CEC v Comptroller of Income Tax

JudgeA V Winslow J
Judgment Date18 June 1971
Neutral Citation[1971] SGHC 7
Citation[1971] SGHC 7
Defendant CounselSat Pal Khattar (Senior Legal Officer)
Published date19 September 2003
Plaintiff CounselGS Hill and Woo Tchi Chu (Rodyk & Davidson)
Date18 June 1971
Docket NumberDistrict Court Appeal No 15 of 1969
CourtHigh Court (Singapore)
Subject MatterIncome taxation,Additional assessment,Standard of proof,Avoidance,Burden of proof on taxpayer to show excessive assessment,Whether there were sham or fictitious transactions -Disregarded transaction does not result in tax by itself,Appeals,Inference to be drawn when evidence withheld,Revenue Law,Proof of evidence,Section 115, illus (g) Evidence Ordinance (Cap 4, 1955 Rev Ed),Evidence,Section 33(1) Income Tax Ordinance (RS(A) No 16 of 1966)

This is an appeal by the taxpayer concerned against the decision of the Board of Review confirming the Comptroller`s additional assessments of tax levied in respect of three specific properties alleged to be owned by the appellant.

This case seems to have caused considerable anxiety to every one concerned before the tribunal below, not only to counsel for the Comptroller but, as a consequence, to counsel for the appellant as well and to some extent to the learned chairman of the board itself as he himself states.
The case already took some time before it was heard by the board, whilst the hearing itself took a number of days, at the end of which the board reserved judgment and delivered that judgment 22 months later.

It will be helpful from now onwards for me to use sub-headings since my judgment on this appeal is a very lengthy one.
Delay of 22 months by board in delivering grounds of decision

The mere fact that a judgment takes 22 months before it is delivered does not necessarily mean that the judgment must be a bad one although such delay can undoubtedly provide cause for complaint.
However, I do not propose to waste much time on this ground of appeal founded on delay because in my judgment there are other more substantial grounds, in the course of my dealing with which, the kind of errors and/or omissions to which delays can contribute may become apparent.

Current appeal did not originate as an investigation case

The first thing to be borne in mind in relation to this appeal is the fact that this was not an investigation case such as those cases in which the Comptroller only states the amount of tax due without particularising the source or sources of the income on which such tax is based.
The Comptroller in this case, however, saw fit to particularise three sources, iegains or profits obtained by way of trade as a result of the purchase and sale of the three properties concerned. The Comptroller had one bite at the cherry earlier in 1962, when he did proceed against the appellant on an investigation basis without specifying sources but at that time he did not consider that he had any material on which he could venture to particularize these sources. It is unfortunate therefore that the board said that the appellant withdrew the appeal, in the absence of any information on the record as to what that appeal was all about and what the assessments were. As this was not an investigation case, the Comptroller was not entitled (nor was the board) to investigate the movements of moneys other than those relating to those particularized as sources of income save insofar as such movements were incidental to those of the specified ones.

HKP and KLP properties owned by appellant`s sons in Hong Kong

The one matter of any consequence on which there is incontrovertible and clear-cut evidence is the fact that the two properties - the HKP and KLP properties were purchased in the names of the appellant`s two sons who were in Hong Kong.
Of this there is no doubt at all. That is supported by their own evidence taken on commission in Hong Kong and by that of solicitors who acted for them in the conveyances concerned, apart from documents.

Failure of appellant to give evidence himself

One central theme which occurs time and time again in the course of the submissions on behalf of the Comptroller which can be seen repeated in the written submissions on his behalf is the fact that the appellant failed to give evidence and thereby deprived the Comptroller of the opportunity of adducing evidence of facts, one way or the other, towards filling obvious gaps in the evidence of the Comptroller`s case against the appellant.


Board held appellant would have given evidence unfavourable to himself

The other theme which is reiterated is the fact that if the appellant had given evidence he could have corroborated the two sons.
The board accordingly came to the conclusion that, if the appellant had in fact given evidence, such evidence would have been unfavourable to himself, which is an amazing conclusion since it presupposes that a witness (however bad a showing he may ultimately make in the witness-box) is going to support the Comptroller`s case in rebuttal even before it commences.

Onus on taxpayer

Under s 80 of the Income Tax Ordinance the onus of proof in these cases lies on people like the appellant to show that tax was excessive, ie that a lesser sum should have been imposed by way of tax and, if so, what that sum should have been even to the extent of its being a blank.
The appellant in this case has submitted that the sum should have been nil.

With regard to the two properties said to be owned by the sons he claimed that no tax was leviable on them at all so far as he, the appellant, was concerned because he was not their owner.
The appellant now claims that he discharged this onus on him, before the board, and that the Comptroller failed to rebut his case although the board found to the contrary.

Board held onus not discharged by appellant

I therefore now turn to this main ground of appeal which I consider will determine the appeal as a whole although I also intend in the course of this judgment to draw attention to some of the other grounds which traverse this main ground or are included in it on issues of mixed law and fact to such an extent as to be invariably involved in its consideration by me as well.


It is contended on behalf of the appellant that once he has shown that the properties as evidenced by the title deeds were in the names of the two sons he has discharged the onus on him of proving that the tax was excessive and of showing that the tax should have been nil.


Mr GS Hill for the appellant therefore contended that, having discharged the onus at the end of the appellant`s case it remained for the Comptroller to rebut it.
In short, according to Mr Hill, it was up to the Comptroller to show that the two transactions were sham, either at common law or as failing within the provisions of s 33 of the Income Tax Ordinance, if relevant.

Whether transactions were sham

I do not propose to embark here on a discussion of the distinction between `artificial` and `fictitious` transactions as used in s 33.
Suffice it to say that the board itself found that the transactions were not artificial but fictitious and I do not wish to be drawn into the controversy which seems to be raging as to whether the decision of the Federal Court of Malaysia in Comptroller of Income Tax v AB Estate [1967] 1 MLJ 89 was correctly decided, so far as this particular appeal is concerned. This appeal largely turns on whether the transactions were sham. It is therefore of little consequence whether they were sham at common law or under s 33 and it is quite clear that the onus of proving sham is on the Comptroller when he tries to rebut the appellant`s contention that the tax was excessive.

Mr Hill seemed to rely on the proposition stated by Knox CJ in Deputy Federal Commissioner of Taxation v Purcell (1920-21) 29 CLR 464 at p 466 to the effect that the burden was clearly on the Comptroller to prove that the transactions were caught by the Australian counterpart of s 33 although on appeal the High Court of Australia did not find it necessary to determine this point as to onus, holding as it did that the transaction in question was never a sham, whoever had the burden in the first instance.
Khox CJ said:

On this point it is clear that the onus is on the respondent to establish facts from which the court may, and should, conclude that the transaction is within the class struck at by the section (260`s predecessor). The section, if construed literally, would extend to every transaction whether voluntary or for value which had the effect of reducing the income of any taxpayer; but, in my opinion, its provisions are intended to and do extend to cover cases in which the transaction in question, if recognized as valid, would enable the taxpayer to avoid payment of income tax on what is really and in truth hisincome.



First, HKP and KLP properties, then Oxley Rise land

It will be useful at this stage to confine my observations to the HKP and KLP properties which on the documentary evidence at least were once clearly owned by the two sons in Hong Kong.
I shall deal at a later stage with the Oxley Rise property which, as I have already said, is admittedly owned by the appellant. Before I leave Oxley Rise, however, and return to the other two properties I should like to confirm what Mr Hill said with regard to errors of memory and recollection which can occur when judgment is delayed for as long as happened in this case. Despite clear evidence on the part of two witnesses at least that the residence occupied by the appellant and his family was very much in existence, the chairman of the board in his grounds states quite categorically that the family house had been demolished. On this more anon whilst I return to the properties owned by the sons, as follows.

As I have already said this was not an investigation case.
It concerns three specific items, two of which relate to the properties owned by the two sons and the appellant`s contention is that each of these two items should be entirely deleted in the assessment of tax. Where, however, the Comptroller has particularised the sources he is not at liberty to treat the case as an investigation case and thereby to require the appellant to establish exactly what his income was from all sources.

Prima facie case established re HKP and KLP by appellant`s case

In my view, at the end of the appellant`s case he had established a prima faciecase that tax was excessive in respect of these two items.
At that stage the Comptroller had not introduced any evidence in rebuttal nor had his evidence yet been heard.

Important evidence including documents not challenged by Comptroller

I agree with Mr Hill that the basic evidence regarding the HKP property was that of the appellant`s son Ming Fai in Hong
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