Issue link: https://maltatoday.uberflip.com/i/627675
46 maltatoday, SUNDAY, 17 JANUARY 2016 Opinion T he Administrative Review Tribunal held that a taxpayer contesting a tax assessment by the Commissioner of Inland Review may show prima facie that the assessment is excessive. This was held in a judgement delivered on 11 January, 2016 in XXX -v- Inland Revenue Commissioner (Case 17/11VG). The taxpayer contested tax assessments issued by the Commissioner for the years between 2000 and 2004 and asked the Tribunal to cancel them. The Commissioner replied by saying that these assessments are correct. According to the Commissioner of Inland Review the taxpayer declared that he lived on social assistance, with very little income as a self-employed trader. As a consequence, he did not pay tax. However, in a tax investigation of a third party, it was discovered that the taxpayer received a payment of Lm4,000, which was tax deductible, from the person who was being investigated. This was not declared by the taxpayer. From further investigations the taxpayer had two cars purchased in 1994 and in 2005. The tax authorities asked for copies of the bank accounts and the profit and loss accounts of his business and ETC employment history certificate. However, the taxpayer did not forward any of these documents and as such the Commissioner issued the assessment on the basis that he had an income of Lm10,000 each year. The taxpayer objected as he held that his only income was from social security. He explained that in the past he did work as a plasterer, but he had a drink problem and was unable to work. He then presented a contract which shows that he had purchased his residence in Birkirkara for the price of Lm3,000. According to documents presented in February 2007, the Commissioner offered the taxpayer to come to some agreement, but there was no reply. The taxpayer explained that there was no reason to reply because there was nothing to add. He further explained the bank refused to give the statements. This was confirmed by witnesses who held that since the taxpayer did not have money in the accounts, the bank refused to issue the letter. Magistrate Gabriella Vella commented that it was hard to understand how a bank would refuse to issue this simple document. The Tribunal, presided by Magistrate Vella, pointed out that the tax authorities did not only ask for the taxpayer's bank account, but also details of his income. From the statement of affairs presented in 2005, it seems that in 1996 he had purchased his residence in Birkirkara for Lm8,000, however, it later resulted that the property was in fact purchased in 2000 for Lm3,000 and he was unable to explain the divergence of facts. It later resulted that the taxpayer purchased another property in 2001 for Lm6,000. In order to justify how he managed to pay for two properties, he produced a private writing where his father donated Lm7,000 and he also borrowed from his brother in law money he later paid back. The tax authorities examined the taxpayer's father's financial situation. It resulted that from 1979 to 2001 he paid only Lm39 in tax and therefore, did not fall under the taxable income bracket. Therefore, the Tribunal was not convinced how a person living on social security could purchase two properties and pay back his loan. The bank statements were never forwarded. The taxpayer denied ever receiving a cheque for Lm4,000 and explained that it may have been for his father but the cheque was issued in his name instead. According to Article 14(1), the Income Tax Management Act stipulates that the tax authorities may order the taxpayer to produce all books, accounts and bank statements or any other document which is required to verify the taxpayer's income. There is no distinction between the size of the business under investigation. According to Article 35(3) of the same Act, the onus of proof for a contested assessment is on the taxpayer, however, as the assessment is ex officio, this burden of proof may be shifted to the CIR, if the taxpayer shows prima facie that the assessment is not reasonable. This was established in AB -v- Commissioner of Inland Revenue of 23 May, 2008. In this particular case, the taxpayer failed to show prima facie that the tax assessments are unreasonable. He did not convince the Tribunal that his only income was from social benefits and therefore the burden of proof could not be transferred to the income tax authorities. On the other hand CIR convinced the Tribunal the assessments between 2000 and 2004 are reasonable. The Tribunal moved to dismiss the appeal. Malcolm Mifsud, Partner, Mifsud & Mifsud Advocates Malcolm Mifsud mmifsud@mifsudadvocates.com.mt mmifsud@mifsudadvocates.com.mt Taxpayer may prove prima facie that Tax Department assessment is excessive A planning application entitled "Reactivation of Class 4b retail shop" concerning a small garage in Msida was turned down by the Malta Environment and Planning Authority's Environment and Planning Commission after MEPA found that "the proposed development will remove the existing parking spaces for the building and so it would conflict with Structure Plan policy TRA 4 and PA circular 3/93 which seek to ensure that appropriate provision is made for off-street parking". Moreover, the Commission said that "the proposal runs counter to Policy NHHO 1 of the North Harbours Local Plan 2006." From the submitted plans, it transpires that the existing floor area is equivalent to circa 90 square metres, of which seven square metres are designated as sanitary facilities. In furtherance to the Commission's decision, the applicant lodged an appeal before the Environment and Planning Tribunal. In his appeal submissions, the applicant maintained that the site features one dwelling unit, overlying the said garage at first floor level. Against this background, the applicant made reference to MEPA Circular (3/14) which states that the introduction of Class 4A and 4B uses may be permitted when a site features a garage and a single dwelling, notwithstanding the fact that onsite parking would be lost. In support of his arguments, the applicant quoted an application which was decided favourably by the Tribunal earlier in the year. Moreover, the applicant made reference to the policy paper entitled "Partial Review of Subsidiary Plans: General Policy relating to Regeneration/ Consolidation Initiatives MEPA – January 2013", which allows certain "flexibility and departures" from established policies when the surroundings are committed by commercial development. On its part, the MEPA reiterated that the proposed development is not acceptable since "the proposed class 4B shop is not in line with policy NHHO 01 of the North Harbours Local Plan 2006, and will also result in the loss of parking for the overlying residential block." While acknowledging that the premises were used as a grocer until the year 1995, the authority noted that "the use of the building in such situations reverts to that originally approved through the issued permits". As a final remark, the case officer underlined that the "Regeneration/Consolidation Initiatives" policy was quoted out of context, given that in such policy the area under consideration is not yet occupied by "a considerable level of legitimate commitment whose nature may not necessarily be in line with local plan policies." In its assessment, the tribunal observed that the premises were licensed as a grocer, which licence was issued by the Police prior to 1992. Consequently, the Tribunal reasoned out that the proposed use does not amount to a "new use". Moreover, the Tribunal was of the opinion that the premises in question would complement a "detached" residential area which otherwise lacks such amenities. Against this background, the tribunal ordered the authority to issue the permit. robert@rmperiti.com Robert Musumeci is a warranted architect and civil engineer. He also holds a Masters Degree in Conservation and a Law Degree Robert Musumeci MEPAwatch Shop will contribute to the residential amenity Use does not amount to a 'new use' due to Police licence YOUR FIRST CLICK OF THE DAY www.maltatoday.com.mt