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Void Assessments to Income Tax in Nigeria

Published online by Cambridge University Press:  28 July 2009

J. M. Elegido
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Extract

Many Nigerian decisions in tax cases have firmly established the possibility of raising the defence of lack of jurisdiction in the assessment in an action for recovery of tax. This development has resulted from decisions of the courts and has led to a significant shift from the practice in the U.K. There— aside from the possibility of applying in rather exceptional cases for judicial review—the consideration of any issues, whether of fact or of law, as to the merits of an assessment is confined to appeals before the Commissioners with further appeal to the High Court on points of law. This apparently technical difference has had great practical importance. Recourse to the courts for the purpose of tax recovery has become more difficult for the Revenue and this has encouraged the development of extra-judicial methods of tax collection.

A study of those Nigerian decisions that have established, extended and applied this doctrine, and of its consequences, should be of interest in other anglophone African countries. The income tax statutes of many such countries are basically similar due to their common descent from a “Model Ordinance” prepared in the U.K. in 1922. Decisions of the Nigerian Courts on the construction of provisions of the Nigerian tax statutes are of persuasive authority in other Commonwealth countries with similar provisions in their own tax enactments.

This paper first provides a broad outline of the Nigerian legislation on tax assessments, appeals and collection in order to facilitate the understanding of the points discussed later.

Type
Research Article
Information
Journal of African Law , Volume 32 , Issue 1 , Spring 1988 , pp. 44 - 63
Copyright
Copyright © School of Oriental and African Studies 1988

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References

1 Model Ordinance by the Inter-departmental Committee on Income Tax in the Colonies not Possessing Responsible Government. Cmd 1988, London, H.M.S.O., 1922Google Scholar.

2 (1962) 1 All N.L.R. 1 (S.C.)Google Scholar

3 For convenience all these enactments will be referred to collectively as the “assessment laws” in the rest of this paper.

4 No. 28 of 1979. Hereinafter referred to as CITA 1979Google Scholar. It replaced and repealed the Companies Income Tax Act No. 22 of 1961. Hereinafter this Act is referred to as CITA 1961.

5 No. 51 of 1972. Hereinafter referred to as ITAF 1972Google Scholar.

6 No. 16 of 1957. Hereinafter referred to as ITL 1957. It will be cited by the 1959 edition of the Western Nigeria LawsGoogle Scholar.

7 No. 5 of 1962. Hereinafter referred to as FL 1962. It will be cited by the 1963 edition of the Eastern Nigeria LawsGoogle Scholar.

8 No. 6 of 1962. Hereinafter referred to as PTL 1962. It will be cited by the 1963 edition of the Northern Nigeria LawsGoogle Scholar.

9 No. 23 of 1961. Hereinafter referred to as PITA 1961. It will be cited by the 1973 edition of the Lagos State LawsGoogle Scholar.

10 In order to facilitate comparison with the statutes of other African countries some representative specimens of the more important Nigerian provisions are reproduced as an Appendix.

11 Section 15(2) FL 1962; s. 36 ITL 1957; s. 23 PITA 1961; s. 16 PTL 1962; s. 19 ITAF 1972Google Scholar. CITA 1979 makes no provision for the Federal Board of Inland Revenue to have to demand returns from taxpayer companies. It simply provides that every company is under an obligation to file with the Board its audited accounts within six months of the close of its accounting year: s. 40(3). Then the Board may request in writing fuller or further returns: s. 41.

12 Section 45 CITA 1979; s. 17 FL 1962; s. 40 ITL 1957; s. 27 PITA 1961; s. 20 PTL 1962; s. 23 ITAF 1972Google Scholar.

13 If a taxpayer without valid excuse fails to submit his return of income after a notice to do so has been validly served on him, he commits an offence: s. 66(2) CITA 1979; s. 35(1) FL 1962); s. 66(6) ITL 1957; s. 59(2) PITA 1961; s. 59(1) PTL 1962; s. 46(2) ITAF 1972Google Scholar.

14 Section 46 CITA 1979; s. 19(3) FL 1962; s. 45 ITL 1957; s. 29 PITA 1961; s. 24 PTL 1962; s. 24 ITAF 1972Google Scholar.

15 Section 46(2) CITA 1979; s. 19(3) FL 1962; s. 45 ITL 1957; s. 29 PITA 1961; s. 24 PTL 1962; s. 24(2) ITAF 1972Google Scholar.

16 Section 47(1) CITA 1979; s. 21 FL 1962 (this section is not framed in terms of “discovery”, but—more widely—by reference to the Assessment Authority having reason to believe that a taxpayer has not been charged or has been charged at a lesser amount than he ought to have been charged); s. 46 ITL 1957; s. 30 PITA 1961; s. 25(1) 1962; s. 25(1) ITAF 1972Google Scholar.

17 Section 47 CITA 1979; s. 46 ITL 1957 (“neglect” is not mentioned); s. 30 PITA 1961; s. 25(3) PTL 1962 (“neglect” is not mentioned); s. 25 ITAF 1972Google Scholar.

18 Section 49 CITA 1979; s. 20(1) FL 1962; s. 48 ITL 1957; s. 32 PITA 1961; s. 26 PTL 1962; s. 27 ITAF 1972Google Scholar.

19 Section 50 CITA 1979 (30 days); s. 23 FL 1962 (21 days); s. 48 ITL 1957 (30 days); s. 33 PITA 1961 (30 days); s. 28 PTL 1962 (3 months); s. 28 ITAF 1972 (30 days)Google Scholar.

20 Section 50(1) CITA 1979 as amended by Act No. 98 of 1979; s. 22(2) FL 1962; s. 48(2) ITL 1957; s. 33(1) PITA 1961; s. 28(1) PTL 1962; s. 28 ITAF 1972Google Scholar.

21 Section 50 CITA 1979; s. 23(3) FL 1962; s. 48(4) ITL 1957; s. 23 PITA 1961; s. 28 PTL 1962; s. 28(3) ITAF 1972Google Scholar.

22 Sections 24, 25, 26 FL 1962Google Scholar.

23 Section 53(1) CITA 1979; s. 51 ITL 1957; s. 36 PITA 1961; s. 31 PTL 1962; s. 30 ITAF 1972Google Scholar.

24 Section 24(2) FL 1962Google Scholar.

25 Section 31 PTL 1962Google Scholar.

26 Section 53 CITA 1979; s. 51 ITL 1957; ss. 36 and 38 PITA 1961; s. 32 ITAF 1972Google Scholar.

27 [1971] 1 N.M.L.R. 162 at p. 166Google Scholar.

28 Section 57 CITA 1979; s. 28(1) FL 1962; s. 55 ITL 1957; s. 44 PITA 1961; s. 38 PTL 1962; s. 35 ITAF 1972Google Scholar.

29 Section 60 CITA 1979 (10%); s. 37(1)(A) FL 1962 (20%); s. 58(1) ITL 1957 (10%); s. 49(1) PITA 1961 (10%); s. 40(1) PTL 1962 (100%); s. 37 ITAF 1972 (10%)Google Scholar.

30 This is popularly known as “tax drive” in the Eastern States. The other assessment laws do not contain similar provisions.

31 Section 61 CITA 1979; s. 34(5) FL 1962; s. 50(1) PITA 1961; s. 43 PTL 1962; s. 38 ITAF 1972, ITL 1957 contains no power to distrainGoogle Scholar.

32 Section 62 CITA 1979; s. 7 FL 1962; s. 51 PITA 1961; s. 42 PTL 1962; s. 63 ITL 1957; s. 39(1) ITAF 1972Google Scholar.

33 (1962) 1 AUN.L.R. 1 (S.C.)Google Scholar.

34 Ibid, at p. 8.

35 Re Calvert [1899] 2 Q.B. 145Google Scholar; Re Moschi (1954) 35 T.C. 692Google Scholar; R. v Bloomsbury Income Tax Commissioners, Ex p. Hooper [1915] 3 K.B. 768Google Scholar; R. v. Swansea Income Tax Commissioners, Ex p. English Crown Spelter Co. (1925) 9 T.C. 437Google Scholar; Ingle v. Farrand [1927] A.C. 417Google Scholar.

36 (1953) 34 T.C. 57(C.A.)Google Scholar.

37 Ibid. at p. 58.

38 (1931) 16 T.C. 145(C.S.)Google Scholar.

39 The case referred to a defect of procedure before the Commissioners.

40 [1924] A.C. 508Google Scholar.

41 Suit No. E/62A/1956 decided on 25.3.57 in the Enugu High Court (unreported).

42 (1957) II E.R.L.R. 14 (H.C.)Google Scholar.

43 Appeal No. W.A.C.A. 127/1954 (unreported).

44 (1953) 43 T.C. 57 (C.A.)Google Scholar.

45 F.B.I.R. v. Rezcallah (1962) 1 All N.L.R. 1 at p. 9Google Scholar.

46 Appeal No. W.A.C.A. 127/1954 (unreported).

47 [1924] A.C. 508Google Scholar.

48 Ibidem.

49 The Supreme Court itself has only had occasion to extend the principle explicitly to the case of lack of service of notice of assessment: Jameledine v. F.B.I.R. Appeal No. S.C. 395/66 decided on 9.2.68 by the Supreme Court (unreported).

50 (1974) 1 All N.L.R. 314 (S.C)Google Scholar. The facts of this case are examined later in this article.

51 (1962) 1 AUN.L.R. 1 at p. 11Google Scholar.

52 Appeal no. S.C. 395/66 decided on 9.2.68 by the Supreme Court (unreported). To the same effect F.B.I.R. v. Animashawun 1974 (3) ALR Comm. 68 (H.C.)Google Scholar.

53 For other cases in which an assessment has been held to be invalid because of failure to serve the notice requesting a return see Commissioner of Revenue v. Attah 1970 (2) ALR Comm. 121 (H.C.)Google Scholar; F.B.I.R. v. J. H. Doherty Ltd. (1971) 1 N.M.L.R. 162 (H.C.)Google Scholar; Mohammadu v. Oturkpo Local Administration 1973 N.N.L.R. 112 (H.C.)Google Scholar; F.B.I.R. v. Animashawun 1974 (3) ALR Comm. 68 (H.C.)Google Scholar; F.B.I.R. v. Funsho Agencies Ltd. 4 FRCR (1978) 195 (H.C.)Google Scholar. The only contrasting decision I have been able to find is that of Aguda J. in F.B.I.R. v. lbadan Bus Service Suit No. 1/39/67 decided on 4.6.69 in Western Nigeria High Court (unreported). It appears that the Rezcallah decision in the Supreme Court was not cited to the court during argument.

54 See also S.O. Ola v. F.B.I.R. 1 FRCR (1974) 70 (H.C.)Google Scholar; F.B.I.R. v. Animashawun 1974 (3) ALR Comm. 68 (H.C.)Google Scholar; Mohammadu v. Oturkpo Local Administration 1973 N.N.L.R. 112 (H.C.)Google Scholar; Obute v. Board of Internal Revenue Suit No. E/5CA/71 decided in the Enugu High Court (unreported); F.B.I.R. v. H.T. & L.T. Cons. Co. Ltd. 4 FRCR (1978) 73. (H.C.)Google Scholar.

55 Section 15(1) FL 1962; s. 23(2) PITA 1961; s. 19(1) ITAF 1972Google Scholar.

56 (1980) 1 PLR 531 (H.C.)Google Scholar.

57 4 FRCR (1978) 73 (H.C.)Google Scholar.

58 2 FRCR (1976) 116(H.C)Google Scholar.

59 [1971] 1 N.M.L.R. 162 (H.C.)Google Scholar.

60 (1947) 12 W.A.C.A. 123Google Scholar. See also F.B.I.R. v. Solanke 1 FRCR (1974) 40 (H.C.)Google Scholar; F.B.I.R. v. West African Futures Co. Ltd. 1 FRCR (1974) 110 (H.C.)Google Scholar. A decision to the contrary in which it was held that strict service to the taxpayer according to the letter of the law is required is Senior Inspector of Taxes v. Adigun Suit No. 1/169/71 decided in the Ibadan High Court (unreported). The authority of the Wasif Mograbi decision was doubted, in the case of companies, in F.B.I.R. v. J. H. Doherty Ltd. [1971] 1 N.M.L.R. 162 (H.C.)Google Scholar because the relevant assessment law made it mandatory that notices on a company be delivered at its registered office.

61 Suit No. FRC/L/35/74 decided on 12.8.74 in the Federal Revenue Court (Lagos) (unreported).

62 1975 (1) N.M.L.R. 272 (H.C.)Google Scholar

63 Section 40(3) CITA 1979Google Scholar.

64 Section 41 CITA 1979Google Scholar.

65 1970 (2) ALR Comm. 121 at pp. 127 and 128 (H.C)Google Scholar.

66 4 FRCR(1978) 73Google Scholar.

67 Appeal No. S.C. 395/66 decided on 9.2.68 (unreported) (S.C.).

68 [1971] 1 N.M.L.R. 162 (H.C.)Google Scholar.

69 1970 (2) ALR Comm. 121 (H.C.)Google Scholar.

70 Section 62(3) CITA 1979; s. 63(3) ITL 1957; s. 51(3) PITA 1961; s. 43(3) PTL 1962; s. 39(3) ITAF 1972Google Scholar.

71 In Bida v. Commissioner of Revenue (1972) 1 All N.L.R. (Part I) 191Google Scholar the Supreme Court held that this provision did not violate the constitutional requirement of fair hearing as it does not constitute “conclusive evidence” but only “prima facie evidence”. To the same effect Regional Tax Administrator v. African Press Ltd. Suit No. 1/373 (63: 1/85/67) decided on 11.11.68 by the Western State High Court (unreported) and Commissioner of Internal Revenue v. Edionseri 1975 (1) N.M.L.R. 272 (H.C.)Google Scholar;

72 (1972) 1 All N.L.R. (Part I) 191 (S.C)Google Scholar.

73 (1962) 1 All N.L.R. (Part I)Google Scholar.

74 1970 (2) ALR Comm. 121 (H.C.)Google Scholar.

75 [1959] A.C. 114 (P.C.)Google Scholar.

76 3 FRCR (1977) 251 at p. 270 (H.C.)Google Scholar. See also Oba v. C.I.R. Suit No. O/Tax 5A/61 decided on 10.8.1962 in the Onitsha High Court (unreported).

77 [1952] A.C. 571 (P.C.)Google Scholar.

78 Ibid. at p. 581.

79 2 FRCR(1976) 93 (H.C.)Google Scholar.

80 (1974) 1 All N.L.R. 314 (S.C.)Google Scholar.

81 Ibid. at pp. 327–29.

82 (1937) L.R. 64 LA. 102 (P.C.)Google Scholar.

83 Ibid. at p. 114.

84 (1979) 3 LRN 119(H.C)Google Scholar.

85 Ibid. at p. 124.

86 1973 (1) ALR Comm. 369 (H.C.)Google Scholar.

87 But in this case the Court thought—erroneously, it is submitted—that it had jurisdiction to reduce the unreasonable assessment. If the assessment authority has not made an honest judgment the correct course of action is to declare the assessment null and void. If it has, it is up to the taxpayer to appeal and in this appeal the onus is on him to show that the assessment is excessive: s. 54(7) CITA 1979; s. 24(8) FL 1962; s. 52(6) ITL 1957; s. 71(2) PITA 1961; s. 35(4) PTL 1962; s. 34 ITAF 1972, which incorporates the provisions of CITA 1961Google Scholar. This was emphasised by the West Africa Court of Appeal in Mai Sundu v. C.I.T. (1955) 14 W.A.C.A. 656Google Scholar and Mori Bayor v. C.I.T. (1955) 14 W.A.C.A. 651;Google Scholar and by the Supreme Court in Ihekwoaba v. C.I.T. 1958 3 FSC 67Google Scholar and in F.B.I.R. v. Nasr (1964) 1 All N.L.R. 408Google Scholar. See also Nsobundu v. C.I.R. Suit No. C/20/A/1958 decided on 23.5.58 in the Calabar High Court (unreported) and Mbah v. C.I.R. Suit No. E/l FLA/63 decided on 27.1.64 in the Enugu High Court (unreported). The point however seems to have been missed in Egole Cosmos v. Board of Internal Revenue (1973) 3 E.C.S.L.R. 661Google Scholar and in Okeke v. C.I.R. Suit No. O/Tax 9A/58 decided on 6.11.58 decided on 6.11.58 in the Onitsha High Court (unreported).

88 2 All N.L.R. 198 (H.C.).

89 Ibid. at p. 202.

90 1 FRCR (1974) 40 (H.C.)Google Scholar.

91 Section 51 CITA 1979; s. 49 ITL 1957; s. 34 PITA 1961; s. 27 PTL 1962; s. 29 ITAF 1972Google Scholar.

92 (1968) 44 T.C. 582(H.C)Google Scholar.

93 Ibid. at p. 597.

94 (1962) 1 All N.L.R. 1 at p. 11. (S.G.)Google Scholar. To the same effect Okupe v. F.B.I.R. (1974) 1 All N.L.R. 314 at p. 322 (S.C.)Google Scholar and F.B.I.R. v. H.T. & L.T. Construction Co. Ltd. 4 FRCR (1978) 73 (H.C).Google Scholar

95 Preston v. I.R.C. [1985] STC 282 at p. 294 (H.L.)Google Scholar.

96 See, for instance, Preston v. I.R.C. [1985] STC 282Google Scholar. Also, in Mulji Jetha Ltd. [1967] E.A. 50Google Scholar, a Kenyan case, it was stated that a tax authority that promises to accept a certain amount in settlement of tax liability if the taxpayer co-operates in certain ways, could be subject to equitable estoppel if it tried to go back on its agreement.

97 See, for instance, Congreve v. Home Office [1976] Q.B. 629Google Scholar. Also Preston v. I.R.C. [1985] STC 282 at p. 297Google Scholar. A similar example, in the Nigerian context, would be where the Revenue deliberately delayed raising an additional assessment in order to deprive the tax payer of loss relief.

96 (1977) 3 S.C. p. 53 (S.C.)Google Scholar.

99 Introduced by Decree No. 58 of 1968. Now s. 25 of CITA 1979. For individuals and unincorporated bodies s. 5A Income Tax Management Act 1961, introduced by Decree No. 58 of 1968, amended by Decree No. 98 of 1979.Google Scholar

100 Now Federal High Court.

101 Namely that it appears to the Board that for any year of assessment “the trade or business produces either no assessable profits, or assessable profits which in the opinion of the Board are less than might be expected to arise from that trade or business or, as the case may be, the true amount of the assessable profits of the company cannot be readily ascertained” (s. 25(1) CITA 1979).Google Scholar

102 (1977) 3 S.C. p. 53 at p. 78 (S.C)Google Scholar.

103 Section 57 CITA 1979; s. 28(2) FL 1962; s. 55 ITL 1957; s. 44 PITA 1961; s. 38 PTL. 1962; s. 35(2) ITAF 1972Google Scholar. These provisions on agreement—unlike s. 54 of the U.K. Taxes Management Act 1970—do not require that the agreement be reached after having given notice of appeal to the Commissioners. On the construction of the provisions on “discovery” and “agreement” in Nigeria, see Mobil Oil (Nigeria) Ltd. v. F.B.I.R. (1977) 3 S.C. p. 53 (S.C.)Google Scholar.

104 (1963) 2 All N.L.R. 198 (H.C.)Google Scholar. On this topic see also Ilorin Native Authority v. Musa Ajao 1967 N.N.L.R. 25 (H.C.)Google ScholarF.B.I.R. v. West African Pictures Co. Ltd. 1 FRCR (1974) 110 (H.C.)Google Scholar; Commissioner of Revenue v. Bida Suit NCH/26/70 in the Kaduna High Court (unreported); F.B.I.R. v. The Nigerian General Insurance Co. Ltd. (1969) 1 All N.L.R. 453 (S.C)Google Scholar.

105 (1963) 2 All N.L.R. 198 at p. 202 (H.C)Google Scholar.

106 (1963) 2 All N.L.R. 198 (H.C.)Google Scholar. On this topic see also Ilorin Native Authority v. Musa Ajao 1967 N.N.L.R. 25 (H.C.)Google Scholar; F.B.I.R. v. West African Futures Co. Ltd. 1 F.R.C.R. (1974) 110 (H.C.)Google Scholar; Commissioner of Revenue v. Bida Suit N.C.H. /26/70 in the Kaduna High Court (unreported); F.B.I.R. v. The Nigerian General Insurance Co. Ltd. (1969) 1 All N.L.R. 453 (S.C.)Google Scholar.

107 (1966) N.M.L.R. 100 (S.C.)Google Scholar. The High Court decision is to be found in 1963 W.R.L.R. 18Google Scholar.

108 (1979) 3 LRN 119(H.C)Google Scholar.

109 C.I.R. v. Pearlberg (1953) 34 T.C. 57 (C.A.)Google Scholar was a U.K. case where the taxpayer claimed that he was not the landlord of certain properties on which he had been assessed. The Court of Appeal held that, the taxpayer not having appealed to the Commissioners, the Court had no jurisdiction to enter into the matter.

110 Section 50 CITA 1979; s. 23(3) FL 1962; s. 33(1) ITL 1957; s. 33(1) PITA 1961; s. 28(1) PTL 1962; s. 28 ITAF 1972Google Scholar.

111 2 FRCR (1976) 116. (H.C.)Google Scholar.

112 Ibid. at p. 118.

113 1967 N.N.L.R. 25 (H.C.)Google Scholar.

114 1973 (1) ALR Coram. 369 (H.C.)Google Scholar.

115 1964 (1) ALR Coram. 249 at pp. 253–4Google Scholar.

116 Decree No. 4 of 1985.