STOP COUGHING.

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

STOP COUGHING.

That's what you'd like to do, no doubt, but it teams as if you are never going to get the better of that wretched cough. Don't neglect your cold, 'but gee a bottle of Baxter's Lung Preserver now. Ask for the large-sized bottle at Is iOii. 1

of Smith. He desired to draw atterv tion to one or two discrepancies be' tween the return 011 wffich this casS was brought and the balance-sheet pr® pared by Modlin. The items were ai follows: i Balance-sheet. Return/ £ £ Sales .... 378,714 305,743 Stock .... 89,779 73 ggj Office, salaries and wages . 1,000 2,02) Bad debts . . . 381 2027 Stock as at September 30, • ' 1904 . ■ . - 79,955 71,900 Purchases, materials and labour • . . . 824,633 274,814 The-net result of the discrepancies between the balance-sheet and the return was in favour of the taxpayer and asainst the Department bo the of about £35,000. He wt>uM srai 5n a tabulated statement showing the return as put in bv the firm and as oravm up from the balance-sheer!;., Tiie thing was that all the data for lift balance-sheet were on tlie Wwasi The inspectors of the Department would state that the Information upon which that balance-sheet was made was taken from the books of the firm, and that there was no reason why any pe?« son soeking to make an honest return should not have been able to make 0118 from the books noon the lines of tlia balance-sheet-. 'lt was, therefore, a question as to what data the'returnl was prepared from. Either the apoel-t lants had gone to the books and had nob taken out the figures they found there, or they had merely inade a guess at theirposition. The return, however, _ did not purport to be a mere estimate, but purported to 1)9 based upon exact figures. ; Smith, throughout the earlier part of the in' specter's (Tyers) investigations, had denied that there had been any bal-, ance-sheet- taken out by the firm. f Tyers bad asked him for a balancesheet early in his investigations, in accordance with the usual practice. Smith continued consistently to' report to Tyers that there was 110 balanceehfeet, and that no balance-sheet had ever been taken out. Smith had further told Tyers that the working sheet 3 and stock sheets of the firm had been destroyed, and tliat it was impossible to provide this data. It was only, when the firm wished to raise a ques-! tion as to the accuracy of the'' pro- ' visional assessment prepared by Tyera that the balance-sheet was produced. Tyeirs,. having . no, balance-sheet, had; been compelled to go> through the books and make, an assessment for himself, and Modlin had gone through this assessment. It was only to support a contention that the firm could not possibly have made such profits as Tyers's statement showed that the balance-; sheet was produced. It was then a seer- - tained by Tyers that. Modlin had prepared balance-sheets for several years before, and had prepared a series of balance-sheets for the purposes of the proposed new oompany. These sheets were ultimately produced for Tyers, as was also a prospectus based upon them. It would be seen that the returns for»the years dealt with in 1 these balance-sheets were 'as much below Modlin's balance-sheets for those years as for the year in question, about a quarter of the profits only being returned. Bowron Bros, had sold out their English business to a company in July, 1907, and then showed a surplus of assets over liabilities of £208,G00, in addition to which they kept certain re-, serves which had not been transferred to the purchasing company at all, With a view to cheeking the result oi his investigations Mr Tyers had pre- > pared a statement, and this statement showed that the firm could not have attained the financial position referred to if it had made only the profits which it reported in its returns to the Department. If, however, the firm liad made the profits entered, in Mr Modlin's balance-sheets, the surplus of assets; over liabilities worked out," curiously enough, to just about the sum referred to. ' THE EVIDENCE. ' THE INSPECTOR'S STATEMENTS. . William Morris Tyers, an inspector' of the Department, stated" that lid came to Christchurch in June to examino the firm's' accounts. Mr G. Bowron referred him to Mr Salter, the firm's accountant, who had lately been engaged, and was not acquainted with some of the former business. On July 1 Mr Salter referred him to Mr Smith for information in regard to the old firm of Bowron Bros. Mr s Smith said that before July 31, 1907, when a balance-sheet was prepared for the purpose of sale to the new firm, 110 balance-sheet had ever been prepared for the firm. Prior to the return for the ten months ended July 31, 1907, Mr Smith said he had always prepared the returns himself. He stated that he had kept tho books of the old firm, and that ho had been succeeded by his brother, who was succeeded by Mr P. H. Goodsir, whose" appointment commenced about October 21, 1904. The latter had been an accountant in tho firm for about three years, and was succeeded by Mr M'Cutcheon. Mr Smith threw considerable doubt on the accuracy of Mr F. Goodsir's ledgers, and said that all stock-sheets prior to July 81, 1907. had been destroyed. He also said/ that his firm did not like to pay .taxes' any more than other firms did, but had always been careful to return too much, rather than too little, and when ho saw how M'Cutcheon had prepared the return for the ten months ended July 31, 1907, he realised that the firm had re-

turned'in' previous years far more than it need have returned. On examining the books kept by Mr Goodsir, he received an impression that there would be another lodger, a private one. The bboks, evidently, had been kept by a competent man, but were incomplete, as if they had been kept by a man from whom information in regard to the capital was-withheld. ■■ On August 12 ho handed to- Mr Smith an assessment that was only provisional, because the difference -between Mr Gcodsir's ledgers and the returns was enormous. _ The assessment showed what the witness thought should have been returned to tin -Department. The firm's return for 1905 showed an assessable income ,of iiii?,OlK); his provisional assessment made it £41;078. For 1906 tho linn . showed an assessable income- of £ 11,000; bis assessment . showed £08,676. For tho .ten months ended July 31. 1907. the firm showed a loss o( .£5000; he showed a profit of £25,600. Mr Smith tolcl him that the ledgers' kept by Mr Goodsir were the only ones, that t!iere vrera no private ledgers, and that there was no balance :;heet before July 31, 1907, and that all stock-sheets before 'that date were destroyed. He ranp: up Mr Smith, who told him several times that a fire was delaying tho assessment, and Inter on he said that hj« wau ted Mr Modiiu to check tho figures. Witness then learnt for the firsl time that Mr Mo'dliri had been brought out to audit the accounts. Witness was astounded that Mr Mod-; lin should require time to'check his own! figures. On September 7 he (Mr Mod- 1 1 iu) brought forward a claim to douuet from the enormous profits which- witness had shown to exist, £IOB,OOO, which he said was owing by Bowron Brothers, London, to" Bowron Bros., Christchurch. He went through the ledgers with Mr Modlin, and said that the deduction would be ridiculous. There was no * proof that it was a bad debt. It- had been accumulating since about 1899. At the commencement of the period over which ho v,'as making assessment of income it was £90,000, and still the firm for the whole period returned, a profit of only £70.000. Mr Modlin consulted with his principals, .and a new light had been thrown on the position. He then said that he had been instructed by Mr George Bowron tc produce a balance sheet., which showed that tho firm owed_ nearly as much ci& , September 30, 1905, as on July 3Jmi' 1907, the inference beiilg that the liri|j had practically made nothing excep®' whtv; bad been drawn out, and that witness's enormous profits were not correct. Ho asked Mr Bowron for a profit and loss account, and ho produced it for the year ending September, 1905, the year for which'the .income ' tax return was wade. It allowed :i net profit of £52.1 Jy. Wii-tww

x previous profit and loss (statements, ' and s'lr Bowron produced a prospectus, in which Mr Modlin, certified to profits in the years 1902, '1903, 1904. ' He asked for the balance sheets for those years, and they were produced. They were formal, regular balance sheet?. The firm's income tax returns far 1902 showed a profit of £i42(J, jiiKi Mr Modlin's balance sheet £22,751; in 1903 the return was £10,395, xantl the. balance sheet showed £i:i5;08»; in 1904, the return showed £12,860 ; an tithe balance .sheet £20,533. "Witness asked for balance sheets after 1900, and-received them. In the agreement oi Kale from Bowron Bros.'to the company dated Jutio 24, 1007, there was a rof «*?«?« n balance .sheet of the previous September, but hj« could _ get no definite assurance'-from Mr Smith and Sir Modlin that it had been prepared. Witness made the taxable income for the year ending September, 1900,_ on Mr Modlin's balance sheet, £62,755; the firm made it £IB,OOO. When Bowron Bros. sold out to the company it ■was for £203,500; there were reserves which tlie company took over ol £32,106; and the firm had a debt cf £108,252 owing to it by Bowron - Bros., London, which it did not- transfer to the company, and also somo other assets that it did not transfer. He estimated that on July 31 of that year the capital was £249,547, approximating to the sum for which the firm sold out to the company. He then went up to Wellington a.nd saw Smith in the Commissioner's office in regard _to the matter of taxation. An estimate iu Smith's handwriting was then produced by the Commissioner. That estimate (produced) showed a total short, return of income of £50,000, Witness discussed ' this estimate ivith Smith and the Commissioner, and stated it was an untrue statement. because whererer a bis; profit was shown on the books or bal-ance-sheet it was ignored .and an average taken from years in which the profit was less. The purchase raonoy received'for the Emrlish business was set down as £200.000, whereas it was £208,500. There were other discrepancies, somo of which operated against the Department and some against the firm*. A comparative statement was .handed in by the witness showing the iiscrepancies between the balancesheets prepared by Modlin and the returns made to the Department by the firm. • CROSS-EXAMINATION OF THE j _ INFORMANT. in answer to questions by Mr Russell, , the witness said he spent from June 30 to October 11 in investigating the affairs of Bowron Bros., and had access to' the firm's books during a period of three nftmths. He asked for balance sheets on July 1 .and did not see them till September 13. All the books and papers of tlie firm, with tho exception of Modlin's balance sheets were at his disposal, but they were iu a chaotic Witness was. however, able to mako what- he considered an accurate provisional assessment from them. George Bowron had remained in the background during the proceedings till September 10. It was Geo-ree Bowron who supplied the balance sheet made by Modlin._ Witness had made up his Blind that it was no use further discussing mattors with the firm as soon as he; had seen Modlin's balance sheet oil September 13. The firm knew its position perfectly well, and had kept it concealed from him. Tho balance shoots gave him much more information than the books, and he had to revise his provisional assessment. After the interview on September 13 he felt that tho firm had been laughing at him all along,* 1 and he had devoted himself to obtaining evidence a,s to the firm's profits thereafter. He had not asked anyone connected with the firm for explanations after that, as ho had felt lie could not place any reliance on informatibn that might be given. He believed the figures he had placed bofore the Court were correct, assuming' that Mcdlin's balance sheets wero correct. A firm's return might tally perfectly ' with its profit and loss account and be Inborrect for income _tas' purposes, but jthe onus of forwarding a correct re;turn lay on the taxpayer. He had been ■told by Bowron Bros, that no private ledger was kept, but he believed that some equivalent of a private ledger must have been kept. ! 'Left sitting.)