ANOTHER CONVICTION

Dominion, Volume 3, Issue 921, 14 September 1910, Page 5

ANOTHER CONVICTION

CHARGE AGAINST BOWRON BROS,

INCOME TAX CASE.

REMARKS BY THE MAGISTRATE.

"THE DEFENCE ABSOLUTELY NO

ANSWER."

(By TeleKraon—rress Associations . Christchurch, Soptcmber 13. Further informations in connection 1 with the charges of evading payment oE income tiix were proceeded ' with at : the sittings of 'tho Magistrate's' Court to-day.

■ The information heard set out that, tho 'defendants, Ueorgo Bowron, William Bowron, and George John Smith, .trading as Bmvr'ou.'" Urolhm, iliii, oil iloutmbur 16, 1907,.'by ■ knowingly and wilfully- making' : a taisu.,return in writing,"evndo lull taxation for theyear • ending September 30, 1*901). ' V Air. X. W. Stringer. KO., appeared for the' Department, and-. Mr. T.' li. Russell tor the -. defence. ,' i Mr.,Stringor's Opening Speech..'. Mr., Stringer said, that -the information related to the year ending . September, 19uU,, and wus siuiilur to that recently disposed of by- the Supreme Court. In the previous case, he had gone very fully into the circumstances of. the case, as it wis known' that explanation would bo m'ada , of very gross discrepancies which existed. The proceedings,; however, had disclosed, the method defondimts had adopted in. preparing their returns. This 'mothod . was, it must bo : admitted, radically, wrong. The firm's practice was to ascertain.'-tho profits for the year. The figures were then,falsified or modified \(as Mr. Bowron put it) in order to bring '.the profits down to" the assumed, amount. Thai resulted in the figures, in tho returns being absolutely erroneous. • In tho jear ending September, 190G, the ascertained profits were'.arrived at by deducting a impposed bad, debt of JJ37,000, and having, arrived at that, the firm manipulated the, figures so, as to bring about h profit less, by >£37,000 than that which they had made. Tho return- showed a net income : of .i1i,895, whereas the books of the firm showed ... a . net income of '471,000. '.Both--thesestotals were subject •to "certain deductions] . showing a.,taxablo'> balance', of''iElo,Bso, while, according to the. books of. the firm, it was ;.£6S,§6B, a difference of . about . .£55,00.0. : That very,largo 1 discrepancy was, supposed to be accounted;, for -by reclamations made, by tho London firm in respect of deficiencies on shipments of various goods 'madu. .by . tho . Christchurch .fiim to. tile London firm. . 'That presupposed consign!'ment'business,'. goods being consigned to [ the London, firm from ' tho Christchurch firm.' The Christchurch ■ firm would get profits or pay deficiencies on tho . ship ment. On behalf of the prosecution he could, not accept, as fact that tho busi- . ness ';was -. a consignment. quo. ■ Returns and' books showed b. salo business.. There was nothing to show-that any such loss of .£59,000 had been made in. rcclama- ; tions.' ? The books did not show them, and there was no record of, theci • except.in George Bowron's .unaided;'memory. The alleged reclamation' loss', was made: in July, 1907, and therefore, could not bo attributed to tho year with which tho' return was concerned. .! The return, though not. actually ,' made -till. December;' 1907, should , only includo transactions. up to September, 1906. '.Defendants had stated that, only; .£33,009. had been sent" to. London' to. coyer, reclamations, but. even supposing' that 0£50,000 . was. Tcally lost/ it, did not,, account - for. the full . discrepancy, ■whibli; was' jJSS,OOO'.;' It. was stated to Mr. 'I'yers that no stock had been taken up to September, 1906, and that no balancc- ; sheet, .had been: prepared for that • year.' Mrl'Tyers had been compelled to estimate tho stock, and lie.assumed that tho.stock was under-stated,: to- some extent, as in 1905, when' there: was. evidence fas to stocks in hand. Stock ascertained in 1907 wa3-.£107,000. ■ •. ..

'• Some Figures. Counsel; referred -to discrepancies between the return and . the books. Sales given ; in\ the.i return ■ were" '.£311,831 17s v 7d., arid 1 in Mr. Tyers's. assessment J8443,633 ,14a. Id.. .Stock in hand in tho roturn was JCSi,739 Bs. fid., and'as found by Mr. Tyefs .>6104,845.;, ■ Defendants' deducted stock in hand ,£72,562 3s. 2d., purchase of stock -£264,837 ,15s. Bd., and labour , and; materials .Us;. 7d.; 'or a total of .£372,597 10s. 5d.,-leaving; an income of • ;£23,973' 103.' Bd.- Mr. Tyers's figures were: Stock in hand .£89,779 : 145. 2d., and purchases of stock, labour, 1 and material .£397,876 ,ss. 7d„ or. a total, of 5487.G55 19s. 10d., t leaving an income of; £60,822' 14s/ 6d. Other ; income'' shown 'in , tho ; return was JC6O2 14s. Id., bringing tho gross income up to >£24,576 45.-: 9d., against. other, .income- shown by - the Department' of ii 20,337. 95.-. 5d., bringing tho gross income to. .£80,210 3s. lid. " The'deductions'made by .defendants in the return amounted to >£12,680; ss. "2d., leaving a'.not income.of ,i 611,895 19s. • 6d. The deductions made by Mr. Tyers amounted to ,£10,164 16s. 5d., '•leaving-'a net inoome of '4i71,045- 7s. 63. Tho . taxable; balance arrived at by defendants was<£lo,Bso,- and by the Department .£08,668. >' ... . -■.■■■■ The Dofence. ,Mr. Russell,, said that, rightly 'or wrongly,; defendants had made up their returns, in; the.-same way for the past fourteen'. years. They considered that some figures were non-essential so long as the. correct- amount •of profits-was stated. In, this year they estimated their ;at >811,000 . or-'^Bl2,OflO, and- then arrived at the other figures; .On tho return, the . firm had been,- sending large ' consignments., -Sales had : amounted to '.£443,000," but of this -.£192,000 were sent Home for eale . on- account 'of the firm.,... By some mistake- that, amount. was entered in the books: as proceeds of sale, but there were really losses of <£59,000. The firm could not say . whether their books : were' right or wrong. ■■ Mr.Vßowron had' not given the V,book-keepers', information ;. rtjarding these losses, . and therefore trouble had arisen. .. , ■ ■ • ' ; Evidence of Georflo Bowron. George Bonfon, one of tho defendants, said' that for many years he. had- ascertained his profits, by comparison tfjth the "firm's; position for the previous year, lie did not consult 'the : books at all except' for the purpose of netting disbursements. The return for 1908-was compiled in much the same way, except : nat_ there .was more information in making it up. They had a;biilance-sheet.up 0 July, .1907, .which, showed, that they -had a_ capital of iC2bS,SOO. The £85(1(1 was hia brother's share in a land transaction. . It .'had. paid income; tax as a separate syndicate: since August or. September, • 1907. ; They knew that very .large losses, must result -from shipments in 1906 and 1907, and provision was made to protect a deficiency of ,£33,000 on those shipments. .. Somi large shipments on consignment were made to the London irm in 1906. Goods were sent Homo on consignment, and were hot sold in

Jew Zealand.. .£102,000 of consignments had been entered into the books as sales in: Lyttelton,' but, as-a matter of fact, a large; portion of the goods had not been sold when the American crisis came on, and . the loss, on shipments in 1906 and 1907 would be, ,£49,000. Complete stock was not taken up to September, 1906, but there was a rough .estimate of value, and the amount filled in would bo within

IflflO of tlio correct figure. The firm had no assets except those in the bal-ance-sheet. The net return was absolutely correct. To Mr. Stringer: In the returns for ;30G and 1907 he liad deducted .£33,000 and' another . J2OOO. He did not distribute the siim in' anv particular way between the tivo years. The loss was really £49,000, and ho considered that about ,£25,000 should bo allowed for each year. The balance-sheet, in July, 1907, showed that the capital was only ,£2500 moro than it was in 1905. There was no bal-dnce-shect in HOC. Consignment goods on an average. would remain, unsold for nine months. Something like .£28,000 was remitted to London for reclamation on consignments. He did not set off the London firm's debt to the Christchurch firm, because he did not wish to see the London firm fail:. They only owed .£16,000 in 1900 and 1907. It did not sec-m to be honest that writing off the debt did not cancel tho debt. Statement by G. J. Smith. G. J. Smith, another defendant, also ■ gave evidence. He said, that when the I return for 1006 was made up, there were

two balance-sheets, one by Modlin, showing a capital of £197,460, in .1905, and tho other of July, 1907, showing a capital or =6200,000, au. increase of ,£2500. There was nothing to show that ,£60,000 liad been made during 1900. That was impossible. No balance-sheet was made for I'JOG, as. tho company .was being formed. The stock lists for tho year were not .completed. The practice of th<! firm was to send consignments to England. The value of consignments in 1906 was .£192,805. _ Sales made here were ,£110,534, and foreign sales .£133,263. The practice had been to .credit goods to the department as if they had been sold, and the whole of .£192,000 had been credited in that way. The real price could not be ascertained ilntil the goods had been' sold,. The firm, in malting up the return, considered that it had paid on every pound it made. He could not discover any assets for <£60,000 profits found by Mr. T'yers since 1903. The assets had not grown in London.~"~He produced his income tax returns'to financiers as . showing the profits made-by the firm. To Mr. Stringer: Witness believed that Mr. Bowron's estimate of reclamations was correct. There was a balance-sheet partially made up for 190G, -but it was not completed. Ho had not realised, in making the return, that it was a solemn declaration, and that not one in a hundred regarded it as that. He believed that ninety per cent, of the returns sent in we're wrong. Witness presented a reconciliation of capital between September 30, 1905, and July 31, 1907, which he claimed showed that income tax had been overpaid on <£5000. There was. no further evidence. . The Magistrate inquired if the other charge relating to an alleged false return made on November 6, 1908, was to be proceeded with! Mr. Russell made an application for the adjournment of that case. v . . The Magistrate's Decision. The Magistrate gave his decision in the case just heard.; He said that the recent proceedings in , the Supreme Court had cleared tho way considerably for him. The result of the appeal enabled him to say without tile slightest hesitation that, the '.defence was absolutely no answer to ths charge before the Court.' Defendants must be convicted for breach of the Act. He would refrain from inflicting a penalty till the other case was disposed of, but intimated that triple the amount of the tax would be the'heaviest part.- ; ■ The hearing was. then adjourned till 10.30' a.m. to-morrow.