Llandovery Investments Ltd v Commissioner of Taxpayer Appeals

• Jurisdiction: Jamaica
• Judge: Harris JA,Dukharan JA,Mcintosh JA
• Judgment Date: 30 March 2012
• Neutral Citation: [2012] JMCA Civ 19
• Court: Court of Appeal (Jamaica)
• Docket Number: SUPREME COURT CIVIL APPEAL NO 35/2010
• Date: 30 March 2012

Between

Llandovery Investments Ltd

Appellant

and

The Commissioner of Taxpayer Appeals (Income Tax)

Respondent

[2012] JMCA Civ 19

Before:

The Hon Mrs Justice Harris JA

The Hon Mr Justice Dukharan JA

The Hon Mrs Justice Mcintosh JA

SUPREME COURT CIVIL APPEAL NO 35/2010

JAMAICA

IN THE COURT OF APPEAL

INCOME TAX - Assessments - Assesment raised for payment of income tax - Income Tax Act, s. 72

Harris JA

1 On 11 April 2007, assessments were raised by the commissioner of the Taxpayer Audit and Assessment Department (TAAD) for the payment of income tax by the appellant for the period 1996 to 1998. The appellant unsuccessfully appealed to the respondent against that decision. Before this court is an appeal against the decision of Anderson J in which he dismissed an appeal brought by the appellant against the respondent in the Revenue Court. Anderson J ordered that the assessments made bythe commissioner on the appellant for the years of assessment 1996 to 1998 be confirmed and that the amounts payable are as follows:

‘Years of Assessment	Tax
1996	450,332.00
1997	1,553,317.33
1998	4,411,470.00’

2 The appellant is a limited liability company incorporated in Jamaica and is involved in the business of dairy farming. Prior to 1996 the appellant was accorded exemption from income tax, it having been granted an approved farmer status. In 2000 the appellant made an application for an exemption but was requested by the TAAD to file returns for the years 1996 to 1998. In June 2000 it filed income tax returns and audited statements. The returns did not reveal a net income. However, the financial statements accompanying the returns reflected a net income. Following this, on 22 April 2002, the TAAD, in pursuance of section 72 of the Income Tax Act, raised additional assessments for the relevant period and served the requisite notices of the assessments on the appellant.

3 By letter of 8 May 2002, the appellant, through Ms Karen Russell of K.O. Russell and Associates (KORA), a firm of accountants, acting on its behalf, objected to the ‘additional assessment for the years 1996-1998’ on the bases that the explanation given for each year was an ‘insufficient-one line’ and that ‘the adjustments are erroneous and excessive and do not in any way reflect the activities of the company’.On 10 June 2002, the TAAD, through, Mr Hopeton Pottinger, an officer employed to the TAAD, responded, indicating that the approved farmer status for which the appellant had applied had not yet been granted as the appellant had failed to comply with all its statutory requirements such as the filing of its National Housing Trust and education tax returns. Mr Pottinger also informed the appellant that it, having not qualified as an approved farmer, had not obtained that status and as a result the approval could not be granted retrospectively. Therefore, the income earned for the years 1996-1998 was subject to income tax.

4 Upon receipt of this letter, Ms Russell, by letter of 31 July 2002, further objected by stating, among other things, that her detailed review of the accounts revealed that the accounts as presented were erroneous and that this required that the accounts and the tax computations for the periods 1996 to 1998 be reconstructed. It is necessary to state that Ms Russell had not been the accountant who had constructed the returns and financial statements filed in 2000. By letter of 19 February 2003 the respondent accorded the appellant an extension of time to 28 March 2003 to file the amended financial statements. The TAAD also indicated that the ‘timely settlement of the objection for Y/A [year of assessment] 1997 and 1998 is dependent on the provision of these records on the date specified’.

5 The amended financial statements and returns for the years 1996 to 1998 were submitted in March 2003. By letter of 7 January 2004 the TAAD informed the appellant that it should submit, by 19 January 2004, certain specified documents to complete the objection process in order to substantiate the figures in its amendedfinancial statements. Failure to do so would cause the notice of objection to cease and the assessment made would be final. A letter dated 26 February 2004 was sent to the appellant granting it a further extension of time to 4 March 2004 to submit the requisite documents. On 1 March 2004 the appellant furnished some of the documents requested and gave an explanation for the absence of the others.

6 On 18 May 2005 the TAAD wrote to the appellant's managing director, Mr Everald Nam, informing him that meetings had been held between the department and the appellant's accountant on 17 January 2005 and 11 May 2005. This letter further stated:

‘At this meeting [of 11 May 2005], you were informed that the information provided to date did not substantiate your claim that the financial statements filed with returns on June 2, 2000 were erroneous.

Therefore, based on the information gained and documentation made available, it is the decision of the department that no change would be made to the amounts previously assessed as there is not sufficient evidence to disregard or discount the information contained in the returns filed on June 2, 2000.

…

The enclosed AU10 and AU3 will provide details of the revised assessment.

…’

7 Included in the AU3 form was a statement that the documents presented by the appellant's accountant during the objection process were related to the year 1998. There was also an explanation pertaining to why the documents submitted were notregarded as substantiating the sum given as income (which had been significantly reduced in the amended returns) and other sums given for various items of expenditure in the amended financial statements. On 9 June 2005, KORA wrote to Errol Hudson, who was the Commissioner of the Taxpayer Appeals Department at the time, indicating that it was objecting to the decision received from the Objection and Quality Review Unit on two grounds of appeal and ‘addressing some of the matters identified by the Revenue's representative in his decision letter’. The hearings in relation to the appeal took place on 5 September 2005 and 7 October 2005. Present at the hearings were, Mr Nam, Ms Russell, representatives from the TAAD, Ms Yasmine Jackson and Mr Raule Plummer, as well as Ms Georgia Silvera Finnikin representing the Taxpayer Appeals Department.

8 Subsequent to the hearing of the appeal, by letter dated 3 November 2005, the appellant was requested to produce certain documents within 14 days of the receipt of the letter, and by letter dated 25 November 2005 the appellant was invited to a hearing scheduled for 12 December 2005. The appellant was informed that at this meeting the documents previously requested would be examined. The appellant was also advised that during the hearing, it would be given the opportunity to ‘address [the Commissioner], give evidence, call witness[es] and put questions to any witness called to give evidence’. These letters also indicated that these activities were being done pursuant to regulation 8 of the Revenue Administration Act. It appears that this meeting did not materialize and on 8 March 2007 Mr Plummer of the TAAD wrote to the Taxpayer Appeals Department indicating that he saw no basis for recommending anychanges to the assessment raised on the appellant. There was no further communication between the parties until 11 April 2007, at which time Mr Hudson wrote to Ms Russell informing her of his decision to confirm the assessments.

9 The appellant being dissatisfied with the Commissioner of Taxpayer Appeals' decision filed a notice of appeal in the Revenue Court. Following the filing of the appeal, a statement of case was filed by the respondent which was subsequently amended. A reply to the statement of case and an amended reply were filed by the appellant. Seven grounds of appeal were filed by the appellant in support of its challenge to Anderson J's order.

Ground one

‘The Learned Judge erred in holding that it is permissible for the Respondent to file an affidavit containing material adverse to the Appellant and to supplement/support his decision when an Appeal is filed against that decision in the Revenue Court.’

Ground one

10 In his oral and written submissions, Mr Hamilton submitted that the procedure for conducting appeals is set out in the Revenue Administration (Appeals and Disputes Settlement) Regulations, 2002 (the Revenue Administration regulations). Pursuant to these regulations, the respondent in hearing these appeals may require parties or any other persons to give evidence on oath. The respondent, he argued, is also entitled to carry out his own investigation of the decision being appealed and may summon persons to give evidence in relation to the decision. He argued that these powers made it clear that in hearing the appeal from the decision of the TAAD, the respondent wasexercising a quasi-judicial function in that he was required to adjudicate upon the conflicting contentions between the relevant commissioner and the taxpayer. The general principle, he submitted, is that a decision-maker who performs a quasi-judicial function is functus officio after he hands down the decision. Therefore, he contended, the respondent, having been functus officio , after delivering his decision, was not competent to file the affidavit. In support of these submissions, he relied on Slaney v Kean [1970] 1 All ER 434 [1970] 1 All ER 434 and Re VGM Holdings Ltd [1941] 3 All ER 417 [1941] 3 All ER 417.

11 Counsel further argued that the reliance on the affidavit was contrary to rule 13 of the Revenue Court Rules of 1972, which provide that reliance ought not to be placed upon any facts not set out in the notice of appeal, statement of case or reply. He relied onEdward Shoucair v The Commissioner of Income Tax SCCA No 58/1979, delivered 31 March 1982 to...