Mootoo v Board of Inland Revenue

• Jurisdiction: Trinidad & Tobago
• Judge: Barnes, J.,Burke, J.,Knights, J.
• Judgment Date: 29 July 1988
• Court: Tax Appeal Board (Trinidad and Tobago)
• Docket Number: Nos. I 64 — I 67 of 1983
• Date: 29 July 1988

Tax Appeal Board

Barnes, J.; Burke, J.; Knights, J.

Nos. I 64 — I 67 of 1983

Mootoo

and

Board of Inland Revenue

Mr. I. Seedansingh for appellant.

Mrs. E. Bridgeman-Volney for respondent.

Revenue law - Income tax — Revenue from undisclosed source — Appeal against assessment to income tax and unemployment levy — Appellant a medical doctor with earnings from rentals and other sources — Evidence that appellant had received funds from an undisclosed source for which he failed to supply documentary evidence — Also, appellant's records in respect of his earnings were incomplete — Adjustment ordered — The assessment of the appellant's income tax and unemployment levy to be redone after income from undisclosed source reduced.

1 These appeals relate to assessments to income tax and unemployment levy for years of income 1975 and 1976 pursuant to the Income Tax Ordinance Ch. 33 No. 1 since replaced by the Income Tax Act Chap. 75:01. The appellant's main source of income was from practice as a medical doctor. He also had earnings from rentals and other sources and had been originally assessed on chargeable income of $11,095. and $10,300. for the years of income 1975 and 1976 respectively. Following a tax audit undertaken by the respondent, his chargeable income for the years was increased to $163,527.88 and $151,652.00 for the relevant years respectively.

2 Following unsuccessful objections against the assessments, the appellant submitted Notices of Appeal on 23rd May, 1983. These appeals were consolidated by order of this Court of 11th July, 1986. During the course of the hearing, the parties arrived at an agreement in regard to the appeals against assessments to income tax and unemployment levy for the year of income 1975 and it was filed with the court on 24th June, 1988. Under the agreement, the adjusted chargeable income of the appellant was reduced from $163,527.88 to $23,230.84 with the result that:–

• (a) Income tax for the year of income 1975 was reduced from $79,065.50 to $5,527.

• (b) Unemployment levy was reduced from $7,681.60 to $661.50.

3 The court has sanctioned this agreement and agreed to confine its further adjudication to the year of income 1976. The tax auditor's findings in regard to 1976 are based on the utilisation of a “sources and application of funds” method which reflected an amount of $135,205.87 as being an undisclosed source of funds to meet total outgoings. This amount was treated as taxable income for assessment to income tax and unemployment levy. The computation by which the tax auditor arrived at the difference is shown on pages 5 and 6 of the respondent's statement of case of 11th July, 1986 (on record) as under –

“1976 Application of Funds:

(a) Loss on La Romain Property	17,557.42
(b) Personal and Capital Expenses paid from National Commercial Bank Current Account	239,360.09
(c) Repayment on Promissory Note for $200,000 — ($12,000 paid in 1975 – Balance $184,000)	4,000.00
(d) Nova Scotia SPL Account payments 12 payments at $1,680	20,160.00
(e) Repayment of loan Account ($800,000 Loan from NCB)
(i) Nova Scotia Promissory Note Balance	184,000.00
(ii) Nova Scotia Promissory Note Balance	115,000.00
(iii) Interest on Two Notes Above	4,653.37
(iv) Nova Scotia Trust Company – Payment for Penitence St.	422,106.86
(v) Nova Scotia Interest	7,562.74
(vi) Penalty Interest	1,407.02
(vii) Interest	2,113.44
(viii) Six Months' Bonus Interest	22,688.24
(ix) National Commercial Bank Promissory Note	40,000.00
(x) National Commercial Promissory Note Interest	952.33	800,484.00
(f) Estimated Cash Living Expenses	15,000.00
(g) Purchase of Daimler Motor Car Pt 7883	45,000.00
Total Application of Funds Identified during the course of audit	1,041,561.51
Total Application of Funds Brought Forward	1,041,561.51

4 Less: Sources of Funds to meet the above Expenditure

(a) Income from Colonial Life	3,576.00
(b) Ballandra Estate — Director's Fees	1,260.00
(c) West Indian National Insurance	900.00
(d) Net Professional Income	22,386.36
(e) Net Rental Income Penitence Street	11,023.36
(f) Increase in National Commercial Bank Overdraft – Opening Balance NIL Closing Balance (56,177.92) Overdraft	56,177.92
(g) Barclays Bank Loan	10,000.00
(h) Loan from National Commercial Bank	800,000.00
(i) Depreciation –
(i) Furniture & Equipment	328.50
(ii) Air Condition Units 679.50	1032.00
Total available Sources of Funds to meet expenditure above –	906,355.64
Undisclosed source of Funds to meet expenditure — Add Back.	135,205.87”

5 The appellant's grounds of appeal are recorded at paragraph 17 on page 8 of the statement of case as under–

“17. The grounds of Appeal with respect to the said income years are as follows –

1976

• (a) Statement of allegations of fact –

  The assessment is arbitrary, excessive and incorrect.

• (b) Statement of the reasons to be advanced in support of appeal

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

  • 2. The chauffeur allowance of $2,400 is deductible.

  • 3. The loss of $16,582.83 on Faralon Drive property is deductible.

  • 4. The loss of $2,880.86 on the Penitence property is deductible.

  • 5. The assessment is unjustified in law and in fact.”

6 The respondent's contentions are stated with respect to both 1975 and 1976 as under in paragraph 18 on pages 8 and 9 of the statement of case.

“18. The respondent will contend –

• (a) that the returns of income submitted by the appellant for the years of income 1975 and 1976 did not reflect the true income of the appellant for the said years.

• (b) 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 it ought to have been charged for the said income years. The respondent has on the facts and in the circumstances of the case and to the best of its judgment raised additional assessments on the appellant under the provisions of the Income Tax Act.

• (c) that the chauffeur allowance claimed by the appellant for the said income years was not wholly and exclusively incurred in the production of the appellant's income for the said years of income and hence not allowable deductions in computing the chargeable income of the appellant for the said years of income.

• (d) that for the years of income 1975 and 1976, the appellant is only entitled to claim one half of any losses sustained on properties jointly owned with his wife.”

7 At the hearing, the appellant conceded the adjustments of $8,778.71 as one half of the loss on Faralon Drives the chauffeur's allowance and the sum of $2,880.80 referred to in (b) (4) of the statement of reasons to be advanced in support of the appeal with respect to the Penitence Street property (see above). The appellant testified to the effect that in 1976 he had not earned any income from an undisclosed source and had correctly returned all his income as stated in his return. He accounted for the difference treated as income from an undisclosed source by asserting that in mid 1976, he had received a loan of $150,000 from the Canadian Imperial Bank of Commerce (hereinafter referred to as “C.I.B.C.”) and that this amount had been excluded as a source of funds by the tax auditor. He tendered Exhibits R.M. 1 and R.M. 2. The former is reproduced in full hereunder:–

“ R.M. 1:

March 5, 1967.

Dr. Romesh Mootoo

c/o San Fernando Medical Centre

corner Penitence & Chacon Streets

San Fernando.

Dear Mr. Mootoo,

We refer to your letter dated January 26, and enclose copies of current account statements for April, June, October, November and December 1975 and January, February and March 1976. We are unable to locate the remaining statements for those periods.

Our record indicates that a loan in the sum of $30,325.41 was granted in April 1976.

Please be guided accordingly.

Respectfully,

F. Mohammed

F. Mohammed (Miss)

Pro Manager.”

The above was contained in a letter from C.I.B.C. to the appellant dated 5th March 1987.

In R.M. 2 he declared inter alia in a sworn affidavit of 5th January, 1988 as under –

TRINIDAD AND TOBAGO:

Appeal No. I 66 — 67 of 1983

IN THE MATTER of THE STATUTORY DECLARATIONS ACT 7:04

I, ROMESH MOOTOO of Faralon Drive, Bel Air, La Romain in the Ward of Naparima in the Republic of Trinidad and Tobago, Medical Practitioner, make oath and say as follows:–

4. That in July, 1976 I received a loan for $150,000.00 from the said Bank but the relevant official documents are unavailable, they having been either lost or destroyed in the course of my moving from one location to another.”

8 The witness further stated that the sum of $150,000 he had obtained from C.I.B.C. had been utilised to meet the cost of repairs and renovations to a property at the Corner of St. James Street and Penitence Street at a total cost of $136,000. He said that he had made several efforts to obtain relevant bank statements from C.I.B.C. to substantiate the loan but these had been unsuccessful even though he had authorised the bank in writing to submit the relevant bank statements to the tax auditor. In this regard he referred to Exhibit R.M. 1 (already quoted) and explained that C.I.B.C.'s failure to locate bank statements despite persistent urgings from him had been due to the fact that the bank premises had been undergoing extensive repair and improvement work at the time it was being attempted to locate the...