The High Court on Tuesday heard the appeal of the Inland Revenue Department against a previous court decision that fung shui practitioner Tony Chan Chun-chuen be granted extension of objection concerning repayment of nearly HK$340 million in outstanding taxes.

Chan had claimed he had not received notices of tax assessment from the department.

However, there were insufficient grounds for Chan's claim for the commissioner of inland revenue to reconsider its rejection of the extension of objection, counsel for the Inland Revenue Department Stewart Wong Kai-ming told the court.

The government counsel pointed out that the Kao, Lee & Yip (KLY), the law firm Chan appointed to act as his receiver for his tax returns from 2003 to 2004, had created confusion in its two letters to Reed Smith Richards Butler, Chan's solicitor. In one letter, KLY claimed it had not received any notices of assessment. In the second letter that followed, the law firm vacillated, saying that it "may have received the notices of assessment".

Wong argued that the equivocal stance KLY took made Chan's case weaker. Thus, it was not possible for the government to reconsider granting the extension of objection to Chan.

The counsel continued that KLY should offer a rational explanation as to why it had not been able to receive notices of assessment, despite the department sending seven letters to the company's address.

Wong continued, it is not known whether Chan really had been unaware of the notice before he filed a notice of objection, because the registered post sent by the department was shown to have been delivered to KLY, despite the law firm's denial.

Earlier in 2010, notices of assessment were sent to KLY, informing Chan of two profits tax assessments worth HK$330.24 million as well as 23 property tax assessments totalling HK$631,784. Chan, however, claimed that he was not aware of the matter until April 2010. Chan sent a notice of objection on June 4, 2010, and it was rejected by the department on June 22.

In the Court of First Instance which ruled in favor of Chan, Justice Anselmo Reyes ruled that the department had failed to consider Chan's "lack of actual knowledge of the notices of assessment", and thus the department's rejection was "unreasonable".

On Tuesday, Chan's counsel Philip Dykes contended that the commissioner of inland revenue retained responsibility to make sure that the notices of assessment are given to the tax payer, and that the tax payer's attention should be successfully drawn, according to the Inland Revenue Ordinance.

Dykes maintained that if the tax payer demonstrated that he did not receive the notice of assessment, then the commissioner failed to meet the duties of his office. If the tax payer did not receive the notice, Dykes said, the department should file a fresh notice, or offer an extension to the tax payer.

Justice Michael Hartmann, however, questioned whether "receiving" necessarily means "giving". "What if a dog ate up the letter, or what if a servant accidentally threw the letter out?"

Justice Peter Cheung Chak-yau also questioned how far the commissioner's responsibility should go. He said that even if the law firm indeed did not receive the notice, or if Chan failed to meet his responsibility to change his postal address, it may have shown that the procedure was handled very casually, and the blame should be on the poor handling of the matter, and the commissioner should not be held responsible.

Justice Cheung reserved judgment to a later date.

andrea@chinadailyhk.com

China Daily

(HK Edition 02/29/2012 page1)