Cassaniti and Commissioner of Taxation (Taxation)

[2020] AATA 3447

Cassaniti and Commissioner of Taxation (Taxation) [2020] AATA 3447 (8 September 2020)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2019/4802, 2019/4803, 2019/4804, 2019/4805

Re:Ivana Cassaniti

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Mr Rob Reitano, Member

Date:8 September 2020

Place:Sydney

The Tribunal extends the time in which the application for review may be filed to 9 August 2019.

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Mr Rob Reitano, Member

CATCHWORDS

PRACTICE AND PROCEDURE – interlocutory application – extension of time – application for review of taxation objection decision – principles to be applied – acceptable explanation for the delay – resting on rights – prejudice – arguable case – where extension of time reasonable in all the circumstances – extension of time granted

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth) s 29

Taxation Administration Act 1953 (Cth) ss 14ZY, 14ZZ, 14ZZC

CASES

Brown v Federal Commissioner of Taxation [1999] FCA 563

Hunter Valley Developments Pty Ltd v Cohen, Minister for Home Affairs and Environment [1984] FCA 176
Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation [1991] FCA 506

Windshuttle v Commissioner of Taxation (1993) 46 FCR 235

REASONS FOR DECISION

Mr Rob Reitano, Member

8 September 2020

1. This case is about the circumstances in which it is reasonable to provide for a period longer than 60 days for a person to bring an application for review of a decision made under Part IVC of the Taxation Administration Act 1953 (Cth) (Tax Act).

2. Section 14ZZC of the Tax Act modifies s.29 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) so that a person seeking a review of an ‘objection decision’, which is a decision made by the Commissioner of Taxation (Commissioner) under s.14ZY of the Tax Act, has 60 days rather than 28 days from the date of decision to make that application.

3. Section 14ZZC leaves undisturbed ss.29(7) of the AAT Act so that the time limits established by s.14ZZC might in some cases be extended by providing a mechanism for making the period longer ‘upon application in writing… if the Tribunal is satisfied that it is reasonable in all the circumstances to do so.’

4. Ivana Cassaniti (Ms Cassaniti) has made a written application to the Tribunal by which she seeks a period longer than 60 days to have an objection decision reviewed by the Tribunal. Ms Cassaniti says there are circumstances that should satisfy the Tribunal that it is reasonable in all the circumstances to extend the time to pursue a review of the objection decision made on 27 October 2017 (Decision). Ms Cassaniti seeks an extension until 9 August 2019 which is when she purported to file an application under s.14ZZC which involves an extension of time of approximately 21 months.

5. I have decided under ss.29(7) of the AAT Act to extend the time for Ms Cassaniti to make her application for a review of the Decision to 9 August 2019. These are the reasons for that decision.

   FACTS

6. On 20 July 2016, following an audit by the Commissioner, amended notices of assessment were issued to Ms Cassaniti for the income tax years ending 30 June 2010 and 30 June 2011 which resulted in an increase in her taxable income by $795,183 and $494,727 respectively in each of those years. The audit also disclosed unexplained deposits amounting to $187,114 and $298,572 for the income years ending 30 June 2012 and 30 June 2013 which were treated by the Commissioner, as he is entitled to do, as income. The Commissioner imposed administrative penalties and shortfall interest charges for various failures associated with returns for the income tax years ending 30 June 2010, 30 June 2011, 30 June 2012, and 30 June 2013. It is not necessary to catalogue those penalties and interest charges any further for present purposes.

7. On 19 September 2016 Ms Cassaniti lodged objections to the 30 June 2010 and 2011 amended notices of assessment, the 30 June 2012 and 30 June 2013 notices of assessment, the penalties and the shortfall interest charges.

8. In July 2017 Ms Cassaniti’s father was diagnosed with lung cancer. Ms Cassaniti was, together with her mother, her father’s primary carer between then and 29 November 2019 when he died. She was responsible for taking him to and from medical appointments, to and from hospital and other aspects of his care.

9. Ms Cassaniti’s evidence about her need to care for her sick father as one of his primary carers was given in a frank and genuine way. She did not exaggerate or overstate what needed to be done in her capacity as a primary carer of her father. She referred to the fact that she was one of four siblings but the others being in full-time employment were constrained in what they could do to assist their father. She referred to the fact that she drove her father and remained with him during almost all his medical treatments. Her evidence that: ‘You know, if I had a choice between going and sitting at chemotherapy with him and doing my objection, I’d choose that any day’ was to the point and believable.

10. She also referred to the profound affect her father’s illness and death had on her mental health. I accept Ms Cassaniti’s evidence about her role in caring for her father and the effect it had on her, even though she has not produced any medical evidence to support the conclusion. I do not consider her evidence to be that she was suffering from some diagnosed medical condition but rather it is her attempt to portray to others the impact her father’s illness had on her mental wellbeing. It is not difficult at all to appreciate the effect that the circumstances of a terminally ill father and his subsequent death would have upon one of his children in the manner she has described.

11. On 27 October 2017 the Commissioner issued the Decision. Ms Cassaniti enjoyed partial albeit limited success. It was from that date that Ms Cassaniti had 60 days to file her application for a review of the Decision; that is, Ms Cassaniti had until 28 December 2017 to file her application for review.

12. At some stage in late 2017 Ms Cassaniti was involved in a dispute with Messrs Dormer Stanhope, who were then acting for her not only in the objection decision matter but also, so it would seem, in some other matters. The dispute was apparently about the costs that Messrs Dormer Stanhope had charged Ms Cassaniti.

13. On 19 January 2018 Ms Cassaniti gave Messrs Dormer Stanhope an authority to transfer her file to Messrs Kekatos Lawyers. Messrs Dormer Stanhope claimed a lien over the file. The costs dispute resulted in an assessment of costs which is presently the subject of an application for a review that has not yet been determined. Messrs Dormer Stanhope have maintained their lien over the file concerning the objection decision. Ms Cassaniti reconstructed her file for the purposes of this application.

14. Since 2017 Ms Cassaniti has been involved in three other sets of legal proceedings: one in the Supreme Court of New South Wales commenced by a liquidator in which companies of which she or her husband are directors and shareholders, and she personally, are defendants; a second involving the enforcement of a settlement which concluded in April 2018; and a third involving proceedings in the Federal Court of Australia. Ms Cassaniti gave instructions and provided evidence in at least two of those proceedings. On the face of things, the two outstanding proceedings appear to be rather large pieces of litigation.

15. Ms Cassaniti was aware since at least January 2018 that she intended to pursue an application for review of the Decision before the Tribunal. She said she did not do so ‘because I had all these other Court matters. I had children to look after and I had a sick dad’. I accept that was her reason for not filing an application in time. She did not, at any time before filing her application with the Tribunal, telegraph her intention to pursue a review at some time in the future to the Commissioner.

16. On 9 August 2019 Ms Cassaniti filed the application for a review under ss.14ZZ(1)(a)(i) of the Tax Act and the application to extend time under ss.29(7) of the AAT Act. The stated reason for the application to extend time was that the review was necessary to ensure Ms Cassaniti paid the correct amount of tax and that there was no prejudice to the Commissioner in allowing her to pursue her review.

    ISSUE

17. The deceptively simple issue is whether ‘the Tribunal is satisfied that it is reasonable in all the circumstances to’ provide Ms Cassaniti with a longer period to file her application for a review of the Decision, that is, until 9 August 2019.

    PRINCIPLES

18. Sub-section 29(7) of the AAT Act sets out the test for determining whether an extension of time to file an application for review with the Tribunal should be granted: namely, whether ‘the Tribunal is satisfied that it is reasonable in all the circumstances’ to extend time.

19. An assessment of what may lead to the required state of satisfaction involves an objective assessment of all the circumstances. Needless to say, the guidance found in the statement of principles in cases like Hunter Valley Developments Pty Ltd v Cohen, Minister for Home Affairs and Environment [1984] FCA 176 (Hunter Valley Developments) and later, specifically in relation to objection decisions relevant to taxation matters, Brown v Federal Commissioner of Taxation [1999] FCA 563 (Brown) assist in identifying the matters and the approach that should be taken in determining what is ‘reasonable in all the circumstances’. Those cases do not restrict the width of the matters that are relevant because of the phrase ‘all the circumstances.’ It is necessary to ensure that mindless adherence to the guidance offered in those cases does not stand in the way of arriving at what in each case must be ‘reasonable’.

20. Hunter Valley Developments and Brown direct attention to matters that provide a useful framework for determining what is reasonable. The matters to which attention is specifically drawn include whether there is an acceptable explanation for the delay; whether the taxpayer simply rested on her or his rights; whether there is prejudice between the parties or as a wider matter prejudice to the public, occasioned because of the delay; and the merits of the case. The category of matters that might be relevant in a case is not confined to these matters and other factors which point to the reasonableness of allowing more time to file an application for review may be relevant. I will deal with each of these matters in turn.

    AN ACCEPTABLE REASON FOR THE DELAY?

21. The first matter is whether there is an acceptable explanation for the delay. This requires a consideration of the circumstances that led to the application not being made within the time limit of 60 days, and in this case, 21 months thereafter.

22. Ms Cassaniti’s explanation for the delay was the fact that she had to care for her children and her sick father as well as her involvement in other litigation. In argument, she did not  refer to the effect that she considered her father’s terminal illness and death had on her mental health, but I accept that too would have played its part in her failure to make an application within the prescribed time.

23. It was not entirely clear from the evidence whether or not Ms Cassaniti had much control over the timing of the other proceedings, or the things that need to be done in respect of them. In respect of two of the sets of proceedings, it seems that she did not initiate the proceedings, so it is unlikely that she had control over the timing of them, and most probably, the steps that needed to be taken in respect of them. Her father’s illness and her role as one of his primary carers, in addition to having four young children, is also unlikely to have helped much.

24. Balanced against these circumstances, Ms Cassaniti was completely frank in her evidence that she knew in January 2018 she intended to pursue her right of review but did nothing about it. Of course, objectively viewed, commencing proceedings for that review would not be a time consuming or difficult thing to do in itself, whether it involved instructing solicitors to do so or not. This is especially so given Ms Cassaniti is trained and works as an accountant and had decided she wanted to pursue that course. Presenting her solicitors with a copy of the objection decision and instructing them to commence proceedings would not have been time consuming or difficult.

25. Even so, the circumstances that presented themselves to Ms Cassaniti were out of the ordinary. ‘Exceptional circumstances’ is not the test I am required to apply. The authorities eschew that test.[1] However, in this case it does assist in putting the delay in a particular context. The 60 day time limit can be, as I have said, presumed to be generally intended to apply in ‘normal’ or ‘usual’ circumstances. The circumstances confronting Ms Cassaniti involved the coming together of two significant things, her father’s illness and the other substantial proceedings, that undoubtedly took up time and energy and diverted attention from the application that needed to be made to this Tribunal.

    [1] Brown at [47].

26. There is an explanation for the delay in this case. It is difficult to make a value judgment about the ‘acceptability’ of the reason for the delay other than to say this is not a case where the explanation is so compelling as to of itself warrant an extension or so non-compelling as to be dismissive about it. Nonetheless, it does provide some plausible or understandable reason as to why it took so long for the application to be filed.

27. I do not consider that Ms Cassaniti prioritised her time in a way that was either leisurely or deliberate. It was rather a case of her first dealing with the things that were confronting her more immediately. Her father’s illness and death and her need to be involved in the litigation to which she was party either directly or indirectly were not things that she had much control over moving to the top or bottom of her ‘to do’ list.

28. I should add, if only for completeness, that I do not accept that her dispute with her former solicitors over costs, and the lien they claimed over her file, had much to do with the delay at all. In terms of her affidavit evidence, Ms Cassaniti said no such thing. Nor did the dispute with her former solicitors rate a mention in her answers in cross-examination when she was asked about the cause of, or reason for, the delay.

    RESTING ON RIGHTS?

29. The second matter I need to consider is whether Ms Cassaniti simply rested on her rights. As I referred to earlier, she took no steps at all to inform the Commissioner that she intended to pursue her right of review. There is no evidence that she took any other steps in seeking to have the ‘issues’ raised by the objection decision resolved. It would have been simple for her to have informed the Commissioner of her intention and of her reasons for not filing an application for review both within the 60 days or at any time during the 21 months that followed. It is relevant to consider together with the effect, or likely effect, of Ms Cassaniti adopting the course she took in not telling the Commissioner what her intentions were. Even so, this matter weighs against granting the extension of time.

    PREJUDICE

30. The third matter is whether there is any prejudice arising from the delay or the grant of an extension. The Commissioner, quite properly in the light of the observations in Brown, did not assert or even attempt to assert any prejudice following on from Ms Cassaniti’s delay.

31. There is no other consequence of the delay, perhaps other than that Ms Cassaniti herself is potentially out of money and that she might be, and in this case is in fact, subject to recovery action by the Commissioner if she does not meet her obligations. The only apparent prejudice in failing to pursue her right of review in time or even in a timely manner is to Ms Cassaniti. Brown went so far as to suggest that it may be desirable to take ‘into account against the absence of prejudice to the Commissioner, the considerable prejudice to a taxpayer who is otherwise denied a right of independent review of an assessment which he or she claims to be excessive.’[2] I do not need to consider that issue here.

    [2] at [55].

    ARGUABLE CASE

32. The fourth matter that is necessary to consider is the merits of Ms Cassaniti’s case. There are two issues: first, upon what basis an arguable case is to be determined and second, what is involved in the notion of an arguable case in a matter of this kind. It is convenient to deal with these matters before dealing with the circumstances of this case. I will deal with them separately.

    What is an ‘arguable case’?

33. The basis on which consideration is given to whether there is an arguable case is by reference to the factual contentions asserted by a taxpayer in their objection. Aside from circumstances where the facts asserted are fanciful or readily disproved, it generally is not appropriate in an application to extend time, which is interlocutory in nature, to go any further. There is no issue that a complete hearing on the merits, perhaps absent consent of both parties and acquiescence in that course by the decision maker, is not appropriate at this stage of proceedings. In Windshuttle v Commissioner of Taxation (1993) 46 FCR 235 (Windshuttle), von Doussa J cautioned against a full scale consideration of the merits of a case where the issue was one that involved an extension of time. Windshuttle disavowed resorting to attacks on facts based on questions of credit or preferring witnesses over one another. It was only when a factual flaw was ‘obvious and easily demonstrated’ would it be appropriate to challenge such matters.[3]

    [3] at 244.

34. In Brown, Hill J followed Windshuttle observing that:

    [25] A party seeking to have the time for objection extended is not required in applying to the tribunal for a review of an adverse decision to undergo at that stage a trial on the merits. There is little doubt that a hearing on the merits would require a close examination of all the circumstances in which the transfer to Mr Brown occurred. For the Tribunal to deal with an application for an extension of time as if it involved a trial on the merits would (unless that course was consented to by the Applicant) involve a denial of natural justice. It was not suggested that this course was consented to by Mr Brown. Had it been, then no doubt efforts would have been made to have Mr Ray present and perhaps also Mr Dickson. As it was they were not called.

    [26] It will be a rare case (unless the parties consent) that the tribunal in considering whether the objection sought to be lodged has merit will proceed to consider for itself the facts. This is particularly so where the issue is predominantly one which involves an examination of all the circumstances of a particular transaction. No doubt an extension of time would not be granted where the facts claimed to exist do not lead to a conclusion that the assessment is excessive…

    [27] But where, as in the present case, the facts contended for by an applicant in his objection as supplemented by statements lodged with the tribunal in connection with the application are such that it would be open to a tribunal to find for the Applicant… it involves legal error for the tribunal to embark upon a trial of the merits and conclude as a result of that trial that if allowed to object out of time the objection would be futile because the taxpayer must lose.

35. Having regard to the observations in Windshuttle and Brown,  I confine my consideration of the merits of the application to a consideration of the facts as contended by Ms Cassaniti and supplemented by statements before the Tribunal.

    What should the argument be about?

36. The second aspect concerns what Ms Cassaniti needs to demonstrate about her prospects of success. In short, to succeed in her application for review Ms Cassaniti must demonstrate that the Commissioner has not only made an error in his assessment but also what the extent of that error is.[4] Ms Cassaniti must demonstrate on final hearing that she has been required to pay too much tax. At this stage, she must demonstrate that she has an arguable case that she has been required to pay too much tax. There must be an arguable case in the sense that the case is not frivolous, a futility or bound to fail.[5] The threshold has been described as a ‘low one’.[6] The extent of the amount by which she has been required to pay too much tax is not relevant except, perhaps, if the amount is trifling or of little consequence in the sense that it is only consistent with a case that is frivolous such that extending time might or would not be reasonable. That is obviously not this case.

    [4] Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation [1991] FCA 506.

    [5] Brown at [56].

    [6] supra.

    Does Ms Cassaniti have an arguable case?

1. The substance of Ms Cassaniti’s case is that she can explain at least some of the deposits which the Commissioner treated as income by reference to the details of various transactions. I will deal only with some of the deposits that Ms Cassaniti seeks to undermine as being ‘unexplained’ because as I have observed it is only necessary for her to make good an arguable case that she has paid too much tax. I will deal with the four matters that were raised at the interlocutory hearing because a consideration of those is sufficient to dispose of this application

2. First, Ms Cassaniti refers to records of several transactions relating to the purchase and refinance of an Alfa Romeo car. Ms Cassaniti appears, on the face of things, to have purchased the Alfa Romeo car on about 16 September 2011. She paid for the vehicle in large part by using money she obtained from Banq Corp Pty Ltd (Banq Corp). Ms Cassaniti gave evidence to the effect that Banq Corp loaned her those funds. She points to the fact that in March 2012 she directed loan funds advanced to her by National Australia Bank to be credited to Banq Corp. This, so the argument runs, was a refinancing of the loan to purchase the vehicle. The argument is straightforward – if the monies were in fact a loan then their source has an explanation that suggests they were not income and should not have been assessed as such.

3. The Commissioner effectively invited rejection of the argument based upon material that was provided by Ms Cassaniti that painted a very different picture – in effect that the Alfa Romeo was never legally owned by Ms Cassaniti, she at all times only held the car for the benefit of Banq Corp and that Banq Corp had at all relevant times claimed beneficial ownership of the car and treated it as its own for all relevant purposes.

4. It is not necessary here to determine which, if either, of the versions put forward are correct. At this stage there is, at least, an arguable case that the amounts in question have been wrongly treated as income. It may be upon a final hearing, when all the evidence is reviewed, presumably after testing at hearing, that the Commissioner’s contention is a good one. But that does not detract from the fact that the argument is yet to be had which at this stage appears, if Ms Cassaniti is correct as to the asserted facts, has some merit.

5. Second, the stamp duty paid in respect of the Alfa Romeo which was part of the funds advanced to Ms Cassaniti by Banq Corp was not treated by the Commissioner as unexplained deposits and therefore as income in the year ending 30 June 2012 – the Commissioner treated it as income in the following year. The amount may well only have been small, $1,344, but it is clear on any view that amount was advanced to Ms Cassaniti in the year ending 30 June 2012 such that if it was to be treated as income it should have been treated as income in that year. Ms Cassaniti has an argument based on those facts that the amount was wrongly treated as income in the year ending 30 June 2013.

6. Third, Ms Cassaniti argues that the Commissioner’s consideration of funds she was claimed to have used to purchase a Harley Davidson motor bike was wrong. Ms Cassaniti says she received the vehicle as a gift and sold it sometime later. The Commissioner points to a document produced by Service NSW titled ‘Confirmation of Registration’ which contains the words ‘The above vehicle was purchaased (sic) by Ivana Cassaniti on 18/03/2011 and disposed of on 18/07/2016.’ The Commissioner says that because the vehicle was disposed of for $13,200, he will treat that amount as the purchase price that Ms Cassaniti paid for the motor bike, her having that amount of money is unexplained and it is treated as income.

7. Ms Cassaniti says the Commissioner is wrong because the motor bike was in fact a gift to her in March 2011. She provided a statutory declaration of Ms Jillian Edwards deposing to the fact of the gift. The Commissioner points to various inconsistencies in dates (which for my part I do not find surprising given that some of them are about things that happened ten years ago) and the use of the word ‘purchaased’ in the Service NSW document. Given the other evidence, it is arguable that not the only error in that document concerns the misspelling of the word ‘purchased’. The Commissioner points to other evidence, tepidly inviting me to make credit findings reliant upon findings in other cases concerning some of the people associated with this transaction, concerned with Ms Cassaniti’s receipt of the motor bike. I have already indicated that I do not consider that such an approach is the one I should adopt. It is sufficient that on the facts asserted by Ms Cassaniti, which may be tested and fully dealt with upon final hearing, that there is an arguable case.

8. Fourth, the Commissioner treated as income money deposited into a bank account that Ms Cassaniti says were in respect of the disposal of a Ford motor vehicle. The money was deposited to her and her husband’s bank account on 22 September 2010, but the Department of Transport records show that ownership of the vehicle did not transfer until about a week later. The Commissioner treated the amount as income because the dates of the deposit and the Department of Transport records were not the same. Ms Cassaniti says that was a wrong basis for treating the amount as income as it was the Department of Transport and the purchaser that had control over when the transfer was registered and not her. Ms Cassaniti maintains she sold the vehicle on the day she deposited the funds.

9. The Commissioner says that Ms Cassaniti has not brought sufficient evidence to support her claim that she sold the vehicle, presumably because she has not brought evidence from the putative purchaser who Ms Cassaniti is able to identify. The Commissioner says that there are ‘questions’ about why the funds were processed through the Banq Corp accounts and not directly from the purchaser and asserts a completely different view of the facts. In my view these are all matters that might be relevant to a determination on the merits at the final hearing. They do not assist a great deal at this stage other than, perhaps, in identifying that there is an argument to be had.

10. Ms Cassaniti’s argument has a sufficient degree of respectability about it such I am satisfied she has an arguable case.

11. There are other matters concerning loans that are in issue, but I do not need to consider those loans for present purposes given the view I taken of the matters already referred to, which I consider demonstrate that Ms Cassaniti has an arguable case. I accept the Commissioner’s submission that because of the way the hearing was conducted it is not appropriate to consider these other matters further at least at this stage of the proceedings. The Commissioner suggested that the items I have considered accounted for only a ‘small’ portion of the total amounts referred to in the Decision. That may well be so but even if the Decision is wrong by only a small amount on an arguable case basis the fact remains that it is in error. Also, it is relevant that because it is the whole of the Decision that is the subject of the review and it cannot be compartmentalised or severed so it is not to the point that it may only have been shown to have been arguably wrong in a small amount. Ms Cassaniti has demonstrated that she has an arguable case that the Decisions is wrong insofar as she has been required to pay too much tax.

    CONCLUSION

12. In considering each of the matters to which I have referred, it is important to not lose sight of the fact that the over-arching purpose of a provision allowing an extension time is to avoid injustice or, perhaps more accurately, the prospect of injustice. I consider that Ms Cassaniti’s explanation for her delay is acceptable. It explains why she did not adhere to the 60 day time limit. There is a certain reality about everything that was happening at the time and no doubt the effect it was having upon her. I do not consider that she engaged in some deliberate or pre-determined strategy of forestalling her application for some other and ulterior reason. There is no prejudice to the Commissioner and, quite properly none has been relied upon. The only prejudice occasioned by any delay is to Ms Cassaniti herself. On the material put forward by Ms Cassaniti, I consider she has an arguable case for demonstrating error in that she has been required by the Commissioner’s Decision to pay more tax than she should.

    DECISION

13. These considerations when weighed together persuade me that I should extend the time for Ms Cassaniti to lodge her application for review under ss.14ZZ(1)(a)(i) of the Tax Act to 9 August 2019 because I am ‘satisfied that it is reasonable in all the circumstances to do so’.

I certify that the preceding 49 (forty -nine) paragraphs are a true copy of the reasons for the decision herein of Mr Rob Reitano, Member

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Associate

Dated: 8 September 2020

Date(s) of hearing:	5 June 2020
Date final submissions received:	28 July 2020
Counsel for the Applicant:	Mr I Young
Solicitors for the Applicant:	V L Macri Lawyers
Counsel for the Respondent:	Mr R Coffey
Solicitors for the Respondent:	Australian Taxation Office