– Tax administration should be scientific, systematic and methodological. – An assessment must pass a legal crucible before its force of being final and conclusive can come to play
The Enugu Zone of the Tax Appeal Tribunal has nullified N28m Tax assessment liability computed by Federal Inland Revenue Service against Celebrities Restaurant Ltd for being incompetent and defective.
The Tribunal declared that the FIRS acted arbitrarily in its dealing and the restaurant is not liable to pay the assessed Companies Income Tax and Value Added Tax, that the discretion of the FIRS to apply 3% VAT where the VAT Act has provided for 5% is certainly not an action that the Tribunal can support.
The Tribunal Chairman led by Hon. Barr. Chukwuemeka Eze held that it will be inappropriate for the tax authority, after admitting that it had incomplete documents to carry out the audit satisfactorily, to proceed to concoct figures arbitrarily and foist it on the taxpayer or tax agent, that the Tax administration should be scientific, systematic and methodological.
From facts, the appellant- Celebrities Restaurant Ltd had filed an appeal against the Respondent’s Additional Assessment Notice dated 30th July 2019 and Demand Notice dated 29th January 2020, among other documents, informing of its additional assessments on Companies Income Tax (CIT), Value Added Tax (VAT) and Education Tax (ET) liability for the period of 2013 – 2017 and maintained that such assessments are invalid and therefore incapable of being final and conclusive.
The firm averred further that the FIRS erred in law when it based its assessment on a wrongfully determined turnover that the company had filed tax returns and paid self-assessed taxes for the period under review.
In defense, the Respondent- FIRS maintained that it acted within its statutory powers and in accordance with the extant tax laws when it assessed the firm to additional tax liabilities for Companies Income Tax, Tertiary Education Tax, and VAT Re-Assessment Notices totaling the sum of N28, 989,842.00 after duly conducted field tax audit.
The Tax agency contended that the assessment notices dated 30th July 2019 and served on the Appellant on 8th August 2019 without a valid objection have become final and conclusive and this Honourable Tribunal cannot reopen an assessment that was not validly objected to in accordance with the law.
FIRS maintained that the fact that the Appellant had filed its tax returns and paid it self – assessed taxes does not preclude the tax agency from carrying out its statutory function to conduct routine tax audit and investigation to ascertain the level of its tax compliance with the relevant tax laws.
The Appellant did not file its VAT returns in the years under review, rather it reluctantly makes payments of any amount it chooses to pay whenever it so pleases to pay without recourse to actual VAT-able sales it made as required by law, and urged the tribunal to dismiss the case in its entirety.
In opposition, the appellant counsel, Gabriel Onovo posited that it is the position of law that a tax assessment that is not in accordance with the law or where the basis of the assessment is faulty in law, such assessment cannot become final and conclusive even where the taxpayer fails to object to the same within the time limit prescribed by law.
The Appellant further exposited that the Respondent clearly informed this Tribunal during the testimonies of its witnesses, that it whimsically allowed only 3% of the total turnover of the Appellant for the relevant years as VAT-exempt sales of the Appellant, urged the tribunal to grant the relief sought.
In a well-considered judgment, the tribunal led by Hon. Barr. Chukwuemeka Eze as Chairman, Hon. Ide John Udeagbala, Hon. Anne Akwiwu and Hon. Prof. J.O. Anyaduba as members held that an assessment must pass a legal crucible before its force of being final and conclusive can come to play and the bases upon which the Respondent arrived at its additional assessment is faulty in law.
The tribunal held that it will be inappropriate for the tax authority, after admitting that it had incomplete documents to carry out the audit satisfactorily, to proceed to concoct figures arbitrarily and foist it on the taxpayer or tax agent that the Tax administration should be scientific, systematic and methodological.
The tribunal further reiterated that where a taxpayer or tax agent is not cooperating in providing relevant documents requested by a tax authority. It is for the tax authority to apply to the appropriate court or tribunal with jurisdiction to compel the taxpayer or tax agent to provide such documents.
“It is logical to state that an audit without the relevant documents cannot satisfy section 66 (1) of the CITA, which empowers the Respondent to serve additional assessment on the Appellant. The law is, therefore, not prostrate in circumstances where a taxpayer or tax agent is recalcitrant in providing relevant documents or information needed by a tax authority to execute its statutory function.” Tribunal ruled.