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| Sunday, 8 August 2004 |
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Can an appellant withdraw an appeal? Observations by Cecil Aluthwela In a series of articles former Deputy Commissioner of (Appeals) Department of inland Revenue Cecil Aluthwela gives his observations on the article titled " On tax appeals - Some reflections" by Stanley Fernando (BA Ceylon) Attorney-at-Law Lecturer and Examiner in Tax Law, Council of Legal Education, Visiting lecturer in Tax Law, Faculty of Law, University of Colombo which appeared in the July 1993 issue (vol.1 No.1) of the Journal of the Institute of Taxation. These observations present different points of view which may be of benefit and interest to the tax paying public. The Inland Revenue Act (Sri Lanka) referred to is Act No 28 of 1979. The sections referred referred to are those in the Act. Under this caption Mr. Fernando quotes the case R.v.I.T. special commissioners ex parte elmhirst. On the basis of the dicta in that case, he concludes that once a taxpayer appeals, he cannot withdraw the appeal. In the United Kingdom at the time of the decision, the Act was silent as to whether an appellant could withdraw an Appeal. Taking advantage of this position Mr. Elmhirst sought to withdraw an appeal against an additional assessment which was almost ten times that of the original assessment. When the Special Commissioners listed the appeal for a hearing the appellant moved by way of a Writ of Prohibition. The Writ action failed, and it was held both in the High Court, and in the Court of Appeal that the Special Commissioners are not merely entitled to but bound to ensure that the appellant was assessed at the correct amount. He cannot prevent this by withdrawing the appeal. The courts supplied the deficiency in the statute. Now this case was decided in 1935. Since then the law has not stood still. By Section 510 I.T.A. 1952, sub-section (4) the appellant could withdraw an appeal by giving notice of his intention to do so to the inspector. The inspector had thirty days within which to object to the notice. If he gives no notice of objection the appeal will stand withdrawn. Not merely at the level of the inspector, even after the appeal has reached the courts the parties could agree that the Commissioner's determination should stand. In which case, the appeal stands withdrawn. Even after the hearing has started the appellant is entitled to withdraw his appeal but before the decision is given vide Bradsaw v Blunden. Thus Mr. Fernando's contention based on the Elmhirst case, that an appellant cannot withdraw an appeal is untenable as far as the United Kingdom tax law is concerned. In India too an appellant cannot, as a matter of right, seek to withdraw an appeal. The appellate authority has the discretion whether to allow the withdrawal of the appeal. Vide Jagmohandas Gokuldas v C.W.T. What should be the position in Sri Lanka? The Act is silent and there is no decided case in point. Hence, the general principles in this regard will apply. Now, what are these general principles. The appellant, once he appeals against an assessment, gives the Commissioner-General opportunity of determining the Assessable Income in respect of an year of assessment. There is no way in which the appellant can stall the hand of the Commissioner-General. However, if the Commissioner-General feels that there is no possibility of enhancing the assessment he should, if the appellant so desires, allow him to withdraw the appeal. Such action is not in accordance with the law. But there is the law and there is the practice. For no useful purpose will be served in hearing and determining an appeal if the appellant and the Commissioner-General are both agreed on the eventual outcome. In this connection it is important to realize that an appellant may want to withdraw an appeal not merely to prevent enhancement. The advantage of pursuing the appeal may be marginal, or the appellant, since appealing, may be convinced that he has no case or a very slender one. For these and many other reasons, an appellant may want to withdraw the appeal. Under the same caption, Mr. Fernando states "where the appellant falls to attend the hearing it is mandatory for the Commissioner - General of Inland Revenue under our law to dismiss the appeal" (Section 117 (7)). There is no statutory basis for Mr. Fernando's contention that, if the appellant fails to attend the appeal hearing, it is mandatory for the Commissioner-General to dismiss the appeal. With all due respect to Mr. Fernando, this is a misconstruction of the section. The general scheme of the Act is that the Commissioner-General shall determine the assessment that has been appealed against. However, the law provides for the exceptional situation to dismiss the appeal where the appellant fails to attend. That the general scheme of the Act is for the Commissioner-General to determine an appeal will be clear from the proviso to section 117 (7). It states that he can vacate the order of dismissal and proceed to hear the appeal. Furthermore, the word used is the Commissioner-General may dismiss the appeal. He may he may not. He may dismiss or determine the appeal in the absence of the appellant. The Act does not make it mandatory, that the Commissioner General dismiss the appeal for non-attendance on the part of the appellant. In the Inland Revenue Act, as in other Acts, there are mandatory and discretionary provisions. The power of dismissal is a discretionary provision and not a mandatory provision as Mr. Fernando will want us to believe. Now, what is the rationale for giving the Commissioner-General this discretion? If the Commissioner-General feels that on the available information there is no possibility of enhancing the assessment he should be thankful that he is relieved of the duty of hearing and determining an appeal. After all, it is the appellant who is the aggrieved party. If he is not interested in pursuing the appeal and if there is no possibility of enhancement, why should the Commissioner-General bestir. As to why the Commissioner-General should not invariably dismiss an appeal for non-attendance on the part of the appellant is best illustrated by an example. Let it be supposed that the appellant had declared an income of Rs. 400,000 from profession and that is the only source declared in the return. The assessor had issued an estimated assessment in a sum of Rs. 450,000 in respect of the same source, thereby increasing the declared income by Rs. 50,000. The taxpayer appeals. No agreement is reached with the assessor in terms of section 117 (5). Hence, the appeal finds its way to the Commissioner-General. Just before the appeal hearing, information is received in the department to the effect that the appellant has a house property in Colombo from which he has derived an income of Rs. 120,000 as rent for the relevant year of assessment, which income he had not declared in the return. The appellant does not attend the appeal hearing. Now is the Commissioner-General going to dismiss the appeal. If he does as Mr. Fernando suggests, the Commissioner-General will, 1. Not be looking into the additional Rs. 50,000 made by the assessor 2. The income from rent, if correct, will escape assessment. Thus the Commissioner-General will have to determine the appeal in the absence of the appellant. In fact, the law makes it imperative that he does so. For section 123, adverts to the assessment determined by the Commissioner-General on appeal; and as I said earlier the determination is in respect of the Assessable Income, that is income from all sources. Apart from statute, the case law supports the position that on appeal the assessment has to be determined. That an appellant by absenting himself from an appeal hearing cannot prevent the appellate authorities from determining an assessment was adverted to in the Court of Appeal in the Elmhirst case (supra). This is what Lord Wright said in the Court of Appeal. "Sub section (3) of Section 136 (of the Income Tax Act 1918) was also referred to as indicating in the submission of Mr. Tucker K. C., that the presence of the taxpayer at the hearing of the appeal was something which was essential to the continuation of the appeal but I do not so read it. I think, all it means is that the appellant, if I may call him so - the person aggrieved, may have the full opportunity of being present and that there should be no decision behind his back, in the sense, that he has not had a proper opportunity of coming, if he wanted to come". (The words within brackets and the underlining are mine) Further on, in the judgement he says "and it was argued that there could not be a hearing of an appeal unless the appellant was present. I find it quite impossible to accept such a view. If the appellant does not think it fit to be present, then the machinery of these sections show that in such a case, the Commissioners have the power and the duty of examining all the facts and that such power is given to them by the mere giving of the notice of appeal and having their duty to examine the facts they are bound to give effect to what appears to them to be the proper assessment or estimate or proper valuation to be made in view of those facts". Supporting the dicta of Lord Wright, Romer J. had this to say. The question we have to determine in this case is whether ............he can stop the further working of the machinery ..... by refusing to be present at the hearing of the appeal. If that be right, he can in that way stop the working of the machinery, then as it appears to me, he is in a position to prevent any final assessment being made upon him under the Act. That would be an extraordinary intention to impute to the legislature. In my opinion that is not the effect of the Act". Further on he says:- "that is to say, because the section says that this power of the Commissioners can be or is to be exercised at the hearing of an appeal, the appellant by withdrawing his notice of appeal or by refusing to appear at the appeal can prevent the Commissioners from exercising that power. I have too much respect myself for the legislature to impute to them such an absurdity as that" (The underlining is mine). Thus by avoiding the hearing of the appeal the appellant cannot invariably expect the Commissioner-General to dismiss the appeal, as Mr. Fernando suggests. The position in India is similar. The appellant by refusing to attend and appeal hearing cannot prevent the Appellate Assistant Commissioner from proceeding with the appeal and if there is an understatement to enhance the assessment vide C.T.V. Nawab Shah v Nawar Khan. This dicta was also quoted with approval in C.I.T. (Central) Calcutta v Raibahadur Hardurray Motilal Chemaria. |
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