Dominelli Ford (Hurstville) pty Ltd v Karmot Auto Spares Pty Ltd

[1992] FCA 550

Re: SONIA SZAJNTOP
And: PAUL GERBER and THE COMMISSIONER OF TAXATION OF THE COMMONWEATH OF
AUSTRALIA
Nos. V G419, 420 of 1991, G225 and 226 of 1992
FED No. 550
Income Tax - Administrative Law
(1992) 92 ATC 4392
(1992) 108 ALR 215
(1992) 28 ALD 187 (extract)

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Hill J.(1)

CATCHWORDS

Income Tax - letter objecting to default assessment - whether valid objection - whether failure to state fully and in detail the grounds of objection

Administrative Law - Administrative Decisions (Judicial Review) Act - Administrative Appeals Tribunal - decision to refuse adjournment - whether a "reviewable decision"

Administrative Law - Administrative Decisions (Judicial Review) Act - Administrative Appeals Tribunal Taxation Appeals Division -whether affirmation of Commissioner's objection decision a "reviewable decision" - whether Court should exercise jurisdiction as matter of discretion

Administrative Appeals Tribunal Act 1975 (Cth) s44, s43(1)

Administrative Decisions (Judicial Review) Act 1977 (Cth) Schedule 2 para (e) and (f)

Income Tax Assessment Act 1936 (Cth) s185(1)

Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation (1991) 32 FCR 148 at 155, applied

H R Lancey Shipping Co Pty Limited v Federal Commissioner of Taxation (1951) 9 ATD 267 at 273, applied

A L Campbell and Co Pty Ltd v Federal Commissioner of Taxation (1951) 82 CLR 452 at 461, applied

HEARING

MELBOURNE

#DATE 1:7:1992

Counsel for the Applicant: J. de Wijn

Instructed by: F.W. Robson and Co

Counsel for the Respondent: G. Davies

Instructed by: The Australian Government Solicitor

ORDER

No. V G419 of 1991

THE COURT ORDERS THAT:

1. The application be dismissed.

2. There be no order as to costs.

No. V G420 of 1991 and 225 - 226 of 1992
THE COURT ORDERS THAT:

1. The application in each matter be dismissed.

2. The Applicant pay the costs of the applications.

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

JUDGE1

Before the Court are two applications brought by Ms Sonia Szajntop ("the Applicant"). The first, to which Dr Paul Gerber (a Deputy President of the Administrative Appeals Tribunal) and the Commissioner of Taxation are respondents seeks judicial review under the provisions of the Administrative Decisions (Judicial Review) Act 1977 ("the ADJR Act") of the Deputy President's decision refusing to grant an adjournment of the hearing of three applications to the Tribunal. The second, to which the Deputy Commissioner of Taxation ("the Commissioner") was the respondent was an appeal to this Court in its original jurisdiction under s44 of the Administrative Appeals Tribunal Act 1975 in respect of Dr Gerber's decisions on the three applications for review which had been before him.

1. The applications for review in the Administrative Appeals Tribunal were brought by the applicant to review three decisions of the Commissioner ("the objection decisions") disallowing three objections to assessments of income tax made by him pursuant to the Income Tax Assessment Act 1936 in respect of the years of income ending 30 June 1985 to 1987 inclusive.

2. In respect of the first application, Dr Gerber appeared and submitted to such order as the Court might make, save as to costs. The Commissioner objected to the jurisdiction of the Court to hear this application and filed a notice of objection to competency which was heard concurrently with the first application. The second application also suffered a procedural difficulty because Dr Gerber made three separate decisions in respect of the three objection decisions before him. A person desiring to appeal from these decisions is required to lodge in respect of each a separate appeal to this Court: Legge Holdings Pty Ltd v Commissioner of Taxation (Lockhart J, 23 March 1990, unreported). This point was not, however, taken by the Commissioner and the second application was argued as if the three appeals were before the court. At my direction and with leave, additional applications were filed to rectify the problem.

3. Because the parties are in agreement that the outcome of the present applications depends ultimately upon a short question of law it is unnecessary to go into great detail concerning the events surrounding the hearing before Dr Gerber on 13 December 1991. It sufficies to say that when notice of the hearing was given by the Tribunal, Mr Steart, the solicitor for the applicant, had mistakenly written the wrong date in his diary. As a result, when he became aware on the date of the hearing, by reason of a telephone conversation with an official of the Tribunal, that the matter was to be heard that day, he was unprepared. He attempted unsuccessfully to arrange for counsel to represent his client. He attempted unsuccessfully to negotiate with the representatives of the Commissioner for an adjournment. He then sought from Dr Gerber an adjournment until the following Wednesday when the Tribunal had two vacant days occasioned apparently by the adjournment of another matter that had been listed before Dr Gerber and in which Mr Steart was acting.

4. When asked his reaction to the application for adjournment counsel for the Commissioner raised the question that the taxpayer had not lodged a proper notice of objection; nor had there been any attempt on behalf of the applicant to:
   

"substitute the notice of objection or to amend or add to whatever notice of objection is said to be on the record".

1. The document upon which the applicant relied as her notice of objection was a letter from her then tax agent dated 11 August 1987 which read as follows:
   

"We are in possession of your assessment No. 385012/3 issued on the 10th July, 1987 and hereby wish to object to your assessment in full. On the 5th August, 1987 we lodged income tax returns for the above and in each case it indicated that there was no tax payable at all. The assessments were raised from a betterment statement produced by one of your Officer (sic) on completely erroneous information. We are at present getting together absolute proof as to the above facts.

In the meantime we request that the assessment be set aside and no penalties charged due to the above events."

1. The Deputy President then heard argument from counsel for the Commissioner on the question whether the document which had been lodged by the applicant, considered by the Commissioner, disallowed and then referred to the Tribunal was an "objection". Upon hearing this argument Dr Gerber said:
   

"As I see it the only issue before me is is it an objection at all in which case should I entertain grounds to amend it."

1. Dr Gerber then called upon Mr Steart who made submissions on these issues. Although he stated that he could supply that day "particulars" of the matters to be raised on behalf of his client, a fair reading of what he said was that he wished to apply to the Tribunal to amend the notice of objection in accordance with particulars which he would supply later in the day.

2. After hearing these submissions Dr Gerber then announced that he would affirm the Commissioner's decisions on the objections. He expressed the view that the application to adjourn had little merit. He said that the applicant was on notice that the competence of the objection was in issue and that there had to be an end to litigation. He then rephrased the critical questions which he had raised in argument:
   

"In considering the hardship to the taxpayer by a refusal to adjourn this matter to another day, I ask myself: can the application be dealt with without amendment to the objection; if not, what is the likelihood of an application to amend the objection succeeding?

1. After referring to some cases Dr Gerber then said:
   

"..I am satisfied that a bald statement that the Commissioner 'relied on erronerous information' cannot be said 'to have directed the Commissioner's attention to the particular respects in which the taxpayer contends that the assessment is erroneous and his reasons for this contention'. In other words, before this taxpayer can get her foot in the door of the Tribunal, her objection clearly requires amendment.

1. The Deputy President then turned his attention to the question whether, in the circumstances of the case, leave to rely on grounds not covered by the objection was likely to be granted in the discretion of the Tribunal should an adjournment be acceded to. He appears to have concluded that it would not be. In the result he refused the application for adjournment and in the absence of any evidence that the Commissioner had acted on erroneous information in arriving at the assessment upheld the objection decision.
   The objection to competency

2. It is convenient before discussing the real matter in dispute between the parties to deal with the objection to competency.

3. The ADJR Act confers upon the Court jurisdiction to review a decision of an administrative character to which that Act applies, or conduct for the purpose of making such a decision. A decision to refuse an adjournment is not, in my view, a reviewable "decision" within the meaning of that expression in the ADJR Act: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 335-8. In the present case, the only decision which would qualify as a reviewable decision would be the Tribunal's decision affirming the Commissioner's objection decision. Nevertheless, the Tribunal's decision to refuse an adjournment might be seen as conduct engaged in for the purpose of making that reviewable decision.

4. Decisions enumerated in Schedule 1 to that Act are excluded from the class of decisions to which the Act applies, and therefore from the class of reviewable decisions: s.3(1) definition of "decision to which this Act applies". Paragraph (e) of that Schedule therefore operates, relevantly, to exclude from review:
   

"decisions making, or forming part of the process of making, or leading up to the making of assessments or calculations of tax...or decisions disalllowing objections to assessments or calculations of tax... or decisions amending, or refusing to amend, assessment or calculations of tax, charge or duty, under any of the following Acts: ...

Income Tax Assessment Act 1936".

1. Prior to the amendment of the ADJR Act by Act No 112 of 1986, one of a series of Acts concerned with the abolition of Taxation Boards of Review and the implementation of the present system of administrative review before the Administrative Appeals Tribunal there was also excluded from review by paragraph (f) of the Schedule: "Decisions of Taxation Boards of Review".

2. Although paragraph (f) was deleted by Act No 112 of 1986 no substitute paragraph was inserted making reference to the Administrative Appeals Tribunal. The present paragraph (f), which has no relevance to the present circumstances, was inserted by the Taxation Laws Amendment Act (No 3) No 107 of 1989. No explanation is afforded in the extrinsic materials to the reason why paragraph (f) was not replaced by a comparable paragraph alluding to the Administrative Appeals Tribunal in its taxation jurisdiction. It may be, as counsel for the Commissioner submitted, that the legislature was of the view that paragraph (f) was unnecessary, having regard to paragraph (e); or it may be that the legislature had no objection to applications being made to this Court for judicial review of decisions of the Tribunal reviewing the objection decisions of the Commissioner. More likely, the matter received no considered decision by the legislature at all.

3. The Commissioner submitted that the decision of the Tribunal fell within the words in paragraph (e) "decisions disallowing objections to assessments". I do not agree. Under the legislative scheme in Part V of the Income Tax Assessment Act applicable to the facts of the present case a taxpayer, whose objection to an assessment has been disallowed in whole or in part, may, if dissatisfied with the Commissioner's decision so to do, request the Commissioner to refer the objection decision to the Tribunal for review: s187. The referral of the Commissioner's decision on the objection operates as the institution of proceedings for review by the Tribunal.

4. The proceedings before the Tribunal are governed by the provisions of the Administrative Appeals Tribunal Act 1975. Under that Act the Tribunal is required by s43(1) to make a decision in writing:
   

"(a) affirming the decision under review;

(b) varying the decision under review; or

(c) setting aside the decision under review and:

(i) making a decision in substitution for the decision so set aside; or

(ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal."

1. Where, as in the present case, the Tribunal acts to affirm the decision under review, the Tribunal does not itself make a decision to disallow an objection to an assessment. That decision has already been made by the Commissioner, and is the subject of the review before the Tribunal. It may be that in a case where the Tribunal sets asides the Commissioner's decision and itself acts to disallow in part the taxpayer's objection, that the decision falls within paragraph (e); it is unnecessary to decide that question. It is sufficient to say that no torture of language can bring about the conclusion that in the present case the Tribunal made a decision to disallow the applicant's objections against her assessments.

2. But this is not to say that, as a matter of discretion, it would be appropriate in all cases for the Court to exercise jurisdiction under the ADJR Act where an appeal lies directly to this Court on a question of law under s44 of the Administrative Appeals Tribunal Act. The various grounds of judicial review to be found in the ADJR Act seem to me necessarily to involve circumstances where an error of law is involved in an administrative decision; hence there will be a considerable and perhaps complete overlap between an appeal under the provisions of s44 on the one hand and an application for judicial review under the ADJR Act on the other. The present is just such a case. The parties are in agreement that the questions of law arising on the appeal under s44 are identical to the questions to be argued under the ADJR Act. In such a case there is clearly no point in instituting proceedings for judicial review, and no point in the Court exercising its discretion to grant relief under the ADJR Act, should such relief be warranted in the circumstances. Accordingly, the appropriate course seems to me to be to dismiss the application for judicial review and to proceed to determine the substantive appeal under s44. In the circumstances, as the Commissioner has been unsuccessful on the jurisdictional question, I propose to make no order as to the costs of the proceedings No VG 419 of 1991, including the notice of motion in those proceedings.
   The challenge to the adjournment

3. Counsel sought to challenge the failure to grant an adjournment on a number of fronts, particularised in a document provided to the Commissioner in response to a request so to do. It is unnecessary to detail these matter, because both sides ultimately conceded that the case on one issue only, namely whether the letter of 11 August 1987 was a valid objection. If it was not, then the Tribunal had no jurisdiction to review any decision with respect to it and the applicant's application to the Tribunal for review necessarily would fail. If, on the other hand, it was a valid objection, then counsel for the Commissioner conceded that the Tribunal erred in law in refusing to grant the adjournment.

4. Both parties conceded that there was no intermediate position, that is to say, that there could not be a document which satisfied the description of an "objection" for the purposes of s187, on the one hand, but which did not set out "fully and in detail" as required by s185 of the Income Tax Assessment Act the grounds upon which the taxpayer relied. The reasons of Dr Gerber appear to have proceded upon this basis.

5. Section 185(1) provides as follows:
   

"A taxpayer dissatisfied with any assessment under this Act may, within 60 days after service of the notice of assessment, lodge with the Commissioner an objection in writing against the assessment stating fully and in detail the grounds on which he relies."

1. It may be that the reasons of Dr Gerber were influenced by the decision of the full court of this Court in Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation (1991) 32 FCR 148 at 155 where the Court (Lockhart, Burchett and Hill JJ.) said:
   

"The fact that s186 requires the Commissioner to give a decision on the "objection" (no reference is made in that section to 'grounds of objection') does not support the Commissioner's submission. The word 'objection' in that section probably means no more than the entire writing which has been lodged with the Commissioner signifying the 'objection' of the taxpayer and the grounds of that objection. But if this be not the case, the 'objection' referred to in the section must be then confined to the statement by the taxpayer to the effect that he objects to the assessment of his taxable income and tax payable as notified to him. It is not a document confined to a particular claim as to taxable income or deduction as the Commissioner would suggest."

1. Although the court did not find it necessary for the purpose of the argument in that case to resolve the issue, its tentative view was in support of the former construction. On that construction, the "grounds of objection" are an integral part of the writing, the whole of which is properly to be considered to be the objection. This accords with the wording of s185 and the case law on that section to which reference will shortly be made.

2. But even if the second view be accepted, the Court was not suggesting in that passage that a writing which did no more than indicate the taxpayer's dissatisfaction with an assessment by objecting to it, but which writing did not otherwise comply with s185, could be treated as an objection for the purpose of enlivening the jurisdiction under s190(a) to permit a taxpayer to rely upon fresh grounds. Indeed, the evident policy of the amendment to that section discussed in Lighthouse Philatelics was that the taxpayer could be relieved, by order of the Court or of the Tribunal from the statutory requirement that he be limited to the grounds stated in his objection. Put simply, s190(a) assumes that the document which is an objection in fact states the grounds upon which the taxpayer objects. It is only if it does that the jurisdiction of the Court or Tribunal may be invoked to permit an amendment.

3. The starting point as to what constitutes a valid objection, ie one that states fully and in detail the grounds upon which the taxpayer relies, is the familiar statement of principle of Williams J in H R Lancey Shipping Co Pty Limited v Federal Commissioner of Taxation (1951) 9 ATD 267 at 273 where his Honour said:
   

"The grounds of objection need not be stated in legal form, they can be expressed in ordinary language, but they should be sufficiently explicit to direct the attention of the respondent to the particular respects in which the taxpayer contends that the assessment is erroneous and his reasons for this contention. In each case the sufficiency of the grounds is a matter for the Court. Vague grounds such as that the assessment is excessive are not, in my opinion, a compliance with the Act."

1. Thus in that case, his Honour held, inter alia that a claim that an amount which had been included in assessable income was not assessable income, was not sufficient to comply with the requirements of s185.

2. To similar effect is the comment of Dixon J in A L Campbell and Co Pty Ltd v Federal Commissioner of Taxation (1951) 82 CLR 452 at 461 where his Honour, speaking of the grounds of objection in contention before him, said:
   

"I think that courts should not interpret grounds of objection technically, narrowly or with rigidity, but at the same time I cannot escape the conviction that the grounds were not intended to cover the point that has been made and that they would not convey it to the commissioner."

1. In conformity with his Honour's direction that a technical construction not be adopted, the courts have further concluded that ambiguities in grounds obscurely worded should be resolved in favour of the taxpayer: Estate of Weinberg v Federal Commissioner of Taxation (1983) 83 ATC 4747 at 4749 and cases there cited. However grounds which suffer from vagueness and generality have not been saved by the need to give a generous construction: cf Archer Bros Pty Limited v Federal Commissioner of Taxation (1953) 90 CLR 140 at 149.

2. The level of detail required will vary with the circumstances of each particular case: cf Poole v Federal Commissioner of Taxation (1970) 1 ATR 715 at 724. Where the Commissioner has provided to the taxpayer an adjustment sheet clearly identifying the basis upon which the assessment has been made, and that basis is attacked by the taxpayer the grounds will be required to put the Commissioner on notice of the error which the disclosed basis is said to involve. But the Act does not require the Commissioner to provide such an adjustment sheet; a defect which in my view should attract the attention of the legislature. Fortunately, in the great majority of cases the Commissioner does. Hence, albeit only to the extent disclosed in the adjustment sheet, the taxpayer will ordinarily be aware of the basis of the assessment and the matters which he must put in dispute between the Commissioner and himself.

3. Where the assessment is made, as in the present case, under the provisions of s167 of the Income Tax Assessment Act, the Commissioner makes an assessment (commonly referred to as a "default assessment") of the amount on which in his opinion income tax should be levied. Should the Commissioner give the taxpayer no explanation of the basis upon which the calculation has been made it would be virtually impossible for the taxpayer to detail his grounds of objection, other than in the most general terms. In such a case, the particularity required will be judged against this circumstance. On the other hand, the assessment will often (as here) be made on the basis of what is commonly referred to as an "asset betterment" statement: cf L'Estrange v Federal Commissioner of Taxation (1978) 78 ATC 4744. Should this be the case, the Commissioner will ordinarily have supplied to the taxpayer a copy of the asset betterment statement either at the conclusion of a tax audit, or at the latest with the assessment.

4. Where the taxpayer has been supplied with an asset betterment statement, it will ordinarily be incumbent upon him to attack in detail such part of the asset betterment statement as he disputes. He may dispute the existence of assets shown on the statement, the expenditure therein set out, or may be able to explain, by some alternative to assessable income, how that growth of assets came about. By detailing these matters in the objection, the taxpayer draws the Commissioner's attention to the matters in dispute between them, so as to enable the Commissioner properly to carry out the duty required of him, namely that he consider the objection, and make a decision upon it.

5. Thus, I agree with the views expressed by Mr Leslie in 2 CTBR (NS) Case 5 and by Mr Gibson in 3 CTBR (NS) Case 110, that the amount of detail required in an objection to a default assessment will vary in proportion to the detail and intelligibility of the information which the Commissioner has supplied to the taxpayer detailing the basis upon which the assessment was made.

6. It was, however, submitted for the applicant that it was not necessary for the taxpayer to deal in the objection with the asset betterment calculation in a case such as the present; the asset betterment statement was not itself the assessment. The objection is to the assessment, and the grounds in question are grounds challenging the assessment. That is, with respect, self evident, but does not address the difficulty. Of course, if the matters in the asset betterment statement are not in issue between the parties, a challenge to them would be unnecessary. Such a case could occur if the challenge of the taxpayer, for example, went not to the quantum of the assessment, but to the existence of one of the matters referred to in s167 as a prerequisite to the power to issue an assessment under that section. That is not the case here. The present is a case where the taxpayer wished, it appears, to take issue with various matters in the asset betterment statement and did not challenge the power of the Commissioner to make a default assessment under s167.

7. Having regard to these matters, it is necessary to return to the letter of 11 August 1991. In its first paragraph it clearly indicated the "wish" to object to the assessment. In the second paragraph it alludes to the income tax returns which the applicant lodged after the issue of the assessment. Those returns showed only a modest income made up of a pension paid by the Department of Social Security, a small amount of tuition income and interest. The applicant also claimed a "pensioner rebate". If the returns be accepted as disclosing the applicant's income from all sources, it is true that no, or only nominal tax would have been payable. The letter then goes on to assert that the assessments were erroneous. The only explanation given for them being erroneous is that the asset betterment statement was based on "completely erroneous information". In what respects it was erroneous is not made clear. If the assertion is that no part of the asset betterment statement is correct that might be a valid ground of objection, but I do not think that is what the taxpayer intended to convey to the Commissioner, and in fact the whole of the factual background preceding the letter indicated that the taxpayer accepted a great deal of the factual basis of the asset betterment statement, although disputing particular items.

8. The final promise to provide "absolute proof" clearly details no ground as to why the assessments are erroneous.

9. All the letter of 11 August 1987 amounts to, therefore, is a claim that the betterment statement contains information that is erroneous. I do not see how it can be said that such a general claim directs the attention of the Commissioner to the particular respects in which the applicant contends that the assessment was eroneous or her reasons for that contention. While counsel for the applicant submitted that the second paragraph of the letter should be read as a statement that the applicant derived no income other than that shown in her return and that the return was correct, I do not think that the letter is sufficiently explicit even to be read as going that far. If it were so read that would probably not avail the taxpayer: cf 15 CTBR Case 83.

10. While non technical language may be employed, and while the court should not give a narrow or rigid construction to the grounds employed and in the event of doubt should give the taxpayer the benefit of that doubt, no amount of generosity of construction enables me to conclude that the applicant's letter in any way set out fully and in detail her grounds of objection. The letter can be construed as involving no more than the general complaint that the asset betterment statement is wrong. Where it was wrong and the extent to which it was wrong remain undefined. Such a general statement in my opinion does not satisfy the language of s185.

11. This does not leave a taxpayer in the position of the applicant necessarily without remedy. There being no valid objection, the Tribunal lacked jurisdiction to deal with the matter. It should have found that it lacked jurisdiction and then dismissed the application for review before it. However, it remains open to the applicant to apply to the Commissioner under s188A to lodge an objection out of time. That section permits a taxpayer who has failed to lodge an objection within the prescribed 60 days to apply to the Commissioner to extend the time in which to do so. A refusal of the Commissioner so to do may be reviewed by the Administrative Appeals Tribunal. Whether in the circumstances of this case the Commissioner would extend time is, at least in the first instance, a matter for him and I make no comment on the matter.

12. It follows that the application will be dismissed with costs.