Llandovery Investments Ltd v Commissioner of Taxpayer Appeals [Revenue Court]
| Jurisdiction | Jamaica |
| Judge | ANDERSON J. |
| Judgment Date | 14 July 2010 |
| Judgment citation (vLex) | [2010] 2 JJC 1001 |
| Date | 14 July 2010 |
| Court | Revenue Court (Jamaica) |
REVENUE COURT APPEAL NO. 6 OF 2007
IN RE THE INCOME TAX ACT
REVENUE LAW - Assessment - Taxpayer submittimg returns and audited accounts and tax compujtgation showing tax due, but not paying tax in mistaken belief that it was an "Approved agricultural enterprise" - Revenue raises assessment based upon accounts submitted - Taxpayer purports to submit new un-audited accounts and returns - Rejected by Commissioner - Previous assessment subject of decision by Commissioner Taxpayer Audit and Assessment - Confirmed on appeal to Commissioner Taxpayer Appeals - Whether Commissioner wrong in law - Whether assessment valid - Whether assessment and decision in breach of assessment provisions of Income Tax Act as amended
This is an appeal by Llandovery Investments Limited, ("The Appellant"), against the decision of the Commissioner of Taxpayer Appeals ("The Respondent") whereby it was ordered that the assessments made on the Appellant by the Commissioner, Taxpayer Audit and Assessment (Income Tax) (the Commissioner) in the amount of additional tax for Years of Assessment 1996 to 1998 be confirmed. The sums confirmed by the Respondent's decision are the following:
| Years of Assessment | Tax |
| 1996 | 450,332.00 |
| 1997 | 1,553,317.33 |
| 1998 | 4,411,470.33 |
The reliefs sought by the Appellant are set out below.
(a) The Appeal be allowed.
(b) That the aforementioned decision of the Respondent be set aside,
(c) The Assessments of the Commissioner be discharged,
(d) That the Respondent do pay to the Appellant, the costs of and incident to the hearing of this Appeal.
(e) Such further or other relief as this Honourable Court may deem just.
The grounds relied upon by the Appellant are as follows;-
That the Respondent erred and/or misdirected himself in fact and law -
(a) by confirming assessments which were ex facie in breach of the mandatory statutory requirement that the "notice(s) shall state the basis on which the assessment(s) is made."
(b) by confirming assessments made on the basis of returns which on the evidence or lack thereof, the Respondent knew were not true and correct,
(c) by agreeing with the Commissioner that the Appellant was bound by the financial statements/accounts submitted with its original returns and, in consequence, ought to be used as the basis for making the assessments instead of the amended returns filed by the Appellant,
(d) by rejecting the Appellant's amended returns which were, as the Respondent admitted, supported by information derived from source documents, on the basis that they "did not substantiate the claim that the income and expenditure shown in the financial statements filed with the original returns were incorrect",
(e) by alleging that the appellant did not keep proper records — no particulars were provided — and justifying the Commissioner's acceptance of the original returns as a basis for mailing the assessments, by reference to Section 89 of the Income Tax Act.
(f) by failing to conduct a careful enquiry to determine which of the returns — original or amenderdr — more accurately reflected the out-turn of the Appellant's business operations and unreservedly accepting the Commissioner's rejection of the Appellant's amended returns.
The Appellant also sought leave to file and argue Supplemental grounds of appeal. These were that the Respondent had erred in law and in fact:
(a) by adjudicating upon the matter without ensuring that the conditions precedent necessary - that is an objection by the Appellant to the assessments made on May 18, 2005 and a decision thereon — to the exercise of his jurisdiction had been met.
(b) by not recognizing that the Commissioner's failure to follow the correct statutory procedure denied the Appellant its fundamental right to object to the assessments made on May 18, 2005.
THE FACTUAL BACKGROUND
The taxpayer is a body corporate involved in dairy farming in the Parish of St. Ann. It first submitted returns for the years of assessment under review showing that there would have been tax due on the basis of the audited returns and tax computation but claiming, erroneously as it turned out, to be exempt from tax on the basis that it was an "approved agricultural enterprise". The taxpayer was advised that at the relevant time it was not an approved agricultural enterprise and therefore the tax liability was payable. It seems to be accepted as common ground that the status could not have been conferred retrospectively, and so a liability arose upon the returns initially submitted.
Based on this determination, the documents were sent to the Assessment unit for an assessment to be raised. Pursuant to section 72 of the Income Tax Act, the Commissioner of Taxpayer Audit and Assessment Department (TAAD) by letter dated April 22, 2002 , raised additional assessments for the years 1996 to 1998 and the Notices of Assessment were served on the Appellant. The Appellant objected by letter dated May 8, 2002 on the basis that the explanation given for each was insufficient and vague and that the adjustments were erroneous and excessive. The TAAD responded to the Appellant by letter dated June 10, 2002 and gave a further explanation as to the basis of the adjustments. It indicated that the Appellant was not an approved farmer for the relevant years 1996–1998 and that the income reported in the financial statements was therefore assessable to income tax.
By letter dated July 31, 2002, the Appellant acknowledged the letter from TAAD dated June 10, 2002, reinforcing its objection and stating that the financial statements for the years ended July 31 1997 and 1998 were erroneous. It was indicated that the taxpayer would be filing amended returns which required reconstruction of accounts as well as the tax computation. It was also further argued that the year of assessment 1996 was partly statute barred, but the Appellant wished to convene a meeting for the reconstructed tax computation to be presented.
Several extensions of time were granted to the Appellant to present the amended financial statements before the Appellant filed amended returns for the relevant years (1996 – 1998) on March 21, 2003. Un-audited statements were attached to the amended returns filed. In pursuance of a settlement of the objection, TAAD requested the Appellant to present bank statements, lodgement books and other source documents to substantiate turnover. Subsequent to that, numerous reminders were sent to the Appellant to produce the documents and again meet with the TAAD.
It is the contention of the TAAD that while the Appellant did submit some of the documents, these were not sufficient to justify rejecting the initial returns filed and overturning the original assessments made. Consequently, TAAD confirmed the assessments.
Pursuing its right given under the Revenue Administration (Appeals and Dispute Settlements) Regulations 2002, the Appellant appealed to the Respondent, Taxpayer Appeals Department (TAD) on May 24, 2006. A hearing was conducted over two (2) days and the Appellant was required to produce the requisite source documents and verification in support of the amended returns. The TAD, having heard the appeal, determined that the Appellant had failed to produce all the documents required. Consequently, after a comprehensive review of the facts the Respondent issued his Notice of Decision, whereby the decision of the Commissioner of TAAD was confirmed.
The Appellant now appeals to this Honourable Court from the decision of the Commissioner TAD as stated in the said Notice of Decision.
THE PROCEEDINGS BEFORE ME
When the hearing commenced on July 14, 2009, the Appellant raised two (2) preliminary points in objection to the matter being heard at all by this court:
The Appellant's Preliminary Objections
Firstly, it was argued for the Appellant that there was no jurisdiction on the part of the Commissioner TAD to hear the appeal from the Commissioner TAAD. The Appellant submitted that the Respondent purported to exercise his jurisdiction to hear the Appellant's appeal pursuant to Section 75(6B) without ensuring that the requisite conditions precedent were met.
In this regard the Appellant cited section 75 (6A) and (6B) of the Income Tax Act. Sub-sections (6), (6A) and (6B) are in the following terms:
(6) In the event of any person assessed, who has objected to an assessment made upon him, agreeing with the Commissioner as to the amount at which he is liable to be assessed, the assessment shall be amended accordingly. In any other event the Commissioner shall give notice in writing to the person of his decision in respect of the objection.
(6A) A person who is dissatisfied with a decision of the Commissioner under subsection (6) may appeal against that decision to the Commissioner of Taxpayer Appeals, within thirty days of the...
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