QUESTION 4 A. Businesses have been hit severely in the light of Covid-19 pandemic and the Movement Control Order imposed by the Malaysian Government to curb the spread of the disease. Karim, a business owner of a restaurant in Negeri Sembilan, had to shut down his business as the abrupt decline in his business income could not sustain the business operating expenses. Briefly explain the type of assessment that could be issued to Karim by the Director-General of Inland Revenue Board of Malaysia when he ceased his business, and why this assessment is issued. B. Based on each of the situations below, explain the type of offence, the provision of the offence under Income Tax Act 1967, and penalty (fine/imprisonment) faced by the taxpayers: i. Aaron submitted a duly completed return for the year of assessment 2019 on his own. He had declared business income from selling imported gift items and souvenirs. It was discovered during a tax audit that he had not declared his income from the rental business that he has been carrying on for the past 5 (five) years. ii. Ben is a head of accounting department in LHS Sdn Bhd. For the year of assessment 2019, he was instructed by the director of the company (Tan), to reclassify certain entertainment expenses of the company (which are not allowable for income tax purposes) as purchases of goods and service. By doing so, he managed to understate the tax liability of the company by more than RM5,000 for 2019. This was discovered during a tax audit. iii. Chong is a tax agent, appointed by Rinata Sdn Bhd to prepare the tax computation for the company. A detailed statement for "Sundry Expenses" of RM80,000 provided by Rinata Sdn Bhd had clearly indicated that a donation of RM10,000 was included therein. Chong made an immediate request in writing for the receipt, advising the company that only donations made to approved bodies or institutions under section 44(6) would be eligible for deduction. Rinata Sdn Bhd confirmed in a letter that the donation had been made to an approved body and that it was in the process of obtaining the receipt for it. In view of the impending due date for the submission of the return and relying on that confirmation, Chong made the relevant adjustments for the donation in the tax computation. It was discovered during a tax audit that there has been an understatement of the company's tax liability as the donation had been made to a non-approved body, about which the company had neglected to inform Chong as the tax agent subsequently.

iv. Fatt, a graduate of Lim Kok Wing University, founded a startup business in Selangor after he graduated. He has been earning a steady income from his business venture in 2019. However, he did not declare any of his income to the Inland Revenue Board of Malaysia by filing Income Tax Return Form, as he was afraid of not getting any government assistance thereafter as his income exceeds the limit stipulated.

taxation questions

(Malaysian tax system)