Is it reasonable to demand 20-year-old tax records?

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High Court Rules IRB's Demand for 20-Year-Old Tax Records Unreasonable and Beyond Statutory Limits

The High Court has ruled that the Inland Revenue Board (IRB) acted unreasonably and beyond its jurisdiction by demanding tax records dating back over 20 years from Toh Puan Na’imah Abdul Khalid. This decision was made in the context of quashing an additional tax assessment notice of RM313.8 million issued to Na’imah for the 2018 assessment year. The court found that the IRB's request violated the standard record-keeping period stipulated under the Income Tax Act 1967.
IRB Exceeded Statutory Authority in Demanding Old Records

The court determined that the IRB's demand for documents pertaining to assets acquired more than 20 years ago was unreasonable. Under the Income Tax Act 1967, taxpayers are generally only mandated to retain such records for a period of seven years. The judge emphasized that the failure to furnish documents that are no longer legally required to be kept cannot justify the issuance of an additional assessment notice, thereby highlighting the IRB's overreach.
Tax Assessment Focused on Foreign Assets Not Remitted to Malaysia

The core of the dispute involved an additional tax assessment notice issued by the IRB, which the High Court found to be unlawful. The judge clarified that the Income Tax Act 1967 primarily applies to income earned within Malaysia and foreign-sourced income that is remitted into the country. In this instance, the assets in question were Na’imah's properties located abroad and were not considered income received in Malaysia, thus falling outside the purview of the assessment.
Additional Assessment Constituted Double Taxation

Furthermore, the court found that the IRB's action resulted in double taxation, which is contrary to the principles of the Income Tax Act 1967. The judge noted that the market value of assets held abroad cannot be unilaterally treated as taxable income simply by virtue of ownership. The assessment was also deemed unlawful because the amount of share ownership involved had already been assessed previously through a joint assessment of Na’imah and the late Tun Daim Zainuddin for the same 2018 assessment year.
Alternative Assessment Period Should Have Been Considered

The judge suggested that if the IRB believed undeclared income was associated with the acquisition of these assets in the 1990s, the assessment should have been made for that original period. Issuing an additional assessment for the 2018 assessment year, more than two decades after the assets were acquired, was deemed inappropriate. This implies that the IRB’s chosen assessment period was not aligned with the timing of the alleged tax discrepancies.

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Is it reasonable to demand 20-year-old tax records?

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