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The South-South Zone of the Tax Appeal Tribunal, sitting in Benin City, has set aside a N102.6 million Withholding Tax assessment imposed on Ecobank Nigeria by the Akwa Ibom State Internal Revenue Service, describing the assessment as unjustifiable and excessive.
The assessment, which covered the 1999 to 2020 years of assessment, included alleged outstanding Withholding Tax on Credit Interest, penalties and interest.
In its unanimous judgment, the Tribunal held that the additional tax assessment for the 1999 to 2014 assessment years was statute-barred, as the Akwa Ibom State Internal Revenue Service (AKSIRS) failed to establish fraud, wilful default or neglect on the part of the Bank to justify extending the statutory six-year limitation period.
The Tribunal also faulted the tax authority's computation of penalty and interest at 21 per cent, holding that it was arbitrary and contrary to the Personal Income Tax Act, 2011, as amended.
The dispute arose from a Revised Assessment Notice dated December 2021 and a Notice of Refusal to Amend dated June 2023, through which AKSIRS demanded N102.6 million from Ecobank as outstanding Withholding Tax on Credit Interest for the 1999 to 2020 assessment years.
Dissatisfied with the demand, Ecobank approached the Tribunal, arguing that the tax authority had previously conducted statutory audits, reconciled its tax liabilities and issued assessments which the Bank had fully settled.
The Bank maintained that the subsequent assessment amounted to double taxation, disregarded its previous tax remittances and was statute-barred in respect of the 1999 to 2014 assessment years.
It further argued that AKSIRS failed to disclose the alleged additional information upon which the revised assessment was based and had not established any fraud, wilful default or neglect to warrant an assessment outside the six-year statutory limitation period prescribed by Section 55(2) of the Personal Income Tax Act.
In its defence, AKSIRS argued that its investigation revealed significant under-remittance of Withholding Tax on Credit Interest by the Bank. It maintained that additional information and inconsistencies discovered in Ecobank's previous submissions justified the revised assessment beyond the six-year limitation period.
The tax authority further alleged that the Bank failed to provide complete records and supporting documents requested during its investigation, an omission it characterised as wilful default and neglect.
It consequently maintained that the revised assessment was a valid Best of Judgement assessment and urged the Tribunal to dismiss the appeal and affirm the N102.6 million demand.
In a well-considered judgment, the Tribunal held that AKSIRS failed to produce concrete or direct evidence of fraud, wilful default or neglect to justify invoking the exception to the six-year limitation period under the Personal Income Tax Act.
The Tribunal consequently declared the additional assessment relating to the 1999 to 2014 assessment years statute-barred and liable to be set aside as null and void.
On the issue of the Bank's tax remittances, the Tribunal noted that Ecobank had tendered documentary evidence showing that it remitted N596.6 million in Withholding Tax, which the Respondent did not controvert.
It also accepted the Bank's explanation that the payments of N7.8 million and N2.8 million, which AKSIRS had attributed to Pay As You Earn (PAYE), represented payment of the agreed N10.6 million previously demanded by the tax authority as outstanding Withholding Tax on Credit Interest.
The Tribunal further emphasised that a tax authority exercising its powers to make a Best of Judgement assessment must act judicially and judiciously, fairly and reasonably, and rely on credible evidence rather than conjecture, assumptions or arbitrary calculations.
On the computation of penalties and interest, the Tribunal held that AKSIRS failed to provide evidence establishing the applicable Central Bank of Nigeria Monetary Policy Rate for the relevant assessment years, thereby rendering its 21 per cent computation inconsistent with the Personal Income Tax Act.
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