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MORI BAYOR
V.
COMMISSIONER OF INCOME TAX
THE WEST AFRICAN COURT OF APPEAL, HOLDEN AT FREETOWN, SIERRA LEONE
27TH DAY OF JANUARY, 1955
2PLR/1955/24 (WACA)
OTHER CITATION(S)
2PLR/1955/24 (WACA)
(1955) XIV WACA PP. 651-655
LEX (1955) – XIV WACA 651-655
BEFORE THEIR LORDSHIPS:
FOSTER-SUTTON, P.
COUSSEY. J.A.
LUKE, J.
BETWEEN:
MORI BAYOR – Appellant
AND
COMMISSIONER OF INCOME TAX – Respondent
ORIGINATING COURT(S)
Appeal by the taxpayer from the decision of the Supreme Court in his appeal against assessment: No. 29/1954.
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REPRESENTATION
C. B. Rogers-Wright — for the Appellant
M. C. Marke — for the Respondent, the Commissioner of Income Tax
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ISSUE(S) FROM THE CAUSE(S) OF ACTION
TAXATION AND REVENUE LAW:- Income Tax Ordinance – Section 18: assessment – Section 18(3): new business – Section 52: additional assessment – Section 57: appeal against assessment – Section 57(4): onus on appellant to prove it is excessive – How treated
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CASE SUMMARY
The fiscal year is from 1st April to ensuing 31st of March. The assessment for a year is based on the income of the preceding year (section 18(1)), but where a new business is begun in a year, then section 18(3) provides that:-
“(a) For the first year the assessable income shall be the amount of the income of that year;
“(b) For the second year the assessable income shall, unless such notice as hereinafter mentioned is given, be the amount of income of one year from the date of the commencement of the trade, business, profession, vocation or employment;
“(c) For the third year the assessable income shall, unless such notice as is hereinafter mentioned be given, be computed in accordance with the provisions of sub-section (1) of this section.”
(No question of notice arises in this case.)
The appellant had been assessed at certain figures for the years 1951-52 and 1952-53; but in the year 1953, owing to information received of large-scale dealings of his, the Commissioner of Income Tax, acting under section 52, which gives him power to make additional assessments, re-assessed the appellant at much more for 1951-52 and 1952-53 and made a similar assessment for 1953-54. He did so having regard to the appellant’s total worth just before 1st April, 1951, and to what he estimated to be the increase in total worth between that date and the 31st March, 1953; and he assumed that the appellant had begun new operations from 1st April, 1951, as accounting for the increase in total worth, which he took to represent the appellant’s income over the period.
The appellant appealed to the Supreme Court under section 57. As sub-section (4) thereof throws the onus on the appellant to prove that the assessment is excessive, he had to satisfy the Judge on two points:-
(1) that the increase (if any) in his total worth was not due to starting a new business but to mere expansion of the old;
(2) that the estimated increase in his total worth was excessive.
On point (1) if he had succeeded, the basis of assessment for 1951-52 would have been the income of the preceding year, instead of the income of 1951-52 itself, which was adopted by the Commissioner by virtue of section 18(3)(a). (That was the practical effect in this case in the result.) He failed before the Judge and appealed further.
As regards that point: The appellant traded at a certain place. The Commissioner alleged that he also had shops at two other places; this the appellant denied in his evidence; whereupon the Commissioner amended his assessment by deleting the item. There were no more questions and no other evidence on the new business which the appellant was supposed to have started and carried on since April, 1951.
As regards point (2): This related to the figures of income estimated by the Commissioner for 1951-52 and 1952-53. The appellant succeeded in having those figures reduced to some extent but was not content and appealed further on this point also. The second half of the judgment infra deals with the evidence and the Judge’s views on the value of the furniture and fittings and on the amount of cash dealings of the appellant and the inference of the increase in his total worth: (the details will not be gone into here; the practical effect was on the assessments for 1952-53 and 1953-54 in the result).
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DECISION(S) OF THE WEST AFRICAN COURT OF APPEAL
Held (allowing the Appeal to the extent of setting aside the re-assessment but affirming the judgment as to amount of income) that:
(1) The Commissioner’s assumption that the large increase in the appellant’s capital worth was due to his starting a new business after 1st April, 1951, was made at a time when the Commissioner thought that the appellant had begun business in two other localities; as the assumption appeared to have been based in that respect on mistaken facts and there was no evidence to contradict the appellant’s testimony that his only business throughout the period was the old one, the Judge erred in holding that the Commissioner’s assumption had not been displaced.
(2) The onus of proving that the assessments were excessive was on the appellant; but the observations made by the Judge on the value of the appellant’s furniture and fittings and on the amount of his cash and drawings were fully justified on the evidence and ought to be affirmed.
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MAIN JUDGMENT
The following judgment was delivered:
FOSTER-SUTTON, P.
This is an appeal from a decision of Smith, C.J., given in three appeals against assessments of income tax made upon the appellant in respect of the years 1951-52, 1952-53 and 1953-54.
The appellant’s income was originally assessed at £1,000 and £1,500 for the years 1951-52 and 1952-53, respectively, and he paid the tax thereon, but in consequence of information received during the year 1953, the Commissioner, acting under the powers conferred by section 52(1) of the Income Tax Ordinance, re-assessed the appellant’s income at £10,500 for each of these years and made a similar assessment of his income for the year of assessment 1953-54.
The appeals before the learned Chief Justice resulted in his reducing the assessments for the three years in question to £8,650, for each year, and it is against that revision that the appellant made his further appeal to this Court. In his replies to the grounds of appeal, filed in the Court below, the Commissioner states that he made the re-assessments for the years 1951-52 and 1952-53, because he “came to be of the opinion in October, 1953, that the appellant had come into possession of substantial capital assets, which could not possibly have derived from the kind of trading operations disclosed by the appellant as having existed up to 31st March, 1951”, and he goes on to say: “It became necessary to assume that the appellant had entered into gainful operations of a new or different kind after 31st March, 1951. In the absence of evidence to the contrary, and for convenience of applying the provisions of the Income Tax Ordinance, the· date of commencement of these new operations was taken as the 1st April, 1951”; and he makes it clear that the assessments were not based on a percentage of turnover or capital, but on a proportion of what he estimated to be the increase in total worth of the appellant between the 1st April, 1951 and the 31st March, 1953.
In other words, the appellant’s income over the period was taken to be (The amount by which his total worth at the end of the period exceeded his total worth at the beginning, If the accretion of capital was due to an expansion of the old business the tax payable for the years 1951-52 and 1952-53 would have been based on his income for the years 1950-51 and 1951-52, respectively; if due to the commencement of a new business the provisions of paragraphs (a) and (b) of section 18(3) of the Ordinance apply, the tax payable in the year 1951-52 would be hued on his income for that year, and the tax payable in 1952-53 would be based on the amount of income of one year from the date of the commencement of the new trade or business; that is to say, in this case, the tax payable in the years 1951-52 and 1952-53 would be based on the income earned from the 1st April, 1951 to the 31st March, 1952. I mention this because Mr. Rogers-Wright, who appeared for the appellant, seemed to be under the mistaken impression that the procedure adopted by the Commissioner would result in the appellant having to pay income tax twice for the year 1951-52, whereas the income of that year, in this case, was only used as a foot-rule for the assessment of the amount of tax payable in each of the two years, 1951-52, 1952-53.
When dealing with the question whether or not a new business had been commenced on the 1st April, 1951, the learned Chief Justice said:
“I now consider the question as to whether the evidence led rebuts the prima facie conclusion of the Commissioner that the appellant started some new activity in 1951. With regard to some items of his affairs, the appellant has led evidence which seriously purports to do this, but as to other important items he has remained extremely vague or has given evidence which I frankly don’t believe, and he has not explained to my satisfaction the reason for this very substantial outburst of business activity which commenced about mid-1951 and he has not shaken in my mind the prima facie conclusion that this sudden increase is not the result of a natural expansion of his previous business.”
Counsel for the appellant submitted that there was no evidence to support the Commissioner’s assumption, that there was evidence to the contrary, and that the learned trial Judge misdirected himself in arriving at this conclusion.
It was agreed that the appellant’s capital worth on 1st April, 1951, was £2,000, and it is beyond doubt that his evidence in the Court below disclosed that there had been a substantial increase in his worth during the immediately succeeding two years; this seems to have been recognised by his counsel in his final address to the trial Judge when he submitted his estimate of his client’s total worth as at 31st March, 1953.
The appellant gave evidence that he had a trading licence, that he traded at Koidu in textiles and provisions and had been so doing for over sixteen years. In his replies to the grounds of appeal the Commissioner alleged that in addition to his trading activities at Koidu the appellant had one shop at Kayima and another at Tefeya, but after the appellant had denied under cross-examination that he had businesses in Kayima or Tefeya the Commissioner amended his assessment by deleting the item. Apart from the cross-examination mentioned, the appellant does not appear to have been asked any questions indicating what new business he is supposed to have been carrying on since 1st April, 1951. Nor was any evidence given on the point.
I agree with Mr. M. C. Marke, who appeared for the respondent, that the onus of proving that he had not commenced a new business in the year 1951 was upon the appellant: section 57 (4) of the Ordinance; but it must not, I think, be lost to sight that the Commissioner’s assumption was made at a time when he thought the appellant had commenced business in two other localities. It seems to me reasonable to suppose that his assumption was, in any event to some extent, made under that mistaken impression. Apart from that the only matter he had to go on was the considerable increase in the appellant’s capital worth alter April, 1951.
The question whether a new trade or business was set up is, in my view, a pure question of fact, and I hesitate to disturb the learned Chief Justice’s conclusion on the matter, but since the Commissioner’s original assumption appears to have been based in one respect on mistaken facts, and there is no evidence to contradict the appellant’s testimony that during the period in question the only business he carried on was that of a trade in textiles and provisions which he had been carrying on for over sixteen years, after anxious consideration I have come to the opinion that the learned trial Judge erred in holding that the assumption had not been displaced.
The Commissioner in his replies to the grounds of appeal referred to “gainful operations”, and Mr. Rogers-Wright submitted that “there is no provision in the law for assessment in respect of gainful operations”, but as it seems to me that this is only another way of expressing income gained from a” trade, business, profession, vocation or employment “, I am of the opinion that there is no merit in the point.
Counsel for the appellant abandoned grounds of appeal (5) and (7), but attacked the learned trial Judge’s findings that as at 31st March, 1953, the value of appellant’s “Furniture and fittings” was £400, item 4, and that his “cash and drawings”, item 7, amounted to the sum of £10,000.
When dealing in his judgment with the question of the value of the furniture and fittings the learned trial Judge said: “The Commissioner originally valued the appellant’s furniture and fittings, including refrigerator at £500, but in the course of his final address he revised this figure to £400, while the appellant’s counsel submitted that the correct figure should be £75, excluding the refrigerator. I have heard evidence from an independent witness as to the type and quality of furniture in the appellant’s houses, and I am satisfied that they are furnished on a very modest scale, but I am not satisfied that the appellant at the material time did not also own a refrigerator and a safe. It is clear that at times he must have had very considerable sums of cash in his possession. His place was burgled in April, 1951, and £64 cash stolen from him and I believe his evidence that not long after this incident he bought an adequate safe in which to keep his money. As to the refrigerator, at one time appellant said he bought it after 31st March, 1953, but in cross-examination he said he couldn’t remember when he bought it or if it was already in his shop when he took stock last year. I hold that the refrigerator which cost £130 must be reckoned in. As to appellant’s shop fittings, I have little evidence as to their details but the scale of the appellant’s purchases of goods during the material period, plus the statement in his petition in case 165/54 that on 1st April, 1952, he had cash and stock in hand valued at £5,530 11s. 1d. indicates that his shop fittings must be on a substantial scale to accommodate and display his goods. Taking all these items together, notwithstanding the modest apartments in the living quarters, I consider that the Commissioner’s revised estimate of £400 to be much nearer the mark than appellant’s figure of £75, and I accept the Commissioner’s figures”; and when dealing with the item “Cash and drawings” he made the following observations:-
“As to cash in hand and cash drawings over the two years, it was submitted on behalf of the appellant that he had no cash in hand at the end of the period and that his drawings for living expenses was £500, while the Commissioner maintained his original figure of £10,000 covering these two items.”
“The appellant gave evidence that he doesn’t drink, a factor which no doubt would help to keep down his expenses, and I accept that fact, but he went on to say that he spends no more than £7 to £8 a month on food.
“Appellant is clearly a prosperous business man and he has several wives and children, but apart from his figures for food and school fees he didn’t give me even estimate of his total rate of spending on general living expenses. His counsel submitted a figure of £250 a year. Presumably he also was left guessing as to the correct figure and I am no better off than he is.
“As to cash, in case 163/54, the appellant stated in his grounds that on 1st April, 1950, he had goods and cash valued at £1,100, but did not separate the two component items. In his evidence he said he had £800 stock and £300 cash.
“In case 164/54 he stated in his grounds that on 1st April, 1951, he had £1,300 in goods and cash, again without separating them, but on 12th April, 1951, he lost £64 in cash when his shop was burgled.
“In case 165/54 he stated in his grounds that on 1st April, 1952, he had £5,530 11s. 1d. in goods and cash, again without separating the two items, while it is clear that about July, 1952, he was able to pay £6,000 to the bank to redeem the deeds of 6 Kissy Road.
“Coosah’s invoice (exhibit 6) for over £1,300 worth of goods supplied on 5th September, 1951, indicates that the appellant undertook to pay it off at the rate of £400 a month.
“Basma’s account (exhibit 4) credits appellant with £2,650 over the period September, 1953 to January, 1954.
“On 2nd March, 1953, appellant borrowed £2,000 from Basma, which he repaid in January, 1954.
“During the period July, Hl52 to March, 1953, he had paid Chanrai about £1,100 on account of goods bought from them, and during the same period he had paid about £1,200 to Philip George.
“During the period 1st April, 1951 to 31st March, 1953, his turnover on Hertling’s account was about £1,500.
“These are only some samples of appellant’s business dealings and they indicate that he must normally be in possession of substantial cash resources, and I don’t believe him for one moment when he says that he had no cash in hand on 31st March, 1953.
“As appellant has not seen fit to be frank and truthful about his cash position as at 31st March, 1953, or as to his expenditure on living expenses, he has not discharged the onus on him of showing that the Commissioner’s estimate of £10,000 is wrong.”
The onus of proving that these assessments were excessive was upon the appellant. In my view the observations made by the learned Chief Justice regarding them were fully justified on the evidence, and I am of the opinion that his findings on the two items ought to be affirmed.
For the reasons I have given I would allow this appeal to the extent of setting aside the re-assessment made in respect of the year 1951-52, and affirm the judgment of the Court below as to the amount of the appellant’s income in the years 1951-52 and 1952-53, that is to say £8,650 in each of those years.
Since the appellant has only partially succeeded on this appeal I would allow him one half of the taxed costs he would have been entitled to if he had been wholly successful.
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COUSSEY, J.A.
I concur.
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LUKE, J.
I concur.
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Appeal allowed to the extent of setting aside the re-assessment for 1951-52; the judgment below affirmed as to amount of income in 1951-52 and 1952-53.
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