Section 106(3) of the Income Tax Act 1967 is constitutional, preserving taxpayer rights while facilitating efficient tax recovery under a 'Pay first, dispute later' system.

Introduction

[1] The primary issue that falls for adjudication and decision in these two appeals brought by the Appellants, Mohd Najib Abd Razak ('Najib Razak') and Mohd Nazifuddin Mohd Najib ('Nazifuddin'), is the constitutionality of s 106(3) of the Income Tax Act 1967 (' ITA '). The primary ground put forward by the Appellants is that s 106(3) usurps judicial power in art 121 of the Federal Constitution ('FC'). It is also contended that the impugned section contravenes art 5(1) FC in that it does not accord the Appellants a fair trial and impedes their right of access to justice.

[2] It is submitted that this contravention arises because s 106(3) expressly limits the defences available to a taxpayer seeking to challenge a summary claim brought by the Respondent, the Government of Malaysia, represented by the Inland Revenue Board ('Inland Revenue') as a debt due, based on monies assessed to be due from the taxpayer. The statutory provision in issue, namely ITA , stipulates that "the Court shall not entertain" any plea that the tax claimed is 'excessive, incorrectly assessed, under appeal or incorrectly increased...'. This limitation on defences that may be considered by the Court, it is maintained, amounts to a usurpation of judicial power as stated above, and therefore warrants being struck down under art 4(1) FC.

[3] In further support of this primary assertion, it is contended that s 106(3) thereby precludes the right to a fair trial by the taxpayer, flouting art 5(1) FC which recognizes this right as part of the right to life. Additionally, the Appellants argue that art 8(1) FC is also contravened in that the Inland Revenue is accorded unlimited powers, creating a disparity between the rights of the Inland Revenue and the taxpayer. This, it is argued, amounts to a contravention of art 8 of the FC. The amicus curiae concurs with the Appellants in that it is submitted that there is a contravention of art 8 FC as ITA ousts judicial power and has no rational nexus with the objective of the .

[4] The Inland Revenue meets these arguments by responding that s 106(3) ITA does not usurp judicial power nor contravene art 121 FC because:

(a) The section, when construed in the context of the ITA holistically, does not preclude or obviate the taxpayer from putting forward these defences, but provides instead for such disputes to be first heard by the Special Commissioners of Income Tax ('SCIT'), a specialist panel of tax commissioners, who are qualified to deal with such tax disputes. On such determination by the SCIT, the taxpayer has recourse to the Court. The Court exercises its power to hear an appeal premised on points of law. There is a right of appeal up to the Federal Court. As such, it cannot be said that judicial power is ousted under s 106(3) . The provides for a specific mode of adjudication under s 99(1) and Schedule 5 .

(b) The Inland Revenue maintains that it cannot be said that a fair trial or access to justice is denied to the taxpayer because the Court exercises its judicial power by way of appeal from the decision of the SCIT under s 99(1) ITA , even after the summary mode of enforcement is disposed of under s 106 . All the defences of the taxpayer are available for review by the Court after having initially been considered by the SCIT.

(c) This means that the judgment obtained summarily under s 106 ITA is not the final dis