Inland Revenue ordered to pay €30,000 compensation for 31-year-old injustice

The Constitutional Court has handed down a landmark judgement ordering the Commissioner of Inland Revenue to pay €30,000 in compensation to a taxpayer who was left in a 31-year legal limbo, after objecting to a 1977 ex-officio tax assessment.

In passing judgement, Mr Justice Gino Camilleri, presiding over the Civil Court in its Constitutional jurisdiction, claimed that it was "unheard of that an ex officio assessment took decades to be decided."

This judgment flings open the floodgates to a series of other similar pending cases before the courts, reminiscent of an era when hundreds of politically motivated ex officio assessments or tax surcharges were issued, mostly during the 1970s and the early 1980s, against numerous business owners: many of whom were forced out of business as a result.

Significantly, the Court placed the onus on the Commissioner of Inland Revenue as the sole person responsible for the injustice.

The case goes back almost four decades, to a time when John Geranzi Limited, who operated retail outlets in Valletta and Sliema, were slapped with an additional tax bill of Lm7,912 covering 1977 as the year of assessment.

The company immediately filed an objection to the Commissioner of Inland Revenue's assessment, but never issued a formal refusal, which would subsequently give the complainant the legal right to seek recourse before the Income Tax Board.

John Geranzi Limited remained in a legal limbo until 2007, when a successive Commissioner of Inland Revenue decided to issue the refusal, leaving the company heirs to dig up receipts and tax returns that went back decades.

Lawyer Robert Montalto, who appeared for John Geranzi Limited, argued that his client had been denied the right to a fair hearing to his objection, practically stripping him from the very principle of justice within a reasonable time.

The plaintiff was practically faced with a situation where the Income Tax Board, summoned to decide his case after 31 years, expected him to remember matters related to the case, and which accounts were held by a director who had since passed away, and so did the tax assessors.

Godfrey Gialanze, who appeared as the business heir to the company, repeatedly argued that he was denied every right to contest the inherited ex officio assessment he had inherited from his father who passed away in 1998.

Gialanze was left alone with the "excessive burden" of having to produce documents dating back three decades in a bid to defend his case, as the Commissioner of Inland Revenue had not bothered to issue a refusal to the initial objection and give the right to the assessed person to file a submission before the Income Tax Board.

The Court agreed that the lengthy time-lapse to consider such a case was "unheard of" while also describing it as a blot on the public service record.

Mr Justice Camilleri ordered the Commissioner of Inland Revenue be found solely responsible for the injustice committed, and ordered him to pay the sum of €30,000 in compensation to Godfrey Gialanze.

The Court acquitted the Prime Minister and the Attorney General from any responsibility.

This is an abriged version of the story published in MaltaToday Midweek, 16 May 2012, on page 1. For the full print version, click here.