Commissioner of Inland Revenue v. Lee Chi-ling

Case No.DCCJ 6256/1976

Court

District Court

Date—

Judge—

Case Document

100%Judiciary

DCCJ006256/1976

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT KOWLOON

CIVIL JURISDICTION

ACTION NO. 6256 OF 1976

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Between:
	Commissioner of Inland Revenue	Plaintiff
	and
	LEE Chi-ling	Defendant

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Coram: B.L. Jones, D.J. in Court.

Date of Judgment: 11th January, 1977.

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DECISION

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1. The plaintiff applies to strike out the defendant's amended defence and counterclaim on the grounds that it discloses no reasonable nor adequate defence.

2. The plaintiff's claim is for the sum of $134,161.00 in respect of profits tax for the years of assessment 1971/72 and 1972/73. Proceedings for recovery of the tax have been instituted in the District Court by virtue of section 75(2) of the Inland Revenue Ordinance Cap. 112.

3. The main particulars of the amended defence are as follows:-

	(1)	The tax claimed is ultra vires the power of the assessor, and is therefore not recoverable.
	(2)	On or about the 30th September, 1974 the assessor wrote to the defendant alleging that the acquisition and resale by the defendant of certain properties amounted to an adventure in the nature of trade. Accordingly the defendant was requested to complete profits tax returns for the years of assessment 1970/71, 1971/72 and 1972/73 within one month of the date of the letter.
	(3)	On or about the 1st August, 1975 an accountant pur-porting to act on behalf of the defendant completed the profits tax returns under the mistaken impression that the defendant had been engaging in a trade, business or profession.
	(4)	The defendant denies that he has ever carried on any trade, profession or business in the colony within the meaning of Part IV of the ordinance.
	(5)	The defendant avers that the notices of assessment are null and void and of no legal effect.

4. Part XI of the ordinance sets out a comprehensive procedure for objections and appeals.

5. Section 70 reads in part:

"Where no valid objection or appeal has been lodged within the time limited by this Part against an assessment as regards the amount of the assessable income or profits assessed thereby ..... the assess-ment as made ......... shall be final and conclusive for all purposes of this ordinance as regards the amount of such assessable income or profits.

6. Tax is recoverable as a civil debt in the District Court by virtue of section 75 of the ordinance.

7. Section 75(4) reads in part:

"In proceedings under this section for the recovery of tax the court shall not entertain any plea that the tax is excessive, incorrect, subject to objection or under appeal, .........."

8. Mr. Tong who appeared on behalf of the defendant argued that despite the procedure set out in Part XI for objections and appeals the defendant can still raise a defence as to liability in the District Court in proceedings for recovery of tax.

9. The instant case shows that the plaintiff made an assessment presumably on the returns submitted by the accountant who purported to act on behalf of the defendant. The defendant now alleges in effect that the accountant acted without authority and contends that he is not legally chargeable to tax. Therefore although section 70 is final and conclusive as to amount it does not preclude a defence on other grounds.

10. The distinction between assessment and tax was referred to in NG Chun-kwan v. Commissioner of Inland Revenue⁽¹⁾ where it was held that whether an assessment was a nullity or not could be raised by way of an objection in an appeal under Part XI. There was no question of shutting out the appellant from the court for he was able to invoke provisions enabling him to appeal from the Commissioner to a Board of Review and then to the High Court.

11. It is pertinent to observe that upon the hearing of an appeal the Board may under section 68(8)(a) annul an assessment whilst the High Court may exercise the same power under section 69(5).

12. The defence in this case in essence pleads that the assessment of tax is incorrect in that it should be nil. In these circumstances the defendants contention that the assessment is null and void can only be determined by way of the procedure contained in Part XI. The limited jurisdiction of the District Court does not extend to the matters pleaded by the defendant.

13. The position was succinctly expressed by Briggs C.J. in NG Chun-kwan v. Commissioner of Inland Revenue at page 98:

"The ordinance therefore carefully differentiates between assessment and tax. Objections to the former are dealt with by a Board of Review and the Supreme Court - objections to the tax are dealt with by the District Court. I do not see how it can be suggested that matters for which an avenue of appeal is provided can be raised by way of a defence in another court."

14. There will therefore be an order to strike out the amended defence and counterclaim with costs on the Upper Scale to the plaintiff.

	Sd. B.L. Jones
	District Judge

Representation:

Mr. Stephen T.M. Poon, Tax Inspector, for Plaintiff.

Mr. Ronny Tong instructed by Rowdget Young & Co. for Defendant.

(1) (1976) H.K.L.R. 94