- Time Barred Assessment - Document Retention and Secondary Evidence - Withdrawal of Stock - Bad Debt Claim

1. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Tax Audit & Appeal Procedures
Prepared by: Siti)

2. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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❖ Time Barred Assessment
❖ Document Retention and Secondary Evidence
❖ Withdrawal of Stock
❖ Bad Debt Claim

3. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Time Barred Assessment

4. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Time-barred Assessment
Section 91(1) of ITA
❖ The Director General, where for any year of assessment it appears to
him that no or no sufficient assessment has been made on a person
chargeable to tax, may in that year or within six years after its
expiration make an assessment or additional assessment, as the case
may be, in respect of that person in the amount or additional amount
of chargeable income and tax or in the additional amount of tax in
which, according to the best of the Director General’s judgment, the
assessment with respect to that person ought to have been made for
that year.
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5. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Time-barred Assessment
Pensonic Sales & Service Sdn Bhd v KPHDN (2011)
❖ Facts:
❑ The respondent found that the appellant is not entitled to claim
IBA and CA for YA 1997 to 2000
❑ The respondent stated that it re-computed and revised the tax
payable by the application and in 2006, it disallowed the CA
brought forward from the YA 1997 to 2000 (PYB) to the YA 2000
(CYB)
❑ The respondent contended that the re-computation is not an
“assessment”
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6. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Time-barred Assessment
Pensonic Sales & Service Sdn Bhd v KPHDN (2011)
❖ Decision by High Court:
❑ Section 91(1) provides that an assessment or additional assessment
must be made in the year of assessment or within six years of
assessment after its expiration.
❑ In this case the CA were claimed in the YA 1997 to 2000 (PYB). The
respondent disallowed the utilisation of CA amounting RM500,198
claimed in the YA 1997 – YA 2000 (PYB) via a Notice of Additional
Assessment (Form JA) for YA 2000 (CYB) dated 14.12.2006 and Notice
of Reduced Assessment (Form JR) for the YA 2000 (CYB) dated
18.05.2007.
❑ Theses JA and JR are previously obviously out of time. Thus section
91(1) applies
❑ An assessment thought labelled as a “re-computation” by the
respondent is still an assessment.
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7. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Time-barred Assessment
Section 91(3) of ITA
❖ The Director General where it appears to him that—
(a) any form of fraud or wilful default has been committed by or on
behalf of any person; or
(b) any person has been negligent
❖ in connection with or in relation to tax, may at any time make an
assessment in respect of that person for any year of assessment for
the purpose of making good any loss of tax attributable to the fraud,
wilful default or negligence in question
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8. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Time-barred Assessment
Burden of Proof on IRB to prved Section 91(3) of ITA
❖ Case:
1. KPHDN v Debir Desa Development Sdn Bhd
2. Ryoshindoh Manufaction Sdn Bhd v KPHDN
❖ Decision:
The onus is on IRB to prove that the taxpayer was negligent
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9. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Document Retention and
Secondary Evidence

10. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Record keeping
Section 82(1) of ITA
❖ Notwithstanding section 82A and subject to this section, every person
carrying on a business—
(a) shall keep and retain in safe custody sufficient records for a
period of seven years from the end of the year to which any
income from that business relates to enable that income…. And
(b) if the gross takings from the business for the basis year for any
year of assessment exceeded one hundred and fifty thousand
ringgit from the sale of goods or one hundred thousand ringgit
from the performance of services, shall issue a printed receipt
serially numbered for every sum received in that year of
assessment in respect of goods sold or services performed in the
course of or in connection with the business and shall retain a
duplicate of every receipt so issued
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11. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Record keeping
Section 82(1) of ITA
❖ For the purposes of this section, “records” include—
(a) books of account recording receipts and payments or income
and expenditure;
(b) invoices, vouchers, receipts and such other documents as in the
opinion of the Director General are necessary to verify the entries
in any books of account; and
(c) any other records as may be specified by the Director General
……
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12. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Withdrawal of Stock

13. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Withdrawal of Stock
Section 24(2) of ITA
❖ Where in the relevant period any stock in trade of a business of the
relevant person is—
(a) withdrawn for his own use; or
(b) withdrawn (otherwise than on requisition or compulsory
acquisition or in a similar manner)
❖ then, an amount equal to the market value of that stock in trade at
the time of its withdrawal shall be treated as gross income of the
relevant person from the business for the relevant period.
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14. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Withdrawal of Stock
Mercedes Benz Malaysia Sdn Bhd v KPHDN (2012) HC
❖ Facts:
❑ The Appellant is a wholesaler of Mercedes Benz vehicle in
Malaysia
❑ The Appellant had registered new vehicles in the Appellant’s
name to change the status of the car to “used cars” for the
purpose of selling them in their secondary sales channel
❑ IRB contended that this constitutes a withdrawal in stock and
should be added into the gross income of the taxpayer tax
computation
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15. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Withdrawal of Stock
Mercedes Benz Malaysia Sdn Bhd v KPHDN (2012) HC
❖ Decision:
❑ Registration of these vehicles under the taxpayer’s name was
necessary by law to ensure that the vehicles could be sold in the
secondary sales channel
❑ The taxpayer’s business has to be looked as a whole set of
operation directed towards producing income
❑ The mere registration of the vehicles does not mean there was
withdrawal of stock for own use
❑ Hence, the appellant is entitled to rely on Section 35(2) of the ITA
to deduct the written down value of its used car stock
❑ The registration of the cars in the taxpayer’s name is to create a
second hand market, there is no evidence to support a finding
that it was withdrawal of stock for its own use
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16. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Bad Debt Claim

17. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Bad Debt Claim
Section 34(2) of ITA
❖ There shall be deducted in the case of any debt as defined in
subsection (3)—
(a) if at the end of the relevant period the debt is reasonably
estimated in all the circumstances of the case to be wholly
irrecoverable, an amount equal to the amount of the debt;
(b) if at the end of the relevant period the debt is reasonably
estimated in all the circumstances of the case to be partly
irrecoverable, an amount equal to so much of the debt as is
estimated to be irrecoverable,
❖ The deduction being in either case reduced by the amount of any
deduction made under this subsection in respect of the debt for the
basis period for a year of assessment prior to the year of assessment
to which the relevant period relates.
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18. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Bad Debt Claim
CR Sdn Bhd v KPHDN (2017) SCIT
❖ Facts:
❑ The appellant rented its premises to HTPC Sdn Bhd from 1995.
❑ In 1999 the amount owed was at RM539,625 and increased to
RM1,196,338 in 2006
❑ In January 2007 a legal letter of demand was sent to HTPC Sdn
Bhd to demand payment of their outstanding sums
❑ On 31 December 2009, the appellant's Board of Directors passed
a resolution to write off the debt of RM1,196,338 as bad debt
❑ The respondent declined to give a deduction of said bad debts
written off
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19. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Bad Debt Claim
CR Sdn Bhd v KPHDN (2017) SCIT
❖ Decision:
❑ Based on Commissioner of Income Tax vs Chitnavis (1932) AIR PC
178, it is the duty of the tribunal upon consider of all relevant and
admissible evidence to determine whether the decision of tax
payer is reasonable and debt is irrecoverable
❑ The restructuring excise is not good enough and unreasonable
because the amount of debts successfully recovered is small
compare to the whole debt
❑ It was not a genuine and reasonable commercial consideration
by merely issuing a letter demanding for full payment of debts
within 7 days after the debt has been accumulated for several
years and surged to RM1.19 million
❑ The Appellant has nit acted reasonably to recover the debts
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20. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Tax Audit and Tax investigation
Landscape

21. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
ENFORCEMENT BY IRB
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Tax Audit
Desk Field
Tax Investigation
Civil Criminal
❑ IRB guide on tax Audit – 2000
❑ Tax Audit Framework – 2007,2013,2015, 2017
❑ Petroleum Tax Audit Framework – 2013
❑ Transfer Pricing Audit Framework – 2013
❑ Tax Audit Framework on Finance and Insurance – 2015
❑ Withholding Tax Audit Framework – 2015
❑ Tax Investigation Framework – 2007, 2013

22. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Tax Audit

23. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
Tax Audit Process
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Submit an appeal within the time frame/notice of assessment is finalised
IRB will issue a notice of assessment
Taxpayer has 18 days to file an objection if dissatisfied with IRB’s findings
Findings of audit and proposed tax adjustments are presented to taxpayer
Field audit conducted
Notification by the IRB that field audit will be conducted
Submission of requested documents
Requested for tax computation and supporting documentation
Taxpayer is selected for an audit

24. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
New Tax Audit Framework
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Key Changes
Full scopes of audit for 3 YAs
Audit visit may be conducted without prior
notice given
Tax audit could be extended to related
businesses/companies with common director
without prior notice
Voluntary disclosures after the audit has
commenced will not result in reduced penalties
Changes to the concessionary penalty rate
1st May 2017

25. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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PR 12/2017: Appeal Against An
Assessment and Application For
Relief

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on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Appeal Against Assessment/ Add
Assessment/Reduced Assessment
(Tax Payable/Add Tax Payable)
Section 99
Appeal Against a Non Chargeable
Case /No Assessment After Tax
Audit
Section 97A
Form Q – within 30 days Non Chargeable – within 30 days
If successful – Tax refund No tax refund
Example 1,2,3,4 Example 6,7,8,9

27. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Appeal for Relief Error & Mistake
(Form B/C Tax Payable Position)
Section 131
Appeal for Relief Error & Mistake
(Form B/C Nil Tax Payable)
Section 97A (5)
Letter or CP 15C – within 5 years Letter or CP 15C – within 6 months
If successful – Tax refund No tax refund
Example 10,11 Example 14
NEW

28. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Appeal for Relief Non-Error & Mistake
(Form B/C Tax Payable Position)
Section 131A
Appeal for Relief Non-Error & Mistake
(Form B/C Nil Tax Payable)
Section 97A (5)
Letter or CP 15C – within 5 years Letter or CP 15C – within 6 months
Gazette Order issued after tax return
submission – within 5 years
Gazette Order issued after tax return
submission – within 5 years
Approval granted after tax return
submission – within 5 years
Approval granted after tax return
submission – within 5 years
Payment subject to WT – within 1 year Payment subject to WT – within 1 year
If successful – Tax refund No tax refund
Example 12,13 Example 15
NEW NEW

29. Contents of this presentation are adapted from the current of legislation at the time of presentation. No person should rely
on the content of this publication without first obtaining professional advice. We, KTP or THK, shall expressly disclaim all and
any liability and responsibility to any person in reliance in whole or any part of this contents.
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Thank You