060-NLR-NLR-V-51-GULLAIN-Appellant-and-COMMISSIONER-OF-INCOME-TAX-Respondent.pdf
Ouillmn t>. Commissioner of h^oine Tax
241
1949Present: Dias J. and Gunasekara J.GUILLAIN, Appellant, and COMMISSIONER OF INCOME TAX,Respondent
S. C. 431—Income Tax, Case Slated, 25)69—BRA, 202.
Income Tax—Additional assessment—Appeal by assesses—Burden of proo/—Incomefrom undisclosed source—Non-disclosure of information by assesses—Effect onassessment—Evidence—Rules of evidence—How far binding on Assessor—Income Tax Ordinance (Cap. 188), sections 64 (3), 65, 73 (4).
The burden of proof in an income tax appeal, whether to the Commjesionerunder flection 69 of the Income Tax Ordinance or to tbo Board of Reviewunder section 73 (4), lies on the assesses.
It came to the knowledge of the income tax authorities that the aseeesee-appellant, although his declared source of income was his salary as the manageroi an hotel, had to his credit in two banks a large sum of nearly two lakhs ofrupees. The aesessee, although called upon to furnish returns and to giveinformation, failed to do so. Thereupon, tho assessor, acting undor section65 of the Income Tax Ordinance, proceeded to assess him “ at the amountor additional amount at which according to hie judgment sue!) person ought tohave been assessed
Held, that, inasmuch as the onus was upou the usse6see to displace theassossmont, the asseseee took grave responsibility in not producing materialswhich would undoubtedly have been of great value for the purpose of formingthe assessor’s opinion. In the circumstances tbo assessor was not bound bythe strict rules of evidence and was entitled to make an assessment accordingto bin judgment.
r
ASE stated by the Board of Review under section 74 of the Income
Tax Ordinance.
N.R. Weerasooria, K.C., with G. T. Sameraunckrame, for asscssec-appellant.—
The findings of the Commissioner are based on conjecture and suspiciononly and not on facts. The question whether there is any evidenoe tosupport the findings apart from the adequacy of evidence is a questionof law and one fit for determination on a case stated. See AmericanThread Co. v. Joyce l.
The initial onus has been cast on the assessoe without any proof beingadduced against him. It is not open to tho taxing authorities to do thisand then to disbelieve the assessee’s assertion that he received no profitsand impose a tax without any affirmative proof. Seoin re Bishnu PriyaChoudhurani2.
The appellant gave evidence to the effect that there -were no undisclosedprofits liable to taxation in his hands and stated categorically the sourcesfrom whioh he received sums of money. This is the only evidenoe in-the case. The Commissioner has suggested in his order that the appellantwas engaged in Black Market operations in liquor. That would amountto a criminal offence. There is no evidence at all to support thatsuggestion. It is submitted that the Commissioner was not entitled tospeculate in that way or to assume conduct amounting to a criminal
offence without evidence,
1 (1912) 106 L. T. 171.
11——LI.
1J. N. A 05636—1,040 (2/50)
a 50 Cal, 507.
242
GuiUain v. Commissioner of Income Tax
One of the documents rolied on by the Commissioner is R 23 which issaid to be a comparative statement of profits from other Bars as appearingin departmental files. The names of the Bars are nob given. These arealtogether res inter alios actae and not binding on the appellant. Apartfrom that, if the Commissioner had material which he wished to use, heshould have put it to appellant to enable the latter to show the trueeffect of that evidence and its applicability or otherwise to the case.Where the names and identity of the Bars are withheld this cannot bedone. It is submitted that the evidence is worthless and should not havebeen considered.
The document R 23 is a letter written on behalf of the appellant tothe assessor for the purpose of a settlement and is marked “ withoutprejudice It is referred to several times in the order as containingadmissions which are used to support the findings if they do not formtheir basis. The objection to this document is twofold : (a) It shouldnot have been admitted at all, (6) The true effect of a document marked“ without prejudice ” is that no admission is made thereby but a basisof settlement proposed. See Cory v. Bretton *.
By reason of the alleged admissions tho Commissioner has proceededon the footing that it was common ground that there were undisclosedprofits and he has thereby gravely misdirected himself as to appellant’scase.
M. F. S. Pidle, K.C., Acting Attorney-General, with H. W. R. Weera-sooriya, Crown Counsel, for the Commissioner of Income Tax,respondent.—
In Income Tax appeals the onus has always been considered to be onthe assessoe to show that the assessment is wrong. Seo Haythomthwaitev. Kelly 2; Norman v. Colder3. The documents produced in this caseshow that the assessor repeatedly called on the appellant for explanationsbut the latter failed to give any. In such circumstances taxing authoritieshave been held entitled to make an estimated assessment on such materialsas are available to them. See Mcpherson & Co. v. Moore4.
The returns of the appellant for previous years disclose only a smallamount received as remuneration for employment. The discovery of alarge sum like Rs. 198,557 ■ 10 in his bank account coupled with his failureto give any explanation suggests that he had some undisclosed sourceof profit and justified the assessor making an additional assessment.The appellant gave evidence and put forward certain explanations tothe Commissioner which he did not accept. It is submitted that in viewof appellant’s previous conduct the Commissioner was entitled to saythat he would not act on his bare word, especially when evidence tocorroborate him was available but was not brought forward.
The Commissioner has found that the appellant had undisclosedprofits in his hands and has pointed out that operations in the BlackMarket in liquor was the probable source. There is an independentfinding on the relevant facts.
With regard to R 29 which is a comparative statement of Bars’ profitsno objection was taken at the time this document was put in or in thepetition of appeal to the Board. The objection to it, if any, must therefore
1 4 C. a? P. 462.■* 26 Tax Caeca 297.
• U Tax Cases 664.4 6 Tax Casts p. 114.
DIAS J.—Ouillain v. (.'onuniMiontr of Income Tar^43
"be taken to have been waived. Apart from that when an assessee hasfailed to disclose relevant material when oalled upon to do so, the assessoris entitled to make an estimate and for that purpose to rely on anymaterial in his possession—(Jan^a Ram Balmokand v. The Commissionerof Income Tax, Punjab *.
With regard to R 23 too no objection was taken at the time itwas put in or in the petitionof appealto the Board.Anyobjection
to it also must therefore betaken tohavebeen waived.Further,
under sections 71 (4) no grounds other than those stated in the petitioncould have been urged before the Board and a fortiori before this court.The present appeal is really from the order of the Board but no reasonsagainst it have been urged. It is tho order of the Commissioner thathas been attacked.
Apart from the admission in the letter R 23 which has been objectedto, the petition of appeal to the Board goes on the footing that therehave been undisclosed profitsand theonlyquestionthatremained
was as to the amount. Thesame admissionthereforeas iscontained
in the letter is found in it, There is also ample evidence otherwiseto support the finding of the Commissioner which should be affirmed.
N. E. Weerasooria, K.C., in reply.—Rightly considered tho petitionof appeal to the Board does not contain an admission to the effect thatthe appellant had undisclosed profits in his hands.
The order of the Board confirms the order of the Commissioner and isfor that reason subject to the same infirmities and open to the samecriticism.
Section 74 of the Ordinance vests the Board with jurisdiction to statea case and this court i6 called upon to hear and determine the questionsof law arising on the staled case. Reference to the petition of appealto the Board need not therefore be made to decide what such questionsarc nor can they be restricted to such as are contained in it.
Cur. adv. vult.
September 22, 1949. Dias J.—
This is a “ Case-stated ” by the Board of Review under section 74of the Income Tax Ordinance (Chapter 188).
The following facts are not in dispute: Mr. G. F. Guillain (hereafterreferred to as “ the assessee ”) carried on a business in Ceylon known as“ The Ceylon Hides & Skins Co,” (hereafter called “ the hides business ”).In 1936 the assessee acquired the Hotel Metropolo in Colombo. Becausehis father-in-law, Mr. Vander Poortcn, had obtained a money decreeagainst him, and in order to prevent the hotel being seized under the writ4>f his father-in-law, the assessee adopted the expedient of having thetransfer of the hotel made out, not in his own name, but in the name ofhis wife, whose power of attorney he held. Although the assessee wasostensibly only the salaried manager of the Hotel Metropole, he, in fact,appropriated all the profits from that business and merely paid his wife.an allowance, and on one occasion paid her hospital bill. Both husband
1 H Report of Income Tax Cate* p. 10.
244
DIAS J.—Quillam v. Commissioner of /ncoitrf. Tax
and wife submitted income tax returns and were assessed thereon. Theprofits or income from the Hotel Metropole were shown in the wife’sincome tax returns.
In the year 1938, cither owing to deteriorating world conditions orfrom other causes, the assesses found that his hides business was notremunerative. The money relating to this business was banked by theassesses in the National Bank of India and the Chartered Bonk. Theexhibits R 27 and R 28 show that in December, 1938, the credit balanceslying in both accounts aggregated a sum of Rs. 99'83 only. The assessesadmits that since 1938 his hides business was in a moribund condition.
R 7 is the income tax return which the assessee forwarded to theauthorities for the period 1944/45, i.e., from April 1,1943, up to March 31,
He stated under the heading “ Principal Employment ” that hewas the salaried manager of the Hotel Metropole and that his employerwas his wife. His salary is stated to be Rs. 200 per mensem. Underthe beading “ Trades, Businesses and Professions ” ho stated that he-was the owner of The Ceylon Hides & Skins Co. but declared that therewere “ no transactions ” in regard to that business during the year inquestion. Under the heading “ Bank Interest ” he stated that hehad earned no bank interest. Under the head “ Notes & Explanations ”the assessee declared “ It must be noted—(1) There were no transactionsthis year by the Ceylon Hides & Skins Co., (2) My salary at the HotelMetropole was brought from Rs. 200 to Rs. 300 a month from January,1944 ”.
In his return R 6 for the tax year 1945/46, i.e., from April 1,1944, upto March 31, 1945, the assessee declared that his salary as the managerof the Hotel Metropole was Rs. 3,600 per annum. He stated that thehides business had no transactions during that year, and that he earnedno bank interest. Under “ Notes & Explanations ” the assessee stated“ Claim for special allowance—Please consider that on the 15th March,
a sum of French francs 30,000 or an equivalent of Rs. 2,015*75was sent by me to my distressed family in liberated Franoe as urgontrelief ”,
The assessee’s Tetum for the year 1946/47 (i.e., from April 1, 1945,up to March 31, 1946) is the exhibit R 5, the contents of which in themain are identical with R 6.
According to these returns R 5, R6 and R7, it is clear that during theperiod involved the assessee had no income other than his salary as themanager of the Hotel Metropole.
The assessee has admitted that though his return for 1944/45 showsthat he received no bank interest, he did receive a sum of Rs. 234, asbank interest which should have been included in his return.
About the beginning of 1947 the Income Tax authorities had reasonto believe that the assessee had not made a full disclosure of his income.In such cases the Ordinance vests the authorities with wide powers.Not only may an assessor give notice in writing to any person who isbelieved to be liable to pay income tax to disclose his income in properform (s. 54 (1)), but a duty is also cast upon every person chargeablewith tax for any year of assessment and who has not been noticed by theIncome Tax Department to make a return of his income without beingnoticed to do so—s. 54 (2).
DtAS J.—Guilin in v. Commissioner of Income TaxL’45
About the beginning of 1947 it came to the knowledge of the authoritiesthat the assessee, although his only declared source of income was hissalary as the manager of the Hotel Metropole, had to his credit in thetwo banks the large sum of Rs. 198,557 ‘10. They considered this wasa matter which merited investigation, because this sum which aggregatednearly two lakhs might on investigation disclose income received by theassessee and which he had not disclosed.
Not only does the Income Tax Ordinance empower the authorities tocall for information, but under s. 65 they have the power to makeadditional assessments within three years after the expiration of theyear of assessment, and in cases where the non-assessment or under-assessment is due to fraud or wilful evasion, the additional assessmentmay be made within ten years after the expiration of the year ofassessment. Commenting on a similar provision of the Income TaxAct in Britain, Lord Hanworth M.R. said in HaythomthwaiU <Se Sons v,Kelly1—“ It is to be observed that that period of six years may, and1 daresay in some cases does, put a very serious burden indeed upon thesubject, because it means this—that although the subject may havecleared up his income tax, I use rather a neutral word—five years before,yet, he is still liable to have a further assessment made upon him for aperiod which does not expire until six years after the expiration of theyear of assessment. For that reason, it is very important that accountsshould be kept and documents preserved, lest there should be a furtherassessment made upon a person or a company
The authorities, having decided that further investigations werenecessary, and that an additional assessment might have to be made,culled upon the assessee to submit further returns for the years in question.The correspondence which has been produced indicates the extremelyunsatisfactory and evasive manner in which the assessee answered thequeries put to him. For example—he was required to produce forinspection his bank pass books, bank statements and cheque counterfoils.He at first ignored the letter, and when his attention was invited, repliedthat he had not preserved the documents. He was then called upon tosupply information with regard to the Hotel Metropole and the hidesbusiness. He was also told that if he had not preserved the requisitedocuments, he should obtain copies of them—see R 11 of May 28, 1947.This was not done.
Where a person has not furnished a return of income when calledupon to do so, and the assessor is of opinion that such person is chargeablewith tax, the law allows the assessor “ to estimate the amount of theassessable income of such person, and to assess him accordingly ”—ss. 64 (3), 65. This the assessor proceeded to do in this case. InOgilvie v. Barron 2 Rowlatt J. said in sending a case back for a furtherassessment “ It must go back in order that the Commissioners may state,and state in terms, what is the figure which they arrive at, applying theirminds and their judgments truly and actually to the figures of therelevant years—guessing them, if you like, if they do not know themand if they cannot be informed of them ; guessing them, if you like, to thebest of their ability from the sources of information they have, and from the1 11 Tax Cases p. 664.*11 Tax Cases p. SOS.
2461II.4S J.—O'uilUtin e, (.ounitia^ioiutf of ltwine. Tnt
best of their skill and judgment, but applying their minds really tothat …. They must really apply their minds to the real question,and if they will tell the Court what figure they arrive at—when they reallydo that—then the Court, of course, must accept it In Macpherson& Co. v. Moort1 the Scottish Court of Session held that whore an assesseedoes not choose to state an account so that the amount of profits may bestrictly determined, he cannot complain if “ a random assessment" ismade upon him by the Crown.
The additional assessment thus made against the assessed is as follows:—
194414519451461946/47
Ks. c.Rs. c.Rs. c.
Income assossed.. 103,240 0.. 103,600 0.. 103,600 0
Tax payable. . 23,501 74 . . 35,870 56 . . 36,279 22
Tax in dispute. . 23,239 94 . . 35,520 14 . . 35,894 76
What the assessor did was this : He took the income disclosed inthe returns R 5, R 6 and R 7 and on the material available to him headded Rs. 100,000 for each year and the undisclosed interest. Theassessor had reason to believe that the assessee had not disclosed hisfull income. The assessee, although called uj>on to furnish returns andto give information, failed to do so. Therefore, the assessor unders. 65 of the Ordinance proceeded to assess him “ at the amount oradditional amount at which according to his judgment such person oughtto have been assessed ”, In Commissioner of Income Tax v. Savarimuttu-Chetty8 this Court pointed out that such additional assessment mayinclude amounts omitted, or overlooked, or miscalculated.
The appeal of the assessee under s. 69 of the Ordinance came up forconsideration by Mr. T. D. Perera, the Commissioner of Income Tax,on July 25, 1947—see XI. On that day Advocate Mr. Chitty appearedfor the appellant-assessee.The matter was adjourned for July 28,1947,
when Mr. E. P. N. Gratiaen, K.C., with the late Mr. Advocate D. W.Fernando represented him. On this day the assessee began, and gaveevidence and was cross-examined. Learned counsel raised no questionas to who should begin, or as to the party on whom the onus lay. Onthe application of learned counsel the inquiry was postponed until August6, 1947, for the purpose of effecting a settlement or compromise inregard to the additional liability—see b. 69 (2) (3). When the proceedingswere resumed on October 30, 1947, Mr. T. D. Perera had been succeededby Mr. Rajapatirana. No objection was taken to the latter continuingthe inquiry. On this last day Advocate Mr. Jayawickrcme appearedfor the appellant. The same firm of proctors instructed all three learnedcounsel.
The findings of the Commissioner of Income Tax are as follows :(1) The assessee had failed to disclose profits amounting to Rs. 142,000’during the period January 1,1940, to June 3,1947, and (2) the assessments-under appeal wore reduced as follows :—
1944/45 Profits from trade reduced to Rs. 56,1691945/46 Profits from trade reduced to Rs. 50,7971946/47 Profits from trade reduced to Rs. 41,904
1 6 Tax Cases at p. 114. 8©e also Wall v. Cooper, 14 Tax Gates at pp. 555, 559*
® (1937) 39 N. L. R.atp. 5.
DIAS J.—Guillain v. Commissioner of Income Tax247
The assessee appealed against this order to the Board of .Review unders. 70. His petition of appeal is the exhibit X 2. For the reasons givenin X 5, the Board of Review dismissed the appeal. The assessce thenrequested the Board to “ state a ease ” for consideration by the SupremeCourt under s. 74. The ** case-stated ” sets out the following pointsof law:—
(а)That the Commissioner and the Board were wrong in that theymisdirected themselves in casting the initial onus on the applicant todisprove a case that had not been made at all, and in the extent ofthe onus that was cast on the applicant;
(б)That the Commissioner and the Board have misdirected them-selves in requiring corroboration of the applicant’s story, mid aminimum degree of proof which are not legal requirements in a case ofthis kind ;
That the Commissioner erred in making the applicant liable tothe assessment in place of his wife who is the owner of the business ;and
That there has been—
a misreception of evidence, and
a failure to consider evidence which was properly admissible.
The Supreme Court in dealing with a “ case-stated ” under s. 74 hasonly to decide the questions of law which have been stated by the Board.Subject to the decision by this Court of such points of law, the decisionof the Board of Review is final. What is a “ question of law ” has beenlaid down in R. v. Seeder de Silva*. It is a fundamental matter thatall questions of fact are for the authority, whether the Commissioner ofIncome Tax or the Board of Review, who iB charged with the matter,and this Court can interfere only if there is some error of law—it being,of course, an error of law if a finding of fact is arrived at with no evidenceto support it. It is not an error of law to arrive at a finding of factwhere there is, so to speak, evidence both ways—Montague Burton, <&c. v.Commissioner of Inland Revenue2. In Wall v. Cooper a LordHanworthsaid : “ It is for the Commissioners to determine the facts, They hadmaterial beforo them on which they can come to the conclusion thatthey have, and having done so this Court cannot any more than couldMr. Justice Rowlatt interfere with their decision on fact We canconsider the findings of fact reached by the Commissioner or the Board ofReview only in so far as they are caught lip within the questions of lawset out in the case-stated.
I shall now proceed to deal with each of the questions of law submittedfor our consideration :
(a) Was the onus wrongly laid on the assesses ?
I am clearly of opinion that there is no substance in this submission.Once an assessment has been made—whether it is one made on a returnsubmitted by the assessee, or an estimated assessment made under theprovisions of s. 64 (2) (6) or s. 65, there arises a rebuttable presumption* (1940) 41 N. L. R. p. HO.1 28 Tax Cases at p. 58.
* 14 Tax Cases at p. 559.
248DIAS J.—Chtillain v. Commissioner of Income. Tax
that the official act of assessment has been rightly and regularly performed.Therefore, when an asscssec appeals against such an assessment, theonus of displacing this presumption rests on him, and it is for the aasessoeto begin and to satisfy the Commissioner that the assessment is wrongor excessive. Jt is to be observed that the learned counsel who appearedliefore the Commissioner did not object to begin. 8. 102 of the EvidenceOrdinance makes the position quite clear—“ The burden of proof in asuit or proceeding lies on that person who would fail, if no evidence atall were given on either side When this appeal came up for determin-ation before the Commiasioner of Income Tax, had no evidence at allbeen led on either side, the appeal would have to bo dismissed becausethere existed a presumption that the assessment was regularly made.When the assessee appealed to the Board of Review, s. 73 (4) clearlyshows that the “ onus of proving that the aasoesment as determinedby the Commissioner on appeal …. is excessive shall )>c on the
appellant ”.
There is direct authority of the English Court of Appeal on this questionof the onus in Income Tax appeals.
In IJaythomthuxiite t>. Kelly1 the facts were as follows : The appellantcompany was assessed for income tax for the years 1920/21 in the sumof £4,905 less a deduction of £1,317. At the end of the year the companyshowed that the year’s trading had resulted in a loss, and tho assessmentwas reduced to Nil under s. 34 of the Income Tax Act, 1918. Tn 1924the authorities discovered that the company’s capital account had beenincreased by a sum of £22,920 stated to represent money paid in by theindividual shareholders. The authorities came to the conclusion fromthis and other information that profits chargeable to tax had been omittedfrom the first assessment. Therefore an additional assessment was madeon the company for the year 1920/21 in the sum of £50,000. Thecompany appealed, and one of the questions for decision was as to theparty on whom the onus lay. Lord Hanworth M.R. said at p. 667 :“ It is quite plain that the Commissioners arc to hold the assessmentstanding good, unless the subject—theappellant—establishes
before the Commissioners by evidence satisfactory to them that theassessment ought to be reduced or set aside (At ]>. 668) “ The questionof whether they accept that evidence or not is a matter for the discretionof the Commissioners …. Inasmuch as the onus lay upon theCompany to displace the assessment, those who wore concerned for thecompany took a grave responsibility in not producing, if they wereavailable, materials which would undoubtedly have been of seriousimport and great value for the purpose of forming the Commissioners’opinion ”. Sargent & Lawrence L.JJ. agreed. This case was followedby the English Court of Appeal in Norman t>. Colder2 when Lord GreeneM.R., Finlay & Morton L.JJ. held that this question of onus was not anarguable one. An application to appeal to the House of Ivords wasrefused.
In my opinion this question of law can be answered only in one way.The onus in an income tax appeal whether to the Commissioner unders. 69 or to the Board of Review unde.r 8.73 (4) lies on the assessee. Not only
* 26 Tax Cases at p. 2.97.
1 11 Tax Cases 664.
249
DIAS J.—GuiUoinv. Commissioner of Income-Tax
did the onus lie on the assessee in the present case but the facts whichwould enable the Commissioner to reduce or set aside the additionalassessment were facts which were peculiarly within Ilia own knowledge.He did not disclose them when called upon to do so. This point oflaw, therefore, fails.
(if) Did the Commissioner of Income Tax and the Board of Reviewmisdirect themselves in requiring corroboration of the assessee'* story ?Did the Commissioner or the Board call for a minimum degree of prooffrom the assessee f
What was the case which the assessee had to meet ? In his incometax returns the assessee showed as his sole source of income his salary asmanager of the Hotel Mctropole. Upon investigation, the assessordiscovered that for the years of assessment 1942/43 to 1947/48 theassessee had deposited in the two banks large sums of money althoughhis hides business terminated in 1938 and the assessee had declaredthat he h d no other source of income than his salary as hotel manager.The-e deposits are as follows :
National Bank Chartered Bank Total
Rs. c. c. Rs. c.
Your to Decombor 31, 1941 Nil 5,250 I) . . 5,250 0
December 31, 1942 . . 45,837 19 . 13,803 20 .. 59,700 39
December 31, 1943 .. 69,491 14 , 9,881 80 . . 70,372 94
December 31, 1944 .. 46,036 85 3,373 2 .. 49,409 87
December 31, 1945 . . 39,223 97 . 9,805 41 .. 49,030 38
Decombor 31, 1940 8,200 0 . 10,8000 .. 25,000 0253,763 58
It will be recalled that on December 31, 1938, the balance to the creditof the assessee in both banks was less than Rs. 100. The Income TaxDepartment when it discovers a state of facts like this would be justifiedin calling upon the assessee to submit a further return of his income, sothat the authorities might satisfy themslcvcs that no evasion of incometax has taken place. When called upon to do so, the assessee failed tosupply the information called for. Even assuming that the assesseeappropriated the whole of the profits of the Hotel Mctropole, his drawingswere only about Rs. 48,000. When on May 28, 1947, the Commissionerby his letter R 11 called for further information from the assessee, thelatter on June 3, 1947, drew out of both banks the sum of Rs. 198,557 * 10.Under 8. 81 (1) (6) of the Ordinance the Commissioner has power to callupon a banker holding money on account of a defaulter to pay the amountof the tax to the Department. The Commissioner drew the inferencethat the act of the assessee in drawing out this money was to preventits being seized by the authorities, in the same way by which he placedthe Hotel Metropole beyond the reach of his father-in-law. What ismore on June 6,1947, the assessee and his wife entered into the agreementA 7, the wife’s power of attorney in the assessee’s favour was revoked,and the wife took charge of the Hotel displacing the assessee as manager.
When the case come up in appeal not only had the assessee to explainail these facts and circumstances, but where corroboration of his testimonywas available any tribunal would expect that such corroboration wouldbe forthcoming. No doubt s. 134 of the Evidence Ordinance enacts
!•J. N. A SS4t3«(2/50)
250DIAS J.—Guillain v. Commissioner of Income Tax
that “ No particular number of witnesses shall in any case be requiredfor the proof of any fact ”, but at the same time where facts are deposedto by a person who is vitally interested in a matter and who has availablewitnesses and documents who can be called and which can be producedin order to support his word, and such person does not call them orproduce the documents, t he tribunal would be entitled to draw an inferenceadverse to the party who withholds such evidence. In Haythomthwaite v.Kelly1 the fact that the assessee had books of account which could havebeen but were not produced, was held to lead to an inference adverseto the appellant—see at pp. 669-670. The Court of Appeal pointed outthat ” inasmuch as the on vs lay upon the company to displace theassessment, those who were concerned for the company took a graveresponsibility in not producing, if they were available, materials whichwould undoubtedly have been of serious import and great businessvalue for the purpose of forming the Commissioner’s opinion ”—at p. 668.“ When that is not done it is not surprising that the Commissioners aswell as others may draw inferences which are not satisfactory to thecompany but- inferences which displace the apparent hardship on thesubject "—at p. 670.
I hold that in the circumstances of this case the Commissioner ofIncome Tax was entitled to direct himself that lie would not acceptany particular evidence unless it was corroborated. It is impossiblefor me to say that he was wrong in so doing, or that either he or theBoard of Review misdirected themselves on the point.
What was the explanation of the asses see for his possession of thislarge sum of money ? He stated that part of this money representedthe profits of the Hotel Metropole which he appropriated. Hus theCommissioner has accepted, and in his final decision he has deducteda sum of Rs. 43,500 on this account as well as a sum of Rs. 10,000 asbeing savings on his salary. These aggregate Rs. 53,500. TheCommissioner has also allowed to the assessee a sum of Rs. 8,869 allegedto have been remitted to France. He has disallowed the balance asnot having been proved. Counsel for the assessee claimed that thetotal sum which ought to be deducted should be Rs. 149,427 made upas follows:
Rs. 37,000 receipts from an arbitration award in 193)
6,000cash in hand
7 927 debts due in Franco
72,000hotel profits
(6)7,500De Bossu’s debt
(0)20,000“ A marriedwoman 'a money given to the usseusee for Safe-
keeping *'
The Commissioner rejected (1). In regard to (2) the Commissionerallowed to the assessee not Rs. 5,000 but Rs. 10,000 as savings fromsalary. Claim (3) was not accepted. On (4) the Commissioner allowed tothe assessee a sum of Rs. 43,500. Claims (5) and (6) were rejected. TheCommissioner found as a fact that the undisclosed profits aggregatedRs. 153,926, but " in order to bring it to a round figure and to take inany possible further adjustment ” he determined that the undisclosed
1 II Tax Cases p. G64.
DIAS J.—Gvillain r. Commissioner of Incot/ie Tax
251
profits to be assessed additionally was Rs. 142,000, and he directed thatthe assessments under appeal should be reduced In the manner indicatedin his order.
In my opinion this point of law fails.
(c) Did the Commissioner err in making the assesses liable for the assessmentin place of his wife who is the owner of (he business ?
I must confess that I cannot follow this contention. The question wasnot who should be assessed, but whether Mr. G. F. Guillain, the assessee,should be assessed ? On this point the asscssce himself admits that hetook all the profits of the Hotel Metropole. Furthermore, neither theCommissioner nor the Board of Review has held that the undisclosedprofits which have now been assessed are profits from the Hotel Metropole.Neither the Commissioner nor the Board of Review has held that theHotel Metropole belongs to the wife of the-assessee. In the petitionof appeal to the Board of Review the lawyers of the assessee have statedthat this was immaterial—“ The appellant submits that the questionas to whom the Hotel belonged or what the appellant’s position was inregard to the Hotel has no bearing on income tax liability ”—see X2,paragraph 5.
It is not impossible for a man to derive an income from some secretsource which he has not disclosed or does not desire to disclose.
Jn my opinion this point is without substance. The assessee has notbeen made liable for income tax which his wife should pay.
{d) (i) Has there been a misreception of evidence ?
This legal objection applies to the admission of the two documentsR 23 and R 29.
As I have already indicated, on July 28, 1947, after the assessee hadgiven evidence, his learned counsel asked that the inquiry should beadjourned so that a settlement or compromise might be reached. OnAugust 14 a minute in the assessor’s file R 31 shows that the proctorfor the assessee saw the assessor “ for a preliminary discussion regardingthe figures on which the assessment will be made The assessor gavehim the figures and also undertook to send to the proctor a statementshowing how those figures had been arrived at. By his letter R 32,dated August 15, the assessor sent to the proctor the statement. Tothis letter the assessee’s proctor wrote the letter R 23 dated September10, 1947, and marked it “ Without prejudice
It is contended that it was improper for the Commissioner to haveconsidered a letter sent “without prejudice” in his order Xl.Undoubtedly a letter written without prejudice is privileged—s. 23,Evidence Ordinance. But parties to a non-criminal proceeding areentitled to waive rules of procedure and evidence. So far as the recordgoes the exhibit R 23 was admitted without any objection from theassessee or his lawyers. In the petition of appeal to the Board of Reviewno point has been raised nor any complaint made in regard to the admissionof R 23. In the case-stated there is no specific reference either to R 23or JR 29.
252
DIAS J.—OuiUain v. Commissioner 0/ Income Tax
With regard to R 29 the following passage in the Commissioner’sfinding is criticised : “ The assessor has also put before me a statement(R 29) showing rates of gross profits in the bars in Colombo and therates of gross profits in the bar in the Hotel Metropole. I have examinedthe statement with the relative files, and it is quite clear from thisstatement that there has been a serious understatement of profits byMr. Guillain.
The learned Attorney-General cited the Indian case of Ganga RamBalmokand v. The Commissioner of Income Taxt Punjab *. In this casethe authorities after examining the accounts of the assessees who werea firm of soap manufacturers and the evidence produced under s. 23 (2)of the Indian Income Tax Act were not satisfied either with the correctnessor the completeness of the accounts, mainly on the ground of the absenceof any stock register and vouchers, and the inability of the assessees toprove the total consumption of raw materials, Ac., as compared withother soap manufacturers in the locality. The Indian Income Taxauthorities, therefore, made an estimate by raising the valne of the salesfrom Rs. 314,456 to Rs. 350,000. The High Court held that in thecircumstances the assessor was justified in acting as he did. Theauthorities which have been cited earlier in this judgment indicate thata distinction must be drawn between an assessce who produces his booksand accounts and makes a full disclosure, and one who either makes areturn which the authorities arc unable to accept, (s. 64 (2) (b)), or onewho fails to furnish any return at all (s. 64 (3)) or one who has been under-assessed (s. 63). In the latter cases the assessor is entitled to “ estimate ”the income or to assess the defaulter “ according to his judgmentIn doing so the English Courts have gone to the extent of holding thatthe assessor may "guess” the estimated income—Ogilvie v. Barron•.This may appear to be a hardship on the assessee, but in reality it isnot so- Where an assessee does not choose to submit his accounts, orfails to make a true and full disclosure, or by fraud or wilful evasionendeavours to escape liability, so that the amount of his profits cannot l>estrictly determined, he cannot complain if a “ random assessment ” ismade upon him by the Crown—Macpherson V- Moore3. Tn suchcases the authorities are not bound by the strict rules of evidence.
The Attorney-General submitted that the Commissioner of IncomeTax had on the facts of this case independently reached the conclusionthat the sum of Rs. 198,557*10 could not possibly represent profitsfrom the Hotel Metropole or the hides business. There is force in thatsubmission. All the facts and circumstances support the view that thissum or the greater portion of it accrued to the assessee as profits fromsome undisclosed source. One may speculate as to what that sourcecould be, but it is irrelevant. Therefore, having formed this view, thoCommissioner in order to test the correctness of his finding independentlyarrived at, looked at R 29 in order to see how the assessee s figurescompared with similar businesses. I agree with the Attorney-Generalthat the particular passage in the Commissioner’s findings is not happilyworded, but what he means appears to be clear when the findings am
1 11 Report* of Income Tax Case*, p. 10
11 Tax Case*, p. SOS.
6 Tax Cases at p, 114, Stx; ulno Wall *•. Cooper. II Tax Cases at p. 556 550
DIAS J.—Quillain v. Commissioner of Income Tax
253
regarded as a whole, namely, that the returns for the Hotel Metropoledo not justify the inference that this large sum of Rs. 198,557 * 10 couldbe the profits from the Hotel Metropole. Jt could not possibly haveaccrued from the hides business, which admittedly was in a moribundcondition at the material dates. Therefore, this money or the greaterportion of it must represent profits from some undisclosed source.
The record shows that R 29 was admitted inter partes and withoutobjection from the assessee or his legal advisers. I am thereforeconstrained .to hold that no objection can now be taken to the admissionof the document. In the case stated no specific reference has beenmade to R 29.
Has there been a failure to consider evidence which was properly
admissible ?
In giving evidence before the Commissioner the assessee stated “ Acertain married lady had given me' certain money to keep in trust forher—Rs. 9,000 in April 1945, and Rs. 11,000 in May 1945. I returnedthe Rs. 20,000 on 6th June, 1947 ”. The Commissioner in his judgmentsays ‘ ‘ Before me it was argued that the lady was Mrs. B. Vander Poortenand that the money was for purchase of jewellery which did notmaterialise. A letter was produced from Mrs. Vander Poorten but itwas not marked ns a document Therefore, the Commissioner cannotbe blamed for not considering evidence which was not properly producedbefore him. No complaint was made about this matter in the petitionof appeal to the Board of Review. At the hearing of the appeal beforethe Board, counsel “ endeavoured in opening his case to read in evidencesome letters and an agreement entered into between the appellantand his wife. The Board was not willing to allow fresh evidence to beled at this stage and did not give permission to counsel to mark thesedocumentsThis reference cannot refer to the agreement A7 which was
already in. In the case stated there is no reference to any letter fromMrs. B. Vander Poorten. S. 73 (7) vests the Board of Review with adiscretion to admit or to reject any evidence adduced whether oral ordocumentary. There was furthermore no proper application to theBoard to admit the letter. For these reasons I hold that there has beenno failure to consider evidence which was properly admissible.
It was finally contended that R 23 and R 29 have not been properlyconstrued by the Commissioner. The Commissioner in his findingstates that R 23 *< admits undisclosed profits up to Rs. 60,026 ”. Assumingthat the Commissioner has drawn an incorrect inference from the contentsof R 23, this is an inference on a question of fact, and not on any questionof law, and I fear that this Court cannot interfere. The same appliesto the document R 29. It is also to be noted that there is nothing allegedin the case stated about any misconstruction of documents. In thepetition of appeal to the Board of Review, X2, the appellant statedin his prayer “ The appellant begs that the Board of Review should bepleased to examine the contentions of the appellant and to cause thesaid assessment to be reduced to Rs. 38,650 which said sum should bedistributed between the Income Tax years 1942/43 to 1947/48 andfrom 1.1.1947 to 3.6.1947 in such manner as to the learned Boardmay seem equitable ”. That clearly is on admission by the assoseee
Ukkti Amina v. Jema
2r»4
that a sum of Rs. 38.650 is undisclosed income of the assessee for whichhe is liable to pay income tax. The IcArned acting Attorney-Generalhas pointed out that this sum of Rs. 38,650 is arrived at as follows:
Rs.
72,1K()-00 hotel profits
(H) savings from salary
00 arbitration award0.000 • 00 cash in hund7.927-00 debts due in France7.5(H)-00Do Dosmi's debt
20,000-00 married laity’s money
159,907*00
If this sum is deducted from the Rs. 108,557 -10 which the assessee hadin the bank, the balance i9 Rs. 38,650*00 which the assessee admits inR 2 is undisclosed income for which he has to pay tax. The Attorney-General further pointed out that the contention now advanced was nottaken before the Board of Review.
The evidence before the Commissioner, oral, documentary andcircumstantial, giving the go-by to R 23 and R 29, amply justify hisfindings. I dismiss the appeal and confirm the assessment determinedby the Board of Review with costs.
Gunasekaba J.—I agree.
Appeal dismissed.