Armirthalingam and Commissioner of Taxation - [2012] AATA 449

CATCHWORDS – TAXATION – understated income - deductions claimed incorrectly for motor vehicle expenses – T-accounting method used to ascertain taxpayer’s taxable income - incorrectly maintained logbook – original logbook unobtainable – reconstruction from personal diaries – personal diaries not produced – taxpayer’s gambling activities and alleged winnings from those activities – analysis of player rating transaction reports and player monthly transaction reports and patron gaming cheque report – analysis of vehicle travel – taxpayer carries burden of proof – inconsistencies in evidence – taxpayer reckless, no remission of penalties – decision affirmed.

Bell IXL Investments Ltd v Life Therapeutics Ltd [2008] FCA 1457
Bradshaw v McEwans Pty Ltd [1951] HCA 480
Brown v Commissioner of Taxation [2001] FCA 596
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission and Others [2000] HCA 47; (2000) 203 CLR 194; 174 ALR 585
Commissioner of Taxation v Traviati [2012] FCA 546
Dixon v Federal Commissioner of Taxation [2008] FCAFC 54; (2008) 167 FCR 287
Drake v Minister for Immigration and Ethnic Affairs [1979] AATA 179; (1979) 24 ALR 577; 2 ALD 60
Favaro v Federal Commissioner of Taxation [1996] FCA 877; (1996) 34 ATR 1
Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; 20 ATR 1370; 64 ALJR 166; 90 ATC 4088
Galea v Commissioner of Taxation [1990] FCA 456; (1990) 90 ATC 5060; 21 ATR 1108
Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81
Hart v Commissioner of Taxation [2003] FCAFC 105; (2003) 131 FCR 203; 53 ATR 371
Henderson v Federal Commissioner of Taxation (1970) 70 ATC 4016
Hua-Aus v Federal Commissioner of Taxation [2010] FCA 341; (2010) 184 FCR 430; 76 ATR 1
Imperial Bottleshops and Egerton v Federal Commissioner of Taxation (1991) 22 ATR 148
Kajewski v Federal Commissioner of Taxation [2003] FCA 258; ATC 4375
Krew v Federal Commissioner of Taxation (1970) 70 ATC 4213
Ma v Commissioner of Taxation [1992] FCA 359; (1992) 37 FCR 225; 23 ATR 485; 27 ALD 601
Luxton v Vines (1952) 85 CLR 352
McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263; 30 ALJR 464
McCormack v Federal Commissioner of Taxation [1979] HCA 18; (1979) 143 CLR 284; 23 ALR 583; 9 ATR 610; 53 ALJR 436; 79 ATC 4111
Minister for Immigration v Dela Cruz [1992] FCA 71; (1992) 34 FCR 348; 110 ALR 367; 26 ALD 663
Pearson v Deputy Commissioner of Taxation [2009] FCA 558; (2009) 74 ATR 437
Re Dixon ATF the Dixon Holdsworth Superannuation Fund and Federal Commissioner of Taxation [2006] AATA 130; (2006) 62 ATR 1001; 2006 ATC 2092
Re Hutson and Commissioner of Taxation [2009] AATA 574; 2009 ATC 10-099
Re Sinclair and Commissioner of Taxation [2010] AATA 902; (2010) 80 ATR 972
Tisdall v Webber [2011] FCAFC 76; (2011) 193 FCR 260
Vu v Commissioner of Taxation [2006] FCA 889; (2006) 63 ATR 341

Evidence Act 1958-1970 (Vic), s 98B
Income Tax Assessment Act 1936, ss 26, 166, 167, 190, 222A, 223, 226G, 226H, 262A
Income Tax Assessment Act 1997, ss 28-25, 28-50, 28-75, 28-90, 28-125, 995-1
Taxation Administration Act 1953, ss 3AA, 14ZZK, 284-75, 284-80, 284-85, 284-220, 284-225
Tax Agents Services Act 2009

DECISION AND REASONS FOR DECISION [2012] AATA 449

ADMINISTRATIVE APPEALS TRIBUNAL     )
  )          2009/5855-5857
TAXATION APPEALS DIVISION  )

ReKANAGANTHARAN ARMIRTHALINGAM
Applicant

AndCOMMISSIONER OF TAXATION
Respondent

DECISION

Tribunal:                   Deputy President S A Forgie
Date:  17 July 2012
Place:  Melbourne

Decision:The Tribunal decides to affirm the respondent’s objection decision of 29 October 2009 affirming the amended assessments dated 15 July 2008 and issued in respect of income years ending 30 June 2000, 30 June 2001 and 30 June 2002.

S A Forgie
Deputy President

REASONS FOR DECISION

Mr Kanagantharan Amirthalingham has applied for review of an objection decision made by a delegate of the Commissioner of Taxation (Commissioner) on 29 October 2009. The objection decision disallowed Mr Armirthalingham’s objection to the Commissioner’s notices of amended assessments made on 15 July 2008 in respect of the income years ending 30 June 2000, 2001 and 2002. Those amended assessments had been made on the basis that Mr Amirthalingham had understated his income by $190,929, $243,204 and $169,675 in those years and that he had incorrectly claimed motor vehicle expenses due to an incorrectly maintained logbook. An indirect measurement tool, known as the T Account Method, was used to make that estimate. Mr Amirthalingham said that the only explanation for the understatement of his income in those three years was that his income included winnings he had received from gambling. His winnings had, for the same years, been $25,333, $138,800 and $104,450 respectively. The termination of his employment had meant that he could not obtain his original log book and he had reconstructed it using his personal diaries.

At the hearing, Mr Amirthalingham conceded that he could not properly claim motor vehicle expenses on the basis of the log books he had reconstructed when he was unable to locate the originals but maintained his claim that he had not understated his income. I have decided that Mr Amirthalingham has not discharged his burden of proof and have affirmed the Commissioner’s objection decision dated 29 October 2009. As that objection decision affirmed the amended assessments issued on 15 July 2008 in respect of the 2000, 2001 and 2002 income years, the effect of my decision is that they remain in place.

BACKGROUND

In this section of my reasons, I set out the findings of fact that I have made on matters forming the background to the issues in dispute. They are not controversial and I have referred to the evidentiary material on which the findings are based in the footnotes.

Mr Amirthalingham’s employment

Mr Amirthalingham was first employed by the Broadmeadows City Council in October 1990. When that council was abolished and subsumed in other councils in approximately 1994, Mr Amirthalingham became an employee of the Hume City Council (HCC).[1]
[1] Mr Amirthalingham’s statement dated 18 January 2011; Exhibit A at [1]. I note that highlighting and comments handwritten in ink and pencil were made by the member conducting the conciliation conference. They do not form part of this exhibit or any other document on which they appear and to which I refer in the course of these reasons. I have paid them no regard in coming to my decision.

On 8 February 2001, Mr Amirthalingham entered a Total Employment Package Agreement for the position of a Landfill Services Coordinator (Agreement) with HCC.[2] This was a Senior Executive Officer position supervising waste disposal. His ordinary hours of work were set at 42.5 each week and were worked from Monday to Sunday. Any hours worked in excess of those hours in order to meet operational requirements were deemed to be included in the annual salary.[3]
[2] T documents; T3 at 73-80
[3] T documents; T3 at 73-80

The Agreement between Mr Amirthalingham and HCC was to the effect that his annual salary included all penalties, allowances and loadings unless otherwise specified in that agreement. In so far as penalty loadings were concerned, the salary package included Mr Amirthalingham’s attending up to ten call outs each year and award travel expenses to the value of $2,500 at 0.58 cents per kilometre. Towards the end of his period of employment, the HCC allowed Mr Amirthalingham to use one of its vehicles to travel on its business as he had complained that his large 4WD was too costly to run.[4]
[4] T documents; T22 at 244

On 8 October 1992, Mr Amirthalingham was stood down from his employment with HCC on full pay while the Victoria Police (VicPol) investigated allegations that monies had been misappropriated by employees at the HCC’s waste disposal premises. This followed HCC’s review of the revenue it obtained from its two tips. It found that it was substantially less than it had been.

On 8 December 2003, Mr Amirthalingham was dismissed from his employment by the HCC.[5] He was charged with various offences but eighteen charges relating to Theft and False Accounting were permanently stayed by Kelly DCJ of the Victorian County Court on 21 July 2006 due to the loss or destruction of evidence.[6] Amounts involved in the eighteen charges totalled $1,163.

[5] T documents; T67 and T68 at 462 and 463

[6] T documents; T83 at 525-546 and T68 at 463

Mr Amirthalingham lodges income tax returns for 2000, 2001 and 2002

On 24 December 2003, Mr Amirthalingham lodged his income tax returns for the income years of 2000, 2001 and 2002.[7]
[7] T documents; T4-T6 at 81-134

The Commissioner’s audit, pre-interview questionnaire and issue of notices of amended assessments

As part of VicPol’s investigation, the Commissioner was asked to audit Mr Amirthalingham’s financial records. The Commissioner used the T account method to ascertain Mr Amirthalingham’s taxable income.

A.The T account method

Section 166 of the Income Tax Assessment Act 1936 (ITAA36) requires the Commissioner to make an assessment of the amount of the taxable income, or that there is no taxable income, from the returns lodged by a taxpayer and from any other information in his possession. The Commissioner must make an assessment of the tax payable, or that there is no tax payable, in the same way. Section 167(b) allows the Commissioner to make an assessment on a different basis if one of three circumstances arises. The first arises if the taxpayer defaults in furnishing a return and the third if the Commissioner has reason to believe that a person, who has not furnished a return, has derived taxable income. The second arises if the Commissioner is not satisfied with the return furnished by a person. In that case:
… the Commissioner may make an assessment of the amount upon which in his or her judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purposes of section 166.”[8]
[8] ITAA36, s 167(b)

Relying on s 167(b), the Commissioner chose in this case to prepare “T accounts”. This is a method that was described by Branson J in Favaro v Federal Commissioner of Taxation:[9]
“… ‘T’ accounts are a technique used as an indirect method of ascertaining a taxpayer’s taxable income. They compare cash available at the beginning of a period plus cash on hand at the end of the period. With full and accurate information, the two sides of the exercise should balance. …”[10]

The exercise leads to the preparation of an Excess Expenditure Statement. As an example, that prepared by the Commissioner on 17 June 2008 for the 2000 income year is reproduced at Attachment A. That led to the Commissioner’s Adjusted Estimate of Underestimated Income shown in the Table at [14] below. Information identifying account numbers and the like have been omitted. References to “FA” and “NA” are references to Mr Amirthalingham’s wife.

[9] [1996] FCA 877; (1996) 34 ATR 1

[10] [1996] FCA 877; (1996) 34 ATR 1 at 5

B.The amended Notices of Assessment

In the course of the audit, Mr Amirthalingham was interviewed by officers of the Australian Taxation Office (ATO). He had previously completed a pre-interview questionnaire on 22 September 2004 (pre-interview questionnaire) in which he estimated that he had won approximately $100,000 from 1996 to 2001 and had lost some $50,000 in 2002.[11] He had made these estimates on the basis of a “gut feel” and not upon any analysis he had undertaken.[12] Following the audit, the Commissioner issued amended Notices of Assessment to him for the 2000, 2001 and 2002 years of income.
[11] T documents; T19 at 201-220
[12] Exhibit A at [5]

In the following table, I have set out details, omitting cents, from: the income tax returns as lodged by Mr Amirthalingham; the assessments; the pre-interview questionnaire; the Commissioner’s initial estimate of understated income; his adjusted estimates; and the amended assessments.[13]
[13] The table is based on the Notices of Amended Assessment at T documents; T95-T99 at 589-593, the Notices of Assessment at T7-T9 at 135-137, the Income Tax Returns at T4-T6 at 81-134 and the pre-interview questionnaire at T19 at 201-220.

30 June 2000	30 June 2001	30 June 2002
TOTAL INCOME AS RETURNED	$56,882	$60,792	$68,084
Salary	$47,393	$51,273	$58,510
Allowance	$298	$334	$351
Interest	$11	$5	$10
Dividend	$408
Net capital gain	$1,113
Gross rent	$9,180	$9,180	$7,692
TOTAL DEDUCTIONS CLAIMED	$35,740	$38,013	$18,416
Including claims for car expenses	$10,805	$10,080	$11,537
TAXABLE INCOME AS ASSESSED	$35,740	$38,013	$49,668
TAX REFUND	$5,060	$9,420	$12,698
INCOME DISCLOSED IN PRE-INTERVIEW QUESTIONNAIRE	$74,909	$94,719	$72,250
*COMMISSIONER’S INITIAL ESTIMATE OF UNDERSTATED* INCOME**	$190,929.00 Total income from known circumstances $242,468.00 Total expenditure $433,397.00 (gambling losses of $86,413.00 and $346,984 other expenditure)	$243,204.00 Total income from known circumstances $185,965.00 Total expenditure $429,169.00 (gambling losses of $46,596.00 and $392,573.00 other expenditure)	$169,675.00 Total income from known circumstances $366,116.00 Total expenditure $535,791.00 (gambling losses of $119,622.00 and $416,169.00 other expenditure)
*COMMISSIONER’S ADJUSTED ESTIMATE OF UNDERSTATED* INCOME[14]**	$200,772.00[15]	$252,661.00[16]	$179,794.00[17]
AMENDED ASSESSMENTS: INCOME TAX
Amended taxable income as assessed as result of audit[18]	$236,512	$290,674	$229,462
Claims for motor vehicle expenses disallowed on audit	$10,805	$10,080	$11,537
Tax on taxable income	$101,762.64	$123,996.78	$95,227.14
Amount payable including penalties and interest	$198,899.14	$120,002.80	$86,643.65
AMENDED ASSESSMENTS: PENALTIES
Amended assessment: penalties on basis of recklessness	$48,215	$60,001	$43,321
AMENDED ASSESSMENTS: INTEREST	$54,076

[14] Adjustments made during the audit at Mr Amirthalingham’s request: T documents, T93 at 584-586

[15] The Commissioner accepts that this figure contains an error but states that the errors are in Mr Amirthalingham’s favour. The first relates to funds expended on his motor vehicle. A figure of $15,129.00 was included in the amount disallowed when it should have been $15,229.00. A figure of $21,365.00 was used as repayment of capital on an investment loan when it should have been $22,022.00. ST documents, ST1 at 747.

[16] ST documents, ST1 at 749

[17] ST documents, ST1 at 750. A figure of $12,757.00 was used as repayment of capital on an investment loan when it should have been $28,003.00.

[18] T documents; T93 at 584-586 and T95 at 589-593

THE EVIDENCE

Mr Amirthalingham’s employment with the HCC

A.Mr Amirthalingham

I have referred above to the Total Employment Package Agreement that Mr Amirthalingham entered with HCC. Mr Amirthalingham described his employment arrangements with HCC as follows:
“From 1997 to 2000, I was part of an in-house tender group called ‘Land Fill Services Team’ which was awarded a three year contract to man and operate the weighbridges in Broadmeadows and Sunbury for the Council. That contract was extended for two years in 2000 until December 2002. The Council was intending at that time to re-Tender.”[19]
[19] Exhibit B at [2(b)]

Mr Amirthalingham said that the purpose of manning the weighbridge at the tips was to weigh the loads that came in to be tipped. He would key in the registration number of the vehicle. If it had been at the tip before, he would weigh it once and the computer would work out the weight of the load given the previous weight of the vehicle. If it had not been to the tip before, its weight would be recorded both before and after shedding its load. Charges were imposed on the basis of both weight and the classification of the type of waste and calculated by the computer.

Mr Amirthalingham supervised the weighbridge and had access to the computer, he said. He did not take money for the transactions and denied that some transactions were not recorded in the computer system. As far as he knows, the receipts that he was required to give customers reflected the data recorded in the computer but he was not always there. Mr Amirthalingham denied that it was possible to produce dummy transactions on the system allowing him to pocket the difference between a duplicate receipt and the receipt shown on the system. He had not stolen anything and this was not the source of the money he had used for gambling.

Mr Amirthalingham said in cross examination that he would work 38 to 42.5 hours each week but that he could swap with people as needed. When asked if he worked from 8:00am to 4:00pm, he replied that, on some days, he worked an hour or an hour and a half. Some days, he would start at the Town Hall and then go to a weighbridge but he could exchange with other workers. The contract was to keep the weighbridge open and the workers could swap if they needed to do something. That happened quite often, he said. It could be that he would swap a half day or leave early.

B. Notes of conversations between ATO officers and HCC

Mr Amirthalingham was the team leader in charge of two gatehouses and the weighbridges at the Bolinda Road tip at Campbellfield and the Sunbury tip. Both tips were open from 8:00am to 4:00pm. He was based at Bolinda Road but would travel to Sunbury approximately once each week.[20] The round trip was approximately 60 kilometres in length.[21] Every day, he would make at least one trip from Bolinda Road to the Town Hall in Pascoe Vale Road at Broadmeadows to deliver paperwork and/or petty cash. The round trip was approximately ten to twelve kilometres.[22] Sometimes, he would pick up his son when he was on the way home from the tip.
[20] T documents; T21 at 243
[21] Statement of Mr Amirthalingham dated 19 May 2011; Exhibit B at 2(g) and two Google maps attached
[22] T documents; T22 at 244

Mr Amirthalingham’s son’s schooling

Mr Amirthalingham’s son attended a private college in the relevant years of income. He would pick him up from after school care located at the school and would do so between 4:00 and 5:00pm each day. It took him over an hour to travel from Bolinda Road to the school. That happened most days, he said, and HE would drop off the money from the tip at the Town Hall between 5:00 and 5:30pm.

Mr Amirthalingham’s property

A. Real estate

In his answers to the Commissioner’s pre-interview questionnaire, Mr Amirthalingham stated that he had sold a unit in Swanston Street, Melbourne, that he had owned since approximately 1994 or 1995 for the sum of $180,000. He did so on 20 February 2002.[23] That was a property from which he had received rental of $31,077.60 from July 1999 to February 2002. He continued to own another unit at the same address and had received rentals of $29,530.31 over the same period. That unit he valued at $170,000.00. His own home he understood to be valued at $550,000.
[23] T documents, T19 at 210
Mr Amirthalingham had entered a Flexi-Plus Mortgage agreement with the National Australia Bank (NAB) on 14 May 1998 for the sum of $70,000.00. It was repayable at the rate of $1,000.00 each month. He had repaid it in May 2001.

Earlier, on 8 April 1997, Mr Amirthalingham had obtained a Tailored Home Loan from NAB for the sum of $305,000.00. The monthly payments were $2,772.00 until he sold the unit in February 2002 and repaid part of the loan. The monthly payments were reduced to $1,000.00.[24]
[24] T documents, T19 at 214

B.Motor vehicles

On 5 August 1999, Mr Amirthalingham purchased a Toyota Land Cruiser for the sum of $73,837.00. He traded in his Toyota Prado and funded the balance of $32,105.70 through a hire purchase agreement. He repaid that loan in May 2001.[25]
[25] T documents, T19 at 213 and 214

Mr Amirthalingham’s holidays

In his pre-interview questionnaire, Mr Amirthalingham declared that he had travelled overseas on holiday in September (20) and October (2) 1999, February (10) and June (10) 2000, September (17) 2001 and January (14) 2002. I have shown the length of each holiday in brackets after the month. The destinations and his estimates of their cost were, in order, Malaysia ($2,000.00), New Zealand ($1,000.00), Malaysia and Philippines ($2,000.00), Singapore and Malaysia ($2,000.00), Philippines and Malaysia ($3,000.00) and Malaysia and India ($2,800.00).[26]
[26] T documents, T19 at 215

Mr Amirthalingham’s income

Mr Amirthalingham said that he won $25,333, $135,600 and $104,450 in the 2000, 2001 and 2002 years of income. As a result of this he understated his income in 2000 and 2001 by $79,183 and $61,008 respectively. He understated it by $54,397 in 2002 leaving a total understatement over the three years of $85,794.

Mr Amirthalingham’s liabilities

In addition to the sum of $30,000 or so that should be deducted for motor vehicle expenses, Mr Amirthalingham had previously notified the Commissioner that adjustments should be made for additional interest income.

Mr Amirthalingham’s gambling

A. Gambling Patterns

Mr Amirthalingham said in giving evidence that he spent a lot of time gambling at Crown during the years from 2000 to 2002. In his pre-interview questionnaire, Mr Amirthalingham stated that he and his wife had won approximately $100,000.00, or $500.00 net each month, from Crown Casino (Crown) during the years from 1996 to 2001. In 2002, they had lost approximately $50,000.[27] He estimated that they spent approximately $500.00 each month from their income from sources other than gambling together with approximately half of the amounts that they won.
[27] T documents, T19 at 216

In 1999, he was given a ranking as a T200 Mahogany player meaning that he was one of the top 200 players in the Mahogany Room at Crown in terms of turnover. Turnover, Mr Troost said in re-examination, is the cumulative total of all bets in the betting session. Mr Jack Troost is the Legal Counsel at Crown. He said that Mr Amirthalingham had retained that ranking until he was banned by Crown as a result of the criminal investigation. Mr Troost said that the Mahogany Room was staffed by Crown’s most experienced staff. It is completely separate from the rest of the Casino and membership is by invitation only. It has a Cage, which is part of Crown’s Bank. Players would cash cheques there and buy chips and make deposits into their own accounts so that they did not have to carry large sums of cash or large numbers of chips with them. Usually, they would buy chips at the table using a voucher obtained from the Cage.

As part of the audit, the Australian Taxation Office (ATO) obtained copies of Player Rating Transaction Reports (PRTR) and Player Monthly Transaction Reports (PMTR) for each of Mr Amirthalingham and his wife from the Crown Casino.[28] They show that both were regular attendees. Mr Amirthalingham initially estimated that he spent 7.5 hours gambling each week but revised this to 6.6 hours in his further statement.[29] In his third statement, he said that he would be at Crown some four times each week and sometimes on the weekends as well. Due to his high level of turnover, Crown would give him and his wife accommodation at Crown Towers. He and his wife would spend the weekend there from Friday to Sunday at Crown’s expense. Crown would also pay for his wife and son to sit in its box at the Melbourne Cricket Ground (MCG) to watch the Australian Open as well as to attend the Melbourne Cup. Crown would invite him and his wife to exclusive Christmas parties and to the New Year’s Ball it held each year. Accommodation would be provided. Dinner would be provided at the gambling table if he indicated he wanted to leave to have dinner. His drinks and cigarettes would be brought to him when he arrived at the table. If he did not attend the Casino for a week or so, Crown would send flowers and telephone to make sure he was all right. Crown took care of its T200 members, Mr Amirthalingham said, and the members formed links among themselves so that they played together.
[28] T documents at 140-167
[29] Exhibit B at [7]

As far as Mr Amirthalingham was concerned, Crown provided all of these sorts of things to its T200 members on a complimentary basis. It did not do so because he had a certain number of reward points. As a consequence, he did not care whether his turnover was being recorded accurately. He rarely showed his T200 membership card as the staff knew his name.

Mrs Amirthalingham gave evidence confirming the benefits that she and her husband received. She would go to Crown with him two or three times each week. At times, she would go shopping with chips worth $5,000. She would ask her husband for them and he would give them to her. He did not have to tell the dealer or anyone else that he had done so. She would pay for her purchases either with the chips or with cash she had obtained by exchanging the chips for cash. Mr Troost said that he had heard that people used chips to pay for goods in the leased premises at Crown. On one occasion, Mrs Amirthalingham said, her husband had purchased a Rolex watch for himself. Mrs Amirthalingham said that she never kept records of the money or chips that she spent. She could not recall when she made purchases. Mrs Amirthalingham said that she never had any difficulty in paying household bills between 1990 and 1992. Her husband had only his job at HCC. They paid their son’s school fees from his Crown winnings.

Mr Amirthalingham said that he played mainly Baccarat and Black Jack at Crown. He explained the rules of Baccarat. It is a game in which players bet on whether the Bank or a Player will achieve either a particular card value or a higher value of cards dealt to them according to set rules or whether they will tie:
(1)If the Banker and Player tie, those who bet on a tie are paid at odds of 8:1.[30]
(2)Bets on either the Banker or Player are paid at odds of 1:1 but, in the case of bets on the Banker, they are paid less 5% commission payable to Crown.
[30] There are usually only two or three ties in 64 games, Mr Amirthalingham said.

Mr Amirthalingham said that his normal practice:
“… would be to start with a $100 bet, and win, so that I would have $200. I would then bet $200, and then win so that I would have $400. If I then bet $300 and lost I would actually still have my starting stake with me: the recorded loss of $300 would be a paper loss because I only lost the money I had won during the game and not the money I started the game with. In the player rewards reports this would show as a $100 buy in and $300 loss but in real terms I would not be behind or ahead.
However, although I almost never lost my starting stake, in the calculations I have made on the PRTs and about which I have given evidence in my first 2 statements I am acknowledging that where I lost, I have had to allow for the loss of my starting bet as well. However, the losses which I had won in the game and then lost should not count towards my overall losses because they did not affect my bottom line: the most I could ever lose was my starting amount. I usually stopped before I lost my starting stake – I would never go down to zero as I would always try to keep my luck for another day. When the PRTs show I lost my entire buy in, what actually happened is that I would have won money during the game at least as high as my buy in and that would cover the loss. So I would not leave with nothing, I would leave with my starting stake intact, having lost only the amounts I had won during the game.”[31]
[31] Exhibit C at [26]-[27]

His starting money was between $5,000 and $10,000 and he obtained that, he said, from previous winnings kept either in his Crown account or his bank account.

Ms Eva Ko was a member of the Mahogany Room from approximately 1998 to 2004. She has known Mr Amirthalingham since 1999 and continues to see him. She said in her statement[32] that she would see him in the Mahogany Room quite often and would sometimes meet up there. Normally, that would be at the weekend, she explained in cross examination. They would gamble on Baccarat together and she would see him gambling amounts of $500 and $2,000. She saw him win amounts which were normally in the order of a few thousand, she said. He always had luck, she told Dr Bender. Ms Ko said that she saw Mrs Amirthalingham use her husband’s chips from his gambling and that, normally, she would go off shopping happily.
[32] Exhibit G

From her own experience as a Baccarat player, Ms Ko said, it is possible to pool or piggy back bets in Baccarat. Pooling is not common but piggy back bets happen more often when a player has a long run of wins.

Whenever a player moved to a new table, Ms Ko said, the supervisor always checked the players’ chips and recorded them as a Buy In at the new table. The supervisor would always check the player’s chips at the end of play but, she told Dr Bender in cross examination, they might have put chips in their pockets in between tables.

She did not know whether all of her wins and losses had been correctly recorded on her rewards card. Crown was supposed to do that so that she could obtain points for her turnover. She agreed with Mr Amirthalingham’s description of how the game of Baccarat is played and how the rewards are recorded.

B.Losses recorded in the Player Rating Transaction Reports maintained by Crown and wins claimed by Mr Amirthalingham

The following details are taken from the Commissioner’s Excess Expenditure Statements and Mr Amirthalingham’s first statement:[33]

[33] Exhibit A at [11]

30 June 2000	30 June 2001	30 June 2002
Commissioner’s assessment of losses	$86,413.00[34]	$46,596.00[35]	$119,622.00[36]
Mr Amirthalingham’s claimed wins at Crown	$25,333.00	$135,600.00	$104,450.00

[34] ST documents, ST1 at 747

[35] ST documents, ST1 at 748

[36] ST documents, ST1 at 750

The losses assessed by the Commissioner match those calculated by Mr Troost in his second statement.[37]

[37] Exhibit 2 at [14]

The Commissioner and Mr Amirthalingham used different methods to reach these figures. Taking the entries from the PRTRs for 18 August 1999 as an example,[38] the following table records the Commissioner’s approach in bold and Mr Amirthalingham’s approach and his comments in italics. The information relating to Buy In and Win and Loss are common to each and are shown in plain typeface.
[38] T documents; T100 at 622

BUY IN $	WIN $	LOSS $	WIN IN GAME – Mr Amirthalingham	ON HAND - ATO	ON HAND – Mr Amirthalingham	COMMENT – Mr Amirthalingham on ATO’s calculation
900	600	0	300	300	Correct
200	200	0	300	Correct
800	800	0	300	Correct
600	1000	400 (minimum)	0	-$100 Should be minus $100 because the Applicant lost $400 in excess of his buy in, and he previously had $300 in hand.	Incorrect because if the buy in is $600, the Applicant cannot lose $1,000 unless he wins at least $400. The Applicant could have won $400 or more.
2400	2400	0	0	- $100
0	50	50 (minimum)	0	-$150 Should be -$150 because the Applicant lost $50 in excess of his Buy In, and he previously had minus $100 in hand.	Incorrect because if the Buy In is $0, the applicant cannot lose $50 unless he wins at least $50. The Applicant could have won $50 or more.

C.Crown’s records

C.1 Player Rating Transaction Reports

Mr Jack Troost is the Legal Counsel at Crown. He has given oral evidence and written evidence in the form of three statements and has also been engaged in discussions with both parties in this matter. He explained the PRTRs. Copies dating from 16 July 1999 to 5 February 2003 are included in the T documents[39] but he illustrated their interpretation by reference to a PRTR from an unidentified player having, he said, a similar playing profile to that of Mr Amirthalingham. I will reproduce only some of the entries.[40] At the top of the PRTR is a record of the patron’s name and membership number. There then follow a number of headings including:[41]

[39] T documents, T12 at 142-167

[40] Exhibit 2 at JTF1

[41] I have omitted the headings Issued Date, Issued Time, Issued Licensee, Issued Employee and Issued Station as no entries have been recorded under them.

Date	Start Time	End Time	Rating#	Loc.	Ac Dn	Buy In	Ave. Bet	Hours	Actl. Win	Points	Turnover
01/02/11	18:21	19:27	629333497	2501	AR/AR	300	400.0	01:06	-200	1240	11,440
01/02/11	18:19	18:26	629328321	2502	AR/AR	300	200.0	00.05	100	47	433
01/02/11	18:07	18:21	629328025	2501	AR/AR	300	200.0	00:14	1300	132	1,213
01/02/11	12:57	12:57	629299825	MO204	00/05	0	0.5	00:00	5	2	6

The way in which the PRTR is intended to be read is as follows:
“This is a game-by-game report, detailing the time the membership card was swiped at a table or inserted into a gaming machine, the time the transaction(s) ceased and the location of the activity. The heading Buyin cites the total amount of monies known to have been exchanged for gaming chips at a casino table; AveBet is the estimated average bet per round of play; Hours is the total recorded gaming activity in hours and minutes. If the player has recorded a net win, the amount will be preceded by a negative sign (-), whereas a net loss to the player is presented as a positive figure. Finally, the report details the points earned for that activity. The heading Date, refers to the ‘gaming day’. Gaming day means the 24 hour cycle from 6:00am to 6:00am.”[42]
[42] Exhibit 2 at JTF1 Mr Troost said in cross examination that a day is taken to run for those 24 hours. Therefore, for example, 21:54 on 5 November is recorded as that day but so too is 03:32 and 03:34 to 05:04 the following day: T documents; TT12 at 165.

Mr Troost said that PRTRs are compiled from information entered in a computer by dealers and supervisors at Crown at the gambling tables when a patron produces a membership card or is known to them. He could not guarantee that the reports were a complete or accurate record. Their accuracy depends upon members’ producing their membership cards or on their being identified by staff. Nevertheless, Crown staff are expected to know and to be able to identify regular gamblers. That would have been the case in the Mahogany Room. Mr Amirthalingham would have been such a person. In addition, it is in the interests of members to produce their cards if they wish to accrue points. Staff are trained and experienced in the entry of accurate information. Accuracy is important because Crown relies on the records to operate its reward scheme and as part of its marketing strategy. It is important both to Crown and to its members that the scheme operates accurately. Members often check their records to watch the accrual of points, Mr Troost said. Points are awarded against turnover. The PRTRs are not used to calculate Crown’s tax liability.

C.2 Patron Activity Inquiry Screen

Behind each line of the PRTR is a Patron Activity Inquiry (or Audit) Screen (PAI). Mr Troost illustrated the entry in the third line of the PRTR that I have reproduced above by reference to the relevant PAI annexed to his further statement.[43] The PAI shows personal details relating to a patron playing roulette[44] and then sets out the details of the transaction:
[43] Exhibit 2 at JTF1
[44] Exhibit 2 at [7(b)]

*Rating#*	*629328025*	*Location:*	*2501*	*Gaming Date:*	*01/02/11*
Start Time:	18:07	Cash In:	300	Chips Out:	0
End Time:	18:21	Chips In:	1,000	Dealer:	[Number]
Average Bet:	200.0	Cheque In:	0	Supervisor:	[Number]
Program#:	Program:	Comp Value:	1
Time Played:	00:14	Actual Win:	1,300	Points:	132
Theoretical:	33	Turnover:	1,213	Crown $:	0.00
Minimum Bet:	5.0	Hands Played:	6	Bonus:	0
Last modified By:	Ws_sgc	01/02/11	19:21:14	HComp:	0.00

Mr Troost explained the meaning of this information:
“… In this transaction, the patron arrives at the table at 18:07. They bring $1000 worth of chips to the table (‘Chips In’) and buy an additional $300 dollars worth of chips (‘Cash In’). They play 6 hands (‘hands played’) in the space of 14 minutes (‘Time Played’). They finish playing at 18:21 (‘End Time’) by which time they have lost their $1300 starting amount (‘Actual Win’). They walk away from the table with no chips remaining (‘Chips Out’).”[45]

A nil entry next to “Cheque In” refers to the fact that no cash was exchanged for a cheque at the Cage. The actual win was $1,300 for the Casino, and not for the player, who lost all of the chips that he brought to the table.

[45] Exhibit 2 at [22]

Mr Troost also explained that:
“a. if a buy in is recorded at $0 then a player may still make a loss. This will be the case where they have brought chips to the table (as in [the] Line … referred to above);
b.if there were a buy in of (say) $400 at the commencement of a line and a loss in the game of $800 (ie Actual Win = $800), there are two possible explanations. This might occur because the player brought $400 worth of chips to the table or because incomplete information was entered by the supervisor in charge of the table.
c.The record of the amount won or lost by a player (ie Actual Win) is not affected by amounts won or lost during the time at the table. Actual Win records a net win or loss ie the amount the player started off with minus the amount they finished with.”[46]
[46] Exhibit 2 at [24]

Explaining that further in cross examination, Mr Troost said that the Buy In figure of $300 shown in the entry for 18:07 on 1 February 2011 of the example PRTR can be less than the ultimate loss for the patron because of further chips that were brought to the table. They were not recorded in the PRTR entry but are shown in the PAI. If a supervisor were to omit to record a patron’s bringing chips to the table, that would make no difference to the win or loss recorded against the patron. Therefore, if a patron were to be recorded as having a Buy In of $400 but a loss (and so a win to the Casino) of $800, that would not mean that the supervisor had inaccurately recorded a Buy In of only $400.

C.3 Monthly Player Rating Transaction Reports

Crown also prepares a Monthly PRTR in relation to each patron’s activities. Again as an example, I set out the details from the month of August 1999:

Month	Days	Buy In	Ave. Bet	Hours	Actl. Win	TheoWin	CompVal	CompExp
99-08	6	16500	36	29:21	8367	525	64	60

The reference to “Days” is a reference to the number of days that the patron was recorded as attending Crown during that month and the “Hours” are the “Total hours the patron was recorded in the Casino for that month”. An “AveBet” is “The estimated average bet per round of play” and the “Buy In”:
“Cites the total amount of monies known to have been exchanged for gaming chips at a casino table. If the patron brings chips to the table a buy in is not recorded.”[47]
[47] Exhibit 2 at [13]

A Monthly PRTR is interpreted in the same way as a PRTR in relation to the first six columns. It is a summary of the PRTRs and, overall, contains less detail. The information in its last three columns reflects:
“TheoWin: Expected takings by Crown, based on Crown’s internal modelling.
CompVal:Dollar value of points patron has earned in that month. One point equals one cent of complimentary value.
CompExpDollar value of points patron has expended in that month.”[48]
[48] Exhibit 2 at [13]

Taking the month of August 1999, the total loss incurred by Mr Amirthalingham was $8,367. Apart from the number of days recorded under the heading of “Days”, the information matches that shown on the PRTRs for the entries relating to his gambling on the days from 6 to 18 August 1999. In particular, the wins and losses shown on the PRTRs show that Mr Amirthalingham lost $8,367 and that figure is matched on the Monthly PRTR for that month. So too do the number of hours gambled by Mr Amirthalingham in that month, Mr Troost agreed.

Mr Troost explained the difference between the number of days shown on the PRTR and the Monthly PRTR. The PRTRs show the number of days on which Mr Amirthalingham gambled whereas the Monthly PRTR shows the days on which he used his membership card. They can be different. Taking the entry for May 2002 as an example, he said that Mr Amirthalingham did not gamble at all during that month but used his card and spent $150 worth of points. Therefore, the figure “1” appeared on the Monthly PRTR but no days were shown on the PRTRs. In the same way, the number of days shown on the Monthly PRTR relating to Mr Amirthalingham’s gambling in August 1999 was six but only five are shown on the PRTRs for that month.

Points are accumulated on the basis of turnover alone. Buy In has nothing to do with it and nor does how much is won or lost. Turnover is an estimate, rather than a precise calculation, Mr Troost said. It is based on a cumulative total of average, rather than actual, bets. He could not explain how the figure of $4,031 was assessed as Mr Amirthalingham’s turnover on 16 July 1999.[49] His Buy In was $350 and his ultimate loss $50. Given that he spent from 21:08 to 00:53, Mr Troost said, Mr Amirthalingham had to have been having wins along the way. Otherwise, he would have been out of there in about 75 minutes. While he was playing, an eye would have been kept on what he was betting and the figures prepared at the end of the session.
[49] T documents; T12 at 166

Mr Troost said that food and drink is free to some in the Mahogany Room. The practice has fluctuated over the years and he could not be sure what the practice was in 1999 to 2002. It was a regular thing to offer free accommodation, free tickets to the MCG and the Australian Open and to invite certain patrons to Christmas and to the New Year’s Ball. Airfares were offered to VIPs as well as a free limousine service. Complimentary betting vouchers might be offered. Flowers were sent to VIPs. There is an area in Crown responsible for VIPs and they have to manage all of these matters within a budget.

A Monthly PRTR relating to Mr Amirthalingham was prepared by Crown for the months from July 1999 to May 2003.[50] On Mr Troost’s analysis, they showed that Mr Amirthalingham had incurred a net gambling loss in the three years of income in issue in this case.[51] That loss was:
[50] T documents at 167
[51] Exhibit 2 at [14]

Year

Mr Amirthalingham Won

Mr Amirthalingham Lost

2000

$0

$86,413.00

2001

$0

$46,596.00

2002

$0

$119,622.00

Returning to the entries for CompVal and CompExp, Mr Troost said that they relate to the rewards programmed operated by Crown. Points can be used to purchase accommodation and for shopping in the Crown shops. They can be used to pay for car parking but some patrons receive complimentary parking for a number of entries. One point equals one cent but the CompVal and CompExp figures are shown in the Monthly PRTRs in dollar figures. Points can also be earned by shopping at specific retail outlets. In the years in issue, those outlets were to be found only at the Crown complex. The programme has since been extended to include others.

C.4 The accuracy of Player Rating Transaction Reports

In his third statement, Mr Troost illustrated that the PRTRs may be incorrect. He took the third entry in the example I have given above. Information that I have not reproduced shows that the patron was playing roulette. The entry shows that he played six hands in 14 minutes and had an average bet of $200 with a turnover of $1,213. This, Mr Troost said, shows that the PRTR is not an accurate record. He explained in his third statement that:
“(d) the patron came to the table (location 2501) and exchanged $300 cash for chips and that is recorded as the ‘buy in’ in the PRTs. At some stage, the patron also produced a chip(s) to the value of $1,000 – the only possible explanation is that he produced it from his pocket. He cannot have won it during the game given the number of bets, his average bet size and turnover. The $1,000 worth of chips ought to have been included as part of the BuyIn which would then mean that … the net loss was $1,300 and the player finished with nothing, therefore the amount the player started off with (BuyIn) was $1,300;
(e)it is not possible for the example given to occur. The following two examples are the closest to it:-

Bet

Win/Loss

Remaining Funds

$300

Loss

$1,000

$200

Loss

$800

$200

Loss

$600

$200

Loss

$400

$200

Loss

$200

$200

Loss

$0

This means that $1,300 was spent with an average bet of $216.67.

Bet

Win/Loss

Remaining Funds

$200

Loss

$1,100

$200

Loss

$900

$200

Loss

$700

$200

Loss

$500

$200

Loss

$300

$200

Loss

$100

This produces an average bet of $200 according to the Audit screen but leaves $100 remaining whereas the patron ended up with $0.
…”[52]

[52] Exhibit F at [7]

Mr Luis Legaspi is a friend of Mr Amirthalingham’s and lived with him for a number of years. He also has a Bachelor of Arts in Industrial Education, majoring in Industrial Electronics, and has passed the Teachers Professional Board Examination. He has completed a number of computer programming courses and courses in related disciplines. Since 1995, he has been employed by a multinational company specialising in the delivery of information technology. He has analysed the entry in the PRTR relating to the same patron playing the six games of roulette. He and Mr Troost both agreed that it was impossible to play six hands in the space of 14 minutes and incur a loss of $1,300 with an average bet of $200. The lowest average bet was $216.67. It was impossible for the patron to have won any amount in those six hands for, to do so, would have caused the total amount he spent to exceed $1,300. Mr Legaspi attached Excel spread sheets that he created demonstrating that there are 794 scenarios which each produce the lowest possible average bet of $216.67.[53]
[53] Exhibit H at [3] I note that the Excel spread Sheets show that 793 permutations are possible when six hands are played and the total spent is $1,300.

In Mr Amirthalingham’s case, Mr Troost said, the PRTRs were likely to have a better chance of being accurate because he had been made a member of the Mahogany Room due to his frequently gambling there and the level of his spend. That room had one supervisor to every two to four tables whereas the main gambling rooms had one supervisor to every eight tables. As eight to ten players sit at a Baccarat table, that means that a supervisor needs to keep track of some 20 people seated at the tables and, if there are players standing behind them, up to 30 people. Higher levels of supervision meant that recording errors were less likely to occur, Mr Troost said. Crown had not conducted any independent audit to check the accuracy of its records.

In his oral evidence, Mr Troost said that the PRTRs are “largely right” but he could not say that they are 100% accurate. There are too many variables for him to estimate just how far below 100% they fall. There could be an error by the supervisor in entering the information, a supervisor could forget to enter the details, there could be outstanding wins and losses or an underestimation of them. Despite that, Mr Troost maintained his position that the PRTRs were largely accurate but could never to be said to be 100% accurate.

In accruing points, Mr Troost said, the main focus was on the amount of money spent by a player. The time that player spends at a table is not relevant for points. No one would be fussed were a supervisor to write down the wrong time but they do have to reconcile their float. They know how many chips they began with and how many chips they requested during the day.

Taking the PRTRs for 8 and 12 December 1999 as examples, Mr Troost said that they show that Mr Amirthalingham won $200 on 8 December 1999 and lost $400 on 12 December 1999. They were the net wins and losses for those days. They read:

Date	Start Time	End Time	Rating#	Loc.	Ac Dn	Buy In	Ave. Bet	Hours	Actl. Win	Points	Turnover
08/12/99	19:16	19:44	128736170	0904	BJ	0	15.0	00:28	0	47	280
08/12/99	22:29	23:24	128765429	1709	BA	0	50.0	00:55	-200	413	1,971
12/12/99	16:12	17:51	129264632	1620	BJ	400	15.0	01:39	400	165	990

Precisely what is meant by the “Buy In” figure was a matter of some discussion. In his first statement, Mr Troost said that:
“A buy in should be recorded in the PRTs as having occurred at a Table (a buy in is never recorded as having occurred at the Cage) when a patron:-
(a)Comes to a Table with chips having purchased them at the Cage (via money paid, or the withdrawal of money from the Applicant’s account) or otherwise, such as having won chips at the previous Table and then taken to the next Table;
(b)Purchases chips at the Table via:-
(i)cash;
(ii)money taken from the patron’s account;
(i)a Chip Purchase Voucher (whether purchased from the Table or from the Cage previously); and
(c)Withdraws cash at the Cage and subsequently converts the cash to chips at the Table.”[54]
[54] Exhibit E at [7]

In his second statement, Mr Troost said that The “Buy In” figure records the amount of chips purchased at either the table or at the Cage in the room concerned. It does not, Mr Troost said, necessarily record all of the chips purchased and brought to the table by the patron. Therefore, [7(a)] of his first statement was “… incorrect in its entirety” and:
“b. On occasions where the Applicant moved tables during a gambling session while still holding chips, the chips brought to the new table are not recorded in the buy in figure in the PRTRs.
c.On occasions where the Applicant bought chips to a table from a previous session, no buy in would have been recorded.
d.On occasions where the Applicant bought chips at the cage and then came to a table, no buy in would have been recorded.
e.On occasions where the Applicant purchased a chip purchase voucher but did not purchase chips at a table, a buy in would not have been recorded.”[55]
[55] Exhibit 2 at [25]$400

In his third statement, Mr Troost said that:
“… in relation to paragraph 7(a), a BuyIn should be recorded in the PRTs in those circumstances. However, this is clearly not the case as is evidenced by the Patron Activity Screen referred to in paragraph 22 of my Second Statement. The same applies to paragraphs 25(b) to (d) of my Second Statement. Paragraph (e) of my Second Statement would have no effect on gambling activities.”[56]
[56] Exhibit F at [8(d)]. The Patron Activity Screen to which Mr Troost refers in this paragraph of his statement is reproduced at [45]. Paragraph [25] of his second statement, to which he also refers, is reproduced in part in [65] above.

In cross examination, Mr Troost agreed that this statement was not correct for it is not correct to say that Chips In should be recorded as a Buy In. The Patron Activity Inquiry Screen, to which I will now turn, separates Cash In and Chips In. A patron may take chips from the Mahogany Room and take them outside the Casino and come back with them on another day or never bring them back. If he comes to the Table with chips, they are not recorded as a Buy In. They are not recorded in the PRTR as chips in hand. Therefore, it does not follow, as Mr Amirthalingham would have it, that a zero Buy In means that he must have won money. All that it means is that a patron brought chips to the Table. The same is true when the Buy In is less than the patron’s loss. That meant that he had been incorrect in his first statement in saying that:
“(a) if a buy in is recorded at $0 then a loss cannot occur in that line unless, during the course of that game, there was a win by the Applicant of an amount at least as large as the loss; and
(b)if there was a buy in of (say) $400 at the commencement of a line and a loss in the game of $800, this could only occur if there was a win during the game of at least $400.”[57]
[57] Exhibit E at [3]

His second statement in which he had said that, on gaining further information and clarification, he could not agree with his first statement that Mr Amirthalingham’s analysis was correct was itself correct.[58] His statement in his third statement at [8(a)] that his first statement was correct was not correct whereas his statement at [26(b)] in his second statement that it was incorrect was itself correct. This meant that he did not agree with the fourth line of the analysis made by Mr Amirthalingham in [26] of his first statement when he concluded that a Buy In of $600 and a win (and so a loss for Mr Amirthalingham) of $1,000 meant that he had to have won at least $400 in the game. That example was given for 18 August 1999.[59] To the extent that Mr Legaspi’s analysis annexed to his statement was based on the assumption that a zero Buy In or a Buy In less than the losses showed a win for Mr Amirthalingham, it was incorrect, Mr Troost said. So too was his own statement at [9(b)] of his first statement when he had said that Mr Amirthalingham must have won at least as much as he had lost in situations in which the loss is greater than the Buy In.
[58] Exhibit 2 at [26]
[59] T documents; T12 at 165

C.5 Patron Gaming Cheque Report

A Patron Gaming Cheque Report dated 13 July 2007 shows that Crown had issued ten cheques to Mr Amirthalingham between 27 December 2000 and 6 August 2001. Four were for $5,000 and the others for $6,000, $7,000, $8,000, $10,000, $20,000 and $25,000 respectively.[60] Mr Amirthalingham said that these cheques reflected his winnings because Crown will not issue cheques unless they are verified as winnings.
[60] T documents at 522

In the period from 1999 to 2002, Mr Troost said in giving evidence, Crown had a policy that it would not give a cheque in exchange for chips unless the staff were satisfied that the player had been playing to a level that was consistent with his or her holding those chips. If not satisfied, the staff would telephone the pit boss to check whether it was so. In more recent years, a cheque is issued.

In cross-examination, Mr Troost said that that a cheque would be issued if Crown was satisfied that the patron was gambling. If a patron broke even so that he left with the amount he arrived with, Crown would issue a cheque if he had been shown to be gambling. A patron would also be given a cheque if he or she arrived at Crown with $50,000 in chips, gambled, lost $30,000 and left with $20,000.

C.6 Patron Transaction Report

A Patron Transaction Report (PTR) appears at T27 of the T documents covering the period from 27 January 2000 to 15 January 2002. It shows amounts deposited and withdrawn by Mr Amirthalingham from his account at Crown. Mr Troost said that it was not possible to use the report to identify whether the amounts deposited came from winnings at the Casino or not. A deposit could come from a patron’s salary. There are, however, deposit slips that relate to the reference numbers given against each entry on the PTR. Those deposit slips show whether the deposit came from chips, cash or a cheque. If it came from chips, the voucher will have a reference number.

C.7 Patron Receipts

Documents described as “Patron Receipts” (Patron Receipts) show details of deposits and withdrawals made in Mr Amirthalingham’s account at Crown.[61] In so far as withdrawals are concerned, they can be divided into withdrawals in the form of Chip Purchase Vouchers, cash and, on one occasion, a cheque. Deposits took the form of Cash Chips only.
[61] They are bundled together in Exhibit A.5

Four of the Patron Receipts were issued on 11 February 2001. The first was issued at 17:27 on 11 February 2001 and showed that Mr Amirthalingham had cashed chips worth $10,000. The balance of his deposit account was $37,000. The identity code on the Patron Receipt, Mr Troost said, showed that it had been issued at the Cage in the Mahogany Room. He agreed that there is no mention on the receipt that the chips came from gambling wins. It was “entirely possible”, he said in cross examination, that they could have been bought earlier, taken away, brought back and exchanged for cash. That meant that he could cash in chips for amounts that did not reflect gambling winnings in related PRTs.

In his first statement, Mr Troost had said at [9(a)] that:
“there are five Patron Receipts dated 13 January 2010 (the first one), 24 January 2001 (the first one), 27 January 2001 and 11 February 2001 (both of them) where the Applicant purchased a Chip Purchase Voucher via his account at either the Cage or a Table and these are not recorded in the PRTs. This is evidence that the Applicant has had a greater level of winnings than is recorded in the PRTs.”

I have set out all of the entries shown on the PRTRs for 13 January 2001 as well as the following days on which gambling is recorded i.e. 14 and 18 January 2001:

Date	Start Time	End Time	Rating#	Loc.	Ac Dn	Buy In	Ave. Bet	Hours	Actl. Win	Points	Turnover
13/01/01	22:01	22:36	184307368	2601	BA	5000	500.0	01:35	3000	3129	30,083
13/01/01	22:43	23:10	184312221	2606	BA	1000	800.0	00:27	-1000	1839	15,120
13/01/01	23:00[62]	00:04	184319489	2601	BA	4000	500.0	01:04	1500	2108	20,267
13/01/01	00:15	01:05	184327162	2606	BA	0	500.0	00:50	2000	2128	17,500
13/01/01	01:07	03:37	184339397	2605	BA	10000	800.0	02:30	-4000	7904	76,000
13/01/01	04:11	05:44	184343670	2605	BA	0	1000.0	01:33	-2000	6126	58,900
14/01/01	05:56	07:50	184347702	2605	BA	0	1000.0	01:54	-100	7509	72,200
18/01/01	22:48	00:37	185025469	2605	BA	10000	500.0	01:49	-2000	3590	34,517

[62] Mr Troost said that the times were entered by the staff. At times, there would be inaccuracies as illustrated by the start time that commenced at 23:00 and so before the previous game had finished at 23:10.

The Patron Receipt issued at 00:07 on that day shows Cash Chips for $5,000. Mr Troost agreed that nothing showed that the chips came from winnings. It is possible that the chips had been purchased earlier. I will set out the information that I have for 13 January 2001 in the Patron Receipts as well as that for the following day, 14 January 2001:

Date	Time Issued	Deposit	Withdrawal	Type	Amount	Deposit Balance
13/01/01	00:37	Deposit	Cash Chips	$5,000	$37,000
13/01/01	20:53	Withdrawal	Chip Purchase Voucher	$3,000	$34,000
13/01/01	22:58	Withdrawal	Chip Purchase Voucher	$4,000	$30,000
14/01/01	01:05	Withdrawal	Chip Purchase Voucher	$10,000	$10,000

The entries for 24 January 2001 in the PRTRs are:

Date	Start Time	End Time	Rating#	Loc.	Ac Dn	Buy In	Ave. Bet	Hours	Actl. Win	Points	Turnover
24/01/01	05:23	06:07	185692947	2604	BA	0	800.0	00:44	3100	2996	24,640
24/01/01	06:05	06:24	185693266	2505	AR	1200	100.0	00:19	-300	205	950
24/01/01	13:53	13:57	185735491	2606	BA	0	300.0	00:04	0	102	840
24/01/01	11:58	14:01	185736217	2601	BA	4000	800.0	02:03	-1000	6481	62,320
24/01/01	14:22	15:12	185747056	2605	BA	0	800.0	00:50	5000	2635	25,333
24/01/01	15:27	15:36	185750548	2606	BA	1500	500.0	00:09	2500	383	3,150

The entries for 24 January 2001 in the Patron Receipts are:

Date	Time Issued	Deposit	Withdrawal	Type	Amount	Deposit Balance
24/01/01	06:01	Withdrawal	Chip Purchase Voucher	1,000	34,000
24/01/01	11:45	Withdrawal	Cash Australian Cash	4,000	30,000

In cross examination, Mr Troost agreed that it “could be” the case that the withdrawal at 06:01 of $1,000 is reflected in the Buy In figure of $1,200 at 06:05 and that it was supplemented by $200 that Mr Amirthalingham took from his pocket.

The entries shown on the PRTRs for 11 February 2001 are:

Date	Start Time	End Time	Rating#	Loc.	Ac Dn	Buy In	Ave. Bet	Hours	Actl. Win	Points	Turnover
11/02/01	15:23	16:15	188445593	2606	BA	5500	400.0	00:52	-2000	1770	14,560
11/02/01	16:08	17:31	188455463	2604	BA	0	400.0	01:23	-1300	2826	23,240
11/02/01	17:43	17:48	188460294	2604	BA	400	100.0	00:05	400	43	350

The entries for 11 February 2001 in the Patron Receipts are:

Date	Time Issued	Deposit	Withdrawal	Type	Amount	Deposit Balance
11/02/01	01:28	Withdrawal	Chip Purchase Voucher	5,000	25,000
11/02/01	03:58	Deposit	CCHP Cash Chips	7,000	32,000
11/02/01	15:25	Withdrawal	Chip Purchase Voucher	5,000	27,000
11/02/01	17:27	Deposit	Cash Chips	10,000	37,000

Mr Troost agreed that it was likely that Mr Amirthalingham had used the Chip Purchase Voucher obtained at 01:28 on 11 February 2001 as part of his Buy In at 15:23 later on the same day. At the same time, events recorded in the Patron Receipts before 06:00 are likely to show up on the PRTRs as occurring on the previous day.

The Patron CPV Reports shown at T78 of the T documents list the Chips Purchase Vouchers purchased. They match the Patron Receipts and can be cross-matched. The same cross-matching cannot be made between the Patron CPV Reports and the PRTRs, Mr Troost agreed. The Chip Purchase Voucher issued at 15:25 on 11 February 2001 matches the entry for the same time, date and location and with the same reference number in the Patron CPV Reports.[63] The Chip Purchase Voucher issued earlier at 01:28 on 11 February 2001 is shown on the Patron CPV Reports as having been issued on 10 February 2001. The details recorded otherwise match those on the Chip Purchase Voucher. Mr Troost agreed that the entries reflected each other and corresponded with the entry in the PRTRs for 10 February 2001 at 02:00.[64] The Buy In was for the sum of $7,000 but that, Mr Troost agreed, was likely to include the sum of $5,000 withdrawn as a Chip Purchase Voucher at 01:28 on 11 February 2001. Mr Troost said that withdrawals will not show up on PRTs if withdrawn in cash at the Cage but will otherwise show up. Deposits will not show up at all.
[63] T documents; T77 at 494
[64] T documents; T77 at 494; T12 at 155

D.Odds favour the Casino

Mr Troost agreed with Dr Bender that, in order to make a profit, the Casino must make a margin on gambling. Furthermore, the odds on the Casino’s winning any game have to favour it and not the player. In roulette, for example, there are an equal number of red and black numbers but zero shifts the odds in the Casino’s favour. Mr Troost agreed that this means that the odds favour Crown overall but said that some patrons sit outside the norm. When asked whether Crown monitors particular patrons, he replied that it did not monitor patrons as much as tables. Each table has an expected win range. If that table is not holding to that range, Crown will look at who is playing at it and to historical data. If Crown suspects a card counter is playing Black Jack, the play is taped. He said that the detection methods are quite sophisticated and can distinguish between a good lead and systematic counting. Those players are then placed on a list and subject to increased monitoring. To his knowledge, Mr Amirthalingham had never been on such a list. He was banned when charged with offences because Crown has processes in place if proceeds of crime are involved. It has to protect itself and the integrity of gambling, he said.

Motor vehicle expenses

A. Mr Amirthalingham

Mr Amirthalingham said that he was not entitled to seek reimbursement for his motor vehicle expenses over and above the $2,500 provided for in his contract of employment.[65] He had claimed $23.00 for motor vehicle expenses in the 2002 income year because he had incurred a parking fine while attending a course at HCC’s request. He had maintained a log book to record his actual motor vehicle expenses but it had been taken during the police investigation. He was unable to recover it and had reconstructed it. These were included in the T documents for the period from 1 July 1999 to 30 June 2002.[66]
[65] Exhibit B at [2(e)]
[66] T documents; T43, 44 and 45 at 296-346

Mr Amirthalingham said that he gave his reconstructed log book to his accountant who calculated the percentage of work use of the motor vehicle in each year to be 81%. That led to the claims for deductions shown in the table at [14] above. They included claims for deductions for use of his motor vehicle.

Comparison of reconstructed log book and PRTRs against school and work commitments

Dr Bender took Mr Amirthalingham through some of the entries from his reconstructed log book and those in the PRTRs for the same period. I have added the information from the PRTRs in the last two columns for comparison as well as some additional entries to show the context and pattern of the records in the log book. In the first entry for 28 March 2000, I have entered each of the times recorded on the relevant PRTR. Apart from the entry for 12 June 2001, the later figures show only the first and last times as they reflect a similar pattern of times. Odometer readings have been omitted where they are illegible:

Date	Day	Purpose	Start	Finish	Travel	Work	Private	Crown Start	Crown Finish
28/03/00	Tue	Work	99	87	14:18	14:49
14:50	14:50
14:52	16:26
16:26	16:30
16:35	17:57
17:59	18:46
19:12	20:53
29/03/00	Wed	Work	27	15
30/03/00	Thu	Work	37	25
31/03/00	Fri	Inspection	38	26
01/04/00	Sat	Work	14842	14940	98	86
02/04/00	Sun	Inspection	14940	15039	99	87
03/04/00	Mon	Work	15039	15171	132	120
04/04/00	Tue	Work	15171	15260	89	77	16:32	01:23
05/04/00	Wed	Work	15260	15309	49	37
02/05/00	Tue	Work	16790	16863	73	61	13:09	20:56
19/05/00	Fri	Work	17483	39	27	08:17	17:17
12/06/01	Mon	Work	41026	41075	49	37	09:23	16:19
19:19	01:42

Mr Amirthalingham agreed that he could not have picked up his son from school on the days on which he attended Crown in the previous table. In relation to the entries for 5 April 2000, he said that, had his son finished school at 3:15pm, he could have picked him up and sent him home. When reminded that he had said that he picked him up between 5:00 and 5:30pm, Mr Amirthalingham said that he was “just giving you a possibility”.

Mr Amirthalingham insisted that the entry for 19 May 2000 was correctly made for his mileage even though he spent the whole of the working day at Crown.

In relation to the entries for 12 June 2001, Mr Amirthalingham said that he had spent most of the day at Crown but travelled for work in the three hour break after 6:00pm. He acknowledged that was after the tip had closed for the day but said that they could have called him and he travelled to the tip. The travel time would have amounted to 80 minutes as it took him 40 minutes to travel from the tip to Crown. That left him with an hour to deal with the problem. He did not know whether he could have picked his son up from school.

Mr Amirthalingham agreed with Dr Bender that the entries for the 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 July 1999 all show private usage of 12 kilometres each day. The same is true for the entries in September and October 1999. The trip from his home to Bolinda Road was approximately 20 kilometres. The Sunbury tip is further away. It might be correct to say that the distance from Bolinda Road to Crown was about 28 kilometres. He had said that the trip took him 40 minutes. When asked how he showed 12 kilometres each day for private use when he only occasionally picked his son up from school on a work trip and the trip from his home to Bolinda Road is approximately a 35 to 38 kilometres round trip, Mr Amirthalingham replied that the trip from home to work is a claimable expense. When asked what the figure of 12 kilometres represented, Mr Amirthalingham replied that it was a distance that he had decided not to claim. He did not know what it represented.

B. Other evidence

A file note kept by Mr Peter Maxell, an officer of the ATO, recorded that HCC would reimburse Mr Amirthalingham at the per kilometre rate if his travel exceeded $2,500. It would do so as part of his wages after he had lodged a claim. Mr Amirthalingham claimed $23 reimbursement from the HCC in the 2002 income year but not in the earlier years.[67]
[67] T documents; T 21 at 243

Taxation returns

Mr Frankie Yin has been an accountant since approximately 1996. He assisted Mr Amirthalingham during his taxation audit and prepared the returns for him for the three years in issue. When asked in cross examination what advice he had given Mr Amirthalingham regarding his claim for vehicle expenses, Mr Yin replied that he had asked whether the travel was for work purposes. It could not be travel from home to work. There are a few methods that could be employed including the maintenance of a log book. Mr Yin said that Mr Amirthalingham had not shown him his log book at the time he prepared his returns. Instead, he showed him depreciation which Mr Yin calculated to be 81%. Mr Yin said that he queried why it was so high and Mr Amirthalingham had told him that he travelled between sites and his office at the Town Hall. He could not recall if he was ever given the original log books. He had not seen the reconstructed log books when he prepared the returns and had first seen it during the audit.

SUBMISSIONS ON BEHALF OF MR AMIRTHALINGHAM

Ms Ellyard submitted, the issue in this case is whether Mr Amirthalingham had assessable income in excess of the amounts he declared to the Commissioner as assessable income. The focus, she submitted was whether he incurred all the expenses he was said to have incurred. If he did, I had to decide whether he met those expenses from undeclared income. The PRTRs, Ms Ellyard submitted, are not evidence of losses on which I should rely. They are not sufficiently reliable to establish anything to do with wins and losses. If I am not of the same view, I should find that they support a finding that Mr Amirthalingham won, rather than lost, at Crown in each of the years in question. The PRTRs and other documents prepared by Crown cannot be raised to the status of financial records.

Relying on authorities to which I will refer below, Ms Ellyard submitted that it is appropriate for a taxpayer to satisfy the burden of proof imposed by s 14ZZK of the Taxation Administration Act 1953 (TA Act) by inferences from all of the evidence. There is no onus on the Commissioner to prove that Mr Amirthalingham has had another job or engaged in illegal activity but it is relevant to consider the extent to which the Commissioner showed those other sources. This is not to reverse the onus of proof placed upon the Commissioner but to assess the evidence.

Ms Ellyard submitted that I should accept Mr Amirthalingham’s denial that he had other employment, had another source of income or was engaged in illegal activity. No evidence was found of the latter after an extensive investigation. She referred to the judgment of Judge Kelly. I should also accept his estimate of how his week was divided up among his activities as well as how he gambled and what he did with his winnings. By 1997, he had bought a watch for $27,000 and he regularly took winnings from the table during a game so that they could not be counted. His evidence in this regard was supported by that of his wife and Ms Ko as well as by Mr Troost.

The figure of “86413” should not appear in the Commissioner’s Excess Expenditure Statement for the 2000 year of income as “Kana’s casino losses”. Mr Amirthalingham said that he met any expenses with gambling winnings. Therefore, any expenses that exceeded his assessable income were funded with the proceeds from gambling. His evidence is supported by the high level of turnover shown on the PRTRs.

If I were not to accept that submission, Ms Ellyard’s alternative submission was that the amounts shown on the Commissioner’s Excess Expenditure Statements as Mr Amirthalingham’s losses should be removed. In their place, I should find that he had won minimum amounts of $25,333 in 2000, $135,600 in 2001 and $104,450 in 2002. She handed up revised excess expenditure statements showing that Mr Amirthalingham’s understated income would be $89,782 in 2000, $70,465 in 2001 and -$44,715 in 2002.

Those statements reflected Mr Amirthalingham’s abandonment of his claimed deductions for motor vehicle expenses. He had been entitled to claim $6,616 in each of the tax years using the 12% depreciation model and so two thirds of the amount he actually claimed. The original penalty imposed was 50% but, Ms Ellyard submitted, no penalty should be imposed as there is no sign that he was reckless. He used his best efforts to recreate the log books and gave his best estimation. At its highest, he could be said to have been no more than negligent. Given everything that was going on in his life at the time, he did the best he could.

The penalty imposed by the Commissioner in respect of the claimed understatement of his income should also be remitted in its entirety on the basis that Mr Amirthalingham is a witness of truth who should be found to have obtained his unexplained earnings from gambling. If that is not accepted, it has been established that he gambles. The only thing that has not been established is that his winnings reflect his unexplained income. Therefore, at its highest, the penalty should be imposed at the rate of 25% and not of 50%.

CONSIDERATION

Burden of proof

A.Statutory provisions

Section 14ZZK of the TA Act provides:
“On an application for review of a reviewable objection decision:
(b)the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(c)the applicant has the burden of proving that:
(i)if the taxation decision concerned is an assessment (other than a franking assessment) – the assessment is excessive; or
(ii)…
(iii)in any other case – the taxation decision concerned should not have been made or should have been made differently.”

B. Standard of proof unaltered: balance of probabilities

Section 14ZZK does not alter the standard of proof that generally applies in the Tribunal. That means that a person who bears a burden of proof may meet it by producing to the Tribunal evidence and other material that is relevant and probative and that satisfies it of the existence or non-existence of relevant factual issues on the balance of probabilities rather than simply on the basis of possibilities.

C.How a taxpayer may satisfy the burden

The case of McCormack v Federal Commissioner of Taxation[68] illustrates the nature of a taxpayer’s task in satisfying the burden. It does so in a case in which the Commissioner had treated the net profit from the sale of a property as assessable income on the basis that it arose from the sale of a property Mrs McCormack had acquired for the purpose of profit-making by sale within the meaning of s 26(a) of ITAA36 as it was then in force. Gibbs J explained Mrs McCormack’s task:
“… The taxpayer bears the burden of proving that the assessment was excessive. To discharge that burden in a case such as the present he must prove affirmatively, on the balance of probabilities, that the property was not acquired for the purpose of profit-making by sale. The burden may be discharged by drawing inferences from the evidence. In some cases in which all the relevant facts are known, and there is no material upon which it might properly be concluded that the property was acquired for the relevant purpose, the inference may properly be drawn that the property was not acquired for the relevant purpose. But it is not enough, even when all the facts are known, that there is no material upon which it may be concluded that the property was acquired for the purpose mentioned in s. 26(a). If a taxpayer can succeed, simply because there is no evidence from which it can be concluded that the relevant purpose existed, that must mean that the burden of proving the existence of that purpose lies on the Commissioner. That in my respectful opinion would be to invert the onus of proof. The taxpayer will succeed if the proper inference from the evidence is that the property was not acquired for the relevant purpose, but if there is no evidence as to the purpose for which the taxpayer acquired the property the appeal must fail.”[69]
[68] [1979] HCA 18; (1979) 143 CLR 284; 23 ALR 583; 9 ATR 610; 53 ALJR 436; 79 ATC 4111
[69] [1979] HCA 18; (1979) 143 CLR 284; 23 ALR 583; 9 ATR 610; 53 ALJR 436; 79 ATC 4111 at [11]; 303; 597; 443; 622; 4,121

If all of the material facts were known and the amount of a taxpayer’s taxation liability turned on the application of the law to those facts, the taxpayer could discharge the burden of proof by establishing that the Commissioner had erroneously included in the assessed taxable income an amount that should not have been included.[70]
[70] Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; 20 ATR 1370; 64 ALJR 166; 90 ATC 4088 at 625; 347; 1375-6; 170; 4094 per Brennan J

It is open to the taxpayer to attack the Commissioner’s power to make an assessment[71] or the calculation of the amount of an assessment. If the taxpayer chooses to attack the calculation of the amount of the assessment:
“… mere error in the formation of that judgment by the Commissioner does not warrant the setting aside of the amount assessed. Given the validity of the exercise of the power to make an assessment …, the ultimate question is whether the amount of the assessment is excessive. The amount of the assessment might not be excessive in fact, though the reasons which led to the assessment were erroneous. …”[72]
[71] McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263; 30 ALJR 464 at 270-271; 465-466 per Dixon CJ, McTiernan and Webb JJ
[72] Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; (1990) 20 ATR 1370; (1990) 64 ALJR 166; 90 ATC 4088 at 623; 345; 1374; 169; 4092 per Brennan J

Therefore, merely establishing on the balance of probabilities that the Commissioner has made an error cannot satisfy the taxpayer’s burden of proof under s 14ZZK(b)(i) in relation to an assessment for the burden is to prove that “the assessment is excessive”. The point was made in Dalco:
“… A taxpayer who shows on the facts that are known a mere error by the Commissioner in assessing the amount of the taxpayer’s taxable income does not show that his objection should have been allowed or that the appeal against the assessment must be allowed. …”[73]

D.No burden of proof on Commissioner and no obligation to put forward material establishing a particular view

[73] [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; (1990) 20 ATR 1370; (1990) 64 ALJR 166; 90 ATC 4088 at 625; 347; 1375-6; 170; 4094 per Brennan J with whom Mason CJ, Dawson, Gaudron and McHugh JJ agreed

In Hart v Commissioner of Taxation[109] (Hart), Hill and Hely JJ considered these concepts and adopted the observations that had been made by Cooper J about the notion of recklessness in the context of s 226H of ITAA36. That section equated with what is now Item 2 in s 284-90 of ITAA97. Justice Cooper had said:
“… Recklessness in this context means to include in a tax statement material upon which the Act or regulations are to operate, knowing that there is a real, as opposed to a fanciful risk, that the material may be incorrect, or be grossly indifferent as to whether or not material is true and correct, and that a reasonable person in the position of the statement-maker would see there was a real risk that the Act and regulations may not operate correctly to lead to the assessment of the proper tax payable because of the content of the tax statement. So understood, the proscribed conduct is more than mere negligence and must amount to gross carelessness.”[110]
[109] [2003] FCAFC 105; (2003) 131 FCR 203; 53 ATR 371; Hill and Hely JJ; Spender J dissenting
[110] BRK (Bris) Pty Ltd v Commissioner of Taxation [2001] FCA 164; (2001) 46 ATR 347 at [77]; 364 cited in Hart [2003] FCAFC 105; (2003) 131 FCR 203; 53 ATR 371 at [43]; 214; 381

Failure to take reasonable care is at the heart of Item 3. What amounts to reasonable was considered by Senior Member Sweidan in Re Hutson and Commissioner of Taxation:[111]
“104. Reasonable care is determined objectively. As to the Trust, it is the care that a reasonable person, in the same circumstances as the Trust, would be likely to exercise in making the statement: MT 2008/1 at [27]-[29].
105. Regard must be had to the nature of the obligation requiring the exercise of reasonable care and the particular circumstances in which the taxpayer under that obligation finds itself, i.e. what would be done by a reasonable person in the circumstances of the Trust: Confidential v Commissioner of Taxation [2008] AATA 415 at [57] & [60].
106. It thus involves consideration of the relative size of the shortfall, type of item, complexity of the law and underlying transactions and the difficulty or expense to avoid the risk of making an error. The Commissioner’s position is that it is necessary to consider the personal attributes of the taxpayer and what care a reasonable person with those attributes would have taken in the taxpayer’s particular circumstances: MT 2008/1 at [45]. …”[112]

D.Has Mr Amirthalingham’s shortfall arisen from his recklessness as to the operation of, or failure to take reasonable care to comply with, a taxation law?
[111] [2009] AATA 574; [2009] ATC 10-099
[112] [2009] AATA 574; [2009] ATC 10-099 at [104]-[106]; 3,006-3,007 For the reasons I gave in Re Sinclair and Commissioner of Taxation [2010] AATA 902; (2010) 80 ATR 972 at [78]-[93]; 993-997, I agree with Senior Member Sweidan’s analysis.

I will begin with Mr Amirthalingham’s claim for a deduction in relation to his car expenses. He conceded his claim early in the hearing and acknowledged that he has included journeys to and from his home as work related journeys in his log book and that they may not be claimed. Despite his concession, the fact that he claimed them remains relevant when considering the imposition of penalties.

Car expenses and their deductibility are the subject of Division 28 of Part 2-5 of ITAA97. Although there are others applying in restricted circumstances, four main methods are recognised for calculating the amount that might be claimed as a deduction: the cents per kilometre method; 12% of original value method; one-third of actual value method; and log book method. Substantiation is not required for the first two methods but is for the last two. In each method, regard must be had to the “business kilometres travelled by the *car in the income year”. They are defined for each method as:
“… kilometres the *car travelled in the course of:
(a) producing your assessable income; or
(b) your *travel between workplaces. You calculate the number of business kilometres by making a reasonable estimate.”[113]
[113] ITAA97, ss 28-25(3); 28-50(2); 28-75(2); and 28-90(5)

Sub-division 28-G prescribes the way in which a log book is to be kept if the log book method is chosen. Section 28-125(2) specifies that a journey is recorded in the log book by specifying the odometer readings at the start and end of the journey, the day it began and ended, how many kilometres the car travelled and why the journey was made. The record must be made at the end of the journey or as soon as possible afterwards. The log book must also reflect the overall use of the car. This is the subject of s 28-125(4). So, for example, it must record the car’s odometer readings at the beginning of the period covered by the log book and at the end. It must record the total number of kilometres travelled over that period as well as the number travelled in the course of the taxpayer’s producing assessable income. The latter is then expressed as a percentage of the total number travelled.

Mr Amirthalingham’s log books do not meet these criteria. I have set out an extract at [88] above. They do not show the odometer readings at the start and end of the journey said to be made for the purpose of earning assessable income. Rather, they show the odometer reading at the beginning and end of the day and so at the beginning and end of all travel in the car during that day whether it be personal or for the purpose of earning assessable income. The reason for the journey is very broadly stated. The word “work” does not, I suggest, give a description of the reason for the journey that supports a finding that it is a journey that is either between workplaces or in the course of a taxpayer’s gaining assessable income. Reference would have to be made to other material to ascertain the reason for making the journey at all.

In addition to these matters, I have already referred to the inconsistencies and inaccuracies in Mr Amirthalingham’s reconstructed log books relating to the use of his motor vehicle. This demonstrates lack of care in their compilation at the very least. I would add that it also demonstrates he paid no regard to what he was actually entitled to in claiming for car expenses. I have been unable to find any reference to, or adjustment made for, the motor vehicle allowance that he was given by HCC as part of his contract with it. That allowance was in the amount of $2,500 assessed at 0.58 cents per kilometre and represented his travelling to attend upon up to ten call outs each year. I have noted that, towards the end of his period of employment, the HCC allowed Mr Amirthalingham to use one of its vehicles to travel on its business. As I have no evidence as to whether that was the case for part of the income years in issue or not, I have assumed that Mr Amirthalingham was using his own motor vehicle at all relevant times.

I accept that Mr Amirthalingham had a lot going on in his life at the time that he reconstructed his log books but, one of those things, was to do with his taxation. Mr Yin said that he advised him that he could not claim for journeys from home to work. Whether he did or did not, the responsibility for checking what he could and could not claim lay with Mr Amirthalingham. ITAA97 sets out how to maintain a log book. The log book that Mr Amirthalingham did have for the period from 1 July 1999 to April 2001 has a section headed “Notes on the use of the Log Book and Odometer Record”.[114] Under that are notes entitled “How to keep a log book” and further notes entitled “How to keep odometer records for a car for a period”. Those notes reflect the requirements of Division 28 of ITAA97 relating to log books.
[114] T documents; T43 at 296

Having regard to all of these matters, I am satisfied that Mr Amirthalingham made his claim for deductions in relation to car expenses reckless as to whether the log books on which he based his claim complied with the law set out in Division 28. It is not to the point that, had he used the depreciation model, he would have been entitled to claim two thirds of the amount he actually claimed in each year. He has chosen a method and his claim is considered on that basis. It is not a case in which Mr Amirthalingham has tried to make a claim based on accurate records but has slipped or even made a careless mistake of the sort that could be regarded as a failure to take reasonable care. Rather, he has been entirely without care of what the law requires of him. He has acted with recklessness. I am satisfied that the Commissioner’s decision to impose a penalty at the rate of 50% under Item 2 of s 284-80 is the proper decision.

I have reached the same conclusion in relation to the penalty imposed in respect of the remaining amounts contributing to Mr Amirthalingham’s shortfall. I am satisfied that he has significantly understated his assessable income over the three years of income in issue. Mr Amirthalingham has not disputed that he omitted to disclose his wife’s credit card accounts to the Commissioner. Those cards were used to meet the expenses of daily living. He has attributed the income that is over and above his salary from HCC to his gambling winnings. There is no suggestion that Mr Amirthalingham was gambling in a way that could lead to the conclusion that he was carrying on a business of gambling. Had he been, he would have been obliged by s 262A of ITAA36 to keep records recording and explaining all transactions and acts in which he engaged and which are relevant for the purposes of tax law. Even in the absence of an obligation, he would have been well advised to keep records of that sort as well as receipts and the like to assist him in identifying accurately the source of his income and being able to identify it as assessable or non-assessable when preparing his returns for each of the three income years in issue. Instead, I find that he prepared his returns solely on the basis of his income from HCC and claims related to that income. He has ignored other income in its entirety. In the circumstances which have included other inaccuracies in recording and reporting, that is more than a failure to take care, reasonable or otherwise. It is to act without regard to what is required by the tax law and so to act recklessly. I am satisfied that the Commissioner’s decision to impose a penalty at the rate of 50% under Item 2 of s 284-80 of Schedule 1 of the TA Act on the remaining part of the shortfall is the proper decision as well.

E.Remission

Under s 298-20(1) of Schedule 1 of the TA Act, the Commissioner may remit all or part of a penalty. No criteria are set out in the section to guide the Commissioner in the exercise of his discretion but its predecessor in ITAA36, s 227(3), has been considered by the Federal Court. It seems to me that the authorities establish the following more particular principles:
(1)Factors relevant in the exercise of the discretion are shaped and limited by the subject matter, scope and purpose of the taxation law and of the particular power conferring discretion.[115]
(2)The existence of special circumstances is not a prerequisite to any exercise of the Commissioner’s power to remit a penalty under s 298-20 of Schedule 1 to the TA Act.[116]
(3)Whether or not a taxpayer has the benefit of a shortfall amount or the Commissioner is deprived of that amount, the fact that there is, or is not, a shortfall amount has nothing to do with the remission of administrative penalties:
(a)If there is, the Commissioner is compensated for any harm he might suffer as a result by the taxpayer’s obligation to pay interest by way of a General Interest Charge;[117] and
(b)It is not permissible to have regard to the fact that the Commissioner became aware of the false statement before any harm was done.[118]
(4)“Broadly speaking, the main consideration relevant to the discretion … was whether any part of the penalty should be remitted on the basis that the outcome is so harsh so as to provide an unjust result, having regard to the particular circumstances of the taxpayer …”,[119]
[115]
[116] Dixon v Federal Commissioner of Taxation [2008] FCAFC 54; (2008) 167 FCR 287 at [21]; 291-292 per Spender, Ryan and Emmett JJ
[117] Dixon v Federal Commissioner of Taxation [2008] FCAFC 54; (2008) 167 FCR 287 at [23]; 292
[118] Dixon v Federal Commissioner of Taxation [2008] FCAFC 54; (2008) 167 FCR 287 at [21]-[25]; 292
[119] Commissioner of Taxation v Traviati [2012] FCA 546 at [78] per Middleton J

In this case, I am satisfied that there is no basis on which I should exercise the discretion to remit all or part of the penalties. Mr Amirthalingham has chosen to act recklessly with regard to his obligations under a legislative scheme that depends upon his engaging in a process of self-assessment. The outcome that attaches to his having acted in that way is not harsh or unjust when viewed having regard to his particular circumstances. No reference has been made to his personal circumstances that might throw a different light upon my conclusion. Certainly, he has faced costs arising from the criminal charges but it has not been suggested to me that the imposition of the penalties would impose a burden that could be regarded as harsh or unjust.

DECISION

For the reasons I have given, I affirm the Commissioner’s objection decision dated 29 October 2009 and affirming his amended assessments dated 15 July 2008 and relating to the income years ending 30 June 2000, 30 June 2001 and 30 June 2002.

ATTACHMENT A

EXCESS EXPENDITURE STATEMENT IN THREE PAGES[120]

[120] ST documents; ST 1 at 746-747

PAGE 1

CALCULATION OF AMENDED NET/TAXABLE INCOME FOR THE YEAR ENDED 2000
NAME: Kanagantharan Amirthalingham	FILE No:
FUNDS AVAILABLE	$
BANK ACCOUNTS
Current Accounts overdrawn as at 30 June 2000
Savings Accounts as at 1 July 1999
… [Bank A] acc … [No.] … (as at 04-09-1999 …)	932
… [Bank A] acc … [No.] … (as at 04-09-1999 …)	44360
… [Bank B] acc … [No.] … opened on 23/11/2000	0
… [Bank B] acc … [No.] … opened on 27/03/2000	0
… [Bank B] acc … [No.] … opened on 25/11/1999	0
… [Bank B] acc … [No.] …	89
Account with Crown Casino (opened on 27/01/2000)	0	45381
Total of further accounts as per schedule (page 3)
Unpresented cheques as at 30 June 2000
TRADE CREDITORS as at 30 June 2000
TRADE DEBTORS as at 1 July 1999
Cash on hand as at 1 July 1999
*INCOME ITEMS (as per return)**
*Gross Business Receipts
*Salary or Wages (47393 + 65707; KA & NA)	113100
*Deduct: Collection Credit {TID}-13770+22304	36074	77026
*PPS Gross Income
*Deduct: PPS Credit
*Gross Dividends	0
*Deduct: Franking Credit
*Gross Rent ($9180 +$9180; KA&FA)	18360
*Gross Interest ($11KA + $22 FA)	33
*Deduct: TFN Credit	33
*allowance	298
298
CAPITAL RECEIPTS
Francisca’s casino winnings	17628
T2 refund	10800
28428
Loans received
loan from … [Bank C] for new m/v registration …	32105	32105
Receipt from trade in of m/v-registration …	40837
*Income Tax Refunds (2000-2002 issued on 09/01/2004 for t/p & wife)
Other: (Gifts, Legacies, Personal Insurance)
40837
OTHER ITEMS
TOTAL FUNDS AVAILABLE (to page 3)	242468

PAGE 2

CALCULATION OF AMENDED NET/TAXABLE INCOME FOR THE YEAR ENDED 2000
NAME: Kanagantharan Amirthalingham	FILE No:
FUNDS EXPENDED	$	$
BANK ACCOUNTS
Current Accounts as at 30 June 2000
Current Accounts overdrawn as at 1 July 1999
Savings Accounts as at 30 June 2000
… [Bank A] acc … [No.] … (as at 04-09-99 …)	455
… [Bank A] acc … [No.] …	55046
… [Bank B] acc … [No.] … opened on 23/11/2000	0
… [Bank B] acc … [No.] … opened on 27/03/2000	2204
… [Bank B] acc … [No.] … opened on 25/11/1999	1196
… [Bank B] acc … [No.] …	111
Account with Crown Casino (opened on 27/01/2000)	14000	73012
Total of further accounts as per schedule (page 3)
Unpresented cheques as at 1 July 1999
TRADE CREDITORS as at 1 July 1999
TRADE DEBTORS as at 30 June 2000
Cash on hand as at 30 June 2000
*BUSINESS ITEMS (as per return)**
rental deductions – interest + other ($7007+$162) for KA&FA	14338
*car & work related expenses ($10805+$3168)-KA	13973
*car, work related expenses, gift, agent fee ($562+589+5+100)-FA	1256
15129
*Investment expenses
*Deduct: Depreciation-car-KA	6700	-6700
LOAN REPAYMENTS
Business {Capital repayments only}
Repayment of capital on investment loan - $1386*26-$14014	21365
Repayment on m/v loan ($786*10-monthly from Sept 99-June 2000)	7861
29226
Private {Capital and Interest repayments}
Home loan repayments-… [Bank A] ($1000*12)	120000
12000
CAPITAL EXPENDITURE {including loans made}
T2 shares	4500
Kana’s casino losses	86413
New m/v…	73837
164750
OTHER EXPENSES
Private Living Expenses-withdrawals from various accounts	79204
Private Living Expenses –credit card payments	61191
Deduct amount expended on:-
total deduction claimed in return less depreciation: ($15129-$6700)	-8429
other rental deductions - $162*2	-324
131642
TOTAL FUNDS EXPENDED (to page 3)	433397

PAGE 3

CALCULATION OF AMENDED NET/TAXABLE INCOME FOR THE YEAR ENDED 2000
NAME: Kanagantharan Amirthalingham	FILE No:
STATEMENT OF ADJUSTMENTS	$	$
TOTAL FUNDS EXPENDED (from page 2)	433397
TOTAL FUNDS AVAILABLE (from page 3)	242468
PRIMARY UNDERSTATEMENT	190929
ADD:- items as per amendment request:-
Interest from … Investment as requested	333
Decrease in Income protection insurance from $538 to $504	34
ADD:- car expenditure claimed – invalid log book	10805
11172
LESS:- item as per amendment request:-
Increase of loan interest from $7007 to $8336	1329
1329
UNDERSTATEMENT	200772

I certify that the preceding one hundred and sixty two paragraphs and Attachment A are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,

Signed: ....................................................................
Leah Berardi Associate

Dates of Hearing 20 to 22 June 2011

Date of Decision  17 July 2012
Counsel for the Applicant  Ms R Ellyard
Solicitor for the Applicant  Mr J Price
Garland Hawthorn Brahe

Counsel for the Respondent Dr P Bender

Solicitor for the Respondent Mr A Nicholas
ATO Legal Services

Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission and Others [2000] HCA 47; (2000) 203 CLR 194; 174 ALR 585 at 205; 591 and see also Drake v Minister for Immigration and Ethnic Affairs [1979] AATA 179; (1979) 24 ALR 577; 2 ALD 60 at 590; 70 per Bowen CJ and Deane J and 602; 80
per Smithers J

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Citations

Armirthalingam and Commissioner of Taxation [2012] AATA 449

Most Recent Citation

Confidential and Commissioner of Taxation [2013] AATA 569

Cases Citing This Decision

2

Cammarano and Commissioner of Taxation (Taxation) [2022] AATA 3910

Confidential and Commissioner of Taxation [2013] AATA 569

Cases Cited

7

Statutory Material Cited

5

Guardian AIT Pty Ltd ATF Australian Investment Trust v Commissioner of Taxation [2021] FCA 1619

Federal Commissioner of Taxation v Dalco [1990] HCA 3

McAndrew v Federal Commissioner of Taxation [1956] HCA 62

Year	Mr Amirthalingham Won	Mr Amirthalingham Lost
2000	$0	$86,413.00
2001	$0	$46,596.00
2002	$0	$119,622.00

*Bet*	*Win/Loss*	*Remaining Funds*
$300	Loss	$1,000
$200	Loss	$800
$200	Loss	$600
$200	Loss	$400
$200	Loss	$200
$200	Loss	$0