Jonas v Bamford
| Jurisdiction | England & Wales |
| Date | 1973 |
| Year | 1973 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income tax - Back duty - Assessments within date - Onus of proof not shifted where appeal opened by Crown on in-date as well as out-of-date years - Taxpayer controlling director and shareholder of company - May be inferred to have received undisclosed remuneration - All information refused for subsequent years - Presumption of continuity - Taxes Management Act 1970 (c. 9), s. 50(6).
The Appellant was at all material times a director of and the principal shareholder in a trading company, which voted him remuneration annually in general meeting. He had no other known sources of income apart from betting. He was able to do what he wished with the company, and it was established that he had procured it to commit irregularities, including lending him the money to buy its shares. Its accounts were given unqualified certificates by the auditors.
As a result of a back duty investigation assessments to income tax under Schedule E for the years 1957-58 to 1964-65 were made on the Appellant on the footing that he had received undisclosed remuneration from the company. The assessment for 1957-58 was made out of time on the grounds of wilful default but the other assessments were made within the normal time limit. The Appellant explained increases in his wealth up to and including August 1961 by reference to betting winnings, but, on advice, declined to furnish any information for subsequent periods. Capital statements were prepared by the Inspector of Taxes for the period to August 1961, and assessments of £5,000 were made for each of the years 1962-63 to 1964-65.
On appeal before the Special Commissioners, the Inspector opened the case in relation to all the assessments. The accounts of the company were not produced, and no evidence was led as to its turnover or profits. The Appellant contended (a) that, since the Crown admitted that there was no evidence that its shareholders and directors had consented to the withdrawal of the sums in question (aggregating £19,559) in addition to the remuneration regularly voted to him, the presumption of regularity in the conduct of the company's affairs had not been rebutted and those amounts could not constitute remuneration assessable under Schedule E; (b) that the Commissioners should accept that the Appellant could reasonably have made, and did make, betting winnings as alleged; (c) that, as assessments under Schedule E on his remuneration for 1960-61 and 1961-62 had already been made and settled by agreement, those assessments had become res judicata and no further assessments could be made for those years; (d) that there was no discovery for any year; (e) that there was no wilful default for 1957-58. The Commissioners found that wilful default had not been established for 1957-58 but that the Appellant had not discharged the onus on him to displace the assessments for the subsequent years, and they confirmed those assessments in the amounts in which they were originally made.
In the High Court the Appellant contended further (i) that by opening his case on all the years the Inspector had assumed the onus of proving the Crown's case as respects the assessments made within the normal time limit as well as the assessment for 1957-58; (ii) that the appeals against those assessments were
conducted contrary to natural justice, in that the Crown's admission that there was no evidence that the shareholders and directors of the company had consented to the withdrawal of the sums in question by the Appellant misled his representative into not arguing that they had been wrongfully diverted and he remained accountable to the company therefor; (iii) that any agreement for him to receive those sums as remuneration without deduction of tax under the Income Tax (Employments) Regulations was void for illegality; (iv) that on the figures the accretions to the Appellant's wealth could all be explained away; (v) that there was at any rate no discovery and no unexplained intake of moneys for the years for which the Appellant had refused informationHeld, (1) that the manner in which the Inspector opened the case before the Commissioners did not shift the statutory onus on the taxpayer of showing that the assessments made within the normal time limit were excessive;
(2) that there had been no failure of natural justice, since the absence of evidence of consent of the shareholders and directors was neutral in effect and the Appellant could have led evidence on the point if he wished to persuade the Commissioners to reach a conclusion in his favour;
(3) that, despite the absence of evidence that the moneys were abstracted rightfully from the company, it was a legitimate inference from the finding that he was able to do what he liked with the company that he had carte blanche to fix his own remuneration;
(4) that there had been a discovery;
(5) that the contention that the settlement by agreement of the first assessments for 1960-61 and 1961-62 precluded further assessments for those years rested on a failure to understand the scope of the doctrine of res judicata;
(6) that failure to apply the Income Tax (Employments) Regulations did not prevent the sums from being remuneration;
(7) that the argument on figures proceeded on an impermissible approach to the Commissioners' findings, and the onus on the Appellant had not been discharged;
(8) as regards the years for which the Appellant had refused to give any information, that once the Inspector had discovered that he had had undeclared income the usual presumption of continuity applied.
Stated under the Taxes Management Act 1970, s. 56, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts starting on 14 February 1972 and continuing over thirteen days Mr. Joseph Jonas (hereinafter called "Mr. Jonas") appealed against the following assessments made upon him to income tax, Schedule E, which were further to the original assessments for the corresponding fiscal years as set out hereunder:
Year of |
Original |
Further assessment |
assessment |
assessment |
under appeal |
£ |
£ |
|
1957-58 |
2115 |
3000 |
1958-59 |
3080 |
920 |
1959-60 |
3580 |
1000 |
1960-61 |
2595 |
1000 |
1961-62 |
3340 |
1000 |
1962-63 |
3385 |
5000 |
1963-64 |
3340 |
5000 |
1964-65 |
4996 |
5000 |
The assessments in column 2, being original assessments, had been made upon Mr. Jonas in respect of his and his wife's remuneration from a company, Baker Sportwear Ltd. ("Baker"). At the same time Mr. Jonas appealed against assessments to surtax made upon him, which were consequential upon the income tax assessments set out above.
(2) The said income tax assessment for 1957-58 was made on 10 October 1969 under the provisions of the proviso to s. 47(1) of the Income Tax Act 1952, and was made with the leave of a General Commissioners for the City of London duly given on the application of an Inspector of Taxes under s. 6(1) of the Income Tax Management Act 1964.
(3) The income tax assessments for all years other than 1957-58 were made within the normal six-year time limit.
3. Shortly stated, the question for our determination was whether Mr. Jonas had assessable income over and above the remuneration from Baker covered by the first assessments referred to in para. 1 above.
(2) The following witnesses gave evidence before us:
(3) Mr. R. H. Gregory, who was Inspector of Taxes, City 16 District, until 10 February 1964, and dealt (inter alia) with the affairs of Baker;
(4) Mr. A.D. Billingham, who was Inspector of Taxes, City 16 District, from February 1964 onwards and also dealt with the affairs of Baker;
(5) Mr. G.A. Spencer, Senior Inspector of Taxes at the Inland Revenue Enquiry Branch;
(6) Mr. J. Sirett, of Epsom, racehorse trainer, who is Mr. Jonas's father-in-law;
(7) Mr. V.L. Passer F.C.A., a partner in the firm of Passer, Sadie & Co, chartered accountants, who were auditors of Baker from 1957 to 1961;
(8) Mr. M.A. Braham, a partner in the firm of Wallace Cash & Co, chartered accountants, who were auditors of Baker from 1962 onwards;
(9) Mr. L. Pyzer, a partner in the firm of Spiro & Steele, solicitors, who is Mr. Jonas's solicitor;
(10) Mr. S. Howard, who was employed by Baker as its bookkeeper from October 1959 until December 1971;
(11) Mrs. Sarah Jonas, Mr. Jonas's mother;
(12) Mrs. Carol Jonas, Mr. Jonas's wife;
(13) Mr. J. Jonas, the Appellant.
(14) The following documents were admitted or proved; such of them as are not annexed hereto as exhibits are available for the use of the Court if required.
(15) A bundle of correspondence and other documents (exhibit A).
(16) An agreement dated 13 July 1956 between Baker, Mr. Jonas and Mrs. Marie Jonas.
(17) An agreement dated 13 July 1956 between Mr. Jonas and Mrs. Marie Jonas.
(18) A schedule prepared by Mr. Spencer relating to Mr. Jonas's financial position for the six years ended 31 August 1955 to 1961, with five pages of supporting statements (exhibit B).
(19) A further schedule amending exhibit B in the light of evidence led at the hearing (exhibit C).
(20) Details of a credit in Mr. Jonas's account of £899 3s. 5d.
(21) Returns of income signed by Mr. Jonas for the years 1957-58 to 1965-66
(22) A bundle of correspondence of February to August 1956 leading up to the two above mentioned agreements of 13 July 1956.
(23) A statement produced by Mr. Braham setting out figures relating to betting by Mr. Jonas (exhibit D).
(24) Analysis of drawing by Mr. Jonas from his bank account, September 1955 to August 1956.
(25) One sheet from Mr. Jonas's bank account, 13 June to 9 August 1957.
(26) Exhibits B and C are hereinafter together called "the schedules".
(27) At the commencement of the hearing it was agreed that the Inspector of Taxes would open the appeal in relation to all the assessments before us...
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