The Kuala Lumpur High Court today granted leave to Datuk Seri Mukhriz Mahathir to initiate judicial review proceedings against an Additional Assessment Notice issued by the Inland Revenue Board (IRB) for over RM5 million. This notice pertains to the assessment years 2017 to 2019.
Presiding over the case, Judge Datuk Amarjeet Singh approved Mukhriz’s application for a temporary stay on the RM5 million payment. This stay will remain in effect pending the hearing of an adjournment application scheduled for April 16. In his ruling, Amarjeet emphasized that the case raised significant legal issues that warrant a thorough examination by the court.
Mukhriz, represented by his counsel Nizamuddin Abdul Hamid, is contesting the tax assessment on multiple grounds. Senior federal counsel Wan Shahida Wan Omar appeared on behalf of the respondents, which include the chief executive officer or director-general of Inland Revenue, Finance Minister Datuk Seri Anwar Ibrahim, and the Malaysian government.
Basis of the Judicial Review
On December 20, Mukhriz, a businessman and politician, filed his judicial review application. He is seeking to quash the Additional Assessment Notice, amounting to RM5,020,707.18, issued by the IRB. Mukhriz argues that the assessment is both unlawful and unreasonable. Specifically, he is challenging the penalty imposed under Section 113(2) of the Income Tax Act (ITA) 1967, asserting that it is ultra vires.
In his application, Mukhriz also accuses the Finance Minister of abusing his authority by allegedly directing the IRB to issue the Additional Assessment Notice and a certificate under Subsection 104(1) of the ITA 1967. He contends that this directive represents an improper use of power.
Mukhriz is further seeking a stay of enforcement on both the Additional Assessment Notice and the related certificate until the judicial review application is resolved. He argues that the IRB erred in its assessment by treating certain unexplained expenses as part of his taxable income, thereby inflating his tax liability.
Misclassification of Income
A critical point in Mukhriz’s challenge concerns the IRB’s alleged misclassification of income. He claims that the IRB improperly treated proceeds from the disposal of shares in OPCOM Holdings Berhad and dividends received from M Ocean Capital Sdn Bhd as taxable income. According to Mukhriz, such income is explicitly non-taxable under Malaysian tax law. He highlights the IRB’s own acknowledgment that both dividends and proceeds from share disposals are recognized as non-taxable income, further underscoring the alleged error.
Mukhriz asserts that this misclassification constitutes unequal and unfair treatment. He contends that the IRB’s actions were improper and reckless, leading to an unjust tax assessment.
Statutory Limitations and Procedural Errors
Another significant aspect of Mukhriz’s argument is the timing of the Additional Assessment Notices for 2017 and 2018. He asserts that these notices were issued beyond the statutory limitation period set out in Section 91(1) of the ITA 1967. This section mandates that such notices must be issued within five years unless the taxpayer is proven to have committed fraud, willful default, or negligence. Mukhriz argues that the IRB has not provided any evidence to support allegations of fraud, willful default, or negligence on his part. As a result, he claims that the notices are procedurally flawed and invalid.
Implications of the Case
This case has broader implications for tax administration and the rights of taxpayers in Malaysia. By granting leave for judicial review, the High Court has acknowledged the importance of examining the legal and procedural issues raised by Mukhriz. The outcome of this case could potentially set a precedent for how additional tax assessments are handled, particularly concerning the classification of income and the statutory limitations imposed by the ITA 1967.
As the hearing date approaches, this legal battle will be closely watched by political observers and taxpayers alike. It raises questions about the balance of power between tax authorities and taxpayers, as well as the safeguards in place to prevent misuse of authority in tax enforcement.
Reference: Mukhriz wins court nod to challenge RM5m additional tax assessment by IRB | Malay Mail
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