Tax inspector's function under 1997 Act administrative and therefore constitutional

The Criminal Assets Bureau (plaintiff) v Gerard Hutch (defendant).

Revenue - Assessment - Whether inspector of taxes purporting to exercise a judicial function - Whether defendant entitled to avail of statutory amnesty - Appropriate appeal procedure to be adopted by the defendant - Whether plaintiff barred from making a claim in respect of tax alleged to be due for more than six years before the date of the claim - Taxes Consolidation Act 1997, sections 924(1)(a), 955(2)(a) and 966(5)(a).

The powers vested in an Inspector of Taxes pursuant to section 966(5)(a) of the Taxes Consolidation Act 1997 was an administrative function, and not a judicial one, and the sub-section was therefore constitutional. The defendant was not entitled to rely on the protection of a statutory amnesty since he had not produced the appropriate evidence to the court. The defendant had not adopted the correct procedure under either of the statutory provisions which might apply to him. The circumstances envisaged by section 924 of the Taxes Consolidation Act 1997 existed in relation to the defendant and accordingly he was not entitled to invoke the protection of section 955(2)(a) of the same Act.

Mr Justice Morris so held in giving liberty to the plaintiff to enter judgment against the defendant in the sum of £1,984,626.44, being income tax alleged to be due by him in respect of various tax years dating from the tax year 1987/88.

The High Court (before the President of the High Court, Mr Justice Morris); judgment delivered 14 May 1999.

Richard Law Nesbitt SC and Grainne Clohessey BL for the plaintiff; Gabrielle M. Wolfe, solicitor, for the defendant.

Mr Justice Morris said that this was an application for leave to enter final judgment against the defendant on foot of a claim for £1,984,626.44 together with interest thereon, being income tax alleged to be due by the defendant in respect of various tax years from the year 1987/88 to 1996/97.

The claim was made pursuant to section 8 of the Criminal Assets Bureau Act 1996 by the plaintiff, who was an officer of the Revenue Commissioners and had been nominated to exercise the powers and functions of the Collector-General, in respect of income tax alleged to be due by the defendant. No point had been raised by the defendant as to the right of the plaintiff to maintain these proceedings, nor was any challenge raised to the formal proofs which had been submitted to the court on behalf of the plaintiff. Mr Justice Morris said that he had considered those proofs and was of the view that they were satisfactory to maintain the present claim subject to the consideration of the four points raised by way of defence.

The first point so raised was that section 996(5)(a) of the Taxes Consolidation Act 1997 purported to vest in an inspector of taxes the judicial function of making a determination of the tax due by a taxpayer; and since the certificate of this officer was to be taken as proof of the amount of the tax due, it was one properly reserved for a judge appointed under the Constitution and, accordingly, the section was unconstitutional. Mr Justice Morris said that this point had already been rejected by the Supreme Court in its determination of the issues in Deighan v Hearne [1990] 1 IR 499, and, although that case concerned section 184 of the Income Tax Act 1967, the reasoning of the court in that case applied to the present legislation.

Section 184 of the Income Tax Act 1967 empowered the Inspector of Taxes to raise an estimated assessment to income tax on a person who had failed to make a return of income when required to do so. That assessment became final and conclusive in default of a notice of appeal. Both the High Court and the Supreme Court in Deighan v Hearne had held that the function of the Inspector of Taxes was purely administrative, and that the taxpayer was precluded from disputing an assessment by virtue of something akin to statutory estoppel.

The second point raised by the defendant related to the Waiver of Certain Tax, Interest and Penalties Act 1993 ("the Tax Amnesty Act"). It was submitted that the defendant had availed of this Act, and that the plaintiff was accordingly estopped from pursuing this claim. In his affidavit, the defendant's tax consultant said that the defendant had availed of the statutory amnesty, which afforded him a defence to all attempts to reassess the defendant for taxes prior to the year 1994, and that the defendant's entitlement to such amnesty had never been disputed.

Mr Justice Morris referred to section 6 of the 1993 Act and said that under that section it was incumbent on the defendant to produce to the court the certificate referred to in that section if he wished to set up, by way of defence, the 1993 Act. Until that was done no defence had been established, and since no such certificate had been produced to the court, this submission was rejected.

The third point raised by the defendant extended to a consideration of whether the appropriate procedure for the defendant to adopt for an appeal from the assessment was the appeal procedure provided for by section 933 of the Taxes Consolidation Act 1997 or, alternatively, section 416 of the Income Tax Act 1967. Mr Justice Morris said that this issue centred around a consideration of whether section 1097 of the Taxes Consolidation Act 1997, which provided that in certain circumstances the obligation to make returns and furnish statements were deemed to come into force on 6 April 1997, or whether the procedure provided for by section 416 of the 1967 Act remained intact. Mr Justice Morris said that it was unnecessary for him to decide this point, because on the evidence before him, he was satisfied that there had been a failure on the part of the defendant to comply with either of these sections. The final point raised by the defendant was that the provisions of section 955(2)(a) of the Taxes Consolidation Act 1997 afforded him a defence. This sub-section provides: "Where a chargeable person has delivered a return for a chargeable period and has made in the return a full and true disclosure of all material facts necessary for the making of an assessment for the chargeable period, an assessment for that period or an amendment of such an assessment shall not be made on the chargeable person after the end of the period of 6 years commencing at the end of the chargeable period in which the return is delivered and no additional tax shall be payable by the chargeable person and no tax shall be repaid to the chargeable person after the end of the period of 6 years by reason of any matter contained in the return."

Accordingly, the defendant claimed that he was protected in respect of any claim dating back prior to six years from the date of the claim.

Mr Justice Morris said that this section must be read subject to section 924 of the Taxes Consolidation Act 1997 which provides:

"(1)(a) Where the inspector discovers that

(i) any properties or profits chargeable to income tax have been omitted from the first assessments,

(ii) a person chargeable (I) has not delivered any statement

(II) has not delivered a full and proper statement

(III) has not been assessed to income tax, or

(IV) has been undercharged in the first assessments, or

(iii) a person chargeable has been allowed, or has obtained from and in the first assessments, any allowance, deduction, exemption, abatement or relief not authorised by the Income Tax Acts,

then, where the tax is chargeable under Schedule D, E or F, the inspector shall make an additional first assessment."

Mr Justice Morris said that he was satisfied that the circumstances envisaged by section 924 existed in this case and, accordingly, the defendant was not protected by the provisions of section 955(2)(a).

Mr Justice Morris said that, in approaching this case in a manner approved by the Supreme Court in First National Commercial Bank plc v Anglin [1996] 1 IR 75, the defendant had not established to his satisfaction that he had any real or bona fide defence to be tried by the court, and he gave judgment for the plaintiff in the amount of the claim.

Solicitors: Chief State Solicitor for the plaintiff; Gabrielle M. Wolfe (Blackrock, Co Dublin) for the defendant.