On 13th November 2018, the High Court of Lagos State in LIRS v. Ecoserve Limited (Suit No.: LD/REV/239/2013), held that any taxpayer aggrieved with a personal income tax assessment is expected to exhaust all internal administrative remedies set out under the Personal Income Tax Act (PITA) before approaching the regular courts. Such administrative remedies include filing an appeal at the Tax Appeal
Tribunal (TAT). The court also held that the High Court does not have original jurisdiction to entertain any action challenging a personal income tax assessment.
Lagos State Internal Revenue Service (LIRS) commenced this action pursuant to Section 104 of PITA to enforce the payment of taxes from Ecoserve Limited. In response, Ecoserve Limited filed a statement of defence and a counter-claim. LIRS, subsequently, discontinued its suit leaving the counter-claim filed by Ecoserve Limited as the only matter to be resolved by the court. The counter-claim sought inter alia to restrain LIRS from taking steps to distrain the premises/property of Ecoserve Limited.
At the hearing of the counter claim, the learned Judge invited counsel to the parties to address the court on whether the court has jurisdiction to hear the counter-claim in view of the provisions of PITA on tax assessments and appeals.
(i) Procedure for Challenging a PITA Assessment
The court summarised the procedure for challenging a tax assessment under PITA as follows:
(ii) The High Court does not have original jurisdiction to hear appeals arising from tax assessment made pursuant to PITA
The High Court held that it does not have the jurisdiction to at first instance hear appeals arising from tax assessment made pursuant to PITA. According to the court the only PITA issue which the regular courts have power to entertain at the first instance is enforcement procedure set out under Section 104 of PITA. The court held that the failure of the Counter-claimant to exhaust the administrative remedies set out under PITA rendered the tax assessment against the Counter-claimant final and conclusive.
(iii) A taxpayer cannot file a counter claim in respect of an assessment which has become final and conclusive and where the tax authority has commenced an action to distrain the property of the tax payer
The court also held that once the tax authority has commenced enforcement proceedings under Section 104 of PITA, the taxpayer cannot validly file a counter claim against such action. According to the court, the rationale for the above is that at the tax enforcement stage i.e. action to distrain, “the role of the tax payer is expected to be limited to defend the enforcement and not to make claims in the suit.”
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This Legal Alert contains information on tax /legal issues. It does not constitute legal or professional advice on such issues. Where specific legal advice is needed, the services of a solicitor/tax adviser should be sought.