| 9/9/2010 |
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| Court of Appeal - Decisions in Income Tax Cases |
| Case No: 57 |
Decided on 31 March 1964 |
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Exercise Of The Commissioner's Discretion. Filing Of Adjustments To Tax Returns
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The case concerned the charging of additional tax by the Commissioner where certain income had been omitted from a return. The taxpayer noticed his error before an assessment was raised, and he filed an additional declaration accordingly.
The Board of Special Commissioners (as later approved by the Court of Appeal) held that once the adjustment had been filed after the lapse of the time limit for the filing of the return, it could not be taken into account for the purpose of establishing liability to additional tax. Before the lapse of the said time limit, the taxpayer could file as many adjustments as he desired, but not later. The Board also held that once the law vested the Commissioner with discretion concerning the reduction or cancellation of additional tax, it could not interfere.
The Court, however, went further into the matter and made a close analysis of the relevant part of the law which stated that:-
'If the Commissioner is satisfied that... any such omission was not due to any fraud, art, contrivance or gross or willful neglect, he shall remit the whole of the said additional tax and in any other case may remit such part or all of the said additional tax as he may think fit'.
The Court held that this provision- required the Commissioner to cancel the additional tax if he was satisfied that there was no fraud, art, etc
- gave him power to reduce or cancel the additional tax, both -
- where he was actually satisfied that there had been fraud, art, etc., as well as
- where he was not satisfied that there had not been fraud, art etc.
During the proceedings before the Board, the Commissioner had exhibited correspondence with the taxpayer, from where it emerged that the Commissioner had stated that, in his opinion, in all cases of omissions additional tax had to be invariably applied, and that, as a matter of policy, a code of reduction of the tax had been introduced which was rigidly applied. The letters also showed that the reduction was effected according to a set pattern, even though the Commissioner had written to the taxpayer: 'I hasten to add, of course, that this reduction is in no way meant to convey that... you were in any way seeking to obtain an undue tax advantage.'
The Court held that the exercise of discretion could not be bound by codes, or set patterns, at the expense of the merits of individual cases. The Court therefore held that the Commissioner had exercised his discretion not according to law. The Court felt that it should not take upon itself the onus of deciding on the merits of the case, which was referred back to the Commissioner so that he could exercise his discretion all over again, in accordance with the explanations given by the Court.
BSC Case No: 18/63
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