Estate of X (Deceased) v Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | A |
| Judgment Date | 01 January 1990 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | Nos. I 124 - I 127 of 1985 |
| Date | 01 January 1990 |
Tax Appeal Board
Barnes, J.; Burke, J.; Dean-Maharaj, J.
Nos. I 124 - I 127 of 1985
Mr. B. Roopnarine for appellant
Mrs. M.A. Robinson-Walters for respondent
Revenue law - Income tax — Assessment — Appeal against assessments to income tax, unemployment levy and penalty tax — Assessment objected to was based on certain document from which the respondents had concluded that the appellant had been paid or credited with sums as interest — No proper internal audit carried out and therefore data on which respondents worked was incomplete — Additional tax as penalty set aside on ground that appellant was not given an opportunity to state his case.
These are appeals against assessments to income tax and unemployment levy for years of income 1979 and 1980, for which years, X had been originally assessed on income declared by him on salary from employment in amounts of $24,000 and $36,000 respectively.
We note from the record that subsequent to making returns for 1979 and 1980, X died in August 1981, but his returns were selected for audit by the respondent in December 1982. We also note that one of the executors of the deceased's estate was one Y (son of the deceased).
Following the audit, adjustments were made to the income of the deceased by the inclusion of $679,207.54 and $253,576.62 as unreported income for 1979 and 1980 respectively as stated at paragraph 10 of the respondent's Statement of Case, (on record):
“10. By letter dated June 12, 1984 the respondent wrote to the said Y notifying him of its intention to adjust the deceased's chargeable income and specified fully the proposed adjustments as follows –
Unreported income
1979
1980
Fixed deposit — TradeConfirmers Ltd.
Interest income
173,370.24
253,576.62
Increase in fixed deposit.investment:
505,837.30
Total unreported income
679,207.54
253,576.62
Add: Chargeable income per return
16,650.00
27,000.00
Adjusted chargeable income
695,857.54
280,576.62
Tax on chargeable income as adjusted
347,928.50
140,288.00
Tax previously assessed
3,577.50
7,450.00
Tax liability
344,351.00
132,638.00
Levy liability
Adjusted chargeable income
695,857.00
280,576.00
Less statutory allowance
20,000.00
20,000.00
Unemployment Levy income
675,857.00
260,576.00
Unemployment levy (5%)
33,792.85
13,028.00
Unemployment levy previously assessed
-
350.00
Levy liability
33,792.85
12,678.80
By the same letter, the Respondent also informed Y of its intention to impose additional tax at the rate of one hundred percent (100%) under Section 39(4) of the Income Tax Ordinance (now Section 83(4) of the Income Tax Act Ch. 75:01).”
The initial decision to increase the tax liability of the appellant was based on certain documents from which it was concluded that X had been paid or credited with interest of $173,370.24 and $253,576.62 on deposit with Trade Confirmers Ltd (T.C.).
On 28th September, 1983, the respondent sent a letter addressed to X in these terms, vide folio (10) of the record:–
28 th September, 1983
X
Port of Spain
Sir,
Income years 1979 & 1980
File No.: 812927-1
In accordance with Section 77 (1) of the Income Tax Ordinance Trade Confirmers Ltd. has notified the Board that interest in the amounts of $173,370.24 and $253,576.62 was paid or credited to you for the years of income 1979 and 1980.
An examination of your income tax returns for the years of income 1979 and 1980 reviled that you failed to report as income the interest mentioned above or any part thereof. Would you kindly let-us know your reasons for the failure to report as income the above mentioned interest.
In addition please state the source of funds utilized to commence the deposits supported by documentary evidence. In this regard please produce certificates from Trade Confirmers Ltd, showing the following:
a) the amounts held on deposit which earned the said interest;
(b) the dates such amounts were first deposited;
• the dates of maturity of the deposits;
(d) the disposal of the funds at maturity of the deposits;
(e) the rate at which the deposits earned interest;
(f) whether the deposits represent new funds or the renewal of deposits previously held.
Please send your reply in writing by October 14, 1983 addressed to:
Commissioner,
Board of Inland Revenue Sixth Floor,
Trinidad House,
Port of Spain.
Yours faithfully,
for Commissioner,
Board of Inland Revenue.”
Shortly after the letter of 28/9/83 the respondent on 11/10/83 was informed by Y that X had died in August 1981 and that he - Y was one, of the Executors of the Estate - Vide folio (12) of the Record:
“Commissioner,
Board of Inland Revenue
Sixth Floor, Trinidad House,
Port of Spain.
Dear Sir,
This is to acknowledge your letter dated 28th Sept., 1983.
I wish to advise you that X passed away in August 1981. Since then, we the executives of his estate, have been looking into the assets and liabilities of X's estate.
We are presently making inquiries concerning the information which you have requested.
As soon as we are able to reveal any relevant information concerning this matter, I shall contact you immediately.
Thanking you,
I am,
Yours faithfully,
Y.”
Over the period 11/11/83 to 12/6/84, the respondent was in communication with Y, in pursuance of its request for information as stated in its letter of 28th September, 1983. The information sought was not supplied, and on 12th June 1984 the respondent notified Y of its intention to adjust the income as it had previously indicated and also to impose additional tax (penalty) at the rate of 100 under section 39(4) of the Income Tax Ordinance, Ch. 33 No. 1 (now section 83(4) of Chap. 75:01). The assessments as proposed were made on the basis of tax audit reports dated December 17th 1984, the explanation of adjustments being “please refer to the Board's letter of 12th June 1984”.
Before taking action to adjust the chargeable income and impose a penalty as stated in the letter of 12th June, 1984, the respondent had communicated with T.C. by letter of 4th April, 1984 and had received a reply by letter updated. These letters at folios 34 and 35 respectively on the record, are reproduced hereunder–
Folio 34
“4 th April, 84
The Managing Director,
Trade Confirmers Ltd.
68, Independence Square,
Port of Spain.
Sir,
Re: “X”
Your company has notified the Board that interest in the amounts of $173,370.24 and $253,576.62 was paid or credited to the above-named taxpayer for the years of income 1979 and 1980 respectively.
In accordance with Section 68 A (1) of the income fax Ordinance the Board requests that you supply the following information with respect to the interest shown in the previous paragraph:
i) the amounts held on deposit which earned the said interest;
ii) the dates of the investment and maturity of the deposits;
iii) the rate at which the deposits earned interest;
iv) whether the deposits represented new funds or the renewal of deposits previously held;
v) the disposal of funds at termination of deposits.
Please be informed that the Board received no return of interest paid or credited to the said taxpayer for the year of income 1981. Kindly submit for the information of the Board interest paid or credited for income year 1981. In addition the information requested in items (i) to (v) should also be submitted in respect of income year 1981.
Please send your reply in writing by April 18, 1984 addressed to:
Commissioner,
Board of Inland Revenue,
Second Floor,
Trinidad House,
Port of Spain.
Yours faithfully,
for commissioner, Board of Inland Revenue.”
Folio 35 undated
“Ihe Commissioner,
Board of Inland Revenue,
Second Floor,
Trinidad House,
PORT of SPAIN.
Dear Sir,
Re: “X”
Your letter in connection with the above dated 4th April, 1984, refers.
We are of the opinion and have been so advised taut our relationship with the taxpayer, having regard to the nature of our business, is a professional and confidential one.
In the circumstances, you are entitled to ask for a statement of interest paid to the taxpayer and we are obliged to comply with that request.
However, we consider our relationship with the taxpayer in connection with the business transaction in question privileged and confidential subject to the one exception aforementioned.
Because of that confidential relationship which is recognised by section 68(A), we are forced to refrain from complying with your request.
Thanks.
Yours respectfully,
Sgd.??
TRADE CONFIRMERS LIMITED.”
There were further communications between the respondent and subsequent to the letter of 12th June, 1984 particulars of which are paragraphs 1l to 14 of the statement of case as follows–
“11. By letter dated June 26, 1984 the said Y sought an appointment to discuss the proposed adjustments the respondent.
12. By letter dated September 12, 1984 the respondent fixed an appointment as requested on September 20, 1984.
13. On September 20, 1984 the said Y and Mr. S. his legal representative conferred with an officer of the Respondent. The said Y informed the Respondent that he was the Executor of the Deceased, and promised to make enquiries of Trade Confirmers Ltd with a view to obtaining proof of the matters listed at para. 5(a) through (f) hereof.
14. By letter dated September 25, 1984 the said Y in his capacity of executor of the appellant's estate wrote the respondent and promised to continue his said enquiries. No further communication was received from the said executor.”
The contentions of the parties are set out in paragraphs 20 and 21 of the statement of case as under –
“20. By Notices of appeal dated December 16, 1985 the said Y appealed against the decision of the Respondent alleging that the...
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