Tax assessments should be served on the tax payer within eight years of the base year, an appeal court has confirmed, and any assessments raised after that period were to be deemed time-barred.

Chief Justice Vincent De Gaetano, Mr Justice Joseph D. Camilleri and Mr Justice Joseph A. Filletti dismissed an appeal filed by the Commissioner of Inland Revenue from a decision of the board of special commissioners delivered in December 2000.

The board had decided an appeal filed by Anthony Cachia from a decision taken by the commissioner in April 2000 concerning assessments for 1986 to 1988.

Cachia had claimed that the liquidation effected by the commissioner was time-barred because assessments for 1985 to 1987 had been raised by the commissioner 10 years later, in 1997.

The Tax Management Act, claimed Cachia, provided for a period of eight years within which the commissioner had to raise the tax from the tax payer.

Cachia therefore submitted that the commissioner was bound to inform the tax payer of the tax due within a period of eight years.

Cachia added that he had always remitted his tax returns in time, and had acknowledgments from the Inland Revenue Department to prove this.

This notwithstanding, prior to 1997 he had not received any communication from the commissioner for the basis years 1985 to 1987.

In its decision the board of special commissioners noted that although Cachia's tax returns for the years of assessment 1986 to 1988 had been remitted by him within the legal time limit, the commissioner had not sent Cachia the income tax assessments until April 30, 1997.

The board had upheld Cachia's appeal and had concluded that the assessments made by the commissioner for the years of assessment 1986 to 1988 were time-barred and ought to be annulled.

But the commissioner appealed, contesting the manner in which the board had interpreted the law and the conclusions reached. The commissioner further claimed the board had acted ultra vires the Tax Management Act, for this law did not contemplate the issue of time barring.

The commissioner further submitted that the board's decision to annul the assessments was disproportionate.

The Court of Appeal had no hesitation in declaring that when a law stipulated that an action had to take place within a stipulated period of time and such period lapsed without the action having taken place, then this could lead to a declaration of nullity unless the law made provision for delay.

Legal time limits, as a rule, had to be observed.

It was only in exceptional cases that the law provided for certain instances when time limits could be extended.

The Tax Management Act, said the court, provided for the commissioner to be entitled to issue an assessment in the case of a tax payer, within eight years from the basis year in question.

The wording of the law was such, the Court of Appeal noted, that it was obvious that the law was dealing with a period of time within which the commissioner had to act.

There were other specific cases listed in the law when the commissioner was not tied down by a time limit, but this was not one of them.

The Court of Appeal dismissed the submission made by the commissioner that the assessments had been worked out by the inland revenue department some four years before they were issued to Cachia.

This was irrelevant, said the court, for what was important was that the tax payer was informed of the assessment raised within a reasonable time, which at law amounted to eight years. Any other interpretation of the law would give rise to uncertainty and a state of absurdity, it said.

It was not only the tax payer who was bound to pay tax according to law but the commissioner was also bound to fulfil his duties in a diligent manner.