Chng Gim Huat v Public Prosecutor

JurisdictionSingapore
JudgeYong Pung How CJ
Judgment Date05 July 2000
Neutral Citation[2000] SGHC 127
Docket NumberMagistrate's Appeal No 255 of 1999
Date05 July 2000
Published date19 September 2003
Year2000
Plaintiff CounselMichael Khoo SC and Josephine Low (Michael Khoo & Partners)
Citation[2000] SGHC 127
Defendant CounselHan Ming Kuang (Deputy Public Prosecutor)
CourtHigh Court (Singapore)
Subject MatterMeaning of "shall be liable",Wilfully omitting to declare interest income with intent to evade tax,Imposition of custodial sentence imposed to meet needs of general deterrence,Income taxation,Significant public interest,Whether sentence manifestly excessive,s 157 Evidence Act (Cap 97, 1997 Rev Ed),s 96(1) Income Tax Act (Cap 134, 1999 Ed),Evidence,Voluntary and swift payments of evaded tax,Findings of fact,Witnesses,Tax evasion,Words and Phrases,Sentencing,s 10(1) Income Tax Act (Cap 134, 1999 Ed),"Shall be liable",ss 96(1), 96(2) Income Tax Act (Cap 134, 1999 Ed),Revenue Law,Whether mandatory to impose fine or imprisonment or both in addition to mandatory penalty,Criminal Procedure and Sentencing,Appeal,Appellate court slow to disturb factual findings of trial judge,Impeachment of witness previous inconsistent statement,"Wilfully",Meaning of interest income,Factors to consider when assessing quantum of sentence,Mitigation,Whether custodial sentence should be substituted with fine

: The appellant was tried before magistrate May Lucia Mesenas on two charges of wilfully omitting interest income from his income tax returns with intent to evade tax:

Summons No 70001/99

You, Chng Gim Huat, NRIC No S0682817E are charged that you, on or about 5 April 1995, in Singapore, did wilfully with intent to evade tax, omit, from your income tax return for the Year of Assessment 1995, interest income amounting to $290,000, and you have thereby committed an offence under s 96(1)(a) of the Income Tax Act (Cap 134, 1994 Ed) and punishable under s 96(1) of the said Act.

Summons No 70002/99

You, Chng Gim Huat, NRIC No S0682817E are charged that you, on or about 8 April 1996, in Singapore, did wilfully with intent to evade tax, omit from your income tax return for the Year of Assessment 1996, interest income amounting to $1,024,000, and you have thereby committed an offence under s 96(1)(a) of the Income Tax Act (Cap 134, 1994 Ed) and punishable under s 96(1) of the said Act.



He was convicted after a trial and sentenced to imprisonment for a period of two months and four months respectively, with both sentences to run concurrently.
Penalties totalling $1,063,936.90 were also imposed, which penalties have since been paid. The appellant appealed against both convictions and the sentences imposed. After hearing the submissions of counsel for the appellant and the DPP, I dismissed the appeals against both convictions and allowed the appeals against the sentences. I now give my reasons in writing.

The agreed facts

An agreed statement of facts was tendered at the commencement of the trial. It was undisputed that the appellant extended an interest-free loan of $6.3m, repayable on demand, to one Ong Kah Chye (`Ong`) via a loan agreement dated 28 June 1990. This was intended to be a bridging loan to be set-off subsequently by Ong selling 5.6m shares in Alliance Securities Pte Ltd (`ASPL`) worth $6.3m to CGH Land Pte Ltd, which was owned by the appellant and two of his sons. The sale was ultimately unsuccessful as CGH Land Pte Ltd withdrew its application to purchase the shares in October 1990. The appellant then sought repayment of the loan.

On 1 October 1992, the appellant received $500,000 from Ong by way of two separate account payee cheques for the sums of $400,000 and $100,000 respectively.
They were accompanied by a covering letter dated 1 October 1992 stating that the cheques were for partial repayment of the loan, reducing the outstanding loan amount to $5.8m.

In the first half of 1994, after the distribution of dividends by ASPL, Ong made five separate payments totalling $290,000 to the appellant.
Ong issued five cash cheques (for the sums of $60,000, $20,000, $110,000, $20,000 and $80,000 respectively) on various dates in April and May 1994. He then caused these cheques to be encashed and handed the cash to the appellant through the latter`s son Chng Beng Siong (`Chng`).

In April 1995, after the distribution of dividends by ASPL, Ong made six separate payments totalling $1.064m to the appellant.
He issued six cash cheques (for the sums of $250,000, $250,000, $200,000, $200,000, $100,000 and $64,000 respectively) on various dates in April 1995. The cheques were given to Chng to be encashed and, in turn, for the cash to be handed to the appellant.

In 1996, the appellant received two payments of $200,000 each by way of cashier`s orders made payable to him.
Both payments were accompanied by a covering letter dated 9 July 1996 and 22 August 1996 respectively. The appellant acknowledged receipt of the second cashier`s order. In 1999, Ong made a further payment of $5.4m to the appellant by way of a transfer of funds into Chng`s bank account.

It was not disputed that the sums of $290,000 and $1.024m were omitted from the appellant`s tax return forms for the assessment years 1995 and 1996.


The prosecution`s case

The prosecution`s case essentially hinged on Ong`s evidence. In court, Ong testified that he proposed to compensate the appellant with interest after the latter complained about his interest costs and opportunity costs. The appellant was agreeable to this proposal. According to Ong, this took place during informal discussions prior to the declaration of dividends by ASPL in the first half of 1994 and 1995.

Ong testified that he proposed paying interest at a rate of 5% pa but the appellant did not confirm this rate as he did not know his borrowing costs.
Ong`s understanding was that the appellant would only confirm the interest costs at a later stage. Ong testified that he did not discuss the 1994 and 1995 payments with the appellant and did not specifically inform him that they were interest payments. He had assumed that the appellant would understand their purpose on the basis of their previous discussions. Furthermore, he wanted to retain the option of treating the payments as capital repayments in the future. Ong testified that the sum of $1.064m paid in 1995 included a sum of $40,000 as reimbursement to the appellant for banking charges incurred by the latter in obtaining the loan.

In the course of the trial, the prosecution applied for and was granted leave to cross-examine and impeach Ong on his previous statements in writing pursuant to ss 147(1) and 157(c) Evidence Act (Cap 97) on the basis of the material discrepancies between his oral testimony and his previous statements to IRAS recorded on 14 February 1998 and 20 August 1998.
Pursuant to the application, the statements were also admitted into evidence under s 147(3) Evidence Act.

The prosecution relied principally on these statements to prove that the appellant knew of the nature of the 1994 and 1995 payments and had wilfully omitted these interest income from his tax returns.
Ong did not dispute that he made both statements nor their voluntariness. The relevant portions are set out below:

Statement recorded 14 February 1998 - exh P24

4 Sometime in the first quarter of 1994, Alliance declared a 10% dividend, Chng learned of the dividend payment, and again he brought up the issue of loan repayment and the interest expenses suffered. Under pressure, and since I benefited from the dividend income from the investment funded by him, I proposed to pay him $290,000 to compensate his interest expenses. This amount of $290,000 is based on 5% pa on the sum o/standing of $5.8m. Chng accepted my proposal, but commented that he did not know the cost of funding. Chng asked for cash cheques and I did not query him. I gave him the following cash cheques from my account with Maybank.

...

5 Similarly, when Alliance declared a 20% dividend on 1.4.95, Chng again brought up the issue of loan repayment and the interest expenses he suffered. He ever brought up the similar issues there and then. I proposed to pay him $1,024,000 interest as per working in App A. After enjoying two years` earnings, I tried my best to sweeten the compensation of Mr Chng`s interest lost in my mind. I was prepared to spend my dividend income. Again, Mr Chng commented that he did not know the cost of fundings but accepted my proposal. Chng asked for cash cheques and I did not query him. I gave him the following cash cheques from my account with Keppel Bank.

Statement recorded 20 August 1998 - exh P25

3 I re-confirm that when the payment of $290,000 in 4/94 and 5/94 and $1,064,000 in 4/95 was made to Chng Gim Huat, I made it very clear that the payments were for interest calculated at 5% p.a. In actual fact, Chng always asked me to compensation for the cost of funds. I further confirm that the word `intention` as stated in App C refer to interest rate of 5%. The letter was requested by Chng so that he could make his tax declaration.



The IRAS investigating officer, Toh Kiau Kee, explained that the 1994 interest payment of $290,000 was computed at the rate of 5% on the outstanding capital sum of $5.8m for one year (ie 1994) while the 1995 payment of $1.024m represented the balance of the accumulated interest on the loan of $6.3m for the period between 1 July 1990 and 1 July 1994, calculated at 5% pa on a compound rate basis.
These figures corresponded with Ong`s calculations contained in App A of exh P24, entitled `Interest to Chng Gim Huat (estimate)` which he had earlier submitted to the SES. The investigating officer confirmed that the interest should have been included in the tax returns for the years of assessment 1995 and 1996 respectively. The additional taxes which would have been payable for the years of assessment 1995 and 1996 were $78,174.39 and $276,471.26 respectively amounting to a total of $354,645.65.

The defence case

The appellant contended that the 1994 and 1995 payments were capital repayments and that he was not aware that they were `interest payments` at the material time. It was only in 1997 that an agreement was reached between Ong and himself to treat them as interest payments. He denied having wilfully omitted the interest payments from the tax returns with an intention to evade tax.

The appellant testified that he first started complaining about his loss of interest and opportunity costs in late 1994 when his various attempts to purchase the ASPL shares failed.
Following the complaints, Ong only informed the appellant that he would compensate the latter at the appropriate time. They did not have any detailed discussion on the question of interest payments in late 1994 or 1995. He testified that it was his understanding that Ong would compensate him with interest after full repayment of the loan was made.

Concerning the 1994 payments, the appellant testified that prior to ASPL`s dividends declaration in April 1994, Ong offered to make repayment of the loan but did not confirm the amount to be paid.
The appellant asked for the first repayment ($60,000) to be made in cash as he was then in need of it. Thereafter, there was no contact between them regarding the...

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