The South-East Zone of the Tax Appeal Tribunal sitting in Enugu on 20th August 2019 nullified a tax assessment of N1,528,205,878.88 issued by the Abia State Board of Internal Revenue (“ASBIR” or “the Board”) against Polaris Bank Limited for the 2006 – 2011 years of assessment in Polaris Bank Limited v Abia State Board of Internal Revenue Appeal No. TAT/Polaris Bank LTD SEZ/001/17 (unreported). The taxes under consideration were of: Pay as You Earn Taxes (PAYE); Withholding Taxes; Development Levy and Business Premises Levy.
The tax assessment was served on Polaris Bank on April 4, 2017. Polaris Bank objected to the tax assessment but paid the sum of N39,110,171.77, representing its undisputed liability. Although ASBIR received the Bank’s letter of objection, it failed to respond to the issues raised in the said letter, instead, it issued a reduced tax assessment in the sum of N254,375,478.06 and demanded payment within a period of 7 days. The Bank refused to make payment and the Board reinstated its initial assessment for the sum of N1,528,205,878.88. The Board also made the payment of the same a condition precedent for the Bank’s attendance at a tax reconciliation meeting scheduled for May 30, 2017. The Bank refused to make the payment but attended the tax reconciliation meeting. Following the meeting, ASBIR issued another reduced tax assessment in the sum of N203,500,382.45 and requested payment from the Bank within 48 hours. The Bank again refused to make payment within the indicated period. Within 72 hours of service of the latter assessment on the Bank, ASBIR cancelled the same and made its first tax assessment of N1,528,205,878.88 final and conclusive.
The Bank filed a Notice of Appeal challenging the Board’s tax assessment of N1,528,205,878.88. In the Appeal, the Bank contended that the Respondent failed to adhere to the procedure stipulated in PITA and argued that a tax assessment cannot become final and conclusive before the resolution of the objection by the taxpayer. The Bank relied upon section 55 of PITA in contending that only the 2011 assessment was valid as it fell within six years backwards from 2017. It argued that the 2006 – 2010 assessments were invalid. The Bank also argued that the Board cannot collect Development and Business Premises Levy based on the Taxes and Levies (Approved List of Collection) Act Cap T2, LFN 2004.
In the proceedings before the Tribunal, the Board joined issues with the Bank and opposed all the reliefs sought by the Bank, the Board also jettisoned its first assessment of N1,528,205,878.88 and relied upon its demand assessment of N203,500,382.45 and argued that the same represented a negotiated settlement of the Bank’s outstanding liability for 2006-2011.
The Tribunal, after hearing both parties allowed the Bank’s appeal in its entirety. The Tribunal found that the Board failed to adhere to the provisions of sections 57, 58 and 104 of PITA; paragraphs 9 and 15 of the PAYE Regulations as well as paragraph 16(1) (3) of the 5th Schedule to the FIRS (Establishment) Act, 2007 in dealing with the Bank’s objection to the tax assessment. The Tribunal agreed with the Bank that in the absence of primary tax legislation in the state providing for imposition, assessment, collection and accounting of Business Premises and Development Levies, the Board could not demand the said levies from the Bank, even though the Bank had paid the levies in the past. The Tribunal reiterated the correct position of the law thus: “A tax authority does not impose the tax. Tax legislation imposes tax while a tax authority COLLECTS it (see section 1 PITA)”. The Tribunal also found that only the 2011 assessment fell within the purview of the Act, as the 2006 – 2010 assessments were more than six years from 2017, the year the audit took place.
The Tribunal finally proclaimed a warning to the Board that: “Giving a taxpayer 48 hours or 7 days or any other period less than what the statute provides and changing assessment figures like the colour of a chameleon reduces the confidence of the taxpayer in the tax system”, and to the Bank, the Tribunal warned: “you should not wait for a tax audit before discovering and paying sums under-remitted”.
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