VALUE ADDED TAX — restaurant — observations and test purchases — whether reliable evidence — yes — inferences drawn from witnessed cashing-up — takings much higher than on any other day — proportion of credit card sales to total materially different from any other occasion — whether reliable test — yes — no dishonesty penalty imposed — whether indication that evidence of suppression lacking — no — assessment made but not notified then reviewed and entirely recalculated by another officer — whether first assessment survives — no — later assessment partly out of time — appeal dismissed in principle but adjustments to assessments  to be made

MANCHESTER TRIBUNAL CENTRE

GOLDKEY RESTAURANT LIMITED
Appellant
	
- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE
Respondents

				Tribunal:	 Colin Bishopp (Chairman)
						 Marjorie Kostick FCA ATII

Sitting in public in Manchester on 15, 16 and 17 September 2003 
Leslie Allen of counsel, instructed by Ernst & Young, for the appellant 
Clare Grundy of counsel, instructed by their solicitor’s office, for the respondents

© CROWN COPYRIGHT 2003

DECISION
1	This is an appeal by Goldkey Restaurant Limited against two VAT assessments. The first, for £66,319 and interest, was notified on 31 January 2000 and it covers the consecutive accounting periods from 1 July 1996 to 31 December 1998. The second, for £15,115 and interest, was notified on 21 February 2000; it covers the two accounting periods running from 1 January to 30 June 1999.
2	A notice of appeal was served on the appellant’s behalf by his then representatives who, according to the date endorsed on the notice of appeal, despatched it to the tribunal on 10 February 2000. It may be that the appellant or its advisers realised that a second assessment was likely, but it obviously could not have been included in that notice of appeal. It is referred to in the respondents’ statement of case, served in September 2000. Although the wording of the statement of case is a little ambiguous, one forms the impression that its draftsman had approached his task upon the assumption that both of the assessments were challenged. However, the notice of appeal has not been amended, nor has a second notice of appeal been submitted and, therefore, no appeal against the second assessment has been mounted. This omission was pointed out to us by Leslie Allen, counsel for the appellant, at the outset of the hearing. He was unable to offer any explanation of the oversight, but asked us to direct that the appeal should be amended, albeit well out of time, so as to include the second of the assessments.
3	His application was opposed by Clare Grundy, counsel for the respondents. She argued that, were we to allow the application, the appeal against the second of the assessments would be more than three years out of time, that the matter had been before the tribunal on two previous occasions when the error had not been noticed, and that the Commissioners should not be prejudiced by an error on the part of the appellant’s advisers. She was, however, forced to concede that the prejudice to the Commissioners consisted in their being out of their money and in their being faced with a very late appeal; she accepted that there was no evidential prejudice. The objection that the Commissioners were out of their money seemed to us to have very little merit since, as we understood the matter, they had not sought to enforce the second assessment and it was for that reason that they had not received payment. Our allowing a late appeal would have little or no impact in that respect. It appeared to us too that the respondents were in no way taken by surprise by the late appeal; not only the statement of case but also the bundle of documents produced for use at the hearing appeared to have been prepared upon the footing that both assessments were under appeal. It seemed to us that it would be quite unjust to refuse the application and shut the appellant out of an appeal because of an obvious oversight where there was no identifiable substantial prejudice to the respondents. Accordingly we allowed Mr Allen’s application.
4	The appellant has two directors, Abdun Noor and his wife, although Mr Noor told us, when he gave evidence, that Mrs Noor takes no active part in the running of the company. Mr Noor has lived in this country since 1985, and has throughout worked in the restaurant trade. For some years before the events with which we are concerned, he had been involved in a restaurant business run from the same premises as those used by the appellant, but that business had ceased and the appellant had begun to trade from 1 July 1996, from which date it had also been registered for VAT. Mr Noor told us that he was an active manager of the business, attending every day unless he was out of the country; he was not often abroad. The restaurant (which served meals to eat in the restaurant as well as take-away meals) was open both at lunchtime and in the evening on every day of the week but except on Sundays, when a buffet lunch was offered, the level of evening trade was far greater than that at lunchtime. In fact, lunchtime trade was so light that on occasion there were no customers at all. We accept that part of Mr Noor’s evidence.
5	He also told us that his system for taking orders, both for diners and take-away customers, was to write each order on duplicate pads, one copy of each order going to the kitchen and the other being placed on a spike kept on the counter, near to the till. Those copies were used for calculating the price of each customer’s order. At the end of each day’s trade, Mr Noor would count up the takings and also total the prices shown on the meal bills; the total of the meal bills was entered in a daily takings book and tallied against the cash, cheques and credit card slips in the till. Periodically Mr Noor took the takings book and purchase invoices to the appellant’s accountant, who prepared its VAT returns and other accounting records. He told us that he assumed that the accountant did his job properly, and signed what was put in front of him without making any real check of his own. He was, however, satisfied that the appellant’s VAT returns were correct. 
6	Included within the bundle of documents was a letter, dated 28 August 1996, written to the appellant by its local VAT office, in which it was instructed to keep its complete till rolls, where a till was in use (as it was in the appellant’s case) as well as details of each transaction—in the case of a restaurant the only practicable method of doing so is to retain the meal bills. Mr Noor told us he had not received that letter, and did not know that it was necessary to keep those documents. He did acknowledge having received a letter of 28 January 1999, written following a control visit made, as we were to learn, as an element of the respondents’ enquiries, in which the officer who had made the visit had observed that till rolls and meal bills were not being retained and in which the instruction was repeated. Mr Noor said he had been keeping his till rolls and meal bills since he received that letter, but he had not done so beforehand.
7	It was put to Mr Noor in cross-examination that he had been penalised for dishonest evasion of VAT, some years ago, when he was running a restaurant business in partnership with others. He conceded that he had been penalised, but maintained that the dishonesty had been perpetrated by his partners without his knowledge, and that he had suffered the penalty because he was jointly and severally liable with them. Rather to our surprise, he was unable to tell us how many other partners there had been. Miss Grundy suggested to him that, with that experience behind him, he would have been scrupulously careful about keeping his records. Mr Noor responded that he had not understood the importance of record-keeping.
8	We mention at this point that we find that contention quite implausible. If, as he would have us believe, Mr Noor had been penalised for the dishonesty of others while himself quite blameless, we are quite sure he would have taken great care to avoid having any further suspicion fall upon him. Even if it were true that he did not receive the first of the two letters to which we have referred (the letter is correctly addressed and we think it more likely than not, and so find, that he did receive it), his professional advisers would almost certainly have advised him that he should retain his records. The requirement is also spelt out in the various notices which retail traders receive from the Commissioners. We do not accept Mr Noor’s evidence that he did not know that he should retain his till rolls and meal bills; on the contrary, we think he was very well aware of the requirement but chose not to retain them.
9	The assessments are based upon test purchases and observations carried out by Customs officers which, we understood, were prompted by their perception that the appellant’s declared takings were lower than might be expected for a restaurant of its size and apparent volume of trade. We had evidence from two Customs officers, Peter Wright and Martin Roberts, both of whom had had some involvement in the observation and test purchase exercise, and we had several pages of hand-written observation records as well as a video tape, whose source was a static camera trained upon the entrance to the appellant’s premises for the entirety of one day’s trade, for part of which we also had a hand-written observation record. We did not watch the whole of the video tape, but saw extracts of it which we were invited to compare with the hand-written record.
10	Our first impression was that the video tape had significant limitations. It was in monochrome, and it appeared that the camera had been set to a fixed focal point. The combination of these factors made it difficult to discern some details, and it was of course impossible to identify those entering and leaving by the colour of their clothing, although some discrimination by shade was feasible. It was apparent from the video tape that the weather conditions on the day on which it was taken were not good, and the lighting conditions were sometimes less than ideal. There were intervals when the view of the entrance to the restaurant and the pavement area outside was partly obscured by parked vehicles. However, the tape was shown to us by means of a machine which was capable of playing it both forwards and backwards and in slow motion, even at one frame at a time. By the use of this facility, and with some degree of repetition, it was possible to make what we concluded was a quite accurate analysis of the numbers of people entering and leaving the premises, and of what they were carrying. Despite our initial misgivings, we accept that the video tape is, in fact, a reliable record capable of adequate analysis.
11	We heard a good deal of quite detailed evidence about the observations, but we do not think it necessary to repeat that detail here. It is sufficient to record that while we accept that the hand-written records are not absolutely accurate, we are not persuaded that any inaccuracy is greater than is inevitably the consequence of human fallibility. One must bear in mind that, whereas it is possible to play a video tape many times over, there is only one, often fleeting, “live” opportunity to observe a person entering or leaving a restaurant, and to see what he is carrying. We are satisfied that, despite that limitation, the Customs officers involved did their best to observe carefully, and to record their observations accurately. That finding does not dispose, however, of Mr Allen’s principal criticism of the observation records, to which we will turn shortly.
12	Mr Noor was, of course, unaware at the time they were made of the observations and was unaware also that some purchases of both take-away meals and of meals eaten in the restaurant had been made by Customs officers in the course of their investigation. On Friday 5 February 1999, after several days’ investigations had been undertaken (they had started in June 1998), officers made an unannounced visit to the premises at the conclusion of the day’s trading. Mr Noor told us that he was quite surprised by the visit, but not surprised in the sense that he felt that Customs had caught him out and he was (as the Commissioners concede) quite cooperative with them. Mr Wright accepted that Mr Noor had not attempted to restrict his access to the premises, although he had confined himself mainly to the counter area, and that he had not discovered any “off record” books or similar items.
13	The takings for that day were found to be £2,418.55. That figure was not far short of double the highest amount recorded in the appellant’s takings book for any other Friday. It was also observed that the credit card payments for that day amounted to £922.15, or about 38 per cent of the total, much lower than the average shown in the takings book for the preceding Fridays of 1999, and significantly less than the lowest recorded figure during that period of 49.5 per cent. A similar analysis of the takings book for the months of April, May and June 1998 showed that credit card sales represented on average 66.9 per cent of the takings for Fridays; the lowest declared proportion was 58 per cent. Mr Noor agreed, as indeed his takings book indicated, that the volume of the trade at the restaurant did not vary widely from one week to the next, and was not prone to significant seasonal change.
14	Mr Noor accepted that the takings on 5 February 1999 were much higher than those recorded on comparable days. The only explanation he could offer was that there had been a large party, of about 13 (though later agreed to be 17) diners, in the restaurant that evening. The Customs officers had themselves observed a large party, though without being able to determine a precise number, and the respondents acknowledge that this factor may have distorted the takings figure. However, it was, they say, insufficient to account for the whole of the difference between the takings on that day and those recorded on other Fridays. An examination of the available figures shows, to our satisfaction, that that contention is correct; if one eliminates the cost of the large party’s meal, and also the cost of meals eaten by Customs officers on that day, the takings remain significantly higher than on any other day as they are recorded in the takings book.
15	There were two further days of observations after the visit on 5 February 1999: on 18 February (when the video tape was obtained) and on 5 June 1999. On 31 March 1999 Mr Noor was interviewed by Mr Wright and by Grahame Thompson, another Customs officer from whom we were to hear brief evidence, in the presence of the appellant’s accountant. Very little turns on the interview, but we need to mention that it was conducted after Mr Noor had been shown the Commissioners’ Notice 730, an indication that he was suspected of dishonest evasion.
16	Mr Allen made a number of criticisms of the Commissioners’ analysis of the observation records. First, it was, he said, in many cases impossible to match people recorded going into the restaurant with those recorded coming out, largely, it seemed, because of changes in the teams of observing officers during the course of the day and in part because observations began after the start of the day’s trading, or ceased before its end. We agree with that argument; it was a factor which Mr Roberts, too, took into account when he came to calculate the amount by which, it is contended, the appellant had suppressed its takings. It is a particularly important factor because of the respondents’ assumption that a person who remained in the premises for more than a certain length of time had eaten a meal. A time of 30 minutes was mentioned during the course of the interview of Mr Noor, but both Mr Wright and Mr Roberts told us that they had in fact used 40 minutes as the yardstick. It transpired that for part of his calculation, and despite his recollection, Mr Wright had after all used 30 minutes. Mr Noor’s evidence was that it was not possible to order and eat a meal in as short a time as 40 minutes, and certainly not 30 minutes. He considered 45 minutes was the minimum practicable time, and an hour more realistic.
17	The only evidence we heard about the time required for a customer to enter the restaurant, be seated, consider the menu and choose and order a meal, for the meal to be prepared, served and eaten, and for the customer to pay his bill, came from Mr Noor, whom we did not consider to be a satisfactory witness; as will be apparent, we reject much of what he told us. Nevertheless, using our own experience and bearing in mind that (except on Sundays) the preponderance of trade was in the evenings (that is, few of the meals served were eaten by those hurrying to return to work after lunch, though it is possible that evening customers were on their way to a theatre or cinema) we accept that, for most customers, even 40 minutes is short; we think there is some merit in Mr Noor’s contention that an hour is more realistic. On the other hand, as Mr Wright was to point out, it is difficult to imagine why a take-away customer would be in the premises for as much as 40 minutes. Since there would be no need for customers to choose from a menu, or for the food to be individually prepared, at the Sunday buffet we think rather less than an hour might be possible, although even then we think that most customers would take at least 40 minutes. 
18	While we think 40 minutes is the bare minimum time which can reasonably be used, we are not persuaded by Mr Noor’s evidence that it is unacceptably short. We agree with Mr Wright that a take-away customer is unlikely to remain within the restaurant for that length of time, waiting for his meal to be prepared, and although, as we accept, it would be unusual we do not think it impossible for a customer in a hurry to order and eat a meal in that time. It is for the appellant to satisfy us that 40 minutes is too short; it has failed to do so. 
19	Mr Allen’s second objection was that it was not possible to determine, with sufficient accuracy, whether those seen coming out of the restaurant were truly carrying a take-away meal. He was able to show to our satisfaction that one group of supposed customers seen on the video tape was in fact Mr Noor’s wife and children, and that if they were carrying anything as they left, it was not a take-away meal, as the respondents had concluded. Although we accept that the respondents have made an error in respect of this observation, we do not accept that there is, overall, any excess counting of take-away sales. It was apparent to us that, when it was not possible to be sure from the observations that a take-away meal was being carried out, the doubt has been resolved in the appellant’s favour. We accept, too, that the respondents have counted only one sale when people were seen to leave the premises together but carrying, between them, more than one bag. The respondents’ calculation of the number of take-away customers is, we have no doubt, inaccurate, but we are satisfied that they are much more likely to have counted too few than too many. This conclusion is borne out by the Commissioners’ discovery, which we accept as correct, that the ascertained takings from take-away sales on 5 February 1999 were higher than their observations indicated might be expected for that day. The Commissioners’ calculations have been made in a manner which has the result that any under-counting of take-away customers favours the appellant.
20	Mr Noor gave evidence of his membership of a number of organisations, such as the Chester Bangladeshi Welfare Organisation and the Cheshire Police Authority. It was quite possible, it was suggested, that other members of those organisations, people seeking his help by reason of his being a member, or family members and friends would call at the restaurant and might stay for some time, perhaps drinking a cup of coffee, but not taking a meal. If such people remained within the premises for 40 minutes or more, they would be recorded, incorrectly, as diners. Mr Noor did not, in fact, suggest that such visits were a frequent occurrence, but we accept that they might occur from time to time—indeed, as we have mentioned, Mrs Noor and their children visited the restaurant, though for only a few minutes. He also told us that, at the relevant time, adjacent premises were occupied by a taxi company whose customers, while waiting for a taxi, might shelter from the rain or use the lavatories in the restaurant, a practice he felt powerless to prevent, and that people doing so might also have been regarded by the observing officers as customers.
21	It was conceded by Mr Noor that he had not mentioned to the Customs officers, during the course of the investigation, that any apparent customers were in fact visiting the premises for other reasons. He had not mentioned his membership of the organisations, nor the alleged use of the premises by customers of the taxi company. We reject his evidence of the latter as fanciful invention, but even if it were true the people making such use would be in the premises for too short a period to be considered to have eaten a meal, and would not have been seen to carry a package signifying a take-away purchase as they left. We are not persuaded by the evidence we heard that the frequency of visits by other non-customers was significant, nor do we think it likely that such visitors would spend more than a short time at the restaurant while Mr Noor was working. We are not satisfied that any such visits as there might have been are sufficient to undermine the respondents’ approach to the assessments (particularly bearing in mind that no information about such visits was before them when the assessments were made), nor do we think, assuming the assessments otherwise survive, that any adjustment is merited on this ground.
22	In April 1999, shortly after the interview of Mr Noor, Mr Wright made an assessment. It was based upon his analysis of five days’ observations, for which purpose he used the manual records, an analysis of the meal bills which had  been retained by Mr Noor after he received the letter of January 1999 to which we have referred, and the conclusions drawn from the observed cashing-up on 5 February 1999. Mr Wright also took into account what Mr Noor had said during his interview, though we do not think that it added very much. He left out of consideration three further days’ observations for which the records were incomplete. He was able to calculate from the meal bills the average cost of a meal eaten in the restaurant (a separate calculation was made for Sundays since the pattern of trade on that day was different) and of a take-away meal, and by multiplying the number of observed diners and take-away customers by the relevant average price he arrived at the expected takings, from which he calculated the tax due. By deducting the tax declared from that figure, he was able to determine the tax supposedly under-declared during the period from 1 July 1996 (the commencement of trade) to 31 December 1998, the end of the last accounting period before the visit of 5 February 1999. The under-declaration calculated by Mr Wright was £66,168.
23	Mr Wright’s assessment was not notified to the appellant. The reason did not emerge clearly at the hearing, though we suspect that Mr Wright’s departure from the Chester office in order to undertake different duties, soon after he had made the assessment, as well as the fact that the Commissioners were awaiting further evidence from the appellant and the accountants it had then instructed to represent it might have resulted in its being overlooked. In September 1999 Mr Roberts revisited the matter, in his capacity of check officer.
24	Among the documents produced to us was a long and detailed note made by Mr Roberts during the course of his review of Mr Wright’s assessment. We were impressed by the care and attention to detail which that note demonstrates. Mr Roberts did not have available to him full details of Mr Wright’s calculations, and therefore started again, although of course he had the same source material. He came to the conclusion, he told us, that Mr Wright’s approach, as he understood it to have been, was flawed to the extent that he did not consider it was to “best judgment”, the requirement imposed on the Commissioners by section 73(1) of the Value Added Tax Act 1994, to which we will return shortly. That may, we think, have been a harsh conclusion. 
25	Mr Roberts proceeded to re-calculate the apparent under-declaration of tax by reconsidering whether any, and if so which, of the incomplete observation records should be used, by deciding to use the video evidence in preference to the manual records for that day and by making his own assessment of the numbers of diners and take-away customers, and of the average meal values. He made rather greater use than had Mr Wright of the difference between the declared proportion of credit card sales and that discovered on 5 February 1999, though as a means of cross-checking, and he looked more critically and carefully at the observation records, making deductions, where no exact correlation of customers going in and coming out could be made, about which could reasonably be considered to have eaten a meal. 
26	It is true, as Mr Allen observed, that Mr Roberts may not always have made the correct deduction. He identified a transcription error in a letter written by Mr Roberts to the appellant’s accountants, though we were not convinced that this particular error was of great importance. It is also possible, as Mr Roberts conceded during the course of his evidence, that he miscounted the number of customers on one occasion, with a consequent error in his calculation of the average cost of a meal. We put the point in that way since Mr Roberts made his first calculation at leisure in his office, while his concession was made while he was in the course of giving his evidence and, as we will explain, we think it appropriate that the correct number should be determined accurately and if possible agreed between the parties.
27	Mr Roberts’ calculation led him to the conclusion that the tax under-declared in the period covered by the first assessment was £66,319, a slightly different, and higher, figure than Mr Wright had achieved. Mr Roberts used the same method of calculation to produce the second of the assessments under appeal, for which he alone was responsible.
28	We need at this point to consider whether the assessment notified on 31 January 2000 is an assessment made by Mr Wright but amended before notification by Mr Roberts; or is a new assessment, made by Mr Roberts. If it is the former, we need also to consider whether any errors made by Mr Wright were truly so serious that the assessment is not to “best judgment” (Mr Roberts’ opinion is not binding on us) and, if so, whether they were capable of cure, and were cured, by Mr Roberts’ intervention. If it is the latter, we need consider only Mr Roberts’ approach and calculations against the requirements of section 73(1), but the consequence of his having made an assessment, if that is what he did, in January 2000 (when the assessment as notified was finalised) is that it is out of time in respect of the first two periods included within it (09/96 and 12/96) because it offends the three-year time limit imposed by section 77(1)(a) of the 1994 Act. Miss Grundy accepted that this would be the consequence if we concluded that Mr Roberts rather than Mr Wright had made that assessment.
29	In our view what Mr Roberts did goes some way beyond mere checking and correction. Although he came to a very similar final figure to that achieved by Mr Wright, and his method of calculation was not fundamentally different (although he paid more regard to some factors and less to others than had Mr Wright), he made an entirely new calculation of his own. He did not do so as a cross-check, to test the accuracy of Mr Wright’s calculation, but because, before starting to make his own calculation, he had examined Mr Wright’s approach and had already discarded it as incorrect. We are satisfied that Mr Wright’s earlier attempt was abandoned and that Mr Roberts made a new assessment of his own. We recognise that Mr Wright’s name appears on the notification as the assessing officer, and that Mr Roberts entered his figures on the same form as Mr Wright had used (overwriting Mr Wright’s entries where necessary) but we regard those factors as insignificant consequences of the manner in which the Commissioners’ computer operates.
30	It follows, therefore, that the first assessment fails in respect of periods 09/96 and 12/96 and the appeal succeeds at least to that extent.
31	We turn next to consider whether Mr Roberts’ approach satisfies the requirements of section 73(1). That subsection reads:
“Where a person has failed to make any returns required under this Act (or under any provision repealed by this Act) or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgment and notify it to him.”
32	It was not argued by Mr Allen that there were no grounds on which the Commissioners might consider making an assessment; he confined himself to the contentions that the assessments were not made to the best of their judgment, and that even if they were, there was no, or no adequate and reliable, evidence on which the calculation of an amount of under-declared tax could be based.
33	What is required of the Commissioners was described by Woolf J in the very well-known case of Van Boeckel v Customs and Excise Commissioners [1981] STC 290. In essence, they are to use the material available to them fairly in determining whether the taxpayer has under-declared his liability, and if so to what extent; and while they cannot assess speculatively, when there is no material before them, they are not under any obligation to carry out exhaustive investigations. That test was revisited by Carnwath J in Rahman v Customs and Excise Commissioners [1998] STC 826 in which he said that an assessment will fail the best judgment test only if it is made dishonestly, capriciously or vindictively, is a spurious estimate or guess, or is wholly unreasonable.
34	We are quite sure none of those descriptions can be applied to Mr Roberts’ assessments (nor, for what it is worth, and despite Mr Roberts’ comment to the contrary, do we think Mr Wright’s approach could be so described). On the contrary, we are satisfied that Mr Roberts fairly and carefully considered all the available material, made an honest attempt at determining whether and, if so, to what extent there had been an under-declaration of tax and came to a conclusion which was reasonable. That he may have made a mistake of counting or of arithmetic does not invalidate his assessments; as Carnwath J explained, it is only in rare cases that the Commissioners will be found to have gone so far astray that an assessment will fail the best judgment test, and the focus of the tribunal should be on determining the correct amount of tax due.
35	Mr Allen argued, with some vigour, that if the appellant had been suppressing its takings by as much as 40 per cent (approximately the figure determined by Mr Roberts) for several years, it must inevitably follow that it had been doing so dishonestly. Such persistent and prolonged under-declarations could not be due to mistake, to theft by staff (which Mr Noor told us he did not think had occurred) or to any other innocent cause. If, therefore, the Commissioners had not imposed a penalty for dishonest evasion, and despite their obvious suspicion of dishonesty, which had been made clear at the interview, the conclusion to be drawn was that they did not have reliable evidence of dishonesty or, therefore, of suppression.
36	While we agree with Mr Allen that it is difficult, if not impossible, to conceive of any innocent explanation of such high and persistent suppression, we do not agree that the Commissioners’ refraining from imposing a dishonesty penalty leads to the conclusion which he urged upon us. The brief evidence we heard from Mr Thompson, then the operational fraud manager at Chester, was that he had decided not to impose a penalty for what he described as operational reasons. He did not volunteer what those operational reasons were, and Mr Allen did not press him. We accept that there may have been legitimate reasons, and we read nothing into the Commissioners’ not having imposed a penalty.
37	We do accept that there is some merit in Mr Allen’s argument that (as we accept) the observation records were not complete and that there is evidence of some inaccuracy. We are mindful of what the tribunal said in Hassan Kudmany (2001, Decision 17,198) another case in which the Commissioners relied on observations of a restaurant. At paragraph 175 of its decision the tribunal commented “The discrepancies between numbers entering and leaving by themselves show that there is a want of accuracy. To say that the difference is very small is no answer. Where there are two figures, one for those entering and one for those leaving, there is no means of knowing which, if either, is right, or by what margin they may be wrong.”
38	We do not, however, consider that those comments are sufficient to undermine the assessment fatally. The criticism in Hassan Kudmany was that the Commissioners had not properly recognised the shortcomings in the evidence available to them. That, we are satisfied, is not the case here; Mr Roberts did identify the gaps in the evidence, made what we consider to be a fair and reasonable attempt to draw such conclusions as could properly be drawn from the available evidence and took those conclusions into account in his calculations. Mr Allen was unable to demonstrate any part of his approach which was fundamentally wrong, or which led to an unreasonable result. As Miss Grundy pointed out, a cross-check made by comparing the proportion of credit card sales found on 5 February 1999 with that revealed by the takings records (which we regard as a useful and fair exercise, founded upon the assumption that cash sales were concealed while credit card sales, inherently difficult to conceal, were not) led to a similar conclusion, namely that takings had been suppressed by about 40 per cent. Any inaccuracy of detail of which Mr Roberts is guilty is capable of cure; despite the tribunal’s criticisms, the assessment in Hassan Kudmany survived, although the tribunal directed that it should be recalculated.
39	We accept that here, too, some recalculation is necessary. Our conclusion is that both of the assessments survive the best judgment test, that the first two periods included in the first assessment must be removed, and that the parties should attempt to agree on a recalculation of the tax suppressed during the remainder of the period covered by that assessment, and the period covered by the second assessment.
40	We approve of Mr Roberts’ general approach to the calculation. We do not direct that the yardstick for determining whether or not a customer has eaten a meal in the restaurant should be altered, but we do direct that the number of customers both for meals to be eaten in and for take-away meals should be reviewed in order to eliminate any inaccuracy in counting, and that any necessary arithmetical adjustment be made. If the parties are able to agree on the outcome, we determine the appeal at the figure so agreed; if agreement cannot be reached we give permission for the appeal to be restored for further argument.
41	The appeal is allowed to that limited extent. We do not think it appropriate to make any direction for costs in the appellant’s favour.

COLIN BISHOPP
CHAIRMAN
Release Date: 6 November 2003
MAN/00/0139