Juman v The Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Koylass H,Burke P,Julumsingh A |
| Judgment Date | 30 July 1982 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | I 11 of 1979 |
| Date | 30 July 1982 |
Tax Appeal Board
Koylass H, Burke P, Julumsingh A
I 11 of 1979
Bruce Procope, S.C., and S. Shivarattan for appellant
M. Daly, S.C., and B. Roopnarine for respondent
Revenue Law - Appeal vs. additional assessment to income tax and unemployment levy and additional tax imposed under Income Tax Ordinance, s. 39(4) — Information sought by respondent not available because fire at appellant's company had destroyed most accounting books and records and appellant had been out of country during most of period of respondent's tax audit — Respondent must establish a prima facie case of discovery to warrant the making of an additional assessment — Onus of proof rests on appellant but evidential burden may shift in certain circumstances — Appellant vague as to his financial affairs, income and expenditure and had failed to shift evidential burden to respondent pursuant to s. 43E (2) of Ordinance — Appeal allowed and assessments to income tax and unemployment levy referred back to respondent for assessment of a sum as additional chargeable income — On the subject of additional tax no evidence of gross neglect such as would justify it.
This is an appeal against additional assessments for the year of income 1971, in regard to which the Court is to adjudicate on assessments to income tax and unemployment levy, as well as additional tax imposed pursuant to section 39(4) of the Income Tax Ordinance (hereinafter referred to as “the Ordinance”).
The principal facts and circumstances leading to the appeal are as follows:–
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(a) On 27th April, 1972, the appellant submitted his income tax return for the year of income 1971 in which he stated his occupation as “Company Director”.
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(b) The respondent accepted this return and assessed the appellant on a chargeable income of $5,007, the tax on which was $711.75. No unemployment levy was charged.
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(c) On 14th Ap.1. 1, 1977, the respondent informed the appellant that a tax audit would be u:Idertaken in regard to his income years 1971 to 1975 and requested production of accounting books and records pursuant to section 683(2) of the Ordinance.
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(d) During the period June to September 1977, there were considerable correspondence and interviews between the parties, but little headway was made in regard to the proposed tax audit and to certain matte:73 relating to Juman's Garment Factory Ltd., and t-) three other companies in which the appellant held an interest. We shall refer hereinafter to Juman's Garment Factory Ltd, as “The Company”.
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(e) The respondent was unable to obtain source documents and information sought as –
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(i) there had been a fire at The Company's premises on April 9th, 19751 which it was alleged had caused the destruction of virtually all accounting books and records of the appellant and the four companies being investigated; and
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(ii) the appellant was out of the country for long periods, during the time of the tax audit.
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(f) By letter of 14th September, 1977, the appellant had appointed the firm of Rupert Bowman & Co., chartered accountants, to handle his tax affairs and those of the four companies. We shall refer hereinafter to Rupert Bowman & Co. as “R.B.”.
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(g) By letter of 29th September, 1977 from R.B., considerable information relating to the year of income 1971 was given to the respondent.
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(h) On 7th November, 1977, the respondent wrote to R.B. requesting that a comparative statement of the true net worth of the appellant as at January 1st, 1971 and December 31st of each of the years 1971 to 1976 be submitted within fourteen (14) days.
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(i) Some correspondence between the parties took place after 7th November, 1977, but the net worth statements were never supplied.
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(j) By letter of 28th November, 1977, the respondent communicated an adjusted statement of the appellant's chargeable income for 1971. This had been computed on the basis of a “source and application of funds” method. The chargeable income for 1971 was adjusted from $5,007 to $590,655. It was also stated in the letter that additional tax under section 39(4) of the Ordinance, was proposed at the rate of 100% ($294,615.75).
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(k) By letter of 9th December, 1977, R.B. queried several items relating to the adjusted chargeable income, as reasons why additional tax should not be imposed.
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(l) On 20th December, 1977, the respondent issued notices of additional assessments to income tax, unemployment levy and additional tax, together with copies of tax audit reports.
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(m) The adjusted chargeable income arrived at by the respondent was $256,484. Income tax and levy on this adjustment were computed at $128,242 and $12,324.20 respectively. Additional tax, pursuant to, section 39(4) of the Ordinance, was imposed in the sum of $127,53n.25. An amount of $250,848 was treated as unreported income for 1971.
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(n) R.B. objected to the revised assessments on 28th December, 1971. The grounds of the objection were –
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“(i) The assessment is arbitrary and hypothetical and the income on which the assessment is raised exceeds by far the income of our client for the year under review.
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(ii) In our opinion, due consideration was not given to the submissions contained in our letter of the 14th December.
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(iii) The whole assessment is harsh and unconscionable and is based on wrong premise.”
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(o) Following correspondence between the parties after service of the notice of objection, from which no basis of an amendment emerged, the respondent determined the objection by letter of 22nd December, 1978 stating that it refused to amend the assessments.
The notice of appeal of 15th January, 1979, is in the following terms:–
“2. The grounds of appeal are as follows–
(a) Statement of allegations of fact. The assessment is arbitrary and hypothetical and bears no relation to the income earned by the appellant in the year. There is no provision in the Income Tax Ordinance for a revised assessment.
(b) Statement of the reasons to be advanced in support of appeal. The assessment is presumptive, harsh and unconscionable and is based on wrong premise.”
In paragraph 12 of the statement of case filed on 15th August, 1978, the respondent contends as follows–
“(i) Information supplied to the Respondent under the provision of Section 77(1) of the Income Tax Ordinance showed that the appellant received, during the year of income 1971, interest as follows–
(a) The sum of $630.00 on a Fixed Deposit with the First National City Bank, Trinidad and Tobago Limited, Independence Square, Port-of-Spain, but omitted to declare the said income in his return of income for the year 1971.
(b) The sum of $326.95 in respect of a Fixed Deposit with the National Commercial Bank Trust Company (Trinidad and Tobago) Limited, during the year 1971, but omitted to declare the said income in his return of income for the year 1971.
(ii) An examination of the appellant's bank accounts and other records revealed that the appellant's expenditure for the year 1971, exceeded his total funds by the sum of $250,848.00.
(iii) The appellant has failed to produce any evidence, although every opportunity was afforded him for this purpose, to show that the Additional Assessment raised on him by the Respondent is arbitrary, hypothetical or excessive, or to what extent the said assessment is incorrect.
(iv) 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.
(v) The appellant failed to provide information and answers to questions with respect to his income and assets for the year 1971, as is required under Section 53(1) and Section 68A(1) of the Income Tax Ordinance.
(vi) The appellant failed to produce proper records and books of account as is required to be kept under Section 68(1) of the Income Tax Ordinance.”
At the hearing, counsel for the appellant sought and obtained leave to argue additional grounds as under –
“(1) Save and except the amounts of $630 and $326.95, being interests from the First National City Bank and the National Commercial respectively, there was no discovery within the meaning of Section 45(1) of the Ordinance.
(2) The imposition of the additional tax pursuant to Section 39(4) is unjustified both in law and in fact.”
The issues to be determined are –
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(a) Did the respondent make a discovery to warrant the making of an additional assessment, pursuant to section 45(1) of the Ordinance?
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(b) Did the appellant derive unreported income in the year of income 1971 in the sum of $250,848, or at all, which is subject to income tax and unemployment levy?
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(c) Do the circumstances warrant the imposition of additional tax under section 39(4) of the Ordinance?
In addition to the appellant, Paul Roopsingh testified on his behalf. For the respondent, Barry Chang, the tax auditor who had undertaken the investigations leading to the additional assessments, testified. The Court also heard evidence from Ian De Silva, Assistant Manager, Operations, of the Bank of Nova Scotia, Frederick Street.
We shall first deal with the evidence in general terms and layer on consider relevant evidence as it affects the several items in regard to which there is dispute.
The appellant's testimony was to the effect that in 1971 he had been the Managing Director of The Company at a monthly salary of $1,200. He stated that he had not been cognisant of the details of his financial and tax affairs for that year and that Paul Roopsingh had attended to such matters. As a director, responsible for finance, Roopsingh had performed a similar function for The Company, thus he would be better able to answer certain questions relating to his and The Company's affairs.
He testified that Roopsingh had prepared the income tax return for 1971. He had inspected and signed it. He, however,...
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