(1988)1988,March
- [PIK.IS,J.] INTHEMATTEROFARTICLE 146OFTHECONSTITUTION COSTASZEVLARIS, Applicant, v. THEREPUBLICOFCYPRUS,THROUGH
- THEMINISTEROFFINANCE, 2.THECOMMISSIONEROFINCOMETAX, Respondents. (CaseNo.434/86). Taxation—Income Tax—The two duties ofthetaxpayer, i.e.tokeepproper recordsandaccountsdisclosinghisincomeandtomakeafrankdisclosure ofthisincome—Gapsinthe accountsandabsenceofproperdocumentation—Groundfor Commissioner toreject the accountsasinaccurate and proceedtoraiseanassessmentreasonablywarrantedbythetotalityofthe 5 circumstances—TheultimatequestioniswhetherthedecisionwasreasonablyopentotheAdministration. Taxation—Income tax—The Income Tax Laws, section 5(l)(d)—Interest earnedfrom depositswiththeTeachersCooperativeSavings—Notexempt fromtaxation. 10 ThefactsofthiscaseappearinthejudgmentoftheCourt. Recoursedismissed. Noorderastocosts. Casesreferredto: Georghiadesv.TheRepublic
(1982)3C.L.R.639; 720 15 3 C.L.R. Zevlaris v. Republic Rainbow ν TheRepublic
(1984)3 C.L.R.
- Recourse. Recourse against the income tax assessment raised on appli cant for theyears 1979-
- M.Christodoulou, for theapplicant. Y. Lazarou, for therespondents. Cur. adv. vult. 1 0 2 ^ 2 5 30 PIKIS J. read thefollowing judgment. At issue is the validity of the assessment of the applicant to income tax fot the years 1979-1982 (Years of Income 1978-1981). In the contention of the applicant the assessments are liable to be set aside because they are fraught with misconception of the facts and the law, as well as abuse of thediscretionary powers vested in theCommis sioner. Misconception of facts derives from failure to ascertain thefacts relevant tothecapital of theapplicant on 31st December, 1977, while misconception of the law stems from a misconstruc tion of therelevant provisions of the IncomeTax Law affecting the taxability of interest earned from savings deposited with the Teachers Cooperative Savings Society.'Abuse of power, on the other hand,emanates from therefusal of theCommissioner toaccept thatanamountof £4.650.- fees earned from themanagement of the property of a certain Demetriou, a resident of Australia, were theincomeof his wife and nothimself. Itis thecase for the applicant thattherecipient of thesefees was his wife. At therequest of theCommissioner theapplicant submitted a capital statementdisclosing his assets over a7 -year period rang ing from 1974 to
- It was regarded necessary for theproper determination of his incomeduring theaforementioned period.A major complaintof the applicant is thatthough theauthoritiesac cepted thestatementof family assets as accurate andon thebasis of it assessed him toincome tax for thepreceding years, they ar- 721 PikisJ. Zevlaris v. Republic
(1988)bitrarily adjusted downward thefigure givenfor hiscapital asat 31st December, 1977,afact resulting in asurplusof incomeof about£9,000.-for which hewasassessed to tax in theensuing years.Inadditiontothestatementaffecting hiscapital,theapplicant madeavailablefor examination hisbooksandaccountsdis- 5 closingthemovementofcapitalandhisincomeovertheyears. As well as being a salary earner, the applicant had income from other sources, that is, rents and interest. Moreover, an amountof£4,650.-wasearnedrepresentingfeesforthemanagementoftherelatively largeestateof Demerriou, afairly burden- JQ somebusiness.Notwithstanding thefact thathewasaccountable toDemerriou andkept hisbooks,hecontended thattherecipient of thefees washiswife. TheCommissioner found theaccountsandrecordsproduced bytheapplicant incomplete andin somerespectsinaccurateand j ^ insistedthattheassessmentmadeofhiscapitalassetsat31stDecember, 1977,wassound andperfectly warranted bytherecords madeavailable.Thedispute affecting theassetsof theapplicant mostlyconcernsadebtof£5,500.-owingtothefamily byA.P. Georghiades Ltd. and another amount of£3,500.-adebt owing -n tothemorcashintheirpossession.Herejected theallegationthat theearnerofthefeesforthemanagementoftheestateofDemerriou wasanybody other than theapplicant.Lastly,interestearned from savingswascontrary tothecontention oftheapplicant,liabletotaxinviewoftheprovisionsofs.5(l)(d)andtheIncome TaxLaws 1961-1981. I havegiven careful consideration tothefacts and thedocumentary evidence relevant to thetaxation of theapplicant. The pertinentquestioninthis,asineveryothercaseofjudicialreview ofadministrative action,iswhetherthedecisionisvulnerableto beset asidefor abuseorexcessofpower, aquestion ultimately, devolvestowhetherthedecisionwasonereasonablyopentothe Administration (Georghiadesv.Republic
(1982)3C.L.R.659). TheIncomeTaxlegislationispremisedontwoequallyimpor722 5 3 C.L.R. Zevlaris v.Republic Pikis J. tantdutiesof the tax-payer: (a) The duty to keep proper records and accounts disclosing hisincome;and (b)Theduty tomakeafrank disclosureof hisincome. 5 ™ 15 20 25 Failuretocomply with thefirstduty can in nowayresult inan advantage to the tax-payer (Rainbow v. Republic
(1984)3 C.L.R. 846). The existence of gaps in the accounts and the absenceofproperdocumentation isavalid ground for the Commissioner toreject them as an inaccurate statement of the tax-payer's income; whereupon he may proceed to raise an assessment reasonably warranted by the totality of the circumstances throwing lighton theincomeof the tax-payer. In thiscasetherecordskept bythetax-payer were in manyrespects inadequate. The questionnaire of the Commissioner and the answers furnished thereto dit not wholly fill the gaps in the accounts and records kept of the income and expenditure of the tax-payer. It wasreasonably open totheCommissioner to assess his capital, as he did, as at 31st December, 1977, and equally open tohim toreject the allegation that the applicant's wife was therecipientofthefees earned for themanagement of theestateof Mr.Demetriou. Nolegalrelationshipexisted between Mr.Demetriou andapplicant's wife, whereas thekeeping of theaccountsof theestate bytheapplicant afforded evidence thattheservicesrendered or abig part of themwere rendered bythe tax-payer. Very possibly his wife assisted him to earn those fees, but that is no reason for treating theincome as thatof hiswife. Lastly, interest earned from deposits with theTeachers Cooperative Savings Society were not exempt for taxation in"view of the provisions of s.5(l)(d) of the IncomeTaxLaws. Therecourse isdismissed.The assessments areconfirmed pursuant to the provisions of Art. 146.4(a) of the Constitution. Let therebenoordersastocosts. Recourse dismissed. Noorderas to costs. 723