Sampath v Board of Inland Revenue
| Jurisdiction | Trinidad & Tobago |
| Judge | Barnes, J.,Burke, J.,Dean-Maharaj, J. |
| Judgment Date | 21 October 1993 |
| Court | Tax Appeal Board (Trinidad and Tobago) |
| Docket Number | No. I 57 of 1988 |
| Date | 21 October 1993 |
Tax Appeal Board
Barnes, J.; Burke, J.; Dean-Maharaj, J.
No. I 57 of 1988
Mr. S. Jairam and Mr. R. Ramcoomarsingh for appellant instructed by Miss Lesley-Ann Lucky-Samaroo
Mrs. E. Bridgeman-Volney for respondent
Revenue law - Income tax — Appeal against assessment to income tax and unemployment levy — Assessment on adjusted chargeable income and not properly made under ss. 83(2) or 89(1) of Income Tax Act and therefore declared null and void — Appeal allowed.
By notice of appeal filed on 27th April, 1988, Saran Sampath, a proprietor in the lumber business, appealed against assessments to income tax and unemployment levy for the year of income 1979. The appellant, having died before the start of hearing, the appeal was conducted by the Executrix of his estate, his widow Dorinda Sampath.
With the approval of the Court, an amended Notice of Appeal was filed on 13th October, 1992 in which the grounds of appeal in respect of the statement of allegations of fact and the statement of the reasons to be advanced in support thereof are stated as under in respect: of the amounts of $1,196,222.50 and $118,342.25 assessed by the respondent as income tax and unemployment levy respectively:
“AMENDED NOTICE of APPEAL
xxxxx xxxxx xxxxx xxxxx
2. The grounds of appeal are as follows:–
(a) Statement of allegations of fact;
(i) At all material times the appellant carried on a lumber business. In or about the year 1973 the appellant along with one Ramdass Bidaisee acquired the La Florissante Estate (a coconut plantation) comprising approximately 100 acres for the sole purpose of going into agriculture. Due to severe financial problems and incessant demands in the ensuing years from the appellant's bankers, the appellant was forced to sell his share in the said property in 1979. Due to fortuitous circumstances (beyond the appellant's control) the value of the said property was significantly enhanced albeit no supplementary or developmental work was carried out by the appellant. The appellant never traded in land, either prior to this transaction or at all.
(ii) During the course of the year of income, the appellant carried on business inter alia with one Patrick Mahabir from whom he purchased lumber for use in his hardware and flush door factory (which businesses were known by the name or style of Saran Sampath hardware and Homes Flush Door Factory). In the course of trade in the year of income the appellant paid to the said Patrick Mahabir various sums including two sums totaling $327,716.14 in respect of purchases made for lumber.
(iii) Sometime in or prior to the year of income 1979 the appellant's sawmill situate at Penal was destroyed by fire as a result of which further records were lost and/or destroyed.
(iv) By letter dated the 30th day of December, 1985 together with documents purporting to be Notices of Assessment bearing issue dated the 31st day of December, 1985 the respondent purported to raise an assessment on the appellant for income tax in the sum of $315,713.50 and Unemployment levy in the sum of $31,131.35.
(v) By letter dated the 3rd day of February, 1988 and also by letter dated the 10th day of February, 1988 the respondent purported to increase the Appellant's income tax liability from $315,713.35 to $1,196,222.50 and his unemployment levy from $31,131.35 to $118,342.25 and the Respondent purported to have determined the appellant's Notice of Objection in accordance with section 86(8) of the Income Tax Act, Chapter 75:01,
(b) Statement of the reasons to be advanced in support of appeal:
(1) The assessment is arbitrary, erroneous, capricious and/or wrongful both in fact and at law and/or cannot be supported or justified by the Income Tax Act or law relating to Income Tax and unemployment levy.
(2) That the appellant cannot being a property developer bought the said land with no intention of selling it for a profit or at all and that the outline approval being obtained in the circumstances cannot amount to an adventure or concern in the nature of a trade.
(3) That the respondent did not and/or did not sufficiently consider the six (6) “badges of trade” set out in the Final Report of the 1954 Royal Commission as they apply to the facts of this case and proceeded to assess the Appellant to income tax and unemployment levy without any basis in fact or law.
(4) The assessments are invalid, bad and ineffectual at law and the Honourable Appeal Board ought to allow the appeal and vacate the assessments.
(5) The respondent erred in failing to allow the purchases claimed by the appellant and in particular the sum of $327,716.14 as expenses incurred wholly and exclusively in the production of the appellant's income.
(6) The Notice of Assessment bearing issue date 31 st day of December, 1985 did not comply with the requirements of section 113(1) of the Income Tax Act that is to say, it did not contain the duly authorised signature as required by law.
(7) The appellant's Notice of objection was not determined within the period of twelve (12) months within the purport meaning and intendment of section 86(8) of the Income Tax Act as the Finance Act 1986 (No. 1 of 1986) could not have altered nor did it alter the appellant's said right to have the Notice of Objection determined within the period then prescribed by law.
Further the appellant's rights in this regard crystallised and/or vested as of the date of issuance of the alleged Notices of the alleged Notices of Assessment.
(8) The said letters dated the 3rd day of February, 1988 and 10th day of February, 1988 purporting to increase the appellant's tax liability and levy liability are ineffectual, null, void and of no effect since they, are in contravention of the scheme of the Income Tax Act and in particular section 86 thereof.
Alternatively, the appellant will contend that in these circumstances an assessment cannot be made whether by way of original assessment or resulting in an increase in the taxpayer's liability after the expiration of a period of six (6) years after the year of income.”
The notice of appeal followed the determination by the respondent of the taxpayer's objection. Initially, the tax return filed, by the appellant on 24 th July, 1984 showed a loss of $225,943 for the year of income 1979.
The respondent had refused to accept the return filed and on 30/12/85 — folios 15/16 of the record — made an assessment on an estimated chargeable income of $644,627. The taxpayer objected to that assessment by a letter to the revenue, dated 12th February, 1980 — folio 18 of the record.
In its letter of determination of the objection, dated 10th February, 1988 — folio 101 of the record, the respondent informed the taxpayer inter alia “I have considered the reasons set out in your letter of objection and reviewed the assessment. As a result, certain adjustments have been made,….”
The adjustments so made by the respondent included increases in the taxpayer's income with respect to the following:
– Profit on sale of land — $2,246,084
– Purchases overstated — $ 329,442
These adjustments were based on an audit report dated 10th February, 1988.
Numerous authorities were cited, and the following persons testified:–
For the appellant
| Dorinda Sanpath | Widow of the deceased appellant arid executrix of his estate. Retired School Supervisor, 7 First Avenue, Mount Lambert |
| Anthony Gilchrist | Law Clerk, Cocorite. |
| William Hugh Benjamin | Chartered Architect, Valsayn. |
| Errol Nagee | Lumber Yard Manager, of Saran Sampath Lumber Yard. |
| Hamlyn Roy Mike | Chartered Accountant Valsayn. |
| For the respondent | |
| Ramdass Bidaisee | Sawmill Proprietor, Red Hill, D'Abadie |
| Mrs. Worslyn Henry | Field Auditor IV, Board of Inland Revenue, |
At the hearing, the Court was called on to deal with various issues, three of which may have been appropriately contended as preliminary points, any of which if determined in favour of the appellant would result in allowance of the appeal without consideration of the specific disputed items relating to the income of the appellant.
One of the submissions by Mr. Jairam was that the appeal should be allowed for the reason that it had been established that the sane official of the respondent had been responsible for both the raising of the assessment after investigation, and the subsequent determination of the related objection.
The Court must agree that on the face of it as a general principle, the procedure giving rise to counsel's submission cannot be perceived as equitable, and especially so in the peculiar circumstances of this case. The reason for this view is that the original assessment disputed on objection, had been based on a blatant error whereby the figure appearing in the accounts submitted with the return as “cost of sales” had been used as gross profit of the appellant in arriving at an estimated chargeable income, thus increasing the said income from $168,820 to $928,420.
Despite these observations, we reject the submission of counsel for the reason that there is no provision in the relevant law to permit an appeal to allowed because of the procedure followed by the respondent.
Other submissions were:–
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(1) The appellant's notice of objection had not been determined within the time prescribed by section 86(8) of the Income Tax Act;
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(2) Under the scheme of the Income Tax Act and in particular section 89(1), an assessment or additional assessment may not be raised on a taxpayer outside the period of six years, after the year of income in respect of which it is raised. The adjustment made by the audit report of 10/2/88 had the effect of the raising of an additional assessment on the appellant, but was not within the stipulated six year period and is therefore null and void and/or of no...
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