Section 106(3) of the Income Tax Act is constitutional; it does not abrogate judicial power and permits a 'pay first, dispute later' system, ensuring access to justice while facilitating tax recovery.

[1]The primary issue that falls for adjudication and decision in these two appeals brought by the Appellants, Dato’ Seri Mohd Najib bin Haji Abd Razak (‘Najib Razak’) and Mohd Nazifuddin bin Mohd Najib (‘Nazifuddin’), is the constitutionality of section 106(3) Income Tax Act 1967 (‘ ITA ‘) . The primary ground put forward by the Appellants is that section 106(3)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 section 106(3)section 106(3) ITA “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 section 106(3)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 section 106(3)ITAITA.

[4]The Inland Revenue meets these arguments by responding that section 106(3)ITAArt. 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 section 106(3) provides for a specific mode of adjudication under section 99(1)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 section 99(1)ITAsection 106ITACourt after having initially been considered by the SCIT.

(c)This means that the judgment obtained summarily under section 106ITAsection 106ITAsection 106(3)ITACourt again by way of appeal on points of law.

(d)If the SCIT, in the course of its determination on the merits of the tax dispute, or the Court by way of appeal on points of law, determines the dispute in favour of the taxpayer, his tax liability is then reduced or reversed, as the case may be. Access to justice, it is asserted, is not therefore precluded or negated under section 106(3) ITA THE UNDER LYING ISSUE

[5]It appears to this Court that underlying these competing positions in relation to the constitutionality of section 106(3)ITAITA whereby the taxpayer is bound to make payment of the quantum assessed to be due by the Inland Revenue first, and only subsequently dispute the sum so assessed, passes the constitutionality test.

[6]The fact that the Act provides for a ‘Pay first, dispute later’ system is borne out inter alia, by section 103(1) ITA assessment, read together with section 103B Part VII of the , the institution of any proceedings under any other written law against the Inland Revenue, does not absolve or exempt the taxpayer from making payment for the purposes of collection of tax pending the adjudication of the taxpayer’s dispute.

[7]In other words, collec