Mori Bayor V. Commissioner Of Income-tax (1955)

LawGlobal Hub Judgment Report – West Africa Court of Appeal

Income Tax Ordinance—Section 18: assessment—Section 18 (3): new business— Section 52: additional assessment—Section 57: appeal against assessment—Section 57 (4): onus on appellant to prove it is excessive.

Facts

The fiscal year is from 1st -April to ensuing 31st of March. The assessment for a year is based on the income of the preceding year (section 18 (1) ), but where a new business is begun in a year, then section 18 (3) provides that:—
“(a) For the first year the assessable income shall be the amount of the income of that year;

“(b) For the second year the assessable income shall, unless such notice as hereinafter mentioned is given, be the amount of income of one year from the date of the commencement of the trade, business, profession, vocation or employment;

“(c) For the third year the assessable income shall, unless such notice as is hereinafter mentioned be given, be computed in accordance with the provisions of sub-section (1) of this section.’
(No question of notice arises in this case.)

The appellant had been assessed at certain figures for the years 1951-52 and
1952-53;’but in the year 1953, owing to information received of large-scale dealings of his, the Commissioner of Income Tax, acting under section 52, which gives him power to make additional assessments, re-assessed the appellant at much more for 1951-52 and 1952-53 and made a similar assessment for 1953-54.

He did so having regard to the appellant’s total worth just before 1st April, 1951, and to what he estimated to be the increase in total worth between that date and the 31st March, 1953; and he assumed that the appellant had begun new operations from 1st April, 1951, as accounting for the increase in total worth, which he took to represent the appellant’s income over the period.

The appellant appealed to the Supreme Court under section 57. As sub-section (4) thereof throws the onus, on the appellant to prove that the assessment is excessive, he had to satisfy the Judge on two points:—

(1) that the increase (if any) in his total worth was not due to starting a new business but to mere expansion of the old;
(2) that the estimated increase in his total worth was excessive.
On point (1) if he had succeeded, the basis of assessment for 1951-52 would have been the income of the preceding year, instead of the income of 1951-52 itself, which was adopted by the Commissioner by virtue of section 18 (3) (a). (That was the practical effect in this case in the result.) He failed before the Judge and appealed further.

As regards that point: The appellant traded at a certain place. The Commissioner alleged that he also had shops at two other places; thisthe appellant denied in his evidence; whereupon the Commissioner amended his assessment by deleting the item. There were no more questions and no other evidence on the new business which the appellant was supposed to have started and carried on since April, 1951.

As regards point (2): This related to the figures of income estimated by the Commissioner for 1951-52 and 1952-53. The appellant succeeded in having those figures reduced to some extent but was not content and appealed further on this
point also.

The second half of the judgment infra deals with the evidence and the Judge’s views on the value of the furniture and fittings and on the amount of cash dealings of the appellant and the inference of the increase in his total worth: (the details will not be gone into here; the practical effect was on the assessments for 1952-53 and 1953-54 in the result).

Held

(1) The Commissioner’s assumption that the large increase in the appellant’s capital worth was due to his starting a new business after 1st April, 1951, was made at a time when the Commissioner thought that the appellant had begun business in two other localities; as the assumption appeared to have been based in that respect on mistaken facts and there was no evidence to contradict the appellant’s testimony that his only business throughout the period was the old one, the Judge erred in holding that the Commissioner’s assumption had not been displaced.

(2) The onus of proving that the assessments were excessive was on the appellant; but the observations made by the Judge on the value of the appellant’s furniture and fittings and on the amount of his cash and drawings were fully justified on the evidence and ought to be affirmed.

Appeal allowed to the extent of setting aside the re-assessment for 1951-52; the judgment below affirmed as to amount of income in 1951-52 and 1952-53.