UNDERSTATING INCOME

New Zealand Times, Volume LIII, Issue 12507, 24 July 1926, Page 6

UNDERSTATING INCOME

FALSE RETURNS MADE CITY BUSINESS MAN CONVICTED FURTHER CHARGES ADJOURNED “The fact that incorrect returns have been made is not denied. I have come to the conclusion that I should convict on the alternative charge of negligently making false returns. It is not established beyond doubt that the returns were wilfully made falsely.” These remarks were made by Mr E. Page, S.M., yesterday afternoon, in convicting Charles Camperdown Odlin, a well-known city business man, of wilfully or negligently making false returns as to his income for the years ending March 31st, 1922-23-24 and 25. Further charges against the C. and A. Odlin Timber and Hardware Company of making false returns for the years 1921-22-23 and 24, and against C. C. .Odlin, of wilfully making false returns in respect of the income of the company for the above years, were adjourned until August sth. His Worship intimated that he would impose the penalty on the conviction against C. C. Odlin after the further charges had been disposed of. Mr P. S. K. Macassey (Crown Prosecutor) and Mr J. M. Tudhope conducted the prosecution, while Mr H. F. O'Leary and Mr R. Kennedy appeared for the defendant. PROSECUTION OUTLINED “Defendant is a timber merchant,” stated Mr J. M. Tudhope for the prosecution. “He is a very large shareholder and managing director of the C. and A. OcTTin Timber and Hardware Company, Ltd. He is also a very large shareholder, and I believe, managing director of John Odlin, Ltd., a company carrying on business of financial dealings generally. Recently Mr Cutforth, inspector of the Tax Department, had occasion to make an investigation of the affairs ■of the C. and A. Odlin Company, Ltd. In the course of these, investigations he found that Mr C- C. Odljn’s returns of bis own personal assessable income had been considerably understated for many years past. Mr Tudhope stated that the deficiency in income tax paid for the past five years amounted to £683 I2s Sd. "LITTLE MORE THAN HALF INCOME”

This deficiency was nearly double the amount paid in income tax for the period, and defendant had returned as his income only a little more than half what he should have .returned. The deficiency in income in the first year (1921) was made up of £SOO bonus, which defendant received from C. and A. Odlin, Ltd., and was taxable income, and £SIQ 9s received from John Odlin, Ltd., as interest on money invested with that company. In each of the other years the deficiencies, viz., £833, £951, £938, and. £1049, represented interest on the defendant’s investments or deposits with John Odlin, Ltd. However, the defendant had failed to include. the interest derived from these investments, as taxable income, arid he must have been well aware that this was taxable income.

'“Mr. Odlin is a shrewd, keen business man, and is continually engaged in intricate financial affairs, and it is inconceivable that he did not know that the interest derived from deposits is taxable income. I submit that the facts disclose a case of wilful evasion of income tax, and I ask for a conr;<ion on that ground.” “INCOME CONSIDERABLY UNDERSTATED” Percy Cutforth, inspector of the Tax Department, gave evidence as to conducting an investigation of the affairs of the C. and A. Odlin Company, in o‘f which he found that Mr C. C. Odlin’s income returns for the past few years had been considerably understated. Witness drew Mr Odlin’s attention to the . deficiencies in the incofnes returned by him, and Mr Odlin agreed that the interest on the investments in John Odlin, Ltd should have been returned as assessable income. Mr Kennedy: I presume you had no difficulty in seeing the position from the boobs of John Odlin, Ltd?—No not in the slightest. ’ The entries were all properly recorded ?—Certainly. , Tudhope ; That’s no assistance to the Tax Department is it ?—No, not at all. Mr Tudhope: It has been said that Mr McLeod, the book-keeper, made out the income tax returns. That does not relieve Mr Odlin from tbo responsibility?—Certainly not. Witness stated that the deficiencies in the amount of income tax paid over the period were as follow (1921), £2OB 11s Id; (1922), £l3B 15s 6d; (1923), £123 Is 9d; (1924) £99 is lid; (1925), £ll3 16s od, making j a total deficiency of £683 12s Bd. "ERROR MADE INADVERTI ENTLY” Mr R. Kennedy stated that the defendant (C. C. Odlin) had two main sources of income, receipts by way of dividends from G. and A. Odlin and by way of dividends from John Odlin, Limited. He received salaries and directors’ fees. in respect of both companies. It was the practice to transfer these amounts to the credit of C. C. Odlin in tbo account of John Odlin, Ltd. This account was not used as an investment account but was current and constantly varying. In no case did Mr C. C. Odlin actually handle the interest accrediting from tlie account. It was an actual fact that the income tax returns were not prepared by Mr Odlin himself, but by his bookkeeper, and when Mr Odlin had signed the returns he took them to be correct. Ho had not in mind interest accruing to his current account with John Odlin. Ltd. Counsel contended that the prosecution had to prove that Mr Odlin had Intentionally put in false income tax returns, whereas in actual fact the error was made inadvertently. DEFENDANT IN THE BOX Charles Camperdown Odlin stated that his acconnt with John Odlin was a current account. All dividends from C. and A. OdJin and John Odlin, Ltd., were paid into this account. Mr H. F. O’Leary: At any time have you drawn the interest on this account?—Never in the history of the account. All your transactions are clearly shown in the books of John Odlin, Ltd. ?—'That is so. Proceeding, witness stated that all the income tax returns had been prepared by Mr MacLeod, secretary of John Odlin’s, Ltd. Mr O’Leary: In signing these returns, did it ever occur to you that each year there was accumulating in

John Odlin’s account interest that was taxable?—Never at alt. Witness stated that iki 1920 he to America on a business visit. On his return he considered that lie spent more than the amount allowed tor the expenses of the trip, and a meeting of shareholders passed a sum of £SOO to reimburse him. “When I received this, I did not believe it, to b» a bonus, but simply .a reimbursement of extra expenditure while abroad: Until the entry Ima been queried b.v the inspector I did not know that it had been entered as a bonus in the minute-book.” "HURRIED PERUSAL OF RETURNS Norman D. MacLeod, bookkeeper of John Odlin, Ltd., stated that he had prepared the income tax returns of the defendant, and was unaware that tlie credit standing to Mr C. C. Odlin's account was taxable income. Witness stated, that, when given the returns to sign, Mr Odlin had made only a hurried perusal of them. Mr H. F. O’Leary submitted that after the hearing or the evidence, a conviction of wilfully entering a false return—otherwise perpetrating a fraud—should not be ontered. An error had certainly been made, said counsel, but it had been made inadvertently and not wilfully. His Worship imposed a conviction an the »lt*runt v* charge of negligently making false returns, and intimated that he woo’d assess tho penalty after the further charges had been disposed of.