Cripps & Jones Holdings Pty Ltd v Commissioner of Taxation

[1987] FCA 222

Re: CRIPPS & JONES HOLDINGS PTY. LIMITED
And: COMMISSIONER OF TAXATION
No. G407 of 1986
Income Tax

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Beaumont J.

CATCHWORDS

Income Tax - Taxation (Unpaid Company Tax) Assessment Act 1982 - making of notional assessment under s.15(4)(b) - whether condition precedent fulfilled - whether s.177 of the Income Tax Assessment Act 1936 conclusively deems condition precedent to be fulfilled.

HEARING

SYDNEY

#DATE 8:5:1987

Counsel and Solicitors for Applicant: R.P. Meagher Q.C. with J. Durack instructed by Minter Ellison

Counsel and Solicitors for Respondent: D.G. Hill Q.C. with S.W. Gibb instructed by Australian Government Solicitor

ORDER

The appeal be allowed.

The assessments be set aside.

The Commissioner pay the applicant's costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is an appeal from a decision of the Administrative Appeals Tribunal on a question of law arising under the Taxation (Unpaid Company Tax) Assessment Act 1982 ("the Assessment Act"). The proceedings are brought pursuant to the right of appeal created by s.224(2) of the Taxation Board of Review (Transfer of Jurisdiction) Act 1986.

1. The background facts are as follows. By letter dated 29 July 1983, the Deputy Commissioner wrote to the applicant on the stated subject "Taxation (Unpaid Company Tax) Assessment Act 1982 - Issue of Company and Undistributed Profits Tax Notices of Assessment in respect of Mainbar Pty. Ltd." In the letter, the Deputy Commissioner said that, according to records held by him, the applicant was the beneficial owner of shares in Mainbar prior to the sale of those shares in May 1974. (Although not mentioned in the letter, Mainbar had been dissolved, pursuant to s.308(4) of the companies Act 1961 (N.S.W.) on 27 March 1981). The letter proceeded:
   
   

"On that basis and in accordance with the provisions of the above Act enclosed are -

(a) the company's income tax notice of assessment for the year ended 30 June 1974; and

(b) a notice of assessment in respect of undistributed profits tax for the same year.

2. These notices are served on Cripps & Jones Holdings Pty Ltd as a preliminary step towards the raising of a recoupment tax assessment."

1. The notices of assessment were in the following form:
   
   

(FORM OMITTED)

1. The letter stated that the Assessment Act gave the applicant the same rights of objection and appeal against Mainbar's assessment as were available to that company.

2. On the same date the applicant received a similar letter and similar notices in respect of shares held by it in Shiprock Pty. Ltd. That company had also been dissolved - on 18 June 1976.

3. On 28 September 1983 the applicant lodged objections to the assessments. By notice dated 5 April 1984, the Commissioner gave notice disallowing the objections. Thereafter the objections were referred to a Board of Review. Pursuant to the provisions of the Taxation Boards of Review (Transfer of Jurisdiction) Act, the Tribunal dealt with the matter. The Tribunal, having found against the applicant on a number of preliminary points argued, affirmed the Commissioner's determination upon the objections. As had been said, the applicant now appeals to this Court. It is conceded by the Commissioner, correctly, that a question of law arises in the proceedings.

4. The legislation comprising the Taxation (Unpaid Company Tax - Vendors) Act 1982 and the Assessment Act is aimed at the collection of moneys found to be irrecoverable by way of company tax from companies which were stripped of the assets, including profits before tax and any assets representing provisions for tax, from which payment of the tax might otherwise have been made or recovered. The legislation seeks to impose liability upon the vendors of shares where the sale of the shares was followed by a stripping operation (see MacCormick v. The Commissioner of Taxation of the Commonwealth of Australia (1984) 158 CLR 622 at p 629). The outline made in MacCormick (at pp 630 et seq.) of the substantive provisions of the Assessment Act makes it unnecessary to describe the general purport of the legislative scheme. Section 15(4) of the Assessment Act is the material provision for present purposes. It provides:
   
   

"Where -

(a) the company ceased to exist before an assessment was made of the ordinary company tax or undistributed profits tax payable by the company in relation to a year of income (in this section also referred to as the 'relevant year of income'), being the year of income in which the last sale time or last purchase time in relation to the scheme occurred or a preceding year of income; and

(b) the Commissioner is of the opinion that, if the company had not ceased to exist and an assessment had been made of the ordinary company tax or undistributed profits tax, as the case may be, payable by the company in relation to the relevant year of income -

(i) ordinary company tax or undistributed profits tax, as the case may be, would have become due and payable by the company in relation to the relevant year of income; and

(ii) if that ordinary company tax or undistributed profits tax, as the case may be, had remained unpaid, recoupment tax would have become payable by a person or persons in relation to the ordinary company tax or undistributed profits tax, as the case may be, payable by the company in relation to the relevant year of income.

the Commissioner may make an assessment (in this section also referred to as the 'notional assessment') of the ordinary company tax (in this section also referred to as the 'notional ordinary company tax') or undistributed profits tax (in this section also referred to as the 'notional undistributed profits tax'), as the case may be, that would be payable by the company in relation to the relevant year of income if the company had not ceased to exist."

1. It is contended by the applicant that the Commissioner has never formed the opinion required to be formed by the provisions of s.15(4)(b). It is said that as a consequence of the failure to fulfil this condition precedent, the power to make an assessment under s.15(4) was not available and that the assessments should be set aside accordingly.

2. The Commissioner called no evidence in the proceedings other than the tender of certified copies of the notices of assessment. The ascertainment of the process of reasoning that led to the making of the assessments can only be achieved by drawing inferences from documentary material tendered by the applicant. This consists of extracts from the Commissioner's files, some answers to interogatories and correspondence between the solicitors.

3. In the Commissioner's file for Mainbar there is a document headed: "T (UCT) Assessment check list (to be completed by collection/recovery clerk or tracing assessor)". Part C of that document is headed: "Assessor check list. All actions to be finalised in order to issue notices pursuant to section 18 of T (UCT) Act".

4. (It will be necessary to explain the statutory position in further detail later when reference is made to the way in which the applicant presented its argument. It will suffice to note here that it is common ground that the subject assessments were made pursuant to s.15(4) and not pursuant to s.18. The latter provision deals with the different question of the notification of company tax liability by, inter alia, service of the company's assessment notice on the vendors of shares in the company. Although the power conferred by s.15(4) is to make a "notional" assessment only (the target company having ceased to exist), there is no power in s.18 to make any assessment, notional or actual.)

5. By letter dated 5 December 1985, the applicant's solicitors sought from the Australian Government Solicitor clarification of the reason why the "assessor check list" in the present case mentioned s.18 rather than s.15. By letter dated ll December 1986, the Australian Government Solicitor replied:
   
   

"The Commissioner does not accept your client's assertion that the question whether he purported to act pursuant to s.18 or s.15 is either an important or relevant matter in your client's appeal. In particular, the Commissioner rejects any assertion that the Commissioner is required to form an opinion whether the relevant company in each case had ceased to exist and he relies upon the provisions of s.177 and the authorities on that section.

However, in response to the questions asked in your letter, I am instructed to advise that the assessor concerned completed the check list in the manner which that list required, and that that list did not, in terms, require the assessor (nor, the Commissioner contends, does the Act so require him) to turn his mind to that question whether action is being taken pursuant to s.18 or s.15. The check list (and the Act) required, inter alia, that the assessor determine whether ordinary company tax or undistributed profits tax would have become due and payable, and that determination was made."

1. The applicant also relies upon the Commissioner's answers to the following interrogatories:
   
   

"1(a) Did the Commissioner, prior to forwarding the Notices to Cripps and Jones Holdings Pty. Limited, form the opinion that vendors recoupment tax was likely to become payable by a person or persons in relation to tax that might become payable by the Company?

1(b) Yes.

(By s.18(1)(b) of the Assessment Act, one of the conditions precedent to the service of a notice of assessment on the vendors of shares is that the Commissioner is of the opinion that vendors recoupment tax is likely to become payable. The applicant contends that since the answer to interrogatory 1 is consistent with this, it is at least some evidence that the Commissioner had embarked, wholly as it turned out, on a s.18 exercise rather than a s.15(4) assessment).

2(a) If the answer to question 1 is 'yes' were the Notices served on Cripps and Jones Holdings Pty. Limited following the formation of that opinion?

2(b) Yes.

3(a) Did the Commissioner, prior to forwarding the Notices to Cripps and Jones Holdings Pty. Limited, form the opinion that tax would have become due and payable by the Company in relation to the year of income?

3(b) Yes.

4(a) If the answer to question 3 is 'yes', did the Commissioner form that opinion i.e. the opinion expressed in question 3 upon the basis that, prior to the relevant tax becoming due and payable, an assessment would be made to the Company?

4(b) No.

5(a) If the answer to question 4 is 'no', upon what basis did the Commissioneer form the opinion expressed in question 3?

5(b) The contents of the balance sheet and profit and loss account of the Company for the year of income.

6(a) If the answer to question 3 is 'yes', did the Commissioner form that opinion i.e. the opinion expressed in question 3, upon the basis that the Company would not have ceased to exist prior to the assessment of tax being made?

6(b) No.

7(a) If the answeer to question 6 is 'no', upon what basis did the Commissioner form the opinion expressed in question 3?

7(b) See answer 5(b)

8(a) If the answer to question 3 is 'yes', did the Commissioner, prior to forwarding the Notice to Cripps and Jones Holdings Pty. Limited, form the opinion that if the relevant tax had remained unpaid recoupment tax would have become payable by a person in relation to the tax payable by the Company in relation to the year of income?

8(b) Yes.

9(a) If the answer to question 8 is 'yes' did the Commissioner form that opinion i.e. the opinion expressed in question 8, upon the basis that, prior to the relevant tax becoming due and payable, an assessment would be made to the Company?

9(b) No.

10(a) If the answer to question 8 is 'no', upon what basis did the Commissioner form the opinion expressed in question 8?

10(b) Not applicable

11(a) If the answer to question 8 is 'yes', did the Commissioner form that opinion i.e. the opinion expressed in question 8, upon the basis that the Company would not have ceased to exist prior to the assessment of tax being made?

11(b) No.

12(a) If the answer to question ll is 'no', upon what basis did the Commissioner form the opinion expressed in question 8?

12(b) The calculations made and appearing on 'TUCT assessment checklist Part B', a copy of which has already been furnished."

1. The applicant said that these answers reveal that at no stage did the Commissioner form the opinion required by s.15(4)(b): on the contrary, it submitted, the Commissioner appears merely to have looked at the company's accounts and sought to proceed under s.18 - an inappropriate provision in the present circumstances. Finally, the applicant relies upon an admission made by counsel for the Commissioner during the course of argument on the applicant's application for leave to administer interrogatories. In opposing the grant of that leave, Mr. Gibb said:
   
   

"Very shortly, the position is that we say that whilst it would be in order for my learned friend to seek to administer interrogatories directed to the commissioner's state of mind if it was necessary for him to form a particular opinion about some matter, and that were a live issue in the appeal, then there could be no question. We would submit that it would be proper to give leave to administer such interrogatories. The issue here, however, is that we say that the interrogatories are framed in such a way that they seek material relating to an opinion which we say the commissioner did not have to form and, therefore, the interrogatory really does not go to a matter in issue.

In any event, we say further, very briefly, your Honour, that in view of the material which has been already provided in an answer to questions, in particular in annexure H to the affidavit supporting the motion, that one has there, for whatever purposes the appellant may legitimately have, material by way of an admission which would be sufficient to set up the argument which was run below and run below unsuccessfully." (emphasis added)

(Transcript of proceedings before Einfeld J. on 6 February 1987 at p.35).

Later, Mr. Gibb said:

"Can I just put it this way, briefly. I think the critical issue in the appeal as it was below - there are other issues below which I think are still to be argued - but the critical issue was whether the commissioner had raised these assessments under section 18, which would be the normal section he would rely on, or whether he raised them under section 15 which dealt with the special situation where the company, the target company, had ceased to exist, and which provision, of course, had to be inserted into the act to deal with that very situation because without service you could have no assessment. Now, your Honour, the issue sought to be argued below was that the commissioner had really purported to act under section 18, whereas the correct section, so it is said, he should have acted under was section 15. To which we responded: well, we rely on section 177 which gives a conclusive effect to the assessment once it is put into evidence; and section 175 which assumes that all conditions precedent to the making of the assessment have been satisfied. And we relied on a line of cases, Bloemen in particular, so that, your Honour, for the purposes of my friend's argument, as I understand what he is doing, he is seeking to get a factual basis for his contention that the commissioner did not direct himself to matters that he should have directed himself to if he were acting under section 15. And so he seeks to get that. We respond to that by saying: well, we did not; and we have told you that. And here is the letter that says what the assessor did was, he had a checklist, he went through the checklist, he dealt with the matters he was required to deal with." (Emphasis added)

(Transcript at pp.38-9)

1. Questions of onus of proof apart, if the only evidence in the proceedings were the Commissioner's file and the notices of assessment, it may have been a difficult matter to decide what inferences should be drawn with respect to the actual processes of reasoning of the decision-maker, given his absence from the witness box. However, the admission made before Einfeld J. that the Commissioner did not direct himself to the question mentioned in s.15(4)(b), was not expressed to be limited to that interlocutory proceeding (cf. Briggs v. Deputy Federal Commissioner of Taxation; Ex parte Briggs (1986) 86 ATC 4748 at p 4,755). Nor has the Commissioner now sought to withdraw the admission. No explanation has been offered for the failure to call the decision-maker. Assuming, as I must, that it was convenient to call him, it would have been a simple matter for him to say, if it were the case, that he had addressed his mind to the matters indicated by s.15(4)(b) and had formed the requisite opinion. Instead, the Commissioner merely tendered the notices of assessment and sought to argue that, by virtue of s.177(1) of the Income Tax Assessment Act, the issue was conclusively presumed in his favour. In the circumstances, I must find that, for the purposes of this proceeding, when making the subject assessments the Commissioner did not address the question whether, if the target companies had not ceased to exist and an assessment had been made of the taxes firstly mentioned in s.15(4)(b), one or other of those taxes would have been payable by those companies as provided by s.15(4)(b)(i) and if one or other of those taxes had remained unpaid, recoupment tax would have become payable as provided by s.15(4)(b)(ii). In short, I find as a fact that the opinion mentioned in s.15(4)(b) was not formed in the present cases.

2. Before dealing with the respective contentions of the parties, it is necessary to mention some further statutory provisions.

3. Section 15(2) deals with the situation where a target company ceases to exist after an assessment has been made of the ordinary company tax or undistributed profits tax. It provides that the liability of the company is not to be affected by its disappearance. As has been noted, s.15(4) deals with the other situation of the company's disappearance before assessment. By s.15(7), the Commissioner shall serve notice of the notional assessment under s.15(4) on the vendors. By s.15(9), where a notional assessment is served under s.15(7), the vendors have the same rights under Division 2 of Part V of the Income Tax Assessment Act 1936 in respect of the notional assessment as the company would have had. (The present appeal is brought by virtue of s.15(9).) By s.15(11)(a), the notional assessment shall be treated as if it were an assessment made under the Income Tax Assessment Act of ordinary company tax or undistributed profits tax, as the case may be, payable by the company in relation to the relevant year of income. Section 15(12) provides:
   
   

"For the purpose of ascertaining the notional company tax that is applicable, at a particular time, in relation to the company in relation to the relevant year of income by virtue of the notional assessment, the provisions of the (Income Tax) Assessment Act apply in relation to the notional assessment and the notional ordinary company tax or notional undistributed profits tax, as the case may be, to which the notional assessment relates as if -

(a) the notional assessment were an assessment of the ordinary company tax or undistributed profits tax, as the case may be, payable by the company in relation to the relevant year of income; and

(b) the notional ordinary company tax or notional undistributed profits tax, as the case may be, were ordinary company tax or undistributed profits tax, as the case may be."

1. Finally, by s.4(1) of the Assessment Act -
   
   

"Unless the contrary intention appears in this Act, sections 6 and 7A, Part II, section 21, Parts IV and V, Division 1 of Part VI, and Parts VII and VIII of the (Income Tax) Assessment Act, and regulations made under that Act, apply for the purposes of the assessment and collection of recoupment tax, and the collection of late payment tax, in like manner, mutatis mutandis, as those provisions apply for the purposes of the assessment and collection of income tax under the (Income Tax) Assessment Act."

1. Reference should also be made to some of the provisions of Part IV of the Income Tax Assesssment Act. By s.175 -
   
   

"The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with."

By s.177(1) -

"The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct."

1. On behalf of the applicant it was submitted that, so far as presently relevant, the scheme of the Assessment Act is to provide former shareholders in companies which, after sale, have failed to pay income tax due, with the opportunity to object to assessments of tax made to those companies and to have those objections determined prior to becoming liable to receive assessments under that Act reflecting the tax liabilities of the companies concerned (i.e. recoupment tax assessments); that, for this purpose, the Assessment Act makes provision, in s.18, for service of the company's assessment (under the Income Tax Assessment Act) on the former shareholders and provides them with the same rights of objection to the company's assessment as the company itself had; that s.18(1) of the Assessment Act permits service of the company's assessment on a former shareholder if the Commissioner is required or permitted to serve notice on the company under the Income Tax Assessment Act and if he is of the opinion that vendors recoupment tax is likely to become payable; that, upon such service, the company itself has rights to object, service on the former shareholders being deemed service on the company and so also do the former shareholders; that s.18(5) makes provision for service of a copy of the notice of assessment on former shareholders where the notice of assessment has already been served on the company and the Commissioner is of the relevant opinion; that if a company has ceased to exist prior to an assessment being made, s.18(1) of the Assessment Act would not authorise service of the company assessment on the former shareholders - the Commissioner is neither required nor permitted by s.18(1)(a) to serve a notice of assessment on a non-existent company - it would be impossible to do so: s.166, read with s.174 of the Income Tax Assessment Act contemplates that assessments will be made in respect of existing entities. (Sections 216 and 220 of the Income Tax Assessment Act make special provision for tax not assessed to deceased persons during their life times to be assessed against their trustees or their estates. There are no similar provisions applying to companies. An assessment may, of course, be issued to the liquidator of a company but while the company is in liquidation it continues to exist).

2. According to the applicant's argument, the Assessment Act recognises this problem and the special position of non-existent ("disappeared") companies by providing, in s.15(4), for "notional" assessments to be made of the tax that would have been payable by the relevant company if it had not ceased to exist: it permits the Commissioner to do so only if the Commissioner is of the opinion specified in s.15(4)(b). Thus, it was contended that s.15(4), in dealing with non-existent companies, was quite different from s.18(1): the latter provision deals only with service of assessments made under the Income Tax Assessment Act with the consequence that both the company and the shareholders have rights of objection, whereas the former provision deals with a "notional" assessment on the company for the purpose only of providing the former shareholders with rights of objection. These rights are conferred by s.15(7). It follows, the applicant said, that service of an assessment under s.18(1) leads to quite a different result from service under s.15(7) of a "notional" assessment made under s.15(4).

3. The applicant then argued that since the Commissioner failed to form the opinion required by s.15(4)(b), the power to make an assessment under that provision was not available here (see Giris Pty. Ltd. v. The Commissioner of Taxation of the Commonwealth of Australia (1969) 119 CLR 365 at p 374; Danmark Pty. Ltd. v. Federal Commissioner of Taxation (1944) 7 ATD 333 (Full High Court) at p 352; Australian Broadcasting Tribunal v. Saatchi & Saatchi Compton (Vic) Pty. Ltd. (1985) 60 ALR 756 at pp 764-5).

4. The Commissioner sought to meet the applicant's case by a number of arguments which may be summarised as follows:
   
   

(i) Sections 175 and 177 of the Income Tax Assessment Act are imported into the operation of the Assessment Act by s.15(12)(a) thereof; it will be remembered that, by that provision, for the purpose of "ascertaining" the "notional" company tax of the target company, the relevant provisions of the Income Tax Assessment Act are picked up; "ascertain" means "to make (a thing) objectively certain, to fix" or "to make (a thing) certain, definite, or precise by determining its limits, extent, amount, position, etc.; to decide, fix, settle, limit"; the appellate process is part of the process of ascertaining the company tax; it is only when all appeals are finalised that the tax is finally ascertained; accordingly, the reasoning in F.J. Bloeman Pty. Ltd. v. Federal Commissioner of Taxation (1981) 147 CLR 360 applies so that the only issue is whether the assessment is excessive - its validity is conclusively established;

(ii) alternatively, ss.175 and 177 of the Income Tax Assessment Act are imported into the operation of the Assessment Act by s.4(1) thereof; the process of assessing the ordinary company tax is a necessary part of the process of assessing vendors recoupment tax (see, e.g. s.5(2)(e)) and is accordingly comprehended within the words "the assessment of recoupment tax";

(iii) in any event, the only relevant matter for discretion is whether there is ordinary company tax or undistributed profits tax that would have been payable if assessed; that is a matter to which the Commissioner directed his mind; the existence or non-existence of the company could not be relevant to this exercise of discretion; and

(iv) if, contrary to (iii), the exercise of discretion were relevantly to depend upon whether the Commissioner took into account the non-existence of the target companies, and this was a matter which was available to be litigated in the Board of Review or the Tribunal, the Tribunal had, by virtue of s.43 of the Administrative Appeals Tribunal Act 1975, had the powers of the Commissioner to exercise discretions and, like the Board of Review, "to do over again what the Commissioner did in making the assessment" (see Mobil Oil Australia Pty. Ltd. v. Federal Commissioner of Taxation

(1963) 113 CLR 475 at p 502). The relevant issue on an appeal from the Tribunal, having regard to ss.223 and 224 of the Taxation Boards of Review (Transfer of Jurisidiction) Act 1986 is whether the Tribunal erred in law in exercising its discretion and it knew of the striking off of the target companies (see B.O.A. Pty. Ltd. v. Federal Commissioner of Taxation 81 ATC 4028 at p 4030).

1. In my opinion, the assessments should be set aside. My reasons for this conclusion are as follows:
   
   

1. Read literally, s.15(4)(b) requires the formation by the Commissioner of the opinion previously mentioned before a "notional" assessment may be made. There is no reason to depart from the ordinary meaning of the words used in this provision. It follows that the power to issue a "notional" assessment in the present case was dependent upon the formation of the requisite opinion by the Commissioner. Since that question was not addressed by the Commissioner, it further follows that the antecedent conditions to the making of the assessments were not satisfied. Accordingly, the assessments were bad unless saved by some other statutory provision (see Giris, supra, at pp. 374, 379, 381-2, 384 and 388-9; W.J. & F. Barnes Proprietary Limited v. Federal Commissioner of Taxation (1957) 96 CLR 294 at pp 304, 311).

I should add, in this connection, that it was also submitted on behalf of the Commissioner that the formation of the requisite opinion was "legally irrelevant". It was said that the fact that the target company had disappeared was beside the point - the non-existence of the company could not alter the fact that it was liable for ordinary company tax and Division 7 tax. So much may be accepted but it is still not open to the Commissioner to ignore the statutory requirements of s.15(4)(b) that he must form the stated opinion before he can issue a special "notional" assessment which may bind third parties. It is hardly necessary to say that the Commissioner has no power to dispense with this requirement.

2. Neither s.175 nor s.177(1) of the Income Tax Assessment Act can validate the assessments. For this purpose, I am prepared to assume in favour of the Commissioner without deciding the point, that ss.175 and 177(1) are picked up by either s.4(1) or s.15(l2) of the Assessment Act and made, potentially at least, applicable to a "notional" assessment purportedly made under s.15(4)(b). I will deal with ss.175 and 177(1) separately.

(a) As to s.175: As Mason and Wilson JJ. observed in Bloemen, supra, at p.371, s.175 does not, and cannot, create a valid assessment where no assessment has been made at all. At least in proceedings for review under Part V of the Income Tax Assessment Act, as here, s.175 does not deprive a taxpayer or a party in his position of any right to challenge an assessment on the ground that the opinion required by the statute to ground the assessment had not been formed.

(b) As to s.177(1): It will be remembered that, by this provision, the production of a notice of assessment shall be "conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars are correct." It was argued by the Commissioner that the present case fell within the first limb of s.177(1) as part of the "due making" of the assessment. He claimed that the "notional" assessments were thus not capable of challenge on the ground of the non-fulfilment of an antecedent condition in the form of the requisite statutory opinion. He said that the formation of that opinion was part of the "due making" of the assessment which, by virtue of s.177(1), was conclusively presumed to be valid and thus non-justiciable in any proceedings.

There appears to be some support for this view in dicta of Kitto J. in McAndrew v. Federal Commissioner of Taxation (1956) 98 CLR 263 at p 275. But the weight of judicial authority is contrary to the Commissioner's contention (see George v. Federal Commissioner of Taxation (1952) 86 CLR 183 per Dixon C.J., McTiernan, Williams, Webb and Fullagar JJ. at pp 205-7; McAndrew, supra, per Dixon C.J., McTiernan and Webb JJ. at pp.270-1; per Taylor J. at pp.281-2). In Bloemen, Mason and Wilson JJ. (with the concurrence of Stephen and Aickin JJ.) said of the relevant statements in George and McAndrew (at p.374) -

"These statements do not support the appellants. They acknowledge that the existence of the antecedent conditions is not part of the 'due making' of an amended assessment, but they do not say that the ascertainment of the taxable income also stands outside that concept. Furthermore, as the power to amend, unlike the Commissioner's power to make his initial assessment, is conditioned in this way, it is natural that s.177(1) should be so interpreted as to permit the taxpayer to challenge the existence of the conditions giving rise to the exercise of a power which imposes on him a new substantive liability to tax."

1. Later, their Honours said (at p.375) -
   
   

"An explicit and, in our view, correct statement of the effect of s.177(1) was made by Taylor J. in McAndrew. For the reasons there expressed his Honour concluded that 's.177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground'. He conceded that the word 'excessive' in s.190(b) was inappropriate. However, he considered that an assessment 'made in purported but not justifiable exercise of a statutory power' could properly be described as 'excessive'.

This interpretation gives expression to the policy which underlies, and is manifest in, the statutory provisions."

The rights of review given to the taxpayer by Part V are "comprehensive" (see Bloemen per Mason and Wilson JJ. at p.376). It is implicit, if not explicit in cases such as Giris, supra, and Barnes, supra, that, in an appeal at least, the taxpayer or a party standing in his shoes may seek to challenge an assessment or a "notional" assessment on the ground that the stated opinion did not exist.

3. It is not open to the Commissioner to contend that the Tribunal itself formed the opinion required of the Commissioner even if the Commissioner overlooked the matter. For this purpose, the Commissioner relied upon the following passage in the reasons of Mr. P.M. Roach, Senior Member, giving the reasons of the Tribunal:

"The Assessment Argument As the matter stands before us it appears that neither target company existed at the date of 'assessment'. That being so section 15(4) of the TUCT Assessment Act applied. That sub-section required that the Commissioner should make 'an assessment' which for convenience would be called a "notional assessment" of the ordinary company tax (or undistributed profits tax, as the case might be) 'that would be payable by the (target company) in relation to the relevant year of income if the company had not ceased to exist'. No provision of the TUCT legislation required the Commissioner to nominate which head of power he was purporting to exercise. (I do not overlook the circumstance that it seems that at the time the references together with required formal documents were submitted to the Board by a formal covering letter addressed only to the Chairman, the Commissioner referred in one case to a section 15 assessment and in the other to a section 18 assessment. At most that reflects some latter confusion and misunderstanding.) For present purposes I am satisfied that the 'assessments' were raised in conformity with the provisions of the TUCT legislation and section 15(4) of the TUCT Assessment Act in particular."

In my opinion, this passage is not capable of the construction sought to be attributed to it by the Commissioner. The Tribunal is there dealing with the matter by way of a review of what the Commissioner had already done rather than purporting to form a fresh opinion as part of an independent exercise of power by the Tribunal. It may well have been open to the Tribunal to form the requisite opinion but, in my view, it did not purport to do so.

1. I make the following orders:
   
   

1. Appeal allowed.

2. Order that the assessments be set aside.

3. Order that the Commissioner pay the applicant's costs.