The Inland Revenue Board (IRB) now seeks to strike out Muhammad Shafee Abdullah’s counterclaim against it linked to the former’s RM9.41 million tax suit against the lawyer.
Acting for the government, IRB contended that Shafee’s counterclaim against it was an abuse of court process and discloses no reasonable cause of action.
Through the counterclaim, Shafee claimed that the tax suit against him was mala fide (in bad faith) due to his legal representation of Najib Abdul Razak in the former prime minister’s 1MDB-linked criminal cases, among other cited reasons.
The lawyer, who claimed to have suffered loss of reputation and loss of business in his legal practice due to the tax suit, is, among others, seeking general, punitive and aggravated damages via the counterclaim against IRB.
Government legal action
According to a copy of the IRB’s striking-out application seen by Malaysiakini, the tax authority contended that Shafee’s counterclaim has no reasonable cause of action, due to the tax suit being a government legal action to recover tax.
“This is because the defendant’s (Shafee) counterclaim contravened Order 73 Rule 4(1) of the Rules of Court 2012 (KKM 2012) that clearly stipulated a person cannot, in any proceedings by the government, file a counterclaim if the proceeding is one to recover tax.
“In this matter, the provision is absolute in light of Order 73 Rule 4(1) which does not provide any exception for the defendant to file a counterclaim in tax-recovery proceedings,” contended Shamsul Effendi Khamis in an affidavit in support of the striking-out bid.
Shamsul Effendi is the assistant director of the control unit of the IRB’s Kuala Lumpur legal branch.
According to the affidavit, Shamsul contended that Shafee should have filed a judicial review application instead of proceeding via a counterclaim.
When contacted by Malaysiakini today, Shafee's counsel Muhammad Farhan Muhammad Shafee said that they will oppose the IRB's striking-out bid.
"We will be opposing the (IRB) application to strike out (Shafee's counterclaim)," Farhan said.
Plaintiff's valid claim
The tax authority representative claimed that Order 53 Rule 2 KKM 2012 states that the court declarations sought by Shafee over the tax-assessment dispute, could only be done through judicial review, and that Order 53 Rule 3 of the same Rule states that Shafee should have filed an application for court leave to proceed with any such judicial review.
“However, the defendant, in this case, has never filed a leave application and/or a judicial review application to seek the declarations.
“Therefore, the defendant had clearly abused this court process to file dispute tax-assessment, which was properly done, in order to delay the plaintiff’s valid tax claim against him,” Shamsul Effendi contended.
He also claimed that Shafee’s counterclaim amounted to an abuse of court process because the lawyer already has a pending tax-reassessment appeal with the IRB’s Special Commissioners of Income Tax (PKCP).
“Therefore, it is clear that the defendant tried to abuse this court process to nullify the additional tax assessment notices through the counterclaim, even though he has appealed to the PKCP and the PKCP has yet to hear and decide on the defendant’s appeal.
“In this matter, I verily state that the defendant’s counterclaim was filed to delay the plaintiff’s valid tax claim against the defendant,” Shamsul Effendi contended.
Incidentally, the IRB has also previously filed an application for the court to grant summary judgment in the tax authority’s favour in the tax suit against Shafee.
Under civil law, a summary judgment allows a court to rule in favour of a plaintiff in a suit, without needing full trial.
Through the summary judgment bid, IRB claimed that Shafee does not have a defence against the tax suit, thus the matter does not require a full hearing.
According to the online cause list, the matter has been fixed for online case management before the Kuala Lumpur High Court on Nov 5.