Kerajaan Malaysia v Maju Holdings Sdn Bhd (Dahulu Dikenali Sebagai Pembangunan Swasta Sdn Bhd) (WA-21NCvC-232-11/2021)

(a). Firstly, in summary judgment actions under ITA 1967, the normal rules for triable issues do not apply because of the provisions of ITA 1967.

(b). Secondly, that the Plaintiff’s claim is based on the declarations made, self-assessed, and confirmed by the Defendant within the prescribed Income Return Form for assessment year 2019.

(c). Thirdly, that the plea raised by the Defendant cannot be S/N kzyoa1x4/EG5DHjLjJtYpg page 3 of 13 entertained by this Court by virtue of section 106(3) of ITA 1967. [7] For the first point, the Plaintiff relied on the decision of Gunn Chit Tuan SCJ in the Supreme Court case of Chong Woo Yit v. Government of Malaysia [1989] 1 CLJ (Rep) 9 approving the dictum of Arulanandom J (as he then was) at p. 13: “We would agree and approve the following dictum of Arulanandom J (as he then was) in the case when he said: When proceedings are commenced under O. 14 the normal rules for triable issues do not apply to cases of this nature because of the provisions of the Income Tax Act. Normally when defence raised triable issues it is a rule of law that unconditional leave to defend should be given but under section 106(3) of the Income Tax Act it clearly states that in any proceedings commenced by the Government under section 106(1) of the Act for the recovery of tax by civil proceedings as a debt due to the Government the Court shall not entertain any plea that the amount to tax sought to be recovered is excessive, incorrectly assessed, under appeal, or incorrectly increased under section 103(4) or (5).”. [Emphasis added] [8] On the second point, the Plaintiff forwarded the argument that it was an annual obligation on the Defendant under ITA 1967 to submit a return form to the Director General of Inland Revenue (DGIR). As Malaysia utilises a self-assessment system, the law provides that the Defendant self declares its own income. This was evidenced in the form of a submitted Income Return Form for assessment year 2019 from the Defendant to the Plaintiff. It was then, under section 90 of ITA 1967, deemed assessed that the tax due S/N kzyoa1x4/EG5DHjLjJtYpg page 4 of 13 and payable was RM5,127,098.40. Thus, the obligation to pay the assessed amount arose under section 103, whether or not the taxpayer appealed against the assessment, before 31 July 2020. [9] The Plaintiff also submitted that the date of the Income Return Form was deemed by law to be the date of the income tax assessed by the DGIR and should be treated as the date of the formal notice of assessment (“the Notice”). Having notified the Defendant and the Defendant having failed to comply with the Notice, the Plaintiff claimed a further increment of 10% and 5% from the assessed amount as penalties which brings to the Total Amount due and payable. [10] On the third point, the Plaintiff argued that the court shall not entertain any plea raised by the Defendant for tax sought to be recovered whether it was excessive, incorrectly assessed, under appeal or incorrectly increased. The Plaintiff cited Section 106(3) of ITA 1967 and several authorities in support of its contention. The Defendant’s Submissions [11] The Defendant conceded in part that a return form for estimated taxes was submitted to the Plaintiff in the sum of RM1,000,000.00 to be paid in 15 instalments and that the Defendant failed to pay part of the instalments leading to the Total Amount. The Defendant also admitted that the Income Return Form was correctly submitted, from which the Total Amount was derived. S/N kzyoa1x4/EG5DHjLjJtYpg page 5 of 13 [12] The Defendant, however, contended that there was a live and triable issue to be considered by this Court where the Defendant cited apex authorities on the subject of summary judgment. [13] The Defendant maintained its line of defence stating that the Prime Minister at the time of the assessment, specifically on 31 May 2021, had announced a programme called Program Strategik Memperkasa Rakyat dan Ekonomi Tambahan (PEMERKASA+) to reduce the burden on businesses affected by the COVID-19 pandemic between 2020 and 2021. This programme was confirmed by the Plaintiff through a media release on 3 June 2021 under the name of the IRB stating that relaxations were offered in the form of: a) delay of payment of penalties; b) consideration of tax payment rescheduling; and c) consideration of reviews of penalties imposed on taxpayers affected by the pandemic. [14] The Defendant further emphasised to this Court that the Defendant had been a “historically responsible taxpayer” by filing and paying its taxes on time, and thus, had never attempted to evade taxes. Such was the reason the Defendant made full disclosure to the Plaintiff in relation to documents and information as per request. Therefore, at all times, the Defendant genuinely sought to settle any sum due and owing. Despite so, the advent of the COVID-19 pandemic badly affected the Defendant and the lockdowns S/N kzyoa1x4/EG5DHjLjJtYpg page 6 of 13 imposed by the Plaintiff made it impossible for the Defendant to raise revenue to pay the Plaintiff. [15] The Defendant cited the decision of Alizatul Khair J (as she then was) in the case of Office Park Development Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri [2011] 9 MLJ 479 to support its contention that it was not mandatory to impose penalties upon assessments and such penalties should not be imposed on parties acting in good faith with full disclosure. Therefore, it was argued that this Court had the power to entertain such plea. Finding and Decision [16] Having appraised the facts adduced by parties through affidavits and after deliberations on the submissions by both learned counsels, I find that the Defendant has failed to raise any triable issues that would warrant a dismissal of this Application. [17] The followings are my reasonings and findings for deciding in favour of the Plaintiff. I. The Law on Summary Judgment for Actions commenced under ITA 1967 [18] It is trite law on what must be satisfied as an application under Order 14 rule 1 of the Rules of Court 2012. The case of Chong Woo Yit (supra) is directly on point on the issue at hand. The decision of Arulanandom J quoted by Gunn Chit Tuan SCJ at p. 13 clearly discussed the specific exception to S/N kzyoa1x4/EG5DHjLjJtYpg page 7 of 13 summary judgments in tax recovery actions: “When proceedings are commenced under O. 14 the normal rules for triable issues do not apply to cases of this nature because of the provisions of the Income Tax Act. Normally when defence raised triable issues it is a rule of law that unconditional leave to defend should be given but under section 106(3) of the Income Tax Act it clearly states that in any proceedings commenced by the Government under section 106(1) of the Act for the recovery of tax by civil proceedings as a debt due to the Government the Court shall not entertain any plea that the amount to tax sought to be recovered is excessive, incorrectly assessed, under appeal, or incorrectly increased under section 103(4) or (5).”. [Emphasis added] [19] The Plaintiff argued that it had satisfactorily proven in its submission that summary judgment should be entered. The Defendant, however, was adamant that its defence of government policy would provide an exception to this. To consider both of these arguments, I shall look at the relevant provisions under ITA 1967. II. Notice of Assessment served upon the Defendant and its Effects under ITA 1967 [20] Section 90(1) and (2) of ITA 1967, provides that once a person or body corporate furnishes a return in accordance with section 77 or 77A of ITA 1967, it is also deemed to have been served a notice of an assessment on the amount of tax chargeable, namely the Notice in our present case:

Where a person has furnished a return in accordance with section 77 or S/N kzyoa1x4/EG5DHjLjJtYpg page 8 of 13 77A to the Director General for a year of assessment, the Director General shall be deemed to have made, on the day on which the return is furnished, an assessment in respect of that person in the amount of tax on the chargeable income, the tax and the chargeable income being the respective amounts as specified in the return.

For the purposes of this Act, where the Director General is deemed to have made an assessment under subsection (1) –

the return referred to in that subsection shall be deemed to be a notice of assessment; and

the deemed notice of assessment shall be deemed to have been served on the person on the day on which the Director General is deemed to have made the assessment. [21] It was admitted that, in our present case, the Defendant had submitted a return form in accordance with section 77A of ITA 1967, as exhibited in “NSML-1” of the Plaintiff’s affidavit in support. Further, the Defendant also admitted in the affidavit in reply to this Application that the return form was, by nature, a notice of assessment for the assessment year of 2019 (namely, the Notice) and that the Notice was given on the Defendant to pay the assessed tax of RM5,127,098.40. [22] The Defendant did not offer any defence to the Plaintiff’s argument in this respect and conceded that it had an obligation to pay the Total Amount. However, the Defendant’s only reason for not doing so was merely because the Defendant was eligible under the PEMERKASA+ programme to reassess penalties and payment options with the Plaintiff and wanted to utilize these options. S/N kzyoa1x4/EG5DHjLjJtYpg page 9 of 13 [23] This brings me to my third point on whether I can entertain this defence. III. Application of Section 106 of ITA 1967 to entertain Plea by the Defendant against any Incorrect Assessments. [24] Section 106(3) of ITA 1967, provides a certain limitation to the courts in entertaining pleas of a certain nature in actions under ITA 1967. It reads as follows:

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), (5) or (7). [25] At risk of repetition, the case of Chong Woo Yit (supra) can be referred in order to explain this Section, which by itself is self-explanatory. In the judgment of Gunn Chit Tuan SCJ at p. 12, the power to entertain any plea for incorrect assessments, excessive, under appeal, or incorrectly increased falls squarely on the Special Commissioners of Income Tax (SCIT) and not the courts: On such civil proceedings being brought by the Government, the Court, unlike the Special Commissioners of Income Tax, has no power to entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased. [26] The reason of such a limitation, as submitted by the Plaintiff, can be read and referred to in the decision of Edgar Joseph Jr. FCJ in the case of S/N kzyoa1x4/EG5DHjLjJtYpg page 10 of 13 Kerajaan Malaysia v. Dato' Ghani Gilong [1995] 3 CLJ 161 in the headnotes: This is because the Special Commissioners are judges of fact and have the jurisdiction to consider pleas of limitation, excessive tax, incorrect assessment or incorrect increase all of which are issues the Court is prohibited from entertaining under s. 106(3) Income Tax Act 1967. [27] Having established the above, I will now analyse the Defendant’s defence. The Defendant framed its argument that the Defendant’s financial position was badly affected by the COVID-19 pandemic which caused the Defendant’s inability to pay the Total Sum. To supplement this, the Defendant relied on the decision of Alizatul Khair J (as she was then) in the case of Office Park Development (supra) in para. 52 as follows: “[52] Further it is not mandatory for the respondent to impose penalty in all tax audits. I agree that the fact that the respondent has a discretion amplifies the appellant’s submission that a penalty should not be imposed in this case as the appellant had acted in good faith and made full disclosure of information.”. [28] The Defendant contended that, by virtue of the above decision, this Court was empowered to make a finding of a triable issue as the question if a penalty should be imposed must be tried to establish whether the Defendant had acted in good faith. [29] I find that the Defendant’s reading of the case Office Park Development (supra) is misconstrued. The case before me can be S/N kzyoa1x4/EG5DHjLjJtYpg page 11 of 13 distinguished from Office Park Development on the simple fact that the Defendant has not appealed its case to the SCIT, as compared to the appellant in Office Park Development. Therefore, there is no fact established on whether the assessments or penalties were correct. [30] It is pertinent to note that even if the Defendant has made such an appeal, pending the outcome of the appeal, the tax is still payable. This is spelt out in Section 106(3) of ITA 1967 and such appeal must be made to the SCIT and not this Court. [31] The Defendant also submitted that the Plaintiff’s claim was premature due to the Defendant's eligibility under the PEMERKASA+ programme to have their assessment reviewed or rescheduled by the Plaintiff. The Defendant further submitted that under the said programme, the tax payable for the assessment year 2019 would be reduced. [32] Again, I find that the Defendant’s argument, despite the façade of a policy argument, ultimately circles back to whether the penalties imposed by the Plaintiff were justified and correct and the appeal of it. This plea falls squarely within the category of plea which this Court is unable to entertain under Section 106(3) of ITA 1967. Conclusion [33] As established above, the Defendant’s defence cannot be entertained by this Court by virtue of the operation of Section 106(3). Therefore, the principle propounded in Chong Woo Yit comes into play where it excludes S/N kzyoa1x4/EG5DHjLjJtYpg page 12 of 13 this defence as a triable issue that would normally dismiss an application for summary judgment. [34] Therefore, I find no triable issues raised by the Defendant that would prevent me from granting the Plaintiff’s application for summary judgment against the Defendant. [35] It is worth to be reminded that this Court is not the correct forum to establish a finding of fact for actions under ITA 1967 for excessive, incorrectly assessed, under appeal or incorrectly assessed. The Defendant must submit itself to the SCIT for that purpose. [36] On the above reasons, I allow this Application under Encl. 8 to enter a summary judgment against the Defendant to pay the sum of RM5,307,041.22 with interest of 5% per annum from the date of judgment until realisation together with costs payable from the Defendant to the Plaintiff. Date: 29th September, 2024 YA Dr. John Lee Kien How @ Mohd Johan Lee Judge High Court Malaya Kuala Lumpur S/N kzyoa1x4/EG5DHjLjJtYpg page 13 of 13 For the Plaintiff: Muhammad Faqrol Syazreen bin Mohd Ghani Legal Counsel Lembaga Hasil Dalam Negeri For the Defendant: Eizlan Farhan bin Nakhrowi Messrs. Chooi & Company + Cheang & Ariff Advocates & Solicitors Table of Authorities Cases Chong Woo Yit v. Government of Malaysia [1989] 1 CLJ (Rep) 9 Kerajaan Malaysia v. Dato' Ghani Gilong [1995] 3 CLJ 161 Office Park Development Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri [2011] 9 MLJ 479 Statutes Income Tax Act 1967, Section 106(3) Income Tax Act 1967, Section 90(1) and (2) Rules of Court 2012, Order 14 rule 1 S/N kzyoa1x4/EG5DHjLjJtYpg