Maragh v Board of Inland Revenue

JurisdictionTrinidad & Tobago
JudgeBarnes, C.
Judgment Date29 November 1985
CourtTax Appeal Board (Trinidad and Tobago)
Docket NumberI 74 and I 75 of 1982
Date29 November 1985

Tax Appeal Board

Barnes, C.; Burke, M.; Seemungal, M.

I 74 and I 75 of 1982

Board of Inland Revenue

Mr. Roopnarine for appellant

Mrs. F. Bridgeman-Volney for respondent

Revenue Law - Appeal v. assessments to income tax and unemployment levy — Whether appellant had failed to report income from his business for the year in question — Appellant did not disprove that the estimate which included the value of goods used from his grocery business — Gross sales figures recomputed.

Barnes, C.

By notices of appeal filed on 29th March, 1982 the appellant appealed against assessments to income tax and unemployment levy for the year of income 1976in amounts of $37,557.00 and $3,265.70 respectively.


These assessments followed an office audit undertaken by the respondent in 1976 as a consequence of which the appellant was attributed with unreported income of $73,350.00 from his business of a grocery and rum shop for the year of income 1976


The explanation of adjustments which was attached to the audit report of 14 th September, 1979 is as under –

‘Income from Trade.


From your records produced sales should be $75,245.84 and not $72,205.04 as declared in your Return. There is a difference of $3,040.00.

Since all your expenses — purchases and other expenses were paid by cash from your drawer and since sales as recorded is a total of cash in the drawer at the end of the day the sales figure reported would be understated by the amount of cash used during the day.

Further since there were no withdrawals from the bank for business purposes or loans, the sum total of all your expenses were met by cash from the drawer.

Unreported sales would be as follows

Purchases — $55,192.00 + Trade expenses $4,518.00 + (Personal Expenses $14,400.00 – Goods taken from shop $3,800.00) = $70,310.00


The grounds of appeal stated in the notice of appeal against the income tax assessment were that the assessment was arbitrary excessive and incorrect and the reasons to be advanced in support of the appeal were –

  • “(1) The appellant did not understate his income by the alleged amount or by any other amount.

  • (2) There was no discovery within the meaning of section 45 (1)

  • (3) The assessment is unjustified both in law and in fact.”


In paragraphs 14 and 15 of the Consolidated Statement of Case, filed by the respondent on 17th July, 1985, the contentions of the respondent were stated as under –

  • ‘14. (a) That the return of income submitted by the appellant for the year of income 1976 did not reflect the true income of the appellant for the said income year.

  • (b) That as a result of the audit it appeared to the; respondent that the appellant had been assessed at a lesser amount than that which he ought to have been charged for the said income year. The respondent has on the facts that in the circumstances of the case raised additional assessments on the appellant in respect of the said income year under the provision of Section 45(1) of the Income Tax Ordinance.

  • c) That the appellant failed to satisfy the respondent that the said additional assessments are excessive or wrong or to what extent they are incorrect.

  • (d) That the respondent is entitled to impose additional tax on the appellant by virtue of Section 45 (1) of the income Tax Ordinance.


15, The respondent further maintains that the said additional assessments are justifiable in law and in fact.’


The issue to be determined by this Court is whether in the year of income 1976, the appellant did earn unreported income in the sum of $75,350.80) or at all.


The appellant testified and the following were put in as exhibits,

  • T.M.1 Record of Purchases 1976

  • T.M.2 Record of sales 1976

  • T.M.3 Savings Pass Book- C.I, B.C Account No. 0534/60


His evidence was that his rum shop and grocery was a small establishment: he employed no one and was assisted by his wife. He had kept records of soles and purchases in exercise books. He had paid for all purchases and expenses of the business as well as living expenses; from cash received one had made deposits of balances on into his savings account from time to time. He had recorded gross soles or each week in his sales record (Exhibit T.M.2). The total sales for the year as per T.M.2 was $75,545, being $3,040 in excess of the amount shown in his return. Purchases amounted to $55,192, trade expenses were $4,518, deposits to savings totaled $24,603 and he had used $3,800 worth of business stock in his home.


Exhibits T.M.1 to T.M.3 had been made available to the tax auditor along with receipts for purchases and expenses. These had been examined in his presence by the tax auditor.


He estimated his living expenses for himself, his wife and four children at $145.00 per week, that is $70.00 for food and $75.00 for other expenses. His attention was drawn to the explanations in the tax audit report, in which his living expenses for the year had been estimated at $14,400, including $3,800 worth of goods used from the business. He denied having provided such an estimate to the tax auditor.


In cross-examination, he refuted a suggestion by Mrs. Bridgeman-Volney that he had informed the tax auditor that the figure of $72,205 shown as sales in his return had been the net sum remaining on hand from receipts after deductions of trade end other expenses.


For the respondent, Eddie Ramlochan testified. He had conducted the tax audit on the appellant. He had not visited the appellant's place of business and had interviewed the appellant at the office of the respondent, had made enquiries from him, and examined records and documents produced to him, including a Sales Book — (Exhibit T, M.2), a bundle of receipts, and a Savings Pass Book — (Exhibit T, M.3).


His evidence was that a Purchases Book had not been produced to him and that he was unable to conduct a proper examination of the receipts as they had been generally badly kept, damp, rotting and smelling badly. He had examined those for the months of January to April, 1976 and had returned the bundle to the appellant. He had accepted figures for purchases and for trade expenses in amounts of $55,192 and $4,518 respectively.


He testified to the effect that the appellant had stated in unambiguous terms on more than one occasion, that the sales figures were based on cash from the drawer totalled and recorded on a piece of paper, and that weekly sales as per the Sales Book were net receipts after deductions of amounts paid out as expenses. His analysis of the Savings Pass Book entries confirmed a figure of $24,502.94 as deposits for 1976. He said that the estimate of $14,400 for living expenses had been provided by the appellant and that he had accepted that estimate as being reasonable.


Ramlochan stated that towards the end of his interview, when he had informed the appellant as to the quantum of unreported income according to his findings, the appellant thereupon changed his position by submitting that his method of recording transactions was to compute gross sales by adding money in the drawer it the end of a day to bills for that day. He stated that he had asked the appellant that if that were so, how could he account for the fact that the total of purchases for March according to receipts from the bundle produced was $5,452.29 and sales as per the Sales Book amounted to $5,170.00.


In his address Mr. Roopnarine referred to section 8(2) of the Tax Appeal Board Act, Chap. 4:50, (hereinafter referred to as Chap. 4:50) — formerly Section 43 E(2) of the Income Tax Ordinance, which reads –

“The onus of proving that the assessment or other decision complained of is excessive or wrong is on the appellant.”‘


Mr. Roopnarine submitted that the onus referred to in the section is to be determined on the balance of probabilities, in support of which ho cited T.P. – v. Board of Inland Revenue, of 1972 of the Appeal Board of Trinidad and Tobago. In that case, it was held that the appellant having failed to establish on a. balance of probabilities that a certain sum on which he had been assessed, resulted from betting wins, the assessment must be affirmed and the appeal dismissed.


He remarked that the question of burden of proof had been the subject of considerable litigation before this Court, as well as in other jurisdictions. He expressed the view that what the appellant was required to show was that, on the evidence his assessment was more likely to be correct than that of the respondent, rather than proving with certainty what was the correct quantum for assessment.


He asked the Court to find that the appellant had succeeded in that regard and stressed the following features of his evidence'

  • (a) The appellant had testified that purchases and other expenses had been met from cash receipts.

  • (b) The sales figure in his return agreed with that shown in the statement of account attached to the return.

  • (c) There was a difference of only $3,040.00 between the amount returned as sales and that shown in the Sales Book (Exhibit T.M.2). The revised sales figure of, $75,245 was not disputed by the appellant, though he, not having prepared his own account, could not explain how the discrepancy had arisen.

  • (d) The figure of $72,205.84 represented gross receipts and the cash balance on hard from time to time, having been diminished by payments of trade and living expense;, had been deposited into the appellant's savings account,

  • (e) The amount deposited to savings for the year was $24,602.94.


Mr Roopnarine referred to the evidence of Ramlochan that he had been informed by the appellant that the figure for sales used in the return represented net receipts after sundry payments had been met from cash. In this regard, he observed that in cross-examination, the appellant appeared to be somewhat hesitant in dealing with the point, but this...

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