Challenging an LHDN Decision: SCIT Appeal or Judicial Review?

Which LHDN decisions can I appeal?

Section 99 of the Income Tax Act 1967 gives a person aggrieved by an assessment a right of appeal to the Special Commissioners. LHDN’s Public Ruling No. 12/2017 on appeals against assessments explains that this covers assessments such as additional assessments raised after a tax audit or investigation, and assessments made on the Director General’s best judgement.

Most taxpayers are assessed on their own returns under self-assessment. A deemed assessment based on your own return generally cannot be appealed, unless you computed the tax in line with a public ruling or LHDN’s practice at the time and disagree with that treatment. If you made an error or mistake in your own return, the usual route is an application for relief under section 131. Similar rights of appeal exist for real property gains tax under the Real Property Gains Tax Act 1976.

How do I file an appeal on Form Q?

The appeal is made by giving notice on Form Q to the Director General within 30 days after the service of the notice of assessment. The form must be signed by the taxpayer, state the amount in dispute and set out the grounds of appeal. The grounds matter, because they frame the issues for the rest of the appeal.

If you miss the deadline, you may apply for an extension of time on Form N, giving a good reason for the delay. If LHDN allows the application, it gives you 30 days to file Form Q. If it refuses, the application is forwarded to the SCIT, and the SCIT’s decision on the extension is final.

What happens after Form Q is filed?

LHDN reviews the appeal and may propose a settlement. It must complete its review within 12 months of receiving the notice of appeal, a period the Minister of Finance may extend by up to six months. If the appeal is not settled, LHDN forwards it to the SCIT.

The SCIT is a specialist tribunal. It usually holds case management first to see whether the dispute can be resolved, and then fixes a hearing at which witnesses may be called and submissions made. The taxpayer may appear in person or be represented by an advocate and solicitor or a qualified tax agent. Either party may appeal against the SCIT’s decision to the High Court, and from there to the Court of Appeal.

Do I have to pay the tax while the appeal is pending?

Yes. Tax charged in an assessment is due and payable whether or not you appeal, and late payment attracts increases. If you do not pay, LHDN may sue for the tax under section 106, and in that suit the court will not entertain arguments that the tax is excessive or under appeal. LHDN may also issue a stoppage order preventing you from leaving Malaysia.

If the appeal succeeds, tax overpaid is refunded. Where paying in full would cause hardship, ask LHDN for an instalment arrangement early. See LHDN Travel Ban in Malaysia: How to Check and Lift a Stoppage Order.

When is judicial review available instead?

Judicial review is the High Court’s supervisory jurisdiction over public decision-makers, including LHDN. It asks whether a decision was lawful, rational and procedurally fair, not what the correct amount of tax is. The application is made under Order 53 of the Rules of Court 2012, generally within three months after the decision is communicated, and the court’s leave is needed first.

The courts expect taxpayers to use the statutory appeal where it is available. In Ketua Pengarah Hasil Dalam Negeri v Alcatel-Lucent Malaysia Sdn Bhd & Anor (Federal Court, 29 November 2016), the taxpayers had paid under protest without appealing to the Special Commissioners. The Federal Court emphasised that the taxpayer must go to the Special Commissioners first, and also found that the judicial review application had been filed out of time.

Judicial review remains available in suitable cases. In Speed Modulation Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2023] 7 MLJ 849, the High Court granted leave to challenge real property gains tax assessments where the complaints raised questions of law and LHDN had relied on a valuation that was not disclosed to the taxpayer, and it stayed further proceedings on the assessments pending the hearing.

How do I choose between an appeal and judicial review?

As a general guide:

• if the dispute is about facts, figures or how the law applies to your transactions, appeal to the SCIT on Form Q;
• if LHDN has acted without legal power, misdirected itself on the law, or acted unfairly or irrationally, judicial review may be considered;
• where in doubt, file Form Q within the 30 days to protect your position while you take advice on judicial review.

Both routes have strict time limits, and the choice affects the evidence you need and the costs involved, so take advice as soon as the assessment or decision arrives. On what happens before an assessment is raised, see LHDN Tax Audit in Malaysia: The Process, Your Rights and Penalties. For indirect tax, see SST Bill of Demand in Malaysia: How to Challenge or Appeal It.