Tan IT Ming v Ketua Pengarah Hasil dalam Negeri (WA-14-3-04/2022)

1 CIVIL APPEAL NO.: WA-14-2-04/2022 TAN TSUEY FONG (HEARD TOGETHER WITH) CIVIL APPEAL NO.: WA-14-3-04/2022 TAN IT MING (HEARD TOGETHER WITH) 07/04/2026 08:17:36 WA-14-3-04/2022 Kand. 138 S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 2 CIVIL APPEAL NO.: WA-14-4-04/2022 TAN TSUEY YING GROUNDS OF JUDGMENT

1. This is an appeal by the Appellants pursuant to paragraph 34,

Schedule 5 of the Income Tax Act 1967 (‘ITA 1967’) against the Deciding Order of the Special Commissioner of Income Tax (‘SCIT’) dated 6.4.2022 whereby the SCIT had dismissed the appeal by the Appellants against the Notice of Additional Assessment (Form JA) for Year of Assessment (‘YA’) 2013 and YA 2014 as follows: Appellant Date of JA for YA 2013 (RM) Date of JA for YA 2014 (RM) Tan It Ming 14.6.2016 14.6.2016 Tan Tsuey Ying 9.6.2016 9.6.2016 S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 3 Tan Tsuey Fong - 9.6.2016 2. The material part of the Deciding Order of the SCIT reads as follows: “ADALAH DIPUTUSKAN bahawa Perayu-Perayu telah gagal membuktikan rayuan Perayu-Perayu selaras dengan perenggan 13 Jadual 5 Akta Cukai Pendapatan 1967 [Akta 53] (‘ACP’); DAN bahawa Perayu-perayu gagal membuktikan bahawa pembelian kayu balak yang dituntut dalam Tahun Taksiran (“TT”) 2013 dan 2014 adalah sepenuhnya dan eksklusif dalam pengeluaran pendapatan kasar Perayu sepertimana keperluan di bawah subseksyen 33(1) ACP 1967; DAN bahawa Perayu-Perayu telah gagal untuk membuktikan bahawa taksiran cukai bagi TT 2013 yang dikenakan terhadap Perayu Tan It Ming dan Tan Tsuey Ying dan TT 2014 terhadap ketiga-tiga Perayu oleh Responden adalah berlebihan (excessive) atau salah (erroneous) sebagaimana yang diperuntukkan di bawah perenggan 13 Jadual 5 ACP 1967; DAN bahawa Responden adalah betul dalam mengenakan penalti terhadap Perayu-Perayu bagi TT 2013 dan 2014 di bawah subseksyen 33(1) ACP 1967; S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 4 DAN DENGAN ITU rayuan Perayu-Perayu ditolak dan Notis Taksiran bagi Tahun Taksiran 2013 dan 2014 yang berkaitan dengan rayuan ini adalah dikekalkan.” 3. Before the hearing began on 15.1.2026, the parties agreed that the oral submission for the day would be on the Part 1 issues (as per the Scott Schedule) pertaining to the “Procedural Irregularities Resulting In The Curtailment Of The Appellants’ Right To A Fair Hearing” and if the Court accepts the Appellants’ submission, the case is to be remitted to the SCIT for determination. In this regard, paragraph 39 of Schedule 5, ITA 1967, and in particular subparagraph (b), provides that: “39. The High Court shall hear and determine any question of law arising on an appeal under paragraph 34 and may in accordance with its determination thereof – (a) order the assessment to which the appeal relates to be confirmed, discharged or amended; (b) remit the appeal to the Special Commissioners with the opinion of the court thereon; or (c) make such other order as it thinks just and appropriate.”. S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 5 4. However, if the Court decides otherwise, the parties will then submit on the Part 2 issues on “Wrongful Assessment Of Tax By The Respondent”. The Grounds of Appeal 5. The grounds of appeal in relation to the alleged procedural irregularities and the denial of a fair and impartial hearing are found in paragraphs 9, 10, 12, 15 - 18, 24, 26 and 36 - 43 of the Memorandum of Appeal. The Appellants’ Contention 6. In a nutshell, the Appellants contended that the Appellants’ right to a fair hearing was impeded by the withdrawal by the Respondent of all letters offering tax concessions to the Appellants (‘said Letters’) in respect of Kilang Papan Slim River Sdn Bhd and Tradisi Elit Sdn Bhd (‘Two Companies’), notwithstanding that the Appellants had agreed to the proposed tax deductions vide the Appellants’ solicitors’ letters dated 26.2.2020, 2.9.2020, 9.11.2020 and 1.3.2021, which had the effect of – (a) the Appellants not being afforded sufficient opportunity to adduce documents or call witnesses to address the Respondent’s revised position; S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 6 (b) the Respondent amending its Issues To Be Tried (‘ITBT’) on the day of the trial resulting in prejudice to the Appellants who had prepared their case based on the earlier agreed issues. A comparison of the ITBT is shown below: Respondent’s ITBT dated 3.3.2021 1. Respondent’s ITBT dated 7.4.2021 Sama ada tuntutan sebagai perbelanjaan belian oleh Perayu di bawah pendapatan perniagaan perkongsian Pine World untuk - i. bayaran sebanyak RM579,100.00 bagi Tahun Taksiran (TT) 2013 dan RM1,986,800.00 bagi TT 2014 kepada pemilik lesen/permit pembalakan adalah bersifat modal dan tidak boleh dibenarkan di bawah Seksyen 33(1) Akta Cukai Pendapatan 1967 (ACP 1967)? ii. belian kayu balak daripada syarikat berikut boleh 1. Sama ada perbelanjaan yang dituntut oleh Perayu di bawah perkongsian Pine World berjumlah RM1,194,100 bagi Tahun Taksiran 2013 dan RM7,519,300 bagi Tahun Taksiran 2014 boleh dibenarkan di bawah Seksyen 33(1) Akta Cukai Pendapatan 1967 (ACP 1967)? 2. Sama ada penalti yang dikenakan di bawah Seksyen 113(2) ACP 1967 bagi Tahun-tahun Taksiran 2013 dan 2014 adalah betul dan teratur? S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 7 dibenarkan di bawah Seksyen 33(1) ACP 1967- a. Kilang Papan Slim River Sdn Bhd berjumlah RM623,500.00 bagi TT 2014; b. Tradisi Elit Sdn Bhd berjumlah RM2,301,000.00 bagi TT 2014; c. Primawas Sdn Bhd berjumlah RM165,000.00 bagi TT 2013 dan RM438,000.00 bagi TT 2014; d. Bazama Sdn Bhd berjumlah RM450,000.00 bagi TT 2013 dan RM720,000.00 bagi TT 2014; dan S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 8 e. Tolok Sdn Bhd berjumlah RM1,450,000.00 bagi TT 2014. 2. Sama ada penalti yang dikenakan di bawah Seksyen 113(2) ACP 1967 bagi TT 2013 dan 2014 adalah betul dan teratur. ; and (c) the Appellants being denied the opportunity to – (i) call their own witness and to subpoena the witnesses from Primawas Sdn Bhd, Bazama Sdn Bhd and Tolok Sdn Bhd (‘Three Companies’); and (ii) recall the sole witness for the Respondent, Sharifah Norshaiha binti Syed Othman (SR1) for cross-examination on the further documents which the Appellants intended to produce. 7. It was further contended that the Respondent had, on the day of the trial itself i.e. 7.4.2021, produced – (a) a Bundle of Documents (‘BoD’) which differed substantially from the earlier list of documents; and S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 9 (b) the Witness Statement for SR1. The Respondent’s Contention 8. The Respondent took the position that – (a) there was no “withdrawal” of the earlier offer by the Respondent as the settlement negotiations failed after the Appellants rejected the Respondent’s offer by the letter dated 26.2.2020. As there was no settlement agreement, the case had to proceed to trial; (b) the Appellants had ample time to prepare for the trial and made a considered decision in not calling any witness at the start of the trial; (c) there was no Agreed ITBT and each party had their own ITBT. Therefore, there was no prejudice to the Appellants as they can present their submissions on their ITBT while the Respondent would do the same for its ITBT; (d) the Respondent’s BoD consists of correspondence between the parties and the Appellants’ own documents submitted during the audit stage and thus, were all within the Appellant’s knowledge; and (e) the Respondent reasonably expected that the exchange of Witness Statements would take place on the date of the S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 10 trial as no Witness Statement was received from the Appellants prior to the trial. The Appellants had sufficient time to prepare for cross-examination of SR1 as it was conducted after the afternoon break. Analysis and Decision of the Court 9. I have considered the Record of Appeal, the Core Bundle and the oral and written submissions by the parties and in my opinion, the Appellants’ complaint of procedural improprieties must be viewed, not as isolated issues, but rather in its entirety and seen against the background or history of the case, including the numerous correspondence between the parties. 10. In particular, I have scrutinised the Case Chronology in the Appendix to the Respondent’s Written Submission In Reply and the Notes of Proceedings and it is my finding that – (a) there was no Agreed ITBT, but rather the Appellants’ ITBT and the Respondent’s ITBT. Apart from presenting their submission on their own ITBT, the Appellants would also have to prepare their case as regards the Respondent’s ITBT, whereby the 1st Issue was amended on the day of the trial itself, following the withdrawal by the Respondent of the said Letters. I agree with the submission by the Appellants that the Respondent has moved the goalpost because the Appellants had accepted that tax deduction was allowed in respect of the Two Companies and the S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 11 Appellants’ case was then premised on the argument that tax deduction should similarly be allowed for the Three Companies; (b) although the Appellants’ solicitors raised the matter regarding the withdrawal of the said Letters and amendment to the Respondent’s ITBT at the eleventh hour and the consequences to the preparation of the Appellants’ case, the Chairman of the SCIT insisted that the trial must proceed; and (c) at the end of the first day of trial, the Chairman of the SCIT had fixed 24.6.2021 for, among others, the Appellants to call their witness, produce their additional documents and subpoena the witnesses from the Three Companies. However, this continued trial never took place and the parties were directed to file their submissions instead and thereafter, a decision was delivered. 11. In light of the above, the Appellants’ right to a fair hearing was indeed curtailed and this Court was constrained to allow the Appellants’ appeal by making an Order that the case be remitted to the SCIT pursuant to paragraph 39(b) of Schedule 5, ITA 1967. 12. I should mention that, just before I pronounced the Order as above said, the learned counsel for the Appellants had informed the Court that, upon further reflection and having re-considered S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal 12 the matter, the Appellants would submit that the Court can remit the case to SCIT or can decide on the Part 2 issues. 13. The Senior Revenue Counsel objected to the Appellants’ sudden change of stance, to which I agreed. The Appellants should honour the agreement which was made on the date of hearing and not take a different position. 14. Costs of RM7,000.00 was ordered to be paid by the Respondent to the Appellant in each appeal. DATED: 3.4.2026 (ALIZA SULAIMAN) JUDGE HIGH COURT IN MALAYA KUALA LUMPUR (BKK1) Solicitors for the Appellants: Tan Sri Muhammad Shafee Bin Md Abdullah (Sarah Maalini Abishegam and Lim Zun Kang with him) Messrs. Shafee & Co. Solicitors for the Respondent: Ahmad Ridzuan Bin Othman (Ariffudin Bin Shahrulzani with him) Senior Revenue Counsel Inland Revenue Board S/N 8mXf7DQYtkifasvI8oCogA **Note : Serial number will be used to verify the originality of this document via eFILING portal