Abraham v The Board of Inland Revenue

JurisdictionTrinidad & Tobago
JudgeKoylass, C.,Burke, M.,Julumsingh, M.
Judgment Date15 July 1981
CourtTax Appeal Board (Trinidad and Tobago)
Docket NumberI 26/1978
Date15 July 1981

Tax Appeal Board

Koylass, C.; Burke, M.; Julumsingh, M.

I 26/1978

Abraham
and
The Board of Inland Revenue
Appearances:

S. Shivarattan for the appellant.

B. Roopnarine for the respondent.

Cases referred to:

  • (1) Laurette v. BIR (1978–85) 2 T.T.T.C. 232.

  • (2) Albert Montaine v. MNR, 2 TABC (Canada).

  • (3) Mr. Mv. MNR, 2 TABC (Canada).

  • (4) Valentine Mitchell v. BIR (1978–85) 2 T.T.T.C. 157.

  • (5) Marg v. BIR (1978–85)2 T.T.T.C. 163.

  • (6) Levine v. MNR, 50 D.T.C. 337.

  • (7) T.P. v. BIR (1967–77) 1 T.T.T.C. 598.

  • (8) Hudson v. Humbles, 42 TC 380; (1965] TR 135; 109 Sot. Jo. 315.

  • (9) James v. Pope 48 TC.

  • (10) GH v. BIR (1967–77) 1 T.T.T.C. 222.

  • (11) George v. Federal Commissioner of Taxation, 10 ARD 48.

Appeal against additional assessment of income tax

Revenue Law - Assessment of taxation — Whether on a balance of probabilities the figures as assessed were excessive or wrong where there was no affirmative evidence as to gains or losses or amounts bet — Whether the additional grounds of appeal could be relied upon where the application was made at the close of the party's case — Amount of unreported income — Finding that the application for leave should not be granted as it was at a late stage in the proceedings — Finding that the appellant had not discharged the onus of proof placed by Section 43E(2) of the Income Tax Ordinance — Appeal allowed and assessment was referred back to the Board of Inland Revenue — Section 39(4) and 43D(5) of the Income Tax Ordinance.

The appellant was a betting shop operator, who also had income from a rented apartment. For the income year 1971 the Board of Inland Revenue (BIR) accepted and assessed the appellant's tax returns. After a tax audit conducted by the BIR it was alleged that there were unreturned taxable income and a second assessment was communicated to appellant accordingly.

The appellant disagreed and filed an appeal raising issues as to whether

  • (i) the appellant had the evidential burden of proving the assessed figure to be excessive or wrong,

  • (ii) there were unreported income from taxable sources in 1971, and

  • (iii) the newly assessed figures were correct.

He sought to establish that the amount treated as unreported income had been derived from gambling but he did not adduce any credible evidence in support.

Held:

The taxpayer/appellant bears the duty of proving on a balance of probabilities that the figures as assessed were excessive or wrong and since he had failed to discharge the duty placed on him, the contention of the BIR that there was additional unreported income from taxable sources must be upheld, although the newly assessed figures were incorrect and must be reassessed.

Appeal allowed and referred to the Board of Inland Revenue for reassessment

1

This appeal is against a second additional assessment for the year of Income 1971, whereby the chargeable income of the appellant had been increased from $13,920.00, as previously adjusted in 1974, to 170,373.00 As a consequence, his tax unemployment levy liability were increased as follow:–

  • (a) Income tax from $3,828.00 to $35,186.00

  • (b) Unemployment levy from $196.00 to $3,018.65.

2

Additional tax under section 39(4) of the Income Tax Ordinance Ch. 33 No. 1 here after referred to as “the Ordinance”) was imposed in the sum of $13,925, but there had been no appeal in that connection.

3

The facts and circumstances which led to the appeal are as follows:–

  • (a) In a tax return dated 5th May, 1972, the appellant had computed his chargeable income as $5,063.00 and his income tax liability thereon as $725.75.

  • (b) The respondent accepted the return and assessed the appellant accordingly.

  • (c) By letter dated 24th May, 1974, the appellant was informed that his income tax return for the income year 1971 was under examination.

  • (d) Following upon a tax audit bases on bank statements in respect of the betting shop account, the respondent discovered unreported income in the sum of $14,197.00 and unclaimed expenditure in the sum of $5,340.00. These findings resulted in an adjusted chargeable income of $13,920.00 and income tax thereon in the sum of $3,828.00.

  • (e) By letter dated 10th March, 1977, the appellant was informed, inter alia, that his income tax affairs for the income years 1971 to 1975 were under examination and he was requested to make available within ten days of the receipt of that letter all bank accounts held by him and his wife, including savings account pass books, current account bank statements, cancelled cheques, cheque stubs, duplicate deposit slips and particulars of all deposit accounts.

  • (f) Following upon another tax audit, the respondent concluded that the appellant had failed to keep proper records and books of account as he was required to do by section 68(1) of the Ordinance. Accordingly, the respondent raised an additional assessment for 1971, based on an estimate of unreported income in the sum of $112,55.00 as revealed by a net worth computation for the year ending 31st December, 1991. This amount was arrived at as follows:–

    Decrease in net worth — ($11,894.77)

    Add: Non-business expenses –

    Royal Bank of Trinidad & Tobago, 31, Frederick Street, Part-of-Spain — $60,761.56

    Royal Bank of Trinidad & Tobago 55, Independence Square, Port-of-Spain — unidentified withdrawals — 54,232.11

    Estimated cash expenses — $24,000.00

    Income tax payments (as per return) — $1,173.31

    Expenses re: owner occupied property (as per return) — $205.00

    Net income — $128,477.19

    Adjusted net income (as per return) — $16,321.78

    Net unreported income — $112,155.41

    The amount of $60,761.54, treated as non-business expenses met from the current account at Royal Bank, Frederick Street, was itemised on a supporting schedule as follows:–

    Bank interest and charges — $75.30

    Property expenses — $362.87

    Rates and taxes — $2,500.62

    Motor vehicle expenses — $86.55

    Life Insurance — $ 2,347.94

    Telephone and electricity — $745.38

    Mortgage interest–

    Royal Bank Trust Co. Ltd. — $2,450.00

    Payments — Barclays Bank of Trinidad and Tobago Ltd. — $840.86

    Unidentified withdrawals — $51,352.02

    $60,761.54

  • (g) By letter dated 28th December, 1977, the appellant objected to the additional assessment on the following grounds:–

    • 1) The alleged Non-business expenses at the Royal Bank of Trinidad & Tobago Limited, 31 Frederick Street, Port-of-Spain, includes payment of Fairchance's gains and losses, where the pool's bank account could not meet its losses.

    • 2) Estimated cash expenses are excessive and in any event would have already been included in either of the two bank accounts. This therefore would result in double taxing of income.

    • 3) The account at the Royal Bank of Trinidad & Tobago limited, 31 Frederick Street, is a private personal account not in connection with the business and includes private gambling gains and tosses which are not taxable and should not be included.

  • (h) In determining the objection, the respondent reviewed the assessment, and by letter of 21st July, 1978, informed the appellant of reduction from $112,155.41 to $56,452.64 as the amount of unreported income. The reduction of $55,702.77 comprises the following:–

    • (i) Inter bank transfers — $31,702.77

    • (ii) Estimated cash expenses — $24,000.00

  • (i) The adjustment of $24,000.00 as at (ii) above resulted from ground (2) of the letter of objection — see (g) above. The adjustment in regard to inter bank transfers was made following consideration by the respondent of a letter of 8th May, 1978 submitted by Brensley Barrow, a practising accountant, who had been engaged by the appellant to represent him in dealing with the objection. We will refer to this letter in the course of reviewing the evidence led at the hearing.

4

The grounds of appeal are stated in the notice of appeal as follows:–

  • (a)Statement of allegations of fact. The Assessments are excessive and arbitrary having regard to the nature of the trade.

  • (b) Statement of the reasons to be advanced in support-of appeal.

The figures used by Revenue in arriving at the arbitrary assessments do not properly reflect the earnings of the Trade.

5

The contentions of the respondent are set out in paragraph 16 of the statement of case as follows:–

16. The respondent will contend:

  • (i) That the appellant failed to keep and/or produce for audit by the respondent proper records and books of account in respect of his business for the year of income 1971, in accordance with the provisions of Section 68 and 68B of the Income Tax Ordinance chapter 33 No. 1.

  • (ii) That the Income Tax Return submitted by the appellant for the year of income 1971, did not reflect the true income of the appellant for the said year of income.

  • (iii) That the respondent and/or his wife operated either solely or jointly the bank accounts referred to In paragraph five (5) herein and omitted to disclose the existence of these accounts to the respondent during the audit performed in 1974.

  • (iv) That the Net Worth statement prepared by the respondent revealed that the appellant's income exceeded that declared by the appellant in his Return of income for the year of income 1971.

  • (v) That although every opportunity was given to the appellant to produce evidence to show that the Additional Assessments raised on him, were excessive and arbitrary, he has failed to do so.

  • (vi) That respondent is of the opinion that the appellant had been assessed at a lesser amount than that which he ought to have been charged for the year of income 1971, and has accordingly, to the best of its judgment raised Additional Assessments to income Tax and Unemployment Levy in respect of the said year of income, under the provisions of the Income Tax Ordinance and the Unemployment Levy Act, 1970.

  • (vii) That the respondent is entitled to impose Addition Tax upon the appellant by virtue of Section 39(4) of the Income Tax Ordinance.

  • (viii) That the appellant has...

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