Supreme Court dismisses appeal where void tax assessments do not create unlawful enrichment for unmarried taxpayer.

[*370] 1967 March 21

(VASSILIADES, P., TRIANTAFYLLIDES, JOSEPHIDES,

STAVRIRIDES, LOIZOU, HADJIANASTASSIOU, JJ.)

APPELLATE JURISDICTION

Byron Pavlides,

Appellant,

and

The Republic of Cyprus, through

1. The Commissioner of Income Tax,

2. The Attorney-General as successor

To the Greek Communal Chamber,

Respondent.

(Revisional Jurisdiction Appeal No.16).

Revenue - Income Tax - Unmarried persons - Appeal against dismissal of recourse against Respondent's decision not to refund to Applicant a sum allegedly paid by him in excess of his tax liability

- Two different assessments in respect of the same year of assessment - Second assessments, made in error, void ab initio.

Constitutional Law - Constitutionality of statutes - Articles 146 and

148 of the Constitution of Cyprus - Under Article 148 there cannot be rendered binding anything which is not within the "jurisdiction or competence" under Article 146

- Decision in Panayides and The Republic etc. (1965) 3 J.S.C. p.206, not a decision on constitutionality of general application.

Administrative Law - Administrative acts - Effect of an error on an administrative act.

Income Tax - See under "Revenue" above.

A. Triantafyllides, for the Appellant.

K. C. Talarides, Counsel of the Republic for the Respondent.

JUDGMENT

VASSILIADES. P.: The Judgment of the Court will be delivered by Mr. Justice HadjiAnastassiou.

HADJIANASTASSIOU. J.: The Appellant (Applicant), who is a bachelor filed a recourse dated 26th August, 1965, [*371] against the decision of the Respondent not to refund to him the sum of £511.260 paid to the Respondent in excess, allegedly, of his tax liability under Laws 16/61, 18/62 and 9/63 of the Greek Communal Chamber.

The Case was heard by a Judge of this Court, at first instance, who dismissed the recourse and the Applicant now appeals against that decision* on the following two grounds, under section 11(2) of the Administration of Justice (Miscellaneous Provisions) Law 1964(Law 33/64): -

"(1). The trial Court erred in deciding that Respondents should not return the income tax paid by Applicant in excess of his true income tax liability. Such decision results in the unlawful enrichment of the State at the expense of the citizen. In other words the State collected tax not legally due and to that extent Government has received money to which they are not entitled.

(2). Appellant further submits that in the circumstances of this particular case he is entitled to the return of the money paid in excess of his actual liability, because the income tax authorities, themselves reopened the matter by sending new revised assessments for the same years".

The facts in this Case, as briefly as possible, are as follows: -

On the 30th November, 1964, the Appellant who is a bachelor was assessed by the Respondent under Laws 16/61, 18/62 and 9/63 of the Greek Communal Chamber, in respect of the years of assessment 1961, 1962 and 1963 respectively, [*372] to pay a total amount of taxes amounting to £1,333.385. On the 5th January, 1965, the Appellant paid the above mentioned sum in full settlement of his relevant tax liability. (For convenience we shall hereinafter refer to these assessments as the "first assessments"). They were based on the taxation scale applicable to unmarried persons, which is higher than that applicable to married persons.

On the 2nd March, 1965, the Supreme Court delivered its Judgment in Panagides and The Republic (1965,3 J.S.C. p.206) by which it was held that the provisions of Greek Communal Law 16/61, making a distinction, for the purposes of taxation imposed by the said Law, between married and unmarried persons, were unconstitutional.

On the 11th June, 1965, the Commissioner of Income Tax made three other assessments on the Appellant in respect of the same years of assessment, 1961-1963 inclusive. The total amount of tax payable under them was £322.225. (For convenience we shall hereinafter refer to these assessments as the "second assessments"). They were no longer based on the taxation scale for unmarried persons.

Appellant made no objection to the second

assessments but by a letter written by his legal advisers on the 5th August, 1965, he asked for a refund of the sum of

£511.260, being the difference of the tax imposed by the first and second assessments.

This letter reads as follows:

"We have been instructed by our client

Mr. Byron Pavlides of Nicosia, to acknowledge receipt of the above [*373] assessments representing his assessments for

income tax for the years of assessment 1961, 1962 and 1963, and to inform you that our client is already credited with you in respect of the following sums: -

Receipt No. A 171901 £ 260.735

" No. A 171902 £ 529.U25

" No. A 171903 £ 543.225

£1,333.385

It would appear from the above that Mr. Pavlides is now credited with a sum of £511,260 mils, which we have been instructed to claim from you. Early settlement will oblige".

On the 18th August, 1965, a letter was written on behalf of the Commissioner of Income Tax to the Appellant's legal advisers, in reply to exhibit 2; such letter reads as follows:-

"I have the honour to refer to your letter dated the 5th August, 1965, and to inform you that it has now come to

light that the notices sent to your client on 11/6/65 in respect of his assessments for the years 1961, 1962 and 1963 were

done so in a misapprehension and should now be considered as cancelled, the reason being that he had already paid the tax in the original assessments. This fact was only brought to my notice after the assessments referred to in your letter had been sent out. In view of this your client is entitled to a refund of the tax applicable to the reduction agreed to be made to the [*374] original assessments such reduction being £55 for 1961; and £110 for each year 1962 and 1963. The total tax refundable to your client amounts to £124.200 i.e. £5.400 for 1 961, £59.400 for 1962 and £59.UOO for 1953. A cheque will be sent to your client direct".

It is common ground that this refund, which is offered by Respondent in exhibit 3, is not in any way connected with the difference arising out of the use for the first assessments of the taxation scale for unmarried persons.

We find it convenient to deal first with the second ground of appeal;

Counsel for the Appellant has argued that the Commissioner of Income Tax has acted under the provisions of section 33 of Law 16/61 - and the corresponding similar provisions of Laws 18/62 and 9/63 - in sending the second assessments to the Appellant.

Section 33 of the Schedule to Law 16/61 reads as follows (in translation): -

"If it be proved to the satisfaction of the Commissioner that any person for any year of assessment has paid tax by deduction or other-wise in excess of the amounts with which he is properly chargeable, such person shall be entitled to have the amount so paid in excess refunded".

The main argument of Appellant's counsel before us, as well as before the trial Judge, was that the second [*375] assortments constituted valid administrative acts, purposefully made, which are binding on both the Appellant and the Administration alike, in fixing the actual tax liability of the Appellant for the years of assessment concerned; therefore, any amount collected over and above such liability ought to be refunded.

The learned trial Judge, in rejecting Appellant's submission on this issue, found that the second assessments were made in error and had this to say in his Judgment at P.27: -

"In my opinion an administrative act which has been done in error must, in most cases, be cancelled when the author of such act has become aware of such error. Such cancellation is, of course, without prejudice to the rights of the citizen to obtain redress in cases where he may have suffered any damage in consequence of such error".

He then went on to state at p.28: -

"As I have already stated the Respondent, in my opinion, had a duty, in accordance with the accepted principles of Administrative Law pertaining to administrative acts, which have been done in error, to rectify such error by cancelling such administrative acts. I am of the opinion that this duty to cancel the three administrative acts, which resulted in the second assessments in respect of the three years of assessments in question, was duly discharged by the Respondent when he became aware of the error and the Applicant was accordingly informed of this by Exhibit 3, [*376] where it was expressly stated that the assess-meats in question 'were done so tinder misapprehension and should now he considered as cancelled, the reason being that he (the Appellant) had already paid the tax on the original assessments'".

We are in full agreement with the above reasoning of the learned trial Judge, It is abundantly clear in our view, that the second assessments were made in error. They were a mere duplicity and they did not in any way constitute new assessments under any provision of law authorizing their making nor could they be said to have been intended to be revocations of the first assessments. In our opinion, therefore, the Commissioner of Income Tax has C acted without proper legal basis at all in sending the second assessments to the Appellant; such assessments were void ab. initio and the Respondent had a duty and was bound to cancel them.

Having reached the above conclusion ground (2) of the appeal fails.

With regard to the first ground of appeal counsel for the Appellant, in his able argument, has submitted that since the Appellant had paid the tax assessed upon him prior to the decision of the Supreme Court in the Panagides case (supra) he ought not to find himself in a worse position than bachelors who had paid their tax after the said

decision, because this would be contrary to the principle of equality safeguarded by Article 28 of the Constitution.

He further submitted that as Article 148 of the Constitution provides that "Subject to the provisions of [*377] paragraph 3 of Article 144 any decision of the Supreme Constitutional Court on any matter within its jurisdiction or competence shall he binding on all courts, organs, authorities and persons in the Republic" a decision of the Supreme Court, exercising the competence of the Supreme Constitutional Court under Article 1h6, such as in the Panagides case, was not binding only inter partes, as in the case of a reference under Article 146, but constituted a decision establishing the unconstitutionality of the provisions relating to the special taxation scale for unmarried persons, thus rendering it unlawful for the Respondent to refuse to refund the relevant difference in tax resulting on the basis of the first and second assessments; Respondent's refusal led to unlawful enrichment of the State at the expense of the citizen, submitted counsel for the Appellant.

The learned trial Judge in dismissing the contention of counsel for the Appellant based on the principle of equality, has referred to a German case reported at p.92 in the "Yearbook on Human Rights for 1957" under the heading "Equal Treatment in General", and had this to say at p.23 of his Judgment:-

"In that case the joint assessment of married couples, which up to then had been legal and customary, had been declared by the Court on the 21st February, 1957 to be unconstitutional. The Federal Constitutional Court ruled on the 12th December1957 (BV erf GE7/I94) 'that no person could demand the adjustment of a tax assessment which had become final before the 21st February, 1957, on the ground of the principle of equality'. [*378]

It was held by the Federal Constitutional Court 'that this involved no violation of the Basic Law, since the certainty of the law and justice were equally essential features of the rule of law' and that 'the legislator was at liberty to decide to which of these two principles he wished to give preference; inequality thereby created did not offend against the principle of equality'".

We are in full agreement with the above view.

We come next to the second contention of Appellant regarding ground (1):

In the Panagides case, which was decided under Article 146, it was held by the Court that because of the distinction made between married and unmarried persons the relevant legislative provision regarding taxation of unmarried persons, in Law 1 6/61, was unconstitutional.

Under Article 146 the Court can deal with the constitutionality of an enactment only to the extent to which such issue is relevant to the validity of the act, decision or omission, which is the subject-matter of the recourse; but it cannot decree the unconstitutionality of an enactment, as such.

Thus, when Article 148 is applied to a

decision under Article 146, its effect is that it is the actual decision in the particular recourse, which is binding on all courts, organs or authorities and persons. This is quite clear if one reads together paragraphs 4 and 5 of Article 146 itself, which read as follows: -

"4. Upon such a recourse the Court may, by its decision – [*379]

(a) confirm, either in whole or in part, such

decision or act or omission; or

(b) Declare, either in whole or in part such

decision or act to Be null and void and of no effect whatsoever; or

(c) declare that such omission, either in whole or in part, ought not to have been made and that whatever has been omitted should have been performed".

"5. Any decision given under paragraph of this Article shall be binding on all courts and all organs or authorities in the Republic and shall be given effect to and acted upon by the organ or authority or person concerned".

Under Article 148 there cannot be rendered binding anything which is not within the "jurisdiction or competence" under Article 146.

There can be, therefore no question of the Panagides case being a decision on constitutionality of general application.

It follows that the sections under which the first assessments were made were and remain in force and there is no question of any unlawful enrichment of the State or of the Appellant having paid beyond his liability according to law It was up to Applicant if he so wished to attack by a recourse the first assessments, but instead he elected to pay his tax liability without any protest.

Having reached the above conclusion and for the above reasons the first ground of the appeal also fails. [*380]

The Order of the Court, therefore, is that the appeal fails and it is hereby dismissed.

VASSILIAPES. P.: As regards costs, the practice of the Court is to let costs follow the event, unless, in any particular case, there are reasons for making a different order. Recourses, being themselves proceedings of a public nature, in a way, this Court has only rarely, in the past, awarded costs in appeals; especially in cases involving points of law of general interest, which had not been decided in an earlier case.

In the present appeal, we are inclined to the view that in the circumstances of the ease, there should be no order for costs in the appeal.

Appeal dismissed.

No order as to costs

in the appeal.

* Decision published in (1965) 5 J.S.C. p. 717.