Chairman Of The Board Of Inland Revenue Vs Joseph Rezcallah & Sons Ltd (1962)

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UNSWORTH, F.J

This is an appeal from a decision of the High Court of the Northern Region of Nigeria dismissing a claim by the chairman of the Board of Inland Revenue for a sum of £2,520, being income tax and penalties for the years of assessment 1958-59 and 1959-60. The reason for the decision was that the two assessments upon which the claim was based were not made in accordance with law because:-

(a) In neither case did the plaintiff prove that the defendants were given notice requiring them, within the period limited by the notice, to deliver a return of income:

(b) The Chief Inspector of Taxes did not exercise his discretion to the best of his judgment in making the assessment under section 53(3) (section 55(3) of the revised edition) of the Income Tax Act.

The appellant appealed to this Court and filed and argued the following grounds of appeal:

(a) The learned trial Judge erred in Law in holding that the merit and/or legality of the assessments were matter which could be raised in a proceeding for recovery of the tax in the High Court.

(b) The learned trial Judge erred in law in the following passage of his judgment:

‘Accordingly I do not agree with the submission of Counsel for the plaintiff that it is entirely irrelevant how the Chief Inspector made the assessments under section 55(3) because if he did not exercise his discretion properly it follows that he did not make the assessments in accordance with law, and this claim, which is based upon those assessments, must fail’.

(c) That the learned trial Judge erred in law in that as there was no objection against the assessment and no appeal to the Appeal Commissioners on the assessment the amount of tax assessed (notwithstanding an omission to prove the service of a Return) became an absolute and conclusive debt due to the Government of Nigeria.

Counsel for the appellant, at the opening of the appeal, applied for the title of the case to be altered to the ‘Federal Board of Inland Revenue’ and this was not opposed by Counsel for the respondents. We granted this application in the exercise of our powers under section 22 of the federal Supreme Court Ordinance.

Council for the appellant then applied for leave to produce the assessments as additional evidence, and in so doing, asked the Court to waive the requirement of notice. This application was opposed by Counsel for the respondents. In reply to the court, Counsel for the appellant agreed that the evidence could have been adduced before the High Court. We did not grant this application and counsel for the appellant then withdrew an application for leave to argue additional grounds of appeal.

Counsel for the appellant said that the facts found by the trial Judge were not in dispute. The issue before us was whether the trial Judge was entitled to consider the validity of the assessment, having regard to the fact that the special procedure for appealing against an assessment had not been followed.

It is convenient at this stage to refer to the sections of the Income Tax Act which will be mentioned in this judgment. The Act is now contained in a revised edition of the Laws, and Counsel agreed that the provisions in this edition are the same as those in the old edition, which was referred to by the trial Judge, subject only to amendments which apply to both editions. I will therefore refer to the sections in the old edition, but insert after each section number the corresponding section number in the revised edition. Section 45 (47 revised) provides that every person chargeable with tax for any year of assessment, when required to do so by any notice in writing given by the Board in pursuance of the Act, shall, within the period limited by such notice, in the form of return containing such notice, prepare and deliver to the Board a true and correct statement in writing containing the particulars specified in the section. Section 53 (55 revised) provides in subsection (1) that the Board shall proceed to assess every person chargeable with the tax as soon as may be after the expiration of the time allowed to such person. The procedure for assessing a person after the expiration of that time is set out in subsections (2) and (3) of that section. Sections 59 and 60 (61 and 62 revised) provide for an appeal against an assessment to the appropriate appeal commissioners. There is a further appeal to the High Court except in cases in which the amount of tax assessed does not exceed £100. Section 61 (63 revised) provides that where no valid objection or appeal has been lodged within the prescribed times against an assessment as regards the amount of the chargeable income the assessment shall be final and conclusive for all purposes of the Act as regards the amount of such income.

Council for the appellant submitted that the Court had no inherent jurisdiction to declare the assessment invalid in the proceedings for the recovery of the tax. He said that if a statute creates new rights and duties and appoints a specific tribunal to decide disputes on matters under the statute, then the ordinary courts are not vested with any inherent jurisdiction to inquire into those matters: recourse must be had to that specific tribunal alone and this is particularly so where a right of appeal from the tribunal is still allowed to the aggrieved parties. Counsel submitted that the prescribed procedure was contained in section 59 (61revised) and 60 (62 revised) of the Act, and that the combined effect of these sections and section 61 (63 revised) is that as assessment to which there had been no objection and no appeal, becomes final and conclusive not only as to the amount of the tax in that assessment, but for all purposes of the Income Tax Act, and such assessment cannot be challenged in a suit in the High Court for the recovery of the tax so assessed. In support of this submission he referred to the case of Inland Revenue Commissioners v. Pearlberg, (1953) 1 A.E.R. 388, as page 389, and to the Nigerian case of Commissioner of Income Tax v. Rewance, (Lagos Court Suit No. 511/1952 and W.A.C.A. 127/1954). He also, very properly, drew our attention to the Privy Council decision in Mandavia v. Commissioner of Income Tax. (P,C, Appeal No.7 of 1957). Counsel also, in the course of argument raised two further matters, to which I will refer later in this judgment.

Counsel for the respondent agreed that the special procedure extension of time under the proviso to section 57(2) (59 revised) of the Act should have been granted, and, in respect of the 1959-60 tax, the taxpayer was entitled to assume that it had been granted. Counsel submitted that the assessments were not conclusive and referred to the cases of R. v. Bloomsbury Income Tax Commissioners, (1915) 3 K.B. 768, Commissioners of Taxation v, Mooney, (1907) A.C. 342 (at page 350), and St. Lucia Usines and Estates Co. Ltd. v. St Lucia (Colonial Treasurer), (1924) A.C. 508.

This issue in this case is an important one, but it is nevertheless a straightforward one, and was clearly put before us in the very able submission of Counsel for the Board of Inland Revenue. The issue is whether the special procedure for appealing against an assessment is conclusive so as to deprive the High Court of jurisdiction to inquire into the validity of the assessment in this claim to recover the tax alleged to be due. The High Court of the Northern Region of Nigeria is established by section 49 of the Constitution of Northern Nigeria and subsection (3) of that section provides that the court shall be a superior court of Record, and ‘save as otherwise provided by any Law in force in the Region, shall have all the powers of such a Court’. There can be no doubt that the High Court must have jurisdiction to inquire into the validity of an assessment on a claim for tax alleged to be due unless the legislature has otherwise provided. It is therefore necessary to examine the provisions of the Income Tax Act in order to ascertain whether this power of the Court has been taken away. Sections 59 and 60 (61 and 62 revised) provide a special procedure for disputing an assessment, but the sections do not say that this procedure is exclusive, In my view the relevant section is section 61 (68 revised), which sets out the extent to which an assessment is conclusive. The section in the revised edition reads as follows:-

63. Where no valid objection or appeal has been lodged within the time limited by section 59, 61 or 62, as the case may be, against an assessment as regards the amount of the chargeable income assessed thereby, or where the amount of the chargeable income has been agreed to under subsection (4) of section 59, or where the amount of such chargeable income has been determined on objection, revision, under the proviso to subsection (4) of section 59, or appeal, the assessment as made, agreed to, revised or determined on appeal, as the case may be, shall be final and conclusive for all purposes of this Act as regards the amount of such chargeable income; and if the full  amount of the tax in respect of any such final and conclusive assessment is not paid within the appropriate period or periods prescribed in this Act, the provisions thereof relating to the recovery of tax, and to any penalty under section 67, shall apply to the collection and recovery thereof subject only to the set-off of the amount of any tax repayable under any claim, made under any provisions of this Act, which has been agreed to by the Board or determined on any appeal against a refusal to admit any such claim:

Provided that-

(a) where an assessment has become final and conclusive any tax overpaid shall be repaid;

(b) nothing in section 59 or in Part XII shall prevent the Board from making any assessment or additional assessment for any year of assessment which does not involve reopening any issue, on the same facts which has been determined, for that year of assessment, under subsection (4) of section 59 by agreement or otherwise or on appeal.

It will be noted that the section provides that the assessment is final, as regards the amount of the chargeable income. In my view however, it is not conclusive as to other matters, and the Court in subsequent proceedings can inquire into the validity of the assessment except in so far as it is restricted by section 58 (section 60 revised), which is not relevant to he matters inquired into by the High Court in this case. This view is supported by the fact that section 60(61) (62 revised) provides that there is no appeal to the High court under the special procedure where an assessment does not exceed £100 and, if the assessment by conclusive as to validity, a person assessed at £100 or less would have no recourse to the Courts to dispute the validity of the assessment.

In reaching the above conclusion I have not been unmindful of the fact that a point of law involving validity might be dealt with on appeal to the High Court under the special procedure. It is true that under those circumstances the matter could not be raised again before the High Court on a claim for the recovery of the tax, but the explanation for this is the law of estoppel and not any provision of the Income Tax Act restricting the power of the High Court to inquire into the validity of an assessment.

It was also submitted in the course of argument by the appellant that the trial Judge was wrong in holding that the assessment was made under section 53 (section 55 revised) as the assessment was made under the Income Tax Act generally and not under any particular section. I do not think that there is substance in this argument. The assessment must be made under some section and it is clear that the appellants case in the High Court was that it was under section 53 (55 revised). Counsel for the present appellant in that Court, in opening his case, is recorded at page 12 of the Record as saying:

Power to assess is contained in section 53(3) of Cap. 92 where no return has been made.
It was further submitted in the course of argument that the fact that no return was made does not prevent an assessment, but this is not the issue here. The finding of the trial Judge in this case was that it had not been established that there had been any demand for a return, which is a very different matter. The trial Judge put the matter in this way:-

In my opinion the Board cannot lawfully assess any person to tax under either subsection until after the expiration of the time allowed to such person for delivery of the return provided for in section 47’. It is, therefore, a condition precedent that the Board must give the person the notice in writing specified in section 47( 1) (Section 45(1), 1948 Ed.).

I have found the cases mentioned by Counsel helpful in considering the general principles involved, but it is to the wording of the Nigerian Act that I have looked in deciding that the High Court has not been deprived of its jurisdiction to consider the validity of an assessment on a claim for the recovery of tax alleged to be due. I will refer briet1y to the three cases on this point cited by Counsel for the appellant. The case of the Inland Revenue Commissioners v. Pearlberg related to the wording of the United Kingdom Finance and Income Tax Acts and the wording of these Acts differ from the Nigerian Laws under consideration here. It is clear from the judgment of the High Court in the case of Commissioner of Income Tax v. Rewance that there had been a demand for tax in that case and the comments of the trial Judge on the question of the special procedure appears to have been unnecessary for the purpose of deciding that the amount of tax claimed was due. The case went to the Federal Supreme Court but there is nothing to show the grounds of appeal that were argued before the Court. The Court dismissed the appeal in a judgment in which they said that there was not substance in the appeal. I do not regard this as a conclusive decision of the Federal Supreme Court on the issue which we are now considering. The decision of the Judicial Committee in the case of Mandavia v. Commissioner income Tax is to the effect that under the Kenya Income Tax Law an assessment made before the expiration of the time allowed for making a return is invalid. It would appear from the judgment that the case reached the Judicial Committee through some special procedure under the Kenya Income Tax Ordinance, but there was no decision of the Judicial Committee on whether that procedure was exclusive.

Councel for the appellant made a final submission that, if the Court was against him, dismissal of the claim should be altered to one of non-suit.

The relevant part of the judgment in the High Court reads as follows:-

For reasons which I have given I rind that the assessments upon which this claim is brought were not made in accordance with law and the claim therefore fails.
I enter judgment for the defendants.

I think that the proper course is to alter the finding of the Court below to a specific finding that ‘the assessment for 1958-59 made on the 11th November, 1958, and that for 1959-60 made on the 3rd October, 1959, were null and void, and that the claim in respect of those purported assessments accordingly fails. The invalid assessments are set aside.’

Subject to the above alterations in the finding s I would dismiss this appeal with costs assessed at £15-I5s-0d plus the cost of the record if the respondent paid for a copy.

Other Citation: (1962) LCN/0960(SC)