IOAKIM ν. REPUBLIC (1989) 3A CLR 411

Taxation -Assessment of taxes - The Assessment and Collection of Taxes Laws 1978-1979, section 20(5) and 21(3) - No time limit for the determination of an objection under section 20(5) - Time limit of six months as regards new assessment, which becomes necessary by reason of a decision in a recourse - Determination of an objection annulled by a decision of this court - Reconsideration of matter and new assessments made - Whether time limit in virtue of section 2 1(3) applicable - Question determined in the positive - Sub judice new assessments declared null and void.

Applicant objected against notices of assessment of income tax issued to him on 30th October, 1974. The objection was finally determined on 16h August, 1978. The determination of the objection was impugned before this Court. The sub judice decision in that recourse (420178) was annulled, because of the decision of the Supreme Court in recourse 327/77, whereby it was decided that the wife's income from property should not be aggregated to the income of the husband.

There followed a reconsideration of the case and new assessments were raised, but outside the limit of six months provided for in section 2 1(3), which began to run upon the issue of the annulling decision of the Court.It appears that, in any event, in raising the new assessment, the respondent did not only deduct the wife's income from the husband's income, but considered the matter, as if the sub judice decision in recourse 420/78 had been annulled in toto.

Held, annulling the sub judice decision:

(1) The provisions of section 2 1(3) of the Assessment and Collection of Taxes Laws 1978-1979 are applicable to the present case. Therefore, since the sub judice assessments were raised after the expiration of 6 months as from the date, when the annulling decision in recourse .420/78 was issued, they have to be declared null and void.

(2) In any event, even if the contention of counsel for the respondent is accepted, that is that the decision in recourse 420/78 did not annul the whole, but only part of the sub judice decision, the sub judice assessments should again be declared null and void, because, in such a case, it is obvious that the respondent was not entitled to depart from that part of the sub judice in recourse 420/78 decision, which had been confirmed by hyphothesis under Art. 146.4(a) of the Constitution.

Sub judice decision declared in whole null and void. No order as to costs.

Cases referred to:

Ioannides and Others v. Republic (1979) 3 C.L.R. 295,

Republic of Cyprus, through The Attorney-General and Others v. Frangos (1965)3 C.L.R. 641,

Solomonides (Dr) v. Republic (Commissioner of Income Tax,) (1968) 3 C.L.R. 105,

Constanne Estates v. Republic (1982) 3 C.L.R. 859,

loannides i Republic (1985) 3 C.L.R. 1801,

River Estates Ltd. v. Republic (1986) 3 C.L.R. 2575,

Ignatiou and Another v. Republic (1989) 3 C.L.R. 346.

Pitsiakkos v. Republic (1985) 3 C.L.R. 1700,

Pantelidou v. Republic (1986) 3 C.L.R. 687,

Pelides v. Republic (Council of Ministers) and Another 3 R.S.C. C. 13,

Mavromati v. Republic and Another (No.1) (1966) 3 C.L.R. 143.

Recourse.

Recourse against the income tax assessment raised on applicant for the years 1970 and 1971

L. Demetriades, for the Applicants.

A. Evangelou, Senior Counsel of the Republic, for the Respondents.

Cur.adv. vult.

STYLIANIDES, J. read the following judgment. The applicant by means of this recourse seeks declaration that the notices of assessment, dated 13th July, 1985, issued by the Respondent - the Commissioner of Income Tax (the "Respondent") and received by the applicant in respect of the years of assessment 1970(71), 197 1(72), are null and void and of no effect whatsoever.

The applicant relies on a number of grounds of Law. The first ground is that:-

"The attempt by the Respondent to proceed with a new (second) determination of objections to assessment which were already declared by the Court on 21st April, 1981 as null and void, is ultra vires and made in excess or abuse of power or authority, not only on the ground that the Court in annulling the assessments in question did not order that new assessments or a new determination of the objection be made, but also on the ground that they were not made within six months from the 21st April, 1981, as provided in subsection (3) of Section 21 of Law 4 of 1978.

There was no objection to any assessments which theCommissioner could determine, as the assessments to which the new notices refer were declared by the. Court as null and void on the 21st April, 1981."

The determination of this ground of law in favour of the applicant disposes finally of this case.

On the application of both counsel and the approval of the Court addresses were heard on this ground only.

The facts relevant to this question, as they emerge from the statement of facts in the recourse and the opposition, are in brevity as follows:

The applicant derived income during the material times from emoluments as Managing Director of a number of private companies, the sale of immovable properties and rents from a joint venture with his brother. The applicant, submitted his income, tax returns for the years. 1970; 1971, and 1972 on 9th March, 1971, 18th September, 1972 and 24th April, 1973, respectively.

Disputes arose as to the taxable income and the; sources thereof and after investigation, and negotiations between the Respondent and the income tax consultant of the applicant no agreement was reached for the years in question.

The Respondent examined applicant's and his wife's capital statements as at 31st December, 1972 and. 31st December, 1957, submitted by their tax, consultant.

The applicant was assessed; for the years of assessment 1971 and 1972 by notices of assessment issued to him on 30th October, 1974. He objcted against both of these assessments by a letter dated 12th November, 1974 of his, tax consultant.

As no agreement was reached, the Respondent on 16th August, 1978 determined the objection and his such decision was communicated to the applicant by letter of even date.

The applicant being aggrieved filed Recourse No. 420/78 to the Supreme Court, applying thereby for a declaration that the assessments raised on the applicant in respect of his income for the years of assessment 1971 (70), 1972(7 1) were null and void and of no effect whatsoever. That recourse was based on no less than nine grounds &law. On 21st April, 1981, counsel of the parties were before the Court. The record reads:-

Mr. Evanglou: in view of the decision of the Supreme Court in Recourses Nos. 327/77 etc. regarding the aggregation of the wife's income from property with that of the husband, it is considered that the decision taken by the respondent Commissioner is this case, in so far as it relates to the same issue, is wrong and should be declared null and void and of no effect whatsoever.

Mr. Nathanael: In view of the statement of my learned friend, with which I agree, I pray that the Court declares the decision null and void.

COURT: In the circumstances, the decision of the respondent is hereby declared null and void and of no effect whatsoever.

Court to Mr. Nathanael.: Do you, in the circumstances, claim costs against the respondent?

Mr. Nathanael: No.

COURT: There will be no order as to costs."

Thereafter new negotiations started between the Respondent and the tax consultant of the applicant. The basic differences were not resolved.

On 11th July, 1985, a letter - Exhibit C to the recourse - was sent to the applicant. The material part thereof reads:-

"Αναφέρομαι στις ενστάσεις σας διά τα φορολογικά έτη 1959-1972 και σας πληροφορώ ότι αφού εξετάσθηκαν πλήρως όλα τα υποβληθέντα στοιχεία, αποφασίσθη το φορολο-γηθέν εισόδημα σας όπως τούτο παρουσιάζεται πιο κάτω.

2. Το πιο σοβαρό σημείο που επηρεάζει το φορολογητέο εισόδημα σας είναι η πώληση μεγάλου αριθμού οικοπέδων, το κέρδος των οποίων υπόκειται σε φορολογία, διότι η πράξη θεωρείται εμπόριο με σκοπό το κέρδος. Τούτο επίσης παρουσιάζω αναλυτικά πιο κάτω.

3. Το φορολογητέο εισόδημα εξακριβώθηκε με δύο τρόπους (α) με κεφαλαιουχική κατάσταση και (β) με το εισόδημα κάθε χρόνου. Και οι δύο τρόποι είναι σύμφωνοι.

4.........................................................................

5. Αυτό το εισόδημα κατανέμεται σύμφωνα με τις δηλώσεις σας που γίνονται αποδεκτές. Το κέρδος από την πώληση των οικοπέδων κατανέμεται ως εξής:-

1970:.................................................................

1971:.................................................................

6. Επισυνάπτω φορολογίες για τα επηρεαζόμενα χρόνια

Notices of assessment for the years of assessment 1971 and 1972 were issued and sent to the applicant. These are the sub judice assessments.

It is the contention for the applicant that the assessments for the years of assessment 1971(70) and 1971(72) were declared null and void by the Supreme Court in Recourse 420/78. That in consequence of that decision of the Supreme Court new assessments should have been made within the period of six months prescribed by section 21(3) of the Assessment and Collection of Taxes Law, 1978 (Law No. 4/78) (the "Law") and no valid assessment could be raised after the expiration of that mandatory period. The objection raised by the applicant and determined on 16th August, 1978, merged in the acts that followed, which were declared null and void by the Court and, therefore, there was no outstanding objection for determination by the Commissioner.

Counsel for the Respondent, on the other hand, submitted that the sub judice assessments in Recourse 420/78 were wrong, in the light of the Decision of the Supreme Court in Case No.327/77 - loannides and Others v. Republic (1979) 3 C.L.R. 295 - concerning the aggregation of the income of husband and wife. Counsel applied to the Court to declare null and void the part of the decision which related to the aggregation of the income of husband and wife. In Recourse 420/78 the Court, in substance and effect, annulled only that part of the decision which related, to the aggregation of the spouses income and the other part, which related to the other issues, remained untouched. As a result the whole matter of the disputed assessments, reverted to the objection stage and the original assessments issued on 31st October, 1974, which related to the years of assessment 1971 and 1972, remained under protest. The respondent Commissioner actually in the present case determined that objection, under section 20(5) of the Law, without raising new assessments, and communicated his reasoned decision by his letter dated 11th July, 1985, afore quoted. That the delay in the determination of the outstanding objection is not contrary to the Law, as there is no time limit for such determination.

Counsel for the applicant in reply submitted that, if the annulling decision of the Court in Recourse 420/78 left unaffected the part of the sub judice decision which did not relate to the aggregation of the income of the husband and wife, the Respondent could not revert to the same matter again.

In the opposition it is stated that the acts and/or decisions complained of were taken under sections 5(1). 6. 13.(2)(b) and 23(1) of the Taxes (Quantifying and Recovery) Laws, 1963 and 1969 (Law Nos 53/63 and 61/69) and that the objections against the above assessments were determined under sections 3,20(5) and 59 of the Assessment and Collection of Taxes Laws 1978- 1979.

Section 23(1) of the Law provides for rectification of omissions and under-charges.

Under section 23(1) the Respondent has power to raise new or additional assessments when it appears to him that a taxpayer was not assessed at all or was under-charged. The power conferred under section 23(1) may be exercised within six years after the end of the year of assessment. Under sub-section 2 ofsection 23, where any person has been guilty of fraud or wilful default, the time limit of the six years mentioned in sub-section (1) is increased to twelve years.

The only limitation to the exercise of these powers is the time to which I have referred.

The Respondent is entitled to invoke his powers under section 23(1), whenever he, bona fide, forms the view that no assessment was raised, or the tax levied is insufficient - (The Republic of Cyprus, through 1. The Attorney-General, 2. The Ministry of Finance through The Director of the Department of Inland Revenue, and Ioannis Chr. Frangos (1965) .3 C.L R. 641; Dr. Solon Solomonides v. Republic (Commissioner of income Tax) (1968) 3 C.L.R. 105; Constanne Estates v. Republic (1982) 3 C.L.R. 859; loannides v. Republic(1985) 3 C.L.R. 1801; River Estates Ltd. v. Republic (1986) 3 C.L.R. 2575; and ApostolosIgnatiou and Another v. The Republic of Cyprus, through The Commissioner of Income Tax (1989) .3 C.L.R. 346).

The sub judice decisions, having regard to the facts and circumstances, were not either assessments or additional assessments in the sense of sub-section (1) of section 23.

The exclusive Revisional Jurisdiction of the Supreme Court is circumscribed in Article 146 of the Constitution. Paragraph 4 thereof reads:-

"4. Upon such a recourse the Court may, by its decision -

(a) confirm, either in whole or in part, such decision or act or omission; or

(b)declare, either in whole or in part, such decision or act to be null and void and of no effect whatsoever; or

(c) declare that such omission, either in whole or in part, ought not to have been made and that whatever has been omitted should have been performed."

A taxpayer, however, is not entitled to resort to this Court under Article 146 of the Constitution, unless he objects in writing to the Director to review and revise an assessment under section 20 of the Law. He can only file a recourse in case of failure to reach an agreement with the Director and after determination by the latter of the amount of tax payable, as subsection (5) of section 20 provides. Thus, an. objection to the assessment and a determination thereof is necessary pre-requisite before the filing of a recourse against a. taxation raised under the provisions of such Law.(Pitsiakkos v Republic (1985) 3 C.L.R 1700; Pantelidou v. Republic (1.986) 3 C.L.R. 687.)

In the past, in the early dates of the Republic; no statutory provision for review of the taxation by an administrative organ existed and the Supreme Constitutional Court in NicosPelides and the Republic (Council of Ministers): and Another 3 R.S.C.C. 13, observed the following, at p. 17:-

"The Court takes this opportunity of stressing that though Article 146 grants it exclusive jurisdiction in. administrative law matters there is nothing in such Article to prevent procedures for administrative review of executive or administrative acts or decisions from being, provided for in a Law Such review may be either -

(a) by way of confirmation or completion of the act or decision in question, in which case no recourse is possible to this Court until such confirmation or completion has taken place (e.g. under section. 17 of CAP 96); or

(b) by way of a review by higher authority or by specially set-up organs or bodies of an administrative nature, in which case a provision for such a review will not be a bar to a recourse before this Court but once the procedure for such a review has been set in motion by a person concerned no recourse is possible to this Court until the review has been completed.

Such review procedures, as aforesaid, are in no way contrary to, or inconsistent with, Article 30 of the Constitution because specially set-up organs or bodies of an administrativenature are not judicial committees or exceptional courts in the sense of paragraph 1 of such Article."

An administrative act, the validity of which is challenged before the Supreme Court, may be either confirmed or annulled in whole or in part. If it is not declared null and void it continues to be valid.

When an administrative act, such as the decision of the Respondent, under section 20(5), is declared null and void, the Respondent, under the provisions of paragraph 5 of Article 146 of the Constitution, is bound to give effect to the decision of the Court and re-examine the whole case in the light of the legal and factual situation existing at the time the annulled decision was taken. This does not preclude him from carrying further inquiry, if necessary.

Sub-section (3) of section 21, however, imposes, both for the interest of the State and the taxpayer, a mandatory period within which certain act has to be made after an annulling decision. It reads:-

"21.-(3) If in consequence of a decision on a recourse it becomes necessary to make a new assessment in order to give effect to the decision of the Supreme Court or comply with the directions thereof, such new assessment may be made within six months from the date of such decision."

There is no time limit, however, under section 20(5) for the determination of an objection - (TheophilactosMavromati (No.1) and the Republic of Cyprus, through 1. The Director of Inland Revenue, 2.The Minister of Finance (1966) 3 C.L.R. 143; loannides v. Republic (supra).

In the present case, if the Decision of the Court of 21st April, 1981, had annulled only the part of the sub judice acts which referred to the aggregation of the income of the spouses, then the remaining part of the act of the Respondent would have by implication been confirmed. Therefore, they continue to be valid and operative and Respondent has no power or authority to raise the assessments challenged by this recourse.If, however, the Court on 21st April, 1981, annulled the whole of the sub judice decisions, the Respondent had to give effect to that Judgment; if, in consequence thereof, it was necessary to make new assessments in order to give effect to the Judgment of the Supreme Court, he had to do so within the time limit prescribed by the Law.

Assuming that the Court annulled in toto the acts impeached by Recourse 420/78, as no directions were given, it is abundantly clear that new assessments had to be raised and this should have been done up to 21st October, 1981 - not after the lapse of more than four years.

Assuming again, that the Decision of the Court annulled the part which related to the aggregation of the income of the spouses, then the remaining part of the Respondent's decision impugned was confirmed. The matter was res judicata and the Respondent had no power in 1985 to take the sub judice decisions and issue the complained of assessments.

On either view of the matter, the Respondent had no power under the Law to proceed and issue the sub judice decisions.

Having regard to the plain and unqualified wording of the operative part of the record of the Court of 21st April, 1981, in Recourse 420/78 - the annulling declaration of the Court - I am of the opinion that the Court declared in whole the impugned acts null and void and of no effect. Thereupon the recourse was brought to an end.

For the foregoing reasons, the sub judice decisions are contrary to law and they are the result of excess of power.

The sub judice decisions are declared in whole null and void and of no effect whatsoever.

Let there be no order as to costs.

Sub judice decision annulled. No

order as to costs.

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