Lembaga Hasil Dalam Negeri (LHDN) v PROFOUND RELIANCE SDN BHD

Case Significance

Illustrates the scope and limits of error-or-mistake relief under section 131 of the Income Tax Act 1967 and the High Court's role in hearing appeals from the Special Commissioners of Income Tax, the Director General's appeal being allowed.

This High Court decision at Kuala Lumpur, sitting in the Appeals and Special Powers Division, concerns an appeal by the Director General of Inland Revenue against a decision of the Special Commissioners of Income Tax (SCIT). It was heard together with a cross-appeal by the taxpayer against the same SCIT decision. The matter concerned the taxpayer, Profound Reliance Sdn Bhd, and its application dated 20 March 2013 for relief in respect of a supposed error or mistake in its returns for the years of assessment 2009, 2010 and 2011, made under section 131 of the Income Tax Act 1967. Section 131 permits a taxpayer who has paid tax and alleges that an assessment was excessive by reason of an error or mistake in a return to apply to the Director General for relief within the statutory period, subject to conditions, including that relief is not available where the return was made on the basis of the law or practice generally prevailing at the time. In this appeal the Director General challenged the Deciding Order of the SCIT to the extent that it had favoured the taxpayer. The court examined whether the SCIT had correctly applied the requirements of section 131 and the limits on error-or-mistake relief, and whether the taxpayer had brought itself within the provision. Concluding that the Director General's challenge was well founded, the court allowed the Director General's appeal, correspondingly dismissing the taxpayer's cross-appeal, and awarded global costs of RM10,000 to the Director General. The judgment is a useful illustration of the scope and limits of error-or-mistake relief under section 131 of the Income Tax Act 1967 and of the High Court's role in hearing appeals from the Special Commissioners of Income Tax. The judgment also reflects the appellate structure for tax disputes, under which the Special Commissioners are the primary fact-finding tribunal and the High Court intervenes where their decision is shown to be wrong in law or unsupported by the evidence, and it underscores that error-or-mistake relief is a carefully bounded remedy that cannot be used to reopen assessments that accorded with the prevailing law and practice.