Lembaga Hasil Dalam Negeri (LHDN) v Stormac Sdn Bhd (BA-21NCVC-62-10/2019)

The Plaintiff is applying for an order under Order 14 Rules of Court 2012, to recover the tax due and payable amounting to RM 1,698,412.09 for the Years of Assessment 2010, 2011, 2013 and 2016 inclusive of 10%, 5%, and 10% increase levied under provisions of Section 103 and 107C of 25 the Income Tax Act 1967.

The cause papers are as follow:- 30

Writ of Summon and Statement of Claims dated 30th of October 2019 (Enclosure 1 and 2); 2

The Defendant’s Statement of Defence dated 17th of December 2019 (Enclosure 6);

The Plaintiff’s Reply to Defence dated 30th of December 2019 (Enclosure 7);

Notice of Application under Order 14 Rule 1 Rules of Court 2012 dated 20th of January 2020 (Enclosure 8);

Plaintiff’s Affidavit in Support affirmed on 20th of February 2020 10 (Enclosure 9);

Defendant’s Affidavit in Reply affirmed on 10th of February 2020 (Enclosure 10); and 15

Plaintiff’s Affidavit in Reply affirmed on 20th of February 2020 (Enclosure 11); and BRIEF FACTS OF THE CASE (AS STATED BY THE PLAINTIFF) 20 3. The Defendant has been assessed with the tax which is due and payable amounting to RM 1,698,412.09 for the Years of Assessment 2010 (Additional Assessment), 2011 (Additional Assessment), 2013 (Additional Assessment) and 2016 inclusive of 10%, 5% and 10% increases pursuant to the provisions of Section 103 and 107C of the Income Tax Act 1967. 25 The details of the claims are clearly stipulated in the Plaintiff’s Statement of Claim.

For the Years of Assessment 2010 (Additional Assessment), 2011 (Additional Assessment) and 2013 (Additional Assessment), the 30 Defendant was assessed with income tax amounting to 3 RM 1,439,153.42, RM 977,326.90 and RM 32,682.96 vide Notice of Additional Assessment dated 10th of November 2014, 10th of November 2014 and 2nd February 2016 respectively.

The accounting period of the Defendant for the Years of Assessment 5 2016 starts from 1st July 2015 till 30th of June 2016.

The Defendant failed to furnish the income tax return form for companies (Form C) for the Years of Assessment 2016 to the Plaintiff within seven (7) months from the date following the close of the accounting period of the 10 Defendant as required under Section 77A(1) of the Income Tax Act 1967. As a result, the Defendant was assessed with an estimated tax amounting to RM 21,657.60 for Years of Assessment 2016 vide Notice of Assessment dated 4th of April 2017 pursuant to Section 90(3) of the Income Tax Act 1967.

Notices of Additional Assessment and Notice of Assessment for Years of Assessment 2010 (Additional Assessment), 2011 (Additional Assessment), 2013 (Additional Assessment) and 2016 were sent to the Defendant at the Defendant’s last known address as per Plaintiff’s record 20 and the said Section 145(2) of the Income Tax Act 1967, the Notice of Additional Assessment and Notice of Assessment were deemed to have been served on the Defendant.

The Defendant failed to pay the said taxes within 30 days from the date of 25 service of Notice of Additional Assessment and Notice of Assessment. Thus, late payment increases of 10% were imposed on the outstanding tax for the Years of Assessment 2010 (Additional Assessment), 2011 (Additional Assessment), 2013 (Additional Assessment) and 2016

Subsequently, upon the Defendant’s continued failure to pay the tax payable together with the 10% increases, a further late payment penalty of 5% were imposed for the Years of Assessment 2010 (Additional Assessment), 2011 (Additional Assessment), 2013 (Additional Assessment) and 2016 pursuant to Section 103 of the Income Tax Act 5 1967.

Besides, the tax assessed for the Years of Assessment 2016 was exceeded the revised estimated tax payable of the Defendant for Years of Assessment 2016 by an amount of more than 30%. Therefore, by virtue 10 of subsection 107C(10) of the Income Tax Act 1967, an increase of 10% was imposed on the amount of that difference for the Years of Assessment 2016. .

15 PARTIES SUBMISSIONS/ CONTENTIONS (amongst others) PLAINTIFF DEFENDANT The assessments were raised based on the provisions of the Income Tax Act 1967 and all the Notices of Assessments had been sent to the Defendant’s last known address through ordinary post in line with section 145(2)(a)(ii) Income Tax Act 1967. The Defendant has never at any point in time disputed that the address used by the PF If the Plaintiff’s claim that the Defendant has properly received the Notice of Assessment, the Plaintiff would have attached the record of service to prove its claim. However, nowhere in the Plaintiff’s affidavit, exhibits evidence of the Plaintiff’s posting and acceptance by the Defendant. 5 was incorrect. It is improper service as the service was made to the Defendant’s last known address in which is Lot 224, Industrial Area, Batu 22, Ijok, however the Plaintiff said that the Defendant’s last know address is No 3A32, Level 4 (Lift 7), Block A, Damansara Diamond. The Defendant actually pleaded in Statement of Defence that the Lot 3892, Jalan 4D U6, Kg Baru Subang Shah Alam is their address of business. Since the Defendant failed to pay the whole outstanding sum of income tax which is still due within 30 days from the date of service of Notices of Assessment, a late payment increases of 10% had been imposed and added to the outstanding debt pursuant to section 103(5) of the Income Tax Act 1967. The Defendant submits that the Defendant has paid RM 18,063.00 for the estimated income tax payment for the year end of 2016, however the said estimated tax amount for the year 2016 has be amended to RM 0.00 after recalculation and the earlier payment was never refunded back. Plaintiff also submits by Section 106(3) Income Tax Act The Defendant submits that the Plaintiff has no right to 6 1967 in which the provision clearly stipulates that in civil proceedings for the recovery of tax, the Court has no power to entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed and under appeal or incorrectly increased. If the Defendant is unhappy or dissatisfied with the assessment raised by the Plaintiff, the Defendant should bring the case before the Special Commissioners of Income Tax which is the right forum to hear and decide the dispute in accordance with Section 99 (1) of the Income Tax Act 1967. impose a 10% on the said tax amount which is also in dispute. The Defendant also submits that the Defendant has filed a suit against the IRB Putrajaya, branch in Kuala Lumpur which involving the Notice of Assessment Year End 2010 and 2011 which are currently in progress and have not been decided by court.

LEGAL PRINCIPLES In the case of Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 2 MLJ 685, the Federal Court held inter alia 5 that:- 7 “For the purposes of an application under Order 14 the preliminary requirements are:

the defendant must have entered an appearance;

(ii) the statement of claim must have been served on the defendant; and

(iii) the affidavit in support of the application must comply with the requirements of Rule 2 of the Order 14. … If the plaintiff fails to satisfy either of these considerations, the summons may be dismissed. If however, these considerations are satisfied, the plaintiff will have established a prima facie case and he becomes entitled to judgment. The burden then shifts to the defendant to satisfy the Court why judgment should not be given against him.”

In the case of Chong Woo Yit v Government of Malaysia [1989] 1 MLJ 473; the Supreme Court, held amongst others:- 5 “Senior federal counsel also referred us to the High Court case of Government of Malaysia v Abdul Rahman [1975] 1 MLJ 276. In that case the taxpayer had been assessed to pay income tax and an additional income tax for certain years. On his failure to pay the amount claimed, the Government of Malaysia instituted a suit against him and applied for leave to enter final judgment. The assistant registrar gave leave to the Revenue and the taxpayer appealed. The appeal was dismissed on the grounds that the court could not entertain any plea that the tax or additional tax was not correctly assessed and therefore leave to sign final judgment was confirmed. We would 8 agree and approve the following dictum of Arulanandom J (as he then was) in that 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 the defence raises triable issues it is a rule of law that unconditional leave to defend should be given but under s 106(3) of the Income Tax Act it clearly states that in any proceedings commenced by the government under s 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 of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased under s 103(4) or (5). In this case the Director General had exercised his powers under s 91(1) of the Act and made additional assessments and added penalties which were provided for by the Act. Since the amount was not paid within 30 days further penalties were added and since that was not paid civil proceedings were brought to recover the tax as a debt due to the government. Under s 103(1) regarding payment of tax, the section reads: '103(1) Subject to this section, tax payable under an assessment for a composite assessment shall on the service of the notice of assessment or composite assessment on the person assessed be due and payable at the place specified in that notice whether or not that person appeals against the assessment or composite assessment, as the case may be.” 9

With the legal principles in mind, I am satisfied that the Plaintiff has complied with the preliminary requirement under Order 14 of the Rules of Court 2012, namely; i) The Defendant has entered appearance; ii) The Statement of Claim had been duly served on the Defendant; 5 and iii) Plaintiff’s affidavit filed herein complied with the requirement of Order 14.

Based on the Plaintiffs’ affidavits filed herein together with the exhibits 10 produced, I found that the Plaintiff has established a prima facie case against the Defendant.

In opposing the Plaintiff’s application, the Defendant submits, that there are issues in dispute and questions to be tried which ought to go for a full 15 trial. The issues raised are dealt below:-

First Issue: Whether the alleged Notice of Assesement (Additional) and/or Notice of Assessment has been properly served to the Defendant .

The Defendant submitted that said Notice of Assessment has not been served on them and and accordingly they have not received the same: and there there is no proof of posting Whereas, the Plaintiff contended that all the Notices of Assessment had been sent to the Defendant at their last known address by ordinary post in line with section145(2)(a)(ii) of the 25 Income Tax Act 1967. Further, the said Notices of of Assessment have never returned undelivered to the Plaintiff.

Thus at this juncture, it would only be proper to have a look at the said section 145(2)(a)(ii) of the Income Tax Act 1967:- 30 10 “(2) 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–

in the case of a company, partnership or body of persons having a registered office in Malaysia –

to that registered office;

(ii) to its last known address; and

(iii) to any person authorized by it to accept service of process.” .

From the reading of the section above, it is clear that a notice relating to tax is deemed to have been served on the person if it is sent by ordinary or registered post to its last known address on which the notice would be 5 received in the ordinary course of post. Based on the Plaintiff’s Affidavit in Support the said Notices (Exhibit “SDN-2” and “SDN-3”) had been sent to the Defendant at his last known address at that point of time.

Further, the Plaintiff has referred this Court to the case of Kerajaan 10 Malaysia v Central Strata Sdn Bhd [2013] 8 CLJ 632 whereby the Court held inter-alia:- “Section 145(2) provides that a notice relating to tax which is sent by ordinary post shall be deemed to have been served on the day succeeding the day on which the notice would have been received 11 in the ordinary course of post. This section does not, anywhere, spell out that a register of some record of notices sent out daily by ordinary post must be maintained as proof of posting. Thus, this was a fit and proper case to call in aid the provisions of s. 114(e) of the Evidence Act 1950 which allows the court to presume that judicial and official acts have been regularly performed.”

Further, on this issue, based on the following conducts of the Defendant, I am satisfied that the Notices of Assessment have been properly served on the the Defendant :- 5 a) The Defendant had never disputed that the address used by the Plaintiff to send the said Notices was an incorrect address. b) The Defendant had made an appeal against the additional 10 assessment for Year 2010 and 2011 to a Special Commisioner of Income Tax and based on Exhibit “SND-10” of the Affidavit in Reply, the Defendant had admitted that the Notice of Assessment for the Year 2010 (Additional Assessment) and Year 2011 were served on the Plainiff on the 12th of November 2014. 15 c) As reflected in Exhibit “SND-8”, the Defendant via their tax agent had written a letter dated 25th of April 2018, to the Plaintiff manifestly seeking time to settle the outstanding tax sum of RM 1,698,412.09. The said Exhibit 8 is reproduced below:- 20 25 12 “PERUNDING CUKAI RAMLI (No. Ejen Cukai: 02/4579/10/2019) No. 1, Jalan LP 3/6, Taman Lestari Perdana, 43300 Seri Kembangan, Selangor D.E. H/P: 019-2219522 / Email: mry1952@gmail.com ____________________________________________________________ Pengarah No. Fail: C 2110593708 Lembaga Hasil Dalam Negeri Cawangan Klang Tarikh : 25 April 2018 Unit Pungutan Syarikat First Tower, Tingkat 1 & Tingkat 9-18 41050 Klang, Selangor Tuan, NOTIS TUNTUTAN CUKAI TERTUNGGAK BAGI TAHUN 2010-2016 NAMA: STORMAC SDN BHD Dengan hormatnya kami merujuk kepada perbincangan dengan En. Azlan pada 24/04/2018 dan surat bertarikh 11/04/2018.

Merujuk pada notis tersebut, syarikat di atas mempunyai baki cukai tertunggak sehingga Tahun Taksiran 2016 sebanyak RM 1,698,412.09. Kami sebagai ejen cukai syarikat di atas ingin memohon jasa baik daripada pihak tuan agar dapat memberi kelonggaran kepada syarikat ini untuk menjelaskan baki cukai tertunggak secara ansuran.

Kes ini masih lagi dalam rayuan kerana ada pertikaian jumlah cukai yang dikenakan. Walau apa pun pembayar cukai tetap akur dengan undang-undang ACP 1967. Disebabkan 13 cukai yang dikenakan terlampau tinggi, pembayar cukai memohon bayaran selama dua puluh empat (24) bulan. Di harap tuan dapat meluluskan permohonan ini dan mengemukakan jadual bayaran.

Jika permohonan ini tidak diluluskan, syarikat akan menghadapi aliran tunai yang teruk dan sukar untuk meneruskan perniagaan.

Bersama-sama ini disertakan surat lantikan Perunding Cukai Ramli sebagai ejen cukai. Sekian, terima kasih. Yang benar, t.t. (MOHAMAD RAMLI BIN YAHYA).”

Thus, it could not have been said that the Defendant or his tax agent had not received the said Notices of Assessement. I found that the Defendant’s denial of receiving the said Notices is just a bare denial and 5 the issue raised by the Defendant herein is clearly devoid of merits.

Second Issue: Whether the alleged outstanding sum to be made payable by the Defendant is correct and has been accurately quantified

On this issue, the Defendant is disputing the amount of tax that had been assessed and imposed against them. On the other hand, the Plaintiff submitted that by virtue of section 106(3) of Income Tax Act 1967, the Court is barred from entertaining any plea that the amount ought to be 14 recovered is excessive, incorrectly assessed, under appeal or, incorrectly increased as claimed by the Defendant. The Plaintiff further contended that any dispute in respect of assessment can be raised before the Special Commisioners of Income Tax.

Section 106(3) of the Income Tax Act 1967 states:- “(3) 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 subsection 103(1A), (3), (4), (5), (6), (7) or (8).”

Relating to the said section, the Plaintiff brought the Court’s attention to 10 the Supreme Court decision in the case of Chong Woo Yit v Government of Malaysia [1989] 1 CLJ (Rep) 9, which held as follows:- “…on service of a notice of assessment on the person assessed, the tax payable under the assessment becomes due and payable whether or not the person appeals against the assessment and would be recovered by the Government by civil proceedings as a debt due to the Government. 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.” 15 15

In light of the express provision of Section 106(3) of the Income Tax Act 1967 and Supreme Court decision as cited above, I am inclined to agree with the Plaintiff’s submission that the Defendant’s dispute on the assessment, being incorrectly assessed for the year 2010 (additional Assessment) and 2011 (additional Assesment) is of no significance in the 5 context of the Plaintiff claim herein. In any event, it can be seen from Exhibit “SDN-10” upon appeal by the Defendant, the Special Commisioners of Income Tax had dismissed the appeal and maintained the assesement made by the Plaintiff.

In respect of Income Tax for the Year 2013 and 2016, it is not disputed that there were no appeal filed by the Defendant to the Commisioner of Income Tax. Section 99(1) of Income Tax Act clearly provides an avenue for a person aggrieved by an assessment to appeal to the Special Commisioners. In the case of Sun Man Tobacco Co. Ltd. v Government 15 of Malaysia [1973] 2 MLJ 163, in which the Federal Court decided as follows:- “… if the taxpayer wished to dispute that the amount of tax sought to be recovered was excessive, incorrectly, under appeal or incorrectly increased, he has to do so by way of appeal to the Special

As I am satisfied that the Notices of Asessment had been properly served, thus the tax imposed against the Defendant becomes due and payable, whether or not the Defendant appeals against the assessment or increased assessment . Section 103 of Income Tax Act 1967 provides:- 25 16 “(2) Where an assessment is made under subsection 90(3), section 91, 92 or 96A, or where an assessment is increaed under subsection 101(2), the tax payable under the assessment or increased assessment shall, on the service of the notice of assessment or composite assessment or increased assessment, as the case may be, be due and payable on the person assessed at the place specified in that notice whether or not that person appeals against the assessment or increased assessment.” (Emphasis mine.

In the case of Kerajaan Malaysia v Ong Kar Beau [2003] 6 MLJ 225, the Court held that:- 5 “My decision are as follows. The scheme of the Income Tax Legislation is clearly that, upon services 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.” (Emphasis mine)

Similarly, in the case of Ta Wu Realty Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri & Anor [2009] I MLJ 555, the Court of Appeal has ruled, amongst others that:- 10 17 “Prompt payment to the IRB is not an indulgence on the part of a taxpayer but a statutory requirement. Once the Director General has made an assessment, and issued a notice of assessment to a taxpayer calling upon him to pay the tax mentioned, the taxpayer must pay up that tax liability within the specific period, even though dissatisfied with that assessment. Any reluctance to pay that tax liability will attract the penalty imposed for late payment.” (Emphasis mine)

Third issue: Whether the Plaintiff had taken consideration that there is another proceeding filed by the Defendant with regards to the Notice of Assessment for the Year 2010 and 2012.

The Defendant contended in light of another proceeding filed by the Defendant against the Plaintiff in another suit (Suit no. 08(f)-48- 02/2019(w)), it is improper, unreasonable and abuse of the court to allowed the Plaintiff to proceed with the proccedings pertaining to the 10 taxation for 2010 and 2011.

It was highlighted by the Plaintiff that the said Suit is actually an appeal against the Kuala Lumpur High Court decision (Suit No. WA-25-230- 08/2017) in which the Court had dismissed the Defendant’s application for 15 a leave to judicial review the decision of the Special Commisioners maintaining the assessment for the said Year 2010 and 2011.

I am of the view that the Defendant’s contention is devoid of merits as by virtue section 103 (2) of the Income Tax Act 1967 stated earlier, upon the 20 service of the notice of assessment the tax payable becomes due and payable whether or not the person appeals against the assessment or 18 increased assessment. Further the Court of appeal in the case of Ta Wu Realty Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri & Anor [2009] I MLJ 555 ruled that “a prompt payment to the Inland Revenue is not an indulgence on the part of a taxpayer but a statutory prequirement… Whether the assessment is right or wrong the tax must be paid 5 notwithstanding any objection or appeal.“

In light of the aforesaid reasons, the defence raised by the Defendant has not merits and the Defendant has failed to raised a triable issue which merits a full trial. I am satisfied this is a fit and proper case for a summary 10 judgment to be entered against the Defendant. I, therefore, allow the Plaintiff’s application herein and the cost of RM 3,500.00 to the Plaintiff. 15 Dated 11th of February 2021 Signed 20 (KHAIRIL AZMI BIN HAJI MOHAMAD HASBIE) Judicial Commissioner High Court Shah Alam 25 For the Plaintiffs : Puan Sivasundary Shivalingam (Lembaga Hasil Dalam Negeri) For the Defendants : Cik Rachel Verghis 30 (Messrs Jasbeer Nur & Lee) 19

Cempaka Finance Bhd v Ho Lai Ying (trading as KH Trading) & Anor [2006] 2 MLJ 685.

National Company for Foreign Trade v Kayu Raya Sdn Bhd [1984] 2 MLJ

300.

Chong Woo Yit v Government of Malaysia [1989] 1 MLJ 473.

Kerajaan Malaysia v Central Strata Sdn Bhd [2013] 8 CLJ 632.

Sun Man Tobacco Co. Ltd. v Government of Malaysia [1973] 2 MLJ 163.

Kerajaan Malaysia v Ong Kar Beau [2003] 6 MLJ 225.

Ta Wu Realty Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri & Anor [2009] I MLJ 555. 20

Order 14 of Rules of Court 2012.

Income Tax Act 1967. 25 30