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Insufficient Document Evidence

Recent Tax Case: C. Limited (No. 2) v. The Board of Inland Revenue


It is the bane of every taxpayer, and every tax professional who represents taxpayers, to receive the following reason in an Explanation of (Audit) Adjustments from the Board of Inland Revenue (the “Revenue”) as the purported justification for why an additional assessment was raised upon the taxpayer:

  • “The Company failed to provide adequate documentary evidence to substantiate the claim in respect of XXXXXX”; or
  • “the documents presented were insufficient to substantiate this claim”.


By way of background, the Trinidad and Tobago (“T&T”) Income Tax Act, Chap. 75:01 (the “ITA”) provides that where it appears to the Revenue that a taxpayer has not been assessed, or has been assessed at less than that which ought to have been charged, the Revenue may, within the year of income or within six years after the expiration of the year of income or three years from the date the tax return is filed, whichever is later (the “Statutory Deadlines”), assess such person at such amount or additional amount as according to its judgment ought to have been charged.

Against the background of the Statutory Deadlines, it is very common in T&T for a taxpayer to file a tax return in year 1, hear nothing from the Revenue for the next 5 years, and months (sometimes weeks) before the expiration of the Statutory Deadlines receive correspondence from the Revenue that it has been (i) shortlisted for an audit, (ii) must attend meetings and (iii) provide supporting documents within a very limited period of time. Thereafter, and no matter what is provided to Revenue (at least from the perspective of the taxpayer) the Revenue will conclude that “insufficient documents” were provided to it in order to substantiate the expense claim(s), and an additional assessment will be raised on the taxpayer days before the expiration of the Statutory Deadlines.

This practice begs the following questions:

  • Is “adequacy of documentary evidence” a subjective standard in the absolute discretion of the Revenue to determine?
  • Does the fact that the general burden to prove the correctness of the tax filing is upon the taxpayer justify the Revenue’s performance of a perfunctory audit?

These issues were the subject of the Tax Appeal Board’s deliberations in the recent case of C Limited (No. 2) v The BIR.

C Ltd. v The Board of Inland Revenue

(Decision delivered November 13, 2017)

Material Facts

The taxpayer submitted its Corporation tax return in respect of year of income 2000 in May 2001. The Revenue initially accepted the return. However, in 2005 the Revenue informed the taxpayer that it had been selected for an audit. Thereafter, the Revenue raised an “additional assessment” on the taxpayer on the basis, inter alia, that the taxpayer did not provide satisfactory documentary evidence to support certain expense claims.

At trial, the Revenue led no evidence in respect of:

  1. why after accepting the Return initially it subsequently selected the taxpayer for an audit in 2005; or
  2. what information or material it acted on in arriving at its additional assessment.

Legal Issue

The primary issue for the Court’s consideration was whether, on an additional assessment:

  • the burden is upon the taxpayer to prove that it has sufficient documentation to substantiate its claim(s); or
  • there is an onus upon the Revenue to demonstrate a positive fact or error of law that justifies the raising of an additional assessment after it had initially accepted the taxpayer’s tax filings.



Appeal allowed.

The Revenue has an onus to establish the facts which caused it to appear to it that the taxpayer was under-assessed and, as a consequence, that it rightfully raised an additional assessment. In short, the Revenue is not permitted to justify its additional assessment on a bare subjective opinion that insufficient evidence in support of the impugned claims was furnished by the taxpayer to it during the audit and objection stages despite numerous requests being made for same. On the contrary, there is an evidential burden placed upon the Revenue to demonstrate the discoveries it had made during its examination in relation to the adjustments that form the basis of its additional assessment.


The vast majority of “assessments” against corporate tax payers in T&T are “additional assessments” as opposed to “best of judgment assessments” (which arise when the taxpayer either makes a Return of Income which is not accepted by the Revenue or fails to make a Return of Income altogether).

The ability of the Revenue to raise an additional assessment is a powerful statutory weapon within its legislative arsenal in the exercise of its monitoring of the compliance of taxpayers within the self-assessment system. However, this power is not absolute and is subject to evidential safeguards to ensure that the additional assessment is not founded on mere suspicion or on an arbitrary or purely subjective basis. Specifically, the Revenue must discover new information or material which warrants such additional assessment. This acts as a judicial mechanism to counteract any potential abuses by the State in the exercise of its statutory powers.

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