DAMANSARA REALTY (JOHOR) SDN. BHD. v Ketua Pengarah Hasil Dalam Negeri (BA-25-66-09/2022)

An order for Certiorari to quash the respondent’s decision in the form of notices of assessment for the years of assessment (“YAs”) 2016 and 2017 and notices of additional assessment for the YAs 2018 and 2019 all dated 15.9.2022 (“Decision”) on the grounds that the said decision of the respondent was ultra vires, illegal, void, unlawful and/or in excess of authority, irrational and/or unreasonable and made without having any regard to the applicant's legitimate expectations;

A Declaration that the alleged disposal of Development Rights on Lot 413 Mukim Tebrau Johor for the development of the Taman Damansara Aliff project (“the Land”) should not and cannot be subject to income tax under section 4(a) of the Income Tax Act 1967 (“ITA”) as the Development Rights are not the applicant's stock in trade; and

A declaration that, by reason of the respondent's failure to invoke section 140(1) of the ITA and give the particulars of S/N ASKTghhhzkWFd8jbvqPaow adjustment together with the impugned notices of assessment for the YAs 2016 and 2017 and notices of additional assessment for the YAs 2018 and 2019 as required under section 140(5) of the ITA, the respondent's decision is illegal and thus, null and void. Factual Background [3] This application for leave to commence judicial review proceedings arises from the notices of assessment for the years of assessment ("YAs") 2016 and 2017 and notices of additional assessment for the YAs 2018 and 2019 all dated 15.9.2022 (“the impugned Notices”) issued by putative respondent to the applicant. [4] The said impugned notices arose from the audit findings letter issued by the putative respondent on 20.5.2021. [5] Dissatisfied with the impugned notices, the applicant filed this application seeking leave to commence judicial review. [6] The applicant also filed an appeal under section 99 of the ITA against the impugned notices by submitting Form Q to the putative respondent on 13.10.2022. Principles relating to leave for Judicial Review [7] The guiding principles for leave for judicial review is that the applicants must show prima facie that the application is not frivolous or vexatious and that there is some substance in the grounds S/N ASKTghhhzkWFd8jbvqPaow supporting the application. In this regard, reference was made to the case of WRP Asia Pacific Sdn Bhd v. Tenaga Nasional Bhd [2012] 4 CLJ 478 which stated as follows: “[12] For purposes of its application, the appellant had alluded to the statutory route of O.53 of the Rules. Under this order two stages are anticipated, with the leave stage being the first, to be followed closely by the substantive hearing after successfully obtaining leave at the High Court. At the leave stage on a quick perusal of the material available, if the court thinks that subsequently at the substantive hearing stage an arguable case may be disclosed, and the relief sought may be granted, leave should be granted (IRC v. National Federation of Self-Employed and Small Business Ltd [1982] AC 617). In Malaysia, the Federal Court in Mohd Nordin Johan v. The Attorney-General, Malaysia [1983] 1 CLJ 130; [1983] CLJ (Rep) 271 when allowing the appeal, opined that ‘the point taken was not frivolous to merit refusal of leave in limine and justified argument on a substantive motion for certiorari’. Without the need to go into depth of the abundant authorities, suffice if we stage that leave may be granted if the leave application is not thought of as frivolous, and if leave is granted, an arguable case in favour of granting the relief sought at the substantive hearing may be the resultant outcome. A rider must be attached to the application though ie, unless the matter for judicial review is amenable to judicial review absolutely no success may be envisaged.” [8] The Supreme Court in Association Of Bank Officers, Peninsular Malaysia v. Malayan Commercial Banks Association [1990] 1 CLJ Rep 33 (SC) stated as follows on the requirement for the application to challenge an Industrial Court Award to show, prima facie, that it is not frivolous or vexatious and there is substance in the proposed challenge: S/N ASKTghhhzkWFd8jbvqPaow “At the outset of the hearing of the appeal before us, we indicated to the parties that we would hear submissions on the issue of leave only… The guiding principles ought to be that the applicants must show prima facie that the application is not frivolous or vexatious and that there is some substance in the grounds supporting the application. On the evidence in this case we found that the appellants had prima facie an arguable case for the granting of the relief they were seeking. Their application was not frivolous or vexatious. There were grounds to consider the allegations made by the appellants and which could only be properly heard and determined on the substantive application for an order of certiorari after leave has been granted.” [9] Founded on these principles, this court will consider the application for leave. Analysis [10] This application seeking leave to commence judicial review proceedings was objected to by the putative respondent. In brief, the objections of the putative respondent are that the applicant has an alternative or domestic remedy which should be exhausted prior to filing this application seeking leave to commence judicial review. [11] It was further argued by the respondent that the applicant had filed Form Q to the putative respondent on 13.10.2022. [12] The main crux of this application is the applicant’s dissatisfaction with the impugned notices raised by the respondent against the applicant. The impugned notices are the assessment of tax made S/N ASKTghhhzkWFd8jbvqPaow by the respondent as a result of the tax audit conducted on the applicant. [13] It was contended by the putative respondent that the applicant ought to file an appeal to the Special Commissioners of Income Tax (SCIT) as provided under section 99 of the ITA which provides: “(1) … a person aggrieved by an assessment made in respect of him may appeal to the Special Commissioners against the assessment by giving to the Director General within thirty days after the service of the notice of assessment or, in the case of an appeal against an assessment made under section 92, within the first three months of the year of assessment following the year of assessment for which the assessment was made (or within such extended period as regards those days or months as may be allowed under section 100) a written notice of appeal in the prescribed form stating the grounds of appeal and containing such other particulars as may be required by that form.” [14] In support of this contention, the putative respondent relied on the case of Ketua Pengarah Hasil Dalam Negeri v. Mudah.my Sdn Bhd [2017] 2 MLJ 197 where the Court of Appeal held that Parliament would not have enacted in vain without any real significant such comprehensive provisions on appeal. [15] It was further submitted by the putative respondent that this court has the discretion by way of judicial review in revenue cases, the exercise of judicial review should only be made in exceptional circumstances. [16] On the other hand, the applicant made reference to the case of Muhibbah Engineering (M) Bhd v Ketua Pengarah Hasil Dalam S/N ASKTghhhzkWFd8jbvqPaow Negeri [2022] 4 MLJ 660 which adopted the position as per the case of QSR Brands Bhd v Suruhanjaya Sekuriti & Anor [2006] 2 CLJ 532 that arguments pertaining to the availability of alternative remedy go to the merits of substantive stage of the judicial review application and ought not to be dealt with at the leave stage. [17] Hence it was argued by the applicant that the existence of alternative remedy does not automatically oust the court’s judicial review jurisdiction. The argument of alternative remedy should be taken into account on substantive application and that the sole question to be determined at the leave stage is whether application is frivolous. See also the case of Allianz General Insurance Co (M) Bhd v Ketua Pengarah Hasil Dalam Negeri [2022] 4 MLJ 498. [18] The applicant contended the filing of Form Q does not bar a judicial review application. Cases cited by the applicant in support of this argument are Ridge v Baldwin and others [1963] 2 All ER 66 and the case of Inspirasi Elit Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2021] 12 MLJ 536. [19] Section 99 of the ITA provides for an appeal mechanism for a party who is aggrieved by the assessment made in respect of him. What this entails is that there is an alternative remedy available to the applicant. [20] In this present application under Order 53 of the Rules of Court 2012, the applicant appealed to the SCIT pursuant to Section 99 of the ITA. This was done by submitting Form Q to the putative respondent on 13.10.2022 pursuant to section 99 of the ITA. S/N ASKTghhhzkWFd8jbvqPaow [21] The applicant filed this application seeking leave to commence judicial review on 26.9.2022. The application by the applicant to SCIT via Form Q was done on 13.10.2022. [22] The dates of filing Form Q and this application in Enclosure 1 will indicate that this application seeking leave for judicial review was filed prior to the filing of Form Q with the putative respondent. [23] In the case of Dell Global Business Center Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri [2021] 10 CLJ 411, Amarjeet Singh J expounded the issue of alternative remedy as reproduced below: “[23] The principles governing the alternative remedy issue is well-settled and are as enunciated by the Supreme Court in Government Of Malaysia & Anor v. Jagdis Singh [1987] 1 CLJ 451; [1987] CLJ (Rep) 110; [1987] 2 MLJ 185 (“Jagdis Singh”), which is incidentally a tax case. [24] The ratio decidendi of the Supreme Court is stated in the following paragraphs of the judgment: ... it is not a rigid rule that whenever there is an appeal procedure available to the applicant he should be denied judicial review. Judicial review is always at the discretion of the Court but where there are other avenue or remedy open to the applicant it will only be exercised in very exceptional circumstances. ... we would therefore hold that the discretion is still with the Courts but where there is an appeal provision available to the applicant certiorari should not normally issue unless there is shown a clear lack of jurisdiction or a blatant failure to perform some statutory duty or in appropriate cases a serious breach of the principles of natural justice. S/N ASKTghhhzkWFd8jbvqPaow [25] In Jagdis Singh the criteria that may amount to exceptional circumstances were described as follows:

a clear lack of jurisdiction;

(ii) a blatant failure to perform some statutory duty; or

(iii) in appropriate cases a serious breach of the principles of natural justice … [31] In this regard I can do no better than to quote Anantham Kasinather JCA when His Lordship commented on the above paragraph in Zakaria Abduallah & Ors v. Lembaga Perlesenan Tenaga Atom & Ors [2013] 1 LNS 304; [2013] 6 MLRA 522 (“Zakaria Abduallah”) as follows: “... then acknowledged cases of a technical nature involving planning, employment and tax to fall within the category of cases where the Court could justifiably refuse, where a statute provides for a specialized appeal procedure. In other words, in cases of a technical nature such as this, the rule would operate in reverse and the Court should grant leave for judicial review only in exceptional cases. The exception being where the applicant is able to demonstrate abuse of power or breach of the rules of natural justice.” [24] To reiterate when there is an alternative remedy available, that remedy should be employed before the matter is brought to the courts for a judicial review. Nonetheless, the court will consider the application for judicial review in exceptional circumstances. What amounts to exceptional circumstances has been laid down in the case of Jagdis Singh (supra). The criteria are a clear lack of jurisdiction, a blatant failure to perform some statutory duty, or in S/N ASKTghhhzkWFd8jbvqPaow appropriate cases a serious breach of the principles of natural justice. [25] Applying the facts of this case to the criteria set out in Jagdis Singh (supra), this court is satisfied there is nothing before this court to show that the criteria for exceptional circumstances as in Jagdis Singh’s (supra) case has been fulfilled. There is no issue of a clear lack of jurisdiction, a blatant failure to perform a statutory duty, or a serious breach of the principles of natural justice. [26] Since the criteria in Jagdis Singh (supra) had not been fulfilled, this court is of the considered view that the this application seeking leave for judicial review should not be allowed. [27] Moreover, this court takes cognisance of the fact that the applicants had filed Form Q with the putative respondent after having filed this application in Enclosure 1. [28] The applicants contend that there is a question of law that requires this court’s consideration. The issue is “Whether the gains from the disposal of the Development Rights on Lot 413 Mukim is subject to income tax under the ITA 1967 or real property gains under the Real Property Gains Tax Act 1976. [29] If indeed this is a question that this court is required to consider, the question therefore is why did the applicant then file Form Q before the SCIT. This court therefore finds this argument untenable. [30] It is the considered view of this court, the applicant cannot have two concurrent “appeals”. One application to this court by way of a judicial review and the other by way of appeal to the SCIT. The S/N ASKTghhhzkWFd8jbvqPaow applicant, in the considered view of this court, should decide which forum the applicant intends to proceed with. Stay [31] Pertaining to the issue of stay, section 103B of the ITA provides as follows: “The institution of any proceedings under any other written law against the Government or the Director General shall not relieve any person from liability for the payment of any tax, debt or other sum for which he is or may be liable to pay under this Part.” [32] A perusal of section 103B of the ITA requires the tax payable to be paid although there is a proceedings filed in court by the taxpayer. [33] The putative respondent submits that the court should refuse to grant a stay order in the judicial review application against the notice of assessment as it will defeat the purpose of Parliament in introducing section 103B of the ITA. By granting stay, it would render the insertion of section 103B in the ITA completely otiose and gives the impression that Parliament had enacted the provision in vain. [34] It was further submitted by the putative respondent that it is the duty of a taxpayer is to pay tax promptly which is a statutory duty. The tax must be paid within the time prescribed by the law notwithstanding any objection or appeal. S/N ASKTghhhzkWFd8jbvqPaow [35] In the case of Government of Malaysia v Mohd Najib bin Hj Abd Razak [2020] 9 MLJ 618, the court observed as follows: “[34] This court, with respect after hearing submissions by parties opined that the granting of the stay of proceedings would actually restrain the plaintiff from enforcing its statutory duty in collecting tax due to the government. Hence, the delay of collecting any amount of tax due to be paid would clearly prejudice the plaintiff. [35] Further, the provisions of ss 103 and 106 of the Act empowers the plaintiff to proceed with the recovery proceeding for unpaid tax against the defendant. If stay of proceedings is granted, it would give a huge impact to the tax recovery process. The stay would, if granted defeat the whole substratum of tax recovery legislation as manifested in ss 103 and 106 of the Act.” [36] This court made reference to the case of Kerajaan Malaysia v Nooryana Najwa bt Dato Sri Mohd Najib [2020] 11 MLJ 242, where the High Court observed the reason why stay should not be given in tax cases as follows: “[25] I dismissed the Defendant’s application in Enc. 53. My reason for dismissing the application is that to stay these proceedings pending the determination of the Federal Court on the constitutionality of section 106(3) of ITA, vis-à-vis the judicial powers of the Courts under Article 121 of the Federal Constitution, would open the flood-gates for all other defendants, facing similar civil suits by the Plaintiff under section 106 of ITA for recovery of unpaid taxes, to use the same grounds of reference to the Federal Court on the constitutionality of section 106(3) of ITA as a basis to stay the civil suits against them. For the same reason, Malaysian tax payers may choose not to pay their taxes pending the decision of the Federal S/N ASKTghhhzkWFd8jbvqPaow Court on the constitutionality of section 106(3) of ITA since all civil proceedings for recovery of unpaid taxes by the Government are to be stayed pending the determination by the Federal Court. Taxes is one of the main sources of income for the Government of Malaysia. Nonpayment of taxes by taxpayers pending the determination by the Federal Court of the constitutionality of section 106(3) of ITA would place our public-sector under more strain than it already is.” [37] A reading for section 103B of the ITA and the cases cited above, this court is satisfied stay should not be granted to the applicant. [38] Nonetheless, if even the argument to allow stay is considered, there must exist special circumstances. What amounts to special circumstances can be found in the case of Leong Poh Shee v Ng Kat Chong [1966] 1 MLJ 86 where Raja Azlan Shah J stated: “[16] …Special Circumstances, as the phrase implies, must be special under circumstances as distinguished from ordinary circumstances. It must be something exceptional in character, something that exceeds or excels in some way that which is usual or common.” [39] In the view of this court, there is naught before this court to indicate there are special circumstances that would enable this court to grant an application for stay. This court is not satisfied there are special circumstances in this case which would warrant a stay. [40] See cases: Kosma Palm Oil Mill Sdn Bhd & Ors v. Koperasi Serbausaha Makmur Sdn Bhd [2004] 1 MLJ 257; Kerajaan Malaysia v Nooryana Najwa bt Dato Sri Mohd Najib [2020] 11 MLJ 242 S/N ASKTghhhzkWFd8jbvqPaow Conclusion [41] In the upshot and premised on the above stated reasons, leave to commence judicial review is refused. Consequentially, this application seeking leave to commence judicial review is hereby dismissed. Costs of RM 5,000.00 subject to allocator is to be paid to the putative respondent. Date: 06 April 2023 (SHAHNAZ BINTI SULAIMAN) Judge High Court of Malaya, Shah Alam S/N ASKTghhhzkWFd8jbvqPaow Counsel: For the Applicant: S. Saravana Kumar, Nur Hanina binti Mohd Azham Tetuan Rosli Dahlan Saravana Partnership Advocates & Solicitors Level 16, Menara 1 Dutamas, Solaris Dutamas, No. 1, Jalan Dutamas 1, 50480 Kuala Lumpur. sara@rdslawpartners.com +6 03 6209 5400 For the Putative Respondent: Ahmad Isyak bin Mohd Hassan, Mohamad Azyraf bin Zakaria Bahagian Rayuan Khas, Jabatan Undang-Undang, Lembaga Hasil Dalam Negeri Malaysia, Menara Hasil Aras 16, Persiaran Rimba Permai, Cyber 8, 63000 Cyberjaya, Selangor. +6 03 8313 8865 S/N ASKTghhhzkWFd8jbvqPaow