- Notice of Refusal to Amend is not a requisite pre-action protocol for proceedings before the Tribunal

The Lagos Zone of the Tax Appeal Tribunal has ordered the Federal Inland Revenue Service (FIRS) to re-assess Tourist Company of Nigeria Plc tax Liabilities for the 2016 year of assessment.

The Panel led by Hon. Olanrewaju Lassise-Phillips allowed the Tourist Company of Nigeria Plc sum of N114,803,000.00 impairment claim as well as N365,644,00.00 cost of sales but disallowed the turnover difference in the sum of N177,817,000.00 and bad debt of N44,121,000.00.

From facts, the appellant- Tourist Company of Nigeria Plc had appealed against the FIRS’s Notice of Additional/Amended Assessment of W14,281,060.00 (Fourteen Million, Two Hundred and Eighty-One Thousand, Sixty Naira) for the Appellant's 2016 year of assessment.

The company urged the tribunal to set aside EDT Notice of Additional/Amended Assessment, and a declaration that the Appellant was not liable to pay FIRS any additional EDT for the 2016 year of assessment on the ground that FIRS’s computation of its turnover did not take into account the company internal revenue arising from promotions and incentives given to its customers as a reward for their patronage, impairment/bad debt ought to be allowed as deductible expenses.

In defense, the Respondent- Federal Inland Revenue Service filed a Preliminary Objection challenging the competence of the Appeal by reason of the Tourist Company of Nigeria Plc’s failure to await the issuance of the Notice of Refusal to Amend (NORA) prescribed under the Companies Income Tax Act before approaching the Tribunal.

The FIRS stated that it conducted a tax audit and informed the Appellant of the additional liability to Tertiary Education Trust in the sum of N14,281,060.00 (Fourteen Million, Two Hundred and Eighty -One Thousand, Sixty Naira) only for the 2016 year of assessment on the grounds that the turnover reported by the firm was less than its actual turnover, and the sums recorded as impairment/bad debt were non-allowable expenses and there was a difference between the cost of sales reported by the firm and the actual cost of sales during the audit.

In opposition, the Tourist Company of Nigeria Plc argued that the FIRS’s incorrect application of the relevant laws and the evidence provided has resulted in an incorrect computation of education tax in the Notice of Assessment, and urged the Tribunal to allow the turnover difference in the sum of N177,817,000.00 as deductible expense. 

On the cost of sales in the sum of N365,655,000.00, Tourist Company of Nigeria Plc’s Counsel submitted that the Notice of Assessment issued by the FIRS was based on an erroneous computation of the company cost of sales. 

In its well-considered judgment after careful evaluation of the evidence and submissions of both parties, the tribunal led by Hon. Olanrewaju Lassise-Phillips as Chairman, Hon. Mark Dike, Hon. Titilola Akiba, Hon. Rasaq Quadri, Hon. Kaneng Adole as members dismissed the FIRS’s objection and held that an aggrieved taxpayer can apply to the tribunal without first receiving a Notice of Refusal to Amend from the Federal Inland Revenue Service. 

The panel stated that the procedure before the Tribunal is governed by the provisions of the Fifth Schedule to the Federal Inland Revenue Service (Establishment) Act (FIRS Act) and does not require a Notice of Refusal to Amend (NORA) from tax authorities to an aggrieved taxpayer before the latter can approach the Tribunal for redress. 

The tribunal reiterated that internal control documents are not necessarily proof that an expense has passed the WREN test, and in an adversarial system of tax dispute adjudication like ours, a taxpayer who desires the Tribunal to find in its favour concerning any legal right or liability which is dependent on the existence of any facts which it asserts must prove that those facts indeed exist. 

The panel held that FIRS was right to have added back the sum of N177,817,000.00, and there is no credible evidence of the existence of bad debt in the sum of N44,121,000.00 in this case, and the respondent was right to have taxed it as it did.

On Impairment in the sum of N114,803,000.00; and Bad Debts of N44,121,000.00, the tribunal held that the Respondent failed to address the issue of impairment and the testimony given by the Appellant remains unchallenged. 

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