Departmental decision is required for judicial review

A government department’s decision not to divulge information to persons being investigated is not sufficient to justify a judicial review by the court. A court may delve into a government department’s decision and not into preparatory measures. This was decided on 2 March, 2016 by Mr Justice Mark Chetcuti in John Grech and his wife Maria Carmela Grech –v- the Commissioner of Inland Revenue.

In their application the Grechs stated that they are pensioners, and suffering from a medical condition, however, recently they were approached by the Tax Compliance Unit (TCU) with regard to their fiscal affairs. The TCU had asked for documents ranging back a number of years, which can only be obtained by means of a considerable investment of resources. In order to understand better what is being asked of them, the Grechs asked the TCU for access to the information relative to this investigation.

They asked for information on what has brought about this investigation, however, the Income Tax Department refused to disclose any information. The plaintiffs claim that this refusal to disclose the information on their own fiscal affairs is in breach of their constitutional rights. Therefore, they asked the court to declare that this refusal for information on themselves is illegal and in breach of the Constitution and to order the Commissioner to pass on all information which the TCU have in hand.

The Commissioner of Inland Revenue replied that this action of judicial review does fall within the parameters of the law, particularly Article 469A of the Code of Organisation and Civil Procedure. In the second plea in the statement of defence, the Commissioner is stating that in order to proceed with a judicial review there must be a decision by a public authority. Since the investigation is in its early stages, there is no decision that may be challenged.

The Commissioner explained that he had notified the Grech couple that there was an investigation on their income from 2004 to 2013 and were asked to attend a meeting. This meeting was cancelled because of medical reasons on the part of the plaintiffs. Another letter was sent asking for a number of documents, which did not arrive and therefore, a number of other letters were sent as reminders.

In October 2015 a meeting took place, where again these documents were asked for. The Commissioner is claiming that his department followed the procedure laid down in the law. Therefore, it is the TCU which needs the information and documents and not the other way round. It is the taxpayer who is duty bound in terms of the Income Tax Act and the Income Tax Management Act.

The Commissioner stated that according to case law the taxpayer is entitled to information on how the Commissioner arrived at his assessment and on how the Commissioner calculated the amount owed in tax. In the particular case there is no assessment in terms of Article 31 of the Income Tax Management Act and neither a notice of refusal or an objection in terms of Article 33 of the same Act.

Mr Justice Chetcuti in his judgement pointed out that although there are allegations of breaches of the plaintiffs’ fundamental human rights, this was not a Constitutional case. The investigations are taking place according to the fiscal laws and it is the Commissioner’s right to investigate a taxpayer. Therefore, this action is one of a judicial review in terms of Art 469(1)(a) of the Code of Organisation and Civil Procedure.

The court then moved to discuss the second plea of the Commissioner on whether there exists a decision that may be sanctioned by the court. Mr Justice Chetcuti held that the Commissioner’s actions can be divided into two, the first is the investigation and the second is the request for information from the taxpayer, which was refused. The judgement reads that at this stage the plaintiffs’ complaint does not constitute an administrative act. In fact in a previous judgement decided 26 November, 2015 Christine Borda –v- Director of Internal Revenue, it had decided that an “act” would be when there is an order, or the issuing of a licence, permit, warrant and any decision or refusal of a request from a person to a public authority. However, in this particular case all there is is an investigation in its early stages and the Commissioner has taken no decision on this investigation. Therefore, the opening of the investigation cannot constitute an administrative act where a decision has been taken. 

The court has to consider whether a refusal to the plaintiffs’ request for information is an administrative act. In fact if the refusal to give information to the taxpayer at this stage would close the investigation definitively, then yes this would be considered as an administrative act.

However, the court held that this is not the case since the request of information by the Commissioner is assisting him to take a decision whether the income tax returns of a number of years should be revised or not. Therefore, the Commissioner should not be disadvantaged in that the taxpayer revises his/her tax return according to what the Commissioner has in his possession.

The Commissioner is to collect all the taxes and it is the taxpayer who should declare everything to the tax authorities. Once the Commissioner issues a new estimate of tax, then the taxpayer has the right of appeal from that decision. 

The plaintiffs’ complaint refers to measures which can be described as preliminary and preparatory acts to what the Commissioner may decide.

The court moved to uphold the Commissioner’s plea and turned down the plaintiffs’ request