085-NLR-NLR-V-71-K.-M.-D.-JAYANETTI-Appellant-and-H.A.-MITRASENA-Assessor-Inland-Revenue-Depa.pdf
JayaneUi v. Mitraeena
386
1968Present : Weeramantry, J.
K. M. D. JAYANETTI, Appellant, and H. A. MITRASENA (Assessor,Inland Revenue Department), Respondent
8. C. 603/1967—M. C. Colombo, 14565/A
Income tax—Prosecution for false return of income.—Confessional statements madeby assessec to the Commissioner at stage of appeal—Admissibility—EvidenceOrdinance, s. 24—Confession caused by inducement, threat, or promise—Requisites thereof—Rule of official secrecy—Exceptions to tho rule—Depart-,mental settlement of an income tax offence—Whether it is a bar to subsequentinstitution of criminal proceedings—Two offences arLing out of the non-disclosureof ihc same item of income—Effect—Offence of evading income tax—Quantumof punishment—Income Tax Ordinance, as. 4, G9, 73 (2), 73 ((J), 79, 80 (1),80 (4), 90 (1), 90 (2), 90 (4), 02 (1), 92 (2), 94 (1)—Inland Revenue Act No. 4 of1963, ss. 124,127—Evidence Ordinance, s. 24—Penal Code, s. 67—InterpretationOrdinance, s. 9.
In a prosecution of tho ossessoe-appellant under sections 92 (1) and 90 (2)of tlir> Incomo Tax Ordinance for making a false return of income for the yearof assessment commencing on 1st April 1961 by not disclosing a certain itemof incomo in tho rotum—
Held, (i) that statements of a confessional Hatin'** made i>y tho assesseo fortho first time to tho Deputy Commissioner of Inland Kevonuo in the courseof tho former's appeal to tho latter against tho assessor’s assessment weronot romlorod inadmissible in evidence by section 24 of tho Evidence Ordinanceif tho statements wore made after tho assessor's allogod inducements, threats,or proinisos had ceased to be operative at the date of the confessional statements.'ITio inducement, throat, or promise contemplated in section 24 of the EvidenceOrdinance should not have been dissipated by tho time of the confessionalstatement.
that a statement mado by an accused person to a person in authorityis not a confession within tlio moaning of section 24 of tho EvidenceOrdinance*, if the benefit conferred by tho indneoment, threat, or promise inquestion has no reference to the criminal proceedings against him.*
that the rule of secrecy contained in section 4 of the Income TaxOrdinance did hot debar the assessor from communicating to the prosecutingCounsel faote which came to his notice rotating to the actual income of the-ossossoe and the disclosures made by tho assesseo. It was competent for theassessor himself to have given evidence about these matters. Such disclosureto Court, for tho purpose of a prosocution undor tho Incomo Tax Ordinance,of matters coming to the notice of an assessor in the performance of his dutiesis within the exception set out in tho opening words of section 4 (1) of theIncome Tax Ordinance.
' (iv) that the circumstance that thoro was a settlement of the assessee’stax matters at the stage of his appeal to the Commissioner! could not amount toa compounding of the offenco committed, so as to preclude the assessor frominstituting criminal proceedings against tho assesseo subsequently on the
31 – PP 006137 (98/08)
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2063—2,255 (8/69)
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WEERAMANTRY, J.—Jayanetti v. MUrasend
same matters which were dopartinontally settled. The only exceptions tothis rulo ore, first, that which is provided by section 80 of the Income TaxOrdinance in a case whore them has been no fraud or wilful negloct involvedin tho disclosure of income and, secondly, the occasions contemplatedin sections 90 (4) and 93 (3).
that the appellant’s non-disclosure of income, although it constitutedtwo soparato offences falling under uoctions 92 (1) and 90 (2) of the IncomeTax Ordinance, related to the same itoin of income and, therefore, in view ofthe provisions of section 67 of the Penal Code and section 9 of the InterpretationOrdinanco, should bo punished on the footing that only the moro serious ofthe two offences hud boen committed.
that tho ponulty of troblo tlio amount of tux which can be imposedtuidor .section 92 (I> of tho Income Tax Ordinanco for tho offence of evadingincuino tax moans throe times tho totality! of the ossosseo’s tax liability for thevour of ussossmont und not merely llano times tho tax which would,have boonchurgoublo upon tho undeclared sum which is tho subjoct matter of tho charge.However, tho effect of section 92 (I) is to confor u discretionary i»owor ontho Court to impose a penalty less than tho troblo ponulty. In tho present casethoro was a total absence of any circumstances of mitigation.
^^Pl'EAD from a judgment of tho Magistrate's Court, Colombo.
A nuodet/ Pcrerv■, with A n audit. Wijei/c^ekam. .1. S. Wijetuufje, N't It»Abcyeticktira and Thilustuw PrJ/poht, for Accused-Appellant.
I'. .'v .I. Pii.llenutfC'ftti». .Senior Crown Counsel, with Lafith- Rodrigo,Crown Counsel, J'or Attorney-General..
Car. od . vul(.
August 20. 1068. Weekamantbv. J.—
The'accused-appellant in this case w as charged with having committedfrom a id urn dated 5th July 1901 made undor the Income Tax Ordinancean income of Us. 12,120 derived by him in respect of transactions relatingto the purchase of sugar by the .food Commissioner's Departmentund thereby evading tdx. On a second count the accused-appellantw as charged w ith making an incorrect return for the year of assessmentcommencing on the 1st day of April 1961 by omitting income of wliich hewas required by the Income Tax Ordinance to make a return to wit anincome of Us. 12,120 derived by him in respect of transactions relating■to the purchase of sugar by the food Commissioner's Department. Theoffence charged under the first count is punishable under section 92 (1)of the Income Tax Ordinance and that under the second count undersection 90 (2).
The. appellant was convicted on both counts und sentenced on count1 to a fine of Rs. 250 and a penalty of Rs. 11,400 and on count 2 to afine-of Rs. 500 and a penalty of Rs. 135*000. The appellant was also
WEERAMANTRY, J.—Jayanetti v. Mitrasena
387
sentenced to one month's rigorous imprisonment in default of payment ofthe fine imposed on count 1 and three months' rigorous imprisonment indefault of payment of tho fine imposed on count 2. As an additionalpunishment on count 2 tho accused was ordered to be detained in thoprecincts of the Court house till 4 p.m. on the date of sentence.
A numbor of questions of lnu- are urged on behalf of the appellant.
Tt is urged that the oonviction in this case rest s upon certain documentswhich are of a confessional nature, which documents it is contended wouldbo inadmissible in terms of section 24 of the Evidence Ordinance. Thesedocuments wore statements made to an assessor and ns such are protected1 *3’ fclie rule of secrecy which, it is claimed, has the effect of precluding themfrom boing used in Court for the purpose of a prosecution."
The appellant also challenges the regularity of the very criminalproceedings themselves, on the basis that there had been a settlement oftho appellant's tax matters for the relevant period before the DeputyCommissioner. and that this settlement amounted to a compoundingof tho offence committed. It is urged therefore that it would not becompetent for the assessor to institute criminal proceedings on those samematters which were departmentally settled.
fn rogard to the elements necessary to maintain these chargessuccessfully the further point is taken that there must be clear proof ofan intention to evade tax and that the prosecution is under the burdenof proving dishonest intention affirmatively without leaving thequestion of intention at the level of surmise and conjecture.
Arising from the fact that two charges have been instituted in respectof the identical sum of Rs. 12,126 derived in respect of the identicaltransaction, the defence makes the farther submission that the prosecutioncannot maintain both charges in as much as they arise from the same actand that in any event the same act cannot attract punishment twiceover.
Finally, on the question of punishment, it is urged that the learnedMagistrate has wrongly imposed on count 7 the penalty appropriate tocount 2 and on count 2 the penalty appropriate to count 1 and further tha tin any evont the penalty appropriate to count 1 is not t hree times thototality of the assessee’s tax liability for the year but- three times tholiability on. the undeclared sum of Rs. 12,126 which is the subject of-this charge./
I shall consider these various points of law in the order in which I havestatedthem.
Coming now to the first contention, namely, that the prosecution rnstson the admission of certain documents of a confessional nature, it isnecessary to review briefly the history of the investigations leading tothe proceedings against thiso appellant.
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WEERAMANTRY, J.—Jayanetli v. Mitrattna
It would appear that for the year in question, that is the year of assess-ment 1961-62, the appellant had sent in a return PI. In PI the appellantwas required to make a full and complete declaration of all his incomes andprofits for the period 1.4.1960 to 31.3.1961, and this declaration havingbeen accepted, the appellant was sent a notice of assessment P2a dated17th October 1961 showing an assessable income of Rs. 25,868 on whichhe was taxed Rs. 1,277. He was subsequently called upon to pay anadditional tax of Rs. 717 in consequence of the amendment of the lawrelating to allowances.
However, the complainant-respondent who was the assessor dealingwith the appellant’s file, started making investigations in 1963 into thefinancial position of the appellant as he found the income that had beenreturned to be incompatible with the disbursements and investmentsof the appellant. It may be observed that, the complainant-respondentwas not at the outset the assessor dealing .with the appellant’s file butthat the file had been sent to him for detailed investigations in August
1963.
Circumstances which appeared to be incompatible with the appellant’sreturns were in particular the purchase of an estate and the building of ahouse in Colombo which had been furnished lavishly. . Suspicion washeightened by the fact that the appellant had given himself the luxuryof a tour practically around the world with two members of hisfamily.
The respondent made his own valuation of the estate and the house andfound a discrepancy of six lakhs of rupees between the income so computedand the income returned and ho therefore proceeded to make additionalassessments for 6 years under section 69. These assessments were madeon 26th August 1963 and that for the year of assessment '1961/62 hasbeen produced at this trial, marked P3. This assessment was for a sumof Rs. 100,000 for that year.
An appeal was preferred against this asseSsmont on 13th September1963, and the respondent inquired into the appeal against the additionalassessments between September 1963 and about February 1964. In thecourse of this inquiry the respondent decided to and in fact conducted asearch of the appellant’s house on 14th October 1963 and a diarymaintained by the appellant was recovered as a result of this search.Two days later the bank vault of the appellant was also searched. Thesetwo searches were both conducted within a few days of the appellant’sreturn home from his trip abroad.
Thereafter, the respondent summoned Jthe appellant for questioningon 25th February 1964. Subsequently the appellant had two furtherinterviews with the respondent on 5th March 1964 and 26th March 1964,and, in April 1964. a search was conducted by the respondent in the
WEERAMANTRY, J.—Jayanelti v. Mtiraaena389
premises of one Smale, an associate of the appellant in some of histransactions, and a number of files containing correspondence and some •
boohs were removed from the house of Smale.
•»
In the course of his inquiries the respondent questioned other personsas well and examined the records of the Food Department relatingto purchases of sugar, dhal and gunnies. This latter aspect of therespondent’s investigations was undertaken in consequence ofinformation gathered from Smale’s files.
Upon the basis of the information now in his possession the respondentissued a second set of additional assessments for a period of 5 years/These five additional assessments were made on 2nd June 1964 and thedate fixed for payment of additional tax was 23rd July 1964. Theseadditional assessments were for an aggregate sum of Rs. 500,000 for thisperiod.
An appeal was duly .preferred against these , five assessments and thefive appeals were again referred baek to the respondent for inquiry. Inthe course of this inquiry the respondent had three further interviews withthe appellant on 11th June, 18th June and 10th July 1964.
No agreement having been reached at these interviews the appealswere put up for hearing by the Commissioner, a circumstance of which theappellant was informed by letter D3 of 31st July 1964. The date ofhearing fixed for these appeals was 11th August 1964.
The letter D3 also dfew the attention of the appellant to the fact that, taxes due on assessments under appeal were collectible and that theDefault Branch had been instructed to take action accordingly.
Appeal proceedings commenced before the Deputy Commissioner on19th August 1964 and at the hearing the appellant was representedby Counsel, Mr. Advocate Ambalavanar.
On a subsequent date of hearing, that is on 30th September 1964, beforethe questioning of the appellant commenced, the appellant elected to makea statement. He was allowed by the Deputy Commissioner to do so andmade a statement which was taken down by the stenographer in theimmediate presence and hearing of the Deputy Commissioner. Thestatement was typed out and submitted to the appellant on the nextdate of inquiry, that is 22nd October 1964, and signed by him. Thisdocument has been produced marked P13 (6) and contains an admissionthat the appellant had a Bank account in Switzerland which had beenopened in 1955. In certain circumstances detailed therein this statementrevealed a numbetf of exchange control offences and also the receipt ofsome money in regard to a Government purchase of Brazilian sugar. Itconcluded with an ad misericordiam appeal highlighting the rise of theappellant from an initial appointment in the clerical service to the postof Food Commissioner and leaving it to the sympathy of the Deputy
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WEERAMANTRY, J.—Jayanetti v. Mitrascna
'Commissioner to consider this background and whether the appellant’s•career as a Civil Servant should be ended when he had reachedthe top of his career and was near the “ plums of office It stated furtherthat these worries were killing him and that he preferred to settle thismatter.
This document P13 (6) is the first of the documents alleged to beconfessional, whose reception in these proceedings is the subjoct ofcomplaint.
The hearing before the Deputy Commissioner was resumed on 6th and10th November 1964 and on the latter date the assessee’s counsel askedthat the hearing be adjourned for another date after having produced astatement which he wanted the Deputy Commissioner to peruse.
The proceedings before the Deputy Commissioner on 6th Novemberhave been produced marked P12A and P13. In these proceedings theappellant is recorded as admitting the receipt, on account of sugar purchases,of sums of £534.10.5d on 31st December 1960, £713.0.3d on 29th January1960, £709.7.8d on 10th April 1959, and also a sum of Rs. 7,500 sometimein 1960. There was also an admission that the appellant had a bankaccount in the Union Bank of Switzerland. The appellant stated furtherthat he had been told by certain parties with whom he negotiated that hewould be paid between £750 and £1,000 on each sugar transaction. Allthese admissions were by way of answers to questions addressed to himby the complainant-respondent.
These proceedings constitute the second document the reception ofwhich is objected to.
The third document to which exception is taken is PI 1, a set of figurescontaining dates and sums of money. This was tendered by the appellant’sCounsel at the commencement of the hearing on 10th November 1964.This statement was signed by the appellant at the request of the DeputyCommissioner on the day it was handed in. This document has an entryof Rs. 5,000 against the date 27.8.1960 and an entry of £534.10.5d againstthe dates 12.7.1960 and 23.8.60. It will be noticed that these dates arewithin the period relevant to this charge and that the aggregateof these sums is Rs. 12,126, the sum referred to in both the presentcharges.
It is stressed on behalf of the appellant that these statementswere made in consequence of relentless pressure kept up against himby the officials of the department. The circumstances in which thesestatements were made are said to amount to inducements, threatsor promise within the meaning of section 24 of the Evidence Ordin-ance, which would have the effect of shutting out these statements atthe trial. It is also pointed out that P13 (b) was made without any
WEERAMANTRY, J.—Jayanettiv. Mitrasena
391
consultation with Mr. Advocate Ambalavanar, Counsel appearing forthe appellant at this inquiry, which again is said to be evidentiary ofthe stress to which the appellant was being subjected at the time.
A number of items of conduct on the part of the complainant-respondentare relied on as amounting both individually and in combination to threats,inducements or promises offered or held out by the complainant-respondent. Among these are : prospects of settlement held out to theappellant; threats of further assessments if he did not settle; an oralstatement alleged to have been made by. the assessor that the appellanthad better settle or else he could do much worse before the Commissioner;a threat of seizure and sale of the appellant's immovable property asappearing in D5 and D6; a threat of proceedings in the Magistrate’s Court,as appearing in D6 ; a threat of further assessments viewed against thebackground of additional assessments running to lakhs of rupees whichwere themselves, it is submitted, capricious and arbitrary; statements bythe assessor such as “ you had better tell the truth ” and " I may havemore evidence than what you imagine ” and a promise of settlement if theassessee admitted having a bank account in Switzerland. Taken in thecontext of frequent offers of settlement and postponements granted forthis purpose, raids on the premises of the appellant as well as of his friendsand confrontations of the appellant with.photostat copies of incriminatingletters which could not be proved in Courts of law, it is submitted thatgrave fears would have been created in the appellant’s mind of financialand social ruin unless he came clean and laid bare to the department theinformation they were in quest of.
Asfniming for the moment that some or all of these items amount tothreats, inducements or promises, it becomes necessary to examinewhether the other requisites of section 24 are satisfied so as toshut out from evidence the statements of the accused to which I havereferred.
It will be seen firstly that in terms of the section it must appear to courtthat the confessional statement was caused by the inducement, threat, orpromise alleged. A second requisite is that such inducement, threat, orpromise should both have reference to the charge against the accusedperson and give him grounds which would appear to him reasonable forsupposing that by making it he would gain any advantage or avoid anyevil of a temporal nature, having reference to the proceedings against theaccused.
It would appear that neither of these requisites is satisfied, so thathaving regard to the provisions of section 24 of the Evidence Ordinance,it does not become necessary to determine whether the conduct of theassessor amounts to inducements, threats or promises held out to theaccused.
In dealing with this first requisite, it must be borne in mind that thelast of the interviews between the assessor and the appellant was on 30thJuly 1864 and the first of these statements was on 30th September
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WEERAMANTRY, J.—Jayaneiti v. Mxtrasena
During the period of two months which intervened, the matterhad passed out of the hands of the assessor and had been referred by himto the Commissioner who was thereafter the authority seized of thematter.
Against this background it becomes necessary to determine whetherthe assessor’s alleged threats, inducements or promises still continued to beoperative at the date of the confessional statements for, as Lord ChiefJustice Parker observed in the Court of Criminal Appeal in Regina, v.Smith1, the effect of the inducement, threat or promise should not havebeen dissipated by the time of the confessional statement.
It will be observed that so long as the appellant’s case was in the handsof the assessor, the former persisted in his denial of a Swiss bank accountand in his claim that all the information required by the assessor had beenduly furnished. For example, as late as 24th June 1964 he denied by hisletter D1 that he had any bank account abroad other than one at theWestminster Bank, London *, and as late as 28th July he was persisting,in his letter D8, in his position that all available information had beenmade available by him.
The interviews, therefore, between the assessor and the appellant hadbeen unproductive of results as far as the assessor was concerned and hisalleged threats, inducements or promises had proved futile. Mattersremained in this state when the case was put up to the Commissionerfor hearing. The assessor’s letter D3 of 31st July makes this positionclear.,
It was only after several dates of hearing before the Commissionerthat the first confessional statement was made.
►
It would seem therefore that the cause of the statement of 30thSeptember was far more likely to have been what transpired at the hearingbefore the Deputy Commissioner rather than what transpired at theappellant’s interviews with the assessor. The reason for the statementis hence most likely to be found in the course taken by the proceedingsbefore the Deputy Commissioner, proceedings at which the realisation keptgrowing upon the appellant that he could no longer persist in his denial ofguilt. On this matter there is a finding of fact by the learned Magistratewhich I see no reason to disturb. As the learned Magistrate has observed,what unnerved the appellant was the obvious thoroughness of theassessor’s investigations which made the appellant see reason by30th September 1964.
In this view of the matter one factor essential to the applicability ofsection 24, namely that the confession should have been caused by thethreat, inducement or promise is therefore lacking.
M1959) 2 Q.B. 35 at 41.
WEERAMANTRY, J.—JaycmeU* v. MUrasena
393
I most next examine whether, assuming one or more of these items toamount to an inducement, threat or promise, they were in the opinion ofthe Court sufficient to give the accused person grounds which would appearto him reasonable for supposing that by making an admission he wouldgain any advantage or avoid any evil of a temporal nature in reference tothe proceedings against him.
With regard to this requirement that the proffered benefit should havereference to the charge against the accused, there has recently been anobservation in England to the effeot that suoh a rule is illogical andunreasonable1 and had never formed part of the law of England.
However we are here called upon to apply the statutory provisions ofour law and whatever view may be taken under the English commonlaw it remains clear that under our law of evidence the proffered ■ 'advantage must have reference to the proceedings against the accusedperson. •.
On this matter it is urged that the confessional statements were theresult of a promise of settlement in the sense that no criminal proceedingswere to bo taken thereafter and if this indeed be the truth this is a benefithaving reference to the charges against the accused. I have elsewherein this judgment examined this contention of the appellant and forreasons therein indicated I have concluded that there was no offer of asettlement and no inducement to settle in the sense that the departmentwas waiving or abandoning its right to prosecute the appellant in aCourt of Law. In view of this finding the advantage gained or evil avoidedwas certainly not in reference to the criminal proceedings against theaccused.
. The plea therefore that section 24 stands in the way of the use of thesestatements must fail on this ground as well.
In view of this conclusion I do not propose to examine the difficultquestion whether these statements are in truth confessions, for shouldthey be such, which indeed the Crown denies, they will still be admissibledespite the provisions of section 24. It is not necessary therefore toconsider the various problems raised by Anandagoda v. The Queen* onthe question whether the statement should amount to a confession of theoffence charged without reference to extrinsic facts and whether thestatement should contain an admission of the entire offence. In thecircumstances I do not feel called upon to decide whether the documentsobjected to contain an admission of the entirety of the offences involvedin counts I and 2 or whether as the Crown contends, they spell out attheir best only , one of the ingredients constituting these offenoes.
1 Commissioner of Customs and Excise v. Harz (1967) 1 AU B. B. 177 at 184 perLord Reid.
> (1982) 64 N. L. B. 73, P. Ojo
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WEERAMANTRY, J.—Jayanctti v. MUrasena
Before I leave this question of threats, inducements or promises Ishould make some observations in regard to certain grounds of complaintwhich are alleged to furnish a background of torment and harassmentagainst which the statements and conduct of the assessor take on thequality of threats.
The assessor has, under cross-examination, said in reference to theassessments made by him amounting to Rs. 500,000 that these werearbitrary. However, despite this answer, in which the assessor did lessthan justice to himself, there would appear to be a basis, unprovedbut not unreasonable, for the assessments that were made. The cir-cumstance that the appellant was able to issue a single cheque for £4000(Rs. 52,000) on his bank account in Switzerland afforded some foundationfor the belief that he had considerable assets abroad. This item ofinformation was gathered by the assessor from certain entries in the diaryof the accused. Moreover the assessor had before him material stronglysuggesting the possibility of the appellant having received around £1000in respect of each sugar purchase by the department. We also have theevidence of the assessor that he examined the appellant’s returns over anumber of years and compared the incomes shown in the returns withthe information he had regarding his investments and disbursements.He had as already observed travelled practically round the world withtwo members of his family, purchased an estate and built a house inColombo which had been lavishly furnished. The difference betweenthe income returned and the income so computed showed a discrepancyof six lakhs of rupees. All this taken against the background of apersistent denial by the assessee of any bank account abroad otherthan one at the Westminster Bank, London, was justification enoughfor the assessor’s belief that considerable assets were hidden away andthat an income of several lakhs had been received but not disclosedduring the years under review.
When making an assessment an assessor is not bound to base hiscomputations only upon provable sources of income and is entitled to makean assessment according to his judgment. The burden then would shiftto the assessee to displace this assessment on the basis of facts which arepeculiarly within his own knowledge h Indeed the language of section69 states no less, for it entitles the assessor to make his assessment “ atthe amount or additional amount at which according to his judgmentsuch person ought to have been assessed.”
No doubt assessors, in view of the amplitude of the discretion vestedin them under section 69 and the far reaching consequences of additionalassessments which they make, will have prominently before them theprinciples of justice and fair play which must ever underlie the exerciseof so wide a discretion, and I have no cause in the present case to reachany other conclusion than that the assessor was so guided when hemade these additional assessments. As has been observed in regard to1 See GuiUain v. Commissioner of Income Tax (1949) 51 N. L. R. 241.
WEERAMANTRY, J.—Jayanetti v. Mitrasena
395
additional assessments under the English Acts, legal evidence is notnecessary as a preliminary to an additional assessment, but there mustbe information before the inspector “ which would enable him, actinghonestly, to come to the conclusion ” that such a state of facts exists.1
The search of the house of the appellant and of those of his associates,the threat of seizure and sale of his immovable assets and the threat ofenhanced assessments and rocovery through the Magistrate’s Court, donot either, in my view, afford evidence of any pressure boing brought tobear upon the appellant more than was legitimate in.all the circumstancesof the case.
This was a case of tax ovasion on a considerable scale and one involvinga' legitimate suspicion of concealment of assets abroad. Moroovor,although tho fact of ovasion becamo quite apparont thore was a resolutoand porsistont denial by tho_ appellant of any ovasion and a refusal byhim to furnish cssontial information which, having regard to tho naturo ofthis caso and tho location of tho assets, was difficult to obtain. Taxofficials engaged in investigating such a case could not in the conscientiousdischarge of their duties do less than was done by tho respondent andI fail to see in his conduct anything other than an ordinary discharge ofduty by a conscientious official, though in tho context, of a somewhatextraordinary case.
I now pass to a consideration of the argumont that the statements areshut out from Court by the operation of tho rule of official socrocycontained in section 4 of tho Income Tax Ordinance.
This section provides that except in the performance of his duties underthe Ordinance every person who is employod in carrying out tho provisionsof tho Ordinance shall preserve and aid in preserving secrecy with regard tomatters relating to the affairs of any person that may come to his know-ledge in tho performance of his duties under the Ordinance. Tho soctiongoes on to prohibit the communication of any such matter to any personother than the person to whom such matter relates or his authorisedrepresentative, and persons employed in carrying out the provisions ofthe Ordinance aro required to take and subscribe an oath of secrecybefore a Justice of tho Peace.
Exceptions to the rule of secrecy as sot out in section 4 (4) covercommunications to the Commissioner of Stamps, tho Commissioner ofEstate Duty and within certain limits to the income tax authority of anypart of Her Majesty’s Bealms and Territories. Further exceptions tothis rule are created by soction 4 (5) in respect of the Auditor-Generaland by section 85 of the Bribery Act, Cap. 26, in respect of the BriberyCommissioner.
* 1 See R. v. Bloomsbury Commissioners (1915) 3 K. B. 758, JoUowing R. o. Ken-sington Commissioners (1913) * K. B. 870 ; Konst am, Income Tax 12th ed..section 399.
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It is submitted for the appellant that the duties of an assessor under theOrdinance are confined to assessments, collections, additional assessmentsand appearances at appeals* 'Prosecution, it is contended, is no partof the duties of an assessor so-^is to make of disclosures in the courseof prosecution an exception to the rule of secrecy. In this connectionattention is drawn to section 94 (1) which provides that no prosecutionmay be commenced except at the instance of or with the sanction of theCommissioner. There is also the evidence of the Deputy Commissionerwho says that prosocution is not within his province but is a matter forthe Commissioner.
Assuming then that the decision to initiate prosocution lies with theCommissioner and the Commissioner alone, once such a decision has beentaken does it fall within the provinco of an assessor’s duties to prosecute orassist at such a prosecution ?
When one examines the scheme of the Income Tax Ordinance, oneBees the importance of the provisions relating to penalties and offences.Practically every aspect of tho duties cast upon assessees by the Ordinancecarrios with it a penal sanction under Chapter XV. Those penal provisionsare the tooth which the Legislature has given the tax department for themore effective carrying out of its ordinary functions and cannot be socompartmentalised as to enable them to bo viewed as a distinct orindependent portion of tho Ordinance, unrelated to its ordinary provisionsregarding declaration, quantification and recovery.
If, as in the present case, an offence under the Ordinance necessitates aprosocution in the Magistrate’s Court which is to be conducted by amember of the Attorney-General’s Department, necessary instructions anddocuments must be furnished to Crown Counsel who is to conduct theprosecution. Can it be said that the rule of secrecy debars an assessorfrom communicating to Crown Counsel matters which have come to hisnotice relating to the affairs of the accused ? It seems to me thatdisclosure in such circumstance is as much part of the duties of an assessor*8 the duty which lies on him of taking any other steps within the law toensure that the revenue is not deprived of its dues by default on the partof the assessee. If the assessor in charge of the file in question is debarredby the rule of secrecy from communicating to Crown Counsel the facts ofwhich he is in possession, an effective prosecution for many of the offencescreated by the Ordinance will not be possible.
For example, in a prosecution for making a false return of income anecessary item of evidence in proving the falsity of the income returnedwould be the assessee’s actual income. Can it be said that an assessorwho is possessed of facts relating to such actual income is debarred fromcommunicating these facts to prosecuting Grown Counsel ?
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397
It may indeed appear somewhat disconcerting that admissions made orinformation divulged by the accused person himself should be the' verymaterial upon which a criminal charge against him is proved, but, as inother areas of the criminal law, such a circumstance does not render the-evidence inadmissible. The Evidence Ordinance lays down certain limitstransgression beyond which will render statements of an accused personinadmissible at his prosecution, but short of this no principle of law isoffended by the use against an accused person at his trial, of disclosuresmade by that person himself. There may indeed be certain circumstancesin which such use of incriminating material savours of unfairness butsuch unfairness does not render evidence inadmissible or vitiate aconviction.
Likewise, it would bo impossible for prosecuting Crown Counsel toconduct the prosecution unless he could reveal to Court information he hasso gathered from the assessor and load evidence in proof of such matters.Should he for this purpose call the assessor as a witness the latter would ingiving ovidence bo discharging his duties under the Ordinance no less thanwhen he instructs Counsel and no less than when he performs those manyother duties not expressly specified in the Ordinance but none the lessessential to give effect to its provisions.
The sections relating to prosecution would indeed be renderedunworkable in many cases upon any other view.
Moreover, oh any view, the performance of that which is an essentialancillary to the performance of one’s duty is itself the performance ofone’s duty. To hold otherwise would be to give to the word * duty ’ ameaning so unduly restricted as to defeat rather than promote the generalpurposes and scheme of the Ordinance. As Maxwell observes, it is theparamount duty of the judicial interpreter to put upon the language of theLegislature honestly and faithfully its plain and rational meaning andto promote its object.1 Applying this principle one is compelled to the viewthat disclosure to Court is within the terms of the exception set out at thecommencement of the section.
It is in my view unsafe to be guided on this matter by the analogy ofsecrecy provisions in other jurisdictions, which were cited in the courseof thie argument, for the terms of the Statutes containing them varyconsiderably from that we are here considering. Such facts therefore asthat section 137 of the Indian Income Tax Act No. 43 of 1061 expressly-exempts from the rule of secrecy prosecutions for an offence under thatAct or that the Second Schedule to the English Income Tax Act of 1952excepts prosecutions for perjury from the rule of secrecy but notprosecutions for other tax offences 8 are not therefore circumstances fromwhich any inference may be drawn in regard to the construction of our1 Maxwell, Interpretation of Statutes, 11th ed., p. 253.
* Vide para. 949 of the final report of the Royal Commission on the Taxation ofTrofite and Income. June 1955.
398
WEERAMANTRY, J.—Jayanettt v. MUrasena
Enactment. It would also appear that neither of the provisions referredto contains a general exception in regard to disclosure in the performanceof duties such as appears in section 4 (1) of out Enactment.
On this aspect of the case reference must finally be made to section 127of the Inland Revenue Act No. 4 of 1963. This provision, which isoperative in regard to years of assessment commencing on or after April1st 1963, but not to the yoar of assessment relevant to the present caseprovides that, notwithstanding anything in any other law, statementsmade or documents produced in relation to any matter arising under theAct, shall be admissible in evidence in proceedings for offences undersoctions 90 and 92 of the Incomo Tax Ordinance.
The appellant seeks to infer from this provision a pro-existing stato ofthe law under which such statements or documents would havo beeninadmissible.
However, when construing a law one must have regard to the terms ofthat law upon their plain meaning and it would not be legitimate to limitthat meaning in view of the terms of a law which has been enacted subse-quently. The reason which prompted the Legislature to enact a provisionin 1963 expressly excepting such prosecutions from the rule of secrecymay havo been a desire to make explicit what was implicit before. More-over the co-existence in tho 1963 Statute of section 124, containing thorule of secrecy as had earlier existed in section 4 of the former Ordinance,along with section 127, cannot in any way limit tho meaning of section124, for there is no such presumption against superfluity of expression inStatutes as amounts to a rulo of interpretation controlling what mightotherwise bo a proper construction.1
Tho Crown submits that the expression “ any other law ” in section 127is suggestive of tho legislature having therein referred to laws other thanthe Inland Revenue Act, to which, had it been its intention to make. reference, the Legislature would havo referred by using phraseology such- as “ notwithstanding anything in this or any other law ”. The factthat section 127 refers to the question of admissibility in contrastto section 4 of the Ordinance, which doos not primarily deal with.admissibility2, is also a circumstance relied on as supporting thiscontention.
These circumstances, though not conclusive, also support the conclu-sion to which I have given expression earlier, and in view of what I havestated heretofore, I conclude that disclosure to Court for the purpose ofprosecution under the Incomo Tax Ordinance, of matters coming to thenotice of an assessor in tho performance of his duties is within theexception set out in the opening words of section 4 (1).
• 1 Maxwell, Interpretation of Statutes, 11th ed., p. 311.
* Qamini Bus Co. Ltd. v. Commissioner of Income Tax (1952) 54 N. L. B. 97 at100, per Viscount Simon.
WEERAMANTRY, J.—Jayanett* v. Mitrastna39ft
I must next consider the contention that the settlement effected in theDepartment as well as the offer of settlement held out by the Departmentreferred to a settlement in the sense of a compounding of the case againstthe appellant. It is contended that it was in the expectation that a settle-ment would have this effect that the disclosures of the appellant were made.It is further submitted that it is not the practice of the Income TaxDepartment in Ceylon or for that matter in the countries of theCommonwealth to prosecute an offender for an income tax offence oncea settlement has been reached with the department.
I should here refer briefly to the relevant sections of the Income TaxOrdinance.
Sections 73 (2) provides that if after such further inquiry by the assessoras the Commissioner may order on receipt of a valid notice of objection, anagreement is reached as to the amount at which the appellant is liable tobe assessed, any necessary adjustment of the assessment shall be made.Where no agreement is reached and the Commissioner proceeds to hearthe appeal, he has power under section 73 (6) in disposing of such appeal, toconfirm, reduce, increase or annul the assessment.
Section 79 provides that where an appeal has been lodged and theamount of the assessable income has been determined on appeal theassessment as so determined shall be final and conclusive for all purposes ofthe Ordinance as regards the amount of such assessable income. In. anassessment which is final and conclusive under section 79 the Commissionermay in terms of section 80 (1), unless the assessee proves to his satisfactionthat there was no fraud or wilful neglect involved in the disclosure ofincome, order the assessee to pay as a penalty for making an incorrectreturn a sum not exceeding Rs. 2,000 and a sum equal to twice the tax onthe amount of the excess. Where a penalty is imposed under this provi-sion the assessee is exempted by section 80 (4) from prosecution for anoffence relating to that return under paragraph (a) of sub-section (2) ofsection 90 or under paragraph (a) of sub-section (1) of section 92.
The provision last referred to implies that there is always the possibilityof prosecution in respect of fraudulent or wilful neglect in the disclosureof income despite the matter having been determined on appeal. Suchdeterminations on appeal are, as already pointed out, orders which mayreduce or increase the assessment, so that what the appellant describesas a settlement is really a determination by the Commissioner at anappeal a. determination whjch leaves the door open to a prosecution unlessthe Commissioner decides;to impose a penalty under section 80 (1). Infact it is by payment of a penalty under section 80 (1) that subsequent. prosecution may be averted in terms of section .80 (4).
The notion of compounding is also not ignored in the scheme of theOrdinance, for the Commissioner is expressly empowered under sections 90
and 92 (2) .to compound) ah offence; and since the notion of
400
WEERAMANTRY, J.—Jayanetti v. Mitraaena
compounding is thus recognised by the Ordinance, it would not bepossible to read into the sections dealing with settlement the notion ofcompounding unless there is such a clear implication in the terms of theOrdinance.
Upon a reading of these provisions it thus becomes clear that adetermination by the Commissioner upon an appeal does not have theeffect of tying the hands of the Commissioner in regard to criminalprosecution.
Dealing next with the question whether an assurance has been heldout by the department that upon such a determination the departmentwould not prosecute, I must'observe that the appellant has not in anyway been able to show that such an assurance express or even implied hasbeen held out by the assessor or anyone else acting on behalf of thedepartment. Indeed the appellant admits that he did not specificallyraise the question of a criminal charge by the department. This wasaccording to him in reliance on his own unilateral understanding of theword 1 settlement ’ as meaning a settlement of all matters with thedepartment including a prosecution for false returns. The most he canpoint to is a statement by him that he expected justice and fair play andsaving from further disgrace—a statement which apparently drew noresponse from the department. Even viewed subjectively from theappellant’s point of view no reasonable grounds existed for his belief.
By way of contrast he states that he did raise with the respondent thepossibility of a bribery charge and that the respondent told him that theCommissioner would have to bring to the notice of the Bribery Commis-sioner any document which might come into his hands tending to supporta charge of bribery. The appellant then stated that there would be noproof forthcoming to maintain such a charge to which remark therespondent replied that in that event the appellant had nothing to fearfrom handing over the bank statements. Even this conversation, dealingthough it did with one type of prosecution, was silent on the questionof prosecution for any tax offence ; and no conversation between theappellant on the one hand and the respondent or the Commissioner onthe other appears to have touched on the question of such proseoutionat all.
What the appellant refers to as a settlement in this case may be gatheredfrom a letter D7 addressed by him to the assessor, which has been counter-signed by the latter, agreeing to the assessments and appeals beingsettled on the basis of an income of Rs. 120,000 for the years 1958/64 to1961/62, Rs. 70,000 for 1962/63 and Rs. 60/000 each for 1963/64 and1964/65. As the Deputy Commissioner has stated in evidence, on 24thNovember 1964 the assessor reported to him that he had agreed to thefigures of the assessable income for the years in question, and havingsatisfied himself that this settlement was reasonable, recorded his deter-mination as required by the Ordinance. This was a determination by theDeputy Commissioner in terms of section 76 (6), and there is nothing to
WEERAMAUTRY, J.—Jayanetti v. Mitrasena401
indicate that in arriving at this determination he was committing theDepartment to foregoing its right to impose a penalty or to launch aprosecution. Had it been the position of the appellant that he desired tohave immunity from prosecution the step one would expect him to takein the absence of a ponalty imposed by the Commissioner under section80 (1) was to obtain a compounding under section 90 (4) or 92 (2).
Reliance was placed upon the existence of an almost invariable practicein the Income Tax Department to refrain from prosecution where settle-ment has been reached beforo the commissioner, and evidence was led tothis effect.
However, the Deputy Commissioner has in his evidence denied anydepartmental practice or policy to refrain from using for purposes otherthan settlement any disclosures made or documents produced by anassessee in the comae of negotiations leading to such settlement and has.stated that if a serious tax evasion is disclosed the Commissioner would,not consider himself prevented from taking further action. MoreoverMr. Advocate Ambalavanar who was called for the defence has quitefairly stated that on occasion he himself has seen the Commissionerto obtain immunity from criminal proceedings, and one can gatherfrom this evidence that the provisions regarding compounding areinvoked in practice where an assurance of non-prosecution is desired.In a case of this importance the clear procedure to which resortshould have teen had, if criminal proceedings were sought to beavoided, was to obtain such immunity in terms of these provisionsand all the more was such a procedure imperative in the absenceof any assurance written or indeed oral that no prosecution would,ensue.
In this state of the matter I do not think that the settlement referredto constitutes a legal bar to a prosecution or that it can be argued on thefacts that the conduct of the department amounts to a representationthat its right to launch a criminal prosecution was being waived or-abandoned.
It is said for the appellant that the conduct of the Department inprosecuting the appellant savours of unfairness having regard to thefact that the matter was settled departmentally. It is relevant in thisconnection to observe the provisions of Section 504 of the English IncomeTax Act of 1952. This section enacts that statements made or documentsproduced will not be inadmissible even though the assessee was induced tomake the statements or produce the documents upon his attention beingdrawn to the right of the Commissioners to accept pecuniary settlementsinstead of instituting proceedings and to their practice to be influencedby the fact that a full confession has been made or full facilities given for -investigation.
32 -PP 006137 (98/08)
402
WEERAMANTRY, J.—Jayanetti v. Milrcuena
If after the assessee’s attention has been expressly drawn to thepossibility of such a settlement instead of an institution of proceedings,there is nevertheless no bar to prosecution or to the use of statements somade or documents so furnished, it would scarcely be possible to suggestthat where there has only been talk of a settlement without anyreference to criminal proceedings it would operate harshly on thetax-payer if such proceedings were subsequently launched.
I must next consider the contention that the prosecution mustclearly prove an intention to evade tax and that dishonest intentionmust be affirmatively proved. This submission was based in the mainon the decision of this Court in Chellappah v. The Commissioner ofIncome. Tax 1.
Basnayake J. there held that the bare omission of the item in questionfrom the computation of the appellant’s profits without proof that theomission was wilful and with intent to evade duty, was insufficient tobring home the charge. Difficulty of proof of such a mental state washeld to be no reason for relaxing in a proceeding under section 87 theobligation that lies on the prosecution in all criminal cases.
In the Income Tax Ordinance as it stood at the time of this judgmentsection 87 (1), which corresponds to section 92 (l)in the later Ordinance,required that the act in question should be done wilfully with intent to■evade. The present section does not, however, have the words “ wilfullywith intent to evade ” but requires that by the doing of the act, the person•concerned should thereby evade tax.
The appellant’s contention is however that the element of wilfulevasion is nevertheless a requirement under the section we are nowconsidering for the reason that the word “ evade ” which still remains,carries with it the connotation of unlawful escape or avoidance by “ fraud,misrepresentation or underhand contrivance ”, as observed by Basnayake•J. in Chellappah’s case.
I do not think the appellant can go so far as to submit that despite theamendment in the Statute the requirements under the former section stillremain unchanged, but even on the assumption that the same require-ment of wilful and unlawful escape is still present despite the omission ofthe expression “ wilfully with intent to evade ”, it would appear that thecircumstances of the present case can scarcely be brought within theruling in Chellappah’s case. That case is clearly distinguishable as theincorrect return therein considered was the result of a wrong viewtaken by the assessed of the law and not the result of dishonesty of anysort.
The present case on the other hand is one where the prosecution hasplaced sufficient evidence before Court to show that the non-disclosure ofthe item of income in question was clearly the result of dishonesty on thepart of the assessee. I do not think the prosecution could be expected toplace before Court any more material on this aspect of the case than inTact it has done.
1 (19,51) 52 N. L. R. 416.
WEERAMANTRY, J.—Jayanetti v. Mitraeena
403
It is said for the appellant that even if he had an intention to evade taxthat was not his dominant intention but rather a desire to protect himselffrom such adverse consequences of his misconduct as the loss of prospectsin Government service or a prosecution for bribery. It is submittedtherefore that the omission of this item was not with the intention ofevading tax and therefore not punishable under section 92 (1).
I do not think there is validity in the distinction sought to be drawn bythe appellant. So long as it is clear that the purpose of the appellant wasinter alia the evasion of tax it matters little that he also had otherpurposes in view or that he was actuated by other motives.
I see no substance therefore in the contention that the prosecution hasfailed to prove an offence under section 90 sub-section 2.
Coming now to the question of punishment, it is contended on behalf ofthe appellant that two offences arise out of one act namely the act ofmaking an incorrect return. The first count deals with omission fromthis return of a sum of Rs. 12,126/- and the second count charges theappellant with the act of making an incorrect return by omitting thissum. These are in the appellant's contention the negative and thepositive aspects of the same transaction and therefore the appellantsubmits that he cannot be punished twice in respect of this one act.
The learned Magistrate has imposed in respect of each of these offencesthe maximum fine which the law allows and if the appellant’s contentionbe correct that he is being charged for the same act as constituting twooffences, there is substance in his contention that the maximum fineshould not be imposed twice over.
In this connection there are two provisions of statute law which must benoticed.
Section 67 of the Penal Code provides that where anything is an offencefalling within two or more separate definitions of any law in force for the.time being, the offender shall not be punished with a more severepunishment than that which the Court which tries him will award inany one of such offences.
We must have regard also to section 9 of the Interpretation Ordinancewhich states that where any act or omission constitutes an offence undertwo or more laws the offender shall unless the contrary intention appears,be liable to be prosecuted and punished under either or any of those lawsbut shall not be tiable to be punished twice for the same offence.
The question then is whether it is the identical act or omission whichconstitutes both offences for which the accused has been charged. Is theact of omitting from a return identical with the act of making an incorrectreturn? Some guidance is offered on this matter by the case of The. King t. Haramania 1, a case where the accused had been convicted forremoving timber without a pennj{, under the Forest Ordinance and was
* (1916) X9N.L.B. 142.
404
WEERAMANTRY, J.—Jayanetti v. MUraeena
Bought to b© tried and punished thereafter in respect of theft of the sametimber. It will be seen that in this case the identical act of removalconstituted two offences, one of which had as an element the absence of apermit and the other the mental state of dishonesty. The act consideredin relation to its attendant circumstances thus constituted two separatooffences under two different laws. The Court upheld the view thatalthough the element of removal of timber was common to both offences,the act of theft was different in law from the act of removing the timberwithout a pormit. Tho “ act ” for the purpose of the offence under tho •Penal Codo was removal coupled with an intention to tako with dishonesty,while the “ act ” for the purpose of tho Forest Ordinance was removalcoupled with the omission to obtain a pormit. The same physical actmay in other words constitute different “ acts ” in law depending on theother factors with which it is associated.
Applying this principle to the present case the “ act ” constitutingthe offence under soction 92 is the omission from a return in associationwith a resulting ovasion of tax while tho " act ” under section 90(2) is'that of making an incorrect return by omitting income required to bodeclared, which occurs in association with the absence of'a reasonableexcuse.
It may well in this way be possible to see different “ acts ” in law as thebasis of the two offences charged, but it seems to me that it would bedifficult to visualiso tho commission of the first of these “ acts ” without acommission also of the second. In this respect the present case differsfrom the case of removal of timber without a permit, which may welloccur -without an associated theft. The two offences are thus so nearlycoincident in their constituent elements and their requisites of proof thatit would be harsh to an assesses to charge and punish him as thoughthese positive and negative aspects of the same matter constitute differentand distinct offences. I therefore take the view, whatever may be thotechnical justification for convicting and punishing the accused separatelyin respect of these offences, that it would operate harshly on the appellant .if he is punished for both these offences separately. I think it wouldsufficiently meet the ends of justice if the accused is punished in respectof one only of these offencos and for this purpose the offence carrying thoheavier penalty must of course be selected.
I come now'.to the question of the quantum of punishment which hascaused me the most anxious consideration in this case.
‘ Before I proceed to oxamine in detail the penal provisions that areapplicable I must observe that the learned Magistrate has inadvertentlyimposed upon the appellant in respect of count 1 the penalty appropriateto count 2 and in respect of count 2 the penalty appropriate to count 1. Itwill be seen that the first charge, i.e., the charge under section 92 (1)entails inter alia a penalty of thrice the tax for the year while the secondcharge, i.e., the charge under section 90 121 entails a oenaltv of doublo
WEERAMANTRY, J.—Jaynnelti t*. Mitrasena405
the tax undercharged. The sentences passed by the Magistrate involve,however, the imposition of the treble penalty on the second charge andthe double penalty on the first.
I shall therefore proceed to deal with this matter on the basis that theMagistrate had in fact imposed the penalties which he had clearly meantto impose namely a sum inter alia of 135,000/- on count 1 and a sum ofRs. 14.400/- on count 2.
I do not think it necessary to consider indetail the penalty of Rs.14,400/-which has boon imposed in respect of the first charge, which had beenmoanl to be imposed in respect of the second, for this sum is not so largein proportion to the offence involved as to merit closer examination. Inany event, in the viow I have already expressed regarding punishmonttwice, over, it will not bo necessary to consider this penalty further. Inregard, howovor, to the ponnlty of Rs. 135,000/- imposed in respect of thosecond charge and meant to have been imposed m respect of tho first,the magnitude of this sum in proportion to the particular charge ofomission of a sum of Rs. 12,126/-, calls for an examination of the principlesinvolved in imposing such a punishment.
The first matter I must consider is whether treble the amount of taxfor which the accused would have been liable for the year of assessment,as provided in section 92 (1), means treble the total tax liability forthat year or whether it means treble the tax which would have beenchargeable upon tho. omitted sum which is tho subject matter of thischarge.
It would appear that if this provision is to be understood as meaningtreble tho total tax liability for the year, apparently disproportionateresults might ensure. For example upon a charge of omission of a sumof Rs. 100/- a penalty of Rs. 300,000/- could bo imposed on a person witha tax liability of Rs. 100,000/- for the year. Indeed a similar provisionin the English Income Tax Act of 1952 produced anomalies which struckDiplock J. who heard the case of Inland Revenue Commissioners t. Hinchyin the Queen's Bench Division as absurd and unjust1 and Lord Evorshed
M.R. in the Court of Appeal as startling 2. These anomalies seriouslydisturbed the Houso of Lords itself as they produced “ penalties whollyunrelated to the oxtent of the default and so extravagant as to boshocking ” 3, and in fact necessitated tho intervention of the Legislaturewhich provided a new code of penalties bj* the Finance Act of 1960 4.
However, in regard to our enactment, the intention of the legislatureto specify a multiple of the total tax liability as the penalty for offencesunder section 92 (1) becomes clear when one compares that section withsection 90 (1) under which, bv way of contrast, the penalty imposed is amultiple of the tax which has been under charged in consequence of the.
1 (1958) 3 AU E. It. 682 al 686.3 I960 A. O. at 761, per Viscount Kilmuu
• (1959) 2 AU E. R. 612 at 619.c* 8 & 9 Eliz. 2, i960, Schedule G. •
40CWEERAMANTRY, J.—JnyaneUi v. Mitratena
incorrect return. The apparently graver nature of the offences specifiedin section 92(1) as compared with the offences under section 90 (1) alsolonds force to this conclusion.
Guidance may also be had on this matter from the decision of theHouse of Lords in Inland Revenue Commissioner v. Ilinchy1 alreadyreferred to, where the words “ treble the tax which he ought to be chargedunder this Act ” were construed despite the resulting anomalies, as notmeaning anything but treble the whole tax which ought to be chargedfor the relevant year.-
There would appear to be nothing strange or unsustainable in the notionof a multiple of the total tax liability when one lias regard to the originof tho notion in the history of English taxation. Tn the 19th century,when it first appeared, treble tho tax liability for the? year was comparablewith, if not less than, a stipulated fine of such, sums as £ 50, for taxationin that century fluctuated between such low extremes as 2 d. in the £ in1875 and Is. 4d. in the £ in 1855. Absurdities and anomalies in such anotion seriously appeared only with the phenomenal increase of taxationin this century, which caused such penalties to assume such extravagantproportions as to cause anxiety hr the mind of the Court imposing them.Having regard to this background there can be little doubt that when thonotion of this multiple tax liability'was devised in the last century' theEnglish Parliament was clearly contemplating a multiple of the total taxliability and not a multiple of the tax under charged. Indeed as ViscountKilmuir L. C. observed in Ilinchy's case 2 a multiple of the tax liabilitywas made a constituent of the penalty for tax offences by an Act of 1805and it would be extremely unlikely that in tho year of Trafalgar andAusterlitz Parliament was considering such a refinement as that involvedin the distinction between a multiple of the tax liability and a multipleof the tax under charged by reason of the defective return.
• The origin of such provisions thus clearly shows that what theycontemplated was a multiple of the total tax liability and as far as weare concerned there is in addition a clear distinction now drawn by ourlegislature between multiples of tax liability and multiples of the tax undercharged. There seems therefore to be no other interpretation to be givento this provision but to road it as moaning a multiple of the total taxliability for the year. The gravity of the burdens that might result,would be no reason to give any ether interpretation to these wordsin the face of the clearly expressed intention of the Legislature,reinforced as it is by these historical considerations, and the decision inHinchy’s case.
There is however a saving feature in the Ceylon legislation which atany rate was not present in some similar English provisions till 1960.Section 25 (3) (a) of the English Act of 1952 made the treble penaltymandatory and left no discretion to the Court, for its terms were that theperson committing the offence in question shall forfeit the sum of £ 20
» (I960) A. C. 748.'• (I960) A. C. at 768-3.
WEE RAMAN TRY, J.—Jayanetli v. Mitrasena407
and treble the tax which he ought to be charged under the Act. Thescheme of the English Act left a discretion not with the Court but withthe Commissioners w ho by section 500 were given a discretion to mitigateany fine or penalty or to stay or compound any proceedings.
In the case of section 92(l)of our Act however the treble penalty isimposed in the terms that the defaulter shall bo liable on conviction to atine " not exceeding the total of Rs, 5,000 and treble the amount of taxfor which he …. is liable under, this Ordinance for tlie year of assess-,mont. !‘ This language clearly indicates that the Court is not bound toimpose the penalty there referred to, for that is only a maximum. Thecorrectness of this interpretation is apparent also from certain observa-tions pf the House of Lords in Hinchy's cane. Lord Lteid considered tluphraseology of section 25 (3) (6) of the 1952 Act which, in terms similar tothose of section 92 (1),states that the defaulter shall, if proceeded againstbefore the General Commissioners.forfeit a sum " not exceeding £ 20 andtreble the tax which he ought to be charged under this Act. ” He drewattention therein to the fact that in earlier enactments of a similar naturein England, a comma appeared after tho fixed sum stipulated as penalty,thereby leaving room tor the argument that the words “not exceeding ”applied only to the lixed. stun and did not, apply to the treblepenalty.1- Lord Reid proceeded to observe that inasmuch as a commanow dmis not appear, if proceedings are now taken before tho GenoralCommissioners, they are entitled to reduce the penalty of treble tax.2 Luour section as well no comma appears after the words " five thousandrupees ”.
•Since, then, the Court has a discretion to impose a penalty less than thetroblo penalty it becomes specially important in any case, where thoparticular default alleged is only in respect of a smali proportion of theassessee’s total income, to relate the punishment which it inflicts to theparticular charge before it.
It would appear that the learned Magistrate has been influenced indeciding on this maximum penalty, by the circumstance that tho appellantas a public officer had failed to maintain the high standards expected ofone in his position and that grave prejudice is caused to the State whenpersons so highly placed in the public service lack integrity and betraytheir trust.
It seems to me however that these are not circumstances strictlypertinent to the question of a penalty which must be imposed in thecase of a tax offence. What the Court is here concerned with is not toexpress its censure at the conduct which has resulted in receipt of theundisclosed monies but with the fact that money though received fromhowever dishonourable a source, has not been declared. The receipt ofmoney by such unscrupulous, means as bribery, blackmail or robbery,will itself attract its own penalty in appropriate proceedings, but it wouldnot- scow right that in ta-x proceedings punishments should bo increased
1 (1960) A. C. at 766.
-.See Inland Het/enue Commissioner v. Elcock (1953) 35 T. C. 27.
408
WEERAMANTJRY, J.—Jayanetti v. Mitrasena
on that account. To do so would be to expose the offender to punishmenttwieo -over for the same misconduct when eventually the penal law-appropriate thereto begins to move against him.
However despite the fact that the Court enjoys a discretion to mitigatetho treble penalty and despite the circumstanco that culpability inreceiving the money ought not to be punished in these proceedings, therowould still appear to be a total absence in this case of any circumstancesof mitigation such as would justify a Court in' imposing a losser penaltythan the maximum which the law- allow s. Tho circumstanco that therehas been in this case a persistent denial of tho receipt of the sum of moneyin question, that this sum though only a part is still a sizeable portion oftho total income undeclared, tho fact that the appellant himself the headof a department was knowingly making a return which he knew to befalse, the fact that the income originally declared was only a very smallproportion of that at which it was subsequently determined—all thoserender inappropriate any reduction of the penalty which the Court mayimpose.
These considerations would appear to render justifiable the heavysentence imposed by the learned Magistrate though on groiuids somewhatdifferent to those which, weighed most heavily with the Magistrate. Nointerference is therefore called for in regard to the quantum of the penaltyof lls. 135,000 imposed by Iho learned Magistrate.
The line of Ks. 250 and the penalty of Rs. 14,400 as well as the sentenceof one month’s rigorous imprisonment in default of payment of the lino,all of which the learned Magistrate has imposed in respect of count (1)and which in fact he had meant to impose in respect of count (2) aredeleted. The fine of Rs. 500 and the penalty of Rs. 135,000, both ofwhich the Magistrate has imposed on count (2) but which in fact he hadmeant to impose on count (1) will stand as the punishments imposed inrespect of count (1). The default term of three months’ rigorousimprisonment imposed in regard to the fine of Rs. 500 exceeds onefourth of tho maximum term of imprisonment of six months prescribedfor the offence, and having regard to the provisions of section 312 (1) (c)of tho Criminal Procedure Code I reduce this term to one of six w eeks’rigorous imprisonment.
Subject to these variations tho appeal is dismissed.
Appeal mainly dismissed.