Boodhoo v The Board of Inland Revenue

• Jurisdiction: Trinidad & Tobago
• Judge: Koylass, C.,Burke, M.,Julumsingh, M.
• Judgment Date: 07 February 1985
• Date: 07 February 1985
• Court: Tax Appeal Board (Trinidad and Tobago)
• Docket Number: I 82-85/1980

Tax Appeal Board

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

I 82-85/1980

Boodhoo

and

The Board of Inland Revenue

Appearances:

S. Shivarattan for the appellant.

Al Robinson-Walters for the respondent.

Revenue Law - Assessment of taxes — Appeal against assessment to income tax and unemployment levy and to additional tax — Whether the true and correct returns of the income had been filed — Whether the appellant had in the relevant years earned other income which had not been returned — Whether the Appellant was guilty of wilful neglect — Finding that the appellant had failed to provide the cost of construction; the period over which the building had been constructed and the amounts utilised from bank loans — Finding that the Appellant had not entrusted the person with the preparation of his tax return that he had utilised earnings of the business in financing the construction of the building and was guilty of wilful neglect — Appeal dismissed.

The appellant carried on an automotive spare parts business as a sole trader. He purchased a parcel of land and constructed a building thereon, financed by three mortgage loans. On a tax audit, the appellant failed to supply information as to the cost of the building and failed to state he had earned interest on a fixed deposit. The issues on appeal were whether the appellant had filed true and correct returns of his income and, if he had not, to what extent the income refunded was incorrect. The respondent had the building valued.

During the hearing of the appeal, the appellant admitted that cash from the business had also been used in the construction of the building, having previously stated at the time of the audit that it had been financed by the three mortgage loans. In his evidence, the appellant had also admitted that he had received interest on a fixed deposit.

Held:

where a taxpayer is found guilty of wilful neglect in the preparation of his tax returns, any appeal against the assessment of his chargeable income will be dismissed; in this case the appellant had, in addition to not including the income from the fixed deposit, failed to inform the person entrusted with the preparation of his tax returns that he had utilized earnings of the business in financing the construction of the building and in the circumstances, he was guilty of willful neglect and his appeal must be dismissed.

Appeal dismissed. No case referred to.

1 These appeals are against assessments to income tax and unemployment levy and to additional tax under section 39(4) of the Income Tax Ordinance (hereinafter referred to as “the Ordinance”) for the years of income 1974 and 1975, as follows:

Year of Income — 1974

Income Tax — $73,694.69

Unemployment Levy — $6,895.10

Additional Tax — $14,700.00

Year of Income — 1975

Income Tax — $45,907.00

Unemployment Levy — $4,101.10

Additional Tax — $7,600.00

2 The reasons for the assessments are set out in paragraphs 4 to 11 of the statement of case as follows:

4

During the course of the audit it was discovered that the appellant had purchased a parcel of land at El Socorro Road in 1973 and constructed a three storey building thereon during 1974, 1975 and 1976. 5. This property along with his business was sold to Autorama Ltd. on or about the 1st October, 1975. 6. The appellant alleged that the source of funds to construct the building was three mortgage loans but failed to satisfy the respondent that these loans were in fact expended on construction of the building. The respondent estimated the cost of the building to be $268,101.55. 7. The respondent decided to analyse the appellant's banking records and discovered deposits in the years under appeal in excess of the amounts reported by the appellant as income. 8. In the absence of proper books and records pertaining to debtors and creditors all outlays were treated as being met by bank withdrawals or cash. Further the appellant failed to provide the respondent with balance sheets in accordance with normal accounting practice whereby the respondent could ascertain whether creditors existed and if so the extent of the extent of such creditors. 9. As a result of the foregoing the respondent came to the conclusion that the appellant had unreported income totalling $140,303 in 1974 and $64,514 in 1975 and that these sums and not the mortgage loans had been the main source of construction of the building. 10. In both years the appellant received $4,500.00 interest on a fixed deposit which was not disclosed in his return of income. The respondent therefore added this to the appellant's income as declared by him. 11. As a result of sale by the appellant of certain assets to Autorama Ltd. the respondent computed the sum of $20.368.00 as balancing charges to the income of the appellant for the year 1975.”

3 At the hearing, the appellant testified as follows:

During the years of income 1974 and up to 30th September, 1975, he had carried on an automotive spare parts business at E1 Socoro Road, San Juan, as a sole trader. As from 1st October, 1975, a company, Autorama Ltd., had taken over the business formerly carried on as Joe's Auto Supplies. As from 1st July, 1975, business had been carried on in new premises constructed by him three quarters of a mile south of the old premises.

Around March 1973, he had purchased a parcel of land at a cost of $43,000 and around May to June 1973 he had started construction thereon. He had started acquiring materials such as steel, B.R.C. and nails for the building way back in 1971, as he had then intended to build on the site where he had been carrying on his business. He had not retained the services of any architect, engineer or contractor in connection with the construction of the building. The plan had been prepared by a person who had prepared plans for other people in the area. The physical work had been done by carpenters and masons under his supervision. On completion, the building consisted of three floors, each 76 feet long by 45 feet wide. In addition, on the ground floor there was a floor area of 24 feet by 12 feet which was used as a tyre shop. The overall height of the building was 32 feet.

He had obtained a loan of $80,000 from Barclays Bank in 1973 and had utilised that sum to acquire the land and to purchase materials for the building. In 1974, he also had an overdraft of $40,000 at Barclays Bank, which had been utilised in constructing the building. A stage had been reached where he wanted more money for the building and, as Barclays Bank was not prepared to grant further facilities, he had sought and obtained a loan of S120,000 from Canadian Imperial Bank of Commerce (hereinafter referred to as “C.I.B.C.”) on 19th December, 1974 and paid off Barclays Bank.

In addition to the funds obtained from Barclays Bank to finance the purchase of the land and the construction of the building, he had utilised approximately $78,000 of business receipts to finance the project.

He had kept books and records pertaining both to the business and construction of the building.

4 He tendered the following in evidence:

• (1) Analysis Cheque and Cash Expenditure Book for 1974 and 1975 — exhibit J.B.1.

• (2) Cheque Payment Book — exhibit J.B.2, which was a record of every cheque issued in 1974, 1975 and a part of 1976.

• (3) Certified copy of mortgage deed No. 38 of 1975 evidencing a loan of $120,000 by C.I.B.C. to the appellant — exhibit J.B.3.

• (4) Bank Deposit and Withdrawal Book in respect of account at C.I.B.C. for the period 30th December, 1974 to 6th January, 1976 exhibit J.B.4.

• (5) Creditors' Ledger for the period 1970 to 30th September, 1975 exhibit J.B.5.

• (6) Daily record of amounts expended on material and labour in constructing the building — exhibit J.B.6.

• (7) Record of payments for labour in the construction of the building from May 1973 to December 1973 — exhibit J.B.7. This was in the form of an ordinary diary, which included other general matters.

• (8) Record of payments for labour in the construction of the building from January 1974 to 31st January, 1975 — exhibit J.B.8. This was in the same form as J.B.7.

• (9) A statement prepared by him from original records for use at the hearing which showed the cost of labour and materials expended in the construction of the building — exhibit J.B.9.

5 The witness further stated that some time during the year 1978 he was interviewed by a tax auditor, who had requested his business records. As at that time he had been employed at Trinidad Feed Mills, he had taken the auditor to his business place and requested his daughter, Kamini Boodhoo, to make all books and deeds available to him. The auditor had inquired about the cost of the building and he had told him that he could not give the cost just like that. His reason for so stating was that in the course of moving to the new building, bills and books had been misplaced. The books in which he had recorded information pertaining to the building costs (exhibits J.B.6 to J.B.8) were subsequently found by his daughter among some school books on the second floor. Exhibit J.B.6 contained an accurate cost of the building which was $151,609.33, and the figures for labour contained therein corresponded with those in J.B.7 and J.B.8.

6 In cross-examination, the appellant testified as Inflows:

7 He had been advised by his daughter, Kamini, that more than one book had been produced to the auditor. He had not kept a general ledger in 1974, He had, however, kept an expense book, a record of cheque payments and deposits and sales invoices, but had not retained duplicates of the sales invoices. He agreed that, in reply to a letter from the auditor dated 25th July, 1978 (folie it of the record), requesting him to confirm certain statements he had allegedly made to the auditor, he had confirmed by letter dated 8th August, 1978 (folio 40 of the record), that the building had been constructed during the years 1974 to...