In this blog we will explore the different types of assessments on which objection can be made by the taxpayer. These include assessments as personal assessment, revised or additional assessment and joint assessment by husband and wife. Starting with the case of Mr. Chan for the tax assessment.
Case of Mr. Chan for Tax Assessment
In the case of Mr. Chan, it was considered by CFI that CIR is designated to rely on arrogance of proper service under Section 58 (3) of Hong Kong tax law. But the reason of late granting of objection can be lack of actual knowledge of assessment. The act of rejecting the application for late objection from CIR was unreasonable on such basis that she was unsatisfied that the notice of objection on assessments, in question were not received by KLY. The real issue here was that whether the Chan had actual notice of assessments that were stated by him. The position of Chan for proving a non-receipt was terrible. And after his utmost effort he had deduced the best evidences. The date for him to be aware of assessments was 24 April 2010 while date of lodgment of assessment was 4 June 2010. There was a large time gap between these two dates. The case was sent back to CIR for reconsideration that whether there was reasonable basis for granting late objection.
It was ruled by CA on the appeal by CIR that in rejecting the request for late objection by Chan, CIR was justified. The request of Chan was to grant more time to object to twenty-five tax assessments.
According to Peter Cheung, JA
According to Lam J
The application of Chan to ‘court for first appeal’ was released in respect of the decision of CIR in which it allowed the rejection of late objection lodged.
Attributions of Fraud of Agent
In the case of Moulin Global Eyecare Trading Limited it was observed that, the case was about application for judicial review by T on the refusal of CIR to accept the late objection under Section 64 of Inland Revenue ordinance and refusal to accept claim under Section 70A of Hong Kong tax law. it was observed by T to be wound up in mid-2006. The former director of T that was also convicted of fraud later, were found to have filled the reported profits of T by crating the fictitious sales. Based on such falsified accounts the profit tax returns were submitted to the CIR and as a result a total of almost HK$89 million was paid by T in profits tax for the assessment years 1998 to 99 to 2003 to 04. The refund of those taxes were claimed by liquidator, on the ground that in the relevant assessment years no taxable profits were made by T. And also the reported profits were non-existent and as the result of different frauds committed by its earlier directors. The claim of liquidator was based on:
The claim of liquidator was rejected by CIR, an important reason that was given by CIR to taxpayer was that relevant return was filed by T with having knowledge of the specified fraud. The decision was given by court of first instance in favor of liquidators and CIR was directed to reconsider her decisions, given that knowledge of an agent should not be assigned to the principal where it is obtained by the agent who in the same transaction is defrauding the principal. The decision of CFI was not accepted by Court of Appeal and allowed the appeal of CIR. On the basis of Section 64 of Hong Kong tax law, appeal of T was dismissed by the Court of Final Appeal unanimously and by a majority appeal of T was dismissed on the basis of Section 70A of Hong Kong tax law. It was held by Court of Final Appeal on the basis of reviewing the language, factual situation and legislative purpose of statutory provisions, that in the present context the guilty knowledge of guilty directors should be attributed to T. Due to this reason it was not relied by liquidators on the proviso in Section 64, as it was not prevented by T from lodging an objection in time: it ‘chose’ not to do that. The liquidator also could not rely on the Section 70 of Hong Kong tax law, because he had not made an error knowing that the return made by him was false, but had told an intentional lie instead by failing the return. It was accepted by Court for Final appeal the importance of having an efficient and fair tax system that can be expected to produce an efficient and fair tax system or less foreseeable level, year on year. Till that end, decision within a reasonable short time and induce payment were the aims of policy in question provisions.
Objection against an Assessment Only
Against an assessment, an objection can only be made. The points given below are not assessments, and due to the reason no objection can be engaged:
There can be many sources for a person to attain the income. That income depending upon the source can be subjected to profits tax, property tax or salaries tax. Only according to the respective types of tax, assessments shall be issued to taxpayer. If a taxpayer having company setup in Hong Kong is elected for personal assessment, the income will be included in the total income for the purposes of personal assessment. If original assessment has become conclusive and final in respect of the individual types of income, then according to Section 64 (7) of Hong Kong tax law, an assessment under the personal assessment does not permit him to reconsider the native assessments.
However, a partner may object to share of profit on partnership included in his personal assessment on the basis that the shares were not computed correctly. For example, the share of assessable profits of partner should be $ 10,000 instead of $ 30,000. If such an objection is made by partner, Section 64 (8) of Hong Kong tax law considers the objection to be objected by all partners as to share of loss or assessable profit assured under Section 22A of Hong Kong tax law, and any agreement or determination that was made to such assurance shall be securing on all partners.
Revised or Additional Assessment
Section 64 (1) proviso (c) of Hong Kong tax law, prohibits the right of objection to a revised or an additional assessment to:
The meanings if this is that original assessment cannot be interrupted.
Joint Assessment of Husband and Wife
Under Section 10 (3) (a) of Hong Kong tax law, joint assessment is issued on the married partner:
Partners either having business in Hong Kong or rendering services in offshore incorporations HK limited has right of objection naturally. Section 64 (9) of Hong Kong tax law, grants right of objection to other partner as well. If partners are unable to reach agreement with CIR, then either one or both of the partners in accordance with Section 64 (10), may appeal to board of revenue department.
The assessor will consider the valid objection upon receiving it. Further information may be asked by him under Section 64 (2). Assessor will then try to have an agreement with taxpayer under Section 64 (3). If agreement cannot be done between them then that case will be referred to the CIR for the purpose of resolution. The reference for this statement is taken from Section 64 (4).