Federal Board Of Inland Revenue Vs The Nigerian General Insurance Co. Ltd (1969)

LawGlobal-Hub Lead Judgment Report

COKER, J.S.C.

The Federal Board of Inland Revenue are the appellants before us and the plaintiffs in the High Courts, Lagos, in this matter and in the present respondents were the defendants in the court below. In the action (Suit No. LD/578/65) the plaintiffs had endorsed their writ for a claim for £3,740 being arrears of 1963/64 and 1964/65 income taxes together with penalties payable thereon by virtue of section 62 of the Companies Income Tax Act, 1961.

The defendants resisted the claim and pleadings were ordered, filed and duly delivered. By their statements of claim the plaintiffs aver inter alia that the defendants are persons subject to Companies Income Tax Act, 1961, that in respect of the relevant years of assessment, the plaintiffs sent to the defendants notices and forms for the declaration of their returns in accordance with section 44 of the Companies Income Tax Act, 1961 and that the defendants did not forward any search returns as demanded.

The statement of claim further avers that in respect of each of the years consend notices of the assessable profits of the defendants proposed to be taxed were the Scrutineer committee for Lagos pursuant to section 10 of the Companies Income Tax Act, 1961 and that later assessment were made on the defendants and notices of such assessments sent by the registered posts to them in accordance with section 52 of the Companies Income Tax Act, 1961.

The statement of claim finally avers that the defendants neither objected to the assessments nor paid the sums raised thereby; that notices pursuant to section 44 of the Acts were served on the defendants to pay and that as they would not pay, the amount assessed together with penalties had become a debt due from the defendants to the plaintiffs; and that they were being sued for the debt.

The statement of defence complains that the notices should have been sent to the tax consultants retained by the defendants to the knowledge of the plaintiffs, that the “best of judgment assessment” levied by the plaintiffs must be in error in that some of the sources of income relied upon by the plaintiffs for taxing the defendants were in fact non-existent for the years of assessment concerned and that in any case “the arbitrary assessment is fantastic, extremely excessive and unrealistic”.

The parties gave evidence at the trial, the plaintiffs calling evidence in support of the allegation in their statement of claim. Evidence by the plaintiffs is to the effect that the assessments on the defendants were made in the absence of any return by the defendants on the best of judgment having regard to the following sources of income reputedly associated by virtue of previous returns with the defendants, i.e.-

(1) Money-lending business;

(2) Income from Investments with the National Bank of Nigeria Limited; and

(3) Normal insurance business.

The general manager of the defendants gave evidence to the effect that the tax consultants employed by the defendants were known to the plaintiffs and that notices should, as had been the case in previous years, have been forwarded to their tax consultants and not to the defendants direct as in this case; and that in any case the money lending business and the income from the investment in the National Bank of Nigeria Limited were not existing during the tax years in consideration. The learned trial judge (Omololu, J.) reviewed the entire evidence before him in the course of a reserved judgment. On the issue of whether or not the notices should have been forwarded to the tax consultants, he observed as follows:

“My finding in respect of Mr. Gomez’s first submission is that although the plaintiff correctly addressed and served the notices on the defendant as provided by the Law, the notices did not in effect reach the defendant in good time and the plaintiff did know or ought to have known that the notices were being addressed to a place which through their experience and previous practice was not the normal place.”

With respect to the merits of the case the learned trial judge found that all notices stipulated by the Companies Income Tax Act, 1961 and required to be served on the defendants were duly served and that the defendants did fail to object as they could have done to the assessments made against them in the circumstances which ensued. Although it was contended before him that the assessments in the circumstances of the case were final and conclusive as to quantum, the learned trial judge found for reasons appearing in his judgment, but which are now irrelevant for the purpose of this appeal, that he could reopen the question of the quantum of the assessments and observed as follows:-

“In considering the whole circumstances of the case the court does not feel able to say that the amount of £3,740 claimed has been proved as debt due to the plaintiff for the reasons which I have given.”