(1984) 3 CLR 160
[*160] 1984 February 2
[SAVVIDES, J.]
IN THE MATTER OF ARTICLE 146 OF THE CONSTITUTION
PROMENADE ESTATES LIMITED,
Applicant,
v.
THE REPUBLIC OF CYPRUS, THROUGH
THE MINISTER OF FINANCE,
Respondent,
(Case No. 16/82).
Administrative Law—Inquiry—Due inquiry—Failure by an administrative organ to make a due and/or proper inquiry is a ground for annulment of the administrative act concerned—Decision assessing applicant to pay capital gains tax—Annulled because the respondent failed to conduct a proper inquiry into the matter.
The applicants in this recourse challenged the decision of the respondent whereby they were assessed to pay a sum of £10,072 as capital gains tax on properties that belonged to them and were sold by public auction on the 9th August, 1981. One of the contentions of the applicants was that the sub judice decision was reached without a due inquiry; and counsel for the respondent conceded that it was reached without due inquiry and was prepared to accept its annulment.
Held, that it is a well established principle of administrative law that failure by an administrative organ to make a due and/or proper inquiry is a ground for annulment and this ground has been repeatedly treated by this Court as sufficient by itself to cause an annulment of the administrative act concerned; that in the light of the material before this Court and the admissions made by counsel for respondent, it has reached the conclusion that the respondent in reaching his decision that the applicant realised a profit of £50,360 - from the sale of immovable properties belonging to it and on the basis of which it was assessed [*161] to pay capital gains tax amounting to £10,072.- was wrong as the respondent failed to conduct a proper inquiry in the matter.
Sub judice decision annulled.
Cases referred to:
HadjiPaschali v. Republic (1980) 3 C.L.R. 101;
Antoniou v. Republic (1978) 3 C.L.R. 308;
Tourpeki v. Republic (1973) 3 C.L.R. 592;
Ioannides v. Republic (1972) 3 C.L.R. 318.
Recourse.
Recourse against the decision of the respondent whereby the applicant was assessed to pay £10,072.- as capital gains tax on properties that belonged to them and were sold by public auction.
M. Christofides, for the applicant.
M. Photiou, for the respondent.
Cur. adv. vult.
SAVVIDES J. read the following judgment. The applicant, by this recourse, challenges the decision of the respondent whereby it was assessed to pay a sum of £10,072.- as capital gains tax on properties that belonged to it and which were sold by public auction on 9.8.81.
The applicant is a private company of limited liability, incorporated in 1973. It was the owner of immovable properties under Registration Nos. 37058 and 35625 situated in Limassol. As the applicant was heavily indebted, its creditors, after having instituted civil proceedings in the District Court of Limassol and obtained judgment against it, proceeded to execute their judgment by a writ of immovables against the aforementioned properties of the applicant. After repeated adjournments of the sale due to the fact that the reserved price fixed by the District Lands Officer could not be realised both properties were sold on 9.8.81 at the price of £200,000.- Upon materialisation of the sale the District Lands Officer informed the Director of the Department of Inland Revenue accordingly, who, after assessing the value of the said properties as on the 27th June, 1979 at £149,640.- concluded that a profit of £50,360 had been realised and as a result assessed the applicant to pay £10,072, representing 20 per cent of the alleged profit as capital gains tax. [*162]
The said assessment was raised under the provisions of section 4 of the Capital Gains Tax Law, 1980 (Law 52/1980), whereby a tax of 20 per cent is imposed on all gains materialised from the sale of immovable property and which are not gains falling under the provisions of the Income Tax Laws.
When the applicant was informed about such assessment, it wrote a letter to the Director of the Department of Inland Revenue, dated the 15th October, 1981, objecting to the said assessment in which it disputed the fact that it realised any profit from the said properties and contended that due to the fact that its properties were compulsorily sold, it suffered a loss of at least £152,000.- which price is the difference between the value of the properties as estimated by the District Lands Office one year before the date of the sale and the price realised by the sale. Such objection was rejected by the Director of the Department of Inland Revenue by his letter dated the 30th October, 1981, as a result of which applicant filed the present recourse.
The grounds of law on which the recourse is based, are the following:
1. The respondent erroneously and arbitrarily fixed the market value of the subject matter properties on 27.6.78 at £149,640.-. Such valuation is neither just nor reasonable and is unreasonably low.
2. The assessment which was imposed on the applicant is not proportionate to the means of the applicant and is of a destructive nature.
3. The sub judice act and/or decision is the result of bad and/or defective reasoning.
4. The sub judice act and/or decision is the result of bad and/or defective and/or abusive exercise of discretionary powers.
5. There is misconception of fact.
6. It is a case of abuse of power. After the auction sale and payment of debts there remained in the hands of the respondent a surplus of £10,072.- which the respondent sought to retain arbitrarily by means of the sub judice decision.
7. In the case of a forced sale of immovables by public [*163] auction, the factual or legal prerequisites for the imposition of tax on capital gains or the application of Law 52/1980 do not exist.
The application was opposed and the grounds of law advanced in support of the opposition are that:
1. The act and/or decision complained of were properly and lawfully taken after all relevant facts and circumstances were taken into consideration.
2. Respondent’s decision is duly reasoned.
By his written address counsel for applicant contended that it is clear from the facts and the various valuations of the Lands Office that on 27.6.78 and at all material times the market value of the properties was over £200,000.- and the allegation of the respondent that on 27.6.78 it was £149,640.- is arbitrary and not based on any actual valuation and its object was to enable the respondent to retain the balance which was left from the sale. In conclusion, counsel contended, that, in the circumstances, the sub judice act and/or decision is null and void and of no effect whatsoever.
Counsel for respondent did not file a written address as directed by the Court and, after repeated adjournments, when the case came up for hearing before me on the 14th November, 1983, he applied for extension of time to file his address and for an adjournment on the ground that all material necessary to enable him prepare his address had not been made available by the respondent. The adjournment was granted subject to the condition that if counsel for respondent failed to comply within one month with the directions to file a written address, he would be deemed as having nothing to say in reply to the written address of counsel for applicant, and the hearing was adjourned to the 21st December, 1983.
On the date of the hearing, counsel for respondent in addressing the Court orally, said that the reason he did not file his written address was because though he had repeatedly asked the respondent to express his view on a valuation report prepared by the District Lands Office of Limassol, copy of which was supplied to him by which the value of the properties on 27.6.1980 was given as £352,000.- and the reasons of such considerable difference in [*164] value between the assessment of the Director of the Department of Inland Revenue as on 27.6.1978 and the valuation of the District Lands Office as on 27.6.1980, and also that he had informed him that if no further instructions were given to him on the matter, he would not be able to file his written address in answer to the contentions of counsel for the applicant. The respondent failed to inform him and respond to his repeated reminders on the matter and he went on adding that:
“To the present day I have not received anything and from the facts I have before me, I admit the decision was readied without a due inquiry and I am prepared to accept the annulment of the decision for this reason. I believe it is enough reason for the annulment of the decision.”
and concluded as follows:
“In view of the fact that I have been satisfied that the allegation of the applicant that there was no due inquiry is correct, I consider it unnecessary to file a written address and what I had to say I have said it orally to-day and have nothing more to add.”
In the light of the material before me and the admissions made by counsel for respondent, I have reached the conclusion that the respondent in reaching his decision that the applicant realised a profit of £50,360.- from the sale of immovable properties belonging to it and on the basis of which it was assessed to pay capital gains tax amounting to £10,072.- was wrong as the respondent failed to conduct a proper inquiry in the matter.
It is a well established principle of administrative law that failure by an administrative organ to make a due and/or proper inquiry is a ground for annulment and this ground has been repeatedly treated by this Court as sufficient by itself to cause an annulment of the administrative act concerned. (See, inter alia, HadjiPaschali v. The Republic (1980) 3 C.L.R. 101, Antoniou v. The Republic (1978) 3 C.L.R. 308, Tourpeki v. The Republic (1973) 3 C.L.R. 592, Ioannides v. The Republic (1972) 3 C.L.R. 318).
In the result, the sub judice decision is annulled but in the circumstances I make no order for costs.
Sub judice decision annulled.
No order as to costs.
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