William Andrew Chang v Commissioner of Taxpayer Appeals

• Jurisdiction: Jamaica
• Judge: Morrison JA,Dukharan JA,Sinclair-Haynes JA
• Judgment Date: 18 March 2016
• Neutral Citation: JM 2016 CA 31
• Court: Court of Appeal (Jamaica)
• Docket Number: SUPREME COURT CIVIL APPEAL NO 141/2011
• Date: 18 March 2016

Between

William Andrew Chang

Appellant

and

The Commissioner of Taxpayer Appeals (Income Tax)

Respondent

[2016] JMCA Civ 16

Before:

The Hon Mr Justice Morrison JA

The Hon Mr Justice Dukharan JA

The Hon Mrs Justice Sinclair-Haynes JA (AG)

SUPREME COURT CIVIL APPEAL NO 141/2011

JAMAICA

IN THE COURT OF APPEAL

Herbert A Hamilton for the appellant

Mrs Cecelia Chapman Daley , Mrs Suesette Harriott-Rogers and Miss Maxine Johnson for the respondent

Morrison JA

Introduction

1 This is an appeal from a judgment of R Anderson J given in the Revenue Court on 14 October 2011.

2 The appellant is a taxpayer. The respondent is the Commissioner of Taxpayer Appeals (the CTA), appointed under section 11B of the Revenue Administration Act (the RAA). Pursuant to section 11C of the RAA, the CTA is responsible for the general administration of the Taxpayer Appeals Department (the TAD), ‘and shall have such other functions … as may be assigned to him by this or any other enactment’. The TAD was established by section 11A, which provides that it shall be the duty of the TAD to provide for, among other things, ‘the hearing of appeals by taxpayers against decisions … in relation to assessments made under the relevant laws relating to revenue…’ 1

3 Under the provisions of the Income Tax Act (the ITA), the CTA is the public officer responsible for hearing such appeals from, among others, the Commissioner of Taxpayer Audit and Assessment (the CTAA). The CTAA is the public officer responsible for the general administration of the Taxpayer Audit and Assessment Department (the TAAD), established under section 11D of the RAA.

4 By a notice of decision issued on 26 June 2009, the CTA confirmed additional assessments to income tax raised by the CTAA against the appellant for the years of assessment 2005 and 2006. The amount of tax payable by the appellant in each of these years was assessed at $12,125,393.75 and $8,136,090.94, respectively. In each

case, the assessment was stated by the CTAA to represent ‘the estimated Jamaican dollar value of investment gains made with a non-licenced financial institution.’ 2

5 By notice of appeal filed on 24 July 2009, the appellant appealed to the Revenue Court against the decision of the CTA. In a written judgment given on 14 October 2011, R Anderson J, the then judge of that court, dismissed the appellant's appeal and confirmed the assessment. This is an appeal from the decision of the learned judge.

6 Perhaps unusually for an income tax appeal, the appellant does not challenge the quantum of the assessment. However, he strongly challenged his liability to pay it on a variety of grounds, engaging questions of law, procedure and, on one possible view, constitutional rights. Before coming to the detailed background to the appeal, it may first be helpful to indicate briefly the statutory and regulatory provisions which govern the assessment and appeals process under the ITA.

7 The starting point in this case is section 72(4) of the ITA, pursuant to which the CTAA is empowered to make additional assessments to tax, where it apppears to her that the taxpayer ‘has not been assessed or has been assessed to a less amount than that which ought to have been charged … within the year of assessment or within six years after the expiration thereof …’ Section 75(1) provides for service of notices of assessment on the taxpayer. Section 75(4) establishes the mechanism whereby such an assessment may be disputed, within 30 days of the service of the notice of assessment,

by way of notice of objection stating the grounds of the objection. Section 75(4A) provides that ‘[t]he onus of proving that the assessment complained of is erroneous shall be on the person making the objection’. Section 75(6) provides that, save where the person making the objection agrees with the CTAA as to the amount at which he is liable to be assessed, in which event the assessment will be amended accordingly, the CTAA is required to give written notice to the person making the objection of her decision on the objection. Section 75(6A) provides that, if dissatisfied with the CTAA's decision, the objector may next, within 30 days, appeal against it to the CTA. Finally, section 76(1) provides that, if dissatisfied with the decision of the CTA, the objector may then appeal to the Revenue Court within 30 days, or such longer period permitted by rules of court. In the event of such an appeal, section 76(2) again allocates the onus of proving that the assessment is erroneous to the objector.

8 As a final preliminary, I should mention the Revenue Administration (Appeals and Disputes Settlement) Regulations, 2002 (the regulations), made pursuant to the provisions of the RAA. Once a notice of appeal is filed in respect of the decision of a revenue commissioner, such as the CTAA, regulation 6 requires the CTA to serve a copy on the relevant revenue commissioner. Regulation 7 provides that, within 21 days of being served with the notice of appeal, the relevant revenue commissioner shall furnish the CTA with ‘(a) all files relating to the relevant decision; [and] (b) a written statement of the reasons for the relevant decision’. And regulation 8(2) provides that, ‘[i]f the [CTA] requires any evidence or further evidence for the investigation of the decision appealed or disputed, he shall give the appellant or the disputant … fourteen days notice in writing specifying what evidence or further evidence is requred’.

The additional assessments

9 In or about January 2008, based on information that the appellant was in receipt of additional income from investments, the TAAD selected him for an investigation. The findings of the investigation revealed that the appellant had investments with an entity known as Olint Investment Club (Olint) 3 and that as at 30 April 2005 his accounts contained a balance of US$319,423.96. Over the period 2005–2006, the appellant's investments with Olint credited him with significant monthly ‘trading gains’ (averaging well over 10% per month). In addition, the TAAD's information indicated that in 2007 the appellant had received a loan of $6,500,000.00 from the Bank of Nova Scotia Jamaica Ltd (BNS), for the purchase of a motor car valued at approximately $7,000,000.00. Further, that the appellant had also purchased two properties valued in excess of $32,000,000.00.

10 Based on her review of the information in the TAAD's possession, the CTAA served the appellant with notices of additional income tax assessments dated 10 March 2008 for the taxable period 2004–2006. The grand total of the assessment was $97,443,744.46, being $565,250.00 for 2004; $15,282,086.33 for 2005; and $81,596,486.13 for 2006. By letter dated 15 May 2008, the appellant's accountant, Mr

Henry Parkes 4 (Mr Parkes), whom he would in due course designate as his agent ‘in respect of all income tax matters’, objected to the additional assessments on the appellant's behalf. The stated grounds of objection were that the assessment was (i) excessive, in that it did not reflect the earnings of the appellant; and (ii) arbitrary, in that no explanation of its basis had been provided.

11 As a result, the appellant and Mr Parkes met with officers of the TAAD and, by letter dated 21 July 2008, Mr Parkes confirmed the appellant's position as follows:

‘Further to our meeting of Tuesday July 8 ^th 2008, we have outlined below an explanation of the business activity conducted between our above mentioned client and Olint Investment Club between January 2005 and March 2006. Mr Chang ended his investment with Olint in April 2006. The funds were paid out in May 2006 and was [sic] invested in his JMMB fund account (statement attached).

Our client commenced relations with Olint in January 2005 with US$20,000. He operated two investment accounts in his name. Account #40A and 188B was funded with cash received by leverageing his ESOP shares received upon his departure from JMMB in 2004. Account # 40A was operated on behalf of a third party Mr. Andrew Stewart. The funds were subsequently merged into account 188B in November 2005.

Upon reviewing the monthly statements we have determined that our client is liable for tax on the investment income from Olint of J$4,506,101 for Y/A 2005 and J$4,087,798.75 for Y/A 2006. We have outlined a detail monthly analysis of the earnings and the tax thereon which is enclosed.’

12 Among other things, Mr Parkes' letter enclosed an undated statement by the appellant, in which he sought to confirm the investment said to have been made on behalf of the third party, Mr Andrew Stewart:

‘ STATEMENT OF WILLIAM ANDREW CHANG

I do hereby state that the proceeds used to invest in the Olint Account Number 40A, were not of my own, but were instead invested on behalf of Andrew Stewart of 539 Northfield Avenue, #21 West Orange New Jersey 07052 .

July 16, 2008

Signed________________________

WILLIAM ANDREW CHANG

Signed_________________________

DELROSE A.M.CAMPBELL

Attorney-at-Law’

13 By letter also dated 21 July 2008, the CTAA issued her notice of decision on the appellant's objection to the additional assessment. The amount in respect of 2004 was confirmed, but the amounts in respect of 2005 and 2006 were reduced to $18,188,090.63 and $12,204,136.41, respectively. Included in the amounts for 2005 and 2006 were penalties of $6,062,696.88 and $4,068,045.47, respectively.

The appeal to the CTA

14 By letter dated 30 September 2008, the appellant appealed against the CTAA's assessment for 2005 and 2006. The grounds of the appeal were that (i) ‘[t]he final assessment includes tax on income earned from investments on behalf of a foreign national’; and (ii) ‘[n]o remittance of the earnings has been made to-date hence [the appellant] has no liability to tax on this sum’. In addition, the appellant appealed against the...