CHAPTER 1

INTRODUCTION

Tax has been described as a compulsory payment imposed by government on individuals,

families, communities, corporations and government agencies and parastatals. Although there
have been vagaries of definitions of taxes, some describing it as levies, charges and other
definitions capable of misleading these terms as taxes. It is distinct from charges; levies
which have often times disguised itself as taxes. The charge of administrative fees by
Government ministries, agencies etc for services in circumstances that give them colouration
of taxes have undermined the principle. 1 In Independent National Electoral Commission
(INEC) v MUSA2 the Supreme Court held that the sum of N 100,000.00 prescribed by INEC
as a registration for political parties was not too much, the Federal Government of Nigeria not
being a Father Christmas.3

Tax payment is a constitutional provision 4 and its enforcement cannot be regarded as illegal.
Tax is a social contract between the government and the citizens, a means by which
infrastructures and other amenities can be provided for the benefits of its citizenry. It is thus,
the civic responsibility of every individual to make such payments failing which there are
penalties. Taxes are meant to be paid on a periodic basis. An audit exercise is first carried out
and a notice of assessment raised and served on the taxpayer to intimate it of its liability.

Taxes can either be direct or indirect. It is direct tax if the tax is levied directly on the income
and property of individuals and companies paid directly to the government by the person on
whom it is imposed.5 Indirect tax is that collected by an intermediary (Such as a retail store)
from the person who bears the ultimate financial burden of the tax (such as the consumer)6.
1*Samuel Olutoyin Oyenitun LL.B (Ilorin), B.L (Lagos); LL.M Unilag (in View)., Power and
Process of Distrain under P ITA: A case study of LIRS.Abiola Sanni, Taxation in the Guise of
Administrative Charges-Imperative of Curbing Abuses of Regulatory Power for Revenue purpose in Nigeria.

2(2003)10 WRN 1 cited in Supra note 1 at page 2.

3Ibid at page 79.

4See section 24(f) Constitution of the Federal Republic of Nigeria (CFRN),1999, CAP C23, Laws of
the Federation of Nigeria (LFN), 2004 as amended.

5Akhidime E. Augustine and Abusonwan E. Rachel, Nigeria Personal Income Tax (Amendment) Act
2011: Implications for Tax Administration and Enforcement at
http://www.afrrevjo.net/journals/ijah/vol. 2 no. 4 article14. Accessed 16/11/16.

6 Ibid

1
It is significant to point out here that there are various types of taxes collectible and enforced
by the three arms of government in Nigeria, the collection and administrative body is
determined by the types of tax.7 These are found in the Taxes and Levies (Approved List for
Collections) Decree 1998. Some of the taxes are Personal Income Tax, Education Tax,
Company Income Tax, Capital Gain Tax, Value Added Tax, Withholding Tax etc. The focus
of this paper will be on the distraint enforcements power and procedure as it affects
individuals liable to pay tax under the Personal Income Tax Act. They basically include Pay
As You Earn (PAYE), Self-Assessment, Withholding Tax and Direct Assessment. The
enabling Act regulating these taxes of individuals8 is the Personal Income Tax Act.

This paper seeks to examine the power and process of Distrain activities in Lagos State with
particular focus on the mode of instituting the action for distrain in court, the time and
method execution of the order whether it totally conforms with the law, whether fair hearing
has been given to a taxpayer in accordance with the provisions of the law and the
interpretation and application of section 104 of PITA with respect to seizure and sale of goods
as opposed to sealing. The reason for choosing Lagos State as a case study in this project is
bent on the fact that Lagos State is a good and practical case-study when it comes to taxation
in Nigeria because it operates the most effective revenue generating tax systems in Nigeria
although not without its flaws and the fact that it is the major key player when it comes to the
use of distrain as an enforcement tool under section 104 of PITA. This paper will therefore,
point out the irregularities and flaws inherent in its practice or use of the process and then
proffer recommendations for a future and better enforcement process.

1.1 BACKGROUND TO THE STUDY

Distraint is a common law remedy available to a landlord to recover arrears of rent. It is a

traditional remedy dating back to the old English common law, but is now restricted by
provincial statute, the Rent Distress Act9(the "Rent Distress Act"), in British Columbia and the
Civil Enforcement Act, in Alberta10.

It is a process where a landlord can only distrain the personal property of the tenant who is
liable for the rent and a landlord cannot distrain tenants' fixtures or improvements. 11Distrain

7http//www.ngex.com/business/Public/Taxes in-Nigeria, accessed on 16/11/16.

8This refers to individuals who are resident in a particular state in a relevant year. It however
excludes individuals who belong to the armed forces, Police force, Federal Capital Territory residents
and individuals of ministry of foreign affairs.

9RSBC 1996, c. 403 cited in www.mcmillan.ca/Distress-How-to-seize-without-being-sued.Accessed

on 30/11/16.

10RSA 2000, c. C-15, cited in supra note 10.Accessed on 30/11/16.

11Supra note 10. Accessed on 30/11/16.

2
under the Rent Distress Act could be illegal if done without due diligence. A landlord may be
held liable for damages if he commits illegal distress. An illegal distress is established when
although there is no tenancy relationship between the parties; the rent is not du; or where rent
is due: the landlord has terminated the lease, the landlord or the bailiff enters the premises
during a prohibited period, or the goods are exempt and when the landlord continues to
distress after the tenant tenders rent and paid cost of distress.12

In the British Columbia case of Beaver Steel Inc. v Skylark Ventures Ltd13the court found that
the president of a company was personally liable for authorizing an illegal distress by
allowing the bailiff to pick the locks and change the locks to the premises. The court found
that the company was liable for authorizing an illegal distress, but took the further step of
finding the president personally liable as he knew the distress was probably unlawful and
authorized the sale of the goods anyway. It is important to note that because the illegal
distress terminated the tenancy, the landlord was not allowed to claim rent after the date on
which the locks were changed.

Distrain in an enforcement procedure that has been imported into tax to enforce the payment
of tax. It is done by seizing upon the goods, chattels, bonds, lands, properties etc. of the
taxpayer after service of notice on the taxpayer and proof that the liability has become final
and conclusive. It is an effective means of compelling the taxpayer to fulfill its obligation to
the government. It is done in a state like Lagos mostly by sealing up the premises of the
taxpayer after due procedure has been followed. However effective this system of
enforcement is, it has erupted series of problems which till today have an unclear answer.
Some of these problems includes: the basis of liability, the mode of commencement of action
by the in the Law Court; the interpretation given to the provisions of section 104 PITA,14
execution of an order after it has lapsed and putting a taxpayer on notice before an ex-parte
order can be executed.

1.2 STATEMENT OF PROBLEM:

This project topic seeks to critically examine the challenges of Distrain process in Nigeria.
This includes: whether employer can be a subject of distrain under PITA; whether the
provisions of section 104 apply to companys who are agents of collection; interpretation of
section 104 of the Act with respect to the commencement procedure for obtaining the order of
distrain; application of Section 104 of Personal Income Tax Act (Sealing of the premises
belonging to a taxpayer as opposed to distrain of chattels and goods for property not
belonging to the taxpayer) and its application by LIRS; legality of executing an abated order
of court among others.

1.3 OPERATIONAL DEFINITIONS

12 Ibid.

13(1983) 47 BCLR 99 (SC) supra.

14Personal Income Tax Act (PITA), CAP P8 LFN 2004 as amended

3
In this research work the following words are given meanings with peculiar reference to this
project as opposed to general meaning.

1 Tax is a compulsory payment imposed government and for indirect benefit of the
public or citizens.

2 Distrain: is a term used in enforcement of tax to recover tax owed by a taxpayer. It is

used to seize movable and immovable properties of the owing taxpayer.

3 PAYE: meaning Pay as You Earn- a system employed by the RTA to ensure
employees pay their taxes as soon as it is earned. The RTA uses the employer as an
indirect agent to deduct and remit these taxes when salaries are paid on monthly basis.

4 Self-Assessment: A system where a taxpayer assesses himself or herself to tax on the

basis of do it yourself A taxpayer computes his/her reliefs and allowances and pays
to the RTA based on this assessment. It is usually done by the self-employed
taxpayers.

5 Direct Assessment: This is similar to Self-Assessment but differs in that under Direct
Assessment, the Assessment is done by the RTA after the taxpayer has filed its returns
for the year under review. Initial assessment done by a self-employed taxpayer is Self-
Assessment while the subsequent payment done by the taxpayer is based on Official
Assessment done by the RTA called Direct Assessment.

6 Power: with regards to this paper, power could be said to be ability or official
capacity to exercise control or authority.15In this context, power refers to the legal
ability or official capacity to exercise control or authority over taxpayer within the
confines of the law as any act outside it will be seen as a contravention of the law.

7 Process: In this context refers to the way or manner in which distrainactivitiesisbeing

carried out from stage of statutory notices to stage of execution of the distrain order.

1.4 SCOPE AND LIMITATION OF THE STUDY

This research work shall focus basically on the power of a State Board of Internal Revenue to
use Distrain as an enforcement tool in the compelling the payment of taxes. It also considers
the ambits of the process leading to distrain, the problems and challenges inherent in it,
whether it is in total compliance with the provisions of PITA or not and possible
recommendations. This research work is further limited to a case study of Lagos State
Internal Revenue Service (the operative arm of Lagos State Board Of Internal Revenue) in
terms of its power and process of exercising distrain in terms of Administration and Policy
coupled with a comparative analysis from two other jurisdictions.

1.5 RESEARCH QUESTIONS:

The research questions posed by this project topic include:

15www.thefreedictionary.com/distrain

4
 i. When does the power of the Relevant Tax Authority to enforce payment of tax
through distrain arises;
ii. Whether or not the power is exercised in full compliance with the provisions of
PITA or it should be amended to suit its mode of application;
iii. the meaning of distrain whether it implies sealing or seizure of goods;
iv. Whether motion ex parte is an appropriate mode of instituting civil actions in our
courts considering the rules of court as against a National Assembly enactment?

1.6 THEORETICAL BASE

A succinct evaluation of distrain as provided for by Personal Income Tax Act 2004 as
amended and the application of the provisions by Lagos State Internal Revenue Service,
whether in total compliance with the provisions of the laws as laid down or is infringing on
some clear provisions in its application. This work will critically examine the theory behind
distrain, its meaning, interpretation according to the provisions of Section 104 of PITA16

1.7 AIM AND OBJECTIVES

This project topic will attempt to examine and state reasons why a taxpayer or the public feels
distrain process is unconstitutional in its entirety considering sections 36 and 44(1) of the
Constitution which respectively gives right to all citizens to be heard before being judged and
allowed to own and acquire property without any limitation or subjection to compulsory
acquisition and also why the taxpayer and the public 17believes that the provision of section
104 PITA as amended is not properly interpreted and applied by the RTA in accordance with
the law on one hand while the RTA will on its part canvass for its constitutionality and give
justification for its mode of interpretation and application of the provisions of section 104 of
PITA. and identify salient areas of challenges with the provisions of the Personal Income Tax
Act 2004 as amended such as a determination of the meaning of distrain as provided in
Section 104 of PITA as amended; provision for motion ex parte as the mode of instituting
distrain action as opposed to other modes provided in the rules of court and the
constitutionality of distrain process under the Nigerian constitution among others. This work
will conclude by shedding more lights on the meaning, interpretation and constitutionality of
the distrain process and then recommend necessary provisions for the amendment of the act
so as to guide its application by the relevant tax authorities.

1.8 SIGNIFICANCE OF THE STUDY

The whole essence of this project topic is to critically examine the power and process of
exercising the right of distrain, identify the problems and defects inherent in its practice and
proffer solutions to same.

1.9 LITERATURE REVIEW/DISCUSSION OF LITERATURE REVIEW

16 Supra note 15.

17Supra note 5.

5
The provision of section 10418 is to the effect that upon service of the demand notice on the
taxpayer by the relevant tax authority and the taxpayer neither objects nor paid the
outstanding liability, the relevant tax authority has the right as provided by section 104 of
Personal Income Tax Act to distrain upon the goods, chattels, bonds etc. of the taxpayer and
or distrain upon any premises upon which the taxpayer is the owner. However, the Relevant
Tax Authority decides to seal up a premises whether or not it belongs to the taxpayer. It
reluctantly distrains upon goods, chattels and bonds all because it feels that approach is not
effective to compel the taxpayer to pay. More so, the mode of commencement of action
provided for by Personal Income Tax Act is alien to the various mode of commencing actions
in the State High Courts of Nigeria. Another major problem is the use of defective exhibits
which are used as evidence to obtain the order of distrain. An example is the proof of delivery
which are supposed to be further substantiated that it was actually delivered to the company
as a condition precedent to instituting an action in court. Defective notice is no doubt a factor
that borders on the jurisdiction of the court.

The word distrain according to Abimbola Akeredolu a Senior Advocate 19means to take
and detain personal property by distress as security for a debt, claim etc. 20Akeredolu in her
paper also makes reference to the Black Law Dictionary21which defines distrain to mean to
force a person by the seizure or detention of personal property to perform an obligation.
These definitions however seems to be lacking in that it fails to consider real property as an
object capable of seizure or sale in distrain. The term distrain is not limited to personal
property alone but extends to real or immovable property.22

Akeredolu further describes distrain as one of the most powerful tax enforcement tools
available to a tax authority. Her paper thus defines distrain as power of the tax authority to
take the property of any defaulting taxpayer in order to recover tax debts. It also considers the
source of the power to distrain under PITA23 and under the Revenue Administration Law
(RAL) of Lagos State24 which gives it power to approach the High Court for an order of
distrain via motion ex parte made by a duly authorized officer of the tax authority.
18Supra note 15.

19Abimbola Akeredolu: Expository of the Dynamics of Distrain and Injunction in Revenue cases.

20New International Websters Comprehensive Dictionary 2010 Edition; op cit Abimbola Akeredolu:
Expository of the Dynamics of Distraint and Injunction in Revenue Cases.

21 Blacks Law Dictionary Eighth Edition

22 Section 104 (5)-(6) PITA supra.

23Ibid at 104 (1) (a) & (b).

24Section 40 of the Revenue Administration Law of Lagos State, 2006.

6
The paper identified the following conditions precedent before a power to distrain can arise
and be valid. They include:

i. the taxpayer must have failed to fix his assessment while the RTA on its own
volition prepares the assessment on the taxpayer and issue a demand notice to that
effect;

ii. There must be service of the demand notice to a taxpayer with the right to object
within 30 days;

iii. The court must be satisfied of the reasons by the RTA before granting the order;

iv. The goods seized must be kept for a period of 14 days and will be free for sale
where the taxpayer fails to redeem with that period among others.

Prominent to be mentioned in this work is the consideration of the question of

constitutionality of the power to distrain by the learned Senior Advocate when she stated that
the power to make laws on taxation is both conferred on the National Assembly as well as the
State House of Assembly. She asserted that section 4(3) of the Nigerian Constitution 25 and
item 59 gives the National Assembly power to legislate on tax statutes within the Exclusive
Legislative List while section 7 and item 7 of the Constitution 26 gives the power to State
Houses of Assembly to make laws on tax statutes within the concurrent legislative list which
implies that PITA and RAL derived their powers pursuant to the above constitutional
provision with a corresponding power for enforcement of tax under section 44(2) (a) of the
Constitution27. The learned writer also referred to the case of Independent Television/ Radio v
Edo State Board of Internal Revenue 28 where the Court of Appeal held that the purport of
section 44(1) of the Constitution cannot be read in isolation but the whole section will be
considered. It stated that the question of section 44(1) of the Constitution will be of no
moment in matters of tax enforcement. The Court held that it is a settled law that where a
party is given opportunity to be heard and such party fails to utilize it, such party cannot hide
under the umbrella of the fair hearing rule, he will fail.The court has therefore pronounced
that power to distrain is valid and constitutional.

The learned writer also considered injunction in relation to distrain and stated that injunction
is a court order commanding or preventing the doing or the continued of an act, She further
stress the fact that Injunctions in relation to distrain are used within the compulsory 14 days

25Supra note 5.

26Ibid

27Ibid

28(2014)LPELR-23215 (CA), VOL. 9 ALL NTC P.421

7
waiting period and that it is at this waiting period that a taxpayer should approach the court
seeking for an injunction to prevent the RTA from disposing of the said goods either because
the RTA has acted illegally or that they get their facts wrong or simply that the default
taxpayer is ready to settle off his debts by paying the assessed amount. The learned writer
further emphasized that injunction is a shield in the hands of the taxpayer against the heavy
sword of distraint in the hands of the RTA.

The learned writer concluded when she opined that power to distrain given to the RTA under
RAL and PITA is meant to create a balanced and workable system whereby the RTA is
clothed with special and potentially effective medium of enforcing payment of tax liabilities
which have become final and conclusive thereby constituting such debts as special debt
owed to the State. She therefore advised that although the power of the RTA is intended to
optimize revenue collection, fairness in tax administration must be ensured to avoid
infringing on the fundamental rights of the taxpayers but should not violate the citizens right
to protection under the Constitution.

Abiola Olateju Somorin another tax expert and practitioner in her book TEJUTAX 29defines
enforcement of payment of tax due by distrain in four ways to wit:

i. simply as a process whereby force is applied to collect the tax due by seizing the
movable properties of the debtor taxpayer and sealing the office premises thus
forcing him to pay the owed taxes;

ii. to take as a pledge property of another and keep it until he performs his obligation
or until the property is retrieved by the sheriff;

iii. a legal process which allows the inland revenue to seize a taxpayers possessions
and if necessary, sell them to settle a debt owed to the inland revenue; and

iv. upon a tenants default, a landlord may in some jurisdiction distrain upon the
tenants property generally by changing the locks and giving notice and the
landlord will then have a lien on the goods.30

The above definition is also not clear whether it includes real or immovable property of a
taxpayer as the definition only mentioned seizure of movable properties. An important aspect
of this provision is the argument by the erudite expert that distrain includes sealing of the
taxpayers office premises. The writer however, noted that distrain is an effective method of
enforcement usually deployed when all administrative procedures have failed.

29Abiola Olateju Somorin: TEJUTAX Reference Book, Nigerian Tax System General Accounting
Taxation terms, (Malthouse Press Ltd)., vol. 1, p 585-586

30Ibid

8
The writer also noted that distrain has not been effectively used in Nigeria until recently when
Federal Inland Revenue Service (FIRS) and Lagos State Internal Revenue Service (LIRS)
invoked the power. The writer in her paper enumerated some positive results of distrain
procedure viz:

1. it is faster in tax debt recovery;

2. it embarrasses high profile debtors and thus encourage voluntary compliance; and

3. it increases tax revenue and serve as deterrent to other recalcitrant taxpayers.31

Somorin in her paper further approached the topic from a comparative manner and an
historical perspective respectively when she asserted that in United Kingdom, law of distress
is used effectively for enforcing tax collection under section 61 of the Tax Management Act,
1970.32 The writer delve further into the history of distrain in Nigeria when she stated that
distrain existed in Nigeria as far back as 1962 as reported on page 82 of the Report of Tax
force on Tax Administration 1979. She argued that several legislations existed on distrain
back then and they include:

a. Eastern Nigeria Finance law, No. 5 of 1962 [section 34 (5)];

b. Income Tax (Miscellaneous Provisions) Decree, 1969 (5.5) FT Only;

c. Bendel State Edicts No. 4&5, 1972;

d. Income Tax Armed Forces & Other Persons (Special Provisions) Decree, 1972; and

e. Company Income Tax Decree, 1979 (section 61).

Somorin later examined distrain in recent times under various laws. She considered section
66 of the Company Income Tax Act33; section 33 of the Federal Inland Revenue Service
(Establishment) Act34 which all had similar provisions with that of section 104 PITA.35

31Ibid at p 585

32 Ibid at p 586

33CAP C21 LFN 2004.

34LFN 2007 CAP F as amended.

35PITA CAP P8 2004 as amended.

9
It is important to point out here that section 104 PITA36 only differs in context compared to
other laws on distrain in that it requires an order of court via motion ex parte before an order
of distrain can be granted in respect of movable properties belonging to the taxpayer. The
order is granted upon the satisfaction of the court on the grounds stated in the affidavit. It
therefore, presupposes the fact that other provisions of laws other than PITA 2004 as
amended, makes no provision for obtaining a court order before movable property can be
distrained upon.

Another important argument by Somorin is that valuable materials such as computers file
documents, laptops; diskettes etc. that will help in getting necessary information about the
taxpayer should be seized. She further advised that proper arrangement must be put in place
for transportation and storage of these materials. She equally advised the RTA to keep an
inventory of items distrained and such an inventory shall be signed by both the authorized
officer and a representative of the company or taxpayer. In my opinion and from several
experiences with taxpayers, taxpayers have always claimed that the basis of their arguments
and evidences to back up their claims is in the seized premises. More so, Lagos State Internal
Revenue Service (LIRS) does not seize goods or chattels including computers and documents
while carrying out distrain order but seals up the taxpayers premises. What therefore, LIRS
has done till date is to inform the company to take out all relevant documents or information
that will help it in defending its claims before the board before sealing is eventually carried
out.

Distrain according to Olumide Daniel 37(in line with section 104 of PITA)38 is simply one of
the other powers conferred on a tax authority to enforce the collection of tax. 39 It is important
to state here that Mohammed Bashir-Tanko40 also shared this view with regards to conditions
precedent before distrain order can be held to be valid.

For there to be distrain or for its process to be valid, certain condition precedents must be
complied with. They include:

i. the tax must be due41;

ii. enforcement must be against a taxable person;42
iii. the taxable person must have been served with an assessment43;

36Ibid at section 104 (4) supra.

37Olumide Bidemi Daniel: Distrain Under the Personal Income Tax Act: An Analysis and Evaluation
of principles and Practice, September, 2015.

38 Ibid no. 20

39 Ibid no. 45, Section 104(1)

40Mohammed Bashir-Tanko, Tax Law Enforcement: Practice and Procedure.

10
 iv. it must have become final and conclusive;44
v. the liability must have remained unpaid at the expiration of the notice period45
vi. the relevant tax authority must have authorized a distrain officer by a letter of
authority46;
vii. goods distrained may be kept for 14days before the relevant tax authority
exercises its right of distrain.47.

It could therefore, be deduced from the above thatthe system follows a systematic procedure
which in summary is as follows:

1. Assessment: This is the first stage of Tax System. It begins with the filing of annual
tax returns, which is further followed by a tax audit exercise to verify the accuracy of
the books.
2. Tax Audit: This is a process whereby the Relevant Tax Authority (RTA) commences a
thorough investigation into the books of a company for a particular year of
Assessment in order to ascertain the accuracy and correctness of records submitted to
the tax authority.
3. Objection: A taxpayer who is dissatisfied with the demand notice raised by the RTA is
expected to object to it within 30 days from the date of receipt of the final liability.
An online source, the free dictionary48 states: the word distrainin accordance with ordinary
English usage means to To seize and hold (property) to compel payment or reparation, as of
debts. It also meansto seize the property of (a person) in order to compel payment of debts;
distress.49 It could also mean to seizetheproperty of an individualandretain it until an

41 Ibid; see also Abiola Sanni: Power to Distrain under section 104 PITA Any Scope for the
Magistrate Court? What possible alternative exists? Presented at LIRS Training tagged: Tax
Simulation Feb, 2017.

42 See Section 108(1) PITA supra; 7up Bottling Co. Plc. V LSIRSB (2000)3 NWLR (pt. 650)565,
605 at paragraph B, 618, paragraph A (Court of Appeal) cited in Ibid n0. 34.

43 Ibid no. 45; Supra no. 48 at page 3

44Ibid; Mohammed Bashir-Tanko, Tax Law Enforcement: Practice and Procedure.

45 Ibid

46Mohammed Bashir-Tanko, Tax Law Enforcement: Practice and Procedure, page 3

47 Ibid

48http://www.thefreedictionary.com/distrain

49Ibid

11
obligation is performed.It is also the taking of thegoodsandchattels of a tenant by a landlord
in order to satisfy an unpaid debt.50

CHAPTER TWO

50 Ibid

12
2.00DISTRAIN GENERALLY

Tax is a compulsory yet non-penal payment imposed by the government on individuals,

families, communities, government agencies and parastatals without any form of direct
benefits. It is significant to point out that for every law to be effective, there must be some
element of force or penal measures to ensure compliance. The fear of penal punishments
leads to a certain level of compliance and serves as a deterrent to other recalcitrant taxpayers.
This position also applies to Tax laws, evasion of taxes or non-payment of taxes is seen as a
very serious offence punishable under the various laws in the country.

This chapter shall critically examine the concept of distrain in two different sense to wit: (i)
from the angle of recovering arrears of rent usually referred to as distress for rent and (ii)
from the angle of enforcing the payment of taxes.

2.01 HISTORY OF DISTRAIN

Distress and distraint dates back to feudal times as a common law remedy for a landlord
whose tenant was not properly paying the rent. The common law action allows the landlord to
seize all the movable property on the premises, whether or not it belonged to the tenant is
immaterial.51 It initially provided the landlord with a mere possession of assets but did not
allow him to use them for his own benefit or to sell them. 52 In Fahrer v Blumenthal53the court
stated that the right to distrain and sell the goods of a tenant did not exist at common law, it
was given by statute.

Although there are many modes or ways of enforcing payment of taxes in countries all over
the world, this research work will focus mainly on Distrain as a major tool in enforcing the
payment of income Tax. The topic shall discuss issues bothering on Mode of instituting
Distrain process in court; the interpretation and application of distrain process (sealing as
opposed to seizure of goods, chattels, bonds etc.)

The word Distrain as earlier on mentioned particularly from inception is often associated with
Seizure by landlord of tenants property for owing rent. It is used in relation to landlord and
tenancy relationship for enforcement of arrears of rent. This later metamorphosed into using
the system as a tool for enforcing the collection of taxes.

It is important to state here that distrain is not the only means of enforcing tax payment in
Nigeria. PITA provides for other methods of recovering tax due which is usually in the form
of debt recovery and it is mostly instituted at the High Courts. No RTA in Nigeria had at any

51www.digitalcommons.law.villanova.edu/cgi/viewcontentcgi?article assessed 22/12/16

52Ibid; See also Moretti V Zanfino, 127, Pa, super.286, 193 A. 106 (1937) cited in Abimbola
Akeredolu: Expository of the Dynamics of Distrain and Injunction in Revenue cases.

53125 Pa. Super.568, 190 A, 206 (1930), Id. at 572, 190 A. at 207.

13
point in time avert its mind to section 78 PITA54 which includes magistrate courts as one of
the competent courts that can handle tax provided it does not exceed the monetary
jurisdiction of magistrate courts.55In fact not until the era of Mr. Olushola Adekanola who
opened the eyes of the LIRS to it, LIRS had always used other modes of enforcement of its
taxes and these are always instituted at the High Courts. Distrain has however until recently
been the most effective means of enforcement of tax payment with respect to PAY AS YOU
EARN (PAYE) in Lagos State.56

Distrain is a comprehensive term that may be used in reference to any detention of Personal
Property, lawful or unlawful.57Distrain also means distrain as a verb is used to mean annex,
appropriate, assume ownership, attach, bear away, carry away, carry off, compulsorily
acquire, confiscate, deprive of, divest, garnish, hominis bona vendere, hurry off with,
impound, impress, lay hold of, levy, levy a distress, make away with, possess oneself of, pre-
empt, replevy, seize, sequester, sequestrate, take away, take into custody, take over, take
possession of.

According to another US online source 58, Distraint is the right of a landlord to take hold of
the property of a tenant which is in the premises of the property rented. Such an action is
taken when a tenant has not paid the rent or has otherwise defaulted on the lease, like causing
damages or destruction of the premises. A usual way to distrain a tenant is by changing locks
and giving notice to the tenant. The tenant may then initiate a legal action called replevin,
against a landlord to reclaim his/her goods distrained. 59A distress warrant authorizes a court
officer to distrain or seize property. Distress warrant is a writ which allows an officer to seize
a tenant's goods. The goods are seized for the tenants failure to pay rent due to the landlord.60

The above definitions considers distrain as a common law remedy available to a landlord to
recover rent from his tenant without resorting to court on one hand and on the other hand
points to the fact only court officer authorised by a distress warrant can distrain or seize

54See section 78(2) PITA supra.

55See section 28 Magistrate Courts Law of Lagos State 2009 which allows up to N 10,000,000
monetary jurisdiction for Magistrate Courts in Lagos State.

56It has attained its peak and now on diminishing returns as its efficacy is in doubts. LIRS currently
does not use distrain for enforcement but has started exploiting other means.

57 Ibid

58http://definitions.uslegal.com/d/distraint

59Ibid; see also supra no. 31

60 Ibid.

14
property. This is also the origin of the term distrain before it was adopted as a means of
enforcement in other fields such as taxation. One thing that is peculiar as a similarity to all
these definitions is the power to seize movable properties, an order of court for sale of
immovable properties and sealing up of companies.

2.1DISTRESS FOR RENT

Distress is another word for Distrain. A distress is defined to be the taking of a personal
chattel, without legal process, from the possession of the wrong doer, into the hands of the
party grieved, as a pledge for the redress of an injury, the performance of a duty or the
satisfaction of a demand.61 This particular article shall consider distress or distraint from the
perspective of recovering rent arrears by a landlord from the tenant as opposed to what
obtains under distraint for enforcement of payment of tax. Distress has been described as an
archaic remedy which has largely fallen into use. 62 Although archaic, Guthleben stated that
the remedy has remained in use in the Australian jurisdictions in which it has been retained:
South Australia and Tasmania63

2.1.1Common Law Right of Distrain

The right to distrain is a common law right and has been modified in the United Kingdom
and in Australia although not codified.64 The rule have been well defined in the case of
Abingdon Rural DistrictCouncil v O Gorman65where Lord Denning MR held that landlord is
entitled at common law to distrain on any goods or chattels that were on the premises, to
whomsoever they belonged. As soon as he seized them, he is to remove them from the
premises and keep them until the arrears were paid or the goods were replevined. He stated
further that while in pound i.e. under seizure the goods were in the custody of the law. If they
were taken by the owner or anyone else, the taker was guilty of a misdemeanor called rescous
(if taken on the way to the pound)66

61http://www.lectlaw.com/def/d184.htm accessed online on 3/4/2017.

62 Abingdon Rural District Council v O Gorman (1968)2 QB 811 at 819 Per Lord Denning MR.
cited in Guthleben, Cate_ Distress for Rent (1995) AdelLawRw9; (1995) 17 Adelaide Law Review
301.

63 In South Australia the right to distrain for rent payable under a residential tenancy agreement has
been removed by s 60 of the Residential Tenancies Act 1995 (SA). The remedy therefore is available
in non-residential tenancies only quoted in Ibid.

64Guthleben, Cate-Distress for Rent (1995) AdelLawRw9; (1995) 17 Adelaide Law Review 301.

65 Supra note 2 cited in ibid no. 64.

66Rescous- means rescue, s. 39 Landlord and Tenant Act, 1936 (SA)

15
2.1.2Difference between Distress at Common Law and Distress Prescribed By Statute.

Distress under common law are taken nomine penae, that is as a compelling payment while
distress at statute is similar to executions of judgment and are taken as satisfaction of a duty.67
Also, Distress of goods or property under common law could not be old while goods or
property distressed under statute might be sold. The only similarity that exists between both
is that both are replevisable.68

2.1.3Procedure for Levying Distress

Guthleben emphasized on the procedure that it is as set out in the Landlord and Tenant Act
1936 (SA)69 where he stated that the most significant modification of the common law is that
the Act confers power on the landlord the power to sell the goods impounded and not merely
to hold them as a security pending payment by the tenant. Distress is levied by serving a
warrant in the form set out in Schedule 1 to the Act and it must be served personally by the
landlord or anybody authorized in writing.70

2.1.4Distress made based on Kinds of Rent

Distress as a remedy to enforce payment of arrears of rent may be made generally for any
kind of rent in arrears, the detention to which if it goes beyond the payment day is an injury
to the person entitled to receive it (landlord). The rent to qualify for distrains must possess the
following characteristics: (1) must be reserved out of a corporeal hereditament; (2) must be
certain in quantity, extent and time of payment. Therefore, an agreement that the lessee pay
no rent, provided he make repairs and the value of the repairs is uncertain would not
authorize the landlord to distrain.71 For instance where the rent is a certain quantity of grain,
the landlord may distrain for so many bushels in arrear, and name the value in order that if the
goods should not be replevied or the arrears tendered, the officer may know what amount of
money is to be raised by the sale and in such case, the tenant may tender the arrears in grain. 72
According to Guthleben, for the power to distrain for rent arises, there must be

67 Ibid.

68Replevisable is from the word replevy which means to take or get back, by a writ for that
purpose (goods and chattels wrongfully taken or detained), upon giving security to try the right to
them in a suit at law and that should be determined against the plaintiff, to return the property
replevied. Accessed online at http://wordnet.princeton.edu.on 4/4/2017.

69 South Australia

70Section 14 Landlord and Tenants Act supra cited in supra note 64.

71http://www.lectlaw.com/def/d184.htm accessed online on 3/4/2017.

72 Ibid

16
 a. Landlord and tenant relationship both at the time of rent becoming due and at the time
of distress being levied;
b. Out of corporeal hereditatments (rents and tenement) and not out of incorporeal
hereditaments (tithes, easements etc.). Only rent may be distrained for and not
outgoings and other charges.73Guthleben stresses the important to state that clauses in
leases which either define such charges as rent or provides that they may be
recovered as rent by leases are not sufficient to overcome this rule.74
c. The rent distrained for must be in arrears. Landlord cannot distrain until after the
midnight of the last day on which it is payable.

It has been made clear on the question of what amount of the rent will a lessor in different
cases be entitled to make a distress, it is a laid down general rule that whatever can properly
be considered as a part of the rent may be distrained for, whatever be the particular mode in
which it is agreed to be paid.

2.1.5Who may make Distress/Distrain

According to Guthleben, he stated that ay holder of a reversion may levy a distress. A tenant
who sublets the premises may distrain against a sub-tenant. Also if the lessors are joint
tenants, any one of them may distrain for the whole of the rent due by the tenant. 75 According
to Lectlaw.com, it on its own itemizes several categories of persons who can levy distrain.

1. Sole Landlord: Where the landlord is the sole owner of the property out of which rent
is payable, then such landlord can distrain of his own right.

2. Joint Tenants: each of the tenants in a joint tenancy has an estate in every part of the
rent and as such can single-handedly distrain alone for the whole, although he must
afterwards account for with his companions for their respective shares of the rent.
However, one joint tenant cannot avow76 solely because avowry77 is upon right and the
right of rent is in all of them.
73Supra note 4 at p 303

74McLoughlin, Commercial Leases and Insolvency (Butterworths, London 1992) pp57-58, where he
suggests that such clauses could not create valid rights to distrain to the extent that they may infringe
statutory provisions imposing special requirements in respect of creditors right to take goods for
debts due cited in supra note 64.

75Lord Hailsham of St. Marylebone (ed), Halsburys Laws of England Vol. 13 (Butterworths,
London, 4thed 1975) paras (213)-(215) cited in supra note 64.

76 Avow: to declare openly, as something believed to be right; to own or acknowledge frankly; as a

man avows his principles or crimes. Accessed at http://wordnet.princeton.edu on 4/4/2017.

77Avowry is the act of the distrainer of goods, who in an action of replevin, avows and justifies the
taking in his own right accessed on 4/4/2017 at http://wordnet.princeton.edu.

17
 3. Tenants in Common: Tenants here have different titles and several estates, therefore,
distrain should be done separately each for his share unless the rent be for an entire
thing to render a horse, in which case, the thing is incapable of division, they must
join. Each tenant in common is entitled to receive from the lessee, his proportion of
the rent, therefore, when a person holding under two tenants paid the whole rent to
one of them, after receiving a notice to the contrary from the other, it was held that the
party who gave the notice might afterwards distrain.78 Tenants in common have no
privity of estate between them as to their respective shares; one may lease his part of
the land to the other rendering rent for which a distress may be made as if the land had
been demised to a stranger.79

4. Rent due for Wife: A husband may distress for rent due to his wife even if it accrue to
her in the character of executrix or administrix.80

5. Tenant by Curtesy: a tenant by curtesy has an estate of freehold in the lands of his
wife, and in contemplation of law, a reversion on all land of the wife leased for years
or lives, and may distrain at common law for all rent accruing before and after the
converture. A woman may be endowed of rent as well as of land; if a husband being a
tenant in fee make a lease for years, reserving rent, and die, his widow shall be
endowed of one-third part of reversion by metes and bounds, together with a third part
of the rent.

6. A tenant for his own life or the life of another: such a tenant has an estate of freehold
and if he makes a lease for years reserving rent, he is entitled to distrain upon the
lessee.81

7. Power of Personal Representatives to distrain: a personal representative of person in

fee, tail or life of rent-service, rent-charge, rents-seek and fee farms may distrain for
arrears upon the land charged with payment as long as the land continue in seisin 82

78 Supra note 61.

79 Ibid.

80 Executrix is a female executor appointed by a will to execute the will. An administratrix is a

female administrator granted a letter of administration of the estate of a deceased. Accessed online at
thefreedictionary.com/executrix/administratrix on 4/4/2017.

81 Ibid.

82Seisin- being in full possession and title of property accessed at the freedictionary.com/seisin on
4/4/2017. See also statute 32 Henry VIII cited in supra note 61.

18
 who ought to have paid the rent or fee farm or some person claiming under him by
purchase, gift or descent.

8. Power of Heir to distrain: The heir entitled to the reversion may also distrain for rent
in arrear which becomes due after the ancestors death; the rent does not become due
till the last minute of the natural day and if the ancestor dies between sunset and
midnight, the heir and not the executor shall have the rent.

9. Trustees: Trustees who have vested in them legal estates, as trustees of a married
woman or assignees of an insolvent may distrain in respect of their legal estates, in the
same manner as if they were beneficially interested in it.

10. Guardians: guardians may make leases of their wards lands in their own names which
will be good during the minority years of the ward and as such has power to distress
in respect of such leases as other persons granting leases in their own rights.83

11. Corporations: Corporations are expected by law to enter into leases with their
common seal. Although, any lease entered into by a corporation without the common
seal of the corporation where the tenant holds under it and pays rent to the bailiff or
agent of the corporation and will be sufficient to o constitute a tenancy at least on a
year to year basis and will no doubt entitle the corporation to distrain for rent.84

2.1.6Goods Exempted or Privileged from Distrain

Generally goods found upon the premises demised to a tenant are generally liable to be
distrained by a landlord for rent whether such goods belongs to the tenant or other persons. 85
It has been held for instance that a gentlemans chariot which stood in a coach-house
belonging to a common livery stable keeper is distrainable by the landlord for the rent due to
him by the livery stable keeper for the coach-house. Certain goods are however exempted
from distrain. According to Guthleben, he stated that both common law and the
Act86Guthleben itemized the following as absolutely privileged from distress namely:

i. Goods of the Crown;

ii. Fixtures;
iii. Perishable articles, including crops;
iv. Money which was not in a receptacle; and
v. Animals.

83 Supra note 61.

84 Ibid.

85 Ibid, see also supra note 64.

86S. 31 Landlord and Tenant Act, 1936 (SA)

19
Guthleben further stated that the Act has removed or reduced some of these privileges. 87 The
exemptions he stated can be classified as being in the nature of trade exemptions and the
necessities of life. Statute has also whittled down the common law power of distress.
According to Guthleben he stated that certain classes of goods may be protected from distress
or sale. The most significant of such goods in practice is the stranger to the lease including an
under-tenant or lodger of the tenant. Procedure however, provides for a procedure to apply to
the landlord for a release of the goods in his custody.88

The exemptions according to lectlaw.com include the followings:

a. Goods of a person who has interest: certain goods of persons with interest in the land
jointly with the distrainer like that of a joint tenant cannot be distrained.
b. Goods of the executors and administrators or assignee of an insolvent in Pennsylvania
law cannot be distrained for more than one year.
c. Goods of a former lawful tenant on the land cannot be distrained. For instance a
tenant at will if quiting on the notice of the landlord is entitled to emblements or
growing crops and even after they are reaped if they remain on the land for the
purpose of husbandry, they cannot be distrained for rent due by the second tenant.
They are equally protected in the hands of the vendee (purchaser.)
d. Goods where no man can have an absolute and valuable property. E.g. cats, dogs,
rabbits and all natural domestic animals cannot be distrained. 89 However, where a deer
of wild nature are kept in a private enclosure for the purpose of sale or profit, this it
was argued has changed their nature by reducing them to a kind of stock or
merchandise that they may be distrained for rent.90
e. Such things that cannot be restored to the owner in the original state in which they
were taken. E.g. milk, fruit etc. cannot be distrained.
f. Things affixed to or annexed to the freehold property. E.g. furnaces, windows, doors
etc. cannot be distrained because they are not personal chattels but belong to reality.
This extends to things that are essentially a part of the freehold.
g. Goods in cases where the proprietor is either compelled from the necessity to place
goods upon the land simply because he has no option, hence the goods of a traveler in
an inn are exempt from distress or where he does so for commercial purposes because
the interest of the community require that commerce should be encouraged and
adventurers will not engage in speculations if the property embarked is to be made
liable for the payment of debts they never contacted.
h. Goods taken in execution cannot be distrained. However the law in some states gives
the landlord the right to claim payment out of the proceeds of an execution for rent,

87Ibid

88S. 19 and 22 of the Landlord and Tenant Act supra note 85.

89 Ibid

90 Ibid

20
 not exceeding one year and he is entitled to payment up to the day of seizure though it
be in the middle of a quarter but he is not entitled to the day of sale.

Other forms of distress referred to as conditional exemptions include:

1. Beasts of the plough which are exempt if there is sufficient distress besides on the
land where the rent issues.
2. Implements of trade; e.g. a loom in actual use; and there is a sufficient distress
besides;
3. Other things in actual use; e.g. a horse on which a person is riding, an exe in the
hands of a person cutting wood and the like.

2.1.7Time when Distrain can be made

Distrain for rent cannot be made until the rent is due by the terms of the lease. It can also only
be made during the day time but not otherwise. At common law, distress cannot be made after
the expiration of the lease while in Philadelphia the landlord may under certain circumstances
apportion his rent and distrain before it becomes due. 91 Section 14 of the Act stated that the
distrain process must be served personally by the landlord or by a person authorized by the
landlord. Guthleben92 stated that the goods upon being seized must be removed and kept in a
secure and discrete part of the premises. 93 A landlord may agree with the tenant that the
goods are to be the subject of a walking distress whereby the goods are impounded but
remain on the demised premises with the tenant still in occupation and free to use and deal in
the goods.94 The Act also confers the power to sell goods not replevied by the tenant within
five days of the distress.

2.1.8Where Distress could be made

Distress could be made on the land or off the land.

1. Distress on the land: It is confined to the land where the rent is due. Where there are
two pieces of land let by two separate demises, although contained in one lease, joint
distress cannot be done for them. Where however, the lands lying in different counties
are let together by one demise at one rent and it does not appear that the lands are
separate from each other, one distress may be made for the whole rent. Where rent is
charged on land and afterwards it was held by several tenants, the grantee or landlord
may distrain for the whole upon the land of any of them. Where also there is a house
on the land, distress may be made in the house; where the window or outer door be

91 Ibid

92Ibid

93s. 32 of the Act supra.

94Supra note 4 at p 306-307.

21
 opened distress may be taken out of it. More so, where an outer door is opened, an
inner door may be broken open for the purpose of taking a distress.95

2. Distress Off the Land: By Pennsylvania statute96 it is enacted that if any tenant for life,
years or will or otherwise shall fraudulently or clandestinely convey his goods off the
premises to prevent the landlord from distraining the same, such person or any person
by him lawfully authorized may within thirty days after such conveyance seize it
wherever they shall be found and dispose of them in such a manner as if they had
been distrained on the premises. There is a proviso that the landlord shall not distrain
any goods which have been previously sold, bona fide and for a valuable
consideration.

2.1.9Who may make Distress

A distress for rent may be made either by the person to whom it is due or by a constable, or
bailiff, or other officer properly authorised by him.

Where the distress is made by a constable, it is necessary that he should be properly

authorized to make it97 or vide a warrant of distress as it is properly called but a subsequent
assent and recognition given by the party for whose use the distress has been made is
sufficient. When the constable is provided with the requisite authority to make a distress, he,
may distrain by seizing the tenant's goods, or some of them in the name of the whole, and
declaring that he takes them as a distress for the sum expressed in the warrant to be due by
the tenant to the landlord, and that he takes them by virtue of the said warrant; which warrant
he ought, if required, to show.

Also, when making the distress it ought to be made for the whole rent; but if goods cannot be
found at the time, sufficient to satisfy the rent, or the party mistake the value of the thing
distrained, he may make a second distress.As soon as a distress is made, an inventory of the
goods distrained should be made, and a copy of it delivered to the tenant, together with a
notice of taking such distress, with the cause for taking it. The distrainor may leave or
impound the distress on the premises for the five days mentioned in the act, but becomes a
trespasser after that time. In the same manner, before the goods are sold they must be
appraised by two reputable free-holders, who shall take an oath or affirmation to be
administered by the sheriff, under-sheriff or coroner, in the words mentioned in the act. The
next stage is to give six days public notice of the time and place for sale of the things
distrained after which if they have not been replevied, they may be sold by the proper officer
who may apply the proceeds of the payment and satisfaction of the rent.98

95Ibid at p 4.

96 Statute of March 1772 cited in supra note 61

97 The landlord must have given him a written authority

22
2.2 DISTRAIN FOR TAX PURPOSES
Distrain has been a term used in Nigeria many years ago, infact its usage and provisions in
our laws dates back to 1962 in the Eastern Nigeria, Eastern Nigeria Finance Law, No. 5 of
1962 [section 34 (5)];Income Tax (Miscellaneous Provisions) Decree, 1969 (5.5) FT Only; in
Bendel State Edicts No. 4&5, 1972;Income Tax Armed Forces & Other Persons (Special
Provisions) Decree, 1972; andCompany Income Tax Decree, 1979 (section 61).99 Although
distrain has just recently gained momentum especially in Lagos State and some few states in
Nigeria, its already at the diminishing returns stage in Lagos as it is been suspended
indefinitely in the state.

Somorin100 in one of her definitions considered in chapter one under the literature review
defines distrain as simply as a process whereby force is applied to collect the tax due by
seizing the movable properties of the debtor taxpayer and sealing the office premises thus
forcing him to pay the owed taxes. She also defines it as a legal process which allows the
Inland Revenue to seize a taxpayers possessions and if necessary, sell them to settle a debt
owed to the Inland Revenue. These definitions are in the right direction with respect to the
enforcement and collection of tax from the taxpayer. A major point to note is the fact that in
Nigeria, the Constitution being the grundnorm makes provision for the civic responsibility of
all citizens101 and for compulsory acquisition where a taxpayer defaults in the fulfillment of
this responsibility.102 Aside from the constitution, other statutory provisions have been
enacted on the regulation of taxation in Nigeria. They include Personal Income Tax Act,
Company Income Tax Act and Petroleum Profit Tax Act etc.

2.3LEGAL FRAMEWORK FOR THE EXERCISE OF THE POWER OF DISTRAIN

The Constitution103 is the grundnorm of all laws in Nigeria. Section 4(3) CFRN 104 gives
exclusive power to the National Assembly to legislate on matters of taxation in Nigeria. Item
59 of the Exclusive Legislative List, itemize the various tax matters upon which the National
Assembly can legislate. Section 4(7) and item 7 CFRN 105 gives the House of Assembly power
to legislate on tax related matters for not contained in the exclusive legislative list.

98 Supra note 61.

99Supra note 29.

100Ibid

101Section 24 (f) CFRN 1999 supra

102Ibid at Section 44(1)-(3).

103 Part 1 II Schedule, CFRN 1999 supra.

104 Ibid.

23
The enforcement provision of Distrain provided for in section 104 PITA106 also has its
backing or source from the Constitution.107 Section 44(2) (a) CFRN108 provides:

1 No moveable property or any interest in an immovable property shall be taken possession

of compulsorily and no right over or interest in any such property shall be acquired
compulsorily in any part of Nigeria except in the manner and for the purposes prescribed
by law that, among other things

a Requires the prompt payment of compensation therefore; and

b gives to any person claiming such compensation a right of access for the determination of
his interest in the property and the amount of compensation to a court of law or tribunal
or body having jurisdiction in that part of Nigeria.

(2) Nothing in subsection (1) of this section shall be construed as affecting any general law.

(a)for the imposition or enforcement of any tax, rate or duty;

The above simply reveals that except in the exercise and or imposition of any tax, rate or
duty, property cannot be taken possession of compulsorily. The constitution therefore,
empowers the RTA to enforce the payment of taxes vide the exercise of distrain.

2.4DISTRAIN AS A TAX ENFORCEMENT TOOL THROUGH CASE LAWS

The courts have made several pronouncements on distrain as a tool for enforcement of taxes.
Some of these case laws would be discussed below.

In Hall v Marshall109the court defined distress as the taking of personal property by way of
pledge, to enforce the performance of something due from the party distrained upon. This
definition is general and considers distrain as seizure of property to compel the doing of an
act.

105 Ibid

1062004 as amended

107Ibid no. 46

108 CFRN,1999, supra.

109 145 Or. 221; p 2d 193

24
In the case of First Bank of Nigeria v Mr. Olaleye Soji & Anor.110 The court held that the
sealing of the plaintiff premises by the consultants employed by the 2 nd defendant is in
harmony with the provisions of s. 96 (1) PITA decree no. 104 of 1993 provided the measure
taken to recover the assessed sum is not unreasonable in the circumstances of the case. This
provision is in line with the provision of section 104 PITA 2004 as amended on the power of
a taxpayer to distrain.

InIndependent Television/Radio v Edo State Board of Internal Revenue111the Court of

Appealextensively dealt with the subject matter of power to distrain as provided under
section 104 PITA112. It gave pronouncement of several issues raised in the matter including
but not limited to:

i on the procedure for obtaining an exparte order under section 104 of PITA as amended
when the court held that though rules of court are meant to be followed, in cases where
an Act of the National Assembly provides for a special procedure to be adopted by the
courts in doing a thing, the Act of the national Assembly shall supersede the provisions
of the High Court Rules.113

ii That the enforcement of PITA under section 104 is not contrary to the constitutional
right to own properties.114

iii That the ex parte provisions in section 104 PITA does not deprive a defaulting taxpayer
the right to fair hearing.115

iv That revenue statutes should be interpreted liberally in favour of deriving revenue by

government in public interest.116

v That in interpreting the statutes and the constitution the interpreter must read the whole
provisions and not a section or subsection.

2.5PERSONAL INCOME TAX ACT

110 (1996) FHCLR 426 at 433 FHC

111 (2014) LPELR-23215 (CA), VOL. 9 ALL NTC P.421

112 2004 as amended supra.

113 See ITV v Edo supra note 110 at pp 431-432

114Ibid at p 455 lines 19-29.

115 Ibid at lines 31-34

116Ibid at p. 441 lines 27-30.

25
The Personal Income Tax Act117 is the major enactment of statute on the subject matter of
distrains with respect to enforcing the payment of taxes. Section 104 PITA118 makes provision
for distrain as an enforcement tool in the hands of the RTA in collecting tax due to the state.
The section119 gave certain condition precedents which must be fulfilled before the RTA can
commence distrain. The conditions have been summarized in the previous chapter and
reproduced as follows:

i the tax must be due120;

ii enforcement must be against a taxable person;121
iii the taxable person must have been served with an assessment122;
iv it must have become final and conclusive;123
v the liability must have remained unpaid at the expiration of the notice period124
vi the relevant tax authority must have authorized a distrain officer by a letter of
authority125;
vii goodsdistrained may be kept for 14days before the relevant tax authority exercises
its right of distrain.126.

Having highlighted the conditions precedent, it is therefore, necessary to discuss below some
of these conditions for a better understanding of the subject matter.

2.5.1ASSESSMENT

117Ibid

118Ibid

119S. 104 PITA supra

120 Ibid; see also Abiola Sanni: Power to Distrain under section 104 PITA Any Scope for the
Magistrate Court? What possible alternative exists? Presented at LIRS Training tagged: Tax
Simulation Feb, 2017.

121 See Section 108(1) PITA supra; 7up Bottling Co. Plc. V LSIRSB (2000)3 NWLR (pt. 650)565,
605 at paragraph B, 618, paragraph A (Court of Appeal) cited in Ibid n0. 34.

122 Ibid no. 45; Supra no. 48 at page 3

123Ibid; Mohammed Bashir-Tanko, Tax Law Enforcement: Practice and Procedure.

124 Ibid

125Mohammed Bashir-Tanko, Tax Law Enforcement: Practice and Procedure, page 3

126 Ibid

26
Tax Assessment is the whole process of measurement of a taxable persons tax obligation and
putting him/her on notice in respect thereof. Therefore, the calculation of the amount of tax
payable by individuals on the basis of the tax law is called Tax Assessment. The modus-
operandi for achieving this depends on the provisions of the tax laws of the system
concerned, which involves the below:

1 Ascertaining the base or the assessable profit.

2 Granting reliefs and allowances as allowed by tax laws.

3 Applying the relevant tax rates.

Depending on the provisions of the relevant laws, it may involve the issuance or not, of the
Notice of assessment and serving same on the Taxpayer.

Where a tax return has been filled and submitted by the taxpayer, Relevant Tax Authority
(SIRS) may:

1 Accept the tax return and make an assessment accordingly, or

2 In the absence of a satisfactory return of form A or written statements; or where the

taxpayer refused to submit his completed form A or written statement within the
specified period of 90 days; the RTA may raise an assessment on the Taxpayer based
on his (RTA) best of judgment (B.O.J)- i.e. estimated assessment.

S. 30 PITA127 on Apportionment of Income states that in the case of a trade, business,

profession or vocation, it is necessary in order to arrive at the income of any year of
assessment or other period to allocate or apportion to specific periods the income or
loss of any period for which accounts have been made up.

However, in the case of employment income the basis period is the year in which that income
is earned (actual year or current year). This means that for an employee who is chargeable to
tax in the year 2013, his income for assessment is that actual earned income between 1 st
January and 31st December 2013.

Special rules however, apply in the case of a new business (commencement), a business that
has ceased operation (cessation), and a business whose accounting date has changed (change
inaccounting date).

2.6CLASSESS OF ASSESSMENTS

There are two broad classifications of assessment:

A Official Assessment (Revenue or Government or Administrative Assessment);

B Self-Assessment.

127PITA 2004 as amended

27
Other relevant areas of importance to this project work include the under listed.

2.6.1 Service of Notice of Assessment

The law requires the RTA to effect service of a Demand Notice or Notice of Assessment on a
taxpayer for the relevant year of assessment via registered post, courier service or electronic
mail.128 The 2004 Act129 provides for the service of Notice on taxpayer via registered post.
The amendment Act130 provided for additional means of service which includes electronic
mail and courier services. Thus, a company is served in any of the methods mentioned above.
The Notice contains the period within which a taxpayer is expected to object and or state his
grounds of appeal.

2.6.2 Best Of Judgment

Where an individual being a self-employed or even a company who or which fails to

complete his income return form (Tax Form A) or fails to provide any other information
required of him will be assessed in a sum estimated to be his income. The assessment will be
made to the best of judgment (BOJ)of the Relevant Tax Authority and it will be based on
evidence held and local knowledge regarding the taxpayer.131

2.6.3 Objection and Appeal

The taxpayer upon receipt of the Demand Notice or Notice of Assessment is expected by law
to object to same within do days of the receipt of the notice where it disagrees and or disputes
with the assessment for review.132 The objection is done vide a notice of objection in writing,
to review and revise the assessment, and the application shall state precisely the grounds of
objection to the assessment.133

Upon receipt of the notice of objection, the RTA may require the taxpayer to furnish certain
documents to buttress his claim and or summon anyone to appear with a view to giving
information that is material to the determination of the objection.134 Where RTA deems it fit

128 Section 57 PITA supra

129Ibid

130Ibid.

131OrienruIgho: Tax Lecture Note for Lagos State Internal Revenue Service Training School staff
members, 2014

132 Section 58(1) PITA 2004 as amended.

133 Ibid.

28
and is satisfied that the assessment is meritorious, a revised assessment and same will be
communicated to the taxpayer.135

2.6.4 Notice of Refusal to Amend (Nora)

Where however, the RTA disagrees with the objection on the ground that it lacks merit, it
shall send a Notice of refusal to amend (NORA) to the taxpayer intimating it of its refusal to
amend and stating reasons for so doing.136

2.6.5 Revised /Amended Liability

The Act137 allows and gives the RTA power to amend and or revise liability where the
objection is meritorious. An amended and or revised liability is issued where, amended where
basis is meritorious and revised upwards where additional evidences are found against the
taxpayer.

2.7 APPEAL

Appeal can either be of two cases. The old Act provides for A Body of Appeal
Commissioners138 as a body where aggrieved taxpayers can appeal to for redress. However,
this section was substituted with a new provision139 which is in line with the FIRSEA140 which
established a Tax Appeal Tribunal (TAT) which hears all matters of disputes between the
taxpayer and the RTA.

Where this option fails, an aggrieved taxpayer is at liberty to appeal to the High Court of the
Relevant Internal revenue service for a redress. An appeal must be made within 30 days of
the receipt of NORA on the taxpayer by the RTA. The Notice of appeal must be in writing
and must state precisely the grounds of appeal, amount involved and the prayers sought by
the taxpayer.

134 Section 58(2) PITA 2004 as amended.

135Ibid at section 58(3).

136 Ibid.

137 PITA 2004 as amended

138 Section 60 PITA 2004.

139 Section 60 PITA 2004 as amended

140 Section 59 FIRSEA

29
Other sources of power of PITA includes Operations of Pay As You Earn(PAYE) Regulations
2002 and the Personal Income Tax (Rates, etc., of Tax Deducted at Source (Withholding
Tax)) Regulations, 1997 (PITA WHT Regulations)

It should be noted that PITA141 makes provision for several modes of enforcing the payment
of taxes. In fact, not until the engagement of Mr. OlusolaAdekanola as the External Tax
Consultant of LIRS that distrain method was first taken cognizance of. LIRS and other SIRS
had been applying the method of debt recovery at the civil jurisdiction of the High Court. A
major provision which has never been used is the provision of section 78 of PITA142which
gives civil jurisdiction to the magistrate courts to preside over tax due from taxpayers. Total
focus has been put on distrain which has overburdened its effectiveness thus at the state of
diminishing returns.
The constitutionality of distrain in tax enforcement have been very well dealt with in this
paper with the conclusion that it is legal, constitutional and not against the principle of fair
hearing. The case of Independent Television/ Radio v Edo State Board of Internal
Revenue143has further laid to rest the issue of illegality or unconstitutionality of the distrain
process in Nigeria when the Court of Appeal held that the purport of section 44(1) of the
Constitution cannot be read in isolation but the whole section will be considered. It stated that
the question of section 44(1) of the Constitution will be of no moment in matters of tax
enforcement. The process of distrain is no doubt faster in debt recover; increases tax revenue,
makes for voluntary compliance. It is important to note that distrain is also is used effectively
for enforcing tax collection in other jurisdictions other than Nigeria.

2.8RELEVANT PROVISIONS RELATING TO WARRANT OF DISTRAIN UNDER

COMPANY INCOME TAX ACT AND FEDERAL INLAND REVENUE SERVICE
(ESTABLISHMENT) ACT 2007 AND OTHER LAWS.

CITA and FIRSEA have similar provisions with regards to enforcement via Distrain. The
warrant and authority to levy warrant of distrain is to be signed by the Chairman of the
Federal Board of Inland Revenue and executed by the officers of the Board. 144 The Act does
not state that the Chairman145 shall be a judicial officer nor required to practice as a legal
practitioner and as such conflicts with the constitutional provision of fair hearing as enshrined

141Supra note 49

142Ibid

143(2014)LPELR-23215 (CA), VOL. 9 ALL NTC P.421

144See section 33 Federal Inland Revenue Service (Establishment) Act and 66 Company Income Tax
Act CAP C21, 2004 respectively.

145S.3(2)(a)FIRSE ACT, Supra.

30
in the Constitution of Nigeria.146Of great significance is the fact these laws have a similarity
with respect to their provision on power to distrain immovable property. The various Acts
provides that an order of court must be obtained before the sale of an immovable property.
This major issue necessitated the amendment of PITA in 2011 to provide for an application to
the Court for an order to distrain a taxpayer for failure to pay taxes. 147 It is also to be noted
that the provisions of section 66 of the CITA and section 33 of the FIRSEA 2007 is the same
in terms of content with the provisions of PITA 2004 as amended but only differs in terms of
obtaining a court order through an ex parte application before the power to distrain can be
exercised on a taxpayer.148

Section 16 of the Casino Tax 149 also makes provision for the power to distrain where the
licensee neglects or refuses to pay the sum charged upon demand notice. Subsection three of
the Act150 provides that distrain shall be done by any inspector duly authorized by a warrant
for that purpose to break open in the daytime any premises calling to his assistance any
constable and any constable called shall assist the inspector in the execution of the warrant.

2.9 PROCESS OF DISTRAIN UNDER PITA

Where a taxpayer has been served with a notice of assessment and the taxpayer fails to object
within the time stipulated by law or where a NORA has been served by a taxpayer on the
taxpayer and he neither appeal or pay the said liability, the RTA proceeds after the expiration
of the relevant notice to obtain a warrant of distrain against the taxpayer. The procedure
adopted varies depending on the SIRS and its policies. Generally however, the following
obtains:

i An ex-parte application filed and praying the State High Court for an Order to
distrain upon the goods, chattels, bonds etc of the taxpayer and or upon the
premises of the taxpayer where he is the owner of the premises.151
ii The application is fixed on a certain date and moved accordingly in the absence of
the taxpayer, the application being an ex-parte.
iii Upon granting the prayer, the respective IRS obtains the order and ensures the
order is executed within 7 days and or 14 days where an extension is applied for in
accordance with the provisions of the law.152

146Supra note 5.

147Supra note 73..

148 Section 104(4) PITA 2004 as amended.

149 1965 LFN

150 Section 16 (3) Casino Tax Act LFN 1965

151 See Section 104 PITA as amended.

31
 iv The order is served on the taxpayer on the day the order is to be executed and the
goods, bonds and or chattels are accordingly distrained or the premises itself
distrained upon.
v The taxpayer is expected to pay the cost of distrain and the liability owed before
its good are returned or sold.

2.10WHAT MAY BE DISTRAINED FOR TAXES

On the question of what may be distrained, although PITA did not categorically state what is
to be distrained, it made provisions fordistrain on chattels, bonds, securities, etc. In practice,
distrain has been levied on both perishable and imperishable goods. For instance, distrain has
been levied on a food store, shops. These shops and stores including hotels were sealed with
foods just cooked, some of which got spoilt before it was replevied. However, on the distrain
of immovable properties; the provision is clear that a court order must be obtained before sale
of such properties can be carried out.

2.11 WHEN DISTRAINED MAY BE MADE FOR TAXES

By the virtue of the Rules of Court, the doing of any Act, service of originating processes,
execution of judgment etc. is done between the hours of 6am in the morning and 6pm in the
evening.153

2.12COMPARATIVE ANALYSIS OF DISTRAIN PROCESS IN OTHER

JURISDICITION (INTERNATIONAL PERSPECTIVE).

2.13 DISTRAIN PROCESS IN UNITED KINGDOM

2.13.1 Distrain in the United Kingdom

Distraint or distress is the seizure of someones property in order to obtain rent or other
money owed, especially in common law countries. 154 As earlier defined, it is also a process
whereby the distrainor (person who distrains) traditionally without prior court approval,
seizes the personal property of another located upon the distrainors land in satisfaction of a
claim as a pledge for performance of duty or in reparation of an injury. 155Distrain as a method
of enforcing recovery of tax is not peculiar to Nigeria in the past until the 20th century.

152Order 39 (3) High Court of Lagos State (Civil Procedure) Rules, 2012.

153 See Order 7 Rule 5 of the High Court of Lagos State (Civil Procedure) Rules, 2012

154Oxford Advanced Dictionary

155Steven H. Gifis, Barrons Law Dictionary, p.139 (2d ed. 1984)

32
HMRC are known to use this method of debt recovery after several failed attempts have been
made to recoup tax and National Insurance liabilities. A visit from an HRMC Enforcement
Officer is unlikely to be a surprise, therefore, if your company has received correspondence
from them with regard to corporation Tax, VAT or PAYE debts.156

With regards to enforcement of distrain, any creditor adopting this model of enforcement
must obtain a court Order. The landlords and the HRMC are the only two exempted from
obtaining a court order before carrying out a distrain exercise.157 This was also the position in
Nigeria under PITA 2004 where the LIRS without a court order carries out distrain exercise
on companies in debt. This it does by a letter of authority signed by the Chairman of LIRS
authorizing the named officer to levy such execution. The position has however changed
under the (Personal Income Tax Act) PITA158 where a court order is now mandatory before
the RTA can levy warrant of distrain on companies.

Time Limits

According to Limitation Act1980, s.37, there is no time limit before which HMRC must
pursue a debt for tax or interest once the assessment or demand has been issued (although
ss.9 and 24 of the Act) do apply for National Insurance liabilities.159

2.13.2Notice Before Distrain

A notice pending enforcement action must first be served on the taxpayer company by mail,
fax, and email or in person by an HMRC field officer. This notice gives 7 days in which to
pay the debt in full or to make alternative arrangements such as a time to by instalment
plan.160In some other jurisdiction the notice gives 14 days notice to pay and once issued, it is
not possible to agree a TTP arrangement. Issuing the notice effectively blocks taxpayers from

156http://www.BegbiesTraynor/articles/insolvency/Distraint and notice of Enforcement, assessed on

27/2/17.

157Ibid

158 See section 104 PITA 2004 as amended

159Ibid

160HMRCs powers to collect tax debts assessed on 27/2/17.

33
removing or selling their goods until the tax is paid.161In Nigeria, there are charges for cost of
distrain. It is at a constant price of N250, 000 in the past but the price varies now. It could be
lesser but does not exceed the amount . This only provides more time to pay but not to alter
162

the amount owed.163

2.13.3Enforcement by an HMRC Officer or a Bailiff

The procedure is that goods are held for a given amount of time and if the rent is not paid,
they may be sold. The actual seizure may be carried out by the landlord (for tenancy matters),
an officer of the government, a bailiff or sheriff officer.164Where forced entry is not allowed,
the HMRC distraint officer, can apply for a break open warrant under section 61(2) of the
Taxes Management Act, 1970. The section permits entry to the debtors premises by the
HMRC distraint officer. Any additional cost incurred by the warrant officer will be added to
the debt to be paid by the debtor during distraint. 165It is to be noted that in the enforcement
process, where negotiation fails or taxpayer does not succeed in extending the terms for
making payments, the HRMC Officer or a bailiff appointed by the HRMC will return to take
control of goods via a Controlled Goods Agreement166.

Seizure of goods under the Controlled Goods Agreement previously known as Walking
Possession Agreement is a process whereby the taxpayer is asked to sign a Controlled Goods
Agreement, if the taxpayer signs, he is given a further 7 days period to pay, otherwise the

161Ibid. Part 3 of the Tribunals, Courts and enforcement Act 2007 now allows a charge for this
service. HMRC charges 75 for issuance of notice.

162See section 104 PITA 2004 as amended.

163Ibid

164www.revolvy.com assessed 01/03/17.

165Ibid

166This is an agreement process in which the HRMC lists ot goods for seizure from the company of
the taxpayer.

34
goods listed will be seized for sale at public auction.167 Where the taxpayer however, refuses
to sign, the HRMC officer of bailiff may arrange for the immediate removal of goods. It is
significant to point out that it is against the law for directors to remove any assets or goods
listed on the Agreement.

In the United Kingdom where our common law and statutory provisions derive from in terms
of formal protection of property rights, tax may be recovered by distrain, or by recovery with
costs in the High Court as a debt due to the Crown.168

In Halsburys Laws of England169, it was noted that:

If a person neglects or refuses to pay the sum charged, upon demand made
by the collector of taxes, the collector may distrain upon the goods and
chattels of the person charged.

The power of the Crown in United Kingdom has been held in terms of enforcement to extend
to goods and properties of third parties. In the English case of MacGregor v. Clamp &Sons170,
the plaintiff claimed damages for the wrongful distress of her piano in respect of a house
occupied by the husband of the plaintiff who refused to pay his taxes upon demand by the
collector. Lush J. underscores the importance of distress when he held that:

The common law was always more indulgent to a tenant, as between him and
his landlord, than to a taxpayer, as between him and the Crown. They both had
power to distrain, but this limit was put on the power of the landlord, that the
tenants implements of trade were exempt from distress. There was no such
limit in the case of a distress by the Crown for taxes.

167Ibid

168See Ade Ipaye: Independent Television-Radio v Edo State Board of Internal Revenue Service
supra:

1694th Edition (Reissue) Vol. 32(2), page 1815 cited in Ade Ipaye supra.

170(1914) 1 KB 288 cited in Ade Ipaye supra.

35
Reforms in the United Kingdom this is based on the fact that its usemay result in violations of
human rights such as Article 8 of the European Convention on human Rights, the right to
respect for private life.171

In the United Kingdom, there have been proposals to reform the remedy of distraint. Lord
Chancellors Department (now Ministry of Justice) proposes abolition of distrain 172 for
residential leases, but retaining it for commercial property subject to certain safeguards to
ensure compliance with the Human Rights Act, 1998.173

2.14Distrain in the United States

Distraint was adopted into the United States common law from England but has recently been
criticized as a possible violation of due process rights under the fourteenth amendment. 174The
position in the United States, being a continent operating a federal system similar to that of
Nigeria with common law origins, is not dissimilar to what is obtainable in the United
Kingdom and Nigeria. In the United States, distrain typically involves the seizure of goods
belonging to the tenant by the landlord to sell the goods for the payment of the rent. In the
past, distress was often carried out without court approval. Today, some kind of court action
is usually required, the main exception being certain tax authorities. The Internal Revenue
Service usually retains the legal power to levy assets (by either seizure or distrain) without a
court order. See the case of United States v. Rodgers175

The Internal Revenue Service of United States administratively enforces the payment of taxes
using power to levy and sell property of the taxpayer.176 A levy is described as a summary

171Fuller v Happy Shopper Markets Ltd (2001) All ER.

172Law Commission and the Scottish Law Commission (March 2010) GROUP 3- DISTRESS
Statute Law Repeals: Consultation Paper Civil and Criminal Justice (PDF). United Kingdom: Law
Commission, pp.12-13. Retrieved 14/10/14 cited in www.wikipedia, the free encyclopedia/distraint.

173Ibid.

174Korngold G. Can distraint stand up as a Landlords Remedy? 5 Real Est. L.J. 242 (1977) cited in
www.wikipedia, the free encyclopedia.

175 461 U.S. 677, 103 S. Ct. 2132, 83-1 U.S. Tax Cas. (CCH) paragr.9374 (1983) (dicta) and Brian
v. Gugin, 853 F. Supp. 358, 94-1 U.S. Tax Cas.(CCH) para.50,278 (D. Idaho 1994).

36
self-help extra-judicial remedy used to compel the payment of tax lien. 177 See the Case of
United States v National Bank of Commerce178

There are conditions precedents that must be met before the Internal Revenue Service (IRS)
may levy distrain under the Internal Revenue Code otherwise referred to as the Code. There
are certain restrictions that limit the timing of a levy. They include:

1. Investigation of the status of the property;

2. Notice and demand;
3. Notice of intention to levy;
4. Collection due process (CDP) rights; and
5. Additional restrictions set forth in IRC.179

2.14.1Notice and Demand

The service must give the taxpayer a notice stating the amount of the tax liability and
demanding payment of it as soon as practicable, but within 60 days after assessment of the
tax.180

The notice and demand of the assessed tax is necessary prior to levy under IRC s. 6331(a)
and is also a prerequisite to the creation of the federal tax lien under IRC section 6321. The
failure to give notice however, does not invalidate the notice. 181 A late notice and demand
given more than 60 days after assessment is a valid notice and demand for purposes of levy
under IRC section 6331(a) and the creation of the federal tax lien under IRC section 6221.

An immediate payment of the tax is normally not demanded unless delay would jeopardize
collection.182 A notice and demand for immediate payment should also be made when the
taxpayers taxable period is terminated pursuant to IRC section 6851 before the expiration of
the taxable period.

176 https://www.irs.gov/irs/part5/irm/part5/irm_05-017-003

177 Ibid

178 472 U.S. 713 (1985)

179 Section 6331 U.S IRC

180 Section 6303(a) IRC.

181 Treasury Registration section 301.6303-1(a)

182See Bremson v United States, 459 F. Supp. 128 (W.D. Mo. 1978) cited in
https://www.irs.gov/irs/part5/irm/part5/irm_05-017-003

37
2.14.2Service of Notice

Notice and demand need not be served personally on the taxpayer to make the notice valid. It
may also, be left at the dwelling or usual place of business of the taxpayer or mailed to
his/her last known address. Where doubt exists as to the dwelling, place of business or last
known address, the notice should be delivered or mailed to all of the available addresses. 183 In
Nigeria, the position is similar but different n the sense that demand notices are served on the
employers company and not dwelling place. The service on dwelling place can only occur in
the case of a high networth individual.184

2.14.3Part Payment

Payment of only a portion of the tax after notice and demand represents neglect or refusal to
pay.185 A levy made before the expiration of the 10-day period after notice and demand, as
well as a levy made before notice and demand, is invalid. 186 Also a levy for tax liability where
no notice and demand was made is invalid. The notification for a proposed assessment notice
does not eliminate the need for notice and demand for payment of the tax once assessment is
made.187

2.14.4Notice of Intent to Levy

Unlike in Nigeria where the only notice served on the taxpayer is the demand notice or notice
of assessment which is then followed by a letter of intention to levy warrant of distrain 188.
Here the Service must provide a taxpayer with a 30-day notice of intent to levy. 189 This is a
subsequent notice to pay up after the service of the notice and demand. 190The notice as earlier
mentioned must be given in person, left at the taxpayers dwelling or usual place of business,
or sent by certified or registered mail to the taxpayers last known address.

183 https://www.irs.gov/irs/part5/irm/part5/irm_05-017-003

184Section 57 PITA supra.

185 See United States v Wintner, 200 F. Supp. 157 (N.D Ohio 1961), affd per curiam, 312 F.2d 749
revd on other grounds, 375 U.S. 393 (1964).

186 L.O.C. Indus Inc v United States, 423 F. Supp. 265 (M.D. Tenn. 1976)

187 https://www.irs.gov/irs/part5/irm/part5/irm_05-017-003

188Which is a 7 day period failure to pay er which court process may be commenced against the
taxpayer

189 IRC Section 6331(d)(2)

38
2.14.5Property and Rights to Property in the United States

All property and rights to property (except that which is exempt under IRC s. 6334)
belonging to the person liable to pay the tax, or on which there is a tax lien, may be levied
upon for payment of such tax. It is to be noted that only the taxpayers interest in property is
subject to levy, it does not extend to the interest of a third party.191 This is different compared
to what obtains in the United Kingdom where the liability extends to that of a third party. See
the case of MacGregor v. Clamp & Sons192

Another important aspect of the property under the US system is that the property to be levied
upon may be real property or personal property.193 The personal property susceptible to levy
may be either tangible or intangible. It is to be noted that the taxpayer need not have the
property in his/her possession before it may be levied on. If it is discovered that the property
or rights to the property are those of the taxpayer, such property is subject to levy no matter
who is in possession. The Supreme Court has held that in determining the taxpayers property
and rights to property, one must look at the state law to determine what rights the taxpayer
has in the property the government seeks to levy on and then to federal law to determine
whether the taxpayers state delineated rights qualify as property or rights to property within
the meaning of the federal tax lien statutes. See Drye v United States194

In comparison with Nigerian system, a recourse is made to the Constitution which is the
grundnorm for our laws and then to PITA. It should be noted here that the system in United
States is a true picture of Federalism as each states of the federation has its own laws to
regulate taxes and not the one made by the federal Parliament (PITA) for states to impose on
its behalf. The courts have held that illegally obtained money is not the taxpayers property;
therefore, the money cannot be levied upon. An instance is where a taxpayer obtains money
through the commission of a crime, state law may provide that the taxpayer has no interest in
or rights to the money. See the case of United States v. Ortiz195there have been instances in
Nigeria where the RTA had levied distrain on the property of a taxpayer vide sealing whether

190This stipulates payment to be made as soon as possible but within 60 days. See IRC section
6303(a).

191United States v Rodgers, supra.

192Supra, see also https://www.irs.gov/irs/part5/irm/part5/irm_05-017-003.

193Compare In Nigeria where it may be movable or immovable property of the taxpayer. See section
104 PITA 2004 as amended.

194528 U.S. 49 (1999); Craft v United States, 535 U.S. 274 (2002).

195140 F. Supp. 355 (S.D.N.Y. 1956)

39
or not it belongs to the taxpayers. It takes the taxpayers landlord or owner several months to
appeal or convince the RTA that the taxpayer is not the owner of the property.

Where the tax lien attaches to an after-acquired property, levy is not limited to property or
rights to property of the taxpayer that exist when the assessment is made. If a federal lien has
attached to the property of the taxpayer and the property is later transferred to a third party in
a way that the lien would not be divested, the property remains subject to levy. See the case
of Glass City Bank v. United States 196 it is also a custom that during the custody of the seized
property in the United States, certain benefits are attributable to the seized property. E,g. is
rental income. It has been suggested that notice be put to remove any doubt as to whether the
United States seized the rights to be benefits. The question that readily comes to mind is that
who will pay a rental income to a property that has become subject of seizure? It is most
likely that even the tenant may not be able to use the premises for which it pays rental
income. This appears to be different from what obtains in Nigeria, the RTA seals of the
premises where it belongs to the taxpayer and it might not be available for the use of other
owners except in certain instances where there can be other entrance to the premises. LIRS
for instances distrains upon the premises of the taxpayer and this may affect all other co-users
of the premises if any.

2.14.6Property Exempted from Seizure

In the United States, generally, certain properties or assets are exempted from being levied
against. These include:

i. CustodiaLegis: custodialegis simply means in control of the court. 197Generally, levy is

not used to enforce collection of taxes if the assets of the taxpayer are in custodia legis.
However, assets may be levied on if it would not interfere with the work of the court or the
court grants permission to levy.198A property would not be said to be in custodialegis where
the levy is done between the date f filing of a petition in a state court for the appointment of a
receiver and the date of appointment. Such levies done between those dates are valid.199

ii.Seizure of Residence/Principal Residence: S.6334 (a)(13)(A) exempts from levy any real
property of the taxpayer used as a residence by any individual (except real property that is
rented), if the levy amount does not exceed $5,000. This means that a taxpayers real property
196326 U.S. 265 (1945)

197 Supra note 185

198See Treas. Reg 301.6331-1(a)(3) cited in supra note 185.

199See United States v. Allen, 328 F.2d 377 (5th Cir. 1964); Young Sheet &Tube Co. v Patterson-
Emerson-Comstock of Ind., 227 F.Supp.208 (N.D Ind. 1963) cited in
https://www.irs.gov/irs/part5/irm/part5/irm_05-017-003

40
used as residence and owned by him will be exempted from levy if the levy amount does not
exceed $5,000. The permission of a court is required before the administrative seizure of
certain principal residences owned by the taxpayer.200 Such principal residences includes: the
taxpayers, the taxpayers spouse; the taxpayers former spouse; and the taxpayers minor
child.201

iii.Seizure of business assets: the internal revenue code of the US requires written approval of
the Area director or Assistant Area Director before seizure of certain business assets.202
Business assets is defined as any tangible personal property or real property (except for
rental property) used in the trade or business of an individual taxpayer.203 Such approvals are
only granted after being satisfied that the taxpayers other assets subject to collection are
insufficient to pay the amount due, together with the expenses of the proceeding.204

iii.Other assets that may be exempted from levy are:

a. Wearing apparel and school books necessary for the taxpayer or members of
his family;
b. Fuel, provisions, furniture, and personal effects in the taxpayers household,
up to a specified, inflation-adjusted amount;
c. Books and tools of trade, necessary for the trade, business or profession of the
taxpayer, up to a specified inflation adjusted amount; and
d. Unemployment benefits.

It is significant to point out here that Nigerian laws only stipulates movable and immovable
properties that are capable of being distrained. Such movable properties include goods,
chattels, bonds, securities etc. which definitions appears to be ambiguous and capable of
several meanings. The United States clearly maps out different properties that are exempted
from levy thus clearing doubts and ambiguity. In Nigeria also, the RTA instead of actually
seizing goods as intended by the provisions of PITA, it distrains by sealing up the company of
the taxpayer 205whether such items in the taxpayers shops are perishable or not, or capable of
being distrained or not. There are occasions that the RTA acts contrary to the provisions of

200See IRC s. 6334(e)(1)

201 https://www.irs.gov/irs/part5/irm/part5/irm_05-017-003

202IRC s . 6334(a)(13)(B)(ii) and IRC s. 6334(e)(2).

203 https://www.irs.gov/irs/part5/irm/part5/irm_05-017-003

204Ibid

205After allowing the taxpayers take only books of account with which it might defend or settle its
claims before the RTA.

41
PITA in sealing of premises not owned by the taxpayer ad go scot free probably because the
taxpayer is unaware of its rights, incapacitated in terms of seeking legal redress or being
carried away by the burden of sealing and worries to get it unsealed.

A worrisome aspect of the US provisions here is the clause Up to a specified inflation

adjusted amount. This is capable of confusion as it may mean different specified inflated
adjusted amount to both taxpayers and the RTA, this to my mind should be reviewed to
clarify the ambiguity.

Nigeria should when the opportunity arises learn from the provisions of the US internal
revenue code with regards to provisions on goods capable of being distrained and those
exempted from distrain. This will further advance our enforcement procedure in Nigeria.

CHAPTER THREE

POWER AND PROCESS OF DISTRAIN: A CASE STUDY OF LAGOS STATE

INTERNAL REVENUE SERVICE

3.0POWER AND PROCESS OF DISTRAIN: A CASE STUDY OF LAGOS STATE

INTERNAL REVENUE SERVICE

This chapter shall focus mainly on the power; authority and mode of obtaining distrain under
Lagos State Internal Revenue. It is trite that the provisions of Personal Income Tax Act

42
(PITA)206 give room to all State Board of Internal Revenue to ensure effective and optimum
collection of taxes and all penalties due to the Government under the relevant laws 207. The
Act also makes provisions for State Board of Internal Revenue to generally control the
management of State Service on matters of policy subject to the relevant laws. 208This is done
by the Lagos State Internal Revenue Service (LIRS) being the operative arm of the State
Board of Internal Revenue209. The LIRS derives its power to devise on an applicable and
workable method to improve and generate optimum revenue for the government. The
methodological approach here is that of an insider. So it is more of a practical approach of an
eye-witness as opposed to speculations or information from other unverified sources.

3.1PROCEDURE IN LAGOS STATE

The procedure in LIRS will be examined on basis of Law, Administration and Policy since
these are the three major bench marks upon which any good tax system should be based.

3.1.1 LAW

The LIRS in order to fully and optimally generate revenue for the government took a massive
step by first enacting a Law to regulate its tax system in line with the provisions of the
Constitution and PITA. LIRS leveraged on the provisions of section 4 (7)210 which gives
power to it to make laws on matters not included in the exclusive legislative list.

The first step LIRS took is to enact the Revenue Administration Law, 2006(RAL)211 which is
a replica of the provisions of PITA and few additions. It thus domesticated the provisions of
PITA into its States law. The LIRS therefore, combine the full effect of RAL and PITA for
the administration and collection of its taxes. It is a known fact in law that the Constitution 212
permits the Federal Government to delegate collection of Personal Income Tax, Capital Gains
Tax and Stamp Duty.213 A question that however, comes to mind is: what is the

206Supra.

207Section 88(1) (a) PITA 2004 as amended.

208 Ibid s. 88(1) (d).

209 Ibid at section 87 PITA 2004 as amended.

210 Supra note 5.

211 Revenue Administration Law, 2006, signed into law on 13 March, 2006.

212 See Paras7 & 8 of the Part II of the 2nd Schedule to the Constitution of the Federal Republic of
Nigeria, 1999 supra.

213AbiolaSanni: Personal Income Tax through Cases, being a paper presented in September, 2015 at
LIRS training session, Oriental Hotels, Lagos.

43
constitutionality and validity of the Revenue Administration Law of Lagos State vis--vis the
provision of the Constitution with respect to the delegation of the power to make laws?
Abiola Sanni214 stated that the States are bereft of the power to make law on the imposition
and collection of Personal Income Tax. The question therefore, is what provision of PITA or
the Constitution that permits the Federal Government to delegate its power to make laws
other than collection to the State Board? What also is the purport of the provision of Section
4215 enabling the state to make laws on an exclusive list? These and many more will be
discussed in subsequent chapters in this paper.

3.2ADMINISTRATIVE ASPECT

3.2.1 Assessment in Lagos State

Tax Assessment is the whole process of measurement of a taxable persons tax obligation and
putting him/her on notice in respect thereof. Therefore, the calculation of the amount of tax
payable by individuals on the basis of the tax law is called Tax Assessment. Generally, the
modus-operandi for achieving this depends on the provisions of the tax laws of the system
concerned, which involves the below:

2. Ascertaining the base or the assessable profit.

3. Granting reliefs and allowances as allowed by tax laws.
4. Applying the relevant tax rates.

Where a tax return has been filled and submitted by the taxpayer, Relevant Tax Authority
(SIRS) may:

1. Accept the tax return and make an assessment accordingly, or

2. In the absence of a satisfactory return of form A or written statements; or where the
taxpayer refused to submit his completed form A or written statement within the
specified period of 90 days; the RTA may raise an assessment on the Taxpayer based
on his (RTA) best of judgment (B.O.J)- i.e. estimated assessment.

The Lagos State Board of Internal Revenue by its operative arm the Lagos Sate Internal
Revenue Service (LIRS) is responsible for the administration of taxes collected by Lagos
State. One of the enforcement drive of LIRS is the distrain process as provided for under
PITA.216

The Lagos State procedure is explained in the following step by step procedure:

3.2.2Filing of Returns and Assessment

214 Ibid

215 Constitution of the Federal Republic of Nigeria, 1999, CAP C23 LFN, 2004 as amended.

216 See section 104 PITA 2004 as amended.

44
Every taxable person is expected to file annual returns of his tax within 90 days from the
commencement of every year of assessment. 217 A taxable person is to file the returns for the
relevant year without notice or demand from the relevant tax authority failing which attracts a
penalty and or fine of N 500,000.00 for body corporate and N 50,000 for individuals.218

3.2.3Registration of Employees with the RTA

The procedure in Lagos State is usually commenced by registration with the nearest tax
station of the RTA. This is done in the following ways:

Application to the relevant tax authority for registration on the letter headed paper of
the applicants company;
A certificate of Incorporation of the Applicants company;
Memorandum and Article of Association of Applicants company;
Sheet containing name, designation and breakdown of incomes; and
Tax clearance certificate of at least two Directors.219

The RTA assesses every taxable person charged with income tax at the expiration of every
year of assessment.220 A taxable person has been defined as any individual or body of
individuals (including a family, any corporation sole, trustee or executor) having any income
which is chargeable with tax under the provisions of this Act.221The RTA is at liberty to
accept and make an assessment according to the information supplied or refuse to accept
return where it suspects some fraudulent supply of information. 222 It can thereafter issue a
best of judgment on a taxpayer.

Assessment of employees in the company of the taxpayer is done based on the information
supplied as stated above and a Tax deduction card will be issued to the employer to deduct
the tax of its employees on monthly basis and remit to the state governments designated
account. It is significant to point out that the RTA yearly sends out its staff to conduct audit
exercise to ascertain the correctness of the information supplied to the branch office (tax
station) of LIRS. Where additional information is gotten, then a notice of assessment will be
raised and the taxpayer will be issued a demand notice to pay the outstanding liability.
217 Section 41 PITA, 2004 as amended

218 Section 81(3) Personal Income Tax Act 2011

219See Igho Orienru: Lagos State Internal Revenue Service Training Materials Tax Lecture Note
2014.

220 Section 54 PITA 2004 as amended.

221 Section 58 PITA, 2004 as amended

222 Section 54(2)(a), (b).

45
It should be noted that the RTA is not under a duty to call for returns. The court held in A v
Commissioner of Internal Revenue223 that failure to call for tax returns does not invalidate
notice of assessment, it on the other hand gives room for best of judgment on the taxpayer.224

3.3TAX AUDIT EXERCISE (PAY AS YOU EARN (P.A.Y.E) AND WITHHOLDING

TAX SCHEME)

Tax Audit exercise is the process of gathering relevant information from the taxpayers books
of account and transactions in order to determine the accurate and correct amount of tax
payable by a taxable person. With regards to Pay As You Earn (PAYE), the procedure in LIRS
is as follows:

i. Issuance of a letter of Notification informing the taxpayer to choose a date within

two weeks from the date of receipt of the letter to make available relevant
documents for Tax Audit exercise. Some of those documents include Annual
financial Statement, Bank Statements, Certificate of Incorporation, Companies
payroll in both hard and soft copies, etc;
ii. The Notification Letter is acknowledged by an accredited staff of the taxpayer
with his name, designation, date, signature and phone number on the letter;
iii. The taxpayer is called from time to time to agree on a date for the tax audit
meeting;
iv. Upon agreeing on a date, the LIRS staff in conjunction with private professional
experts referred to as Tax Audit Monitoring Agents (TAMA) goes to the company
to gather relevant information from the taxpayers books of accounts;
v. The information is subsequently turned in as a Tax Audit report, signed by both
staff members and the TAMA and submitted to the Tax Audit department in both
soft and hard copies;
vi. The report is assessed by the Assessment unit and then reduced into writing as
Demand Notice by Tax Audit department with breakdown of the PAYE,
Withholding Tax and Penalties and interest where applicable;
vii. The Demand Notice is then served on the taxpayer to pay and or object;
viii. Where a taxpayer does not agree with the RTA in picking a date for the tax audit
exercise, the RTA sends a further letter of Uncooperative and obstructive attitude
known as Non-Compliance letter on the taxpayer;
ix. Where the taxpayer still refuses this opportunity, the RTA then gives liberty to the
TAMA and Board staff members to raise a Best of Judgment Assessment (BOJ) on
the taxpayer.

3.4 BEST OF JUDGMENT ASSESSMENT (LIRS)

A best of judgment is a kind of assessment done by the RTA especially where the taxpayer
has failed to file its annual returns or has failed to permit the tax audit exercise carried out by
the relevant tax authority. The Act gives the State Board the power to uses its discretion to the

223Vol. 1 ALL NTC pg 79

224 See Commissioner of Revenue v Attah M.O. Vol. 1 ALL NTC, p 279

46
best of its ability to determine a taxpayers assessment. 225 The court has held that Best of
judgment is not applicable to P.A.Y.E system. See the case of Nigerian Breweries Plc v
Lagos State Internal Revenue Board226. The court of Appeal held that the only situation in
which the respondents can use the best of his judgments and belief under PAYE regulations.
The court also held in FBIR v Solanke FM227 that where a taxpayer fails to furnish particulars
of his income, the RTA is entitled to raise a Best of Judgment. The Court has also held that
failure to file annual returns and the lapse of time are condition precedent that compels the
RTA to making a best of Judgment. See Commissioner of Revenue v Attah M.O.228

3.5SERVICE OF DEMAND NOTICE (LIRS)

LIRS complies with the provision of PITA229 in effecting service of Demand Notice on the
taxpayer. The Act permits that service of demand notices or assessment could be send by
registered post, courier services, email etc. and it must contain the name, address, amount and
rights of a taxpayer among others. 230In recent times, LIRS does that by engaging the service
of an independent courier company to effect the service on its behalf. The court has also held
that the where a RTA serves a demand notice by means of a registered post to taxpayer, the
onus is on the RTA to show that notices were properly addressed and sent by registered post
to the taxpayer. See Jamaledine A.R. v FBIR231

The proof of delivery of the demand notice is brought back by the courier and put in the file
as evidence of service. It is clearly stated in the demand notice that a taxpayer shall have the
right to object to the liability within the stipulated period of 30 days as provided for by law. 232
See also the case of Alhaji Yahaya Mohammadu v Oturkpo Local Administration.233

3.6PAYMENT OF UNDISPUTED AMOUNT (LIRS)

225Supra

226Nigerian Breweries Plc v Lagos State Internal Revenue Board, Vol. 4 ALL NTC 479 at pp 480
and 487 (lines 20-38)

227Vol. 1 ALL NTC p 417

228Vol. 1 ALL NTC p 279

229 Section 57 PITA 2004 as amended.

230 Ibid

231Vol. 1 ALL NTC, Pg 193.

232 Section 58 PITA 2004 as amended.

47
An undisputed amount is an amount agreed to by the taxpayer that it is liable to pay to the
government as tax owed. In other words, it is the amount that is not a subject of
objection.234The procedure in LIRS is that a taxpayer in line with the provisions of PITA235is
expected to pay the amount that is not in dispute or not a subject of objection to the RTA
within two months and before its letter of objection can be seen as validly entertained. In
LIRS, an objection letter may not be entertained if taxpayer fails to make payments on the
amount not in dispute or to which it had admitted as owing. An objection letter must be
accompanied by the cheque or evidence of payment of the undisputed amount by the
taxpayer. This position has been upheld by the court in The Queen v Port Harcourt Tax
Authority236the court held that the amount to be deposited to the tax authority is the difference
between the amount assessed and the tax chargeable on ones income that he admits. In other
words, the amount that the taxpayer admits out of the tax chargeable as undisputable should
be paid to the relevant tax authority.

3.7OBJECTION IN LIRS

A taxpayer in LIRS is at liberty in line with the provisions of PITA to object to a liability
within the time stipulated by law 237 as many times as possible. The objection must be in
writing and must precisely state the grounds of appeal. The court held in FIRS v Maiduguri
International Hotels238that a taxpayer must clearly and tacitly deny or object to tax liability
where it seeks to absolve itself of tax liability in a suit for tax recovery by the tax authority. It
should be noted that the grounds of objection must be substantiated with valid documentary
evidence, otherwise it might be refused. Where a taxpayer fails to object within the time
stipulated by law, the said liability will be regarded as final and conclusive; 239 as such the
taxpayer is estopped from objecting to same and is required under the law to pay the whole
liability. Where a taxpayer has not objected within the time stipulated by law, the RTA serves
on the taxpayer a Notice of Refusal to Amend (NORA) which clearly stipulates that the
objection is final and conclusive.

233Vol. 1 ALL NTC p 371, See also Lagos Board of Internal Revenue V Jenkins investment Ltd Vol.
8 ALL NTC p 193

234 Section 68 PITA 2004 as amended

235 Ibid

236Vol. 1 ALL NTC page 63 at page 65

237 Ibid

238Vol. 8 ALL NTC Pg 247.

239 Section 104 PITA 2004 as amended

48
3.8NOTICE OF REFUSAL TO AMEND (NORA) IN LIRS

This occurs when an assessment is said to be final and conclusive. This position is provided
for under the old Act.240 Personal Income Tax Act Amendment 2011 deleted the provision.
However, section104 PITA still provides for liability final and conclusive. NORA comes in
when an objection has been refused by the LIRS. 241 In LIRS, where a taxpayer fails to object
within the 30 days stipulated time by PITA242, the file is sent to the legal department for legal
action to distrain.

Where however, the taxpayer objects within the stipulated period it will be served a letter of
invitation for a Tax Audit Reconciliation (TARC) Meeting in which case the letter will state
the list of documents required to be brought at the meeting to defend its grounds of objection
against the Board. The meeting is usually a fair one in which both parties presents their cases
and supports it with evidence failing which LIRS will reject the grounds of objection.

Where the taxpayer fails to attend or attend but did not furnish the required documents, the
LIRS shall be at liberty to exercise its power to reject and issue a letter of NORA conveying
its decision to reject the taxpayers basis of objection. 243 The file is in like manner sent to the
legal department for legal action.

3.9FINAL AND CONCLUSIVE IN LIRS

An assessment is said to be final and conclusive when the time to pay a tax liability by a
taxpayer has lapsed and the taxpayers right to object had either lapsed or has been refused by
the RTA on reasonable grounds provided for in PITA. Where a taxpayers statutory right to
appeal is not exercised, the assessment will be regarded as final and conclusive. See Aboud v.
Regional Tax Board244Assessment cannot be final and conclusive unless the RTA rejects or
refuses the taxpayers objection where there is an objection. See Ilorin Native Authority v.
Mallam Musa Ajao245

3.10ADMINISTRATIVE POLICY OF LIRS

240 Section 66 PITA before Amendment

241 Section 58(3)PITA 2004 as amended

242 Section 58 PITA 2004 as amended

243 Ibid

244 VOL. 1 ALL NTC Pg. 183 cited in Abiola Sanni: Personal Income Tax through cases, presented
in September, 2015 at LIRS training session at Oriental Hotels.

245 Vol. 1 All NTC p 187

49
Where an assessment has become final and conclusive, the liability remains unpaid and the
taxpayer has failed to object within the limited time, the taxpayer is due for prosecution for
the liability it owed the government. The court has pronounced in Anosike P.O. v Tax
Assessment Authority (Abakaliki)246 that the Court does not have the power to extend the time
to appeal against tax assessment. Therefore, once the 30 days statutory period expires and the
taxpayer does not object, the right of such taxpayer is foreclosed under the law and cannot be
extended. The LIRS in its innovative stance and as a leading front in generating revenue for
the state looks at the substance rather than the form. It has therefore, since he last quarter of
2015 in its magnanimity requests the taxpayer to make a 30% payment on account. The 30%
payment is of the total outstanding liability which if after the TARC, there is merit in
reducing the liability, any excess payment made can be used as tax credit to either settle the
year of assessments tax liability or be used for subsequent year of assessments liability.

3.11APPEAL TO TAX APPEAL TRIBUNAL

A taxpayer dissatisfied or aggrieved with the rejection of its objection by the relevant tax
authority is at liberty to file an application on appeal to the tax appeal tribunal (TAT). This
appeal must be lodged within 30 days from the date of the rejection of the objection letter.
Where no such appeal is lodged or served on the LIRS, the file is sent to the legal department
for legal action.

3.12 LETTER OF INTENTION TO LEVY WARRANT OF DISTRAIN IN LIRS

Where an opportunity given to a taxpayer to object to a tax liability has lapsed and the
taxpayer neither objects nor pays the outstanding tax liability, the legal department issues and
serve on the taxpayer vide courier a letter of intention to levy warrant of distrain on the
goods, chattels, bonds, securities and or properties of the taxpayer. The content of the letter is
to the effect that a taxpayer is required to make a payment of the amount outstanding within 7
days of the receipt of this letter having become final and conclusive 247failing which legal
action shall be commenced against the taxpayer.

The evidence of service of the demand notice referred usually to as Proof of delivery is
attached with the file and used as evidence in the law court against the taxpayer. Upon the
expiration of the 7 days period, where the taxpayer does not pay, the LIRS shall proceed with
a legal action in court with a view to recover the outstanding liability.

3.13 INSTITUTION OF DISTRAIN ACTION IN COURT IN LIRS

LIRS complies with the provision of PITA248 in instituting civil action against the taxpayer. It
is simply through an ex parte application praying the court for an order to distrain upon the
246Vol. 1 ALL NTC p 109

247 Section 104 PITA 2004 as amended

50
goods of the taxpayer by seizure of chattels bonds (movable property), etc. or upon
immovable property of which the taxpayer is the owner. The LIRS being the Claimant
attaches the demand notice, notice of TARC meeting, NORA letter (where applicable), letter
of intention and the proof of delivery of these notices as exhibits before the Courts. A major
issue that has plagued the RTA is the choice of the appropriate commencement method to
adopt in instituting distrain processes in line with the rules of court. The question as to
whether or not the provisions of an Act of the National Assembly (PITA) 249 supersedes the
rules of court with respect to the mode of instituting a civil action in court remains a serious
challenge to the institution of distrain action in court.250 Although the courts have reiterated
the fact that an enactment of statutes by the parliament. In the past in LIRS the order of
instituting the process is as follows:

Writ of Summons--- List of Exhibits---- List of Witnesses---- Witness Written Deposition-----

Motion Ex parte------Affidavit in support of Motion Ex parte-------Exhibits------ Written
Address in support of Motion Ex parte

Currently, owing to the various challenges surrounding the institution of the procedure as
discussed above LIRS has decided to apply strictly with the provision of PITA to come by
way of motion ex parte to institute an action against the taxpayer for distrain. Some have
questioned the legality of instituting an action by way of Writ of Summons 251 by the RTA and
yet do not serve the originating process on the Defendant before proceeding to move and
obtain an order for distrain. In spite of the adoption of this procedure by way of motion ex
parte, the procedure has also suffered a lot particularly in the hands of revenue judges who
grants the order as a form of decree nissi meaning temporarily and insists that upon
obtaining the court order, the RTA must effect the service of the order on the taxpayer before
execution. So the court adjourns for a return date to enable the taxpayer enter an appearance
and show cause why the distrain order should not be executed. Failure to appear on the return
date thus makes the order absolute. Where however, the defendant taxpayer enters
appearance, the defendant is allowed to show reasons why the distrain order should not be
enforced against it.

This to my mind has defeated the purpose of ex parte application which seeks to distrain the
taxpayers goods unnoticed (since it is an ex parte application). The question as to why the
taxpayer has been given fair hearing does not arise as such argument has been laid to rest in

248 Ibid

249 Personal Income Tax Act, 2004 as amended

250 See the case of Independent Television/Radio v Edo State Board of Internal
Revenue(2014)LPELR-23215 (CA), VOL. 9 ALL NTC P.421

251 Order 3 Rule 1 High Court of Lagos State (Civil Procedure ) Rules 2012

51
the case of Independent Television/Radio v Edo State Board of Internal Revenue252 This shall
be further expatiated upon in subsequent chapter.

3.14 OBTAINING COURT ORDER, LETTER OF AUTHORITY AND EXECUTION OF

DISTRAIN

The motion filed by the Claimant (LIRS) in any of the two methods discussed above i.e.
either with writ of summons or ordinary ex parte application is moved by the Claimant ex
parte and granted by the court and expected to be executed within 7 days after successfully
obtaining the order.

In the case of an originating process instituted by writ of summons, the motion ex parte is
accompanied by an affidavit of urgency first which makes the administrative judge assign the
matter as requiring urgency. In this era of writ of summons, the RTA executes the order as
soon as practicable immediately the order is successfully obtained. It is significant to point
out that the order granted may not be signed on the same day it was granted. LIRS upon
granting of the distrain order by the court applies for a certified true copy (CTC) of the order.
It only executes after it has obtained a CTC of the order. LIRS presents a copy of the order
and all other originating process to the taxpayer just before sealing. The only condition on
which LIRS will not seal the premises is where the taxpayer immediately offset the tax
liability or provides evidence of full payment of the liability. The taxpayer is at liberty to after
the sealing enter an appearance as defendant and state its position. In most cases, the position
has always been that the taxpayer will come praying LIRS to unseal its premises.

LIRS it is important to state here that sealing as opposed to seizure or distrain upon goods,
chattels etc. is more effective as it places the taxpayer on its toes to come begging for
settlement as that process will no doubt crumble business for the period the company is under
lock.

However, on the other hand in the case of motion ex parte, made temporarily, the service of
this on the taxpayer has made them enter an appearance even where there are no valid
grounds for defending the action. Taxpayers have used this medium to delay and sometimes
frustrate the ex parte application as technicalities is what the taxpayer will be relying. It is
significant to point out that this method of using ex parte application without writ of
summons is new and had only been used in 2016 for the first time. It has however not
recorded much success as the judges insist of service of the order on the taxpayer and awaits
an appearance in court before the court can make the order nissi absolute.

3.14.1LETTER OF AUTHORITY
Letter of authority is issued and signed by the Executive Chairman of LIRS after obtaining
the distrain order in court. The executive chairman appoints a named officer(s) 253 of the
agency to proceed with the sealing of the company. The board staff on a particular day for

252 (2014)LPELR-23215 (CA), VOL. 9 ALL NTC p.421

52
enforcement maps out with team of law enforcement officers only to ensure a violent free
enforcement exercise and to forestall all likely obstructive reactions from recalcitrant
taxpayers.

3.14.2SEALING OFF OF COMPANY

LIRS storms the various companies against whom the distrain orders have been obtained with
the patrol team fully empowered and fortified by Governors monitoring team and other law
enforcement team. On arriving at the company, a copy of the court order and the originating
process is served on the company representative before proceeding with the sealing. The
company is thereafter informed to move out relevant documents it may require to defend its
claim and to also switch off all electrical appliances. This often times comes with a level of
resistance from the taxpayer notwithstanding the presence of the police. After few minutes of
informing the taxpayers of the need to leave the premises, the officers of LIRS proceeds with
the sealing of the company and a government sticker tagged Distrained. The company
remains sealed until payment is made and reconciliation done between the parties.

Although Kasim J as he then was held in First Bank of Nigeria v AG Anambra State &
Anor.254that the provision of section 96 PITA 1993 gives power to the RTA to distrain for non-
payment of tax. Anambras Edict also makes provision for sealing of premises. With due
respect to the Court, this judgment in my opinion is erroneous. This is because it is clear here
that PITA does not intend that the term distrain means the same thing as sealing off of a
taxpayers premises. Section 104 (5) PITA255 is reproduced below:
Section 104 (5) Personal income Tax Act, 2004 as amended:
(5)the distress taken pursuant to this section may, at the cost of the then owner, be
kept for 14 days at the end of which time, if the amount due in respect of tax and the
cost and charges incidental to the distress are not paid, the same way be sold.
From the above, it is clear that the intention of the law makers is to seize the goods, chattels,
bonds, securities etc. and keep for 14 days. It is clear that a sealed building or premises is not
the intendment of the makers here as an immovable property cannot be sold within 14 days
without a court order.256 Further, as earlier argued in this paper and according to Abiola
Sanni257 he stated that state boards of internal revenue are bereft of the power to make law on
the imposition and collection of Personal Income Tax. It therefore, implies that the Anambra

253section 104(3) &(4) PITA 2004 as amended.

254 Vol. 4 ALL NTC P 437 at Pg 447

255Supra.

256Section 104 (8) PITA 2004 as amended.

257 Ibid no. 111

53
Edict cannot stand on the face of it as it is inconsistent with the provision of the constitution.
This remains one of the issues that will be examined in the immediate chapter to this paper.

3.14.3 POST DISTRAIN ACTIVITIES

Post distrain activities are activities that happens after a company has been distrained by
LIRS. All post distrain activities are transferred to two units viz: Distrain Unit under Legal
Department and Strategic Audit unit. A distrained taxpayer reports with possibility of
resolving the tax liability and having its company unsealed. A taxpayer distrained pays the
full amount of liability or at least more than 50% of the outstanding liability and N 250,000
being the cost of distrain.258 The Strategic Audit then invites the taxpayer for a subsequent
meeting and reviews the basis of assessment. This is further reduced into an amended demand
notice and served on the taxpayer to pay. Note that where a taxpayer elects to pay the full
sum, the need for post distrain audit review by Strategic Audit will not arise. Also, in certain
instances, after a taxpayer is distrained, some proceed to challenge the sealing of their
company in court where in other instances; they first ensure the re-opening of their offices
before proceeding to file a process in court challenging the sealing.

The above discussed is in brevity is the summary of the power and process of distrain under
LIRS. This however is not to conclude that the system is perfect and without flaws. Several
flaws have been identified and these issues among other will be discussed in the next chapter.

258In the past, the cost of distrain beingN250,000.00 is not negotiable. However, in recent times, the
LIRS has been liberal in terms of the cost of distrain, in some cases; it is reduced to N150,000 as the
case may be.

54
CHAPTER FOUR- ISSUES AND CHALLENGES IN THE PROCESS OF DISTRAIN

4.1 ISSUES AND CHALLENGES IN THE PROCESS OF DISTRAIN

It has been earlier mentioned that distrain is not the only means of enforcing the payment of
taxes. There have been other means of enforcement, however, until recently 259, distrain has
proven to be the most effective means of compelling taxpayers to comply with the payment
of their taxes. Despite the many successes recorded by this means of enforcement of tax,
several issues and challenges exists in the process of enforcing distrain. Some of these issues
include: Issues arising from assessment which have become final and conclusive; whether a
company without employees is required to remit PAYE; mode of instituting the action for
distrain in court whether it supersedes the rules of court or not; whether ex parte provisions in
PITA contradicts the principle of fair hearing; constitutionality of distrain with regards to
properties; interpretation and application of section 104 PITA with respect to seizure to remit
and sale of goods and properties as opposed to sealing.

4.2ISSUES ARISING FROM ASSESSMENT HAVING BECOME FINAL AND

CONCLUSIVE

As earlier discussed, where a taxpayer receives a demand notice and fails to object within the
statutory period provided for by law or where it objects but fails to satisfy the RTA with the
documents provided, then the RTA shall issue out a letter of Refusal to amend. Certain
condition precedents must be considered before an assessment can be regarded as final and
conclusive. Some of these condition precedents have generated several issues some of which
include:

i. Complains of not receiving the demand notice: The RTA on its own had claimed
to have issued and served on the taxpayer a demand notice intimating it of its
liability for the relevant year and there exist a proof of delivery (POD)to prove
such delivery. This is also the case where sometimes a taxpayer after receipt of the
demand notice, objects in writing and the RTA purportedly invites for a meeting
and requires the taxpayer to provide certain documents to buttress its claims. The
excuse from the taxpayer in most cases is that they either did not receive the

259Distrain has been the most means of enforcing tax payment until recently where the law of
diminishing returns seems to have set in. Even the courts reluctantly grant distrain orders in recent
times.

55
 demand notice or the letter of invitation for meeting. The RTA would have based
on its own statutory notices rely on evidence brought by the courier company and
conclude that the liability is final and conclusive. The bottom line is sometimes
between the genuineness of the POD brought by the courier company as its
evidence of delivery and that of the claims of the company that it either received it
or not. In certain instances, the company receives but he recipient may not
understand the importance until a court case arises.

ii. Invalid Objections: The law is clear that an objection letter must state clearly in
writing the grounds of objection otherwise such will not be valid. See FIRS v
Maiduguri International Hotels260. Some taxpayers only writes a mere letter
acknowledging the receipt of the letter few days after getting it, denies the liability
by stating the word object without more and promising to reply in due course.
The RTA does not see this as an objection and will no doubt issue a NORA 261
intimating the taxpayer that the liability is final and conclusive.

iii. Fairness of LIRS presiding alone over TARC Meetings: the taxpayer is invited for
a Tax Audit reconciliation meeting upon receipt of letter of objection from the
taxpayer. The meeting is held to enable both parties look at grey areas and reach a
compromise. It has however, been the position of taxpayers that the process is not
fair enough as it negates the natural justice principle of Nemojudex in casa sua
meaning you cannot be a judge in your own case. LIRS presides over the
meeting and determines to a large extent what document it would admit and what
it would not admit. Even where the evidences are so clear, the RTA may still insist
on the same liability.

iv. Failure to objection within the statutory period: The provision of PITA 2004 as
amended is clear with respect to an objection filed outside the 30-day statutory
period for objection. The LIRS takes advantage of this to make the liability final
and conclusive except and unless the taxpayer makes a 30% payment on account
before its basis of objection can be visited. However, the court in Prime
Plastichem Nig. Ltd v. Federal Inland Revenue Service262have held that failure of a
taxpayer to object to an assessment within 30 days will not at all times result in
the assessment being final and conclusive, there is need for tax authorities to
follow proper and due procedure in administrating tax laws. The court has also
held in Chairman of the Board of Inland Revenue v Joseph Rezcallah & Sons
Ltd263 that the fact that an assessment has become final and conclusive does not

260Supra

261Aboud v. Regional Tax Board Supra

262

56
 deprive the court from making inquiry into it. This is done to checkmate any form
of arbitrariness in the powers of the RTA.

v. Payment of Undisputed Liability: The law is clear as to the payment of

undisputed amount by a taxpayer.264 LIRS sometimes forecloses the right of a
taxpayer who claims or insists it has fully discharged its tax obligations which he
is expected to pay to the RTA. This is not a criterion for foreclosure and cannot be
held to be fair.

vi. Abolition of section 66 PITA: The deletion of section 66 PITA 2004 has made
some taxpayers to believe that the era of final and conclusive is gone and some of
them argue this with LIRS. However, section 104 PITA265 still has provisions for
final and conclusive

Considering the above conditions precedents, several disputes had arisen with respect to an
assessment being final and conclusive. While some of the assertions of the taxpayer are
correct and may be backed up by law, the LIRS is also correct in other aspect and a
compromise between the two will help resolve the issues emanating from their differences.

4.3 ISSUES ON WHO IS SUBJECT TO DISTRAIN WHETHER EMPLOYEE OR

EMPLOYER?

It is trite that only a taxable person can be the subject of distrain under PITA as currently
worded.266 Section 108 PITA267 defines a taxable person as any individual or body of
individuals (including a family, any corporation sole, trustee or executor) having income
which is chargeable with tax under the provisions of this Act. This definition does not in any
way include an employer or a withholding tax agent (payer) as provided for under PITA268

The court in 7up Bottling Company Plc v LSIRB 269the court on the effect of section 54
PITA270 held that assessment is between the RTA and the taxable person but not between

263 VOL. 1 ALL NTC Pg. 117

264 See Section 68 PITA 2004 as amended. See also The Queen v Port Harcourt Tax Authority
supra.

265PITA 2004 as amended

266Olumide, Bidemi Daniel: Distrain under the Personal Income Tax Act: An Analysis and
Evaluation of Principles and Practice.

267PITA 2004 as amended.

268Olumide, Bidemi Daniel supra at page 3.

57
the RTA and the employer.271 The court held further that a taxable person under PITA and the
PAYE system is the employee but not the employer. 272 The court in analysing the provisions
of section 53(5)(a) and (b) PITA which is now section 54(5)(a)&(b) of PITA 2004 as
amended held that Best of Judgment (BOJ) assessment generally cannot be raised on an
employee whose income is deductible under the PAYE system except the employee applies
for it of the RTA considers it necessary to do so.273

The courts in a latter case of Nigerian Breweries Plc v LSIRB274the Court of Appeal in
attempting the question whether BOJ basis of assessment is applicable to the PAYE system of
personal income tax imposition and collection. The Court in interpreting the effect of section
29 of the Personal Income Tax Law of Lagos which is the same with provisions of section 54
PITA275 re-emphasized that fact that the employee or staff is the taxable person for the
purpose of PAYE system. The Court in interpreting section 29(5) 276 held that the section
exempts staff subject to PAYE from arbitrariness of best of judgment.277

Due to the much ado occasioned by the decisions of the courts, the Minister of Finance
pursuant to section 80(6) PITA made the Operations of Pay As You Earn (PAYE)
Regulations, 2002 referred to as PAYE Regulations. Regulations 9 of it make provisions
that assessments, appeals and other proceedings in PITA shall include an employer. Olumide,
Bidemi Daniel278 opined that the regulation is inconsistent with the legislated provisions of
PITA. He argued that a regulation or other administrative act done by the executive cannot be

269 (2000) 3 NWLR (Pt. 650) 565 605 at para B, 618, para A, Court of Appeal, particularly at pages
602-606

270PITA 2004 as amended.

2717up Bottling Co, Plc v LSIRB supra particularly at page 603 at paragraph H cited in Olumide,
Bidemi Daniel supra.

272 Ibid p 605 at para B

273 Ibid p 604 at paras A-B cited in Olumide, Bidemi Daniel supra at page 4.

274 (2002) 5 NWLR (Pt. 759) 1 C.A particularly at pg. 16-18, paras G -E

2752004 as amended.

276 Lagos State personal Income Tax Law, also section 54(5) PITA 2004 as amended.

277 See page 17 at para F cited in Olumide, Bidemi Daniel, supra,

278 In his book supra at pages 4-5

58
effected contrary to the express intentions of the legislation as founded in the wordings of the
law, except the law expressly authorises the executive to do so. 279 He stated further that tax
statutes are legislations enacted by the Parliament and not a fiat of the executive. He said that
a Regulation such as the PAYE Regulation can only amplify PITA but not amend, add to or
override its express wordings.280 He further commented on the failure of the federal
legislature to when amending PITA to PITAM to deem it fit to effect the necessary clause to
include an employer.

He moreover, argued that section 50 of PITA281 cannot be relied on to declare an employer as

an agent of the employee. He referred to section 81 PITA282 which provides for the obligation
of a taxpayer and this only makes the employer an agent of the RTA but not the employee. 283
He however said a good system exist for Withholding Tax because the payer is obligated to
deduct the amount which had been statutorily determined by known percentages. More also,
he stated that the liability of the employer can only be raised in the aspect of tax deduction of
PAYE in which case the employer can be held liable for non-deduction or non-remittance.

4.4 MODE OF INSTITUTING THE ACTION FOR DISTRAIN IN COURT, WHETHER

OR NOT IT SUPERSEDES THE RULES OF COURT?

It is a common parlance that every court in Nigeria is equipped with practice directions
usually referred to as Rules of court which is a step by step procedure on how proceedings
under it may be run. It is also trite that the Court with jurisdiction in PAYE matters at the state
level is the High Court of Lagos State. 284 A major issue erupting from the exercise of the
power of distrain given to State Boards of Internal Revenue is the power to obtain the distrain
order by way of motion ex parte. 285 There is no doubt that motion ex parte is not one of the
various modes of instituting civil actions in the high court in Nigeria generally. Order 3 of the

279 Ibid, he also referred to express power given to the minister under section 38 of the Value Added
Tax, Laws of the Federation, 2004.

280Olumide, Bidemi Daniel supra, page 5. See also Akanni v Odejide (2004) 9 NWLR (Pt. 879)575
at 605 paragraph F.

2812004 as amended.See also section 50 (3) PITA.

282 Ibid

283See D.S.A Agricultural Machinery Manufacturing CompanyLtd v LSIRB (2013)11 TLRN 115,
132 CA cited in Olumide, Bidemi Daniel supra.Olumide,

284 See section 104 (3) PITA 2004 as amended

285 Section 104 (4) PITA 2004 as amended

59
High Court Rules286 makes mention of various mode of commencing actions in court which
include among others Writ of Summons, Originating summons etc. 287 Motion ex parte is
provided for under Order 39 of the High Court Rules. 288 The disparity in the mode of
commencement has been a subject of dispute. In the past as discussed in previous chapter,
LIRS come by way of Writ of Summons but attaches an ex parte application and an affidavit
of urgency to its originating processes. It moves the ex parte application first and obtains the
order with which it seals up taxpayers company. The writ of summons is not served
immediately the action is filed but served when the taxpayer is about to be distrained for it to
respond. The taxpayer is then at liberty to either challenge the sealing of its company and the
writ of summons or pursue in earnest terms a way to ensure its company is unsealed.

The court in Clement v Iwuanyanwu289 Per Ogunwumiju J.C.A held that High Court Rules are
Adjectival rather than substantive law and can never supersede an enactment of National
Assembly. This presupposes that PITA being an act of the National Assembly supersedes
rules of court. The courts in recent times as a matter of practice reluctantly allow the
execution of warrant of distrain it granted the RTA unless it first serve the certified true copy
of the distrain order on the taxpayer. The court adjourns for a return date for the taxpayer to
come and defend itself before the Rule nissi can be made absolute. There is therefore, a wide
gap between the decision above and the practice as it obtains now and this gap needs to be
bridged for there to be an effective system. This is because adjournment for a return date
defeats the purpose intended by the legislators in PITA and no doubt defeats the efficacy of
ex parte which is not putting the other party on notice.

4.5 WHETHER EX PARTE PROVISIONS IN PITA CONTRADICTS THE

PRINCIPLE OF FAIR HEARING?

While some have argued that the provision for ex parte application contradicts the doctrine of
fair hearing under the Section 36 of the Constitution as the other party-taxpayer is not put on
notice before obtaining and execution of the distrain other.290 It is very well arguable that
every citizen of Nigeria is entitled to be given a fair hearing in the determination of civil
rights and obligations which includes any question or determination by or against any

286 Lagos State High Court (Civil Procedure) Rules 2012

287 See Order 3 supra

288 See Order 39(3) Lagos High Court rules supra.

289(1989)9 NWLR (Part 107), p 39; See Duke v Akpabuyo (2008)19 NWLR (Part 959), Page 13.

290 Section 36(1) CFRN 1999 as amended

60
government or authority.291 It has been argued however that the provisions of relevant laws
must be read in full and not in isolation to other provisions. A careful review of the provisions
of section 36 Constitution of the Federal Republic of Nigeria 1999 as amended provides for
limitation to the rights available to citizens with regards to fair hearing. For the avoidance of
doubt, section ((1) and (2) is reproduced as follows:

(1) In the determination of his civil rights and obligations, including any question
or determination by or against any government or authority, a person shall be
entitled to a fair hearing within a reasonable time by a court or other tribunal
established by law and constituted in such manner as to secure its
independence and impartiality.
(2) Without prejudice to the foregoing provisions of this section, a law shall not
be invalidated by reason only that it confers on any government or authority
power to determine questions arising in the administration of a law that affects
or may affect the civil rights and obligations of any person if such law-
(a) Provides for an opportunity for the persons whose rights and
obligations may be affected to make representations to the
administering authority before that authority makes the decision
affecting that person; and
(b) Contains no provision making the determination of the
administering authority final and conclusive.

From the above provision, it is clear that a law shall not be invalidated where ample
opportunity has been provided for any person whose civil right may be affected to defend but
fail to avail itself of that opportunity. In Ekpo v. Calabar Local Government292Uwaifo J.C.A
held that:

I cannot conceive that a subsection of a section of a statute standing alone can be

read with full comprehension, a subsection will usually have a connecting
relationship with other subsection of a section. A result contemplated by one
subsection may not have occurred at all upon a true consideration of the available

291 Ibid, See also Ade Ipaye: Independent Television-Radio v Edo State Board of Internal Revenue
Service: Amicus curiae in the Brief of Argument at the Court of Appeal in the case.

292(1993) 3 NWLR (Pt. 281) 324 at 337 cited in Ade Ipaye: Independent Television-Radio v Edo
State Board of Internal Revenue Service: Amicus Curiae in the Brief of Argument at the Court of
Appeal.

61
 facts if other subsections create certain conditions for that result. Not to recognise
this is not only to read that particular subsection in the abstract but also to disregard
the preceding or subsequent condition for a better cohesive understanding of the
intention of the law giver.

The conclusion drawn from the above is that section 104 of PITA 2004 as amended is a
statute on tax provides as one of the numerous modes of enforcing tax payment in Nigeria.
PITA as a law gives an ample opportunity to a taxpayers to exercise the right it is entitled to
within the time frame provided by the Act. The section has some condition precedents that
must be satisfied before the RTA can exercise its statutory power under section 104 of PITA.
For instance, the Act provides that a taxpayer must have been served with an assessment, the
assessment must have been due and remained unpaid, the taxpayer must have been informed
of his right to object within a 30-day period after service of the demand notice on it and
despite this provision, the taxpayer has filed to utilise its right as provided for in the Act.
These provision no doubt is in tandem with the provisions of section 36(2) CFRN. 293 In
Lagos, even where there is no statutory provision for it, the LIRS makes provision for writing
a final letter of demand referred to as letter of intention to levy warrant of distrain. A taxpayer
who fails in all to avail itself of this opportunity will be estopped from coming to hide under
the provision o fair hearing to escape.

In all the power of the relevant tax authority is not without a court order.294 The court must be
fully satisfied that all the conditions precedents have been complied with before it grants the
order for distrain. It is to be noted that distrain under section 104 is an interim measure to
ensure payment of tax. In other words, section 104 does not contain any provision making the
determination of the tax authority final and conclusive .295This is different from some
provisions which make the government or relevant tax authoritys power final and
conclusive. The court held in Ainabebholo v. Edo State University Workers Farmers
Multipurpose Coop. Society Ltd &Ors (2007) All FWLR (Part. 366) 712, that the provision
unconstitutional as it curtails the right of a citizen to access court after determination by the
commissioner. In contrast, the statutory provision that a tax assessment becomes final and
293Ibid; see section 36 CFRN 1999 supra as amended.

294 In the past, it is usually exercised without a court order.

295Supra note 232.

62
conclusive does not prevent the taxpayer from approaching a court of law to challenge the
assessment or to protest the process by which it was issued.296

The RTAs power to distrain is not without recourse to the court which shall assess and be
satisfied with it considering its merit before granting the other. It was held in the English case
of Lumsden v. Burnett297 that non-payment of tax after service of demand notice is evidence
of refusal to pay. This has also been well addressed in the case of ITV v Edo State Board of
Internal Revenue Service298 where the Court of Appeal held that ex parte application for
distrain order is not against the rule of fair hearing and it is constitutional.

However, the decision Court of Appeal is still subject to being change since it is not the
highest court in the land, it however, remains the judicial precedent until a verdict of the
Supreme Court is pronounced to either affirm or reverse it.

4.6ISSUES ON THE CONSTITUTIONALITY OF DISTRAIN WITH REGARDS TO

RIGHT TO OWN PROPERTIES.

This is an issue that bothers on the right to own and acquire properties in Nigeria without any
form of compulsory acquisition by any other person including the government or any other
authority. The provision of section 104 of PITA299 is believed to be in conflict with the
provision of section 44(1) of the constitution300 especially as it relates to the fundamental
rights of citizens. Section 44(1) of the Constitution provides:

No moveable property or any interest in an immovable property shall be

taken possession of compulsorily and no right over or interest in any such
property shall be acquired compulsorily in any part of Nigeria except in the
manner and for the purposes prescribed by a law, that among other things-
(a) Requires the prompt payment of compensation therefor; and

296 In Lagos, many company have sued the Lagos State Board of Internal Revenue for wrongful
distrain and these could go either ways.

297(1898)2 QB 171.

298 Supra

299 Supra

300 CFRN 1999 as amended

63
 (b) Gives to any person claiming such compensation a right of access for
the determination of his interest in the property and the amount of
compensation to a court of law or tribunal or body having jurisdiction
in that part of Nigeria.
From the above provision, it is clear that the provision of section 44(1) of the Constitution is
not an absolute provision and as earlier stated, cannot be read in isolation of others. 301 In
Attorney-General of Bendel State v. Attorney-General of Federation 302the court held that
The Constitution of the Federal Republic of Nigeria is an organic scheme of government to
be dealt with as an entirety; a particular provision cannot be severed from the rest of the
Constitution.Also in Ishola v Ajiboye303the decision of the court isto the effect that:

Constitutional provisions dealing with the same subject matter are to be

construed together. Seemingly conflicting parts are to be harmonised, if
possible, so that effect can be given to all parts of the Constitution.

It therefore, follows that the provision of section 44(1) cannot be read in isolation of other
provisions of that section. Section 44(2)(a) of the constitution provides:

Nothing in sub-section (1) of this section shall be construed as affecting any

general law for the imposition or enforcement of any tax, rate or duty.

The above provision limits the absolute power to own and acquire property in Nigeria. Where
a taxpayer fails to make payments for the purpose of imposition and enforcement of any tax,
then the provision of section 44(2)(a)304 can be invoked. Invariably, this provision is in
tandem with the provision of section 104 PITA. It provides in parts: Without prejudice to
any other power conferred on the relevant tax authority for the enforcement of payment of
tax due from a taxable person.305 Section 104 PITA does not exist on its own but relies on
301 See Ekpo v Calabar Local Government supra.

302(1981) 10 SC 132-134 cited in Ade Ipaye: Independent Television-Radio v Edo State Board of
Internal Revenue Service: Amicus curiae in the Brief of Argument at the Court of Appeal.

303(1994) 6 NWLR (Pt. 352) 506 at 559 cited in Ade Ipaye supra.

304 CFRN 1999 as amended

305 See also Ade Ipaye supra.

64
the provisions of other sections of PITA and the constitution to derive its power.306 The
exercise of distrain as contained in the provisions of PITA can only be unconstitutional where
it is found to be inconsistent with the provisions of the constitution of Nigeria.307

It is significant to note that the payment of tax is the obligation of every citizen 308 of Nigeria
and the failure to comply is met with the punitive sections of the constitution i.e. the power to
compulsorily acquire property of citizens and any other law not in conflict with the
constitution. Therefore, section 104 PITA is in line with section 24(f) and section 44(2)(a) of
the Constitution which will as a matter of fact stripe a defaulting taxpayer of its right to own
or acquire movable or immoveable properties in Nigeria.

4.7 INTERPRETATION AND APPLICATION OF SECTION 104 PITA WITH

RESPECT TO SEIZURE AND SALE OF GOODS AS OPPOSED TO SEALING

One of the controversies inherent in the process and power of distrain is the challenge of
interpretation and application of section 104 PITA 2004 as amended. While some courts and
RTA have interpreted section 104 of PITA309as meaning sealing, it however, appears that the
provision of that section is wrong applied. From all the definitions given of distrain or
distraint or distress, it is obvious that one thing is common which is seizure of goods chattels
or sale of immovable property where it is established that the taxpayer owns the immovable
property. Section 104 PITA 2004 as amended provides:

104. Power to distrain

(1) Without prejudice to any other power conferred on the relevant tax authority
for the enforcement of payment of tax due from a taxable person that has been
properly served with an assessment which has become final and conclusive
and a demand notice has been served upon the person in accordance with the
provisions of this Part of this Act, or has been served upon the person, then, if
payment of tax is not made within the time specified by the demand notice, the
306 See Independent Television-Radio v Edo State Board of Internal Revenue Service supra.

307 See section 1(3)CFRN 1999 as amended.

308 See section 24(f)CFRN 1999 as amended.

309PITA 2004 as amended.

65
 relevant tax authority may, in the prescribed form, for the purpose of
enforcing payment of tax due-
(a) distrain the taxpayer by his goods or other chattels, bonds or other
securities; or
(b) distrain upon any land, premises, or place in respect of which the
taxpayer is the owner, and subject to the following provisions of this section,
recover the amount of tax due by sale of anything so distrained.
(2) The authority to distrain under this section shall be in the form as the relevant
tax authority may direct.

(3) For the purpose of levying any distress under this section, an officer duly
authorized by the relevant tax authority shall apply to a Judge of a High Court
sitting in Chambers under oath for the issue of a warrant under this section.

(4) The Judge may, on application made ex-parte, authorize such officer, referred
to in subsection (3) of this section, in writing to execute any warrant of
distress and, if necessary, break open any building or place in the daytime for
the purpose of levying such distress and he may call to his assistance any
police officer and it shall be the duty of any police officer when so required to
aid and assist in the execution of any warrant of distress and in levying the
distress.

(5) The distress taken pursuant to this section may, at the cost of the owner, be
kept for 14 days, at the end of which time, if the, amount due in respect of tax
and the cost and charges incidental to the distress are not paid, thesame may
be sold.

(6) In exercise of the powers of distress conferred by this section, the person to
whom the authority is granted under subsection (3) of this section may
distrain upon all goods, chattels and effects belonging to the debtor wherever
the same may be found in Nigeria.

(7) Nothing in this section shall be construed as authorizing the sale of any
immoveable property without an order of a court of competent jurisdiction.

From the above provisions, there seems to be no provision implying the sealing of companies
for the purpose of executing distrain powers. However, the court held in FBN v A.G Anambra
& Anor310Kassim J that distrain means to take goods from someone in order to force payment
of debt. The sealing off of the premises of tax defaulters is another means of forcing payment
of debt as long as it is done with reasonable force.311 The court based its judgment on

3104 ALL NTC. 437

311 Ibid at p 447 lines 26-30

66
provisions of section 96 PITA 2004 and on Anambra State edict which gives power to the tax
authority to seal off.

The above judgment with due respect in my own opinion lacks merit and is not well
considered. The Anambra edict is not an act of the National Assembly and cannot supersede
the provisions of PITA. Distrain by all definitions given all over the world does not indicate
that it meant sealing. A careful study of the provisions of section 104 PITA 2004 as amended
will reveal that the intention of the lawmakers is the seizure of goods, chattels, bonds,
securities etc.312 and sale of immovable property where it is established that the immovable
belongs to the taxpayer but no place in the Act appears to suggest sealing. The intention of
the legislators in making provisions for breaking open any premises is clearly for the purpose
of seizure and not sealing.313 Further to buttress this argument is the provision of subsection 5
of PITA314 that provides for the seizure of any movable property of the taxpayer to be kept for
a period of 14 days. The subsection provides:

The distress taken pursuant to this section may, at the cost of the owner, be kept for
14 days, at the end of which time, if the, amount due in respect of tax and the cost and
charges incidental to the distress are not paid, thesame may be sold.

This therefore shows that what the lawmakers envisaged is seizure or sale but not sealing. In
furtherance of this argument is the provision of subsection 7 of that section 315 which states
that an immovable property of a taxpayer can only be sold after obtaining a court order
authorising the sale. It must however, be noted that the RTA can only exercise its power of
sale of the taxpayers property where it can be established that the immovable property
belongs to the taxpayer.316

In conclusion, the intention of the lawmakers should be pursued. The various canons of
interpretations are there to serve as a guide. The literal rule is the first and must be applied
where the words of a statute are clear and unambiguous. To conclude that the purport of the
legislators in this sense means sealing, will be ambiguous and would defeat the purpose and
effect of literal rule.

312 Section 104 (1) PITA 2004 as amended

313Section 104(4) supra.

314Section 104(5) supra.

315Section 104(7) supra.

316 Section 104(1)(b) supra.

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CHAPTER FIVE

SUMMARY, RECOMMENDATIONS AND CONCLUSION

5.0 SUMMARRY

This paper has extensively dealt with the power and process of distrain considering a case
study of Lagos State Internal Revenue Service. It has also observed that despite the potency
and assumed effectiveness of the distrain process, it is not as perfect as it appears, it is clear

68
that the process is bewildered with various issues and challenges. Chapter one dealt with the
introduction to the subject matter, the purpose of the study, scope and history. Chapter two
delves into a practical session of the power and process of distrain under PAYE: a case-study
of LIRS. Chapter three compares distrain process under international jurisdictions. Chapter
four critically examines the various issues plaguing the distrain process as applicable under
PAYE. This chapter proffers some viable solutions among other things to these problems and
then concludes.

5.1 RECOMMENDATIONS

A. On final and conclusive

The RTA must ensure that the followings are properly looked into:

i. Ensuring proper service on the concerned taxpayer: the RTA must ensure that the
taxpayers address truly exist and not a fictitious one. It must also ensure that
demand notices are served on the correct company with the companys
acknowledgement stamp and full names of the receiver;
ii. Determination of objection as final and conclusive: It is suggested here that RTA
should not be the only body overseeing the matters of hearing objections. A
neutral third party must be included to fulfill the principle of natural justice earlier
mentioned;
iii. Enlightenment of taxpayers: taxpayers must be continuously sensitised of the need
to object within the time stated by the law and clearly stating their grounds of
objection. These should be clearly stated in simple day to day English and
preferably through advertising gimmicks;
iv. Finality of final and conclusive: The court should be empowered in all cases to be
able to aid the helpless taxpayer where the RTA has held that the liability is final
and conclusive. This will make the RTA a bit courteous in being fair in
determination of finality of taxpayers liability.

B. On who is subject to distrain between the employee and employer: Although the issue
appears to have been laid to rest, there is the possibility of the decision being challenged
someday at the Supreme Court since the judicial precedent applicable on the matter now
is the verdict of the Court of Appeal. It is hereby recommended that whenever the
opportunity arises for amendment of PITA, clear provisions should be made to make an
employer of labour liable for tax and being subject to distrain as opposed to the employee.

C. On mode of instituting distrain in Court: it is clear that an enactment of the National

Assembly supersedes rules of court. Even in other countries of the world, motion ex parte
is not one of the modes of commencing an action in court. In Nigeria however, with the
system of practice in Nigeria, it is clear that rules of court have formed the basis of our
laws in terms of commencement of action throughout the various levels of court in
Nigeria. Since this is tidier with our laws it is recommended that PITA be amended to
inculcate an appropriate mode of commencement of action with the motion ex parte
procedure. Originating Summons or motion is recommended.

69
 D. On the interpretation and application of Section 104 PITA 2004 as amended: It is clear
that distrain all over the world is about seizure of goods and sale of it or of properties
after obtaining an order of court. It is no doubt that sealing is more effective and less
expensive compared to seizure of goods. It is therefore, recommended that PITA be
amended to include sealing in the definition of distrain for purpose of clarity and smooth
application.

Also, our laws should be defined in such a way that will clarify the properties capable of
distrain and not couched evasively or ambiguously. Enumerating the specific type of
properties capable of being distrained and those exempted from distrain will be a good
provision in PITA whenever it is to be amended.

Further, since distrain is not the only mode of enforcing the payment of taxes, it is also
recommended that other mode of enforcement be tried. For instance the provision of
section 78 PITA 2004 as amended which empowers magistrate courts to have
jurisdictions over tax debts as long as it does not exceed the maximum monetary
jurisdiction of magistrate courts317has never been exploited in the enforcement methods in
Nigeria. It is advised that this method be tried as it tends to be cheaper and faster
compared to distrain. It does not have any issue with the mode of commencement of
actions in our courts as the section already makes provision for a commencement mode
that is apt with the existing modes of commencement.

5.2CONCLUSION

Tax is a civil obligation of all citizens of a country and the payment of it is compulsory
for the growth and development of any nation. It is the life-wire of any positive-thriving
economy. Failure to comply with it should be treated with some level of sanctions and
punishments. Distrain is a major effective tool in compelling payment of taxes under
PAYE especially in Lagos State. The process of distrain is however burdened with some
shortcomings in which recommendations have been made. Adopting the above
recommendations will make the method more effective. It is also suggested in this paper
that other forms of enforcement of payment of taxes should be adopted. A specific
mention is made of section 78 of PITA 2004 as amended which has never been tried in the
process of enforcement of taxes. It is no gainsaying that the adoption of the method will
but have its own shortcomings; it is recommended that we try this method first and then
deal with its shortcomings as events unfold.318

317 Section 28 Magistrate Courts Law of Lagos State supra.

318Prof AbiolaSanni: Power to Distrain under section 104 any scope for the Magistrate Court?
What possible alternative exists? Presented at LIRS Training tagged: Tax Simulation Feb, 2017.

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 BIBLIOGRAPHY

BOOKS, MAGAZINES, ARTICLES, JOURNALS, NEWSPAPERS, COMMISSION

REPORTS, PAPERS ETC.

BOOKS

LIST OF SOURCES OF SCHOLARLY PUBLICATIONS AND OTHER STATUTES

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 1. All Nigerian Tax Law Report of Nigeria.

2. Blacks Law Dictionary Eighth Edition.

3. Abiola Sanni Taxation in the Guise of Administrative Charges-Imperative of Curbing

Abuses of Regulatory Power for Revenue Purpose in Nigeria.

4. Constitution of the Federal Republic of Nigeria, 1999 as amended.

5. Abiola Olateju Somorin: TEJUTAX Reference Book, Nigerian Tax System General
Accounting Taxation terms, (Malthouse Press Ltd)., vol. 1, p 585-586

PAPERS

1. Abimbola Akeredolu: Expository of the Dynamics of Distrain and Injunction in

Revenue Cases.

2. Abiola Sanni: Power to Distrain under section 104 any scope for the magistrate
court? What possible alternative exists?Presented at LIRS Training tagged: Tax
Simulation Feb, 2017.

3. Akhidime E. Augustine and Abusonwan E. Rachel: Nigeria Personal Income Tax

(Amendment) Act, 2011: Implications for Tax Administration and Enforcement.

4. Enforcement Procedures in Nigeria Tax System accessed at www.studymode.com on

16/11/16.

5. Mohammed Bashir-Tanko, Tax Law Enforcement: Practice and Procedure.

6. Olugbenga S. Obatola, The Rudiments of Nigerian Taxation.

7. Olumide, Bidemi Daniel: Distrain under the Personal Income Tax Act: An Analysis
and Evaluation of Principles and Practice.

8. PITA in Nigeria-online publication @ www.ukessays.com.

9. Personal Income Tax Act 2004 as amended.

JOURNALS
1. Journal from www.iiste.org/journals/index.php/Ejbm/article/download.

2. Nigerian Tax Notes Maples and Temples, Vol. 6 No. 06, June, 2000
ONLINE JOURNALS

1. https://www.irs.gov/irs/part5/irm/part5/irm_05-017-003

2. www.wikipedia, the free encyclopedia/distraint

3. http://www.BegbiesTraynor/articles/insolvency/Distraint and notice of Enforcement,

assessed on 27/2/17

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4. http://wordnet.princeton.edu on 4/4/2017.

5. http://www.lectlaw.com/def/d184.htm accessed online on 3/4/2017.

6. http://definitions.uslegal.com/d/distraint

7. www.digitalcommons.law.villanova.edu/cgi/viewcontentcgi?article assessed 22/12/16

8. www.thefreedictionary.com/distrain

9. www.mcmillan.ca/Distress-How-to-seize-without-being-sued.Accessed on 30/11/16

10. http://www.afrrevjo.net/journals/ijah/vol. 2 no. 4 article14. Accessed 16/11/16.

11. http//www.ngex.com/business/Public/Taxes in-Nigeria, accessed on 16/11/16.

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