Introduction
Generally, the basis for imposing and collecting personal income tax under the Personal Income Tax Act as amended (PITA) in
The principle of residence which remains the focus here posits that there is sufficient nexus between a taxpayer and a relevant tax authority and where it is shown that a taxpayer resides in a particular State, the relevant State Internal Revenue Service becomes the appropriate authority for collection of personal income tax from such taxpayer. See Section 2(2) of PITA (as amended).
Thus, in an employment situation, the employer is obligated to remit the Pay as You Earn (PAYE) on behalf of its employees to the relevant tax authority. The procedure for remittance of PAYE and the filing of relevant returns appears seamless but challenges may arise where the taxpayer/employee has multiple places of residence or where the taxpayer resides in multiple jurisdictions. PITA clearly stipulates the test for determining principal place of residence in the case of multiple places of residence. The ultimate burden of proof in civil litigation remains on the party who institutes the action whilst the evidential burden of proof is predicated on the evidence adduced by the parties. In this piece, we will be examining higher degree of proof required in civil cases vis a vis the decision in
Background Facts
The OGIRS commissioned an enumeration of Ogun State residents along its border areas, in the course of which it discovered some employees of Honeywell who were residents of Ogun State, but whose taxes were not remitted to Ogun State as required by law. The OGIRS subsequently notified Honeywell of this issue in writing stating the names found and a demand that their tax be paid to Ogun State. Upon Honeywell's failure to respond to the demand, the OGIRS relying on best of judgment served an assessment notice on Honeywell alleging liability for PAYE taxes and development levy for the years 2011 to 2016 to the tune of N48,687,447.60. Honeywell objected to the assessment on the grounds that the OGIRS included Lagos State employees, unknown/unidentified persons and wrongful calculation of the penalty and interest. Further to a reconciliation meeting wherein the OGIRS requested Honeywell to provide satisfactory documentary evidence in support of its objection, the OGIRS issued a revised assessment notice increasing the tax liability to N133,612,401.73. Honeywell further objected to the revised assessment and the OGIRS upon receipt of the said Notice of Objection refused to amend its assessment and forwarded a Notice of Refusal to Amend (NORA) to Honeywell. Honeywell promptly filed an appeal at the
Argument by Parties
At the TAT, Honeywell argued amongst others that the initial assessment included its
Honeywell opined that its employees were not resident in Ogun State and that from the cross-examination of its witness and the OGIRS's final address, it was not in contention that "the proof of residency in
The OGIRS argued that it was not merely enough for Honeywell to claim that the employees added to the assessment were not resident in Ogun State from 2011 to 2016, rather that the assertion should be substantiated with evidence, such as acknowledged copies of employment letters, evidence of place of residence i.e. tenancy agreement and utility bills and Bank Verification Numbers (BVN) of the employees concerned as requested by the OGIRS after the reconciliation meeting. The OGIRS further argued that the annual employees return filed with Lagos State Internal Revenue Service (LIRS), revenue receipts for January-
TAT's decision
The Tribunal held that Honeywell failed to discharge the evidential burden of proof on it to establish that it has no employee resident in Ogun State from 2011-2016, as it can be deduced from the evaluation of the exhibits that Honeywell never tendered any further independent corroborative document such as a
Our Comments
The decision in this case appears to have increased the requisites for proof of residence by taxpayers and the substantial discharge of the onus of proof by taxpayers.
In line with the provisions of Paragraph 15(6) of the Fifth Schedule to the Federal Inland Revenue Service (Establishment) Act, the decisions in Best Children International Schools Ltd v FIRS (2018) LPELR- 46727 , OWUH & ORS vs. IDU & ORS (2002) FWLR (Pt.94) 65; ONYENGE & ORS vs. EBERE & ORS (2004) All FWLR (Pt.219) 981; OGBU vs. WOKOMA (2005)7 SC (Pt.11) 123, the Tribunal held that the onus of proving that the assessment complained of was excessive remains on the appellant. Thus, Honeywell had the onus to prove that its employees were not resident in Ogun State for the relevant years of assessment and ultimately, that the assessment was excessive.
However, it is imperative to examine whether this burden was substantially discharged by Honeywell. In the instant case, Honeywell in its notice of objection challenging the initial assessment of N48,687,447.60 failed to support its objection with relevant documents to show that the assessment included
The Tribunal noted that Honeywell ought to have tendered further independent corroborative documents such as a
The law is trite that in civil cases, the burden of first proving the existence or non-existence of a fact lies on the party against whom the judgment of the Court would be given if no evidence were produced on either side, regard being had to any presumption that may arise on the pleadings - Section 137(1) of the Evidence Act.
Thus, if such party adduces any evidence which ought reasonably to satisfy the court that the fact sought to be proved is established, the burden then lies on the party against whom judgment would be given if no more evidence were adduced and successively, until all the issues in the pleadings have been dealt with. This is the clear position of the law as enunciated in YIWA v. TATA (2018) LPELR-44669(CA). Hence, evidence to establish a fact ought to be credible and sufficient to discharge the burden of proof based on the standard of preponderance of evidence considering which side outweighs the other side on the imaginary scale of justice. Dibiamaka v. Osakwe (1989) 3 NWLR (Pt.107) p.101 at p.113;
Jiaza v. Bamgbose (1999) 7 NWLR (Pt. 610) 10 NWLR (Pt.1202) p.412; Ayorinde v. Sogunro (2012) LPELR - 7808(SC)
We note however that after the reconciliation meeting, Honeywell updated its records and forwarded an additional list of 25 employees resident in Ogun State and that it was on the basis of the said list that the OGIRS issued a revised assessment. The said list was not challenged by Honeywell during cross examination neither did Honeywell provide proof that the individuals listed in the OGIRS's assessment were not resident in Ogun State.
The decision in Honeywell's case appears to have increased the requisites for proof of residence by taxpayers and the substantial discharge of the onus of proof by taxpayers from the known balance of probabilities accustomed to civil cases. This is inferred from the position of the Tribunal that further independent corroborative documents such as the State Residents Registration Agency Registration document, letter of employment, utility bills, tenancy agreement, voters registration cards.must be adduced that irrefutably and incontrovertibly establishes the residence of the taxpayer.
As such it appears from this decision that it is immaterial that evidence of annual returns, PAYE receipts or remittances properly so filed in another state is adduced without any further evidence. As opined by the Tribunal, further independent corroborative documents such as the State Residents Registration Agency Registration document, letter of employment, utility bills, tenancy agreement, voters registration card, or other evidence pertaining to the specific employee residence would be submitted by the taxpayer in discharge of the onus proof. This appears to imbue on the taxpayer a higher degree of proof than is required in civil cases beyond the permitted exceptions of proof beyond reasonable doubt upon allegation of crime in a civil case1, claim of special damages2 and special interests. Specifically, where there is an allegation of crime in a civil case, such allegation must be proved beyond reasonable doubt as is obtainable in criminal matters. Any claim of special damages or special interest also requires a higher degree of proof as same must be pleaded and strictly proved.
Thus, until this decision is reviewed, it appears that taxpayers opposing any PAYE assessment on the ground of non-residence will in addition to objecting with evidence of remittances to the relevant tax authority, annual returns etc need to adduce further evidence to corroborate the non-residency of its employees.
Footnotes
1. See Agbaje v Fashola (2008) 6 NWLR (pt. 1982) 90 at 147 para E, Akeredolu v Mimiko (2014) 1 NWLR (pt 1388) 439 paras C-D
2. Khawan v. Akinkugba (2002) FWLR (pt 109) 1574
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr Nnamdi Oragwu
PUNUKA Attorneys & Solicitors
Plot
Off
Lekki Phase 1
Tel: 12704791
Fax: 12704790
E-mail: o.kalu@punuka.com
URL: www.punuka.com
© Mondaq Ltd, 2022 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source