Did IRB act beyond its legal powers in issuing the tax bill?

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The High Court Ruled the Inland Revenue Board Acted Beyond Its Jurisdiction in Issuing the RM313.8 Million Tax Assessment

The High Court has allowed a judicial review application by Toh Puan Na’imah Abdul Khalid, quashing an additional tax assessment notice of RM313.8 million issued by the Inland Revenue Board (IRB). Judge Evawani Farisyta Mohammad ruled that the IRB exceeded its authority under the Income Tax Act 1967 by issuing this notice for the 2018 assessment year, finding the assessment unlawful and contrary to the Act's provisions.
Assessment Notice Deemed Unlawful Due to Double Taxation

The court found the additional tax assessment notice unlawful because the share ownership involved had already been subject to assessment through the joint tax filing of Na’imah and the late Tun Daim Zainuddin for the 2018 assessment year. This action by the IRB resulted in double taxation, which is prohibited under the Income Tax Act 1967.
Foreign Assets Not Taxable Income Under Current Law

A key finding of the court was that the market value of assets located abroad cannot be considered taxable income merely by virtue of ownership. The judge clarified that the Income Tax Act 1967 specifically applies to income earned within Malaysia or foreign-sourced income that is remitted into Malaysia. The disputed assets were Na’imah's properties held overseas and did not meet the criteria for income received in the country.
IRB's Assessment Period and Record-Keeping Requirements Criticised

The judge noted that if the IRB believed undeclared income was involved at the time assets were acquired in the 1990s, the assessment should have been made for that period, not retrospectively for the 2018 assessment year. Furthermore, the court deemed it unreasonable for the IRB to demand documents for assets acquired over 20 years ago, as the Income Tax Act 1967 only requires taxpayers to retain records for a period of seven years. The failure to provide documents no longer legally mandated to be kept could not serve as justification for issuing the additional assessment notice.

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Did IRB act beyond its legal powers in issuing the tax bill?

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