Habib v The Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Koylass, C.,Burke, M.,Julumsingh, M. |
| Judgment Date | 25 November 1982 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Date | 25 November 1982 |
| Docket Number | I 37 of 1978 |
Tax Appeal Board
Koylass, C.; Burke, M.; Julumsingh, M.
I 37 of 1978
S. Shivarattan for appellant
B. Roopnarine for respondent
Revenue Law - Appeal vs. additional assessments on chargeable income and unemployment levy and imposition of additional tax — Funding of unreported income by appellant — Additional assessments to income tax and unemployment levy referred back to respondent for reassessment on the basis of unreported income — Appellant did not convince that his omission of $77,212.49 from his return did not amount to “fraud, covin, art or contrivance or gross or wilful neglect” and therefore additional tax should be readjusted on the basis of the reassessment to income tax.
On 16th October, 1978, the appellant appealed against additional assessments made upon him for the year of income 1971, whereby his chargeable income was increased from $6,600.00 to $182,167.45. His tax liability was increased from $1,140.00 to $89,943.50. Unemployment levy was increased from nil to $8,606.35. Additional tax in the sum of $89,943.50 was also imposed under section 39(4) of the Income Tax Ordinance (hereinafter referred to as “the Ordinance”).
The additional assessments had been made following an audit in the course of which the respondent had analysed certain bank statements relating to accounts operated by the appellant at Barclays Bank of Trinidad and Tobago Limited at Salvatori Building, Port-of-Spain (hereinafter referred to as “Barclays Bank”), and at the Canadian Imperial Bank of Commerce, Independence Square, Port-of-Spain (hereinafter referred to as “C.I.B.C.”).
The appellant was the owner of Amin's Racing Service operated at 14, Henry Street, Port-of-Spain, and his accounting terminal date was 5th August.
As bank statements for the period 6th August, 1970 to 30th December, 1970, in respect of the account operated at Barclays Bank and for the period 31st January, 1971 to 5th August, 1971, in respect of the account operated at C.I.B.C., had not been supplied to the respondent after requests for same, the respondent estimated the bank deposits for those periods in the following amounts–
Barclays Bank — $5,575.50
C.I.B.C. — $131,975.67
and made the additional assessments
The adjusted chargeable income was arrived at as follows–
| “Total Bank Deposits (actual plus estimates) Add: | $198,586.07 |
| (i) Business expenses met by cash | $45,659.56 |
| (ii) Estimated Private and living expenses | 47,140.00 |
| (iii) Payments under Deed of Covenant | 100.00 |
| (iv) Income Tax Payments | 2,430.010 95,329.56 |
| B/F | $293,915.63 |
| Add: Rental Income (as returned) 6,000.00 – | $299,915.63 |
| Less: Income Reported – | 299,915.63 |
| Racing Pool operation – | $1111348.18 |
| Rental Income 6000.00 – | 124.348.18 |
| Unreported Income (estimated) – | 175,567.45 |
| Add: Chargeable Income previously assessed | 6.600.00 |
| Adjusted chargeable income | 182,167.45” |
The estimated living expense of $47,140.00 was arrived at as follows–
“Estimated Living Expenses met by Cash
Grocery –
$7,200.00
Household items –
4,000.00
Clothing –
4, 60000
Education Expenses (Books, uniforms etc.) –
1,200.00
School fees –
3,000
Allowance for children –
2,400.00
Travelling expenses (Foreign) –
4,500
Expenses for foreign trips (Accommodation, meals, travel etc.) –
7,200.00
Medical expenses –
8,400.00
Telephone and electricity –
8411.01
Motor vehicle expenses –
1,200.00
Domestic help –
1,200.00
TOTAL
47,140.00”
The grounds of appeal are as follows–
“(a) Statement of allegations of fact. The assessment is harsh and unconscionable and bears no relation to the true income of the trade or business carried on.
(b) Statement of the reasons to be advanced in support of appeal. (i) The assessment is based on a hypothetical and presumptive income. (ii) There is no provision in the law for a revised assessment. (iii) The Board of Inland Revenue has not made a discovery to warrant an additional assessment.”
The respondent's contentions, as set out in paragraph 17 of the statement of case, are as follows–
“(i) That the appellant failed to keep and/or produce to the respondent for examination, proper records and books of account in respect of his business of a Racing Pool Operator, which he is required to keep under the provisions of Section 68 of the Income Tax Ordinance, Chapter 33 No. 1.
(ii) That an examination by the respondent:
(a) of the bank statements of the appellant in respect of his Current Account with the Canadian Imperial Bank of Commerce for the period 6th August, 1970 to 30th January, 1971, revealed that the said account was in debit by $150,467.69 as at 30th January, 1971. The statement in respect of the said account showed that the, said account contained a credit balance of $6,061.60 as at 16th September, 1971. The total deposits into the said account for the said period emerging from the bank balances on the above-mentioned dates was therefore $156,529.29. The respondent accordingly estimated the deposits for the period 31st January 1971 to 5th August 1971 on a time basis at $131,975:67.
(b) of the bank statements in respect of his Current Account with Barclays Bank Limited for the period 31st December 1970 to 6th August 1971 revealed that the appellant deposited the total sum of $11,878:24 into the said account. The bank statements for the period 6th August, 1970 to 30th December 1970 were not produced for examination and the respondent accordingly estimated the deposit into the said account on a time basis at $5,575.50
(iii) That the estimates of bank deposits into the accounts referred to in paragraph 16(a) and (b) herein are reasonable and proper in the absence of the bank statement for the periods to which they relate.
(iv) That the bank deposits as determined by the respondent plus the estimated business and private expenses paid for by cash exceeded the gross business receipts returned by the appellant for the year of income 1971.
(v) That as a result of the audit, the 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. The respondent has, on the facts and in the circumstances of the case and to the best of its judgment raised an Additional Assessment on the appellant in respect of the year of income 1971 under the provisions of Section 45(1) of the Income Tax Ordinance, Chapter 33 No. 1.
(vi) That the appellant has failed to satisfy the respondent that the said Additional Assessment is excessive or wrong or to what extent the said assessment is incorrect.
(vii) That the respondent is entitled to impose additional tax on the appellant by virtue of Section 39(4) of the Income Tax Ordinance, Chapter 33 No. 1.
(viii) That although every opportunity was given to the appellant he has failed to satisfy the respondent that the Additional Tax charged under Section 39(4) should not be imposed.”
At the hearing, the respondent was granted, with the consent of the appellant, an order to be at liberty to inspect and take copies of any entries –
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(a) in the books of C.I.B.C. “relating to an account in the names of Amin Habib and/or Courtney Dookie, Manager of the Racing Pool known as Amin's Racing Service, operated by Amin Habib, for the period 31st January, 1971 to 5th August, 1971;” and
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(b) in the books of Barclays Bank “relating to current account No. 211792957 in the name of Amin Habib for the period 5th August, 1970 to 30th December, 1970.”
Copies of documents obtained, pursuant to the order, were made available to the appellant by the respondent and they were tendered in evidence by the appellant and marked as follows –
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(a) Bank statements for the period 5th August 197i to 30th December, 1970, relating to current account No. 211792957 operated by the appellant at Barclays Bank, together with a covering letter dated 15th February, 1982 from that bank to the respondent were marked A H 3.
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(b) A letter dated 1st March, 1982, from the Bank of Commerce, Trinidad and Tobago Ltd. (formerly C.I.B.C.), to the respondent was marked A H 4.
The bank statements referred to at (a) above, showed deposits totalling $22,234.49 for the period. In the letter, exhibit A H 4, C.I.B.C. had informed the respondent that as it kept records for ten (10) years only, records in respect of which the order had been made would have been destroyed.
At the hearing, in addition to the appellant, Rupert Bowman, a Chartered Accountant of the firm of Rupert Bowman & Co., Chartered Accountants, and Courtney Dookie, the manager of the appellant's Racing Service, testified on his behalf.
Guleman Seale, the field auditor, who had conducted the audit, testified on behalf of the respondent.
In considering the evidence, we shall confine our attention to the matters in issue. These are –
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(1) Was there a discovery by the respondent to warrant the raising of an additional assessment under section 45(1) of the Ordinance?
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(2) Did the appellant earn the sum of $175,567.45 or any part thereof as additional income from a taxable source or sources during the relevant year of income?
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(3) Was the additional tax of $89,943.50 correctly imposed under section 39(4) of the Ordinance?
As regards the second issue, it will be necessary to examine the basis for the following amounts which have been disputed by the appellant –
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(a) Total Bank Deposits (actual plus estimates) — 198,586.07
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(b) Business expenses met by cash — 45,659.56
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(c) Estimated living expenses met by cash — 47,140.00
We shall first consider the evidence in relation to total bank deposits of $198,586.07. In this connection, the appellant testified that following receipt...
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