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| Sunday, 3 October 2004 |
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The Assessors right to be heard at the appeal hearing contd. 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. There are number of objections to this submission (1) This section namely section 117 (8) was never intended to summon AN ASSESSOR OR AN APPELLANT. It was intended to summon third parties totally unconnected with the appeal. The issue in appeal may be the cost of the construction of a building running into several millions. Expert evidence will be necessary in such a case. Hence, the Commissioner-General may summon a professor of Building Economics or a Civil Construction Engineer. Or the issue in appeal may be capital gains on the sale of a building. In such case the Commissioner-General may summon an expert valuer. (2) Mr. Fernando submits that the Commissioner-General after summoning the assessor as a witness should lead his evidence. Now, for the Commissioner-General to lead evidence, he should be thoroughly conversant with all what had transpired before the appeal hearing. For this purpose he should study the file in depth - the basis for the assessment in appeal, the information called for by the assessor, the information supplied by the taxpayer, the assessor's observation on such information, the letters written by the assessor, replies by the taxpayer, the notes of interview, submissions by the authorized representative, so on and so forth. Now if the Commissioner-General has the time to do all this, the assessor's presence at the appeal hearing will not be necessary. Because the assessor testify to anything more than what is in the file. It is precisely because the Commissioner-General does not have the time to peruse a file in depth that the assessor is there to assist him. (3) If the Commissioner-General were to lead the evidence of the assessor he will cease to sit in judgement over the correctness of the assessment in appeal. By leading the evidence of the assessor he will be supporting the assessor's case and therefore the assessment in appeal. Further, what if the Commissioner-General were to ask leading questions from the assessor - leading questions are those which suggest the expected answers. Even if the authorised representative or the appellant objects to such questions, who is there to disallow them. (4) If the assessor is summoned as a witness his only function would be to answer questions that are put to him. As a witness he cannot do anything more. He cannot assist the Commissioner-General by pointing out to the unsatisfactory nature of the accounts, that there is a capital discrepancy and so on. In short he cannot assist the Commissioner-General. (5) Nowhere in the public service does a head of a department summon a subordinate officer under the provisions of a statute. Not merely in the Inland Revenue, but in other government departments too, subordinate officers take decisions against which appeals are lodged. At the inquiry in to the appeal the officer concerned will invariably be present to defend his stand. For example a customs officer may impose duty on an imported article. The importer may appeal to higher authorities. At the inquiry, the collector of customs, for instance will require the officer who imposed the duty to be present. He does not do so under any provision of the Customs Ordinance. He will just request the officer to be present. Likewise, a rating officer of a municipality will decide the rate applicable to particular premises. The ratepayer may appeal to the higher municipal authorities. At the inquiry into the appeal the rating officer will be present with a view to indicating the basis of his valuation. For this purpose he will not be summoned under any provision of the Municipal Ordinance. (6) That the section is not intended to summon an assessor will be clear from a close scrutiny of it. If a person fails to comply with a notice under section 117(8), in terms of section 151 he would have committed an offence and will be liable to conviction after summary trial before a magistrate. Now, if an assessor does not attend when summoned, is the Commissioner-General to proceed to prosecute the assessor? The very fact of penal sanction for failure to attend when summoned indicates that the section was never intended to summon an assessor as a witness. (7) If the assessor is summoned as a witness after the Examination-in-Chief he will have to be exposed to Cross Examination by the appellant and Re-Examination by the Commissioner-General. In short, a mere departmental inquiry by the head of the department will be transformed into something like a court trial and thereby make the appeal machinery utterly cumbersome, if not unworkable. It is precisely to avoid such a situation that the provision regarding the admissibility of evidence in terms of the evidence ordinance has been shut out vide section 121 (9) of the Inland Revenue Act. Huxhan, the author of the Income Tax Scheme, did not want the appeal procedure to take the form of a trial in a court of law vide Huxham Report and the Draft Ordinance. To quote:- "Income tax being an annual tax it is essential that an appeal against one years assessment should be disposed of before the next years assessment falls due. The ordinary procedure in the civil courts do not make this possible. The effect of scores, if not hundreds of appeals standing over a year at a time would be a little short of disastrous. The principal duty of an appellate tribunal hearing an income tax appeal on a question of fact is to determined the appellants income from business or other sources. To do this properly, the proper atmosphere is that of a group of businessmen discussing a business problem rather than that of a court of law bound by strict rules of procedure". (8) Finally if the Commissioner-General is to lead the evidence of the assessor he has to lead the evidence before some other person. For instance when an attorney-at-law leads evidence in a court of law he does so before a judge. Now before whom is the Commissioner-General to lead the evidence of the assessor? At an appeal hearing before the Commissioner-General those present besides, the Commissioner-General are, the assessor, the taxpayer and/or his authorised or representatives and the stenographer. To give effect to Mr. Fernando's suggestion another person has to be brought in to hear the appeal. But the Act does not permit such a course of action. For the Act is to the effect that the Commissioner-General will hear the appeal. That being so he cannot lead the evidence of the assessor. For he cannot sit in judgement as to the correctness of the assessment at the same time lead evidence. In short he cannot be both judge and advocate at the same time. Mr. Fernando further states that the Commissioner-General is empowered to lead the evidence of the assessor in terms of section 117 (8) with all respect this is clearly a misreading of section 117 (8). All what the section states is; (a) That the Commissioner-General can summon anyone whom he thinks can give evidence in respect of the appeal. (b) Examine him on oath or otherwise. From the foregoing it will be obvious that, Mr. Fernando's submission is unworkable. The fact of matter is that it is unnecessary to get unduly legalistic about purely administrative matters. |
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