Commissioners of Inland Revenue v Hinchy

JurisdictionEngland & Wales
JudgeTHE MASTER of THE ROLLS,THE MASTER OF THE ROLLS
Judgment Date11 May 1959
Judgment citation (vLex)[1959] EWCA Civ J0511-2
Date11 May 1959
CourtCourt of Appeal

[1959] EWCA Civ J0511-2

In The Supreme Court of Judicature

Court of Appeal

Before:

The Master of the Rolls (Lord Evershed)

Lord Justice Ormerod and

Lord Justice Habman

Commissioners of Inland Revenue
and
Albert Edwin Hinchy

THE ATTORNEY-GENERAL (Rt. Hon. SIR REGINALD MANNINGHAM-BULLER, Q.C. M.P.), Mr. JOHN PENNYCUICK and Mr. ALAN S. ORR (instructed "by Solicitor of Inland Revenue,) appeared on behalf of the Appellants (Plaintiffs).

THE RESPONDENT (Defendant) appeared in person.

THE MASTER of THE ROLLS
1

: The Judgment which I am about to read is the Judgment of the Court.

2

The question arising on this appeal is apparently short and simple enough: it is the meaning of a few words in section 25 sub-section. 3 (a) and (b) of the Income Tax Act, 1952 -".… trebls the tax which he ought to be charged under this Act". But the full arguments of the Attorney-General and Mr. Pennycuick have at least made clear that not only the sub-section hut the whole fasciculus of sections, 18 to 30 inclusive, which form part of Chapter II of the Act, and which in large measure trace their descent through the Income Tax Act, 1918, from that of 1842, has in the course of 117 years and in greatly changed circumstances acquired an obscurity, and in some respects an artificiality, quite remarkable even in a taxing statute. As long ago as 1909 the Master of the Rolls, Sir Herbert Cozens-Hardy, described the prototype of the sub-section under review, section 55 of the 1842 Act, as "ungrammatical and almost unintelligible". The language of that section has nevertheless been reproduced, substantially unchanged, in the two consolidating statutes of 1918 and 1952. We shall in the course of this Judgment have occasion to refer to more than one of the problems which the present sub-section and its fellows present, problems which (if they are soluble at all) it is fortunately unnecessary for us to solve.

3

It is the contention of the Crown that the words we have cited mean "treble the taxpayer's whole (properly) assessed tax for the relevant year". If that view be right, results and anomalies of an extravagant kind follow. Yet it is clear that the Court (unlike the Commissioners) has no dispensing power under the sub-section. The remedy in the last resort, according to the Crown's argument, is found in the power of the Commissioners or the Treasury (for example, under section 500) to mitigate or remit the penalty before or after judgment. It has indeed been urged upon us that the Crown's practice has been consistent for over a century and that we should give judicial sanction to it, relying upon the Treasury in the exercise of its statutory discretion to avoid harshness or injustice. We have no warrant to suggest that the Treasury's discretion has not at all times been most fairly and properly exercised, and certainly in the present case we can see no ground for sympathy with the Respondent, who, being an officer in the Department of Customs and Excise, deliberately failed to make true and correct disclosure over many years of one source of untaxed income of his wife and himself, namely, the Post Office Savings Bank. Nevertheless, we venture to think that the results of the Crown's contention - particularly at a time when present rates of taxation may swell the penalty for atrifling mistake to almost astronomical figures - are most unsatisfactory however well the Treasury's discretion be exercised; and we express the hope accordingly that Parliament may find time to review the sections in question.

4

The facts of the case are themselves not free from obscurity; but for the purpose of this appeal they may not greatly matter. We have said that the Respondent was and is a servant of the Crown employed in the Customs and Excise Department. His salary as such was taxable under Schedule, and tax was levied at the source under P.A.Y.E. For the tax year 1952/53 this levy was £125, 6s. 6d. He had for the same year disclosed in his income tax return the sum of £18. 6s. Od. for Post Office Savings Bank interest received by himself and his wife. It is not now in doubt that the true amount of such interest was £51. 5s. 9d. As we have said, he had made similar understatements for a number of previous years. He has now been duly assessed for the year 1952/53 in the full sum of £51. 5s. 9d. According to the Writ in the action the full tax assessment for the year is £139. 11s. 6d., namely, £125. 6s. 6d. Schedule tax in respect of his employment and £14. 5s. Od. "Income Tax Schedule in respect of untaxed interest". In an earlier paragraph of the Writ reference is made to the amount of £10. 6s. Od. which the Respondent had disclosed. But the sum of £14. 5st Od. represents arithmetically 9s.6d. in the £ on £30 - 9s. 6d. "being the appropriate rate of tax. Prom one of the documents in the case, containing a computation "by the Crown of the amount of tax properly due from the Respondent in respect of the difference "between the sums received for Post Office Savings Bank interest and the oums disclosed (see page 26 of the correspondence), there appears againBt the year 1952/53 the item for "bank interest "Assessed, say £21", a sum less "by £30 than the true amount of such interest: and £14. 5s. Od. is shown as the amount of tax (at 9s.6d. in the £) on this figure of £30. In the circumstances, it must, we suppose, "be assumed for the purpose of this case that the Respondent had "been assessed and taxed in respect of Post Office Bank interest on the sum of £21 "but that, as later appeared, the true and correct amount of such interest for the year was £30 more, namely, £51.

5

Even so, however, the claim made "by the Writ appears to "be entirely at variance with the Crown's so-called practice, according to which he should now "be charged the treble penalty not only on the P.A.Y.E. tax and not only on the tax on the excess income of £30, "but on the full amount of the Post Office Bank interest, £51 odd - let alone on certain other income which appears from his return. For the purposes of this case, however, and in view of the conclusion which we have formed, it is sufficient to say that £14. 5s. Od. must "be taken to represent the tax (at 9s.6d. in the £) on the undisclosed amount of bank interest, namely £30.

6

It is nevertheless to be observed that the Crown's view of the true construction of the sub-section which forms the second ground of appeal stated in the notice in the present case' is inconsistent with the claim in the Writ at least in two respects: first, the claim was not confined to sums charged by direct assessment as it included P.A.Y.E. levy; second, "£14. 5s. Od. was not the tax on the whole Post Office interest but only on the balance of £30 undeclared.

7

We return now to the question of construction of section 25 sub-section 3. The view of the learned Judge was that the Crowns claim must be limited to £20 only. He was of opinion that since before the issue of the Writ the Respondent had been assessed in the sum of £139. lis. 6d., namely, £125. 6s. 6d. under Schedule plus £14. 5s. Od., it could no longer be said that, at that date, there was any tax which the Respondent "ought to be charged under the Act". It was also the Judge's view, though this is not reflected in his decision, because of the opinion above referred to, that the essential phrase "the tax which he ought to be charged" is limited to the tax for which he should be charged, but was not in fact charged upon his income tax return as a result of his incorrect statement therein of the amount of bank interest - that is, in figures, £14. 5s. Od. Upon this third view the Crown would be entitled to judgment (in addition to the sum of £20) for three times £14. 5s. Od., or £42, 15s. Od. The Crown's dissent from this view forms its first ground for the present appeal, as the notice shows.

8

We propose to consider the question first as a matter of construction of the Act, without reference to any decided cases; and then to see whether the conclusion at which we so arrive is affected is any decision binding upon this Court. It is necessary first to refer at some length to the group of sections to which we have already alluded.

9

Section 18 is the first of a series of sections under Chapter 11 with a cross-heading "Returns and Assessment". Subsection 1 reads: "It shall be the duty of every person who is chargeable to income tax for any year of assessment to give notice to the surveyor that he is so chargeable at or before the end of that year.…" I can pass over the proviso. Sub-section 2: "If any person, without reasonable excuse, fails to give such a notice as aforesaid, he shall (a) if proceeded against by action in any court, forfeit the sum of twenty pounds and treble the tax which he ought to be charged under this Act; or (b) if proceeded against before the General Commissioners, forfeit a sum not exceeding twenty pounds and treble the tax which he ought to be charged under this Act, and where he is proceeded against before the General Commissioners, the penalty shall be recovered in the same manner as any other penalty under this Act, and the increased tax shall be added to the assessment".

10

Section 19: "Every individual, when required so to do by a notice given to him by the surveyor, shall, within the time limited by the notice, prepare and deliver to the surveyor a true and correct return in the prescribed form of all the sources of his income and of the amount derived from each source for the year preceding the year of assessment, computed" as therein provided; and again I can pass over the proviso.

11

Section 20 contains a similar provision relating to the current year's chargeable income, and I need not read that; or the supplemental provisions in sub-sections 2, 3 and k; but I should perhaps add that there is at the end of sub-section a proviso as follows: "Provided that the penalty inflicted...

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