Kerajaan Malaysia (LHDN) v Pua Kim Ban (21NCVC-5-02/2018)

On 10 July 2018, the plaintiff, the Government of Malaysia, applied for summary judgment under Order 14 of the Rules of Court 2012 in respect of its claim against the defendant, Pua Kim Ban, for unpaid income tax. 2

On 26 February 2018, the plaintiff instituted this action against the defendant under section 106(1) of the Income Tax Act 1967 (“the Act’) for the recovery of RM 3,026,653.99 being additional income tax raised on the defendant for the years 2008 to 2014 and 2016, inclusive of the 10%, 10% and 5% penalties under sections 107(B) and 103 of the said Act. It was alleged in the statement of claim that the additional assessments for the said years were issued and duly posted vide ordinary post to the defendant’s last known address.

On 2 May 2018, the defendant filed his Defence through his solicitors. It was alleged, inter-alia, that he was not liable to pay the additional income tax or penalties as he did not receive the notice of assessments. By its Reply dated 16 May 2016, the plaintiff denied the allegation that the notices of assessment were not served on the defendant.

The plaintiff filed the present application for summary judgment about 2 months after the filing of its Reply. The plaintiff’s affidavit in support was affirmed by one Ahmad Shafie bin Rahmat, a tax officer in the 3 plaintiff’s department, who deposed that notices of additional assessment for the said years mentioned in the claim were issued and posted vide ordinary post to the defendant’s last known address. The said notices of assessment and a certificate signed and issued by the Director General of the Inland Revenue under section 142 of the Act certifying the amount due from the defendant were exhibited in support of the application.

The defendant resisted the application on two main grounds: i. That there was delay in the filing of the application; and; ii. That there was a triable issue as to whether the defendant received the notices of assessment that formed the subject matter of the present action.

The defendant contended that the summary judgment application was defective as it was made only after Defence had been delivered and no explanation was given by the plaintiff for the delay. The contention was premised on the following passage in the decision of 4 the Supreme Court in Krishnamurthy & Anor v Malayan Finance Corp Bhd [1986] 2 MLJ 134 : … the law as to the time when an application for an O 14 judgment could be made is settled law. The application must be made after an appearance has been entered and it could be made either before or after the delivery of defence provided that where it was made after the delivery of the defence, the plaintiff must explain the delay. If this explanation was not accepted by the court no O 14 judgment could be signed. This is the ratio decidendi in McLardy v Slateum (1890) 24 QBD 504. This case was followed by Raja Azlan Shah J (as he then was) in Comptroller-General of Inland Revenue, Malaysia v Weng Lok Mining Co Ltd [1969] 2 MLJ 98 and Abdoolcader J (as he then was) in Societe des Etains de Bayas Tudjuh v Woh Heng Mining Kongsi [1978] 2 MLJ 267.

In my view, the principle laid down in Krishnamurthy & Anor v Malayan Finance Corp Bhd does not apply to income tax cases in light of section 142(1) of the Act. The section provides: In a suit under section 106 the production of a certificate signed by the Director General giving the name and address of the defendant and the amount of tax due from him shall be sufficient evidence of the amount so due and sufficient authority for the court to give judgment for that amount." 5

It is clear from the provision that the Court has absolutely no discretion but to give judgment in favour of the Government upon the production of the section 142(1) certificate. In the present case, as the Director General of Income tax has issued the section 142(1) certificate, the Court must give judgment notwithstanding any delay in the filing of the application, whether explained or otherwise.

That brings me to the second ground that. The only ground on which a taxpayer would be entitled to have a summary judgment application against him to recover income tax dismissed, is if he is able to show that the notice of assessment was not served on him. It is trite law that a taxpayer’s liability to pay income tax arises only upon service of the notice of assessment on him. The defendant claimed that he did not receive the notices of assessments posted to him, and pointed to the the absence of any proof in the plaintiff’s affidavits to show that they were in fact posted to him. It was said that as the notices of assessment were “crucial documents”, they ought to have been sent to him by registered post instead of ordinary post. 6

The defendant’s allegation that he did not receive the notices of assessment is not supported by the affidavit evidence. It is pertinent that the defendant had by letter dated 21 October 2017 (marked as exhibit “ASR 6”) written to the plaintiff seeking time to settle the tax claimed in the very same notices of assessment in this action. The letter clearly shows the defendant’s assertion that he did not receive the notices of assessment is untrue and does not constitute a triable issue.

In addition, the defendant’s complaint that the plaintiff ought to have posted the notices of assessment to him by registered post instead of ordinary post is totally without merit by reason of the provisions in section 145 of the Act. It provides:

Subject to any express provision of this Act, for the purposes of this Act notices may be served personally or by ordinary or registered post.

A notice relating to tax which is sent by ordinary or registered post shall be deemed to have been served on the person (including a partnership) to whom it is addressed on the day succeeding the day on which the notice would have been received in the ordinary course of post if it is addressed- 7

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in the case of an individual, to his last known address.

It is clear from the provision that the notices of assessment can be served by ordinary post.

For the reasons given, the plaintiff’s application for summary judgment is allowed with costs of RM3,000. Dated: 17 December 2018