Deputy Commissioner of Taxation v Richard Walter Pty Ltd
Case
•
[1995] HCA 23
•3 May 1995
No judgment structure available for this case.
HIGH COURT OF AUSTRALIA
MASON CJ BRENNAN, DEANE, DAWSON, TOOHEY, GAUDRON AND McHUGH
DEPUTY COMMISSIONER OF TAXATION v RICHARD WALTER PTY. LTD.
(1995) 183 CLR 168
23 February 1995
Income Tax (Cth)—Notice of assessment—Validity—Conclusiveness—Assessment of taxpayer—Assessment of another person in respect of same income—Whether taxpayer's assessment definitive—Whether assessments evidence of bad faith or improper purpose on part of Commissioner—Provision making notice of assessment conclusive evidence of due making assessment—Whether purports to deprive Federal Court of jurisdiction to make orders against Commissioner—Income Tax Assessment Act 1936 (Cth), ss 175, 177(1)—Judiciary Act 1903 (Cth), s 39B(1). Federal Court of Australia—Jurisdiction—Matter in which mandamus, prohibition or injunction sought against officer of Commonwealth—Provision making notice of assessment—Whether purports to deprive court of jurisdiction—Income Tax Assessment Act 1936 (Cth), ss 175, 177(1)—Judiciary Act 1903 (Cth), s 39B(1).
Headnote
Section 175 of the Income Tax Assessment Act 1936 (Cth) provided: "The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with." Section 177(1) provided: "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 under Part IVc of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct."
Section 39B(1) of the Judiciary Act 1903 (Cth) vested in the Federal Court "jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth".
Held, by the whole Court, (1) that the Commissioner may issue assessments on an alternative basis to different taxpayers in respect of the same income.
Richardson v Federal Commissioner of Taxation (1932) 48 CLR 192 and Deputy Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55 at 67, applied.
(2) That the fact that the taxpayer and another person have received assessments relating to the same amount of income does not evidence bad faith or improper purpose on the part of the Commissioner or mean that the taxpayer's assessment is tentative and not definitive.
Federal Commissioner of Taxation v S Hoffnung and Co Ltd (1928) 42 CLR 39, distinguished.
Held, further, by Mason CJ, Dawson, Toohey and McHugh JJ, that s 177(1) did not purport to deprive the Federal Court of the jurisdiction conferred by s 39B(1) of the Judiciary Act.
David Jones Finance and Investments Pty Ltd v Federal Commissioner of Taxation (1991) 28 FCR 484, disapproved.
Deane and Gaudron JJ were of the opinion that s 39B(1) overrode or amended s 177(1) to the extent that it would make a certificate conclusive evidence of the due making of an assessment in proceedings in the Federal Court under s 39B(1) in which the applicant's case was that an assessment was invalid on the ground that it was not bona fide.
Per Brennan J (1) Where s 175 declares the validity of an assessment to be unaffected by non-compliance with the general provisions of the Act governing the ascertainment of a taxpayer's assessable income and tax liability, that provision is to be given an operation according to its tenor provided the elements of the principle in R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 are satisfied.
(2) The operation of s 177(1) corresponds with the operation of s 175, and the disconformity between the sections which was accepted in FJ Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 371, 375, is erroneous.
Hearing
CANBERRA, 1994, 3 May, 1995, February 23
#DATE 23:2:1995
CASE STATED pursuant to the Judiciary Act 1903 (Cth), s 18.
On 10 December 1991 the Deputy Commissioner of Taxation made a determination under s 177F(1)(a) of the Income Tax Assessment Act 1936 (Cth) that Richard Walter Pty Ltd (the taxpayer) had obtained in the year ended 30 June 1991, or would but for the operation of s 177F have obtained, a tax benefit in connection with a scheme to which Pt IVA applied. An adjustment sheet identified the tax benefit as an amount of $2,143,148 being the net income purportedly derived by Morlea Professional Services Pty Ltd (Morlea) as agent for the Morlea Partnership. The tax benefit was calculated by deducting from the sum of $2,246,103, described as the net income of the Morlea Partnership, the sum of $102,955, the net income of the Aborda Trust previously returned. In accordance with s 177F(2), the Deputy Commissioner determined that that amount be deemed to be included in the taxpayer's assessable income. Determinations based on s 177F were also made in respect of the financial years ended 30 June 1982, 1983 and 1984. On 11 December 1991 the Deputy Commissioner issued assessments to give effect to the determinations. On 10 December 1991, the Deputy Commissioner also made determinations under s 177F(1)(a) in respect of Morlea for the years ended 30 June 1981, 1982, 1983 and 1984. For the year ending 30 June 1981, the tax benefit was identified as $2,246,103, being the net income purportedly derived by Morlea as agent for the Morlea Partnership. Assessments giving effect to those determinations were issued on 11 December 1991. In all cases the tax benefit determined in respect of Morlea corresponded with the tax benefit determined in the case of the taxpayer less the amount of net income previously returned by the Aborda Trust. The taxpayer lodged objections to the assessments which were disallowed. The Deputy Commissioner sued to recover the amount of unpaid tax in the Supreme Court of New South Wales. The taxpayer appealed to the Federal Court against the assessments. On 5 February 1993 the taxpayer instituted proceedings in the Federal Court pursuant to s 39B of the Judiciary Act 1903 (Cth) to restrain the Deputy Commissioner from proceeding with the recovery action. On 29 March 1993 the Deputy Commissioner filed a notice of motion in the s 39B proceedings for an order that the taxpayer's application be dismissed on the ground that upon the production of notices of assessment certified under the hand of the Deputy Commissioner in accordance with s 177 of the Act the Federal Court lacked jurisdiction to grant the relief sought. The notice of motion was removed into the High Court, and, pursuant to s 18 of the Judiciary Act, Mason CJ stated a case and reserved the following question for the consideration of the Full Court: "Does the production of the Notices of Assessment preclude wholly or in part challenge or review of the Richard Walter assessments in the proceeding under s 39B of the Judiciary Act 1903 (Cth), by reason of the operation of s 177 of the Income Tax Assessment Act 1936 (Cth)?"
G A A Nettle QC (with him S C Kenny), for the plaintiff. Section 177(1) of the Income Tax Assessment Act distinguishes between the taxpayer's actual substantive liability and the process by which the Commissioner arrived at that liability. Issues relating to the taxpayer's substantive liability are to be subject to review or appeal in proceedings under Pt IVC of the Taxation Administration Act 1953, but the process by which the Commissioner determined that liability is beyond challenge in any court or tribunal once the Commissioner has produced a document of the kind referred to in the sub-section ((1) F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360;). The due making of an assessment is not reviewable at all ((2) Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 620-621; F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 375, 377, 378, 379.). The "due making" in s 177(1) covers all procedural steps other than those which go to substantive liability and so contribute to the excessiveness of the assessment (3) McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 274-275, 271; F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 373). Sections 175 and 177(1) have the effect that a challenge to an assessment can be brought only under Pt IVc of the Taxation Administration Act (4) McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 269; F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 375, 378-379, 380). The matters that may be challenged in proceedings on an appeal under Pt IVc cover the entire ground of the taxpayer's substantive liability. It is open to the taxpayer to challenge not only the calculation of the amount of an assessment but also the Commissioner's authority to make the assessment (5) Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 621, 631; F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 373-374, 375, 376; Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353; Kolotex Hosiery (Australia) Pty Ltd v Federal Commissioner of Taxation (1975) 132 CLR 535; Giris Pty Ltd v Federal Commissioner of Taxation (1969) 119 CLR 365). F J Bloemen Pty Ltd v Federal Commissioner of Taxation disposes of the argument that s 39B of the Judiciary Act permits the Federal Court to inquire into the due making of an assessment, notwithstanding s 177(1): production of a s 177 notice precluded the Supreme Court from entertaining the proceedings seeking declaratory relief on the ground that the relevant assessments were invalid because not issued bona fide. Production of a s 177 notice in the s 39B proceedings here precludes further inquiry into the matters raised by the taxpayer in the Federal Court. The federal jurisdiction vested in a State court by s 39 of the Judiciary Act is the same jurisdiction vested in the High Court by s 75(iii) of the Constitution. When the Federal Court exercises the jurisdiction conferred by s 39B, it is the jurisdiction vested in the High Court by s 75(v). There is no material difference between pars (iii) and (v) of s 75. David Jones Finance and Investments Pty Ltd v Federal Commissioner of Taxation (6) (1991) 28 FCR 484) is wrong. Section 177 does not limit the jurisdiction of the Federal Court in any relevant sense, nor that of the High Court under s 75(v). It leaves the jurisdiction intact, but requires that it be exercised in a fashion which compels the court to treat the notice as evidence of an assessment, and precludes an inquiry into its validity. If s 177 is jurisdictional, and thus limits the jurisdiction of the Federal Court under s 39B, that is within power. A jurisdiction that has been conferred by statute can be removed or qualified in the same way. Section 39B is not constitutionally entrenched like s 75(v) of the Constitution. Section 39B, being general, is subject to specific, though earlier, provisions (7) Maxwell on the Interpretation of Statutes, 12th ed (1976), pp 196 et seq; Pearce and Geddes, Statutory Interpretation in Australia, 3rd ed (1988), pp 149-150; Maybury v Plowman (1913) 16 CLR 468 at 473-474). Decisions such as R v Hickman; Ex parte Fox and Clinton (8) (1945) 70 CLR 598), R v Coldham; Ex parte Australian Workers' Union (9) (1983) 153 CLR 415) and O'Toole v Charles David Pty Ltd (10) (1991) 171 CLR 232) do not apply in the context of s 177(1). They concerned the effect of privative clauses which purported to prevent the decisions to which they applied being subject to prohibition, mandamus or injunction. They stand for the proposition that, absent constitutional considerations, privative clauses of this kind will preclude the grant of such remedies, providing the decision-maker has made a bona fide attempt to exercise the power, the decision relates to the subject matter of the legislation, and the decision is reasonably capable of reference to the power given (the Hickman principle). The operation of the Hickman principle depends upon the construction of the relevant statute and the context in which the privative clause is found. It is always open to Parliament expressly to adopt some other expedient. In s 177(1) it has chosen another solution, and there is no room for the Hickman principle to apply. It has said that the purposes of the Commissioner are not relevant to the validity of an assessment, although in some cases they may be relevant to issues of substantive liability and therefore to proceedings under Pt IVC. In any event, s 177(1) is not a privative provision. The Hickman principle operates only where it is necessary to reconcile an exercise of statutory power with a clause which protects a determination of a tribunal notwithstanding an excess of power. So far from protecting an assessment, s 177 affords an elaborate means of inquiring into it. Because s 177 permits a taxpayer to contest his liability to tax in every respect, it does not produce an immunisation from attack of the kind that might attract the Hickman principle. The inconsistency which lies at the basis of the principle is absent. The Hickman principle does not apply to the Supreme Court (11) F J Bloemen Pty Ltd v Federal Commissioner of Taxation) so it cannot apply to the Federal Court. Section 75(v) of the Constitution does not create substantive rights (12) Werrin v The Commonwealth (1937) 59 CLR 150 at 161, 167-168; Maguire v Simpson (1977) 139 CLR 362 at 371; The Commonwealth v Evans Deakin Industries Ltd (1986) 161 CLR 254 at 263). It was included to ensure that persons against whom causes of action lay in their official capacity as officers of the Commonwealth would be amenable to the jurisdiction of the High Court (13) Bank of NSW v The Commonwealth (1948) 76 CLR 1 at 363). Section 39B confers jurisdiction in virtually the same terms as s 75(v) and accordingly cannot be regarded as a source of substantive liability. In the absence of questions of constitutional validity, the general law determines whether and to what extent this Court will inquire into a supposed abuse or excess of power before deciding whether to grant the remedies referred to in s 75(v) (14) Ince Bros and Cambridge Manufacturing Co Pty Ltd v Federated Clothing and Allied Trades Union (1924) 34 CLR 457 at 464). Section 39B must have a similar ambulatory effect. Section 177(1) is part of the general law affecting the occasion for resort to the remedies described in ss 75(v) and 39B. Section 177(1) says that there can be no inquiry into the "due making" of an assessment, and so there can be no occasion to consider the remedies to which s 39B refers. The issue of more than one assessment in respect of the one amount of income is not improper so long as only one is enforced until appeals have been determined (15) Deputy Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55 at 67; Richardson v Federal Commissioner of Taxation (1932) 48 CLR 192). An assessment is definitive if it appears on its face to be final; that is to say, if it is not tentative (16) F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 372-373).
R F Edmonds, for the respondent. The abuse or excess of power contended for is the breach of the statutory duty reposed in the Commissioner by s 166 to make an assessment of the taxable income of the taxpayer and of the tax payable thereon. The notices issued to the taxpayer could not be a bona fide or definitive ascertainment of its taxable income when the tax benefit the Commissioner identified in his determinations as having been obtained by the taxpayer, and by those same determinations included in the assessable income of the taxpayer, was the same tax benefit which he identified in his determinations as having been obtained by Morlea, and by those same determinations included in its assessable income. The lawfulness of an assessment cannot depend, as the Commissioner contends, on his not commencing recovery proceedings against more than one of the taxpayers assessed. A valid assessment cannot become invalid because recovery proceedings are taken. Whether an assessment is beyond power or an abuse of power cannot depend on later events. Just as the conditions on which the power to amend an assessment in reliance on s 170(2) are conditions precedent to the power of the Commissioner to amend and not part of the "due making" of an assessment (17) McAndrew v Federal Commissioner of Taxation (1956) 86 CLR 263 at 271, 279), so the conditions precedent to the power to make an assessment to give effect to a determination purportedly made under s 177F(1) are not part of the "due making" of such an assessment and are therefore not protected by the conclusivity said to be conferred by the first or procedural limb of s 177(1) (18) Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 662, 663; Federal Commissioner of Taxation v Jackson (1990) 27 FCR 1 at 8,9). Section 177(1) does not provide conclusivity where the error deprives a purported assessment of validity. (He referred to R v Taylor; Ex parte Professional Officers' Association (19) (1951) 82 CLR 177 at 186); Re Moore; Ex parte Co-operative Bulk Handling Ltd (20) (1982) 56 ALJR 697; 41 ALR 221); Federal Commissioner of Taxation v Dalco (21) (1990) 168 CLR 614 at 624); and Public Service Association (SA) v Federated Clerks' Union (SA Branch)(22) (1991) 173 CLR 132 at 141, 142).) Because the notices could not be a bona fide ascertainment of the taxpayer's taxable income when they include the same amount included in the assessable income of Morlea, there has been an abuse of power: a breach of the statutory duty imposed by s 166 to make an assessment of the taxable income of the defendant which vitiates the purported assessments and entitles the Court to go behind them(23) R v Commissioner of Taxation (WA); Ex parte Briggs (1986) 12 FCR 301 at 308; Re Pezzano; Ex parte Deputy Federal Commissioner of Taxation (1989) 20 ATR 423 at 426; 89 ATC 4,255 at 4,258, 4,259; Lucas v O'Reilly (1979) 36 FLR 102 at 112; 9 ATR 540 at 547-548; 79 ATC 4,081 at 4,087). Part IVA does not change the long-standing principle that two persons cannot be severally liable, each in his own right, to include in his individual assessment for the same year the same income. But for the schemes, both taxpayers could not have derived the same income from the same source. The assessments cannot have been bona fide. Section 177(1) looks to a definitive ascertainment of the taxpayer's taxable income and of the tax payable thereon, not one which is merely tentative (24) F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 372-373). The notices are no more a definitive ascertainment than they are a bona fide ascertainment of the taxpayer's taxable income when they include in its assessable income the same amount as has been included in the assessable income of Morlea. Far from being a definitive ascertainment of the taxpayer's taxable income, the notices are tentative or protective assessments (25) Federal Commissioner of Taxation v S Hoffnung and Co Ltd (1928) 42 CLR 39). That there has been neither a bona fide nor a definitive ascertainment of the taxpayer's taxable income is apparent from the taxpayer's and Morlea's notices, if not on their face, then in the supporting adjustment sheets which are part of the notices of assessment (26) F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 374, 381). (He referred to Prestige Motors Pty Ltd v Federal Commissioner of Taxation (27) (1993) 47 FCR 138 at 146).) That the Commissioner is not obliged to vacate an assessment against a taxpayer made on a given set of facts before assessing another taxpayer in respect of the same income on a different set of facts unknown to the Commissioner at the time of the making of the first assessment (28) Richardson v Federal Commissioner of Taxation (1932) 48 CLR 192 at 207), is neither relevant nor applicable to a case such at the present where the commissioner has purported to asses two taxpayers in respect of the same income on the same set of facts and in reliance on the same provision of the Act. Production of the notices does not preclude challenge to the Commissioner's purported assessments under s 39B. A privative clause will validate an award or order of the Conciliation and Arbitration Commission so far as it can do so constitutionally, provided that three conditions are fulfilled: the purported exercise must be a bona fide attempt to exercise the power, it must relate to the subject matter of the legislation, and it must be reasonably capable of being referred to the power (29) R v Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415 at 418). Section 177(1) is a privative clause, and that principle is applicable to decisions of the Commissioner. The observations in David Jones Finance and Investments Pty Ltd v Federal Commissioner of Taxation (30) (1991) 28 FCR 484 at 495) are correct. That case also correctly determined the nature and extent of the jurisdiction conferred on the Federal Court by s 39B. Reconciliation of the prima facie inconsistency between a conclusive evidence clause such as s 177(1) and the limitations in s 166 on the Federal Commissioner's power to make an assessment of a taxpayer's taxable income is to be resolved by reading the two provisions together and giving effect to each. In David Jones Finance and Investments Pty Ltd v Federal Commissioner of Taxation the majority would have interpreted the jurisdiction conferred by s 39B as free from any limitation or qualification imposed by s 177(1). The basis of this interpretation was that, unlike the privative provisions, s 177(1) was not an empowering provision because of the conditional nature of its operation. Its effect was purely jurisdictional and could not displace the jurisdiction conferred by s 39B. That view fails to recognise that the assessment process is not complete until service of the notice of assessment, even if the process of ascertainment of taxable income and of the tax payable has been completed (31) Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 at 251, 252; Prestige Motors Pty Ltd v Federal Commissioner of Taxation (1993) 47 FCR 138 at 142, 143). Until service there is no assessment. Section 177(1) aside, until the notice of assessment is produced, there is no evidence that an assesment has been made (32) F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 377). The substantive limb of s 177(1) operates only to channel disputed assessments into the Pt IVC process and has no effect on power. It merely defines the jurisdiction in which the inquiry may be undertaken and cannot displace the jurisdiction conferred by s 39B. Adoption of the Hickman principle would have the result that production of a notice of assessment will be conclusive evidence of the due making of the assessment and that the amount and all the particulars of the assessment are correct (except in proceedings under Pt IVC) save where the purported exercise of power can be seen on the face of the record to be not bona fide, where it does not relate to the subject matter of the Act, or where it is not reasonably capable of being referred to the power, that is, on its face goes beyond the power (33) R v Commonwealth Conciliation and Arbitration Commission; Ex parte Amalgamated Engineering Union (1967) 118 CLR 219 at 252, 253). So confined, the cases in which any of these conditions will not be satisfied in respect of an assessment purportedly made will be rare. It will certainly not impact on the efficacy of s 177(1) as an integral part of the tax collection process. Such an approach is not inconsistent with F J Bloemen Pty Ltd v Federal Commissioner of Taxation. That case is not authority that s 177(1) is effective to preclude State Supreme Courts from exercising the powers conferred on them by s 39 of the Judiciary Act where it appears from the notice or some accompanying document that the assessment was not bona fide in the sense explained. The endorsement on the adjustment sheet in that case did not arouse suspicion. The abuse of power is apparent here on the face of the record, the record encompassing not only the notices of assessment including supporting documentation but also those issued to Morlea. The alleged conclusivity asserted by production of the notices of assessment issued to the taxpayer is no greater than the conclusivity conferred by the production of those issued to Morlea. The face of the record includes both.
G A A Nettle QC, in reply. Richardson v Federal Commissioner of Taxation (34) (1932) 48 CLR 192) establishes that the Commissioner can make alternative assessments. The case thus allows for the possibility of the Commissioner assessing in the alternative one taxpayer or the other according to which of them, under relevant Pt IVA schemes, has derived the tax benefit. An alternative assessment is still a definitive assessment for the purpose of s 177 (35) Tupicoff v Federal Commissioner of Taxation (1984) 4 FCR 505 at 523). R v Commissioner of Taxation (WA); Ex parte Briggs (36) (1986) 12 FCR 301) should be confined to its special facts or overruled as inconsistent with F J Bloemen Pty Ltd v Federal Commissioner of Taxation. Section 177 is directed to a notice of assessment, not to an assessment. It does not give validity to what might later be held to be an invalid assessment. Accordingly the section does not transgress any constitutional prohibition on Parliament legislating to curtail the jurisdiction of the High Court under s 75. (He referred to Ince Bros and Cambridge Manufacturing Co Pty Ltd v Federated Clothing and Allied Trades Union (37) (1924) 34 CLR 457 at 464).)
18 April 1995
MASON CJ The Justices have considered the submissions of the plaintiff and the defendant in relation to costs. By majority, Deane and Gaudron JJ dissenting, the order of the Court is the defendant to pay the plaintiff's costs of the removal application and the case stated.
Cur adv vult
Counsel for the Plaintiff: G.A. Nettle QC with S.C. Kenny
Solicitor for the Plaintiff: Australian Government Solicitor
Counsel for the Defendant: R.F. Edmonds
Solicitor for the Defendant: Mallesons Stephen Jaques
Orders
Answer the question reserved in the case stated as follows:
Question: Does the production of the Notices of Assessment preclude wholly or in part challenge or review of the Richard Walter assessments in the proceeding under section 39B of the Judiciary Act 1903 (Cth), by reason of the operation of section 177 of the Income Tax Assessment Act 1936 (Cth)?
Answer: No. but the challenge must fail or the review be refused.
The taxpayer to file and serve submissions as to costs within seven days, the Commissioner to file and serve submissions as to costs within 14 days, and the taxpayer to file and serve any submissions in reply within 21 days of the delivery of this judgment.
Decisions
MASON CJ The facts of this matter are set out in the reasons for judgment prepared by Toohey J.
2. The question reserved in the case which I stated is in these terms:
"Does the production of the Notices of Assessment preclude wholly or in part challenge or review of the Richard Walter assessments in the proceeding under section 39B of the Judiciary Act 1903 (Cth), by reason of the operation of section 177 of the Income Tax Assessment Act 1936 (Cth) ?"
In order to answer that question it is necessary to ascertain (1) the nature of the determinations made by the Deputy Commissioner of Taxation under s.177F of the Income Tax Assessment Act 1936 (Cth) ("the Act") and their relationship with the assessment of the taxpayer to tax; (2) whether s.39B of the Judiciary Act 1903 (Cth) vests in the Federal Court the whole of the jurisdiction conferred upon the High Court by s.75(v) of the Constitution except so much of that jurisdiction as is excluded by s.39B(2) ; and (3) the effect and validity of s.177(1) of the Act.
3. Because the taxpayer challenges the assessments on the ground that the determinations made by the Deputy Commissioner under s.177F cannot be sustained, it is convenient to begin with an examination of the nature and effect of s.177F and the determinations made under that section in relation to the taxpayer. Subsequently it will be necessary to determine whether, and to what extent, those determinations are protected by s.177(1).
The nature of the determinations made by the Commissioner under s.177F and their relationship with the assessment of the taxpayer to tax
4. Part IVA is an anti-avoidance regime introduced into the Act by Act No. 110 of 1981. The Part is brought into operation in a particular case by the making of a determination pursuant to s.177F by the Commissioner or his delegate. The prerequisites for the making of such a determination are that a taxpayer has obtained, or would but for the operation of s.177F(1) have obtained, a tax benefit and that the obtaining of that benefit was in connection with a scheme to which Pt IVA applies. A "tax benefit" is defined by s.177C so as to include an amount not being included in the assessable income of the taxpayer of a year of income where that amount would have been included, or might reasonably be expected to have been included, in the assessable income of the taxpayer of that year of income if the scheme had not been entered into or carried out.
5. A scheme to which Pt IVA applies is one which has been entered into or carried out and of which, having regard to various matters set out in s.177D, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of it did so for the purpose of enabling the taxpayer to obtain a tax benefit in connection with the scheme. Section 177F(1) and (2) provides:
"(1) Where a tax benefit has been obtained, or would but for this section be obtained, by a taxpayer in connection with a scheme to which this Part applies, the Commissioner may -
(a) in the case of a tax benefit that is referable to an amount not being included in the assessable income of the taxpayer of a year of income - determine that the whole or a part of that amount shall be included in the assessable income of the taxpayer of that year of income ...
and, where the Commissioner makes such a determination, he shall take such action as he considers necessary to give effect to that determination.
(2) Where the Commissioner determines under paragraph 1(a) that an amount is to be included in the assessable income of a taxpayer of a year of income, that amount shall be deemed to be included in that assessable income by virtue of such provision of this Act as the Commissioner determines."
6. It is evident from the provisions that the Commissioner's power to make determinations under s.177F(1) and (2) is conditioned upon the fact that a tax benefit has been obtained, or would have been obtained but for the section, in connection with a scheme to which Pt IVA applies. Although the power to make a determination is conditioned in this way, the making of the determination forms part of the process of assessment and goes to the ascertainment of the substantive liability of the taxpayer to tax. This conclusion is material to the application of s.177(1) to be discussed later.
Section 75(v) of the Constitution
7. Section 75(v) is a grant of jurisdiction to the High Court in all matters in which a writ of mandamus or prohibition or an injunction is sought against an officer of the Commonwealth. The provision is not a source of substantive rights (1 Musgrave v. The Commonwealth (1937) 57 CLR 514; Werrin v. The Commonwealth (1938) 59 CLR 150 at 167-168 per Dixon J; Maguire v. Simpson (1977) 139 CLR 362 at 404 per Jacobs J; but cf. The Commonwealth v. New South Wales (1923) 32 CLR 200 at 216 per Isaacs, Rich and Starke JJ) except in so far as the grant of jurisdiction necessarily recognizes the principles of general law according to which the jurisdiction to grant the remedies mentioned is exercised. The purpose of its inclusion in the Constitution was (2 Bank of N.S.W. v. The Commonwealth (1948) 76 CLR 1 at 363 per Dixon J):
"to make it constitutionally certain that there would be a jurisdiction capable of restraining officers of the Commonwealth from exceeding Federal power".
As Gavan Duffy and Rich JJ noted in The Tramways Case (No.1) (3 (1914) 18 CLR 54 at 82.), it was intended:
"to remedy a specific defect in the American Constitution disclosed by the case of Marbury v. Madison (4 (1803) 1 Cranch 137.), which shows that there is no jurisdiction in the Supreme Court of the United States to issue mandamus or prohibition to non-judicial officers of the Government" (5 See also Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 778-779; Collins v. Charles Marshall Pty. Ltd. (1955) 92 CLR 529 at 544.).
8. Whether s.75(v) adds to the jurisdiction granted to the High Court by s.75(iii) has never been decided; perhaps all that s.75(v) does is to resolve doubts that were thought to arise as to the significance of the words "being sued on behalf of the Commonwealth" in s.75(iii) (6 See the discussion in Bank of N.S.W. (1948) 76 CLR at 362-367 per Dixon J). At all events, it is clear that, as s.75 is a constitutional grant of jurisdiction (7 The Tramways Case (No.1) (1914) 18 CLR at 68 per Barton J, 82 per Gavan Duffy and Rich JJ; The Commonwealth v. New South Wales (1923) 32 CLR at 216 per Isaacs, Rich and Starke JJ; Waterside Workers' Federation of Australia v. Gilchrist, Watt and Sanderson Ltd. (1924) 34 CLR 482 at 526 per Isaacs and Rich JJ; Australian Coal and Shale Employees Federation v. Aberfield Coal Mining Co. Ltd. (1942) 66 CLR 161 at 176 per Latham CJ; R. v. Connell; Ex parte The Hetton Bellbird Collieries Ltd. (1944) 69 CLR 407 at 428 per Latham CJ, 438-439 per Starke J; Werrin (1938) 59 CLR at 165-167 per Dixon J; Bank of N.S.W. (1948) 76 CLR at 357 per Dixon J), it is beyond the power of the Parliament to withdraw any matter from the grant of jurisdiction or to abrogate or qualify the grant. However, in Ince Bros. and Cambridge Manufacturing Co. Pty. Ltd. v. Federated Clothing and Allied Trades Union (8 (1924) 34 CLR 457 at 464; see also WWF v. Gilchrist, Watt and Sanderson Ltd. (1924) 34 CLR at 526.), Isaacs, Powers and Rich JJ, after pointing out that Parliament could not repeal s.75(v), observed that Parliament could "by appropriate legislation limit the cases to which that remedy is applicable".
9. The extent to which Parliament can, by means of privative clauses providing that awards and orders shall not be subject to prohibition or mandamus, limit the cases in which this Court can grant a remedy in the form of mandamus or prohibition has been discussed in a series of cases. For present purposes that discussion may be taken as beginning with the decision in R. v. Hickman; Ex parte Fox and Clinton (9 (1945) 70 CLR 598.). In that case, Dixon J expressed the principle, in a form which subsequently gained acceptance, in these terms (10 ibid. at 615.):
"Such a clause is interpreted as meaning that no decision which is in fact given by the body concerned shall be invalidated on the ground that it has not conformed to the requirements governing its proceedings or the exercise of its authority or has not confined its acts within the limits laid down by the instrument giving it authority, provided always that its decision is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the body."
His Honour went on to say ((11) ibid. at 616.):
"(W) here the legislature confers authority subject to limitations, and at the same time enacts such a clause as is contained in reg.17, it becomes a question of interpretation of the whole legislative instrument whether transgression of the limits, so long as done bona fide and bearing on its face every appearance of an attempt to pursue the power, necessarily spells invalidity." (12 In O'Toole v. Charles David Pty. Ltd. (1991) 171 CLR 232 the suggestion that the first of the conditions stated by Dixon J in Hickman related only to what was apparent on the face of the record and excluded investigation of subjective motivation was made by Deane, Gaudron and McHugh JJ at 287 but rejected by Mason CJ at 249-250, Brennan J at 275 and Dawson J at 305, with whom Toohey J agreed.)
10. It is unnecessary to refer to the later decisions which have adopted and applied this principle. It will be sufficient to mention the two most recent decisions. In Reg. v. Coldham; Ex parte Australian Workers' Union (13 (1983) 153 CLR 415 at 418.), Brennan J and I said that the reason for interpreting a privative clause in conformity with the principle is that it is necessary to reconcile the prima facie inconsistency between a statutory provision which appears to limit the powers of a tribunal and the privative clause which appears to contemplate that the tribunal's order will operate free from any restriction.
11. What emerges from the decisions of this Court applying the Hickman principle to privative clauses, especially to s.60 (and its predecessor s.31) of the Conciliation and Arbitration Act 1904 (Cth), is that they are effective to protect an award or order from challenge on the ground of a mere defect or irregularity which does not deprive the tribunal of the power to make the award or order. Thus, in Reg. v. Coldham, Deane and Dawson JJ, with reference to s.60, said (14 ibid. at 427; see also at 418 per Mason ACJ and Brennan J):
"Such a statutory provision is effective to exclude any general judicial review of the proceedings of the Commission."
Section 39B of the Judiciary Act
12. Section 39B(1) vests in the Federal Court:
"jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth".
13. Section 39B(2) excludes from the class of "officers of the Commonwealth" a person holding office under the Industrial Relations Act 1988 (Cth) or the Coal Industry Act 1946 (Cth) and a judge of the Industrial Relations Court or of the Family Court. As the language of s.39B(1) is, to all intents and purposes, identical with the language of s.75(v), it would seem to follow that, subject to s.39B(2), s.39B vests in the Federal Court the entirety of the jurisdiction which s.75(v) confers on the High Court. In this respect, s.39B, within the area of its application, has much the same operation as s.39 of the Judiciary Act has had in investing State courts with federal jurisdiction. That means that the operation of s.39B is necessarily subject to the application of other statutes of the Parliament. Section 39B, unlike s.75(v) of the Constitution, is not constitutionally entrenched and may be repealed or amended by a later statute. Moreover, the relationship between s.39B and earlier statutory provisions still in force may give rise to problems. Thus, in terms of the relationship between that section and s.177 of the Act, the question whether s.39B is to be read in the light of, and subject to, s.177 or whether s.39B impliedly amends s.177 could arise.
Section 177 of the Act and its effect
14. It is necessary to refer to other provisions of the Act in order to outline the framework in which s.177 operates. Section 166 requires the Commissioner to make an assessment of the amount of the taxable income of any taxpayer and of the tax payable thereon:
"(f) rom the returns, and from any other information in his possession, or from any one or more of these sources".
In order to assess a taxpayer's taxable income, the Commissioner is to calculate the assessable income of the taxpayer in accordance with the Act and subtract therefrom the allowable deductions to which the taxpayer is entitled, except where s.167 appliesa.
15. Section 167 provides that, if (a) a person makes default in furnishing a return; or (b) the Commissioner is not satisfied with the return furnished by a person; or (c) the Commissioner has reason to believe that a person who has not furnished a return has derived taxable income, he may:
"make an assessment of the amount upon which in his judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of s.166".
16. Section 175 provides that the validity of an assessment "shall not be affected by reason that any of the provisions of this Act have not been complied with". This section does not relieve the Commissioner from performing his duty to make an assessment. The section does not create a valid assessment where none has been made at all. The section requires an actual assessment as a condition of its operation (15 F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation (1981) 147 CLR 360 at 371 per Mason and Wilson JJ). But otherwise, the effect of s.175 is that compliance with particular provisions of the Act is not essential to the validity of an assessment.
17. It is in this setting that s.177(1) provides that the production of a notice of assessment or of a copy:
"shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct".
18. The legal consequences which follow from service of a notice of assessment appear from s.204(1). It provides:
19. "Subject to the provisions of this Part, any income tax assessed shall be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the thirtieth day after the service of the notice."
It is only after the Commissioner, having gone through the process of calculation, serves a notice of assessment on the taxpayer that there is brought about an ascertainment of the taxable income and the tax payable for the purposes of s.166 so that, to use the words of Kitto J in Batagol v. Federal Commissioner of Taxationa (16 (1963) 109 CLR 243 at 252.), "they are to be taken for all purposes (except those of appeal: see s.177) to be the result flowing from the application of the Act in the particular case".
20. Section 177(1) distinguishes (17 George v. Federal Commissioner of Taxation (1952) 86 CLR 183 at 206-207; McAndrew v. Federal Commissioner of Taxation (1956) 98 CLR 263 at 271, 279; F.J. Bloemen (1981) 147 CLR at 373; Federal Commissioner of Taxation v. Dalco (1990) 168 CLR 614 at 620, 632.):
"between the procedure or mechanism by which the taxable income and tax is ascertained or assessed on the one hand and on the other hand the substantive liability of the taxpayer. The former involves the due making of the assessment."
21. In Federal Commissioner of Taxation v. Dalco (18 (1990) 168 CLR at 620.), Brennan J (with whom Mason CJ, Deane, Dawson, Gaudron and McHugh JJ agreed) pointed out that, in a case arising under s.167(b), where there are two functions for the Commissioner to perform - first, to decide whether he is satisfied with the return furnished and, second, if not so satisfied, to form a judgment of the amount on which tax ought to be levied - the first function is a procedural step and is part of the due making of the assessment whereas the second function is not. Accordingly, although the first function is conclusively proved by production of the notice of assessment, in proceedings on appeal against an assessment production of the notice does not conclusively prove the formation of a judgment of the amount on which tax ought to be levied.
22. In McAndrew v. Federal Commissioner of Taxation (19 (1956) 98 CLR at 271.), Dixon CJ, McTiernan and Webb JJ concluded that fulfilment of the conditions which bring a case within s.170(2) of the Act, thereby activating the power to amend an assessment, is a matter that comes within the words of exception in s.177(1) (as it was then), viz. "except in proceedings on appeal against the assessment". Subsequently, in F.J Bloemen Pty. Ltd. v. Federal Commissioner of Taxation (20 (1981) 147 CLR at 373-374.), Mason and Wilson JJ (with whom Stephen and Aickin JJ agreed) accepted the correctness of that view but pointed out that this did not mean that a like approach should be taken in the case of an original assessment the making of which was not similarly conditioned.
23. In the present case, the taxpayer submits that, just as the existence of the conditions on which the power to amend an assessment under s.170(2) was held to be a condition precedent to the power of the Commissioner to amend and not to form part of the "due making" of an assessment, the fulfilment of the conditions precedent to the power to make an assessment to give effect to a determination purporting to have been made under s.177F(1) of the Act was not part of the "due making" of such an assessment. It follows, so the argument runs, that the determination is not protected by the conclusivity conferred by the first limb of s.177(1) on production of the notice of assessment.
24. In passing, I should point out that, in George v. Federal Commissioner of Taxation (21 (1952) 86 CLR at 204.), this Court decided that it was wrong to treat the formation of a judgment by the Commissioner as to the amount of the taxpayer's taxable income as if it were not a part of the process of assessment and as if it were but the fulfilment of a condition precedent to the power or authority to assess. The Court went on to say (22 ibid.; see also Dalco (1990) 168 CLR at 622 per Brennan J):
"If, however, it were a condition precedent the question would at once arise whether the fulfilment of the condition was not part of 'the due making of the assessment' of which s.177(1) makes the production of a notice of assessment conclusive evidence."
Although the Court considered that it was unnecessary to answer that question, it concluded with the comment that (23 (1952) 86 CLR at 207.) :
"the 'due making of the assessment' was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal".
25. For the reasons stated earlier, the making of a determination by the Commissioner under s.177F of the Act is a determination going to substantive liability and, in conformity with the interpretation of s.177(1) adopted in George, McAndrew, F.J. Bloemen and Dalco, is put in issue by an appeal which challenges the assessment on the ground that it is excessive.
26. Underlying the arguments in the present case is the question whether s.177(1) attempts to oust or cut back the jurisdiction of the courts or whether it merely gives conclusive evidentiary effect to a notice of assessment as to the steps which constitute "due making" and, except in Pt IVC proceedings, as to the amount of tax and the particulars in the notice. For reasons stated in the earlier discussion of s.75(v) of the Constitution, s.177(1) could not affect the constitutional jurisdiction of this Court. And, in none of the judgments in the cases in this Court has it ever been suggested that the sub-section might be seen as an attempt to qualify the jurisdiction of this Court. Nor, for that matter, has it been suggested in those cases that the sub-section might be seen as an attempt to qualify the jurisdiction of the Supreme Court of a State or the Federal Court. The terms of the first limb of the sub-section are not directed to curial jurisdiction or to a party's right to resort to the courts. Instead, the sub-section gives conclusive evidentiary effect to a notice of assessment when produced in much the same way that parties by contract give conclusive effect to a certificate stating the amount of one party's indebtedness to another (24 See Dobbs v. National Bank of Australasia Ltd. (1935) 53 CLR 643.).
27. Legislative attempts to regulate the way in which a court is to exercise its jurisdiction may amount to an attempt to oust or exclude the jurisdiction of the court or to a usurpation of, or interference with, the exercise of judicial power. Section 54R of the Migration Act 1958 (Cth), which was held invalid in Chu Kheng Lim v. Minister for Immigration (25 (1992) 176 CLR 1 at 36-37 per Brennan, Deane and Dawson JJ, 53 per Gaudron J), was such a case. A conclusive evidence provision would not ordinarily be regarded as ousting jurisdiction or interfering with the exercise of judicial power. That is because a provision of that kind usually does no more than attach definitive legal consequences to an act, transaction or instrument. However, it would be very different if an attempt were made to give conclusivity to a document or certificate which was in its terms determinative of the very issue for determination in a pending case.
28. The question whether the legislature can prescribe a conclusive rule of evidence to be applied by federal courts has not been considered in this Court. The vesting of the judicial power of the Commonwealth in Ch.III courts requires those courts to determine facts in controversy. Consequently, a statutory provision which attempts to preclude the determination by a federal court of facts in controversy constitutes an impermissible intrusion into the exercise of judicial power. As Wigmore states it (26 Wigmore on Evidence, (1972), vol.4, 1353.):
"The judicial function under the constitution is to apply the law in controverted cases; to apply the law necessarily involves the determination of the facts; to determine the facts necessarily involves the investigation of evidence as a basis for that determination. To forbid investigation is to forbid the exercise of an indestructible judicial function."
On the other hand, a rule of substantive law, which will not intrude into the exercise of judicial power, may be expressed in the form of a conclusive evidence provision.
29. It follows that the characterization of s.177(1) is the critical consideration. Does it prescribe a substantive rule that all procedural steps, other than those going to substantive liability and so going to the excessiveness of the assessment, are directory only and do not touch the validity of the assessment? Or is it a jurisdictional provision which simply attempts to preclude the court from inquiring into matters which do go to the validity of the assessment?
30. In David Jones Finance and Investments Pty. Ltd. v. Commissioner of Taxation (27 (1991) 99 ALR 447 at 465 per Morling and French JJ), the Full Court of the Federal Court (Morling and French JJ, Pincus J dissenting) answered this question by holding that s.177(1) was a jurisdictional provision. In reaching this conclusion, the majority was influenced by the fact that s.177(1) has a contingent or conditional operation; its preclusive effect in relation to the "due making" of the assessment is hinged upon the production of the notice of assessment or a copy of it. In the view of the majority, the conditional operation of the provision is incompatible with the suggestion that the sub-section is an empowering provision which protects an assessment against invalidation for non-compliance with procedural requirements or for some excess of authority. The majority reasoned to that conclusion in this way (28 ibid.):
"Both first and second limbs (of s.177(1) ) come into effect only upon the production of a notice of assessment and operate in the context of proceedings in which the 'due making' of the assessment or the amount and particulars thereof might otherwise be debated. If a notice is not produced, they can be debated. The statutory powers under which the Commissioner or his delegates operate in making assessments are therefore logically anterior to the operation of the section in proceedings in which the 'due making' and substantive liability might be in issue. There is nothing to indicate that the legislature would have intended that these powers should be contingently and retroactively affected by the production of a notice in later litigation. To so construe the section would be to allow the absurd possibility that the powers exercised in making an assessment are to be treated as greater in one proceeding where a notice is produced (say recovery proceedings) than in another where it is not produced (say judicial review proceedings)."
All this, in their Honours' view, led to the conclusion that the effect of s.177(1) was "purely jurisdictional".
31. With respect to their Honours, it is scarcely accurate to describe the effect of the sub-section as purely jurisdictional. The sub-section leaves the jurisdiction of the relevant court intact but requires the court in the exercise of its jurisdiction to treat the notice of assessment as having been duly made. The effect of s.177(1) therefore is to condition the exercise of jurisdiction upon production of the notice of assessment or a copy of it so that it is treated as valid, otherwise than in Pt IVC proceedings (29 F.J. Bloemen (1981) 147 CLR at 375-376.).
32. In theory, in proceedings other than Pt IVC proceedings, the validity of the notice is contingent upon its production or production of a copy. Nonetheless, it was plainly contemplated that, in such proceedings, production would take place as a matter of course. Indeed, it is difficult to suppose that the Commissioner would fail to produce the notice once an assessment was made complete and finalized by the service of the notice. And it is equally difficult to suppose that a person could seek to challenge the validity of an assessment or proposed assessment before service of the notice of assessment because, as already mentioned, it is only after service of the notice that the taxable income and the tax payable are ascertained. Unless and until service takes place, the Commissioner has not discharged his statutory responsibility to make an assessment.
33. It follows that the majority in David Jones Finance was mistaken in perceiving a marked difference in the powers exercised in making an assessment depending upon whether the proceedings were recovery proceedings or judicial review proceedings. Furthermore, their Honours do not appear to have taken into account the significance of s.175. That provision is of critical importance because it indicates that compliance with any of the provisions of the Act is not essential to validity. Viewed in the light of s.175, s.177(1) is a provision which gives effect to the substantive expression of intention in the earlier section. The reference to "due making" of the assessment in s.177(1) reflects the content of s.175.
34. The view that the relevant provisions of the Act do no more than require the making of an assessment, due-compliance with the statutory provisions not being essential to the validity of an assessment, is in conformity with statements made by members of this Court. Apart from the observation of Isaacs ACJ in Federal Commissioner of Taxation v. Clarke (30 (1927) 40 CLR 246 at 276.) that:
"(t) he Act so far trusts the Commissioner and does not contemplate ... a curial diving into the many official and confidential channels of information to which the Commissioner may have recourse to protect the Treasury",
there was the statement made by Kitto J in Batagol (31 (1963) 109 CLR at 252.), to which I have referred. In addition, in F.J. Bloemen (32 (1981) 147 CLR at 376.), Mason and Wilson JJ (with whom Stephen and Aickin JJ agreed) said:
"The general tenor of the statutory provisions suggests that a taxpayer wishing to challenge a notice of assessment served upon him will be effectively confined to the Pt V procedures."
Later, their Honours, when referring to the production of the notice of assessment in that case, said (33 ibid. at 378.):
"Its production will put beyond contention the due making of the assessment so that the Court cannot find that no assessment was made or that, if made, it was made for an inadmissible purpose."
35. This last statement, which perhaps goes further than anything said before, proceeds upon the footing that the paramount purpose of the Act is to ascertain the liability of taxpayers to tax and that the Act, with that object in view, sets up a legislative regime whereby the Commissioner assesses a taxpayer to tax, the taxpayer being liable to pay the amount stated in the notice of assessment, subject to a reference to the Administrative Appeals Tribunal or an appeal under Pt IVC to the Federal Court. In such an appeal, it is for the taxpayer to show that the assessment is excessive. In that context, the existence of an inadmissible purpose on the part of the Commissioner plays no part. The central element of the legislative regime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax. In such an appeal, the taxpayer is at liberty to challenge the exercise of any relevant discretion by the Commissioner. Thus, on appeal, the court will set aside the assessment if any relevant exercise of discretion by the Commissioner is affected by error of law, if he has taken an extraneous factor into account or if he has failed to consider a material factor (34 Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 CLR 353 at 360.).
36. In the light of the relevant provisions of the Act, as I have explained them, s.177 is not inconsistent with s.75 of the Constitution; nor does s.177 trench upon the provisions of s.75. Section 177 gives effect to the substantive provisions of the Act, in particular s.175, the effect of which is to ensure that the validity of an assessment does not depend upon compliance with any of the particular provisions of the Act or considerations of purpose. On this view, s.177(1) is consistent with the Hickman principle.
37. It follows that the first limb of s.177(1) is effective to preclude a challenge by the taxpayer in proceedings in the Federal Court under s.39B of the Judiciary Act to the validity of the assessment on the ground that the Commissioner has included the same amounts in the taxable income of more than one taxpayer. In any event, there is long-standing authority supporting the proposition that the Commissioner has power to assess more than one taxpayer in respect of the same income (35 Richardson v. Federal Commissioner of Taxation (1932) 48 CLR 192.).
38. I did not understand the taxpayer to contend that the assessments were tentative or were vitiated by bad faith or improper purpose otherwise than by reference to the fact that two taxpayers were assessed to tax in respect of the same income deriving from the one source.
39. In the result, I would answer the question reserved in the case stated as follows:
"No, but the challenge must fail or the review be refused by reason of the combined operation of ss.175 and 177 of the Income Tax Assessment Act 1936 (Cth)."
BRENNAN J The provisions of Pt IVA of the Income Tax Assessment Act 1936 (Cth) ("the Act") authorize the Commissioner to make a determination which effectively eliminates a tax benefit that has been or would otherwise be obtained under certain schemes to reduce income tax. Where the tax benefit is referable to an amount that is not included in the assessable income of the taxpayer, the Commissioner's determination may include that amount in the taxpayer's assessable income (s.177F(1) (a) ) whereupon the amount is "deemed to be included in that assessable income by virtue of such provision of (the) Act as the Commissioner determines" (s.177F(2) ). Similar provisions apply, mutatis mutandis, where the tax benefit is referable to "a deduction or a part of a deduction (that is) allowable to the taxpayer in relation to a year of income" (s.177F(1) (b), and see s.177F(3) (b) and (4) ). Thus the Commissioner eliminates the tax benefit by including assessable income or disallowing deductions that would, apart from Pt IVA, not be included or be allowable under other provisions of the Act.
2. On 10 December 1991, in purported pursuance of s.177F(1) (a) and (2) of the Act, a Deputy Commissioner made determinations in respect of the respondent, Richard Walter Pty. Ltd. ("Richard Walter"), for the years of income ended 30 June 1981, 1982, 1983 and 1984 ("the 1981-1984 years"). For the year ended 30 June 1981, for example, the Deputy Commissioner determined that the amount of $2,143,148 should be deemed to be included in the assessable income of Richard Walter by virtue of s.25(1), s.92(1), s.97(1) or s.99B of the Act. On 11 December 1991 the Deputy Commissioner, having made those determinations in respect of the 1981- 1984 years, issued notices of assessment (or, for the 1981 and 1982 years, notices of amended assessment) to Richard Walter in respect of the 1981-1984 years giving effect to the determinations he had made. The determinations are reflected in the adjustment sheets which accompanied the notices of assessment. The amended adjustment sheet in respect of the year ended 30 June 1981, for example, added to the taxable income otherwise assessed the sum of $2,143,148 which was identified as follows:
"An amount of $2,143,148 being the net income purportedly derived by Morlea Professional Services Pty Ltd as agent for the Morlea Partnership has now been included in assessable income."
The notices of assessment for the 1981-1984 years were served on Richard Walter.
3. On 10 November 1992 the Deputy Commissioner commenced proceedings in the Supreme Court of New South Wales against Richard Walter for the recovery of the taxes assessed for the 1981-1984 years and the taxes assessed for the years ended 30 June 1986 and 1989. Those proceedings so far as they related to the 1981-1984 years were subsequently transferred to the Federal Court of Australia. The Deputy Commissioner moved for judgment for the amount of tax specified in the notices of assessment for the 1981-1984 years.
4. For its part, Richard Walter objected to the assessments pursuant to s.175A of the Act and Pt IVC of the Taxation Administration Act 1953 (Cth) ("the Administration Act") and, upon the Deputy Commissioner making an objection decision disallowing the objections, appealed to the Federal Court. Then, on 5 February 1993 Richard Walter, invoking the jurisdiction conferred on the Federal Court by s.39B of the Judiciary Act 1903 (Cth), commenced a proceeding in that Court (the s.39B proceeding) to restrain proceedings for the recovery of the taxes assessed in respect of the 1981-1984 years. In the s.39B proceeding, Richard Walter sought declarations which, after some reforming in the submissions made in this Court, read as follows:
(a) the determinations under s.177F(2) in respect of the 1981-1984 years are not determinations for the purposes of s.177F of the Act;
(b) further or alternatively those determinations are void and of no effect;
(c) the assessments in respect of those years are not assessments under or for the purposes of the Act and the notices of assessment do not notify assessments of income tax within the meaning of that Act; and
(d) further or alternatively those assessments are void and of no effect.
5. The Deputy Commissioner filed an affidavit producing copies of the notices certified as true copies under his hand. He moved to dismiss the s.39B proceeding on the ground that the Federal Court lacked jurisdiction to grant relief by reason of the production of notices of assessment certified under the hand of a Deputy Commissioner. This motion was founded on what is contended to be the conclusive effect of s.177(1) of the Act which reads:
"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 under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct."
6. The Deputy Commissioner's motion to strike out the s.39B proceeding was removed into this Court where the Chief Justice stated a case and reserved the following question of law for consideration of the Full Court:
Judiciary Act, s.39B(1)
16. Section 39B(1) of the Judiciary Act was introduced in 1983 (108 See Statute Law (Miscellaneous Provisions) Act (No.2) 1983 (Cth), s.3 and Sched.1.). It is qualified by the provisions of s.39B(2) in respects which are irrelevant for present purposes. Subject to that qualification, the only variation between the words describing the jurisdiction which s.39B(1) vests in the Federal Court and the words of s.75(v) of the Constitution describing the jurisdiction which that sub-section vests in this Court would seem to be immaterial: the substitution in s.39B(1) of the words "with respect to any matter" for the words "(i) n all matters" in s.75(v) and the addition in s.39B(1) of the words "or officers" after the word "officer" in s.75(v). Prima facie, the Parliament must, in otherwise adopting the exact words of s.75(v), be taken to have intended that the jurisdiction described in s.39B(1) would correspond with the jurisdiction conferred on this Court by s.75(v). That means that, as a matter of prima facie construction, the words of s.39B(1) should be construed as conferring upon the Federal Court, in a case such as the present where an injunction is sought to restrain an officer of the Commonwealth from acting on the basis that an allegedly invalid decision is valid, jurisdiction to determine whether the impugned decision is or is not in fact invalid. Accordingly, on that prima facie construction of the words of s.39B(1), there exists between that sub- section and s.177(1) of the Act a similar inconsistency to that which exists between s.177(1) and s.75(v) of the Constitution, that is to say, inconsistency to the extent that s.177(1) would preclude the proper judicial determination of a challenge to the validity of an assessment on the ground that it is not bona fide. Section 39B(1) does not, however, enjoy s.75(v) 's status as a provision of the Constitution. The prima facie inconsistency between it and s.177(1) is an inconsistency between two different enactments of the same legislature.
17. It is possible to argue that, in enacting s.39B of the Judiciary Act, the Parliament would not have intended to modify the Act's carefully constructed legislative scheme under which a challenge to an assessment is confined to specifically designed review and appeal procedures and, even in those procedures, to questions of substantive liability as distinct from the intrinsic validity of the assessment as an assessment (109 cf. Perpetual Executors and Trustees Association of Australia Ltd. v. Federal Commissioner of Taxation (1948) 77 CLR 1 at 29.). That argument is, however, without real persuasive force once it is appreciated that the prima facie inconsistency between s.39B(1) and s.177(1) merely reflects that which already existed between s.177(1) and s.75(v) of the Constitution and that s.39B(1), if given its full prima facie effect, does no more than confine s.177(1) 's operation in certain kinds of matters in the Federal Court in the same way as it is confined in the same kinds of matters in this Court. In that context, there is no real basis for attributing to the Parliament an intention that the words of s.39B(1) of the Judiciary Act should be given a narrower construction than the corresponding words of s.75(v) of the Constitution. To the contrary, it seems to us to be most unlikely that the Parliament would have intended that s.177(1) of the Act should have a wider application in proceedings in the Federal Court than it has in proceedings in this Court with the consequence that a taxpayer who wishes to challenge the validity of an assessment on the ground that it was not a bona fide exercise of relevant powers would be effectively compelled to invoke the jurisdiction of this Court rather than the more appropriate jurisdiction of the Federal Court.
18. It follows that the prima facie inconsistency between s.39B(1) of the Judiciary Act and s.177(1) of the Act must be resolved, in accordance with the ordinary rules of construction of statutes (110 Goodwin v. Phillips (1908) 7 CLR 1 at 7.), in favour of the subsequent provision, that is to say, in favour of s.39B(1). The effect of that is that s.39B(1) overrides or pro tanto amends s.177(1) to the extent that s.177(1) would make a certificate of the Commissioner or a Second or Deputy Commissioner conclusive evidence of the due making of an assessment in proceedings in the Federal Court under s.39B(1) in which the applicant's case is that the assessment is invalid on the ground that it is not bona fide.
Residual operation of s.177(1)
19. As has been seen, s.177(1) of the Act is inconsistent with s.75(v) of the Constitution only to the extent that it purportedly precludes the Court from determining, in the exercise of the original jurisdiction conferred by that sub-section, a claim that an assessment is invalid on the ground that it is not bona fide. Section 177(1) is also inconsistent with any other provision of the Constitution (111 See, in particular, Constitution, s.75(iii).) directly conferring original jurisdiction upon the Court to the extent that it would purportedly preclude the proper judicial determination of such a claim in circumstances where the determination of the claim was a necessary step in the exercise of that jurisdiction. That inconsistency does not, however, give rise to total invalidity. Clearly, That being s.177(1) can be read down, in accordance with s.15A of the Acts Interpretation Act 1901 (Cth), to avoid the excess of legislative power. The appropriate method of reading the sub-section down is, in our view, to read it as simply inapplicable in relation to the issue of the validity of an assessment which is alleged, in such proceedings in this Court, to be not "bona fide" in the sense explained above. Similarly, s.177(1) is overridden and pro tanto repealed by the provision of s.39B(1) of the Judiciary Act only to the extent that it would otherwise be applicable in relation to that issue in proceedings in the Federal Court under that provision.
Conclusion
20. The assessments and amended assessments which the taxpayer attacks in the proceedings in the Federal Court were based upon determinations purportedly made by the respondent Deputy Commissioner pursuant to s.177F of the Act. The taxpayer claims that those determinations and the assessments or amended assessments based upon them ("the relevant determinations and assessments") are not determinations or assessments for the purposes of the Act and are all void. It follows from what has been written above that s.177(1) of the Act has been overridden and pro tanto repealed by s.39B(1) of the Judiciary Act to the extent that it would preclude a consideration by the Federal Court of the question whether the relevant determinations and assessments are in fact void.
21. Strictly speaking, it is unnecessary to determine the answer to that question for the purposes of the proceedings before this Court. However, the case stated indicates, and it was common ground in argument, that the only basis of the claim that the relevant determinations and assessments are not determinations or assessments for the purposes of the Act and are void is the alleged fact that "the income the subject of the Morlea determinations and the Morlea assessments is the same income as the income the subject of the Richard Walter determinations and the Richard Walter assessments". Since the matter was examined in argument and is dealt with in other judgments, it is appropriate that we indicate that we consider that the taxpayer's challenge to the relevant determinations and assessments must fail for the reason that that alleged fact would not, if established, of itself suffice to establish that the relevant determinations or assessments are not determinations or assessments for the purposes of the Act or that they are void. In that regard, we are in general agreement with the reasons given by Dawson J for concluding that the provisions of the Act permit the Commissioner to make s.177F determinations and assessments based upon them on an alternative basis. That is not, of course, to suggest that the courts would be powerless to prevent their processes being abused to obtain double recovery by enforcement of an alternative assessment.
22. The question reserved for the consideration of this Full Court reads:
"Does the production of the Notices Of Assessment preclude wholly or in part challenge or review of the Richard Walter assessments in the proceeding under section 39B of the Judiciary Act 1903 (Cth), by reason of the operation of section 177 of the Income Tax Assessment Act 1936 (Cth) ?"
We would answer it:
"No, but the challenge must fail or the review be refused."
DAWSON J The question of law reserved for the consideration of the Court in this case arises out of the service by the Deputy Commissioner of Taxation ("the Commissioner") of amended notices of assessment in respect of specified years upon Richard Walter Pty. Ltd. and Morlea Professional Services Pty. Ltd. The Commissioner assessed each of those taxpayers to tax upon the same income, that is to say, the same amounts (save for an immaterial sum) from the same source for the same periods of time. Both taxpayers objected to their assessments. The objection by Richard Walter Pty. Ltd. was disallowed and an appeal to the Federal Court against the disallowance has not yet been heard. According to the stated case, there has been no decision upon the objection by Morlea Professional Services Pty. Ltd.
2. In the meantime the Commissioner commenced proceedings against Richard Walter Pty. Ltd., but not against Morlea Professional Services Pty. Ltd., to recover the tax for which it was said to be liable under its assessments. Those proceedings were commenced in the Supreme Court of New South Wales but subsequently removed (save for one aspect) to the Federal Court.
3. Richard Walter Pty. Ltd. for its part invoked the jurisdiction conferred on the Federal Court by s.39B of the Judiciary Act 1903 (Cth) by commencing proceedings in that court against the Commissioner to restrain him from continuing or prosecuting the recovery proceedings. Section 39B confers (with certain immaterial exceptions) original jurisdiction on the Federal Court with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth.
4. The Commissioner sought by notice of motion to have the s.39B proceedings dismissed on the ground that the Federal Court lacked jurisdiction by reason of the effect given by s.177 of the Income Tax Assessment Act 1936 (Cth) ("the Act") to the production of the relevant notices of assessment certified under the hand of the Commissioner. Sub-section (1) of s.177 provides:
"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 under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct."
The notice of motion having been removed into this Court, the Chief Justice stated a case and reserved the following question for the consideration of the Full Court:
"Does the production of the Notices Of Assessment preclude wholly or in part challenge or review of the Richard Walter assessments in the proceeding under section 39B of the Judiciary Act 1903 (Cth), by reason of the operation of section 177 of the Income Tax Assessment Act 1936 (Cth) ?"
5. The taxpayer, Richard Walter Pty. Ltd., contends that the question should be answered in the negative. It does so upon the basis that the assessments which the Commissioner purported to make against it are not valid assessments because Morlea Professional Services Pty. Ltd. was assessed to tax in respect of the same amount. Thus, the argument runs, the notices upon which the Commissioner seeks to rely are not notices of assessment within the meaning of s.177(1) and the sub-section has no application. Alternatively, the taxpayer says that, if the relevant notices are notices of assessment within the meaning of s.177(1), the sub-section is invalid to the extent that it purports to preclude the Court from determining the validity of the assessments. This alternative argument is based upon the premise that, subject to the specified exceptions, the jurisdiction conferred upon the Federal Court by s.39B of the Judiciary Act is co-extensive with that conferred upon the High Court by s.75(v) of the Constitution, namely, jurisdiction in all matters "(i) n which a writ of Mandamus or prohibition or an injunction is sought against an officer of the Commonwealth".
6. Although the jurisdiction of the Federal Court is conferred pursuant to the legislative power contained in s.77(i) of the Constitution - the power to define the jurisdiction of any federal court other than the High Court - it is, unlike the relevant jurisdiction of the High Court, conferred by statute and admits of statutory exceptions or limitations. However, it is convenient for present purposes to put to one side the possibility that s.177(1) of the Act intended to qualify the jurisdiction conferred by s.39B of the Judiciary Act, and to proceed upon the footing that the jurisdiction was intended to be no less than that conferred upon the High Court by s.75(v) of the Constitution.
7. The whole basis upon which the taxpayer seeks to challenge the assessments against it is that Morlea Professional Services Pty. Ltd. is assessed to tax at the same time in respect of the same income. That is not contested, and it is upon that basis that the taxpayer says that the assessments neither constitute a bona fide assessment of the amount of its taxable income nor are definitive, being at best tentative assessments. It is also upon that basis that the taxpayer says that the assessments constitute an abuse of the power of the Commissioner under s.166 of the Act to make an assessment of the amount of the taxable income of the taxpayer and of the tax payable thereon.
8. However, an immediate and insuperable obstacle is encountered by the taxpayer in the form of authority contrary to its basic propositions. In Richardson v. Federal Commissioner of Taxation (112 (1932) 48 CLR 192.) the taxpayer's assessment was amended to include income which had been returned as part of the income of a nominee who had been assessed to tax upon that income. Whilst it was accepted that "two persons cannot be severally liable each in his own right to include in his individual assessment for the same year the same income" (113 ibid. at 205.), this Court saw no difficulty in the co-existence of assessments to tax of different persons in respect of the same income. Thus Dixon J observed (114 ibid. at 207.):
"No doubt, when and if the Commissioner arrived at the clear conclusion that to ensure the completeness and accuracy of the nominee's assessments the exclusion of the income he returned was requisite, it became his duty to exercise his power under sec.37 (the power to alter assessments and refund any tax overpaid). But it was not unnatural that he should delay relieving one of two persons whom he considered culpable until the liability of the other was established. The questions which may arise out of such situations are no doubt attended with difficulty. ... It is enough to say that there is nothing in the character of the power given in sec.37 or in the nature of the power of assessment which requires the formal alteration of the nominee's assessments before the alteration of the assessment of the taxpayer."
It is true that in Richardson the circumstances were not the same as in the present case, but there is nothing in those circumstances which would limit the generality of the proposition accepted by the Court that more than one taxpayer may be assessed to tax upon the same income. Indeed, in Deputy Commissioner of Taxation v. Moorebank Pty. Ltd. (115 (1988) 165 CLR 55.) this Court thought that a "case in which the Commissioner issues a number of assessments on an alternative basis to different taxpayers in respect of the same income provides an obvious example" of a situation in which it would be "oppressive for the Commissioner to seek to enforce payment of the full amount due under a notice of assessment or by way of additional tax before the final resolution of a genuine dispute about the correctness of the assessment" (116 ibid. at 67.). Clearly the authority of Richardson has been accepted for a considerable time during which frequent amendments have been made to the Act. It would be wrong now to depart from that decision.
9. The manner in which the taxpayer seeks to establish that the assessments in question are tentative only and constitute an abuse of power on the part of the Commissioner is by placing reliance upon the notices of assessment themselves, and presumably the notices of assessment served upon Morlea Professional Services Pty. Ltd., to show that there are assessments against different persons in respect of the same income. But even assuming that the notices of assessment against Morlea Professional Services Pty. Ltd. are admissible in evidence notwithstanding the tender by the Commissioner of the notices of assessment against Richard Walter Pty. Ltd., the most that could be drawn from the evidence would be that two persons were assessed to tax in respect of the same income. Applying the decision in Richardson, that would not establish that the assessments were either tentative or an abuse of power. There being nothing in, or in relation to, the notices of assessment against the taxpayer to suggest that they are not notices of assessment within the meaning of the Act and of s.177(1), that sub-section would apply. Because the proceedings in the Federal Court to restrain the Commissioner from recovering the tax are not proceedings upon a review or appeal relating to the assessments, the production of the notices of assessment by the Commissioner would be conclusive evidence, not only of the due making of the assessments, but also that the amounts and all the particulars of the assessments are correct.
10. In F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation (117 (1981) 147 CLR 360.) the taxpayer sought to impugn assessments against it upon grounds similar to those raised in the present case, namely, that they were tentative only and constituted an abuse of power. Mason and Wilson JJ referred to s.175 of the Act which provides:
"The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with."
Of that provision they said (118 ibid. at 371.):
"This section does not relieve the Commissioner from the necessity of performing his duty to make an assessment. The section protects the validity of an assessment, once made, from the consequences which might otherwise flow from the Commissioner's failure to comply with any provisions of the Act. But it does not, and cannot, create a valid assessment where no assessment has been made at all. The section requires an actual assessment as a condition of its operation."
And of s.177(1), which is designed to give evidentiary effect to s.175, Mason and Wilson JJ said (119 ibid. at 372.):
"There is no ground for saying that 'assessment' in s.177(1) is used otherwise than in its defined sense".
The taxpayer's contention in Bloemen was, however, rejected because the notices of assessment which were produced lent no support to it; on their face they constituted notices of assessment within the meaning of s.177(1) so that the sub-section applied to make them conclusive evidence that the assessments were duly made and that the amounts and all the particulars were correct.
11. The Court in Bloemen did not resile from the decision in Federal Commissioner of Taxation v. Hoffnung and Co. Ltd. (120 (1928) 42 CLR 39.), which held that a tentative assessment was no assessment at all, but as Mason and Wilson JJ pointed out (121 (1981) 147 CLR at 374.) the document in Hoffnung, which was said to be a notice of an assessment, "bore evidence, if not on its face then in the supporting documentation, which denied it that character. Visual inspection alone was sufficient to compel the conclusion that the document was not a notice of assessment for the purpose of the relevant Act." Mason and Wilson JJ went on to say (122 ibid. at 377.):
"It is one thing to say that a notice of a tentative assessment is not touched by ss.175 and 177. That is clearly correct. But it is difficult to understand how it can be said, consistently with those sections, that a notice which appears to be a final notice of assessment is nevertheless not what it appears to be because there was no assessment at all."
12. The position is, therefore, that whilst s.177(1) has no application in relation to an assessment which is tentative or which constitutes an abuse of power, where the production of a notice of assessment does not reveal any such defect, it conclusively establishes the validity of the assessment except on a review or appeal. That is to say, it conclusively establishes, to the contrary of any contention by the taxpayer, that the assessment is neither tentative nor an abuse of power. This forms the basis for the taxpayer's alternative argument that s.177(1) purports to cut down the jurisdiction of the Federal Court - assuming it to be a jurisdiction which is co-extensive with that conferred on the High Court by s.75(v) of the Constitution - with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth.
13. However, s.177(1), at least in form, operates upon the evidence in the particular case and does not purport to restrict jurisdiction. Nor, I think, does it do so in substance. Section 75(v) of the Constitution defines jurisdiction in terms of remedies rather than subject-matter and it has long been recognized that Parliament may deal with a subject- matter within its legislative competence in such a way as to render the kind of relief referred to in s.75(v) inappropriate in the circumstances without affecting the jurisdiction of the Court to grant such relief where appropriate. As Isaacs and Rich JJ pointed out in Waterside Workers' Federation of Australia v. Gilchrist, Watt and Sanderson Ltd. (123 (1924) 34 CLR 482 at 526.), the jurisdiction under s.75(v) exists, "but it needs a proper case for its exercise" (124 See also Ince Bros. and Cambridge Manufacturing Co. Pty. Ltd. v. Federated Clothing and Allied Trades Union (1924) 34 CLR 457 at 464.). There is no reason why the legislature should not render prerogative relief inappropriate by making a particular kind of evidence conclusive proof of specified matters, provided that in doing so it does not deny the jurisdiction for which s.75(v) provides. No doubt there are cases in which no line can be drawn between the facilitation of proof of a particular matter and the denial of a remedy. That might occur where the conclusiveness of the evidence effectively determined the issue between the parties for all purposes. But it is, I think, clear enough that s.177(1) only operates to create a situation in which, upon the evidence constituted by a notice of assessment, liability in recovery proceedings is conclusively established, rather than to deny the jurisdiction to grant the remedies referred to in s.75(v).
14. As the Court recognized in Bloemen (125 (1981) 147 CLR at 376.), if the Commissioner of Taxation in endeavouring to recover tax were to elect to prove his case by giving evidence otherwise than by reliance upon s.177(1), there is no reason why the taxpayer would not be free to contest the validity of the assessment and be given such relief as was appropriate. That may be more theoretical than real, because there does not appear to be any reason why the Commissioner would not rely upon s.177(1) when he was able to do so.
15. But the tentative assessment in Hoffnung was not theoretical. Notice of that assessment did not attract the operation of s.177(1) so as to provide conclusive evidence of the validity of the assessment because the tentative nature of the assessment appeared on the face of the proceedings. It was not a notice of assessment within the meaning of the Act. There was nothing in s.177(1) which would have precluded a claim for prerogative relief in that case, had that relief been otherwise appropriate.
16. Nor was the situation theoretical in Re Deputy Commissioner of Taxation (W.A.); Ex parte Briggs (126 (1986) 69 ALR 185.) where prerogative relief was sought against the Commissioner. In that case, the Commissioner conceded for the purpose of the proceedings that in issuing the relevant notices of assessment he had made no attempt to ascertain or evaluate the taxpayer's taxable income. In view of that concession, the Full Court of Federal Court held that there was no assessment within the meaning of the Act so that s.177(1) did not operate to provide conclusive evidence of validity. The evidence was, therefore, not such as to preclude a claim for prerogative relief, if that relief was otherwise appropriate. Moreover, in proceedings where no notice of assessment has been issued, but a taxpayer seeks to contest its tax liability by way of a claim for prerogative relief or an injunction, s.177(1) can have no direct operation (127 See Oil Basins Ltd. v. The Commonwealth (1993) 178 CLR 643.).
17. Section 75(iii) provides that the High Court shall have jurisdiction in all matters in which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party. Section 75(v) was a measure designed to ensure that appropriate relief was available against Commonwealth officers and was thought to be necessary to overcome an inadequacy which was perceived to exist in the United States Constitution (128 See The Tramways Case (No.1) (1914) 18 CLR 54 at 82.). Whether s.75(v) was really necessary, having regard to s.75(iii), is now, perhaps, an academic question (129 See Bank of N.S.W. v. The Commonwealth (1948) 76 CLR 1 at 363-367.). But another question which may not have been finally settled is whether s.75 is a source of substantive liability or whether it affords procedural rights only. The more recent tendency is to regard s.75, and in particular s.75(iii), as being procedural in character (130 See, e.g, Werrin v. The Commonwealth (1938) 59 CLR 150 at 165-168; Maguire v. Simpson (1977) 139 CLR 362 at 404-405; cf. The Commonwealth v. New South Wales (1923) 32 CLR 200.). Be that as it may, it is to my mind perfectly clear that neither s.75(iii) nor s.75(v) can have an operation which affects the capacity of the Commonwealth to define its obligations and those of others with respect to the matters over which it has legislative power. In particular, it has power under s.51(ii) of the Constitution to specify those circumstances which give rise to liability for tax.
18. The protection against an unconstitutional impost lies in the nature of a tax rather than in the availability of a particular remedy to contest it. An impost will not satisfy the description of a tax if it is impossible to differentiate it from an arbitrary exaction. Such a differentiation can only be made by reference to the criteria by which liability to pay the tax is imposed. Moreover, a tax may not be made incontestable, for to do so would place beyond examination the constitutional limits upon power (131 See MacCormick v. Federal Commissioner of Taxation (1984) 158 CLR 622 at 639, 640.). However, to make a notice of assessment conclusive evidence of liability in recovery proceedings is not, having regard to the existence of review and appeal procedures, to render the tax either arbitrary or incontestable. The position would plainly be different if a notice of assessment were conclusive for all purposes. To the extent that s.177(1) may be regarded as having a substantive operation extending beyond that of a mere evidentiary provision, it must be to change the nature of the tax imposed from that of an impost giving rise to a liability which is contestable generally to that of an impost the liability for which is contestable only upon a review or by way of appeal. The unavailability of any remedy under s.75(v) to impede the recovery process arises from the nature of the tax rather than the restriction of jurisdiction to grant those remedies. And it is clear that it is within legislative power to define the nature of the liability imposed by a tax, provided that the liability is not arbitrary or incontestable.
19. In Deputy Federal Commissioner of Taxation v. Brown (132 (1958) 100 CLR 32 at 40.), Dixon CJ described the process in these terms:
"The general machinery for assessment is only too familiar. It is unnecessary to refer to it except for the purpose of noting the following points, viz.:- (1) that tax is not due and payable until assessed; (2) that it then becomes a debt to the Crown payable on the date specified in the notice of assessment or, if there be none, on the thirtieth day after service of the notice; (3) that the assessment of liability is conclusive except upon the processes of review and appeal.
Although there is no judicial decision to that effect, it has, I think, been generally assumed that under the Constitution liability for tax cannot be imposed upon the subject without leaving open to him some judicial process by which he may show that in truth he was not taxable or not taxable in the sum assessed, that is to say that an administrative assessment could not be made absolutely conclusive upon him if no recourse to the judicial power were allowed."
The general assumption referred to by Dixon CJ has, of course, now received judicial recognition (133 See MacCormick v. Federal Commissioner of Taxation (1984) 158 CLR at 639; Deputy Federal Commissioner of Taxation v. Truhold Benefit Pty. Ltd. (1985) 158 CLR 678 at 684; Air Caledonie International v. The Commonwealth (1988) 165 CLR 462 at 467.).
20. Reliance was placed upon the decision of this Court in R. v. Hickman; Ex parte Fox and Clinton (134 (1945) 70 CLR 598.). In that case a formula was devised to reconcile the prima facie inconsistency between a statutory provision which limits the powers of a decision maker and another provision - a privative clause - which contemplates that any decision will operate free from any restriction. The formula, which is a compromise, prevents a decision from being called in question provided that it is the result of a bona fide attempt to exercise the power to make it, it relates to the subject-matter of the legislation and it does not on its face go beyond the power (135 See also Reg. v. Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415; O'Toole v. Charles David Pty. Ltd. (1991) 171 CLR 232.).
21. However, I am unable to discover in the present case anything which would warrant the application of the Hickman formula, either directly or by way of analogy. The requirements of the Act which govern the making of an assessment do not produce any inconsistency with the provision that a notice of assessment constitutes conclusive evidence in recovery proceedings. That is because s.175 provides that the validity of any assessment shall not be affected by reason of the fact that any of the provisions of the Act have not been complied with. The effect of s.175 is that the requirements of the Act relating to the making of an assessment are directory only and, whilst imposing obligations upon the Commissioner, their non-observance has no consequences for the validity of the assessment. Of course, upon a review or in an appeal the non- observance of those requirements may indicate that the assessment ought not to stand, but that is a different matter (136 See Taxation Administration Act 1953 (Cth), ss.14ZZK, 14ZZO.). Having regard to s.175, there is no inconsistency, apparent or otherwise, between the requirements of the Act relating to the making of an assessment and s.177(1), and no reconciliation is called for. Indeed, as I have said, s.177(1) does no more than give evidentiary effect to s.175.
22. Even if the taxpayer in this case were not precluded by s.177(1) from attacking the assessments in the recovery proceedings, it could not succeed, as it seeks to do, upon the basis that two persons were assessed to tax in respect of the same income. In any event, s.177(1) provides that the relevant notices of assessment are conclusive evidence of the validity of the assessments and, in so doing, does not invalidly restrict the jurisdiction conferred by s.75(v) of the Constitution. For these reasons, I would answer the question reserved as follows:
The production of the Notices of Assessment wholly precludes challenge or review of the Richard Walter assessments in the proceeding under s.39B of the Judiciary Act.
TOOHEY J This matter comes before the Court by way of a case stated and a question reserved for the consideration of the Court, following the removal of a proceeding on notice of motion from the Federal Court of Australia.
2. The question reserved is:
"Does the production of the Notices of Assessment preclude wholly or in part challenge or review of the Richard Walter assessments in the proceeding under section 39B of the Judiciary Act 1903 (Cth), by reason of the operation of section 177 of the Income Tax Assessment Act 1936 (Cth) ?"
The assessments
3. The "Richard Walter assessments" referred to in the question reserved are assessments raised by the applicant ("the Commissioner") against the respondent ("the taxpayer") in respect of the years ended 30 June 1981, 1982, 1983 and 1984. The assessments for the first two years are amended assessments but nothing was said to turn on that. In each case the taxable income of the taxpayer was increased by a very considerable amount from that returned. This came about because of the inclusion by the Commissioner, in the assessable income of the taxpayer for each year, of the net income of Morlea Professional Services Pty. Ltd. ("Morlea"). In each case that net income had been returned by Morlea as agent for the Morlea Partnership. But, relying upon "sham, section 260 and/or Part IVA" of the Income Tax Assessment Act 1936 (Cth) ("the Act"), the Commissioner included the income in the assessable income of the taxpayer for the years in question. The taxpayer objected to each of the assessments; the objections were disallowed.
4. In the case of each assessment the Commissioner made determinations under s.177F(1) and (2) of the Act. Section 177F empowers the Commissioner, where a tax benefit has been obtained by a taxpayer in connection with a scheme to reduce income tax to which Pt IVA applies, to include in the assessable income of the taxpayer the amount of the benefit. The Commissioner made like determinations in the case of Morlea and included the income of the Morlea Partnership in the assessable income of that company for the four years in question. Morlea objected to each of the assessments; the objections were disallowed.
5. There is a question as to whether an adjustment sheet may be treated as part of a notice of assessment. This will be dealt with later. For the moment it is enough to record that in the case of each tax year the Commissioner issued an adjustment sheet or amended adjustment sheet which explained the amount added to the taxable income of the taxpayer as returned in the following way:
"An amount of $ ... being the net income purportedly derived by Morlea Professional Services Pty Ltd as agent for the Morlea Partnership has now been included in assessable income."
The adjustment sheets for Morlea use the same formula.
The proceedings
6. The Commissioner brought proceedings in the Supreme Court of New South Wales for the recovery of unpaid tax in respect of the assessments raised against the taxpayer. The Commissioner has taken no action against Morlea in respect of the assessments raised against it.
7. The taxpayer appealed to the Federal Court of Australia against the disallowance of its objections; those appeals have not yet been heard. The taxpayer then brought action in the Federal Court of Australia seeking various declarations, with a view to demonstrating that the assessments raised against it and the determinations made under s.177F are void and of no effect. The Commissioner countered with a notice of motion for orders that the proceedings in the Federal Court be dismissed on the ground that the Federal Court "lacked jurisdiction to grant the relief which Richard Walter sought by reason of the production of notices of assessment certified under the hand of the Deputy Commissioner in accordance with s.177 of the Act" (137 Strictly speaking, this is the language of the case stated not the motion itself but the paraphrase identifies the issues more clearly.). The notice of motion led to the application for removal of that proceeding into this Court.
The issues
8. As the matter was argued, two primary issues emerged. The first concerns the operation of s.177(1) of the Act, which reads:
"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 under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct."
9. The Commissioner contended that s.177(1) precludes any challenge to the steps leading to the making of an assessment and that a taxpayer who wishes to challenge an assessment must do so through the system now to be found in Pt IVC of the Taxation Administration Act 1953 (Cth). The taxpayer accepted the generality but not the universality of that proposition and, in particular, argued that the sub-section has no operation where assessments have been raised which include, at the instance of the Commissioner, the same amounts in the assessable income of more than one taxpayer.
10. The second issue arises from s.39B(1) of the Judiciary Act 1903 (Cth) which includes in the original jurisdiction of the Federal Court "jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth". The taxpayer argued that even if s.177(1) of the Act had the operation contended for by the Commissioner so far as the Supreme Courts are concerned, the sub-section could not limit the jurisdiction of the Federal Court to inquire into and determine an application for prerogative relief against a Commonwealth officer, the Commissioner being such an officer.
Section 177(1)
11. It is convenient to deal first with the operation of s.177(1) of the Act. If the taxpayer's argument in this regard be accepted, the effect of s.39B of the Judiciary Act does not necessarily arise for decision though equally it must be acknowledged that, if s.39B has the effect contended for by the taxpayer, s.177(1) cannot constrain the exercise of jurisdiction by the Federal Court in dealing with the challenge to the assessments.
12. Section 177(1) has been treated by the Court as an integral part of the tax collection system. The Commissioner relied upon the distinction which the sub-section draws between a taxpayer's substantive liability and the process by which the Commissioner arrives at that liability. The sub-section leaves open to challenge under Pt IVC of the Taxation Administration Act "the amount and all the particulars of the assessment" but "the due making of the assessment" is conclusively determined by production of a notice of assessment in accordance with the terms of the sub-section. Service of a notice of assessment on a taxpayer brings about an ascertainment of the amount of the taxable income and of the amount of the tax payable by the taxpayer (138 Batagol v. Federal Commissioner of Taxation (1963) 109 CLR 243 at 251-252; Federal Commissioner of Taxation v. Prestige Motors Pty. Ltd. (1994) 68 ALJR 634 at 637; 123 ALR 306 at 310-311.). In George v. Federal Commissioner of Taxation (139 (1952) 86 CLR 183 at 207.) the Court said:
"Obviously the 'due making of the assessment' was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal."
13. As Dixon CJ, McTiernan and Webb JJ observed in McAndrew v. Federal Commissioner of Taxation (140 (1956) 98 CLR 263 at 270.):
"It is the manifest policy, one may now almost say the historical policy, of the legislation on the one hand to give to the taxpayer full opportunity on objecting to his assessment of contesting his liability in every respect before a court or before a board of review but on the other hand to require that in proceedings for the recovery of the tax the taxpayer will be concluded by the assessment and will not be entitled to go behind it for any purpose."
This distinction is well recognised in the decisions of the Court (141 F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation (1981) 147 CLR 360; McAndrew; George; Federal Commissioner of Taxation v. Dalco (1990) 168 CLR 614. See also McDonald v. Commissioner of Business Franchises (1992) 175 CLR 472.). In F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation (142 (1981) 147 CLR at 378.) Mason and Wilson JJ said of a notice of assessment:
"Its production will put beyond contention the due making of the assessment so that the Court cannot find that no assessment was made or that, if made, it was made for an inadmissible purpose."
14. Section 175 of the Act reads:
"The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with."
But as Mason and Wilson JJ said in Bloemen (143 ibid. at 371.), s.175 does not create a valid assessment where no assessment has been made at all. It "protects the validity of an assessment, once made, from the consequences which might otherwise flow from the Commissioner's failure to comply with any provisions of the Act". Thus the section plays no significant part in the disposition of the matter before the Court. It is s.177 which attributes to the production of a notice of assessment "conclusive evidence of the due making of the assessment" and governs the exercise of jurisdiction accordingly.
15. It is apparent that the taxpayer is faced with a formidable weight of authority in seeking to go behind the assessments in proceedings other than those provided in Pt IVC of the Taxation Administration Act. The taxpayer did not seek to challenge the correctness of any of the decisions which have been mentioned. It said that, nevertheless, an error in the process of making an assessment - what its counsel described as "an error which goes to jurisdiction" - will deprive the assessment of validity. It said further that the existence of assessments, which include in the taxpayer's assessable income amounts which the Commissioner included as well in the assessable income of Morlea, demonstrates that there has been such an error and a breach of the statutory duty imposed on the Commissioner by s.166 of the Act to make an assessment of the taxable income of the taxpayer. It follows, so the argument ran, that the Federal Court may go behind the assessments raised against it.
16. As presented, there seem to be two arguments involved here and it is hard to say whether they are discrete or whether they overlap to some extent. One is that in raising assessments against two taxpayers, which include the same amounts of assessable income, there has been an abuse of power on the part of the Commissioner which s.177(1) does not protect because it constitutes an error going to jurisdiction. The other is that failure by the Commissioner to observe a condition precedent to the making of an assessment means that there has been no "due making of the assessment" and that an assessment which includes income the subject of an assessment against another taxpayer evidences a failure on the part of the Commissioner to make the definitive assessment which the Act requires for s.177(1) to operate.
17. However, the weight of authority is clearly against any general proposition that a court may inquire into the making of an assessment with a view to determining whether there has been an abuse of power. In Dalco (144 (1990) 168 CLR at 633-634.) I mentioned possible circumstances in which a court might go behind the making of an assessment. But clearly the circumstances, if they exist at all, are most exceptional. Indeed, the admissions made by the Commissioner in Re Deputy Commissioner of Taxation (W.A.) ; Ex parte Briggs (145 (1986) 69 ALR 185.) seem designed to postulate the most extreme situation for the purpose of testing the scope and operation of s.177(1). But the circumstances here are not of that exceptional kind.
18. The Court has accepted that the Commissioner may issue assessments on an alternative basis to different taxpayers in respect of the same income though it would be oppressive to proceed to recover against more than one before the final resolution of a genuine dispute about the correctness of the assessment (146 Deputy Commissioner of Taxation v. Moorebank Pty. Ltd. (1988) 165 CLR 55 at 67.). In refusing special leave to appeal from the decision of the Full Court of the Supreme Court of Queensland in Deputy Commissioner of Taxation v. Jonrich Pty. Ltd. (147 (1986) 70 ALR 357.), Gibbs CJ speaking for himself and Wilson and Dawson JJ said (148 Transcript, 7 November 1986 at 7.):
"The Court sees no reason to doubt the correctness of the conclusion that it is not outside the jurisdiction of the Commissioner to issue inconsistent assessments."
In Jonrich the Commissioner had assessed Jonrich Pty. Ltd. as trustee on the net income of a trust estate though the Commissioner had already included the whole income of the trust estate in the assessable income of the beneficiaries. What does not appear from the transcript of the special leave hearing or from the report of the decision of the Full Court is whether the Commissioner initiated the inclusion of the income in the assessable income of the beneficiaries or whether the beneficiaries had themselves included it.
19. In Richardson v. Federal Commissioner of Taxation (149 (1932) 48 CLR 192.) profits derived from the carrying on of a hotel business were returned as part of the assessable income of a nominee of the appellant. The Commissioner later amended the appellant's assessments to include the profits in the appellant's assessable income without, it appears, amending the assessments already raised against the nominee. On the hearing of the appellant's appeal no question arose as to the validity of his assessments by reason of those raised against the nominee.
20. It is true that the present case is not one in which a taxpayer included an amount of income in his or her return and the Commissioner assessed another taxpayer as well in respect of that income. Here, following determinations made under s.177F, the Commissioner initiated, in the case of both the taxpayer and Morlea, the inclusion of amounts which neither taxpayer had included in its returns. For that reason, the taxpayer argued, the assessments against it must be regarded as an abuse of power. And, it was said, they cannot be treated as definitive; they are merely tentative.
21. The existence of other assessments relating to the same amounts of income does not evidence bad faith or improper purpose on the part of the Commissioner. The "assessment" to which s.177(1) refers is the "assessment" defined in s.6, namely, the ascertainment of the amount of taxable income and of the tax payable on that taxable income. It is apparent that the Commissioner intended to embark upon and did embark upon that process. Whether the assessments will in the end survive the appellate process intact is not to the point.
22. Equally, the existence of the assessments against Morlea does not mean that the assessments against the taxpayer are not definitive. Federal Commissioner of Taxation v. Hoffnung and Co. Ltd. (150 (1928) 42 CLR 39.) is clearly distinguishable because in that case the Commissioner, in admissions of fact, acknowledged that the assessment was "tentative" and that a matter relevant to the assessment "remained to be adjusted". In those circumstances it is hardly surprising that the Court held that the assessment did not preclude objections when a complete and final assessment had been made. Isaacs J observed (151 ibid. at 55.):
"If an assessment definitive in character is made, it assumes that, so far as can there be seen, a fixed and certain sum is definitely due, neither more nor less."
Whatever implications the Morlea assessments may ultimately prove to have, the assessments raised against the taxpayer answer Isaacs J's description.
23. There is nothing in the existence of assessments against the taxpayer and Morlea that deprives s.177(1) of its accepted operation, so far as the taxpayer is concerned. Subject to what follows regarding s.39B of the Judiciary Act, s.177(1) operates according to its terms against the taxpayer.
Adjustment sheets
24. Before turning to the issue raised by s.39B, something should be said of a matter which arose during the course of argument, namely, whether an adjustment sheet forms part of a notice of assessment. It is the adjustment sheets accompanying the assessments or amended assessments against the taxpayer which disclose the inclusion of the income of the Morlea Partnership in the assessable income of the taxpayer.
25. There appears to be only one decision of this Court in which the matter has been discussed, and then only briefly. In Bloemen Murphy J said (152 (1981) 147 CLR at 380.): "The adjustment sheet was not part of the assessment". The comment was made in relation to an argument that a statement in the adjustment sheet rendered the assessment tentative only, an argument which Murphy J in any event rejected. On the other hand Aickin J said (153 ibid. at 381.):
"In the present case the notice of assessment had attached to it a paper headed 'Adjustment Sheet' which has been correctly treated as part of the notice of assessment."
26. In my respectful view, the approach taken by Murphy J is to be preferred. His Honour cited in support of his statement the judgment of Neasey J in Federal Commissioner of Taxation v. Reynolds (154 (1981) 34 ALR 463.). In concluding that the statement in the adjustment sheet of reliance upon a particular section of the Act was not part of the assessment (155 ibid. at 476.), Neasey J had earlier observed (156 ibid. at 473.):
"There is no provision in the Act which requires the Commissioner to send any document in the nature of an adjustment sheet, although it is commonly done, and is done for an important purpose."
27. In Prestige Motors Pty. Ltd. v. Federal Commissioner of Taxation (157 (1993) 118 ALR 497 at 505.) Hill J inferred from a passage in the joint judgment of Mason and Wilson JJ in Bloemen (158 (1981) 147 CLR at 374.), which speaks of a notice of assessment bearing evidence "if not on its face then in the supporting documentation", that their Honours also would treat an adjustment sheet which accompanied an assessment as part of the notice of assessment, at least for the purpose of determining whether, on its face, a document was a notice for the purpose of the Act. But that, I suggest, is to read too much into the passage. Their Honours were simply referring to earlier decisions in which supporting documentation was taken into account, apparently without question.
28. The Commissioner may be ordered to give particulars of the basis of his assessment in proceedings where the assessment is challenged (159 Bailey v. Federal Commissioner of Taxation (1977) 136 CLR 214.). The Court has left open the question whether particulars might be ordered before the institution of proceedings by a taxpayer and that question does not arise here. An adjustment sheet is an explanatory document. But it is not a notice of assessment; that document in its usual form is self-sufficient in the sense that it identifies the amount of taxable income and of the tax payable thereon.
29. The conclusion that in the present case the notices of assessment have the evidentiary effect ascribed to such notices by s.177(1) and were not made in bad faith or for an improper purpose and are not tentative is unaffected by consideration of the adjustment sheets. Nevertheless, if an adjustment sheet is not part of the "notice of assessment" to which s.177(1) refers, the operation of s.177(1) is reinforced because the notice itself identifies only the amount of taxable income and the amount of tax payable thereon.
Judiciary Act
30. However, the taxpayer's case goes further. It contends that, whatever the implications of s.177(1) for the Supreme Courts, the sub-section cannot affect the jurisdiction invested in the Federal Court by s.39B of the Judiciary Act. In so doing, the taxpayer relies upon the decision of the Full Court of the Federal Court (Morling and French JJ, Pincus J dissenting) in David Jones Finance and Investments Pty. Ltd. v. Commissioner of Taxation (160 (1991) 99 ALR 447.). The Commissioner's response is that no distinction can be drawn between the jurisdiction of the Federal Court and that of a Supreme Court in any relevant respect.
31. Section 75(v) of the Constitution confers on the High Court original jurisdiction in all matters "In which a writ of mandamus or prohibition or an injunction is sought against an officer of the Commonwealth". Section 39 of the Judiciary Act invests the several courts of the States with federal jurisdiction in all matters in which the High Court has original jurisdiction or in which original jurisdiction may be conferred upon it, subject to the qualifications mentioned in s.39(2). That investing is done pursuant to s.77(iii) of the Constitution which empowers the Parliament, with respect to any of the matters mentioned in s.75, to make laws "Investing any court of a State with federal jurisdiction". As stated previously, s.39B includes in the original jurisdiction of the Federal Court jurisdiction "with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth", with qualifications that are not relevant here. This adopts the language of s.75(v) of the Constitution. Section 39B is enacted pursuant to s.77(i) of the Constitution, which empowers the Parliament to make laws with respect to any of the matters mentioned in s.75, "Defining the jurisdiction of any federal court other than the High Court".
32. As is apparent from the judgment of Dixon J in Bank of N.S.W. v. The Commonwealth (161 (1948) 76 CLR 1 at 363.), s.75(v) was included by way of caution in order to ensure that officers of the Commonwealth against whom prerogative relief was sought were amenable to the jurisdiction of the High Court. Arguably, that end was achieved by s.75(iii), which confers on the High Court original jurisdiction in all matters "In which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party". That s.75(v) is a source of federal jurisdiction rather than of substantive rights gains support from the judgment of Dixon J in Werrin v. The Commonwealth (162 (1938) 59 CLR 150 at 167.) and of Jacobs J in Maguire v. Simpson (163 (1977) 139 CLR 362 at 404.).
33. Section 39B defines the jurisdiction of the Federal Court in a relevant respect; it does no more. "Characteristically an exercise of jurisdiction is attended by an exercise of power" (164 Re Nolan; Ex parte Young (1991) 172 CLR 460 at 487.). However, it is not the distinction between jurisdiction and power with which we are concerned, rather with the exercise of jurisdiction. The jurisdiction of a court is its capacity to inquire into and determine matters of a particular character. Because s.39B confers jurisdiction on the Federal Court to deal with a matter in which mandamus, prohibition or an injunction is sought against an officer of the Commonwealth, it does not follow that the exercise of that jurisdiction may not be affected by other statutory provisions. Indeed the Parliament may repeal or amend s.39B, though the Parliament may not deprive the High Court of its jurisdiction under s.75(v).
34. The effect of s.177(1) of the Act is not to deprive the Federal Court of the jurisdiction which s.39B of the Judiciary Act confers. Certainly, s.177(1) constrains the jursidiction of any court to inquire into the making of an assessment but it does so only in the context that a system of objections, determinations, reviews and appeals is provided for. That system is now to be found in Pt IVC of the Taxation Administration Act. In the course of their judgment in Bloemen, Mason and Wilson JJ said (165 (1981) 147 CLR at 376.):
"It does not necessarily follow from what we have said that the Act excludes the general jurisdiction of the Supreme Court. Section 177(1) specifically operates by compelling a court, for example the Supreme Court, in the exercise of its jurisdiction to treat a notice of assessment on its production as conclusive evidence that the assessment has been duly made and thereby foreclosing that issue. In theory s.177 leaves the Supreme Court with jurisdiction to decide whether an assessment has been duly made in a case in which an appropriate document is not produced."
Their Honours made that statement in a context in which "the rights of review given to the taxpayer by Pt V are comprehensive" (166 ibid.).
35. These comments have equal application to the relevant jurisdiction of the Federal Court under s.39B, substituting Pt IVC of the Taxation Administration Act for Pt V of the Act as it then stood. And it is not to the point to argue as to the position of the High Court in this regard. Relevantly, the High Court owes its jurisdiction directly to the Constitution; the State courts and the Federal Court owe theirs directly to enactments of the Parliament.
36. Unless there is a basis for distinguishing the relevant jurisdiction of the State courts and the Federal Court, Bloemen stands directly in the path of the taxpayer because there Mason and Wilson JJ adopted as a "correct statement of the effect of s.177(1) " (167 ibid. at 375.) the conclusion of Taylor J in McAndrew (168 (1956) 98 CLR at 281.) 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". There is no basis for distinguishing the jurisdiction of the courts in this regard.
37. The taxpayer argued that s.177 operated in the same manner as a privative clause, so that the test propounded by Dixon J in The King v. Hickman; Ex parte Fox and Clinton (169 (1945) 70 CLR 598 at 615.) and adopted in later cases (170 See the cases cited in The Queen v. Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415 at 418; also see O'Toole v. Charles David Pty. Ltd. (1991) 171 CLR 232.) applied. In so doing it relied upon the decision of this Court in O'Toole v. Charles David Pty. Ltd. (171 (1991) 171 CLR 232.) which held that a privative provision in s.60 of the Conciliation and Arbitration Act 1904 (Cth) did not protect an award from challenge on the ground that it exceeded the legislative power of the Parliament nor did it preclude the Federal Court from determining any challenge to the validity of an award made by the Conciliation and Arbitration Commission on constitutional grounds.
38. However, the Hickman test operates where it is sought to reconcile an exercise of statutory authority with a provision which protects the determination under challenge, notwithstanding that it may be in excess of power. Section 177(1) does not purport to immunise an assessment from challenge. Its evidentiary effect is expressed in a context which recognises and incorporates the proceedings by way of review and appeal which the Act, and now the Taxation Administration Act, has established. It is only within that context that it gives to a notice of assessment the conclusiveness of which it speaks. Equally, s.175 is only concerned to protect an assessment from challenge by reason of some defect or irregularity in the making of the assessment. It does not operate where the power of the Commissioner to make an assessment is at issue.
39. Nothing in s.177(1) can be said to deprive the Federal Court of the jurisdiction which s.39B confers on that Court, being a jurisdiction with respect to any matter in which prerogative relief is sought against an officer of the Commonwealth. I cannot agree with the view expressed by the majority in David Jones Finance (172 (1991) 99 ALR at 465.) that the effect of s.177 "is purely jurisdictional". The section requires a court, in the exercise of its jurisdiction, to treat the production of a notice of assessment as conclusive evidence of the due making of the assessment and to deal with the matter before it accordingly. Section 39B defines the jurisdiction of the Court and it is a jurisdiction to be exercised in conformity with other relevant statutory provisions, including s.177(1) of the Act. After all, s.39B was introduced in a statutory context of which s.177(1), as construed in Bloemen less than three years before the enactment of s.39B and at a time when the Federal Court had appellate jurisdiction in income tax cases, formed part. There is much force in the observation of Pincus J in David Jones Finance that it is difficult to accept that s.39B was intended to exclude or limit the application of s.177(1) in the Federal Court. As his Honour said (173 ibid. at 473.):
"the substantial weakening of such a critical part of the tax collection system in this country could hardly have been intended to be effected by a mere implication".
40. The decision of the majority in David Jones Finance that the intention of the Parliament was to confer on the Federal Court the full amplitude of the original jurisdiction of the High Court under s.75(v) so that the exercise of jurisdiction by the Federal Court is not affected by s.177(1) should not be followed.
41. I would answer the question reserved as follows:
"Production of the notices of assessment against Richard Walter Pty. Ltd. wholly precludes challenge or review of the assessments in question in the proceeding under s.39B of the Judiciary Act 1903 (Cth)."
McHUGH J The question that arises in this case stated is whether the production of notices of assessment purporting to be made under the provisions of the Income Tax Assessment Act 1936 (Cth) ("the Act") precludes the challenge or review of those assessments in proceedings brought under s.39B of the Judiciary Act 1903 (Cth).
2. Section 39B(1) provides that the original jurisdiction of the Federal Court of Australia includes jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer of the Commonwealth. The terms of that sub-section reflect the terms of s.75(v) of the Constitution.
3. On 10 December 1991, the Deputy Commissioner of Taxation made a determination pursuant to s.177F(1) (a) of the Act that Richard Walter Pty. Ltd. ("the taxpayer") had obtained in the year ended 30 June 1981, or would but for the operation of s.177F have obtained, a tax benefit in connection with a scheme to which Pt IVA of the Act applies. An amended adjustment sheet identified the tax benefit as "(a) n amount of $2,143,148 being the net income purportedly derived by Morlea Professional Services Pty Ltd as agent for the Morlea Partnership". The adjustment sheet also showed that the tax benefit of the taxpayer had been calculated by deducting from the sum of $2,246,103, described as the "(n) et income of the Morlea Partnership", the sum of $102,955 which was described as: "Net income of the Aborda Trust previously returned". In accordance with s.177F(2) of the Act, the Commissioner determined that the amount of $2,143,148 be deemed to be included in the assessable income of the taxpayer. Determinations based on s.177F were also made in respect of the financial years ended 30 June 1982, 1983 and 1984. On 11 December 1991 the Deputy Commissioner issued assessments to give effect to the determinations.
4. On 10 December 1991, the Deputy Commissioner also made determinations pursuant to s.177F(1) (a) of the Act in respect of Morlea Professional Services Pty. Ltd. ("Morlea") for the years ended 30 June 1981, 1982, 1983 and 1984. For the year ended 30 June 1981, the tax benefit was identified as $2,246,103 being "the net income purportedly derived by Morlea Professional Services Pty Ltd as agent for the Morlea Partnership". The Deputy Commissioner issued assessments to give effect to those determinations on 11 December 1991. In all cases, the tax benefit determined in respect of Morlea corresponded with the tax benefit determined in the case of the taxpayer less the amount of net income previously returned by the Aborda Trust.
5. Objections to the assessments were lodged by the taxpayer. The Deputy Commissioner disallowed them. On 24 December 1992, the taxpayer appealed against the assessments. On 5 February 1993, the taxpayer instituted proceedings in the Federal Court of Australia pursuant to the provisions of s.39B of the Judiciary Act to restrain the Deputy Commissioner from prosecuting any proceedings to collect or recover from the taxpayer the amount of tax identified in the notices of assessment. The taxpayer also sought various declarations to the effect that the assessments were void, that their making was an abuse or excess of power, and that the Deputy Commissioner had acted ultra vires. The taxpayer claims that the notices of assessment issued to it were not a bona fide or definitive ascertainment of its taxable income. This was because the tax benefits which the Deputy Commissioner identified as obtained by the defendant were the same tax benefits that the Deputy Commissioner identified as obtained by Morlea and which he had included in the assessable income of Morlea.
6. On 29 March 1993, the Deputy Commissioner filed a notice of motion in the Federal Court in the s.39B proceedings for orders that the taxpayer's application be dismissed. The ground relied upon was that, upon the production of notices of assessment certified under the hand of the Deputy Commissioner in accordance with s.177 of the Act, the Federal Court lacked jurisdiction to grant the relief sought.
7. Section 177(1) provides that the production of a notice of assessment certified under the hand of the Commissioner "shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct". Section 175 of the Act also provides that the validity of any assessment is not "affected by reason that any of the provisions of this Act have not been complied with".
8. Section 8 of the Act imposes on the Commissioner the duty to administer the Act. By s.8 of the Taxation Administration Act, the Commissioner may delegate his powers and functions to a Deputy Commissioner. The Commissioner's power to make assessments of tax derives from ss.166, 167 and 169 of the Act. Section 166 of the Act imposes a duty on the Commissioner to make an assessment of the amount of the taxable income of a taxpayer and of the tax payable thereon. The assessment is to be made from the returns and from any other information in the taxpayer's possession or from one or more of those sources. Section 167 relevantly provides that, if a person makes default in furnishing a return or if the Commissioner is not satisfied with the return furnished by that person, the Commissioner may make an assessment of the amount upon which in his judgment income tax ought to be levied. The amount so identified is to be treated as the taxable income of that person for the purpose of s.166. However, as Kitto J pointed out in Batagol v. Federal Commissioner of Taxation (174 (1963) 109 CLR 243 at 251-252.), no step under the Act has any legal significance until the Commissioner has gone through the process of calculation and served on the taxpayer a notice that states that the Commissioner has assessed the taxable income of the taxpayer and the specified amounts of that tax (175 See also Federal Commissioner of Taxation v. Prestige Motors Pty. Ltd. (1994) 68 ALJR 634 at 637; 123 ALR 306 at 310-311.).
9. Counsel for the taxpayer contended that the issue of alternative assessments to Morlea and the taxpayer in respect of the same income showed that the documents served on the taxpayer and Morlea were not definitive assessments of their liability to tax but were merely tentative and alternative assertions by the Deputy Commissioner. Furthermore, he contended that the notices proposed to be produced by the Deputy Commissioner in the s.39B proceedings in the Federal Court were not a bona fide ascertainment of the taxpayer's taxable income in each year because they included in the assessable income the same amount that had been included in the assessable income of Morlea and assessed as its taxable income. Accordingly, the Deputy Commissioner was in breach of the statutory duty imposed on him by s.166 of the Act to make an assessment of the taxable income of the taxpayer (176 Counsel relied on the terms of the adjustment sheets to support these submissions. Since I am of opinion that the taxpayer's claim must fail, it is unnecessary to decide whether the adjustment sheets are part of an assessment for the purposes of the Act or whether the Morlea assessments would be admissible. In F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation (1981) 147 CLR 360 at 380, Murphy J held that the adjustment sheet in that case was not part of the assessment. Aickin J held (at 381) that it was.).
10. Counsel for the taxpayer accepted that s.177(1) of the Act drew a distinction between the procedure by which taxable income is ascertained and the assessment of the taxpayer's substantive liability to tax. He accepted that in all legal proceedings including Pt IVC proceedings the production of a notice of assessment was conclusive evidence of the "due making" of the assessment and that the procedure by which the tax was ascertained could not be challenged in those proceedings (177 See George v. Federal Commissioner of Taxation (1952) 86 CLR 183 at 206-207; McAndrew v. Federal Commissioner of Taxation (1956) 98 CLR 263 at 271; Bloemen (1981) 147 CLR at 373; Federal Commissioner of Taxation v. Dalco (1990) 168 CLR 614 at 620.). However, he contended that the "due making" of the assessment did not include the existence of the conditions precedent to the exercise of the power to make an assessment that gave effect to a determination purportedly made under s.177F(1). Counsel contended that s.177(1) does not give conclusivity to an assessment where the error in question deprives a purported assessment of validity.
11. An assessment made tentatively or subject to revision is not an assessment for the purposes of the Act (178 Federal Commissioner of Taxation v. Hoffnung and Co. Ltd. (1928) 42 CLR 39.). Unless the notice served on the taxpayer is definitive of the taxpayer's liability, it is not an assessment for the purposes of ss.175 and 177 of the Act. It will be definitive if "it assumes that, so far as can there be seen, a fixed and certain sum is definitely due, neither more nor less" (179 ibid. at 55 per Isaacs J). If the notice does specify that a fixed sum is definitely and not provisionally payable by a particular person, it will be an assessment for the purposes of the Act. In F.J. Bloemen v. Federal Commissioner of Taxation (180 (1981) 147 CLR at 378.), Mason and Wilson JJ said that "a notice in proper form of an assessment necessarily compels the conclusion that there was an assessment made in fact".
12. On its face, each of the documents issued to the taxpayer is in the form of an assessment within the meaning of s.6 of the Act. It specifies that a fixed sum is definitely due and payable by the taxpayer. There is nothing tentative or provisional about the tax liability that it assumes.
13. Furthermore, in Richardson v. Federal Commissioner of Taxation (181 (1932) 48 CLR 192.), this Court rejected the argument that the Commissioner cannot assess a taxpayer in respect of income while assessments upon another person which include the same income "are maintained in force to warrant the retention of the tax already paid". In Richardson, a nominee of the taxpayer had included the relevant income in his return and had been assessed and paid tax in respect of that income. Dixon J said (182 ibid. at 207.):
"(T) he taxpayer alone was exposed to tax in respect of the income in question. The nominee's liability arose only upon a false state of facts. No doubt, when and if the Commissioner arrived at the clear conclusion that to ensure the completeness and accuracy of the nominee's assessments the exclusion of the income he returned was requisite, it became his duty to exercise his power under sec.37 (183 Section 37 authorised the amendment of the assessment.). But it was not unnatural that he should delay relieving one of two persons whom he considered culpable until the liability of the other was established."
14. In my opinion, Richardson decides that the issue of an assessment within the meaning of s.6 of the Act is within the powers invested in the Commissioner notwithstanding that the assessment purports to impose a tax liability in respect of income that is the subject of another assessment. In Deputy Commissioner of Taxation v. Moorebank Pty. Ltd. (184 (1988) 165 CLR 55 at 67.) Mason CJ, Brennan, Deane, Dawson and Gaudron JJ accepted that the Commissioner could issue "a number of assessments on an alternative basis to different taxpayers in respect of the same income". Whether or not s.177 precludes the taxpayer from going behind the assessments issued in this case, Richardson would seem to be a complete answer to the taxpayer's contention that the Commissioner was in breach of the duty imposed on him by s.166.
15. Consequently, even if s.177 of the Act invalidly cuts down the s.39B jurisdiction of the Federal Court, the taxpayer's claim that the assessments issued to it were either tentative or void seems bound to fail.
16. However, the question reserved for decision is: "Does the production of the Notices of Assessment preclude wholly or in part challenge or review of the Richard Walter assessments in the proceeding under section 39B of the Judiciary Act 1903 (Cth), by reason of the operation of section 177 of the Income Tax Assessment Act 1936 (Cth) ?"
17. In David Jones Finance and Investments Pty. Ltd. v. Commissioner of Taxation ( 185 (1991) 99 ALR 447.), Morling and French JJ held that s.177 of the Act would cut down the jurisdiction conferred on the Federal Court by s.39B if s.177 applied to that Court because s.177 restricted the remedies available to a taxpayer to those conferred by Pt V of the Act (186 Now Pt IVC of the Taxation Administration Act 1953.). Central to that conclusion was the proposition that s.177(1) operated conditionally and only applied on production of a notice of assessment. Their Honours said (187 (1991) 99 ALR at 465.):
"The statutory powers under which the Commissioner or his delegates operate in making assessments are therefore logically anterior to the operation of the section in proceedings in which the 'due making' and substantive liability might be in issue. There is nothing to indicate that the legislature would have intended that these powers should be contingently and retroactively affected by the production of a notice in later litigation. To so construe the action would be to allow the absurd possibility that the powers exercised in making an assessment are to be treated as greater in one proceeding where a notice is produced (say recovery proceedings) than in another where it is not produced (say judicial review proceedings)."
Their Honours said (188 ibid.) that the conditional nature of s.177 distinguished it from the privative clauses found in statutes that had been considered in the context of s.75(v) of the Constitution. They said that s.177 was "intended to operate and does operate to deny to the courts authority to inquire into the due making of the assessments and, except in Pt V proceedings, whether the amount and all the particulars of the assessment are correct". Their Honours went on to say that, on that characterisation, the effect of s.177 was purely jurisdictional and "cannot displace the jurisdiction conferred on (the Federal) Court by s.39B (of the Judiciary Act) ". Consequently, that Court had jurisdiction to inquire into the "'due making' of the assessment and the amount and all the particulars thereof" (189 ibid. at 466.).
18. Counsel for the taxpayer felt unable to support the reasoning that led to this conclusion. He said that it failed to recognise that the assessment process is not complete until service of the notice of assessment even if the process of ascertainment of taxable income and of the tax payable has been completed. He pointed out that until the service of the notice took place there was no assessment and that, until a notice of assessment is produced, there is no evidence that an assessment had been made. Since the production of the notice of assessment in any proceeding concerned with the assessment was virtually inevitable, it was erroneous to suppose that s.177 had a conditional operation.
19. Nevertheless, counsel for the taxpayer submitted that the decision in David Jones Finance was correct. He submitted that s.39B and s.177(1) were to be reconciled by the adoption of the "Hickman test". In R. v. Hickman; Ex parte Fox and Clinton (190 (1945) 70 CLR 598.), Dixon J formulated a principle for reconciling this Court's jurisdiction under s.75(v) of the Constitution and statutory privative clauses which contemplate that the order of a Commonwealth officer is to operate free from interference by appellate review or prerogative writ. His Honour said (191 ibid. at 615.):
"Such a clause is interpreted as meaning that no decision which is in fact given by the body concerned shall be invalidated on the ground that it has not conformed to the requirements governing its proceedings or the exercise of its authority or has not confined its acts within the limits laid down by the instrument giving it authority, provided always that its decision is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the body."
This statement of principle has been regarded as authoritative in this Court (192 Reg. v. Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415 at 418, 422, 427; O'Toole v. Charles David Pty. Ltd. (1991) 171 CLR 232 at 248, 249, 251, 274, 286, 304.).
20. In my opinion the short answer to the submission for the taxpayer is that s.177(1) is not an attempt to oust the jurisdiction of the Federal Court or any court invested with federal jurisdiction. Although s.177 uses the term "conclusive evidence", its purpose is to enact substantive rules of law which give effect to two policies which are manifest in the terms of the Act and associated legislation. The first policy is that the provisions of the Act involved in the "due making" of an assessment are directory provisions which are not legally enforceable. That policy is manifested by the terms of s.175 of the Act. The second policy is that assessments of tax are not challengeable in ordinary legal proceedings. That policy is now manifested in the terms of Pt IVC of the Taxation Administration Act and was formerly manifested in the provisions of Pt V of the Act.
21. Section 175 provides that the validity of any assessment is not affected by the failure of the Commissioner to comply with any of the provisions of the Act; the first limb of s.177 is designed to further the policy of s.175 by ensuring that the "due making" of the assessment cannot be litigated in any court or tribunal. But, under the second or exception limb of s.177, matters affecting the substantive liability of the taxpayer are open to challenge in Pt IVC proceedings. In George v. Federal Commissioner of Taxation (193 (1952) 86 CLR at 207.), the Court said that "the 'due making of the assessment' was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal". The relationship between the two limbs of s.177(1) was summed up by Dixon CJ, McTiernan and Webb JJ in McAndrew v. Federal Commissioner of Taxation (194 (1956) 98 CLR at 270.) :
"The ground over which s.177(1) gives conclusiveness to the assessment is described as the due-making of the assessment and the correctness of the amount and all the particulars of the assessment. But that appears to us to comprise the whole ground. It is the manifest policy ... of the legislation on the one hand to give to the taxpayer full opportunity on objecting to his assessment of contesting his liability in every respect before a court or before a board of review but on the other hand to require that in proceedings for the recovery of the tax the taxpayer will be concluded by the assessment and will not be entitled to go behind it for any purpose."
22. In McAndrew (195 ibid. at 281.), Taylor J said that "'the due making of the assessment' does not involve the ascertainment of the existence of the state of facts prescribed as a condition precedent to making an amended assessment". But in Bloemen, Mason and Wilson JJ pointed out that the power to make an original assessment was not conditioned in that way. Accordingly, there was "no like reason for reading (s.177(1) ) so as to allow the taxpayer to contest the making of an original assessment" (196 Bloemen (1981) 147 CLR at 374.). Their Honours went on to conclude (197 ibid. at 378.) that once the assessment was produced "the Court cannot find that no assessment was made or that, if made, it was made for an inadmissible purpose".
23. In Bloemen, the relevant court was the Supreme Court of New South Wales exercising invested federal jurisdiction. No valid distinction can be drawn between the jurisdiction of that Court and the Federal Court so far as s.177 is concerned. Accordingly, if s.177 applies to the Federal Court in s.39B proceedings, it would preclude the taxpayer from challenging their validity even if the assessments of the taxpayer in this case were not made bona fide or were made for an improper purpose. That does not mean, however, that s.177 would cut down the jurisdiction of the Federal Court.
24. With great respect to the learned judges who formed the majority in David Jones Finance, I have great difficulty in seeing how s.177 affects the jurisdiction of the Federal Court or, if it does, why a general grant of jurisdiction such as s.39B should not be read subject to a section such as s.177 which deals with a specific subject matter. Parliament cannot oust the jurisdiction conferred by s.75(v) of the Constitution, but it can legislate in such a way as to limit the cases that come within its scope (198 Ince Bros. and Cambridge Manufacturing Co. Pty. Ltd. v. Federated Clothing and Allied Trades Union (1924) 34 CLR 457 at 464; Waterside Workers' Federation of Australia v. Gilchrist, Watt and Sanderson Ltd. (1924) 34 CLR 482 at 526.). One way this can be done is to make a course of action by a Commonwealth officer non-justiciable. That is what the Act has done in respect of the "due making" of an income tax assessment. As a result of s.175 and the first limb of s.177, the procedural acts of the Commissioner in making an assessment do not give rise to any legally enforceable duty that can attract the operation of s.75(v) of the Constitution or s.39B of the Judiciary Act. The procedural steps by which the Commissioner makes an assessment are not justiciable in courts invested with federal jurisdiction. As Isaacs ACJ said in Federal Commissioner of Taxation v. Clarke (199 (1927) 40 CLR 246 at 276.) the Act "trusts the Commissioner and does not contemplate ... a curial diving into the many official and confidential channels of information to which the Commissioner may have recourse to protect the Treasury".
25. Accordingly, s.177 does not affect the jurisdiction of the Federal Court. Together with s.175, it enacts a substantive rule of law that is applicable in any legal proceedings in any court including this Court that is invested with jurisdiction to hear matters relating to the assessment or enforcement of tax liabilities. It operates "in the exercise of its jurisdiction" (200 Bloemen (1981) 147 CLR at 376.) and does not withhold jurisdiction. Because ss.175 and 177 enact a substantive rule of law that defines the legal effect of the Commissioner's conduct occurring in the course of making an assessment, no question of interference with the judicial power of the Commonwealth arises.
26. Furthermore, if contrary to my opinion the effect of s.177 was jurisdictional, I see no reason to conclude that, by implication, s.39B of the Judiciary Act was intended to confer jurisdiction on the Federal Court in respect of the making of assessments when that jurisdiction did not previously exist. As Pincus J pointed out in his dissenting judgment in David Jones Finance (201 (1991) 99 ALR at 472.), s.39B was enacted at a time when the Federal Court had jurisdiction in tax appeals and less than three years after this Court had said in Bloemen (202 (1981) 147 CLR at 376.):
"Section 177(1) specifically operates by compelling a court, for example the Supreme Court, in the exercise of its jurisdiction to treat a notice of assessment on its production as conclusive evidence that the assessment has been duly made and thereby foreclosing that issue."
27. If the effect of s.177 is jurisdictional, s.39B must have conferred on the Federal Court a jurisdiction in tax matters that s.177 had specifically excluded. It hardly seems likely that Parliament intended a general provision such as s.39B to exclude such a key section in the taxation system as s.177 of the Act. Like Pincus J, I find it difficult to accept that s.39B "was intended to exclude or limit the application of s.177(1) of the (Act) in proceedings in (the Federal) Court; the substantial weakening of such a critical part of the tax collection system in this country could hardly have been intended to be effected by a mere implication."
28. Accordingly, the question reserved should be answered:
"The combined effect of ss.175 and 177 of the Income Tax Assessment Act 1936 (Cth) wholly precludes any challenge or review of the Richard Walter assessments in the proceeding under s.39B of the Judiciary Act 1903 (Cth)."
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Cited Sections