Initially
assessed as failing to declare income of $591,000 for the 2006 tax year,
Auckland pharmacist Jawahar Bhaskar Musuku was held liable for tax on income of
$201,740 following an Inland Revenue review and a High Court hearing. Mr Musuku said his 2006 income was $32,378
only.
The High Court was told Inland Revenue
investigated Mr Musuku after finding he had not filed any tax returns for six
years, two of his companies had never filed GST returns and his family trust
together with another of his companies did not have IRD numbers and had never
filed tax returns. He owned and operated
retail pharmacies in the Auckland suburbs of Mission Bay and Remuera. The investigation dragged on for seven years
in the face of what Inland Revenue described as persistent failures to respond
when asked repeatedly for documents and information. Co-operation of sorts followed after issuing an
initial default assessment demanding tax payable of $221,791 on income of
$591,000. Even then, the High Court described
Mr Musuku as providing incomplete information, contradictory statements and
unreliable or incorrect, if not misleading, documentation. Information, often incomplete, was drip-fed
to Inland Revenue in response to repeated requests. After what the High Court described as some
generous concessions by Inland Revenue, the initial default assemment was
revised downwards to $201,740. Mr Musuku
changed tax advisors at least six times over the seven year investigation. A complicating factor was Mr Musuku’s habit
of failing to keep separate his business and personal transactions. There was evidence he paid many business
expenses on his personal credit card, to collect air points.
Mr Musuku failed in challenges before both
the Taxation Review Authority and the High Court over Inland Revenue’s
assessment of his 2006 income at $210,740.
It is for taxpayers to prove on the balance of probabilities that a
default assessment is wrong. Inland
Revenue’s assessment was backed up by over one hundred pages of analysis
derived primarily from bank records.
Musuku
v. Inland Revenue – High Court (10.05.16)
16.079