, Appellant’s Counsel sought to rely on the latter Notice of Appeal filed on 18/06/2019.
ISSUES FOR DETERMINATION:
In the Appellant’s Brief of Arguments settled by Chika Mgbokwere-Mba, Esq., filed on 06/02/2020 but deemed as properly filed by this Court on 08/07/2020, two issues were distilled for the Court’s determination, to wit:
1. Whether the learned trial Judge was right when he failed to resolve issues raised by the Appellant (as Defendant) thereby denying the Appellant of fair hearing.
2. Whether the trial Judge was right when he granted the claimant’s claims notwithstanding the claimant’s non-compliance with the relevant provisions of Personal income Tax Act, 2011 and the Defendant’s undisputed documentary evidence of its non-liability.
The Respondent’s Brief of Arguments was filed on 16/07/2020 and settled by Obike Onyemere, Esq., in which its Counsel adopted the issues formulated by the Appellant.
The simple issue that arises for determination, under which this appeal can effectively be determined, is;
“Whether the trial Judge rightly adjudged in favour of the Respondent.”
Appellant’s Submissions
Appellant submitted that the trial Court in its judgment failed to resolve the issues raised by the Appellant at the lower Court thereby breaching the Appellant’s right to fair hearing, occasioning a grave miscarriage of justice, citing the case of Garba V. Mohammed (2016) 16 NWLR (Part 1537) Page.162 Para D-E.
Counsel pointed out that the Appellant persistently denied liability and maintained a stance of non-indebtedness to the Respondent for the withholding tax deducted on interest for the years 2014 to 2015 and providing receipts to prove the same but that this was never resolved. He accused the Respondent of failing to comply with the requisite preconditions prescribed in Section 58 (3) & Section 68 (2) of the Personal Income Tax Act, Cap. P8, 2011 and that the Respondent, as a Tax Authority, ought to have determined the objection raised by the Appellant in accordance with the strict provisions of Section 58 (3) of PITA, particularly its proviso that a notice of refusal together with a notice of revised assessment ought to be served on a Tax payer where the Tax payer fails to agree with the relevant tax authority on the amount of tax chargeable but that the Respondent failed to do so.
Learned Counsel further submitted that assuming, without conceding, that the Respondent served the Revised Notice on the Appellant, it still failed to serve it together with a Notice of refusal to amend, citing the case of Cherubim & Seraphim Church Movement Vs Ijaodola (2008) AFWLR (Part 40) Page 271 that there ought to be strict compliance with a statute when the word ‘Shall’ is used. The Respondent, he said, had not exhausted its statutorily conferred duties as regards reconciliation of disputed tax assessments before instituting this suit, thereby rendering the originating process incompetent and divesting the lower Court of jurisdiction to entertain the suit.
Respondent’s Submissions
The Respondent contended, however, that the trial Court resolved all the issues raised by the Appellant. Counsel submitted that, in accordance with the Tax laws, any objection to an Assessment/Demand Notice is first made to the Tax Authority, thereafter, if the Defendant still disputes the liability as determined by the Tax Authority, a further appeal can be made to the Tax Appeal Tribunal at Enugu.
However, that in the instant case, after the Respondent conveyed its final decision to the Appellant via its revised demand Notice of 22/11/2018, which was acknowledged by the Appellant with its official stamp (the Appellant neither objected nor appealed against the revised demand notice. The lower Court was thus right to hold the Appellant liable having not objected to nor appealed against the revised demand notice. As there was no objection against the revised demand notice of 22/11/2018, the proviso to Section 58(3) of the Personal Income Tax cannot thus avail the Appellant, as that section refers to a person who has objected to an assessment or who has made an application for review. By Order III Rules (1) & (2) of the Tax Appeal Tribunal Procedure Rules, 2010, if the Appellant still disputed the demand Notice dated 22/11/2018, it ought to have lodged an appeal against it to the Tax Appeal Tribunal within the statutory period of 30 days.
REPLY BRIEF:
Appellant’s Counsel submitted that it is only where a taxpayer’s notice of objection to a demand notice is premised on the accuracy or not of the tax chargeable that a stalemate in resolution of same between him and the tax authority will require the tax payer to lodge an appeal before the Tax Appeal Tribunal as provided by the Act but where, as this case, the tax payer’s claim is for non-liability/non-indebtedness, that provision of the Act will not apply.
It was Counsel’s further response that the Appellant had specifically denied receipt of any revised notice and the Respondent has failed to prove service of same. He cited S.C Chemiron Int’l Ltd V Stabilini Visinoni Ltd (2018) 17 NWLR (Part 1647) Page 78 Paras G-H on the proof required by law to establish service. In response to the Respondent’s submission that the provision of Section 58(3) of the Personal Income Tax (Law) cannot avail the Appellant, having not objected to the assessment, Appellant’s Counsel submitted that it is not in dispute that the Appellant vide the letter of June 25, 2018 formally expressed its objection to the Respondent’s demand notice.
RESOLUTION:
The requisite sections of the Personal Income Tax Act Cap P8 as amended by the Personal Income Tax Act (Amendment) Act, 2011 and the Finance Act, 2019 are as follows:
57. Service of Notice of Assessment
The relevant tax authority shall cause to be served on or sent by registered post or courier service or electronic mail to each taxable person, or person in whose name a taxable person is chargeable, whose name appears in the assessment lists, a notice stating the amount of any assessable, total or chargeable income, the tax charged, the place at which payment should be made, and setting out the rights of that person as contained in Sections 58 and 59 of this Act.
58. Revision in case of objection
(1) If a person disputes an assessment he may apply to the relevant tax authority by notice of objection in writing, to review and to revise the assessment, and the application shall state precisely the grounds of objection to the assessment and shall be made within thirty days from the date of service of the notice of the assessment.
(2) On receipt of a notice of objection, the relevant tax authority may require the person giving that notice to furnish such particulars and to produce such books or other documents as the relevant tax authority may deem necessary, and may summon any person who may be able to give information which is material to the determination of the objection to attend for examination by an officer of the relevant tax authority on oath or otherwise.
(3) If a person who has objected to an assessment agrees with the relevant tax authority as to the correct amount of the tax chargeable, the assessment shall be amended accordingly and notice of the tax chargeable shall be served on the person: Provided that, if an applicant for revision under the provision of this subsection fails to agree with the relevant tax authority on the amount of the tax chargeable, the relevant tax authority shall give notice of refusal to amend the assessment as desired by that person and may revise the assessment to such amount as the relevant tax authority may, according to the best of its judgment, determine and give notice of the revised assessment and of the tax payable together with notice of refusal to amend the revised assessment and, where requisite, any reference in this Act to an assessment or to an additional assessment shall be treated as revised under the provisions of this proviso.
Section 68
(2) Collection of income tax in a case where notice of an objection or an appeal has been given by or on behalf of the person shall remain in abeyance until the objection or appeal is determined, except that the relevant tax authority may enforce payment of that portion, if any, of the tax which is not in dispute.
From the processes attached to the Originating Motion filed by the Appellant and exhibited thereto, at Pages 13-21 of the Record of Appeal, subsequent to the Notice of Assessment given by the Respondent, the Appellant, in a letter written by Ijewere & Co, Chartered Tax Advisers, on 25/6/2018, disputed the assessment by the Respondent of the sum of N19,805,175.66, requesting for an amicable resolution. Attached to this letter were correspondence between them and a document showing a withholding tax schedule over the period in question. Also attached is a letter written by the Appellant to the Respondent, dated 25/1/2019, stated to be in response to a Final Notice of Warning by the Respondent, demanding the reduced payment of tax liability of N14,732,161.72 again denying indebtedness and requesting the Respondent to invite them for a reconciliation meeting.
The lower Court held at Pages 41-42 of the Record, as follows:
“”Let me reiterate the correct procedure under PITA, when the Tax authority serves a notice on the Tax payer and the payer objects, what happens next? When Claimant’s notice served on Defendant, Defendant objected via its letter of 25/6/2018, the Claimant revised the demand notice via its letter 22/11/2018 wherein it reduced the claimed amount.
That notice gave Defendant 7-days within which to pay. That appears to be the final position of the Claimant. I agree with Mr. Obike that there was no need for a committee between the parties because the revised Assessment was based on the documents and information made available by the Defendant That also appeared to be the final position of the Defendant. In that type of case, where there appeared to be a stalemate, what should be the next step?
The act provides that Defendant should lodge an appeal before the Tax Appeal Tribunal at Enugu.
“As it is now, no objections to the assessment are to be made to me sitting as a Court of 1st instance. All objections are to be taken by the Appeal Tribunal.”
I have no reason to disagree with the reasoning of the lower Court. As is clear from the statute above, the Appellant, in compliance with Section 58 (1) of PITA Supra, objected to the assessment of the Respondent. The Respondent, also in compliance with Section 58 (2) reduced the assessed amount, describing the same as “a Final Notice of Warning”, as stated in the Appellant’s letter, Exhibit PITA 2. It was thus incumbent on the Appellant, in the event of this impasse to appeal to the Tax Appeal Tribunal.
The options open to an aggrieved taxpayer, as stated in Section 13 of the 5th Schedule of the Federal Inland Revenue Service (Establishment) Act, 2007 are as follow:
“(1) A person aggrieved by an assessment or demand notice made upon him by the Service or aggrieved by any action or decision of the Service under the provisions of the tax laws referred to in paragraph 11, may appeal against such decision or assessment or demand notice within the period stipulated under this Schedule to the Tribunal.
(2) An appeal under this schedule shall be filed within a period of 30 days from the date on which a copy of the order or decision which is being appealed against is made, or deemed to have been made by the Service and it shall be in such form and be accompanied by such fee as may be prescribed provided that the Tribunal may entertain an appeal after the expiry of the said period of 30 days if it is satisfied that there was sufficient cause for the delay.
(3) Where a notice of appeal is not given by the appellant as required under subparagraph (1) of this paragraph within the period specified, the assessment or demand notices shall become final and conclusive and the Service may charge interests and penalties in addition to recovering the outstanding tax liabilities which remain unpaid from any person through proceedings at the Tribunal.
Underlining Mine.
The Appellant, having failed to appeal to the Tax Appeal Tribunal, the lower Court, I hold, was right to have rejected its objection to the Respondent’s claim, which claim, I hold, was based on Sections 74, 76, 78 and 104 of the Personal Income Tax Act Supra, to wit, penalty for non-payment of tax, interest thereon and the right of distraint of the Respondent.
I thus resolve the sole issue for determination against the Appellant. This appeal accordingly fails and is dismissed. The judgment of the lower Court, coram Onuoha A.K. Ogwe (Chief Judge) delivered on 20/5/2019 in Suit No. HU/52/2019, is consequently affirmed. The Appellant shall pay costs of N100,000 to the Respondent.
RITA NOSAKHARE PEMU, J.C.A.: I had the advantage of reading before now, the leading judgment just delivered by my brother, OLUDOTUN ADEBOLA ADEFOPE-OKOJIE, JCA.
I agree with his reasoning and conclusions.
I dismiss the appeal and affirm the judgment delivered on the 20/5/2019 in Suit No HU/52/2019.
I abide by the consequential order made as to costs.
IBRAHIM WAKILI JAURO, J.C.A.: I have read before now the draft judgment of my learned brother O. A. Adefope-Okojie, JCA.
His Lordship had extensively dealt with the lone issue in this appeal and I am in agreement with the reasoning and conclusion reached. I have nothing to add than to concur with the judgment that this appeal is unmeritorious and must fail. I equally dismiss same and abide by the order as to cost.
Appearances:
CHIKA MBA For Appellant(s)
OBIKE ONYEMERE For Respondent(s)