INCOME TAX CASES.

Star (Christchurch), Issue 9914, 1 August 1910, Page 2

INCOME TAX CASES.

THIS REHEARING,

PROCEEDINGS UN THE SUPREME

COURT TO-DAY.

At the Supreme Court to-day, before tne Chief Justice (Sir Robert Stout) and his Honor Mr Justice Sim, the case brought by the Income Tax Department against members of the firm or Bowron Bros. was called on for rehearing. The case was first heard before Mr H. W. Bishop, S.M., some weeks ago. The informant was William Morris Tyers, inspector under the. Jjand and Income Tax Assessment Act, lyOctj and the defendants wero William. Bowron, Bowron and GeorgeJohn Smith, trading in partnership as merchants under the firm name of Bowron Bros. The information charged the defendants with having committed a breach of Section 10G of tho Land and Income Tax Act by knowingly and wilfully, on November '6, 1906, making a false return in writing in relation to tho income of the firm, affecting its liability to taxation, thereby evading full taxation in respect of income tax. The Magistrate convicted the defendants, and they applied for a rehearing before the Supremo Court. Mr T. G. Russell appeared for tho appellants in the present case, and, Mr T. W. Stringer, K.C., and Mr T. Neave, for the respondent, the Commissioner of Taxes. The case has aroused a great deal of interest, but there was only a small attendance in the Court when the rehearing was begun this morning. Mr Stringer said that before the case was opened, he would ask the Court to rule on a point in regard to the third ground of appeal. The ground was that the defendant firm was not guilty of the offence. It was not a proper setting forth of the grounds of an appeal under the Justices of the Peace Act. Details should be given, and the Court had power, to order in that direction. Ho quoted decisions given by the Chief Justice and by Mr Justice Denniston. The case was somewhat anomalous. At tfre Magistrate's Court no evidence was disclosed for the firm, aud he presumed that, in making a plea of not guilty, matter altogether outside of the evidence at the lower Court would be gone into. The procedure laid down in ■the Act provided that the grounds of the appeal must be stated definitely. Mr Russell said that the plea of not guilty, he understood, would give the appellants tho right to traverse the wliole case.

The Chief Justice said that Mr Russell would hare to show that the evidence already given was not sufficient to warrant conviction, or else raise specific points of law. Mr Russell said that' the appellants had to aliow upon what grounds they challenged the finding of the Lower Court, and they said that they were not guilty of the offence. The Chief Justice said that the plea of not guilty was not a ground of appeal. He had never heard of such tithing. If there were specific grounds, the other side must have notice of them. It was not fair to go into Court and say "We won't tell you what points we are going to raise." Mr Russell said that the appellants believed that the evidence in the Lower Court did not justify conviction. Their own! -evidence, which was not given in that Court, would show that the facts, as placed before the Magistrate, were different from what they appeared to be. The appellants were charged with having made a false return wilfully. They said that they would bring evidence to show that the return made was correct, or, if not correct, was not mad© with intention to defraud. Mr Russell amended the ground of appeal by inserting the words "that the return in writing is not false, or, if it is false, it is not fake with the knowledge of the appellants," and tho hearing of the case was gone 011 with. A QUESTION AS TO OPENING. • Mr Stringer • said' that, in view of the fact that he had put in the whole of the case* as taken before tho Lower Court, 110 would suggest that it might be more convenient for his learned friend to commence his affirmative defence. He (Mr Stringer) "had nothing to add to the case already disclosed, save that 110 might put in some tabulated statements made from the books. Substantially, he would deal only with evidence and documents already put in. Mr Russell said he objected to the course suggested. He would prefer that his friends should go through his case with Mr Tyers again, at any rate*. The Chief Justice: Are you willing I that the evidence as given in the Go-art below should be put in? Mr Russell: No, ! nm not. The Chief Justice: Then I am afraid* you will hare to go on, Mr Stringer. MR STRINGER'S OPENING. Mr Stringer said that in the lower Court he had opened the case very fully, and a report of his opening on that occasion was before their Honors. It was his present intention to present only a few salient points for the consideration of the Court. The return in j respect of which the information in thin caso-was laid was .made by the firm of liowron Bros. 011 November 6, 1906, and related to income earned by the firm, for UlO year ended December I 80, 1905. In the Court- below there was a. good deal of controversy as to whether the return was really made up to December 30, J.POS, but he understood fr-c-m his learned friend that was not now in question. The return, as their Honors would see. was in prescribed form, and showed as assessable £.13,833 2s Bd. At this time the firm had a balance-sheet- prepared by an accountant and auditor and had it in its possession for nine or ten months. That balance-sheet showed a net income of £52,41S 8s 3d. That balancesheet, however, contained a number of deductions which were not permissible for income tax purposes. ; When the balance-sheet was brought in line witli tie Act tho real taxable income was found to be £64.972 lis 9d. If this was the real position of the firm's affairs it was paying taxes upon only about a third of its income. Mr Modlin, tho accountant who prepared _ the bahnccvshcet referred tc, was paid a high salary, and was brought out from England by Messrs Bowron. Bros, to assist in the flotation of certain English interests by the firm. Ho was a properly qualified and a very able accountsut. It was a curious tiling that in course of the dis-\ put-es- as to- the short returns for iiicoiue tax, Smith, a member of the firm, in writing to the. Commissioner of Taxes

Mr Russell: I understand that letter was nneii out by the Magistrate. Mr Stringer said that was not tlio case. Tho Hitter was not written " without prejudice," and was clearly admissible. Ib contained an offer. The Chief Justice: Perhaps it would bo hotter, Mr Stringer, to lot the- matter rest till tho letter comes up in evidence.

•'trincer. continuum". said that an inspector of tho Land and Income Tax .i. wnent had inspected the' books of fi v m wit' l ilr Modhn and found that Mr Modlin's balance-sheet earreefc]y sho.vod tho position of the firm. In the Court below be (Mr Stringer) had m.julo ii ptc tpn»o«t that it was necessary to prove tl this return was knowingly and wilfully false, but lie did noo now consider this necessary. In a case, for instance, where- one ot the partners of a firm made a false return, it won .va not be necessary to prove that the other partners knew it to be fake to establish their liability, The Chief Justice: Who made the return in this case ? Mr Stringer said th&t the return was signed by Georce Bovcron, but the body of tho return was in tho hand writing