High Court dismisses Shafee's bid to initiate counterclaim against LHDN

KUALA LUMPUR: The High Court here has dismissed lawyer Tan Sri Muhammad Shafee Abdullah's leave application to initiate a counterclaim against the Inland Revenue Board (LHDN) over RM9.41mil in alleged tax arrears.

Judicial Commissioner Roz Mawar Rozain, in her decision, said that an individual facing a tax recovery lawsuit was not entitled to file a counterclaim against the government.

ALSO READ: LHDN objects to Shafee's application to file counterclaim over income tax

Muhammad Shafee had contended that the lawsuit was filed against him in bad faith and it was a collateral attack for defending former prime minister Datuk Seri Najib Razak.

The senior lawyer was Najib's lead counsel in his 1Malaysia Development Bhd (1MDB)-linked criminal cases.

ALSO READ: Shafee fails in bid to stay LHDN suit for RM9.41mil

"However, the court observed that the defendant’s counterclaim was against parties like the Malaysian Anti-Corruption Commission (MACC) and the Attorney General’s Chambers (AGC), which are not part of today’s proceedings," JC Roz Mawar said here on Thursday (April 13).

Any complaints a taxpayer had about their tax amount could be addressed at the Special Commissioners of Income Tax (SCIT), she said.

"It is the 'pay first talk later' principle in the country. Payment must be made first as the plaintiff (government) is empowered to collect (the tax arrears) and any overpayment may be refunded later to the taxpayer," JC Roz Mawar said.

ALSO READ: Sept 28 decision on Shafee’s stay application over LHDN suit

The court also ordered Muhammad Shafee to pay RM5,000 in costs to the government.

JC Roz Mawar also fixed July 22 to hear LHDN's application to obtain summary judgment against Muhammad Shafee to recover the RM9.41mil.

Muhammad Shafee was represented by Datuk Seri Rajan Navaratnam while Senior Revenue Counsel Al-Hummidallah Idrus appeared for the government.

On May 6, 2021, LHDN filed the suit against Muhammad Shafee over alleged failure to pay the amount of income tax owed for the Assessment Years 2011, 2012, 2013, 2014 and 2016 including the tax increase on the imposed sum.

Muhammad Shafee then filed the leave application to initiate a counterclaim on the grounds that the tax claim was an attack on him in his capacity as a lawyer for Najib.

LHDN objected to the leave application based on Order 73 of Rule 4 of the Rules of Court 2012 and Subsection 42(2)(e)(i) of the Government Proceedings Act 1956, which stated that counterclaims could not be filed against the government for tax collection actions.

On Sept 27, 2021, LHDN requested that the suit against Muhammad Shafee be decided through summary judgment on the grounds that the defendant failed to pay the entire income tax arrears and the tax increase imposed on him amounting to RM9,414,708.32 within the stipulated period.

A summary judgment was obtained when the court decided on a case through written submissions without a full trial and without calling witnesses.

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