Hillenbrand v Commissioners of Inland Revenue
| Jurisdiction | Scotland |
| Date | 1963 |
| Year | 1963 |
| Court | Court of Session |
COURT OF SESSION (FIRST DIVISION)-
Income Tax - Back duty.
On appeal against additional assessments to Income Tax under Schedule D for the years 1942-43 to 1960-61, the Appellant, a hairdresser, admitted that she had omitted items from her returns, but contended that the default was not wilful. The General Commissioners found that she had been guilty of wilful default.
Held, that the Commissioners were entitled to reach their conclusion.
Stated under the Income Tax Act, 1952, Section 64, by the Commissioners for the General Purposes of the Income Tax Acts for the opinion of the Court of Session, as the Court of Exchequer in Scotland.
I. At a meeting of the Commissioners for the General Purposes of the Income Tax Acts for the Kyle Division of Ayrshire held on 16th April, 1964, at Ayr, Miss Beatrice Kate Hillenbrand, carrying on business as hairdresser at 70 Sandgate, Ayr (hereinafter called "the Appellant"), appealed against additional assessments to Income Tax made on her under Schedule D for the years 1942-43 to 1960-61 inclusive. The Appellant was represented by Mr. W.R. Grieve, Q.C., and the Crown by Mr. S.B. Albiston, H.M. Inspector of Taxes, Ayr 1st District.
The questions for our determination were:
(2) Whether the Appellant in all or any of the years in question had failed to disclose the whole of her income in the Income Tax returns made by her to the Revenue and if so, whether in so doing the Appellant had committed wilful default within the meaning of the proviso to Section 47(1) of the Income Tax Act, 1952, in regard to Income Tax returns made by her to the Revenue;
(3) What sum in respect of living expenses fell to be taken into account in computing the Appellant's profits for the years in question.
II. Evidence was given to us by the following persons: Mr. S.B. Albiston, one of Her Majesty's Inspectors of Taxes, Ayr 1st District; the Appellant; Mrs. Dorothy Adams or Kerr, the Appellant's daughter; Mrs. Mabel Margaret Hillenbrand or Martin, the Appellant's sister; Mr. William Gardner, the Appellant's solicitor.
As a result of the evidence, both oral and documentary, adduced, we find the following facts proved or admitted.
(a) The Appellant commenced business as a hairdresser in 1937. Until 25th April, 1942, she was in partnership. Thereafter the Appellant carried on business by herself from Boswell Park, Ayr, until November, 1958, when she purchased premises at 70 Sandgate, Ayr. Her business in Boswell Park was conducted by herself and three young assistants. Throughout the whole period in dispute accounts of her business were prepared by Mr. J. Kerr McKenzie, chartered accountant, Kilmarnock, who died in April, 1962.
(b) In 1953 inquiries undertaken by the then Inspector of Taxes, Ayr 1st District, led to the disclosure of an account the Appellant had with the Savings Bank of Glasgow, the interest from which account had not been disclosed in the Appellant's Income Tax returns.
(c) On 24th March, 1953, the Appellant signed a certificate which stated that a full disclosure had been made of all the facts bearing on her liability to Income Tax.
(d) In 1957 the then Inspector of Taxes, Ayr 1st District, ascertained that the Appellant's son, then aged 15, had a savings account. The capital for this account had been provided by the Appellant. This account was not disclosed in the Appellant's Income Tax returns or in the certificate dated 24th March, 1953.
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(e) At an interview with the Inspector of Taxes on 16th March, 1960, the Appellant admitted that she had received income from paying guests which had not been disclosed in her Income Tax returns. She subsequently supplied a list showing the estimated amounts received in each year and giving the names of some of the paying guests. However, at the hearing before us the Appellant denied that she had ever received income from paying guests and explained that she had supplied these figures at her accountant's suggestion. The Appellant stated that the names she supplied were those of relatives who did not pay for their accommodation.
(a) The Inspector of Taxes stated that he had prepared and agreed with the Appellant's accountant, the late Mr. J. Kerr McKenzie, C.A., a capital statement.
(b) We accepted that he had prepared and agreed such a statement.
(c) The agreed capital statement showed the increase or decrease year by year of the Appellant's capital receipts and expenditure so far as known and estimates of her living expenses. The Inspector produced a simplified version of the agreed statement which is annexed hereto marked "A" and forms part of this Case(1).
(d) The simplified statement showed that in all of the years under review except four there were increases in the Appellant's private assets which represented annual savings by the Appellant. It also showed that the Appellant's expenditure exceeded her receipts.
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(e) The Inspector of Taxes explained to us that the excess of expenditure over receipts could be explained by inferring that the deficiency must have been met by unrecorded sums drawn by the Appellant from her business profits and that the Appellant's true profits fell to be arrived at by adding together in each year the excess of expenditure over income and the profits shown in her
Income Tax returns together with an estimated figure based on the receipts disclosed by the Appellant in respect of income...
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