Tax Appeal Tribunal Rules On Validity Of Electronic Service Of Objection Against Tax Assessment, Penalty For Filing Incorrect Tax Returns, And Related Matters

Introduction

The Tax Appeal Tribunal, Lagos Zone (“TAT” or the “Tribunal”), in Earth Moving International Ltd. v FIRS (unreported judgement delivered on September 17, 2019 in Appeal No. TAT/C2/CIT/030/2018) (“Earth Moving”) pronounced that electronic service of a taxpayer’s objection, against a notice of assessment issued by the Federal Inland Revenue Service (“FIRS”), is valid and binding on the FIRS. The Tribunal also held that an industrial action can extend the statutory timeframe, within which a taxpayer may object to a notice of assessment issued by the FIRS.

Also, the TAT held in Siem Offshore Rederi AS v FIRS (unreported judgment delivered on September 17, 2019 in Appeal No. TAT/LZ/CIT/016/2017) (“Siem Offshore”), that:

1. The failure of a taxpayer to file correct tax returns and pay the full amount of tax due on its taxable income for any relevant accounting period, within the time statutorily allowed for the purpose, renders the taxpayer liable to payment of interest and penalty on the payable tax assessment; and

2. An appellant seeking to rely on a previous decision of the TAT in a present appeal pending before the Tribunal, must show that the facts and circumstances of both cases are so similar that it would amount to injustice for the Tribunal to reach a different decision in the present appeal. 

The Earth Moving case

In Earth Moving, the FIRS conducted a tax audit exercise on the appellant’s business operations for the 2016 accounting year and thereafter, raised an additional tax assessment of N25,469,873 on the appellant’s taxable income for the period. The appellant objected to the additional assessment. The FIRS subsequently issued a revised assessment dated August 27, 2018, which was served on the Appellant on August 29, 2018. By law, the appellant was required to communicate its objection to the revised assessment within 30 days of the receipt of same (specifically, on September 28, 2018). However, the appellant challenged the revised assessment by way of an official email sent to the relevant Tax Controller of the FIRS on September 26, 2018, and thereafter delivered a physical copy of the objection to the FIRS on October 2, 2018. In response, the FIRS issued a Notice of Refusal to Amend the revised assessment (“NORA”), dated October 5, 2018 to the appellant. The NORA was based on the ground that the appellant’s notice of objection was filed out of time.

The appellant resisted the FIRS’ position on the point and requested a review of its objection to the additional assessment on merit, in order to allow the parties conclude the tax audit exercise. The appellant also contended that the delay in delivering the physical copy of the objection to the FIRS was as a result of an industrial action embarked upon by members of the Nigerian Labour Congress (“NLC”) between September 27 and 28, 2018. It was further contended that the next three days following the industrial action were work-free days, in that September 29 and 30, 2018 fell on a weekend while October 1, 2018 was a public holiday in Nigeria.

The FIRS disregarded the appellant’s contentions and instead issued another NORA dated October 22, 2018 which was served on the appellant on October 15, 2018. The bases of the FIRS’ reissued NORA were that (i) the appellant’s objection to the revised assessment was invalid, having been filed out of time; and (ii) the additional tax assessment remained final and conclusive. Aggrieved, the appellant lodged an appeal at the TAT, challenging the validity of the additional assessment. The key issues that arose for determination by the Tribunal in the appeal include:

1. Whether in the circumstances of the appeal, the appellant’s notice of objection against the revised assessment sent by email on September 26, 2018 and subsequently delivered physically to the FIRS on October 2, 2018 was filed out of time;

2. Whether the revised assessment had become final and conclusive by reason of the appellant’s physical delivery of its objection on October 2, 2018, well over 30 days after receipt of the revised assessment; and

3. Whether there was a valid and competent appeal lodged before the TAT to invoke the jurisdiction of the Tribunal.

The Tribunal resolved all three questions in favour of the appellant and held as follows:

• By section 69(1) and (2) of the Companies Income Tax Act[1] (“CITA”), a taxpayer who disputes a tax assessment raised by the FIRS is required by law to file its notice of objection within 30 days of its receipt of the relevant notice of assessment, but the medium through which the written objection should be transmitted is not stated in the law.

• The appellant’s emailed notice of objection, validly received by a senior official of the FIRS September 26, 2018 but physically delivered to the FIRS on October 2, 2018, was filed within 30 days as required by law. Hence, it is binding on the FIRS because the receipt of a document by a relevant FIRS Tax Controller, translates to receipt of the document by FIRS.

  

• The revised assessment raised by the FIRS had not become final and conclusive because the time within which the appellant was statutorily required to file its objection against the revised assessment froze on September 27, 2018; when the NLC industrial action commenced and re-started on October 2, 2018; when work resumed after the weekend of September 29 and 30, 2018 and the public holiday on October 1, 2018. 

• A valid appeal was lodged by the appellant, competent enough to evoke the jurisdiction of the Tribunal to hear and determine the appeal because the appellant showed to the satisfaction of the Tribunal, the existence of exceptional circumstance occasioning the delay in physically delivering the appellant’s notice of objection[2].

1 Cap. C21 Laws of the Federation of Nigeria (“LFN”) 2004 (as amended in 2007). Section 69(1) and (2) of the CITA provides that if any company disputes an assessment served on it by the FIRS, it may apply to the FIRS by notice of objection in writing to review and to revise the assessment made upon it. Such an application shall (a) be made within 30 days from the date of service of the notice of assessment, and (b) contain the ground of objection to the assessment, that is, (i) the amount of assessable and total profits of the company for the relevant year of assessment, and (ii) the amount of tax payable for the year, which the company claims should be stated on the notice of assessment.

2 Paragraph 13(2) of the FIRS Act allows the TAT to entertain a tax appeal after the expiry of the statutory period of 30 days within which the appeal ought to have been filed if it is satisfied that there was sufficient cause for the delay.