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

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

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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:

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“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.”

He then set aside the assessment and ordered that fresh assessments in respect of the two tax years concerned be made on the defendants. He made no order as to costs on either side. The plaintiffs have now appealed against that decision, the principal contention before us being that the notices were properly and duly sent or delivered and that in the circumstances of this case, the court should not have considered itself competent to reopen the issue of the quantum of the assessment.

Learned counsel for the defendants maintained that the court could reopen, as indeed it did, the quantum of the assessments relying on the case of Board of Inland Revenue V Razcallah & Sons Ltd. [1962] 1 All N.L.R. 1 and that in any case the notices prescribed by section 44 of the Companies Income Tax Act, 1961 were not properly sent to the defendants. We have already set out the findings of the learned trial judge in respect of the notices and the service of them.

It seems clear that the judge did not find against the plaintiffs on this point, as he indeed held, in this connection that the plaintiffs had complied with the law. If, as it is intended by the learned counsel for the defendants to do, the defendants are of the view that the judgment should be varied on that issue then the defendants as required by Order 7, rule 13 (1) of the Supreme Court Rules should have filed a notice of such intention showing the grounds or reasons for the contention and so apprise the plaintiffs of what otherwise they were contending. The defendants have not done so in this case and we see no reasons why compliance with the rules should not as it should, be insisted upon.

If then the notices were duly and properly served on the defendants, the only question for determination pertains to the merits of the case. The case of Razcallah (supra) concerns the construction of a section of a different legislation and indeed in that case it was held that the notices were not properly served and were therefore invalid as a basis of any tax liability.

We think therefore that the decision in that case should be confined to the facts therein canvassed and adjudicated upon. The appeal before us undoubtedly raises the question of the nature of the jurisdiction of the High Court of Lagos in income tax matters and it is of paramount importance that the legal position should be clarified. Generally speaking the Companies Income Tax Act, 1961 provides for the assessment, levying and calculation of taxes from companies and by elaborate provisions meticulously dealing with every stage of the entire process ensures the creation of a system by which a tax payer or the Board of Inland Revenue is bestowed with a channel of appeal through a body of Appeal Commissioners (section 56) to the High Court of Lagos (section 59).

Even if there are no Appeal Commissioners appointed by virtue of section 55 of the Act an appeal still does lie to the High Court of Lagos by virtue of section 59(2) against an assessment which is not agreed.

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The powers of the Appeal Commissioners are set out in section 57 sub-sections (6), (7) and (9) of section 58 (1) provides the manner in whch the Appeal Commissioners is publicized. On an appeal in pursuant of the Act to the High Court of Lagos, that court has the jurisdiction expressly conferred on it by section 59 (5) of the Act which provides the following:

“59(5) the provisions of sub-section (6), (7) and (9) of subsection (1) of section 58 of this Act shall apply to an appeal under this section with any necessary modifications.”

“57(6) Every company so appealing shall be entitled to be represented at the hearing of the appeal: Provided that, if the person intended by the company to be its representative in any appeal is unable for good course shown to attend the hearing thereof, the Appeal Commissioners may adjourn the hearing for such reasonable time as they think fit, or admit the appeal to be made by some other person or by way of written statement.

(7) The onus of proving that the assessment complained of is excessive shall be on the appellant.

(9) The Appeal Commissioners may confirm, reduce, increase or annul the assessment or make such order thereon as they see fit.”

In any case section 60 of the Act stipulates that an assessment unsuccessfully objected to or appealed from shall be final and conclusive for all purposes of the Act as regards the amount of the taxable profits of the company concerned. On the other hand, the Companies Income Tax Act, 1961 makes concurrent provisions for the simple and speedy recovery of taxes due by action in any court of competent jurisdiction, competence being based upon the financial limits of the jurisdiction of such a court. These provisions contained in section 63 of the Act are complementary to those prescribed in section 59(5) and are not designed specifically only for the High Court of Lagos. But as section 63(2) expressly states the provisions are applicable in any court which possesses the necessary jurisdictional competence. Section 63(3) reads as follows:-

“63(3) In any action brought under subsection (1) of this section the production of a certificate signed by any person duly authorised by the Chairman of the Board giving the name and address of the defendant and the amount of tax due shall be sufficient evidence of the amount so due and sufficient authority for the court to give judgment for the said amount.”

It will be seen therefore that a special procedure is thereby created for the recovery of taxes under the section a procedure applicable in all competent courts in accordance with the Rules of the court concerned and clearly not as envisaged only for the High Court of Lagos as in section 59 of the Act. If a claim is brought before the High Court of Lagos in virtue of the section it behooves the court to proceed in accordance with the provisions of section 63 of the Act. It is therefore manifest that as far as the High Court of Lagos is concerned it exercises two channels of jurisdiction as described above. Regard must therefore always be had to this fact and the High Court of Lagos should not be oblivious of the two different patterns of jurisdiction. By way of analogy reference may be made to the case of Aboud v. Regional Tax Board (1966) N .M.L.R. 100. In that case the appellant had sought in the High Court, Ibadan, a declaration as to the amount of tax payable by him after having failed to take advantage of the statutory right of appeal to the appropriate local Committee. This Court held that the assessments had become final and conclusive by virtue of section 55 of Western Nigeria Income Tax Law and that in those circumstances the High Court, Ibadan, ought not to have exercised jurisdiction as it did, with regards to the declaration sought since the court could not have granted any ancillary relief.

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In the instant case, the learned trial judge did not consider the provisions of section 60 of the Companies Income Tax Act, 1961 for if he did, it would have occurred to him that on the strength of his own findings the assessments on the defendants had become final and conclusive. At that stage the raison d’ etre of Razcallah’s case (supra) ceased to apply and the learned trial judge clearly misdirected himself to think that on the authority of that case he was entitled as he did to reopen the issue of the quantum of the assessments. Having regard to the course which this case took in the High Court we have had some difficulty about the nature of the orders to make on this appeal. The statement of defence on which the case went for trial contains a great deal of material which should have been the subject of objection or argument in limine and the defendants were as much at fault in putting those facts in their pleadings as the plaintiffs were in failing to take the proper objection at the proper time. Surely if either or both parties or their counsel had adverted to the provisions of Order 32, rule 19 of the old Supreme Court Rules (applicable in the High Court of Lagos) a great deal of the argument arising in this case would have been obviated.

Counsel on both sides are in the circumstances in agreement that we should send back the case for trial de novo and we accede to that request.

In the event the appeal succeeds and it is allowed, the judgment of Omololu J. in the High Court, Lagos (Suit No. LD/578/65) is set aside and it is ordered that the case be sent back to the court for hearing de novo.

The learned trial judge made no order for costs in the court below and we do not propose to disturb this position. The respondents before us will however pay to the appellants the costs of this appeal fixed at 37 guineas.

Other Citation: (1969) LCN/1633(SC)

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