B & S Displays v Special Commissioners of Income Tax
| Jurisdiction | England & Wales |
| Year | 1978 |
| Date | 1978 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Penalty - Initial penalties awarded for failure to comply with notices issued under s 20, Taxes Management Act 1970 - Validity of notices contested on variety of grounds - Some notices held invalid as to part - Such invalidity incapable of cure by severance - No reasonable excuse for non-compliance with valid notices shown - Ss 11, 20, 98, 100, 118, Taxes Management Act 1970; ss 4A & 24, Inland Revenue Regulation Act 1890.
On 24 March 1976 notices under s 20, Taxes Management Act 1970, were served by the Board of Inland Revenue on each of the six Defendant Companies requiring them to make certain books, accounts and documents relating to specified periods available for inspection. In the cases of B & S Displays Ltd., B & S Contracts & Design Ltd. and Intercam Contracts & Marketing Ltd., two notices each covering a different period were served. None of the notices were complied with. On 4 August 1976 informations were laid before the Special Commissioners claiming penalties under s 98, Taxes Management Act 1970, in respect of such failure. The Special Commissioners declared that the Companies had failed to comply with each notice served upon them and awarded a penalty. In the three cases where one notice only had been served on a Company they awarded a penalty of £20. In each of the other cases where two notices had been served they awarded a penalty of £10 in respect of each notice.
The Companies appealed to the High Court where it was contended on their behalf: (i) that the power to issue notices under s 20 was conferred solely to assist the making of assessments within the normal six year time limit under s 34, Taxes Management Act 1970, and that as the notices required production of documents for chargeable periods long past they were bad; (ii) that some of the notices were bad because the recital of the grounds for giving them was inaccurate; (iii) that the proceedings for the recovery of the penalties had not been authorised by order of the Board of Inland Revenue as required by s 100(1), Taxes Management Act 1970; (iv) that the Special Commissioners were wrong in rejecting a defence of "reasonable excuse" under s 118(2), Taxes Management Act 1970; (v) that some of the notices (namely, one each in respect of B & S Contracts & Design Ltd. and Intercam Contracts & Marketing Ltd. and those in respect of Silk Screen Specialists Ltd. and G S Group Electrics Ltd.) were invalid by reason of the fact that the periods specified in them for which documents were required did not correspond with periods for which it had been proved that returns had been required and this defect could not be remedied by excising the incorrect part of the notice.
Held, dismissing two appeals, allowing two appeals and allowing two appeals in part:
(i) that no time limit could be read into s 20;
(ii) that an inaccurate recital as to the grounds for the service of a notice did not invalidate it;
(iii) that it could not be said that there was no evidence on which the Special Commissioners could be satisfied that the proceedings were duly authorised by the Board and in any event, by virtue of s 24(4), Inland Revenue Regulation Act 1890, in the absence of proof to the contrary the informations were to be deemed to be issued in exercise of the functions conferred on the Board;
(iv) that no reasonable excuse for non-compliance with the notice had been demonstrated;
(v) that the notices had expressly required production of documents for periods in which returns had previously been received, but for some such periods no returns had been required. In those cases the whole notice as drafted, being related to documents for the particular period for which returns were required, was invalid.
Per Curiam: (a) the making of an objection in law which proved to be ill-founded cannot be put forward as a "reasonable excuse" for the purpose of s 118(2); (b) in general, there was no reason why the period for which the production of documents was required under a s 20 notice should coincide with that for which a return of profits had been required.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 29 and 30 November 1976 and 10 and 11 February 1977 proceedings against B & S Displays Ltd. (hereinafter called "the first Defendant") for the recovery of penalties under s 98(1) of the Taxes Management Act 1970 were commenced by informations laid by Gavin Moffat McGregor, one of Her Majesty's Inspectors of Taxes, on 4 August 1976.
2. The said informations alleged that the first Defendant had failed to comply with two notices dated 24 March 1976 served on the first Defendant under s 20 of the Taxes Management Act 1970 and had thereby rendered itself liable to a penalty not exceeding £50 in respect of each notice. Copies of the informations are annexed hereto, exhibit E1 and E2(1).
3. The first Defendant was summoned by summons dated 7 October 1976 to appear before us on 29 and 30 November 1976. A copy of the summons is annexed hereto, exhibit F(1). At the same hearing we heard proceedings against the following companies:
(ii) B & S Contracts & Design Ltd.
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(iii) Intercam Contracts & Marketing Ltd.
(iv) Silk Screen Specialists Ltd.
(v) G S Group Electrics Ltd.
(vi) Town & Country Exhibitions Ltd.
for penalties for alleged failure to comply with similar notices also dated 24 March 1976. To avoid repetition we have included in this note our findings and reasons and our decisions in all six matters. We refer below to the first Defendant and the above five Companies as "the six Defendants".
4. The following witnesses gave evidence before us on behalf of the Commissioners of Inland Revenue: (a) the said Gavin Moffat McGregor (hereinafter called "Mr. McGregor"), one of Her Majesty's Inspectors of Taxes; (b) Mr. Jack Francis Patterson, one of Her Majesty's Inspectors of Taxes.
5. The following documents were proved or admitted before us:
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(i) Bundle A (exhibit A), copy documents, consisting of:
1. (1) & (2) Two notices dated 24 March 1976 to B & S Displays Ltd. under Taxes Management Act 1970, s 20 for the periods 1 July 1961 to 30 June 1970 and 1 July 1970 to 30 June 1972 respectively. Other notices dated the same day to the following Companies and for the following periods: (3) B & S Contracts & Design Ltd.-1 January 1969 to 31 December 1970; (4) B & S Contracts & Design Ltd.-1 January 1971 to 31 December 1971; (5) Intercam Contracts & Marketing Ltd.-15 February 1963 to 30 June 1971; (6) Intercam Contracts & Marketing Ltd.-1 July 1971 to 30 June 1972; (7) Silk Screen Specialists Ltd.-1 August 1967 to 30 June 1971; (8) G S Group Electrics Ltd.-1 October 1963 to 31 December 1968; (9) Town & Country Exhibitions Ltd.-8 May 1963 to 30 April 1972. (10) A schedule which is common to all the above-mentioned notices.
2. (1) & (2) Two informations laid by Mr. McGregor, re B & S Displays Ltd., exhibited before the Commissioners for the Special Purposes of the Income Tax Acts on 4 August 1976. [The other informations, all exhibited on the same day, in respect of the other Companies are mutatis mutandis the same.]
3. (1)-(3) Returns, B & S Displays Ltd., years ended 5 April 1961, 1964, 1965.
4. (1)-(11) Bundles of trading accounts, B & S Displays Ltd., for accounting periods ended 30 June 1962 to 1972 inclusive.
5. (1)-(3) Bundles of trading accounts, B & S Contracts & Design Ltd., for accounting periods ended 31 December 1969 to 1971 inclusive.
6. (1)-(9) Bundle of trading accounts, Intercam Contracts & Marketing Ltd., for accounting periods 15 February 1963 to 30 June 1964 and for periods ended 30 June 1965 to 30 June 1972 inclusive.
7. (1)-(5) Bundle of trading accounts, Silk Screen Specialists Ltd., for accounting periods 1 August 1967 to 30 June 1968 and for periods ended 30 June 1969 to 30 June 1971 inclusive.
8. (1) & (2) Returns, GS Group Electrics Ltd., years ended 5 April 1964 and 1965.
9. (1)-(5) Bundle of trading accounts, G S Group Electrics Ltd., for accounting periods 1 October 1963 to 30 September 1964 and for periods ended 30 September 1965 to 30 September 1968 inclusive and for the period from 1 October 1968 to 31 December 1968.
10. (1) & (2) Returns, Town & Country Exhibitions Ltd., years ended 5 April 1964 and 1965.
11. (1)-(9) Bundle of trading accounts, Town & Country Exhibitions Ltd., for the accounting periods 8 May 1963 to 30 April 1964 and for periods ended 30 April 1965 to 30 April 1972 inclusive.
(ii) Bundle B (exhibit B)-copy correspondence between the Inland Revenue and Messrs. G.A. and M.J. Stammers, Mrs. Y. Stammers, Mr. K. Coombes, Messrs. Philip Colman & Co. and Messrs. S. Rutter & Co., 58 letters in all.
(iii) A list of periods for which returns were issued to each of the six Defendants for completion: exhibit C.
(iv) A specimen corporation tax return: exhibit D.
Copies of the above are annexed hereto as exhibits(1).
6. As a result of the evidence both oral and documentary adduced before us we find the following facts proved or admitted:
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(a) Mr. Jack Francis Patterson is an Inspector at Stratford 1st District. That District was responsible for the tax affairs of the six Defendants until they were transferred to another District a few years ago. The procedure in the District for recording the issue of returns to companies was to mark with a tick a register sheet of the company in its file. The issue of returns to companies was recorded collectively on a control sheet and placed on front of the
register of companies. He produced a list of returns issued to each of the six Defendants for years...
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