Gault v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Judgment Date | 03 July 1990 |
| Date | 03 July 1990 |
| Court | Court of Session |
Court of Session (Inner House).
Lord President Hope, Lord Allanbridge and Lord Brand.
Mr WA Nimmo Smith QC and Mr Colin Tyre (instructed by Stuart & Stuart, Edinburgh) for the taxpayer.
Mr J E Drummond Young QC and Mr James McNeill (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the opinion of the court:
IR Commrs v Niddrie and Benhar Coal Co Ltd TAX(1951) 32 TC 244
McKerron (R & D) Ltd v IR Commrs TAX(1978) 53 TC 28
Ottley v Morris (HMIT) TAX(1978) 52 TC 375
Rose v Humbles (HMIT) TAX(1971) 48 TC 103
This was an appeal by the taxpayer seeking to quash a decision of the general commissioners for Moray on the grounds that an adjournment should have been granted and that the commissioners should have considered a letter written by the taxpayer's newly appointed accountants after the hearing but before a decision was given.
The taxpayer, who had a furniture shop since 1974, entrusted his affairs to an accountant who made no returns until 1982.
It appeared to the Revenue that the returns were inaccurate and that the taxpayer had drawn sums from the business which had not been declared. Consequently estimated assessments were made for the years 1975-76 to 1983-84.
At the hearing of the taxpayer's appeal to the general commissioners on 7 February 1984 he called a number of witnesses but his solicitor indicated that he might seek an adjournment so that further witnesses could be called. When the commissioners stated that all appropriate witnesses should have been called in the first place the solicitor requested an adjournment of the whole case to permit better preparation of the taxpayer's contentions. That request was refused having regard not only to the number of years covered by the appeal but the facts that the taxpayer had consulted his solicitor over a year before the hearing, that lengthy negotiations had taken place and that he had had five weeks' notice of the date of the hearing.
After hearing evidence and submissions from the parties the commissioners reserved their decision. On reconvening on 15 February 1984 they refused to read a letter, dated the previous day, from the taxpayer's new accountants who had been consulted after the hearing. The letter again requested an adjournment but with a view to reaching a settlement. A copy of the letter had not been sent to the Revenue.
On 22 February the commissioners, having found that there had been wilful neglect on the part of the taxpayer, determined the assessments in adjusted amounts and granted a certificate for default interest under the Taxes Management Act 1970 section 70 subsec-or-para (3) section 88Taxes Management Act 1970, sec. 70(3) and 88.
Held, dismissing the taxpayer's appeal:
1. It was impossible to say that the commissioners' decision to refuse an adjournment when the request was made at the hearing was one which no reasonable tribunal could have reached.
2. The commissioners were justified in refusing to examine the letter from the new accountants. It would have been improper for them to take its contents into account without providing the Revenue with an opportunity to reply. It should have been clearly stated that an adjournment was being requested and a copy sent to the Revenue.
1. At a meeting of the commissioners for the general purposes of the income tax for the division of Moray held on 7 February 1984 for the purpose of hearing appeals Mr Derrick Gault appealed against the following assessments to income tax under Income and Corporation Taxes Act 1988Case I of Sch. D [in respect of the taxpayer's business trading as Elgin Discount Furniture Centre]:
2. At the start of the hearing Mr J A R Comfort, solicitor, Elgin as agent for the taxpayer indicated he might wish during the course of the hearing to move for an adjournment in order to allow more witnesses to be called but we considered that all appropriate witnesses should have been cited to this sitting. Mr Comfort then moved for an adjournment of the whole case to permit better preparation of the taxpayer's contentions. Having regard to the period of years covered by the appeal, to the fact that the negotiations between the Enquiry Branch of the Inland Revenue and the taxpayer had extended over 18 months during which the taxpayer had not been co-operative, and that the taxpayer had consulted his solicitors as far back as December 1982, and having heard representations on behalf of the taxpayer (whose solicitor conceded that the taxpayer had not co-operated with the Inland Revenue) and a detailed statement from the Inland Revenue relating the course of numerous discussions held with the taxpayer during 1982 and 1983 and explaining that he had been given written notice of the appeal hearing more than five weeks previously we refused the application for adjournment and the case proceeded.
3., 4. [Paragraphs 3 and 4 listed the witnesses who gave evidence and the documents proved or admitted before the commissioners.]
5. In view of the fact that an application was to be made at the hearing for the grant of certificates in terms of Taxes Management Act 1970 section 70 subsec-or-para (3)sec. 70(3) of the Taxes Management Act 1970, the inspector of taxes (Mr E C Jones) opened the appeal in relation to all the assessments before us.
6. [Paragraph 6 set out the facts found by the general commissioners relating to the taxpayer's accounts and relevant matters.]
7. In his closing statement on behalf of the taxpayer it was contended by Mr Comfort:
(2) that this hearing should not have proceeded on this day or at least that the taxpayer should have been granted an adjournment to enable him to consider the volume of documentary productions lodged at the hearing by the Inland Revenue. It was true that much of the documentary evidence had been put to the taxpayer in advance of the hearing by the Inland Revenue but it was also the case that on several important points the taxpayer was unable to refer to the sources of the information as the Inland Revenue had retained possession of some of his business books for a lengthy period prior to the hearing;
(3) although it had been conceded at the outset that the taxpayer had not always co-operated with the Inland Revenue this had been at a time when, admittedly through his own choice, the taxpayer had not had the benefit of legal advice. The taxpayer had consulted his solicitors in December 1982 and on their advice had co-operated with the Inland Revenue but from then until approximately two days before this hearing the taxpayer, for whatever reason, had chosen not to seek the advice of his solicitors. Having seen again the benefits of professional advice, even at a very late stage, the taxpayer should have been granted an adjournment so that his advisers could consider his position fully and assist him to give a fair and proper presentation of his case. What had been presented at this hearing was a very hastily arranged band of witnesses to speak to sundry important points of evidence without the taxpayer's advisers having the opportunity to enlist specialist accountancy advice to answer the Inland Revenue's allegations;
(4) notwithstanding the forgoing the Inland Revenue had failed to establish fraud or wilful default on the part of the taxpayer;
(5) although the Inland Revenue had established a gross profit rate of approximately 35 per cent on one or two selected items the sample had been too limited to justify the conclusion that the taxpayer's overall gross profit rate had been of that order and that, accordingly, his...
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