Federal Commissioner of Taxation v Reid

[1927] HCA 54

196 HIGH COURT

[1927.

[HIGH COURT OF AUSTRALIA.]

THE FEDERAL COMMISSIONER OF

A ppe l l a n t ;

T A X A T IO N ............................................

REID

R espondent .

H. C. OF A. Income Tax—Assessment—Alteration of assessment— Limitation of time within

which alteration may be made—Repeal—Retrospective legislation—Income Tax Assessment Act 191.5-1918 {No. 34 of 1915—No. 18 of 1918), sec. 33—Income S y d n e y ,Tax Assessment Act 1922-1925 {No. 37 of 1922—No. 28 of 1925), secs. 2, 37—

1927.

Nov. 21;

Acts Interiwetation Act 1901-1918 {No. 2 of 1901—No. 8 of 1918), secs. 5, 8.

Dec. 8.

Held, that the .second proviso to sec. 2 of the Income Tax Assessment Act

K qox C.J..

Isaacs, Higgius,

1922-1925, namely, that no alteration or addition shall be made in or to any

Powers and Starke J J .assessment made under the Acts repealed by that Act after three years from

t he date when the tax payable on the assessment was originally due and payable, unless the Commissioner of Taxation has reason to believe that there has been an avoidance of tax owing to fraud or attempted evasion, does not apply to the making of alterations and additions before 26th September 1925, the date when the Income Tax Assessment Act 1925, by which the proviso was enacted, received the royal assent.

Ca se

St a t e d .

On the hearing of an appeal by the Federal Commissioner of Taxation from a decision of a Board of Review upon an appeal to it by Harold Sydney Reid from an amended assessment of him for income tax for the year ended 30th June 1915, Knox C.J. stated a case, which was substantially as follows, for the opinion of the Full Court:—

1. On 23rd May 1916 the above-named appellant (hereinafter

called the “ Commissioner ”) caused to be given to the above-named respondent (hereinafter called the “ taxpayer ”) notice in writing of

40 C.L.R.] OF AUSTRALIA.

197

an assessment (hereinafter called the “ original assessment ”) of an

H . C.OF A.

1927.

amount of Federal income tax under the Income Tax Assessment Act

1915 in respect of the financial year conunencing on 1st July 1915 F e d e b a x

CoMMIS-

in respect of the taxable income of the taxpayer derived in the year

SIONEK OE T a x a t io n

ended on 30th June 1915. The said amount became due and

V.

payable on 22nd June 1916 and was duly paid.

R e i d .

2. On 17th December 1924 the Commissioner caused to be given to the taxpayer a notice in writing of an amended assessment under the Income Tax Assessment Act 1915-1921 and the Income Tax Assessment Act 1922-1924 in respect of the financial year commencing on 1st July 1915 in respect of the income of the taxpayer derived in the year ended on 30th June 1915.

3. The taxpayer was dissatisfied with the said amended assessment, and on 23rd January 1925 duly lodged a notice of objection m writing against the said amended assessment upon the grounds : (i.) that the interest received by him was not the sum of £198 but the sum of £106 as appearing by the original assessment; (ii.) that the dividend from Robert Reid & Co. did not arise from a source within Australasia ; (iii.) that the said amended assessment was an alteration or addition to the assessment notified on 23rd May 1916 ; (iv.) that such alteration or addition was not made until after the expiration of three years from the date when the tax payable on the original assessment was originally due and payable and was therefore legally not within the power of the Commissioner, the Commissioner not having reason to beheve that there had been any avoidance of tax owing to fraud or attempted evasion.

4. On 12th June 1925 the Commissioner gave to the taxpayer a notice in writing that his objection to the said amended assessment had been disallowed save in so far as related to the said first ground of objection. On 12th June 1925 the Commissioner caused to be given to the taxpayer a notice in ^vriting of an amended assessment under the Income Tax Assessment Act 1915-1921 and the Incotne Tax Assessment Act 1922-1924. Such last-mentioned amended assessment gave effect to the said first ground of objection.

5. Within thirty days after service by post of the said notice of amended assessment of 12th Jime 1925 the taxpayer in writing

198 HIGH COURT

[1927.

H. C. OF A. notified the Commissioner that he was dissatisfied with the decision

of the Commissioner on the said objection, and requested the

F e d e r a l Commissioner to treat the said objection as an appeal to the High

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s io n e r OF Court of Australia.

T a x a t io n

V.6. On 26th September 1925, being the date of the commencement

R e i d .of sec. 21 of the income Tax Assessment Act 1925, the hearing of the

said appeal had not commenced.

7. On 22nd December 1925 the taxpayer in writing pursuant to sec. 21 (2) of the Income Tax Assessment Act 1925 requested the Commissioner to refer the said amended assessment to a Board of Review for review in respect of the matters stated in the objection. Pursuant to such request the Commissioner on 22nd September 1926 referred the said amended assessment to a Board of Review.

8. On 18th July 1927 the Board of Review reviewed the said amended assessment, together with amended assessments made by the Commissioner in respect of the taxable income of the taxpayer in the years ended on 30th June 1916, 1917, 1918, 1919 and 1920 respectively.

9. On the said review the only ground relied upon by the taxpayer was that the assessment of the Commissioner for the year ended 30th June 1915 was an alteration or addition made in or to an assessment after the expiration of three years from the date when the tax payable on the assessment was originally due and payable.

10. On the said review the Commissioner admitted that he had no reason to believe that there had been an avoidance of tax owing to fraud or attempted evasion.

11. On 28th July 1927 the Board of Review gave a decision, and by majority allowed the said objection to the said amended assess­ ment upon the said third and fourth grounds of objection without giving a decision on the said second ground of objection.

12. On 26th August 1927 pursuant to sec. 51 (6) of the Income Tax Assessment Act 1922-1925 the Commissioner appealed to this Court.

The questions asked were as follows :—

(1) Were the amended assessments mentioned in the notices of amended assessment given by the Commissioner to the taxpayer on 17th December 1924 and 12th June 1925, or

40 C.L.R.] OF AUSTRALIA.

199

was either of them, a vahd exercise of the powers of the S. 0. o f A.

Commissioner under the Income Tax Assessment Act 1915-

'

F e d e b a i. COMMIS-

1921 and the Income Tax Assessment Act 1922-1925 ?

Was the Board of Review in error in holding that the

SIONEB o r T axation

Commissioner was not entitled to make such amended

V.

assessments after the expiration of three years from the

R e id .

date when the tax payable on the original assessment was

due and payable ?

Lamb K.C. (with him Alroy Cohen), for the appellant. The alteration of the assessment was made under sec. 33 of the Income Tax Assessment Act 1915-1918 which imposes no limitation upon the time within which alterations may be made. Sec. 37 of the Income Tax Assessment Act 1922, which limited the time within which alterations might be made, applied only to assessments made under the Act of 1922. That clearly appears on a consideration of secs. 32 to 40. The second proviso to sec. 2 of the Income Tax Assessment Act 1922-1925 is not retrospective and does not operate to invalidate alterations made before 26th September 1925, the date when the Income Tax Assessment Act 1925, which enacted the proviso, came into force. Sub-sec. 2 of sec. 2 of the Income Tax Assessment Act 1924, which provides that the section is to be retrospective, applies to that section only, and cannot have any application to amendments of the section subsequently made.

Flannery K.C. (with him Weston), for the respondent. On the proper construction of sec. 2 of the Income Tax Assessment Act 1925 read with sec. 2 of the Income Tax Assessment Act 1924, the proviso limiting the time within which alterations may be made is retro­

spective.

After the amendment made by sec. 2 of the Act of 1924,

sec. 2 of the Act 1922-1924 consisted of sec. 2 of the Act of 1922 plus the whole of sec. 2 of the Act of 1924, including sub-sec. 2; and to that the amendment made by the Act of 1925 was added. The provision in sec. 33 of the Income Tax Assessment Act 1915-1918 allowing the Commissioner at any time to make alterations to assessments is a right or privilege of the Commissioner and is an obhgation of the taxpayer within the meaning of sec. 8 (c) of the

200 HIGH COURT

[1927.

H.C. OF A.Acts Interpretation Act 1901-1918. That right or privilege was kept

1927. alive by sec. 8 (c) notwithstanding the repeal effected by sec. 2 of

F e d e b a l the Act of 1922. Sec. 37 of the Act of 1922 applied to that right or

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s io n e r OF privilege, and limited the time within which it might be exercised.

T a x a t io n

V.Sec. 37 is quite general, and applies to assessments made under the

K e i d .repealed Acts as weU as to those made under the Act of 1922. The words “ subject to this Act ” in sec. 2 of the Act of 1924 have the effect of reviving the provisions of sec. 33 of the Act of 1915-1918 subject to the condition imposed by sec. 37 of the Act of 1922. [Counsel referred to West Derby Union v. Metropolitan Life Assurance Society (1).]

Lamb K.C., in reply, referred to Federal Commissioner of Taxation V. Australian Boot Factory Ltd. (2); Attorney-General v. Clarkson (3).

Cur. adv. vuU.

Dec. 8.

The following written judgments were delivered ;—

K n o x C.J. a n d Sta r k e J. Consideration has led us to the

conclusion that both the questions stated in the case should he

answered in the affirmative.

On 26th September 1925 the royal assent was given by the Governor-General for and on behalf of the King to an Act, No. 28 of 1925, whereby it was enacted ;—“ 2. Section two of the Principal Act ” (i.e., the Income Tax Assessment Act 1922-1924) “ is amended by adding at the end thereof the following further proviso; ‘ Provided further that no alteration or addition shall be made m or to any assessment made under any such Act after the expiration of three years from the date when the tax payable on the assessment was originally due and payable, unless the Commissioner has reason to believe that there has been an avoidance of tax owing to fraud or

attempted evasion.” The Acts Interpretation Act 1901-1918, sec. 5,

enacts : “ (1) Every Act to which the royal assent is given by the Governor-General for and on behalf of the King shall come into operation on the day on which such Act receives the royal assent.

(1) (1897) A.C. 647, at p. 65.5.

(2) (1926) 38 C.L.R. 391, at p. 397.

(3) (1900) 1 Q.B. 1.56, at p. 16.5.

40 C.L.R.] OF AUSTRALIA.

201

unless the contrary intention appears in such Act.” Consequently,

H. C. OF A.

sec. 2 of the Act No. 28 of 1925 commenced and came into operation

1927.

on 26th September 1925 unless some other provision is made or F e d e b a l

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some contrary intention appears.

There is nothing to the contrary

SIOKBB OF T a x a t io n

expressly provided in the Act No. 28 of 1925, but it is argued that

V.

such provision has been made or such an intention appears when R e i d .

the Act is read together with the Acts No. 37 of 1922, sec. 2, and Knox C.J.

Starke J.

No. 51 of 1924, sec. 2. The provision in sec. 2 (2) of the Act No. 51 of 1924 “ This section shall be deemed to have commenced upon the date of the commencement of the Principal Act ’’--i.e., on 18th October 1922—applies on its proper construction only to the provision contained in sec. 2 (1) of the Act No. 51 of 1924 and not to the provision of sec. 2 of the Act No. 37 of 1922. Consequently the Act No. 51 of 1924 does not affect the general rule enacted by the Acts Interpretation Act.

Next, it is said that sec. 2 of the Act No. 28 of 1925 is a further proviso to a repeal section in the Act No. 37 of 1922—sec. 2— which operates from 18th October 1922. However the modification of the operation of a repeal clause may operate from the date of the royal assent being given to the modification it estabhshes DO contrary intent to the rule of the Acts Interpretation Act. The taxpayer therefore is unable to rely upon the provision of sec. 2 of the Act No. 28 of 1925, for the alteration or addition in his assess­ ment was made before the passing of the Act and was allowed by .the Income Tax Assessment Acts then in force. Some reliance was also placed upon sec. 37 of the Act No. 37 of 1922, but the Incmne Tax Assessment Act 1915-1921, and not sec. 37 of the Act of 1922,

governs this case.

The effect of the Acts No. 51 of 1924 and No. 28

of 1925, sec. 2, is so to provide, and it is unnecessary to enter upon a detailed examination of the 1922 Act for the purpose of considering what assessments are covered by it.

I saacs J. The whole question in this case is whether sec. 2 of Act No. 28 of 1925 is retrospective so as to operate as from 18th October 1922. I am very clear that the answer should be in the negative. The relevant legislation really speaks for itself in terms

that I think are unequivocal.

Prior to 18th October 1922 certain

202 HIGH COURT

[1927.

H.C; or AIncome Tax Assessment Acts were in force. On tliat date, by Act

1927. No. 37 of 1922, it was enacted in sec. 2 ; “ The Acts set forth in the

F e d e k a l Schedule to this Act are repealed.” That was all. The Act of 1922

Co m m is­

s io n e r OF applied for assessment purposes only to financial years beginning

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V.1st July 1922. For previous years, the power of assessment no

R e i d .longer existed. For the purpose of enforcing liabilities accrued as

Isaacs J.

under assessments made and notified, doubtless sec. 8 of the Acts Interpretation Act 1901 would have applied. But it would not have availed to validate a new assessment or a new amendment in an existing assessment. So that the unqualified repeal left a gap in the management and administration of the income tax, which nothing but new' legislation could bridge. Consequently, by Act No. 51 of 1924 and by sec. 2 of that Act, it was enacted in these words ;—“ (1) Section two of the Principal Act is amended by inserting at the end thereof the following proviso ; ‘ Provided that the Acts repealed by this Act shall, subject to this Act, continue, and be deemed to have at all times continued, in force for all purposes in conne tion with income tax payable for any financial year prior to the first day of July one thousand nine hundred and twenty-two.’ (2) This section shall be deemed to have commenced upon the date of the commencement of the Principal Act.” It is very necessary in view of the argument to examine that section closely :—(a) I t is a section of Act No. 51 of 1924, or as the Act calls itself, “ the Income Tax Assessment Act 1924.’’ (b) It is not a section of the Principal Act, namely, “ the Income Tax Assessment .

Act 1922-1923.” (c) The section by sub-sec. 1 adds a proviso to sec. 2 of the Principal Act. (d) I t adds to the Principal Act nothing more than the proviso and it does not add the enacting words of sub-sec. 1 or any part of sub-sec. 2.

By sec. 1, sub-sec. 3, of the Act of 1924 “ The Principal Act” (that is, the Act of 1922-1923), “ as amended by this Act, may be cited as the Income Tax Assessment Act 1922-1924.” But only the “ amendments ” themselves are made part of the Principal Act, not what is said about those amendments. What is said about those amendments is part of the Act of 1924 only. So that sec. 2 of the “ Principal Act,” that is “ the Incmne Tax Assessment Act 1922-1924 ” thenceforth read as follows ;—“ The Acts set forth in

40 C.L.R.] OF AUSTRALIA.

203

the Schedule to this Act are repealed : Provided that the Acts H.. C. o f A.

repealed by this Act shall, subject to this Act, continue, and be

,__ j

deemed to have at all times continued, in force for all purposes in F e d e r a l

CoMms-

connection with income tax payable for any financial year prior to S IO N 'E R O F

T a x a t io n

the first day of July one thousand nine hundred and twenty-two.”

V.

And nothing more. Both by force of the internal construction of

R e i d .

the proviso itself, and also by express force of sub-sec. 2 of the Act

Isaacs J

of 1924, the proviso was to apply retrospectively to 18th October 1922. The Legislature in October 1924 was thus doubly careful to see that the new proviso did operate retrospectively ; and it even went further and again recognized this in sec. 17, sub-sec. 4.

Eleven months afterwards, on 26th September 1925, a further Act was passed. No 28 of that year. By that time, it may be confidently assumed, a great many assessments had been made or altered and acted on by Crown and taxpayers all over the Commonwealth on the authority of the proviso to sec 2 of the Act of 1922. In the

1925 Act sec. 1 is important.

It says: “ (1) This Act may be

cited as the Income Tax Assessment Act 1925. (2) The Income Tax Assessment Act 1922-1924 is in this Act referred to as the Principal Act.” Then comes sec. 2, which says : “ Section two of the Principal Act is amended by adding at the end thereof the following further proviso.” The wording of the proviso itself is noticeably different from the wording of the former proviso. I t is couched entirely in the future : “ no alteration or addition shall be made ” and “ unless the Commissioner has reason to believe,” &c. There is no “ deeming ” to have been in force as in the former proviso. So that on ordinary well established principles of construction no retrospective effect could legitimately be given to it, even if there were no further considerations forbidding it. But there are additional reasons. I have written out above, the complete form of sec. 2 of the Principal Act as it stood immediately before the 1925 Act was passed. In addition, there is no sub-section as in the Act of 1924 declaring retrospectively. Not only so, it is clear that is no oversight, if oversight could in any case be lawfully assumed. Sec. 24 of the 1925 Act shows beyond question that the Parliament specifically directed its attention to the subject of retrospectivity in sec. 16 and sec. 24. The latter section is particularly strong to show that the new

204 HIGH COURT

[1927.

H. C. or A. proviso was not intended to be retrospective, and to hold it so would

■ be in direct opposition to the considered intention of Parliament. If

F e d e r a l reasons were needed for this attitude, they are on the surface. Nearly

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twelve months had passed : there must have been many thousands

s io n e r

o r

T a x a t io n

of pounds assessed as tax and paid by taxpayers and placed in the

R e i d .Treasury, including items going beyond the three years limit. Isaacs J.These payments were, we must assume, justly due. To annul

them, as we are invited to do, means either to introduce inequahties among taxpayers or seriously to disturb the settled Treasury conditions. I t is not for me to pronounce on the pohcy of Parhament, but I can see no such injustice as was argued for. Even if I could, it is beyond my province, and I am bound to expound the will of Parliament as it has declared by unusually plain words.

In my opinion the questions ought to be answered : (1) Yes, both vahd; (2) Yes.

Higgins J. In my opinion, both questions asked in the case stated must be answered in the affirmative, in favour of the Clommissioner. The problem vanishes when it is clearly grasped that the hmitation to three years is first imposed on the Commissioner (as to the financial years before 1st July 1922) by the amendment contained in sec. 2 of the Income Tax Assessment Act 1925 ; that this Act came into operation on 26th September 1925 ; and that the amended assessments which the Board has rejected were notified before that date, on 17th December 1924 and 12th Jime 1925. Sec. 37 of Act No. 37 of 1922 has nothing to do with assessments for the financial years up to 1st July 1922. There seems to have been a mistake made in this Act of 1922 in repealing the earher Acts absolutely, without making provision for assessments for the financial years up to 1st July 1922. This mistake was rectified by providing that the repealed Acts should be deemed to have at all times continued for all purposes of income tax for those years (sub-sec. 1); and that the rectification should be deemed to apply as from 18th October 1922 (sub-sec. 2). But the limitation to three years for amended assessments did not begin to apply till 26th September 1925.

40 C.L.R.] . OF AUSTRALIA.

205

P o w er s J. This is an appeal from the decision of a majority of

C. o f A .

,

1927

a Board of Review, on the following objection submitted to the

__

Board : “ that the assessment is an alteration or an addition to Federai,

COMMLS-

an assessment notified on 2.3rd May 1916, and that such alteration

SIONER OF T a x a tio n

or addition was not made until after the expiration of three years

V.

from the date when the tax payable on the original assessment was R e i d .

originally due and payable, and was, therefore, legally not within

Powers J.

the power of the Commissioner, the Commissioner not having reason to believe that there had been any avoidance of tax owing to fraud or attempted evasion.” It is admitted that the assessment was an alteration or an addition ; that it was not made until after three years, &c. ; and that the Commissioner had no reason to beheve there had been any fraud or attempted evasion.

The Chief Justice of this Court on the hearing of the appeal stated a case and submitted for the opinion of this Full Court the following questions of law arising in the appeal:—(1) Were the amended assessments mentioned in the notices of amended assessment given by the Commissioner to the taxpayer on 17th December 1924 and 12th June 192-5, or was either of them, a vahd exercise of the powers of the Commissioner under the Income Tax Assessment Act 19 lb- 1921 and the Income Tax Assesstnent Act 1922-1925 ? (2) Was the Board of Review in error in holding that the Commissioner was not entitled to make such amended assessments after the expiration of three years from the date when the tax payable on the original assessment was due and payable.

It appears to me that the question for this Court to decide is whether sec. 2 of Act No. 28 of 1925, adding a proviso to sec. 2 of the Principal Act (1922-1924), was by implication or directly made retrospective.

It was contended that, as sec. 2 of the Income Tax Assessment Act of 1922-1924 (the Principal Act referred to) conunenced from the date of the commencement of that Act, sec. 2 of the 1925 Act adding a proviso to the section must also be deemed to have conmienced from that date. I do not agree with that contention. In sec. 24 of the Act of 1925 Parliament declared that “ Sections three and five, paragraph (i) of section six and section seven of this Act shall be deemed to have commenced upon the date of

206 HIGH COURT

[1927.

H. C. or A. th e

commencement of the Income Tax Assessment Act 1922.” Parhament evidently applied its mind to the question as to what

1927.

F e d e r a l part of the Act should be made retrospective and deliberately

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s io n e r OF omitted sec. 2 and sec. 4 and part of sec. 6 of the Act when it

T a x a t io n

V.declared what part of the Act was to have a retroactive effect.

R e i d .

For the reasons mentioned the answer to the first question

Powers J

submitted should be Yes, and to the second question Yes.

Both questions answered in the ciffirmative.

Sohcitor for the appellant, W. H. Sharwood, Crown Solicitor for the Commonwealth.

Sohcitors for the respondent. Sly d Russell.

B. L.

[HIGH COURT OF AUSTRALIA.]

DAWSON

A ppellant ;

THE KING

R espo n d en t .

ON APPEAL FROM THE SUPREME COURT OF

NEW SOUTH WALES.

H . C. OF A.

Criminal Law— Sexual offence—“ Step-father” and “ step-daughter”—Ilhgitimate

1927.                daughter of wife of accused— Crimes Act 1900 (N.S. IF.) (No. 40 0/1900), sec. 73 {Crimes (Atnendment) Act 1924 {N.S.W.} {No. 10 of 1924), sec. 5).*

S y d n e y ,

Held, that the words “ step-father ” and “ step-daughter ” in sec. 73 of April 7.the Crimes Act 1924 (N.S.W.)—enacted by sec. 5 of the Crimes {Amendment)

Knox C.J.,

Isaacs and

* Sec. 73 of the Crimes Act 1900

carnally knows any girl of or above the

Starke JJ.(N.S.W.)—enacted by sec. 5 of the age of ten years, and under the age of

Crimes {Amendment) Act 1924 (N.S.W.) seventeen years, being his pupil, or

—provides that “ Whosoever, being a daughter, or step-daughter, shall be

schoolmaster or other teacher, or a liable to penal servitude for fourteen

father, or step-father, unlawfully and

years.”