Chellappah V. Commissioner Of IncomeTax

1951 Present: Basnayake J.

CHELLAPPAH, Appellant, and COMMISSIONER OF INCOME TAX, Respondent

S. C. 1,260-M. C. Colombo, 5,317/A

Income Tax Ordinance-Omission of income from return-Making false statement or entry in return-Prosecution under section 87 (1)-" Wilfully with intent to evade tax "-Meaning of words " wilfully " and " evade "-Excess Profits Duty Ordinance, No. 38 of 1941, s. 12 (5).

In a prosecution under section 87 (1) of the Income Tax Ordinance-

(i) the burden is on the Crown to prove that the accused " wilfully with intent to evade tax " committed any one of the acts specified in the section.

(ii) the word " wilfully " should be construed as meaning deliberately or purposely with the evil intent of committing the act or acts enumerated in the section.

(iii) the word " evade " must be understood not in the innocuous sense of avoid tax by taking advantage of the statute, but in the sense of unlawfully escape or avoid by fraud, misrepresentation or underhand contrivance.

(IV) the omission from a return of any income does not constitute an offence unless it is done deliberately and with evil intention of defeating unlawfully the object of the statute by knowingly presenting a false picture of the income of the person making the return by omitting therefrom material which the taxpayer knows should properly be there. An omission based on a. mistaken view of the law or facts is not punishable.

(v) the fact that a statement or entry is false does not attract punishment unless the object of the false statement or entry was to defeat the purpose of the statute, to deny to the revenue its legitimate dues.

(vi) proceedings under section 87 of the Income Tax Ordinance cannot be regarded in the same way as a proceeding to recover tax under the Excess Profits Duty Ordinance. The admissions made by a person in proceedings for the recovery of tax cannot by themselves afford proof of a charge under section 87.

Held further, (a) that where a building contractor passed over certain of his contracts to another person who gave him a share of the profits for supervising the contracts, such payment should be reckoned as remuneration for services rendered and not as profits from his business as building contractor.

(b) that a person could not be punished under section 87 (1) of the Income Tax Ordinance for omitting in his return certain sums which he claimed as secret commissions paid by him. The fact that he submitted to pay tax on these sums did not by itself bring him within the ambit of the penal provision.

APPEAL from a judgment of the Magistrate's Court, Colombo.

H. V. Perera, K.C., with S. Nadesan and N. Nadarasa, for the appellant.

J. A. P. Cherubim, Crown Counsel, with E. H. C. Jayetileke, Crown Counsel, for the Attorney-General.

Cur. adv. vult.

April 18, 1951. BASNAYAKE J.-

The appellant, John Chellappah, has been convicted on nine charges in respect of offences under the Excess Profits Duty Ordinance, No. 38 of 1941. Section 12 (5) of that Ordinance incorporates therein Chapter XV of the Income Tax Ordinance, which prescribes offences and penalties. The penal provision that arises for consideration in the instant case is section 87 of the Income Tax Ordinance. That section, omitting paragraphs (e), (f) and (g) of sub-section (1), and sub-section (2), which are not material to this case, reads as follows: -

87. (1) Any person who wilfully with intent to evade or to assist any other person to evade tax

(a) omits from a return made under this Ordinance any income which should be included; or

(b) makes any false statement or entry in any return made under this Ordinance; or

(c) makes a false statement in connection with a claim for a deduction or allowance under Chapter V or Chapter VI; or

d) signs any statement or return furnished under this Ordinance without reasonable grounds for believing the same to be true;

shall be guil

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