Former prime minister Najib Abdul Razak and his son Mohd Nazifuddin failed to quash a High Court ruling in relation to the tax suits against them.
Under civil law, a court may allow summary judgment, which entails deciding on a legal matter without going for full trial.
At present before the Kuala Lumpur High Court, the IRB has pending bankruptcy proceedings against Najib and Nazifuddin to recover the taxes.
The government agency is relying on the summary judgment for the bankruptcy proceedings.
Najib also has a pending tax-reassessment appeal with the IRB’s Special Commissioners of Income Tax (SCIT), which is set to be heard in January next year.
The three-person Court of Appeal bench chaired by Abdul Karim Abdul Jalil unanimously ruled that there is no merit in the appeals by Najib and Nazifuddin.
The other members of the bench are judges Vazeer Alam Mydin Meera and Supang Lian.
“There is no merit in both appeals and there has not been an error in the High Court’s decision.
"Both appeals are dismissed with RM10,000 costs each,” Karim ruled. In essence, this means that Najib and Nazifuddin each have to bear RM10,000 in legal costs.
Karim said that the bench disagreed with submissions from Najib’s legal team that Section 106(3) of the Income Tax Act 1967 is invalid for going against Article 121 of the Federal Constitution.
Section 106, in general, empowers the IRB to institute civil action at court to recover tax arrears and penalties from taxpayers.
Section 106 (3) specifically states that when in relation to IRB’s civil action to recover taxes, the court “shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased”.
Article 121 is in relation to the powers of the judiciary in Malaysia.
Najib’s legal team had contended that Section 106(3) usurped the power of the judiciary as enshrined in Article 121.
Karim ruled that the law on tax assessment and collection has been firmly established by various legal precedents set by the courts since 1967.
Under Malaysia’s “pay first, talk later” tax practice, a dissatisfied taxpayer must still first pay the tax amount as assessed by the IRB, and then only file an appeal with SCIT for reassessment of the tax amount.
“As regrettable as it may be from the point of view of a taxpayer, the duty of the court is to enforce the will of Parliament, and the issue of oppressiveness (as contended by Najib in relation to the tax matter against him) is irrelevant to the determination of this question (validity of Section 106(3)).
“Whether the (tax) assessment was right or wrong, it (assessed tax amount) must be paid (to IRB) regardless of appeal (to SCIT for tax reassessment),” Karim said.
At the end of the online proceedings, the Court of Appeal also allowed an application by Najib’s lead counsel Muhammad Shafee Abdullah for an interim stay of the summary judgment order.
The interim stay will be in effect until Tuesday to allow Najib’s legal team time to file a written application to stay the summary judgment ruling.
The to-be-filed written application seeks to stay the summary judgment order, pending disposal of Najib and Nazifuddin’s appeal to the Federal Court against today’s verdict.
Senior revenue counsel Hazlina Hussein appeared for the IRB in the Court of Appeal proceedings.