IN THE TAX APPEAL TRIBUNAL
IN THE SOUTH-SOUTH ZONE
HOLDEN AT BENIN
APPEALNO: TAT/SSZ/015/2020
BETWEEN:
1. JUBILANT MULTI-CONCEPT LTD APPELLANT
2. MR. JULIUS ESENE
AND
FEDERAL INLAND REVENUE SERVICE ----- RESPONDENT
BEFORE:
PROF OBEHI A. ODIASE-ALEGIMENLEN CHAIRMAN
DR DAVID ALA-PETERS COMMISSIONER
MRS HILDA OFURE OZOH COMMISSIONER
MR VITALIS FRIDAY AJOKU COMMISSIONER
PROF OLATUNDE JULIUS OTUSANYA COMMISSIONER
THURSDAY 16TH NOVEMBER 2023
JUDGEMENT
This Appeal is brought before the Tax Appeal Tribunal (South-South Zone Sitting in Benin), dated and filed on 14th September 2020 in Suit No. TAT/SSZ/015/2020.
BRIEF FACTS
The Appellant was incorporated in 2007 and is a duly registered tax payer engaged in the business of Environmental business and contractors to many companies and corporate bodies including Shell Petroleum Development Company (SPDC) while the Respondent is a Federal Government Agency saddled with the statutory responsibility to administer the various tax laws in Nigeria by virtue of the Federal Inland Revenue Service (Establishment) Act 2007.
The Appellant being dissatisfied with the Respondent’s Tax Assessment/Demand Notice/ Action dated 21/03/2017, 29/08/2018 and 24/07/2019 respectively, appealed to the Tax Appeal Tribunal, South South Zone on the grounds set out below:
i. Wrongful review of 2017 year of Assessment of Tax returns carried out by the Respondent against the Appellants via Respondent letter dated 21/3/2018.
ii. Imposition of taxes on the Appellant by the Respondent over a phantom contract sum of N316,015,124.04 (Three Hundred and Sixteen Miliion, Fifteen Thousand Naira, One Hundred and Twenty Four Naira and Four Kobo only) or N316,015,124.04 USD allegedly paid to the Appellant by Shell Petroleum Development Company (SPDC) when there is no such contract executed for SPDC or any company at all and when there is no such payment by SPDC or any company at all to the Appellant.
iii. Tax assessment was carried out by the Respondent against the Appellant when it did not execute any contract for SPDC or any other company to the amount being claimed by the Respondent and all entreaties made to the Respondent to issue the Appellant tax clearance from 2018 to date fell on deaf ears.
iv. Pre-action letters written by Appellant’s solicitors, dated 15/11/2019 and the reminder dated 21/5/2020 were ignored by the Respondent.
v. The Respondent has no power under the various Tax Laws of the Federal Republic of Nigeria and under the Federal Inland Revenue Service (Establishment) Act 2007 to deny tax clearance to the Appellant over unverified amount allegedly paid to the Appellant by the SPDC.
vi. The Respondent continued refusal to issue tax clearance to the Appellant over a non-existent contract sum of money allegedly paid by SPDC is a deliberate action of the Respondent to destroy the Appellants’ businesses.
In view of the above, the Appellant sought the following reliefs from this Tribunal:
i. An Order directing that the Appellant is not liable to pay any tax on the alleged payment N316,015,124.04 (Three Hundred and Sixteen Miliion, Fifteen Thousand Naira, One Hundred and Twenty-Four Naira and Four Kobo only) or N316,015,124.04 USD to the Appellants by SPDC as such payment does not exist.
ii. Immediate issuance of Tax Clearance Certificate to the Appellant as Appellant have done nothing wrong to warrant the punishment of the Respondent.
iii. Adequate compensation/general damages for loss of income since 2018 when the Appellant Tax Clearance was suspended amounting to N150,000,000 against the Respondent.
iv. An order of this Honourable Tribunal directing that all officers of the Respondent who negligently brought this hardship on the Appellant for three years now (2018 to 2020), and still counting, be punished by the disciplinary instruments of the Respondents.
In response, the Respondent filed its Respondent Reply on the 9th day of July 2021 and contested the Appeal on the following grounds:
1. The Respondent is statutorily empowered to adopt measures to identify, trace, confiscate or seize proceeds from tax fraud or evasion. Also adopt measure which include compliance and regulatory actions, introduction and maintain or investigative and control techniques on the detection and prevention of non-compliance of tax laws.
2. The Respondent insist that the Appellant earned the sum of $316,015,124.4 as proceeds of contract it had with Shell Petroleum Development Company (SPDC) and they are liable to pay Company Income Tax, Education Tax and Value Added Tax.
3. The Respondent is under statutory obligation to deny any tax payer Tax Clearance Certificate for failure to settle its Tax liability.
The Respondent also filed a Notice of Preliminary Objection dated 09/11/2020 and filed on the 10/11/2020 challenging the jurisdiction of the Honourable Tribunal to hear this Appeal on the grounds that pre-action Notice was not given to the Respondent as statutorily required by Section 55, (3) & (4), (a-d) Federal Inland Revenue (Establishment) Act 2007 before the commencement of this Appeal. This Tribunal gave its Ruling on Thursday 17th of June 2021 affirming its jurisdiction to hear this matter.
On the 5th day of October, 2021, the Appellant opened his case. The 2nd Appellant testified for himself and on behalf of the 1st Appellant as AW1. He adopted his written depositions dated 14th of September, 2020, 7th of July, 2021 and 9th of November, 2021 as his evidence in chief. In proof of its case, the Appellant tendered 7 Exhibits (Exhibit JMC 1-7.). The Respondent on its own part opened its defense on the 14th December, 2022 wherein the Respondent called two witnesses, RW1, Charles Amune, Deputy Manager ICT of the Respondent who tendered One (1) Exhibit FIRS 1 and AW2, Edomwouyi Kingsley who tendered 3 Exhibits (Exhibits FIRS 2-4). Trial in this matter came to an end on WEDNESDAY 21ST JUNE, 2023 and the matter was adjourned to Wednesday 23rd of August, 2023 for Final Written Addresses. Parties adopted their Final Written Addresses on 19th day of October, 2023 and the matter was adjourned to today 16th November 2023 for judgement.
ISSUES FOR DETERMINATION
The Respondent Counsel, Joseph N. Nwokolobia, in its final written address, submitted the following issues for determination:
1. Whether the Respondent has power to assess the appellant to additional tax having made any discovery.
2. Whether an assessment dully served on the Appellant can be invalidated by reason of mistake on the assessment.
3. Whether the Appellant has been able to prove his case to be entitled to any compensation / general damages claimed.
Appellant Counsel, Dr. M.O.Oseghale, in response, formulated a lone issue for determination which is:
whether the Appellant has proved its case on the preponderance of evidence to be entitled to the reliefs sought in this Appeal
Gleaning from the evidence tendered and arguments canvassed by Counsels in this matter, the Tribunal is of the view that only one Issue calls for determination.
Whether from the preponderance of evidence in this matter, the Appellant has proved its case to be entitled to the reliefs sought in this appeal.
DETERMINATION OF THE ISSUE
Whether from the preponderance of evidence in this matter, the Appellant has proved its case to be entitled to the reliefs sought in this appeal.
The Appellant case is that in 2018 the 2nd Appellant received a letter dated 21st March, 2018 from the Respondent, which is a review of 2017 year of Assessment tax Returns resulting to an Additional Assessment Tax liability in the sum of N28,375,562.16 (Twenty Eight Million, Three Hundred and Seventy Five Thousand, Five Hundred and Sixty Two Naira and Sixteen Kobo only) for Companies Income Tax; N1,891,704.14 (One Million, Eight Hundred and Ninety One Thousand, Seven Hundred and Four Naira and Forteen Kobo only) for Educational Tax and N21,805,043.56 (Twenty One Million, Eight Hundred and Five Thousand, Forty Three Naira and Fifty Six Kobo) for Value Added Tax based on an alleged undisclosed income of $316,015,124.04. This the Appellant denied that they did not execute any contract for SPDC to the turn of the said amount. That the amount credited to the account on the said date was 8,026.36 USD and the total in the account was 899.33 USD.
Respondent in its evidence stated that the review of the additional assessment issued on the Appellant was as a result of their findings and discovery of an undisclosed Sum of $316,015,124.04 by a Mckinsey Software. And that the bank statement tendered by the Appellant do not include any transaction done on the said date 1st of February, 2016. And that from the exhibit there is no indication of what happened and it made inquiries to SPDC to know avail, and also wrote, but to no avail.
From the above positions by parties, the primary issues that needed resolution is a certain sum of $316,015,124.04 alleged to have been discovered by one Mckinsey software deployed by the Respondent. That the said sum discovered was paid into Appellants Account from Shell Petroleum Development Company (SPDC) which relates to contracts/services rendered to SPDC.
The Appellant tendered EXHIBIT JMC 3A - JMC 3I which are First Bank Statements of the Appellant Dollar Account from Jan 2016 to Jan 2017 and EXHIBIT JMC 6A - JMC 6H which are First Bank Statements of the Appellant Naira Account from Jan 2016 to Jan 2017. Clearly, in these Bank Statements, there is no amount of 316,015,124.04 either in Dollar or Naira.
The Respondent also alleged that when the Appellant replied and furnished the Respondent with the requested bank statements, it was discovered that the date of the transaction in question which was the 1st day of February, 2016 was missing thereby making it difficult to attach any credibility to it as it been doctored. This assertion by the Respondent, the Tribunal did not find merit in it. In EXHIBIT JMC 3H which is the Dollar denominated Bank Statement, it is clearly seen that there is a transaction of $8,028.35 credit to the Appellant on that 1st February 2016 which the Appellant had disclosed to the Respondent in Exhibit JMC 2 even before the commencement of this Appeal. On EXHIBIT JMC 6C which is the Naira denominated Bank Statement for the disputed transaction period; the Tribunal agree that there was no transaction on that particular 1st February 2016. However, the Tribunal cannot agree that it was an omission. It is common knowledge that in bank statements, figures are not captured on a particular day if there are no transactions on that day. Thus, the Tribunal believes that its was not an omission but rather, there was no transaction on that day. Another way of confirming from the bank statement is that there was a transaction on the 26th January 2016 resulting to a balance of N826,888.36. There was also a withdrawal of N132,000.00 on the 4th February 2016. so, if you subtract the N132,000.00 from the N826,888.36. it will give you the same balance of N694,888.38 reflected on the 4th February 2016 in the bank statement. If there was an omission, it will definitely not give you that same figure. This shows that there was no omission in any of the bank statements provided by the Appellant.
Besides, EXHIBIT JMC 3A - JMC 3H and EXHIBIT JMC 6A - JMC 6H are documents issued by a public Financial Institution well regulated and guided by laws in Nigeria. So if the Respondent is not comfortable with that piece of evidence and is still alleging that there is a certain $316,015,124.04 that is not captured in the Appellant Bank Statement, it is the responsibility of the Respondent at this point to prove that such a transaction exists as the onus of proof has shifted from the Appellant to the Respondent, as he who alleges must prove. The law provides, that once a claimant has proved its case, the burden of proof then shifts to the Respondent. In ELEPHANT INVESTMENT LTD v. FIJABI (2015) LPELR-24732(CA), the learned judge Amina Adamu Augie J.C.A (Pp.) 43-45, paras. E-A) while delivering the lead judgement, emphasized that;
“the party that asserts the existence of a particular fact must prove it, and if he fails to prove that fact, his case will ultimately collapse.
See also the cases of INEME v. INEC & ORS (2013) LPELR-21415(CA) and AKINDOSOYE v IKUGBAYIRE & ANOR Supra
The Respondent could have written to the bank for confirmation of the Bank Statement or even write to the bank for the confirmation of the Transaction as the law provides exceptions to the duty of confidentiality of Banks to its customers. See the case of UBA PLC V CAC & ORS (2016) LPELR - 40569 (CA)
The Tribunal is of the view that Respondents claim that it made inquiries and wrote letters to SPDC who refused to respond is not enough reason to insinuate the existence of a transaction without substantiating it with a credible proof apart from the so-called Mckinzy Software that was deployed by the Respondent. At this point we need to reiterate that he who comes to equity must come with clean hands. See the cases of ADEJUMO VS AYANTEGBE (1989) 3 NWLR (Pt 110) 417 @ 422-423 Ratio 11; KARAYE v. WIKE & ORS (2019) LPELR-49382(SC). In our view, the Respondent hasn’t done enough to verify this transaction.
The Tribunal is also not comfortable with Respondent inconsistencies as regards to the purported print out of Exhibit FIRS 1 and FIRS 4 vis a vis Exhibits JMC 1 dated 21st March, 2018 and JMC 3A dated 29th August, 2018. Exhibit FIRS 1 and FIRS 4 which are the figures generated by the Mckinsey Software are in the sum of 316,015,124.4USD whereas in Exhibits JMC 1 and JMC 3A, the Additional Assessment amounting to N28,375,562.16 (Twenty Eight Million, Three Hundred and Seventy Five Thousand, Five Hundred and Sixty Two Naira and Sixteen Kobo only) for Companies Income Tax; N1,891,704.14 (One Million, Eight Hundred and Ninety One Thousand, Seven Hundred and Four Naira and Forteen Kobo only) for Educational Tax and N21,805,043.56 (Twenty One Million, Eight Hundred and Five Thousand, Forty Three Naira and Fifty Six Kobo) for Value Added Tax (VAT) were derived based on the Naira figure of N316,015,124.04 (Three Hundred and Sixteen Miliion, Fifteen Thousand Naira, One Hundred and Twenty Four Naira and Four Kobo only). These two figures which are the same denominated in different currencies Naira & Dollar cannot be of the same value. Respondent however claimed, it was a mistake as shown in the extract of the cross examination below:
Appellant: Take a look at this Exhibit (EXH JMC1), the amount there is dominated in local currency that is Naira?
RW1: Yes
Appellant: I said that Exhibit JMC1, the cap letter the amount there is in local currency that is naira?
RW1: Yes as it is here, is in local currency
Appellant: I will be correct to say that the value/amount denominated in naira in Exhibit JMC1 is the same as the one stated in your Exhibit FIRS1?
RW1: Exhibit FIRS1 is not clear to me.
Appellant: now, do you also know that this amount in contention is also denominated in Naira, by your own employer? That’s FIRS also denominated this amount in Naira?
RW1: from the bank data search, is in dollar. That’s from the search, it brings out Dollar for the amount, but if peradventure, any staff of FIRS denominated it out in Naira, it could be an error
Appellant: now, look at this Exhibit JMC1 and JMC3a, those document are from FIRS?
RW1: yes my lord.
Appellant: those Exhibit JMC1 and JMC3a, the figures there are denominated in Naira, is that correct?
RW1: from the exhibit, I see it denominated in Naira.
If it was a mistake, as claimed by Respondent, it would have been expedient for Respondent to amend its Reply to this Appeal converting the Dollar Value to the Naira value and reflecting same in the Additional Assessment. This the Respondent failed to do and also failed to tell the Tribunal which of the values (Dollar or Naira) is the correct figure. And so, at this point, the Tribunal does not know which of the figures to believe. It is trite law that when a party contradicts itself, the Courts are left with no choice other than to discountenance such evidence. See the case of AMAECHI v. STATE (2016) LPELR-40977(CA).
Apparently, the claim of the Appellant was consistent and was not controverted in any way before and during the trial as shown in the extract of the cross examination below:
Respondent: your company transacts business in US Dollar, is that True?
AW1: Yes, because we have a dollar account and our client sometimes pay us in dollar.
Respondent: Prior to this case, as there been any incident of money transferred to your account in US dollar that you do not know about?
AW1: No, all the money that are transferred into the account, I usually know about it because once SHELL pays they usually send what is called payment Advise.
Respondent: is it true that you are the sole signatory to your USD account with First Bank of Nigeria Plc?
AW1: Yes
Respondent: On the 28th of March 2017, you deposited the total sum of $153,375(One hundred and fifty three thousand three and seventy five dollar) into the account of the first Appellant i.e. Jubilant, is it true?
AW1: No, is not true. I have never deposited that kind of funds
Respondent: Do you know any company called Hynex International Company?
AW1: I cannot remember knowing such company, No I don’t know that company
Respondent: Are you aware that on the 24th of February of 2016, the sum of $354,920.94 cent was transferred from the account of the first Appellant to Hynex international company Domiciliary Account?
AW1: No, sir
Respondent: Will you be surprised if you see the document showing that the figures mentioned in the proceeding question are available?
AW1: Of course, I will be surprised because we have FBN statement which did not show these figures and besides we have never executed any project or contract that we can have such money
The position of the law is that civil matters are proved on preponderance of evidence and balance of probabilities. See the cases of SEOGBEKUN V ADELAKUN (2013) All FWLR (PART 664)168 at 188 D-F and MR. OLUMIDE HENRY v. DEMMY GLOBAL RESOURCES LIMITED. LPELR-49972(CA).
Conclusively, based on the evidence of both parties, it is our opinion that the Appellant has made out a case to be entitled to the judgement of this Tribunal. Judgement is hereby delivered in favour of the Appellant and the Tribunal orders as follows:
(1) That the Additional Assessment for 2017 Year of Assessment dated 21st March 2018 in the sum of #28,375,562.16 for Companies Income Tax, #1,891,704.14 for Educational Tax and #21,805,043.56 for VAT is hereby dismissed.
(2) That the Appellant is not liable to pay any tax on the alleged payment by SPDC to the Appellant in the sum of N316,015,124.04 (Three Hundred and Sixteen Miliion, Fifteen Thousand Naira, One Hundred and Twenty-Four Naira and Four Kobo only) or N316,015,124.04 USD as such payment does not exist.
Prayers (i) and (ii) are granted while prayers (iii) and (iv) are refused
This is the unanimous judgement of the Tribunal
Dated this __ 16th _____ day of __ November____ 2023.
Signed:
Hon. Prof. Obehi Adetokunbo Odiase-Alegimenlen Chairman
Hon Dr. Ala-Peters David Hon. Mrs. Hilda Ofure Ozoh
Member Member
Hon. Barr. Ajoku Vitalis Friday Hon. Prof. Otusanya Olatunde Julius Member Member
REPRESENTATION:
DR. M.O. OSEGHALE - Appellant
J. N. NWOKOLOBIA - Respondent