Kerajaan Malaysia v 1. ) Maju Holdings Sdn Bhd (Dahulu Dikenali Sebagai Pembangunan Swasta Sdn Bhd) (WA-21NCvC-18-02/2021)

MAJU HOLDINGS SDN BHD (DAHULU DIKENALI SEBAGAI PEMBANGUNAN SWASTA SDN BHD)

ABU SAHID BIN MOHAMED (NO. K/P: 510820-01-5073) … DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT (Enclosure 10 – Order 14 Rule 1 of Rules of Court 2012) A. Introduction i) Facts of the case [1] This is an application by the Inland Revenue Board (“IRB”) to summarily enter judgment against Maju Holdings Sdn Bhd (“D1”) and Abu Sahid bin Mohamed (“D2”) (collectively “the Defendants”). [2] For year of Assessment 2018, D1 had been assessed with income tax amounting to RM51,966,694.66 through the Notice of Assessment dated 28.10.2020 (‘Notice of Assessment of 2018’). [3] For years of Assessment 2012 and 2017, D1 had been assessed with additional assessments amounting to RM23,191,149.60 and 16/10/2024 09:31:48 WA-21NCvC-18-02/2021 Kand. 53 RM59,847,004.80 respectively through Notices of Assessment both dated 28.10.2020 (‘Additional Notices of Assessment of 2012 and 2017’). [4] Since D1 had failed to settle the income tax for the Additional Notices of Assessment of 2012 and 2017 and Notice of Assessment of 2018 within 30 days from the date of each respective notices being served, an increment of 10% amounting to RM2,319,114.96, RM5,984,700.48 and RM5,196,669.46 respectively had been imposed and added to the said unpaid income tax. [5] Being aggrieved by the Notice of Assessment of 2018 and Additional Notices of Assessment of 2012 and 2017all dated 28.10.2020 (collectively known as ‘Notices of Assessment’), on 25.11.2020, D1 appealed to the Special Commissioners of Income Tax (‘SCIT’) by filing the Form Qs (‘Form Qs’) with the IRB pursuant to s 99(1) of the Income Tax Act 1967 (‘ITA’) (‘Appeal’). [6] D2 is at all material time the director and shareholder of D1. In view of the operation of Section 75A of the ITA, D2 is jointly and severally liable for all tax due and payable by D1. [7] The Plaintiff later filed a writ of summons and statement of claim against the Defendants for the failure on the part of D1 to pay its income tax under these Notices of Assessment including the increment by a sum equal to ten per cent of the tax so unpaid amounting to RM148,505,333.96. The Defendants then filed a statement of defence. The Plaintiff later filed its reply. [8] Thereafter, the Plaintiff filed a summary judgment application (‘this Application’) – under Order 14, rule 1 of the Rules of Court 2012 (“ROC 2012”) for the recovery of the same. An affidavit in support of this Application was affirmed by one Mohd Roslan Che Yusoff who is an executive officer (Assessment) of the legal branch of the IRB (Enclosure 11). Subsequently, the Defendants filed their affidavit to oppose this Application. The same was affirmed by one Mohamed Roslan bin Mohamed Shariff who is the Group Chief Executive Office of the Defendant (Enclosure 13). Immediately, the Plaintiff responded through an affidavit in reply affirmed by Mohd Roslan Che Yusoff (Enclosure 15). ii) Submission of the Plaintiff [9] The Plaintiff submitted that the amount of tax imposed on D1 was due and payable regardless whether the Defendants had appealed against the assessment. Both the amount of tax due and the increments imposed under ITA are to be recovered as a tax due and payable. [10] The Plaintiff further submitted that the Court shall not entertain any plea on the amount of tax sought to be recovered was excessive, incorrectly assessed, under appeal, or incorrectly increased. The Defendants should have appealed to the SCIT if it was dissatisfied and aggrieved by the imposed penalty and the statute of limitations. The Plaintiff argued that only the SCIT held the jurisdiction to hear both issues according to the provisions of the ITA. [11] The Plaintiff later concluded that the Defendants had no merit in their opposition to this Application. iii) Submission of the Defendants [12] The Defendants’ case was briefly concerning the procedure involved. As D1 was aggrieved by the Notices of Assessment served by the Plaintiff, it had appealed to the SCIT. [13] On appeal, the Director General (‘DG’) was required to review the assessment within 12 months. However, the Plaintiff commenced this civil proceeding against the Defendants without taking into account the fact that there might be a settlement between the parties. [14] D1 disputed the additional assessment and the increments of 10% from the amount due and payable pursuant to the ITA. Also, the imposition of increments on the Notices of Assessment was not mandatory. [15] The First Defendant also denied the validity of additional assessment for year of assessment 2012 as it was time barred. [16] The Defendants submitted that Defendants had a real and bona fide defence. Thus, it was the Defendants’ submission that this Application should be dismissed by the Court with cost. B. Finding and Decisions of the Court [17] Having appraised the facts adduced by all the parties through affidavits and after considering the submissions by the learned counsels, I find that the Defendants have failed to raise any triable issues. Thus, this Application by the Plaintiff is allowed with costs. My decision is based on the following findings.

LEGAL PRINCIPLES RELATING TO THE SUMMARY JUDGMENT APPLICATION IN TAXATION CASE [18] It is trite law that the principle governing the summary judgment application is well-settled under Order 14 Rules 1 of the Rules of Court 2012. [19] The Defendants’ Counsel argued that from the facts, the case was not a plain and obvious case for summary judgment. There were, in fact, triable issues of fact and of law in the case, particularly on: a) whether the additional assessment for the year 2012 was statute barred; and b) whether imposition of increments on notices of assessment was mandatory. [20] However, the Plaintiff refuted the Defendants’ argument on the basis that the amount of tax imposed on D1 by the Plaintiff was due and payable in accordance with Section 103(2) of ITA. [21] In addition to that, under Section 106(1) of the same Act: “Tax due and payable may be recovered by the Government by civil proceedings as a debt due to the Government.” [Emphasis added] [22] In Arumugam Pillai v. Government of Malaysia [1975] 2 MLJ 29, at p. 29, Gill CJ (Malaya) decided that: “…by reason of the operation of section 106(3) of the Income Tax Act, 1967, the court, to put it bluntly, had only one function to perform, and that was to give judgement in favour of the Government.” [Emphasis added] [23] The Plaintiff emphasized and argued that the issue raised by the Defendants in regards to the amount of tax and the penalties imposed by the Plaintiff could not be pleaded in Court since such issue would be contradictory with section 106(1) and (3) of ITA which provided that: “In any proceedings under this section 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 under subsection 103(3),

(4), (5), (6), (7) or (8).” [Emphasis added] [24] Based on the provisions stated, Plaintiff submitted that the Court should not entertain any plea on the amount of tax sought to be recovered was excessive, incorrectly assessed, under appeal, or incorrectly increased. Besides, the then Federal Court had also deliberated on this in Sun Man Tobacco Co. Ltd v. Government of Malaysia [1973] 2 MLJ 163 at p. 165, Gill FJ: “In place of a Board of Review we now have the Special Commissioners of Income Tax. It is open to a taxpayer to go before them and prove that he is not liable to assessment. The doors of justice are not shut to him merely because the claimant is the Government, but he has to enter the doors of the Special Commissioners first to raise the plea of non-observance of the principle of natural justice or to establish that the Director-General acted arbitrarily and in a non-judicial manner. It is only after he has availed himself of that remedy as laid down by the law that he has a right to come to the Courts.” [Emphasis added] [25] The ratio mentioned earlier by the Federal Court in Arumugam Pillai (Supra), is clear; this Court must give judgement in favour of the Plaintiff because only the SCIT could determine the appeal by the Defendants (See, Kerajaan Malaysia v. Saratogoa Sdn Bhd [2006] 7 CLJ 229). [26] In deciding this issue, this Court agree with the Plaintiff that this Court is not the right quorum to decide on the issue of amount of tax assessed and the assessment that have been raised by the Defendants including the amount of exact tax due and payable to the Plaintiff in this Application. This is the trite position of the law. [27] The Plaintiff has satisfactorily proven in its submission that summary judgment should be entered. The Defendants on the other hand, challenged this position and alleged that an Order 14 application did not necessarily mean that this Application could be allowed as a matter of right. The Defendants also alleged that it was enough for the Defendants to raise only one defence to strike out this Application. Hence, I will now proceed to discuss the key issues raised by the Defendants to analyse whether the Defendants have any defence in opposing this Application.

(ii) THE TAX BECOME DUE AND PAYABLE AFTER NOTICE [28] In this case, Notices of Assessment which had been served by post to the latest address known or the registered address shall be deemed to be served on Defendants. [29] The Plaintiff submitted that by serving the Notices of Assessment to the Defendants, the tax assessed had become due and payable whether or not the Defendants appealed to the SCIT. Since the Defendants had failed to pay the tax due and payable within the specified time, the tax can be recovered by Plaintiff by way of civil action. [30] Having considered the above authorities, it is abundantly clear that under the law, the amount due including the increments of 10% and 5% must be paid by the Defendants. It is the Defendants’ statutory obligation to pay it. Any dispute or appeal regarding the amount must officially be lodged with the SCIT and not this Court. Thus, there is no merit in the Defendants’ argument on this issue.

(iii) ISSUE ON THE TIME LIMITATION FOR THE ADDITIONAL ASSESSMENT FOR YEAR 2012 [31] The Defendants contended that there was a limitation of 5 years after the end of a particular year of assessment to make an additional assessment. It was argued that the additional assessment for year 2012, which was only raised on 28.10.2020, was outside the 5 years period provided for in Section 91(1) of the ITA and therefore statute barred. [32] However, the Plaintiff reasserted that the issue of the statute of limitations was irrelevant in this case by directing this Court to Section 91(3) ITA 1967 which allowed an exception on time limitation. Section 91(3) ITA 1967 clearly provided that: “(3) The Director General where it appears to him that—

any form of fraud or wilful default has been committed by or on behalf of any person; or

any person has been negligent, in connection with or in relation to tax, may at any time make an assessment in respect of that person for any year of assessment for the purpose of making good any loss of tax attributable to the fraud, wilful default or negligence in question.” [Emphasis added] [33] The Plaintiff also drew the attention of the Court to a recent case where the issue of statute of limitations was raised by the taxpayer in that case, and the Court had ruled that the Plaintiff had the authority to raise assessments beyond the statute of limitations. In the case of Government of Malaysia v. Mohd Najib bin Hj Abd Razak [2020] 9 MLJ 618 my learned brother Ahmad Bache J held that: “[45] Be that as it may, it is pertinent to note that the Plaintiff has the authority to raise the assessment beyond the limitation period as provided under section 91(3) of the ITA 1967, where the section clearly states that: "(3) The Director-General where it appears to him that:

any form of fraud or willful default has been committed by or on behalf of any person; or

any person has been negligent. in connection with or in relation to tax, may at any time make an assessment in respect of that person for any year of assessment for the purpose of making good any loss of tax attributable to the fraud, willful default or negligence in question." [Emphasis added] [34] The Plaintiff also referred to another case report in Government of Malaysia v. Mohd Najib bin Hj Abd Razak [2020] 12 MLJ 580 in which the same High Court, in granting the Plaintiff's summary judgment application, stated that the issue of statute of limitations was a question of fact and must be determined by SCIT: “[63] It is germane to note on the issues of fraud/ willful/default/negligence under Section 91 (3) of the ITA 1967 and on limitation period, they are all issues of facts. This Court opines that such issues are to be decided by the SCIT being judges of facts.” [35] Therefore, the Plaintiff had premised that the additional assessment for year 2012 was based on the provisions of ITA. Furthermore, the Plaintiff contended that the statute of limitations was an issue involving the merits of the assessments that should be decided by the SCIT instead of this Court. [36] The Plaintiff's argument was supported by the decision of the Federal Court in the case of Kerajaan Malaysia v. Dato' Haji Ghani Gilong [1995] 3 CLJ 161, in which it was decided by His Lordship Edgar Joseph Jr. FCJ that the SCIT had jurisdiction to hear issues related to the statute of limitations. Relevant excerpts were submitted as below: “[2] The plea of limitation based on s. 91(1) and

Income Tax Act 1967 by a taxpayer cannot be entertained by the High Court. Only the Special Commissioners have the power to do so. If otherwise, a decision by the High Court on the question of limitation would prevent the Special Commissioners from deciding the same question as they would regard themselves as bound by the decision of the High Court thereby abdicating their fact finding function of determining whether there has been fraud or wilful default under s. 91(3)(a) Income Tax Act.” [Emphasis added] [37] The Plaintiff also referred to the decision of the Supreme Court, in Chong Woo Yit v. Government of Malaysia [1989] 1 CLJ (Rep) 9); where at page 11(f), Gunn Chit Tuan SCJ quoted and endorsed the following ratio of Arumugam: “In our judgment, limitation as such does not apply to any proceedings by the Government for the recovery of any tax. This would seem clear from the proviso to s. 33(1) of the Limitation Ordinance 1953. Reading s. 91 of the Income Tax Act 1967 as a whole it would seem clear that, quite apart from any form of fraud, the words " within twelve years after its expiration " are irrelevant where there has been any wilful default on the part of a taxpayer in disclosing part of his income for any particular year of assessment.” [Emphasis added] [38] Therefore, based on the aforementioned authorities, I agree with the Plaintiff that the inland revenue is legally allowed to raise assessments beyond the statute of limitations. Consequently, the raised assessments are valid under the ITA. [39] The Defendants legitimately owes the Plaintiff according to ITA. The Defendants' failure to pay ITA has resulted in a lawful debt under the law. In regards to the issue of statute limitation, it is trite that this issue should be heard before the SCIT. This Court do not possess any jurisdiction to hear and/or decide on this. Based on the cases mentioned, it is settled law that the issue of limitation must be dealt by the SCIT since the SCIT has the power to hear any plea of limitation. Again, the Defendants have, thus, failed in their argument under this issue.

(iv) IMPOSITION OF PENALTY [40] To further, Defendants’ Counsel argued that the ITA does not provide that it is mandatory to impose penalty on the Notices of Assessment should D1 fail to pay within 30 days from the service of the Notices of Assessment. Therefore, it was argued that the issue whether the imposition of penalty was mandatory was also a triable issue and thus, this Application ought not be granted. [41] The Plaintiff rebutted this and argued that the imposition of penalties on the Notices of Assessment was valid under Section 103 of the ITA. D1 should have appealed to the SCIT if it was dissatisfied and aggrieved by the imposed penalty and the statute of limitations. Only the SCIT held jurisdiction to hear both issues according to the provisions of the ITA. [42] This Court again agree that Section 103 of the ITA has given the Plaintiff the right to levy any penalty and additional increment to any outstanding income taxes. Also, according to Section 125(2) of the ITA, the imposed penalties must be collected using a method where the penalties are considered part of the tax that the Defendants are required to pay. This is further supported by the decision in Kerajaan Malaysia v. Ong Kar Beau [2003] 6 MLJ 225 where Zaleha Zahari J observed that: “My decision are as follows: The scheme of the Income Tax legislation is clearly that, upon service of a Notice of Assessment on the person assessed, the tax payable under the assessment becomes due and payable at the place specified in the Notice, whether or not that person appeals against the assessment. Failure to pay within the time prescribed would attract the provisions of the penalties provided for under section 103 (4) and section 103(5A) of the Act. The amount assessed and penalty imposed can be recovered by way of civil proceedings as a debt due to the Government.” [Emphasis added] [43] Again, with due respect, it is clear in our case that the Defendants have failed to fully settle the tax assessed within the time frame stated in ITA. As a result, the increments of 10% and 5% are imposed in accordance with Section 103(5) and 103(6) of the ITA. Therefore, this Court agree that the increments of 10% and 5% are appropriate and in accordance with the taxation laws.

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 [44] As mentioned earlier, the law permits the government to recover tax which is due and payable through civil proceedings as a debt owing to the government. However, I am mindful that in proceedings under Section 106(3), the court is not allowed to consider any argument that the amount of tax being sought for recovery is excessive, inaccurately assessed, under appeal, or incorrectly increased. This is also the ratio of the Federal Court in Sun Man (Supra) at p. 165: “In place of a Board of Review we now have the Special Commissioners of Income Tax. It is open to a taxpayer to go before them and prove that he is not liable to assessment. The doors of justice are not shut to him merely because the claimant is the Government, but he has to enter the doors of the Special Commissioners first to raise the plea of non-observance of the principle of natural justice or to establish that the Director-General acted arbitrarily and in a non-judicial manner. It is only after he has availed himself of that remedy as laid down by the law that he has a right to come to the Courts.” [Emphasis added] [45] This is indeed, reaffirmed by the Federal Court in Arumugam (Supra). [46] In Kerajaan Malaysia v. Saratogoa Sdn Bhd [2006] 7 CLJ 229, Wan Adnan Muhamad J at para 21 at p. 236, had decided that: “Hanya Pesuruhjaya Cukai sahaja yang boleh menimbang rayuan defendan berkenaan dengan cukai yang dikenakan.” [47] In considering this issue, I agree with the Plaintiff that this Court is not the appropriate authority to determine the issue on the amount of tax assessed and the assessment, including the specific amount of tax due and claimed by the Plaintiff in this case. Only the SCIT has such power. Again, I see no triable issue here.

(vi) THE RIGHT PROVIDED TO PLEA TO THE SCIT [48] The Plaintiff submitted that if the Defendants were not satisfied with the assessment served, the Defendants could make a plea to the SCIT under Section 99(1) ITA: “(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.” [Emphasis added] [49] This is indeed the position in Sun Man (Supra). [50] Also, as His Lordship Azmi LP clearly concluded in Sun Man (Supra) at p. 164: “In my opinion the learned Judge, was right in this instant case where he said that if the taxpayer wished to dispute that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased under s. 103(4) or (5) he has to do so by way of appeal to the Special Commissioners.” [Emphasis added] [51] ITA provides that the assessment shall be conclusive and final for the purposes of the Act. Section 97 states that: “97. (1) Where—

no valid notice of appeal against an assessment has been given under section 99 within the time specified by that section (or any extension thereof);

an agreement has been come to with respect to an assessment pursuant to subsection 101(2);

an assessment has been determined on appeal and there is no right of further appeal; or

a valid notice of appeal against an assessment has been given but the appellant dies before the hearing of the appeal by the Special Commissioners is commenced or completed and no personal representatives of the estate of the deceased appellant applies to the Special Commissioners within two years after his death to proceed with or complete the hearing, the assessment as made, agreed to or determined shall be final and conclusive for the purposes of this Act.

Nothing in subsection (1) shall prejudice the exercise of any power conferred on the Director General by section 91, 95 or subsection 143(3).”. [52] Again, with due respect, it is clear in our case that if the taxpayer wishes to dispute that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased under s. 103(4) or (5) he has to do so by way of appeal to the SCIT. [53] This Court has no intention to discuss much further on whether the tax sought is excessive, incorrectly assessed or incorrectly increased. First and foremost, as far as this Court is concerned, the law is trite that the Plaintiff has the right to impose 10% and 5% increments and the Defendants must pay up the tax liability within a specific period, no matter how dissatisfied they are with the assessment. Any appeal, if at all, must be made to the SCIT. As in our current case, even if the Defendants had made such appeal, pending the outcome of the appeal, the tax is still payable. It is the Defendants’ statutory obligation to pay the amount stated in the Notices of Assessment. Thus, there is, again, no merit in the Defendants’ argument regarding this issue. C. Conclusion [54] To sum up, this Court hold that the Defendants have failed to raise any triable issues that need to be addressed. It is the position of law that the tax is due and payable after initial notices have been deemed to be issued and served on the taxpayer. I therefore find that this Application in Enclosure 10 is in order and thus allow it with cost. [55] Judgment is hereby entered summarily against the Defendants for the sum of RM148,505,333.96 together with interest at a rate of 5% per annum from the date of judgment until realization. The Defendants are also ordered to pay costs to the Plaintiff. Dated: 29th September, 2024 YA DR. JOHN LEE KIEN HOW @ MOHD JOHAN LEE Judge High Court Malaya Kuala Lumpur For the Plaintiff Komathi A/P P. Karuppanan Legal Counsel Lembaga Hasil Dalam Negeri For the Defendants Eizlan Farhan Bin Nakhrowi Messrs. Chooi & Company + Cheang & Ariff Advocates & Solicitors Table of Authorities Cases Arumugam Pillai v. Government of Malaysia [1975] 2 MLJ 29 Sun Man Tobacco Co. Ltd v. Government of Malaysia [1973] 2 MLJ 163 Government of Malaysia v. Mohd Najib bin Hj Abd Razak [2020] 9 MLJ 618 Government of Malaysia v. Mohd Najib bin Hj Abd Razak [2020] 12 MLJ 580 Kerajaan Malaysia v. Dato' Haji Ghani Gilong [1995] 3 CLJ 161 Chong Woo Yit v. Government of Malaysia [1989] 1 CLJ (Rep) 9) Kerajaan Malaysia v. Ong Kar Beau [2003] 6 MLJ 225 Kerajaan Malaysia v. Saratogoa Sdn Bhd [2006] 7 CLJ 229 Statutes Income Tax Act 1967, ss. 90(2)(b), 91(3), 92, 96A, 99, 103(2), (3), (4), 106(3), 125(2), 134 (2)(b) (v), 136(5), 142, 163 (5) Rules of Court 2012, O. 14 r.