9911796707
|
Home
Issues Involved:
1. Applicability of Section 71 versus Section 72 for tax assessments. 2. Validity of assessments made before the expiration of the "time allowed" under Section 71. 3. Judicial consideration of wilful default or neglect under Sections 40 and 72. Comprehensive, Issue-wise Detailed Analysis: 1. Applicability of Section 71 versus Section 72 for Tax Assessments: The appellant argued that Section 72 did not apply until the machinery under Section 71 had been put into operation. The appellant contended that Section 71(1) lays down the procedure which has to be followed in all cases, and the "time allowed" refers to the time allowed for the furnishing of the return under Section 59(1). Thus, the commissioner must serve a notice if he believes someone to be assessable or possibly assessable. If a return is made and accepted, the commissioner proceeds under Section 71(2)(a). If the return is not accepted, Section 71(2)(b) applies, and if no return is delivered, Section 71(3) applies. In no case can an assessment be made until the "time allowed" has expired. The respondent, however, relied on the general wording of Section 72, arguing that it covers any case in which a person has not been assessed, whether or not he has had a notice and a "time allowed" under Sections 59 and 71. The respondent conceded that it would be contrary to the scheme of the Act to operate Section 72 in current cases, and that Sections 59 and 71 were intended to be the normal machinery. However, if a year or longer had elapsed following the year of income, Section 72 was properly available. The Court of Appeal accepted the argument that the two sections overlap over the whole period, noting that if the department were to abandon the practice of requiring returns and began to assess by guesswork under Section 72, the courts might say that the powers given by the Act were being abused. However, the mere theoretical danger of misuse does not justify construing the sections in an unnaturally restricted sense. 2. Validity of Assessments Made Before the Expiration of the "Time Allowed" Under Section 71: The appellant argued that the assessments were ultra vires and void as they were made before the "time allowed" by Section 71 had expired. The respondent admitted this if the power to make these assessments had to be found under Section 71. The respondent justified the assessments under the words of Section 72, "Where it appears to the commissioner that any person liable to tax has not been assessed...the commissioner may...assess such person at such amount...as, according to his judgement, ought to have been charged." Their Lordships concluded that the construction submitted by the appellant was correct. If the power to make an assessment under Section 72 applies to the making of an original assessment, it would be inconsistent with the general and mandatory provisions of Section 71. Section 71 provides how all original assessments are to be made, and Section 72 deals with additional assessments and cases where subsequent information leads the Revenue to reopen what had been settled. Therefore, before making the assessments, the "time allowed" under Section 71 had to elapse, which did not happen in this case. Consequently, the assessments were set aside. 3. Judicial Consideration of Wilful Default or Neglect Under Sections 40 and 72: The appellant also contended that the Court of Appeal had not judicially considered the question of wilful default or neglect under Sections 40 and 72, or alternatively, that the whole sum assessed as penalties should be remitted to the Supreme Court. Since the appellant succeeded on the first submission, points (2) and (3) did not arise. Conclusion: Their Lordships advised that the appeal be allowed and the assessments set aside. The respondent must pay the appellant's costs throughout. The judgment emphasized that Section 71 provides the mandatory procedure for original assessments and that Section 72 is intended for additional assessments or reopening settled cases based on subsequent information.
|
