IN MALAYSIA, the Inland Revenue Board (IRB) is conferred with extensive authority to ensure compliance and curb potential revenue losses. This is achieved through the implementation of tax audits, and it is not uncommon for taxpayers to find themselves in disagreement with notices of assessment or additional assessment issued by the IRB due to purported underpayments.
There are two distinct avenues for taxpayers to contest the IRB’s assessments: first, by seeking recourse via the Special Commissioners of Income Tax (SCIT); and second, by pursuing a judicial review process.
Appeal to the SCIT
The taxpayer must promptly undertake to safeguard their rights by submitting a notice of appeal to the SCIT within 30 days of the date of service of the assessment. By law, both the appellant and the IRB are allocated up to one year to deliberate and reach a settlement on this appeal. Should this period lapse without an agreement, the IRB is obliged to forward such an appeal to the SCIT.
An appeal before the SCIT may be heard either by a panel of three special commissioners or by a single commissioner. Throughout this process, the merits of the appeal will be thoroughly evaluated involving a careful review of records, documentary evidence and testimonies from witnesses. Subsequently, a deciding order will be issued in which the assessment appealed against will either be confirmed or discharged.
Note however that prior to the completion of the hearing, the taxpayer retains the option to reach a settlement agreement with the IRB, which could be documented before the SCIT.
A SCIT deciding order may be appealed to the High Court and the Court of Appeal thereafter. However, the courts’ scope of review is confined to assessing the accuracy of the SCIT’s interpretation and application of the law. Factual determinations by the SCIT hold conclusive weight and serve as the foundation upon which the courts evaluate the appeal.
In specific situations, a taxpayer might opt to directly file a judicial review application to the High Court to challenge the IRB’s assessment. Access to judicial review is at the discretion of the Court and leave to commence such proceedings may be granted only in exceptional circumstances. These circumstances fall into three distinct categories: first, a clear lack of jurisdiction; second, a blatant failure to perform some statutory duty; and third, a serious breach of the principles of natural justice.
Judicial review is not concerned with the merits of a decision but with the validity of the decision-making process. Therefore, this route would not be appropriate for handling factual disputes that can only be resolved by the SCIT. Be that as it may, judicial review may be preferable if there are questions of law to be raised directly and if such questions are of public importance, they may be pursued up to the Federal Court.
It is essential for a taxpayer to carefully consider the pros and cons before choosing the suitable route in challenging a tax assessment. Typically, in both the appeal to the SCIT and the process of judicial review, the burden lies with the taxpayer to possess the necessary documents and evidence to prove their case.
Although taxpayers can represent themselves at the SCIT, they should also recognise that the factual conclusions reached at the SCIT level are final. As a result, to guarantee that the most compelling case is put forth and to prevent potential complications if further appeals to the courts arise, it is advisable for taxpayers to seek expert legal counsel and representation.
This article is contributed by Syed Asyraaf of Christopher & Lee Ong (www.christopherleeong.com).