Commissioner of Taxation v Bazzo

The case of Commissioner of Taxation v Bazzo involved a dispute between the Commissioner of Taxation and Ms Bazzo over assessable income, penalties, and the merits review of objection decisions by the Administrative Appeals Tribunal (AAT). Ms Bazzo appealed against the AAT's decision to dismiss her objection to the Commissioner's amended assessments, while the Commissioner cross-appealed against the AAT's decision to allow Ms Bazzo's objection to the penalties imposed. The Federal Court was required to determine whether the AAT correctly applied the law in assessing Ms Bazzo's income and penalties and in reviewing the objection decisions.

The court held that the AAT did not err in rejecting the 'all or nothing' approach to the taxpayer's onus under s 14ZZK(b)(i) of the Income Tax Assessment Act 1936 (Cth) (ITAA36). Instead, the AAT was required to make findings as to the extent of Ms Bazzo's income according to ordinary concepts. The court also found that the AAT had failed to consider Ms Bazzo's submissions regarding the remission of penalties and had misapplied the law in determining that the 20% uplift on the shortfall penalty under s 284-220(1)(c) of the Taxation Administration Act 1953 (Cth) did not apply because no penalty had been applied 'previously'. Finally, the court held that the AAT erred in its approach on review in determining whether there was fraud or evasion by not forming its own opinion, as required by s 170(2) of the ITAA36.

As a result of the court's decision, the appeal was dismissed, and the cross-appeal was allowed. The court ordered that within seven days each party provide a minute of proposed orders to give effect to these reasons, including any order as to costs. Within 14 days, each party must provide written submissions of no more than five pages together with any necessary affidavit in support of the orders sought by that party which are not agreed. The question of the orders to be made on the cross-appeal was to be determined on the papers.