Hudson v Humbles
| Jurisdiction | England & Wales |
| Judgment Date | 06 April 1965 |
| Date | 06 April 1965 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income Tax, Schedule E - Back duty - Unexplained increases of capital - Whether prima facie case of wilful default - Income Tax Act, 1952 (15 & 16 Geo. VI & 1 Eliz. II, c. 10), Section 47(1) proviso.
An enquiry into the Appellant's tax affairs showed that in the years 1946-47 to 1949-50 he had received sums considerably in excess of his known income, for which he failed to furnish a satisfactory account. At the material times he was director and controlling shareholder of a trading company. Assessments to Income Tax under Schedule E for those years in aggregate amount of £14,854, based on a capital statement prepared by the Inspector of Taxes, were made on him more than six years later, on the footing that those sums represented undisclosed drawings of remuneration from the company and that in failing to disclose them for tax purposes he had been guilty of wilful default. An assessment for 1954-55 in respect of further undisclosed drawings was made within six years.
On appeal before the General Commissioners, it was contended for the Appellant that, although he had admittedly been neglectful, his neglect did not amount to wilful default. No evidence was given by him or on his behalf. The Commissioners decided that he had been guilty of wilful default and confirmed the assessments, subject to an agreed adjustment.
In the High Court, it was contended for the Appellant that the Revenue had not made out a prima facie case for treating the receipts in question as remuneration from the Company.
Held, that it was not necessary for the Revenue, in order to raise a prima facie case of wilful default, to show the particular quality or source of the receipts unaccounted for, and that the Commissioners' conclusion was justified.
Stated under Section 64 of the Income Tax Act, 1952, by the Commissioners for the General Purposes of the Income Tax for the Stockport Division of the County of Chester for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the General Purposes of the Income Tax for the Stockport Division of the County of Chester held at the Town Hall, Dukinfield, on Wednesday, 8th August, 1962, Fred Hudson (hereinafter called "the Appellant") appealed against the following assessments:
£ |
||
1946-47 |
Schedule E additional assessment-remuneration from Hudson, Dodsworth & Co., Ltd. |
736 |
1947-48 |
" " " " |
3739 |
1948-49 |
" " " " |
6206 |
1949-50 |
" " " " |
4173 |
1954-55 |
" " " " |
1889 |
1955-56 |
" " " " |
841 |
The Appellant, who did not attend the hearing, was represented by Mr. P.V. Delahunty, F.C.A.
(i) The assessments for the years 1946-47 to 1949-50 inclusive were additional assessments made on the Appellant under the provisions of Section 47, Income Tax Act, 1952, and at the commencement of the hearing it was agreed that it was incumbent upon the Inspector of Taxes to satisfy the Commissioners that fraud or wilful default had been committed by or on behalf of the Appellant in relation to Income Tax for each of the years in question.
(ii) The Inspector gave evidence before us, which we accepted. He tendered in evidence a capital statement prepared by him covering the years 1941 to 1956. This statement consisted of an annual statement of the assets of the Appellant and his wife and an annual reconciliation of these assets with his known income. A copy of the statement is annexed hereto and marked A(1) . The Inspector had prepared this statement on the basis of information in his possession supplied in correspondence by the Appellant and his agents and at interviews with them. Except for the three errors hereinafter mentioned, only one of which, namely, a correction of £100 in 1949-50, affects the years 1946-47 to 1949-50, and for the estimate of living expenses, the statement was accepted on behalf of the Appellant as being accurately so based. The said statement, which is hereinafter more fully explained, showed that in the basis periods for the years of assessment 1946-47 to 1949-50, inclusive, increases in capital plus living expenses of the Appellant and his wife and children considerably exceeded known income, and formed the basis of the assessment under appeal before us. The said statement was the result of prolonged enquiries into the Appellant's taxation affairs, which started in June, 1954. In that year he had first been asked to forward explanations reconciling the growth of his capital with his known income. The Appellant had submitted certain statements in October, 1957, and again in April, 1959, but despite numerous requests he had failed to submit comprehensive statements reconciling the growth of his capital. Only in July, 1959, did it come to light that the Appellant and his wife had owned approximately 100 racehorses between 1941 and 1959 and at no time had information been supplied to show the cost of purchase, breeding, training and keeping these racehorses, except for the cost of one purchase included in exhibit A(1). In another respect the Appellant's statements were incomplete, for they contained details of share transactions in one particular stock only, and a promise by the Appellant in July, 1959, to write to three stockbrokers and obtain statements of all his share transactions from them had failed to bring any further information.
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(iii) It was contended by H.M. Inspector of Taxes:
(a) that on the evidence submitted the Appellant had been guilty of wilful default within the meaning of Section 47 of the Income Tax Act, 1952, for the years 1946-47 to 1949-50 inclusive; and
(b) that the additional assessments for the said years had accordingly been properly made.
(iv) It was contended on behalf of the Appellant that, although he had admittedly been neglectful, his neglect did not amount to wilful default within the meaning of the proviso to Section 47 (1), Income Tax Act, 1952. The share transactions contained in exhibit A comprised the majority of the Appellant's dealings in shares, whilst the living expenses could be taken as being...
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