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Friday, September 13, 2019
/ 09:37AM / By Taiwo Oyedele, Folajimi Olamide
Akinla and Kenneth Erikume
The Tax Appeal Tribunal (TAT or Tribunal),
in Polaris Bank v. Abia State Board of Internal Revenue has made certain
pronouncements in respect of different tax matters including the limitation
period for assessments, the position of the Taxes and Levies (Approved List for
Collection) Act and final and conclusive assessments.
In 2017, the Abia State Board of
Internal Revenue ("ASBIR") issued a demand notice of about N1.5
billion on Polaris Bank ("Bank") with respect to 2006 - 2011 years of
assessment.
The assessment included business and
development levies charged under the Taxes and Levies (Approved List for
Collection) Act 2004 as amended. The Bank objected but admitted a liability of
about N39 million which it paid. None of the Bank's objections was addressed by
the ASBIR.
Subsequently, ASBIR issued another
assessment of about N255 million, directing the Bank to pay this sum as a
condition for attending a reconciliation meeting. The Bank did not make the
payment. At the reconciliation meeting, ASBIR offered a 20% rebate directing
payment within 48 hours otherwise the assessment would become final and
conclusive. After the Bank requested for a revised assessment in line with
section 58 of the Personal Income Tax Act (PITA), ASBIR reverted to the initial
assessment of N1.5 billion and demanded payment within seven days. The Bank
appealed the assessment.
Seven issues were distilled by the
Tribunal. Some of the most important issues and decisions are summarized below:
The Tribunal held that ASBIR failed to
follow the procedure relating to objections under section 58 of PITA.
Particularly, ASBIR did not address any of the objections raised by the Bank.
Under section 58 a tax authority can request further information, accept the
taxpayer's position and issue a revised assessment or reject the taxpayer's
position by issuing a notice of refusal to amend an assessment.
The Tribunal also found that the demand
notices issued by ASBIR were invalid as they were not compliant with PITA.
The Tribunal held that because the Bank
objected within 30 days, the assessment was not final and conclusive.
The Tribunal held that the Taxes and
Levies (Approved List for Collection) Act is not a primary tax legislation. It
merely allocates taxing rights between the three levels of government.
Therefore, ASBIR was wrong to rely on it for imposing business and development
levies. In the absence of a principal law, ASBIR could not collect the tax.
This means where there is no existing primary tax law, the relevant law making
body such as the State House of Assembly of a state needs to legislate on the
specific tax or levy before the relevant tax authority can administer them.
The Tribunal held that by virtue of
section 55 of PITA, ASBIR did not have the authority to conduct a tax audit
outside six years except on grounds contained in section 55 (fraud, willful
default or neglect). Further, even though the exercise was labelled a tax
investigation it was a mere audit which could not go beyond six years.
Section 55 requires assessments to be
made within 6 years. It does not refer to audits as ruled by the Tribunal. So,
a tax authority may carry out audits without any time limitations but must
issue limit its assessments to a period of six years except on grounds of
fraud, willful default or neglect. Also, tax authorities are required to
demonstrate the existence of any of the grounds before going outside the
six-year limitation period. It is not enough to merely refer to an audit as an
investigation.
More generally, tax authorities need to
follow the provisions of the law or face the risk of the Tribunal nullifying
their assessments.
Disclaimer
The content
of this article is intended to provide a general guide to the subject matter.
Specialist advice should be sought about your specific circumstances.
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