ENORMOUS DISCREPANCIES

Taranaki Daily News, Volume LII, Issue 328, 2 March 1910, Page 5

ENORMOUS DISCREPANCIES

" MISREPRESENTATION ALL ALOXG THE LINE." ALLEGED EVASION OF INCOME TAX. ' A DIFFERENCE OF ABOUT £41,000. By Telegraph.—Press,' Association. Christchurch, Last Night. The case in which the Income Tax Department is proceeding against Win. Bowron, George Bowron and Georg: l John Smith, trading in partnership as merchants in Christchurch. for having (1) on November 6th, 1906,, knowingly and willingly made a false return in relation to the income oj the firm, affecting the firm's liability to taxation by evading full taxation; and (2) knowingly and wilfully delivered the same return, was opened before Mr. H. W. Bishop, S.M., this morning. The Crown Prosecutor, Mr. Stringer, K.C., appeared for the Department. Mr. Skerref.t, K.C.. with him Mr. Anthony, appeaml for defendants. Mr. Stringer said that a return furnished by Bowron Bros, showed their income for tlie year ended September 30, 1905, as £15,836, whereas the firm's audited balance-sheet showed £52,418, and increased after adjustments io £64.972. The return was, he believed, in the handwriting of G. J. Smith. He believed the discrepancy was the result ot ignorance of the true position. ;n the balance-sheet the value of tli? stock was set down at £89,779, and in the return £72,562; bad debts were shown at £384 in the balance-sheet, and £2127 in the' return; wages were stated as £IOOO in the balance-sheet, and as .£2020 in the return. Taken over all there'was an under-e.stimation of about £38.000. Mr. Tyers had commenced investigation of the firm's affairs two years' ago. Mr. G. J. Smith had to'd him the firm had issued no balancesheet till 1907, when the company was formed, and had kept no profit and loss account. Tyers had gone into the books, and his figures had been .checked by Air. Modlin. who had audited the firm's accounts. In the course of discussion upon the accuracy of these figures), Modlin had surprised Tyers bv producing a balance-sheet for 1905, although Smith had said there were no 'balance-sheets prior to 1907. Smith said he had overlooked the fact that a balance had been prepared in 1905. Then Tyers found that sheets had been prepared every year from 1898 to 1906. Mr. Stringer submitted there had been misrepresentation all along the line since 1898. Mr. Skerrett objected that matters more than throe months prior to 'he date of the alleged offence could not be raised. Mr. Stringer said he would defer discussion of details. He would take the prospectus prepared in anticipation of the flotation of the English company, giving certified returns for the years 1902. 1903 and 1904. _ The return furnished To til? Department in December, 1904, showed a profit of £10,395'. ModTin's balancc-sh' j ct showed a profit rf £22,085. For the next year the return gave the income at £12,360. and the balance-sheet showed £20.533. lie contended that in the face of these "balance-sheets the returns could not be justified. In -July, 1907, a company was formed to take over the business, when the surplus assets over liabilities were shown as £208,500, together with £108,252 due by Bowron Bros., the London reserves amounting To "£30,000, the latter amounts being retained by the partners. Thus in 1907 Bowron Bros, and Smith had accumulated £208,*OO. and as'much more as the retained securities would realise. In 1901 their capital was £87,407, and they had returned their profit up to 1907 as £56,303. Alter makimr minor adjustments, the capital by 1907 would amount to £151,710. The partners' own drawings and other payments were £60,204, so that the capital, according to these returns, would have been £91,506, whe -e----as the 'actual figures were £208,801. Mr. Stringer, in outlining the case against Bowron Bros., argued that from the prospectus prepared for the flotation of the English company, the capital of the partners in 1907 was £2OS,OO'O, with other assets. From the returns supplied to the Department, however, lie could account only for £91.000. SOME ILLUMINATING EVIDENCE. The evidence of Wm. Maurice Tyers, Inspector of the Land and Income Tax Department, was that th? firm's business was formed into a limited liability company on July 31st, 1907, and all stock sheets prior to that date had been destroyed. He was informed that no balance-sheets were available, so witness had to start on the books. Subsequently witness made interim reports to the Commissioner. About the middle of August witness made his provision!! assessment fo r two years ending October, 1907. He leit these with Smith, and suggested that the figures should be checked. There was such an enormous discrepancy between his figures and the returns that hp thought they should be looked into. The discrepancy was roughly about £41,000. Their return for 1906 showed £II,OOO odd, and his figures showed £68,000. For the ten months ending July, 1907, th? return showed a loss of £SOOO odd. and his figures showed a profit of £25.000 odd. At that titnn he put the following questions to Smith and obtained ;e----plies:— , Are the ledgers kept by Goodsir trie only ones?— Yes. Was there no private ledger?— No. Was there no profit and loss account before September 30th. 190S? —No. no;ie. Have all stock-sheets prior to July 31st, 1907, been destroyed?— Yes. How were the returns prepared?— l got the expenses from the accountant, and tilled in the purchases, sales and j stocks myself. j In connection with the 1905 accounts Modlin (auditor of the company) ev~ ! plained that £2OOO should be charged j as portion of a oad debt due from Bowron Bros, in London amounting to £108.252. Witness saw George Bowron and asked him. Has George Bowron, William Bowron, or Smith, either separately or in any capacity together, any interest in the firm of Bowron Bros.. London?— None, Were any business-like steps taken to collect file balance from time to tim<'? —fs'o. Witness subsequently pointed out to Modlin that it was ridiculous to claim j as a (reduction any portion o't the j £loß.fflTo, which had not accrued in the two years and ten months ending July 31st, 1907. which amounted in round ] figures Io £17,000. Later, Modlin gave witness a balance-sheet up to 30th September, 1905, the existence of which he

had never dreamt of. The balancesheets were put in, and showed the income for 1002 was whilst the return given to the Department showed the income for 1002 was ,t'22,7"»1. whiM the return given to tiie Department showed £7420. For 1003 the balancesheet showed C 22.085. and the return £10.305. For 1004. the balance-sheet showed £20,533. and the return sliowd £12,800. For 1005, the balance-sheet showed .-£52.418, and the return £lB.836. In all cases the difference was against the Department. On September 23rd last, witness suggested to ModJin, without prejudice, that the firm should make a full restitution. Modlhi was to consult the firm, but nothing came of the matter. Later, .witness suggested that the firm should pay £IO,OOO in respect of the back taxation short-paid, and negotiations took place between the Commissioner and Smith, but no settlement was arrived at. The witness was still under examination when the Court adjourned till tomorrow.