(1987)1987 ΑρπΙ 6 [PIK1S J] IN THE MATTER O FARTICLE 146 O FTHE CONSTITUTION ANDREAS TRIKOMITIS, Applicant, ν THE COMMISSIONER O FINCOME TAX, Respondent (Case No 279/86) Income tax — Judicial control — Pnnciples applicable — When a decision is considered as reasonably open to the administration— Factsrelevantto the detennmation of tax liability — Subject to the limits of its discretion the Administrationis the arbiterofsuchfacts In determining the applicant's liability to income tax and special 5 contribution the Commissioner of Income Tax rejected aspects of the accounts submitted by theapplicantandinparticularrejected, inthe absence of satisfactory proof the following allegations of the applicant, namely that (
- a)The purchase of a building site in Limassol was financed by a gratis payment of £21,750 from one Mr Hara, a Japanese executive of a motor 1 0 company, (b)The studies of applicant's son were financed by an amountof £9 000 by thesame Mr Hara fc)An amountof £15 U00incash was brought over by the applicant on his displacement from Famagusta, (
- d)Capital allowance for buildings erected at Famagusta shortly before the Turkish invasion a claim that was made for the first time in 1985, and (e)£13,000 1 5 collected by theapplicantfrom afamily companyfor pre 1974 debts As a result theapplicant filed this recourse Held, dismissing therecourse
(1)Income taxcases too are subjectto the same rulesapplicable toJudicialreviewofadministrative action The ultimate question is whether the sub judice decision was reasonably open to the 2 U Administration A decision was reasonably open provideditisfoundedonan adequate inquiry, itrestson asoundconceptionof the factsand iswithingthe discretionary powers vested inthe Administration Subject to the limits of its discretion the Administration isthe arbiterofthe factsrelevant tothe liability of the subject to tax 25
(2)Itisthe dutyofataxpayer,particularlyofabusiness man, tokeepproper 592 3 C.L.R. 5 Trikomltis v. Comm. of Income Tax records and make full disclosure of his financial affairs There is a corresponding amenity on the part of the Commissioner toreject incometax returns made in deviation of such duty (Rainbow ν The Republic
(1984)3 C LR 846 and Tryfonosν TheRepublic
(1984)3 C LR 884 adopted) In this caae the applicant omitted to truike disclosuie about an important asset and,generally his conductwas apt togivecause for further inquiry
(3)Considenng applicant s conductinits entirety and his failure to furnish evidence insupport of his contentions itwas more than reasonably opento the respondent toreject applicant s allegations 10 Recoursedismissedwith£100 costsagainstapplicant Cases referredto Georghiadesν TheRepublic
(1982)3 C LR 659 Rainbow ν TheRepublic
(1984)3 C LR 846 15 Tryfonosν TheRepublic
(1984)3 CLR 884 Recourse. Recourse against the assessment of income tax and special contribution raised on applicant A Poetis,for theapplicant 20 Υ Lazarou, for the respondent Cur adv vuli PIKISJ read the following judgment The crucial question that must be answered in these proceedings is whether it was reasonably open to the Commissioner to reiect aspects of the 25 accounts submitted by the applicant for the determination of his liability to income tax and special contributions It is evident from the events that preceded the assessments questioned in these proceedings, that the Income Tax Office reviewed with apprehension the accounts submitted by the applicant Their 30 inquisitive approach was notwithout reason Applicant, to begin, was guilty of long delay in making his returns Furthermore, his accounts were scantily documented and by any standards incomplete To ascertain the liability to tax of the applicant, statements of theassets and liabilities of the applicantatparticular 35 dates were sought and obtained When submitted the statements were far from complete Importantassets of theapplicantwere left out, a fact that no doubt reinforced the mistrust with which th 593 Pikis J. Trikomltis v. Comm. of Income Tax (19S7) viewed hisaccounts.Togiveone example, heomitted to account for the purchases during the relevant period of a building site at Limassol for an amount of £31.750 -Aseries of meetings were held between officials ofthe respondent and theapplicantand his auditor in order to elicit his income and expenditure during the years under review. In the end the Commissioner sough; documentation of certain items featuring in the accounts, in the absence of which he rejected the allegations of the applicant, a rejection thatenhanced hisliabilitytotax. Moreanalyticallythe Commissioner rejected, inthe absence of 10 satisfactory proof, the following allegations ofthe applicant, that: (a)Thepurchase oftheLimassolbuildingsitewas financed in great part by Mr. Hara, a Japanese executive of a motor company. When the purchase of the site was discovered by the respondent andtheapplicantwasaskedtoaccountforthis 15 acquisition, he claimed that an amount of £21,750.represented a gratispayment ofMr.Hara,seemingly inspired by friendship. No evidence of any kind was adduced to substantiate this assertion. (
- b)The studies of the son of the applicant in the United 20 Kingdom were financed by an amount of £9,000.- by Mr. Hara, thebenefactor ofthefamily.Similarly,no documentary evidence wasproduced to substantiate thisallegation either. (c)Anamount of£15,000.-incashwasbroughtoverbythe applicant on his displacement from Famagusta. No Bank 25 lodgment or any other documentary evidence signifying possession ofthe moneywas produced. (
- d)Capital allowance for buildings erected at Famagusta shortly before the Turkish invasion. The claim for deduction on thisaccount wasfirstmadeon 10thJuly, 1985.Evenifthe 30 making oftheinvestmentwasacceptedonitsfacevalue,afact doubtedbytherespondent,applicantwouldnotbeentitledto any allowance as suggested bycounsel for the respondent in the absence of any proof that the premises were used and employed ina business. (
- e)£13,000.- collected by the applicant from a family company forpre 1974 debts.Such proof aswas givenof the names of the debtors who made payment was considered unsatisfactory, whereas the conflicting allegations made by 594 35 3 C.L.R. Trikomitis ν Comm. of Income Tax Pikis J. theapplicant inthecourse of theinvestigation of histax affairs about the actual sum collected added to the doubts of the respondent about the validity of the allegations of the applicant 5 In a letter of the respondent accompanying the sub judice assessments toincometax andspecial contnbutioninaccordance with thelaw inforce atthematenaltime,thegaps inthestatements of applicant were noted as well as the absence of satisfactory proof substantiating the relevant allegations The assessments 10 raised are, as already explained, thesubject-matter of the present proceedings Counsel for the applicant submitted the rejection of the allegations of his client was peremptory and an abuse of the powers vested in the Commissioner Applicant submitted whatever evidence was available to him and should not be 15 penalized for his inability to make a more comprehensive statement of his financial affairs Respecting the collection of debts and the consequential payment made by the family company to the applicant, the documentary evidence adduced was, under any circumstances, 20 satisfactory and ought to have been accepted by the Commissioner An affidavit of the applicant sworn to on 3rd March, 1987, adds nothing by way of objective proof to the case of the applicant InGeorghiades ν TheRepublic*'the FullBenchof theSupreme 25 Court affirmed that income tax cases too are subject to the same rules applicable to judicial review of administrative action The ultimatequestion, as inevery othercase, iswhethertheimpugned administrative act was reasonably open to the Administration A decision is reasonably open to the Administration provided it is 30 founded on an adequate inquiry, itrests onasound conceptionof the facts and is within the discretionary powers vested in the Administration Subject to the limits of their discretion, the Administration is the arbiter of the facts relevant tothe liability of the subject totax 35 Two subsequent decisions of theSupremeCourtserveto stress the duty of a tax-payer, particularly a business-man, to keep proper recordsandmake full disclosure of hisfinancial affairs, and the corresponding amenity of theCommissionertoreject income '(1982J3CLR 659 595 Plkis J. TriLomitis v. Comm. of Income Tax
(1987)taxreturnsmade indeviation oftheafore-mentioned dutyofataxpayer. The cases are: Rainbow v. The Republic*and Tryfonos v. The Republic**. Inthiscasetoothe Commissioner was justified intreatingaspectsoftheaccountsoftheapplicantwithan element of mistrust. Not only the applicant omitted to make disclosure 5 aboutanimportant asset,buthisconductgenerallywasapttogive cause for further inquiry· Moreover, his inability to furnish documentary evidenceaboutthebenevolence ofthe family friend or business associate, Mr. Hara, and the way hisdonations were channelled tothe family could notbut reinforce the unwillingness 10 oftheCommissionertoaccepthisstatementsascorrect.Reviewof thebackground tothesubjudice assessments revealsa consistent effort on the part of theapplicanttoreduce hisliabilitytotax.The belated claim for a capital allowance is indicative of this effort, whereas his inconsistencies regarding the amounts actually 15 collected from debtors through the family company, could very easily leave the Commissioner unsatisfied with the correctnessof the allegation. Lastly, the absence of any evidence whatever to suppoit the claim that he carried an amount of £15.000 in cash could be treated as one other effort to scale down the 20 height of his income. The Commissioner afforded reasonable opportunity to the applicant to come forward and support his claims before finally rejecting the above items in hisaccounts, in the absence of any satisfactory response. Considering the conduct of the applicant in itsentirety and the 25 failure tofurnish evidencesupportinghiscontentions,itwasmore than reasonably open to the Commissioner to reject his allegations. In conclusion, Ifind the recourse wholly unjustified and itisdismissed. Infact, Iam oftheviewthisisapropercase to adjudge the applicant to paycosts. 30 In the result the sub judice decisions are, pursuant to Art. 146.4(a),confirmed inthewhole.Theapplicantisadjudged topay the costs of the proceedings fixed at£100. Recourse dismissed. Applicant topay £100.-costs. *<1984)3CLR.846 ••
(1984)3CLR 884 596 35