Tax arrears: Lawyer Shafee fails to obtain leave to file counterclaim

Judicial Commissioner (JC) Roz Mawar Rozain dismissed Muhammad Shafee's application after finding that the defendant's counterclaim does not arise from the recovery of taxes but from mala fide acts by the Malaysian Anti-Corruption Agency (MACC) and the Attorney General's Chambers (AGC), which does not fall within the set scope of the rule prohibiting counterclaim.

"The court observed that the defendant's counterclaim was against parties like the MACC and the AGC, who are not part of this proceedings," she added.

The JC also said that whatever dissatisfaction over calculations of the taxes could be dealt with before Special Commissioners of Income Tax (SCIT).

She said that Muhammad Shafee's claim that tax assessments were "concocted mala fide" by MACC and the AGC can be dealt with another avenue.

The JC said that there was a slew of case laws which indicated that the whole scheme of tax law in Malaysia is that payment demanded must be paid notwithstanding appeals and that the principle of "pay first, talk later" is predominant.

"There may be appeals before SCIT but payments must be made or become debts due to the IRB of which they are legally empowered to collect the tax arrears," she said adding that Muhammad Shafee was not the first taxpayer who wished to file a counterclaim in these types of proceedings.

The JC also ordered a prominent lawyer to pay RM5,000 in costs to the government.

Meanwhile, the court fixed July 26 to hear summary judgment by the IRB on behalf of the government against Muhammad Shafee.

Muhammad Shafee filed the application in May 2021, on the grounds that, among others, the tax claim was an attack on him as a political victim in his capacity as a lawyer for former Prime Minister Datuk Seri Najib Tun Razak and was considered to be an UMNO lawyer even though he was not.

Muhammad Shafee claimed that on Aug 10, 2018, two days after the 1Malaysia Development Berhad charges were levelled on Najib, and after he issued a series of press statements critical of the Pakatan Harapan government, he was called in by the MACC to give a statement on the receipt of the RM9.5 million.

Following the statement to the MACC, Muhammad Shafee alleged that a meeting was held in September 2018 among the IRB, the MACC and AGC to discuss a plan of action to oppress and persecute him with the aim of discouraging him from acting as Najib's counsel.

On Sept 27, 2021, IRB requested that the suit against Muhammad Shafee be decided through summary judgement 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.

IRB which filed the suit on May 6, 2021, claimed that until now, the lawyer has still failed to pay the amount of income tax owed for the assessment years of 2011, 2012, 2013, 2014 and 2016 including the increase on the imposed sum.

On Oct 28 last year, the High Court acquitted and discharged Muhammad Shafee on two charges of receiving money from illegal activities amounting to RM9.5 million from Najib and two charges of making incorrect statements to the IRB.

However, the prosecution on Nov 1 last year filed an appeal against the court's decision.

Muhammad Shafee was represented by Datuk Seri Rajan Navaratnam and Muhammad Farhan Muhammad Shafee while IRB senior counsels Al-Hummidallah Idrus, Norzilah Abdul Hamid and Muhammad Faqrol Syazreen Mohd Ghause acted for the IRB.