The issuance of a final and conclusive tax assessment marks the resolution of a tax dispute, bringing closure for both the taxpayer and the tax authority involved. In cases where the assessment is undisputed, the taxpayer is expected to settle the alleged tax liability. This finality grants the tax authority the power to take further actions, such as distraint against the taxpayer’s property. However, if the assessment lacks a legal basis, any actions taken by the tax authority based on it are considered void ab initio.
A notable example is the Longe Medical Centre & Anor v. AG Ogun State (2020) LPELR- 49751 (Longe’s Case), where the Court of Appeal determined that the Ogun State Internal Revenue Service (OIRS) exceeded its legal authority by invading and locking up the premises of the taxpayer based on a final and conclusive assessment lacking legal foundation. The case primarily centered around the proper tax authority responsible for assessing and collecting Personal Income Tax (PIT).
This article provides an overview of the Longe’s Case, highlighting its implications for taxpayers and the overall integrity of the tax administration system.
When and How Assessments Become Final and Conclusive
Assessments become final and conclusive when a taxpayer agrees with the tax liability stated in the assessment notice. Alternatively, an assessment achieves finality when the taxpayer fails to object within the specified legal timeframe. Section 13 of the Fifth Schedule to the Federal Inland Revenue Service (Establishment) Act, 2007, outlines that an assessment becomes final and conclusive if the taxpayer does not object or appeal within 30 days from the assessment date.
The Longe’s Case: Brief Facts and Court Decision
The Longe’s Case originated from the High Court of Ogun State. In 2011, the OIRS took action against Longe Medical Centre, locking up its premises based on a demand for the payment of employees’ PIT. The medical center, registered with the Lagos State Private Hospital Registration Authority, insisted its tax liability was to the Lagos State Internal Revenue Service (LIRS), as all its staff resided in Lagos.
The Court of Appeal ruled that the OIRS acted beyond its jurisdiction by distraining the property of the medical center in Lagos State. The court emphasized that the medical center had no obligation to remit PIT to OIRS, as its tax obligation was to Lagos State.
Tax Residency: Vital for Personal Income Tax Validity
A crucial condition for the validity of Personal Income Tax assessments is tax residency. Section 2(2) of the Personal Income Tax Act (PITA) states that the PIT of individuals is collected by the state in which the individual is deemed resident for that assessment year. The use of the term “only” implies exclusive authority for the resident state to collect PIT. Exceptions exist for certain individuals, such as itinerant workers and those employed in specific capacities, whose tax is due to the Federal Inland Revenue Service.
In summary, the Longe’s Case underscores the importance of adherence to legal bases, especially tax residency, for the validity of Personal Income Tax assessments. Taxpayers and tax authorities alike must ensure compliance with jurisdictional boundaries to maintain the integrity of the tax system.
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