Shirkissoon v The Board of Inland Revenue

• Jurisdiction: Trinidad & Tobago
• Judge: Barnes, S.C.
• Judgment Date: 01 January 1994
• Court: Tax Appeal Board (Trinidad and Tobago)
• Date: 01 January 1994
• Docket Number: No. I 2 - I 3 of 1991

Tax Appeal Board

Barnes, S.C.; Burke, Mem.; Dean-Maharaj, Mem.

No. I 2 - I 3 of 1991

Shirkissoon

and

The Board of Inland Revenue

Mr. B. Roopnarine for appellant.

Ms. Allyson West for respondent.

Revenue law - Income tax — Respondent decided that an assessment of the appellant's tax liability should be raised on the basis of a bank deposit method for all the years of income under review — Appellant appealed on the ground that the assessment was not consistent with the facts as supplied to the Board — Court found that the assessment was not properly made under section 89(1) of the Income Tax Act — Appellant satisfied the burden of proof on a balance of probabilities that the assessment of the respondent was not correct — Appeal allowed.

Barnes, S.C.

1 These are appeals against additional assessments to income tax and unemployment levy for the year of income 1982.

2 The facts and circumstances leading up to the disputed assessments can be seen from paras 1 – 5 of the respondent's amended consolidated statement of case filed on 4th November, 1992 (on record).

• “1. During the year of income 1982, the appellant operated a furniture and appliances store under the trade name Teelucksingh's Furniture and Appliances Ltd.

• 2. The appellant filed an income tax return in respect of the year of income 1982 and declared his income tax liability to be as follows –

  Chargeable Income	$5,517.00
  Tax Liability	527.55

  The respondent accepted the said return and assessed the appellant accordingly.

• 3. During the course of an audit examination of the appellant's income tax returns for the years of income 1984 and 1985, which was initiated by letter dated June 9, 1988; it was discovered, inter alia, that the appellant had made large deposits into his bank account during the course of 1982. Since it was found that total bank deposits for the years 1984 and 1985 far exceeded declared sales in those years it was decided that the audit examination should be expanded to include the years of income 1982 to 1986 inclusive.

• 4. In the absence of the appellant's income tax return for the year of income 1982, which could not, by that time, be located, as well as his books and records, which he claimed were lost or destroyed sometime prior to the audit, and having regard to the findings referred to at paragraph 3 above, it was decided that an assessment of the appellant's tax liability should be raised on the basis of a bank deposit method for all the years under review, including the year of income 1982.

• 5. By virtue of the employment of the said method whereby the Respondent treated total deposits as gross sales and total withdrawals as business expenses for the year of income 1982, it was determined that the appellant's chargeable income was $334,706.00 and that his income tax and unemployment levy liabilities thereon were $167,353.00 and $14,985.00 respectively.”

3 By Notices of Appeal filed on 11th January, 1991, the appellant appealed to the Tax Appeal Board against the decision of the respondent on the ground that the assessment was not consistent with the facts as supplied to the Board and as a consequence of the inconsistency the assessment was harsh and oppressive. On 8th July, 1992, the appellant filed an amended Notice of Appeal in these terms –

• I. The contact letter informing the taxpayer that the year for which the assessment was raised was delivered only as late as November, 18, 1988.

• II. The taxpayer made every effort to meet the board's request for information and was in the process of collecting the additional information when notice of assessment was served.

• III. As a result of (II) above the taxpayer was not afforded the opportunity, to respond to the Field Auditor's queries.

• Iv. The auditors failed to consider business expenses which would have arisen during the year of income and therefore deductible against Income.

• v. There is no discovery within the meaning of section 89(1) of the Income Tax Act to justify the raising of the assessments.

• VI. The appellant did not understate his Income by the amount alleged or at all.

• VII. The assessments cannot be justified in law or having regard to the facts and circumstances of the case.”

4 The issues we are to determine are firstly whether there has been a discovery pursuant to sec. 89(1) of the Income Tax Act to justify the raising of an additional assessment and secondly if that hurdle has been overcome whether the appellant can satisfy the court on the evidence that the respondent has erred in raising the additional assessment on the bank deposit method and that that assessment on the appellant is incorrect.

5 The following persons testified in addition to the appellant:–

For the appellant–	Balram Ramlakhan Certified Accountant of Siewdass Road, Upper Caripichaima.
For the respondent–	(1) Lionel Seeram Field Auditor II Board of Inland Revenue (2) Subert Gilbert Field Autitor III Board of Inland Revenue

6 We first deal with the issue of discovery pursuant to sec. 89.(1) of the Income Tax Act which reads –

“89. (1) Subject to this section, where it appears to the Board that any person liable to tax has not been assessed, or has been assessed at a less amount than that which ought to have been charged, the Board may, within the year of income or within six years after the expiration thereof, assess such person at such amount or additional amount as according to its judgment ought to have been charged, and the provisions of this Act as to notice of assessment, appeal and other proceedings under this Act shall m apply to such assessment or additional assessment and to the tax charged thereunder.”

7 Before proceeding to establish the facts on the relevant evidence, there are two points to be noted from the respondent's statement of case, paragraphs 1 – 5 which we have earlier quoted and these are –

• (1) At the time of making the additional assessment the appellant's return for 1982 had not been located.

• (2) The adjustment for 1982 as stated in paragraph 3 of the amended statement of case, was made as it had been found that total bank deposits for years 1984 and 1985 far exceeded declared sales in those years and it was decided that the audit examination should be expanded to include the years 1982 to 1986 inclusive.

8 As the rationale for the additional assessment had been that additional deposits had exceeded declared sales, one would have expected to learn what the figures for declared sales had been in 1982, but this vital information was not provided in the audit report for the reason that the appellant's return had not been available for examination at the time the additional assessment was raised.

9 From the very outset of his evidence, Seeram had indicated the he disclaimed full responsibility for the audit and subsequent assessment. He linked the name of his supervisor with most of the vital steps taken. He declared that the decision to audit the appellant was taken when his supervisor (one R. Maharaj) whom he had accompanied, had visited the appellant and had noted that deposits for 1984 and 1985 were substantially higher than sales reported.

10 Seeram stated that an audit for 1982, as well as 1983 and 1986 was decided upon on the day his supervisor had visited the taxpayer. The audit for the years 1984 and 1985 had been proceeding at the time. Seeram's view was that an overall audit for five (5) years had been proceeding concurrently.

11 Regarding the 1982 audit, Seeram could not at first state the date it commenced and he also asserted that he had had no meeting with the appellant regarding his affairs for 1982.

12 After consulting his notes, Seeram said that the audit for 1982 was started on 14/11/88 and completed on 16/12/88 during which two hours were spent on 24/11/88, one hour on 15/12/88 both in writing up the file and one hour on 16/12/88 in closing the file.

13 Seeram, on being questioned as to comparative figures of deposits and declared sales, was able to comply regarding 1984 and 1985, but stated that he could not do so for 1982, as he did not know the figures for reported sales in that year.

14 In cross-examination,...