Kais and Commissioner of Taxation (Taxation)

This matter concerned applications for review by Kais Jewellery (Syd) Pty Ltd and Mr Ali Kais against decisions of the Commissioner of Taxation. The dispute centred on whether Kais Jewellery (Syd) was entitled to Goods and Services Tax (GST) input tax credits for purported acquisitions of scrap gold, with the Commissioner asserting these acquisitions were fictitious and a cover for acquisitions of gold bullion by Mr Kais. The Commissioner also contended that cash withdrawals used for these purported acquisitions constituted assessable ordinary income in the hands of Mr Kais. The Administrative Appeals Tribunal (AAT) was required to determine whether a witness statement from Mr Ibrahim, a key witness who had passed away before the hearing, should be admitted into evidence, despite the Commissioner's objection.

The primary legal issue before the Tribunal was whether to admit into evidence a witness statement made by Mr Ibrahim, who was unavailable for cross-examination due to his death. The Commissioner conceded the statement was relevant to a central issue in the case but argued its admission would be unfairly prejudicial to the Commissioner, given the inability to test its contents through cross-examination. The Tribunal considered its own powers under section 33(1)(c) of the Administrative Appeals Tribunal Act 1975 (Cth), which allows it to inform itself on any matter in such manner as it thinks appropriate, noting it is not bound by the rules of evidence.

The Tribunal reasoned that while not bound by formal rules of evidence, the principles underpinning them, particularly those in the Evidence Act 1995 (Cth), could provide useful guidance. It referred to section 63 of the Evidence Act, which permits hearsay evidence in civil proceedings where the maker of the representation is unavailable, and section 135, which allows for the exclusion of evidence if its probative value is substantially outweighed by the danger of unfair prejudice. The Tribunal noted the Commissioner's concession that the statement was relevant to a central issue. Applying these principles, the Tribunal concluded that the mere absence of an opportunity for cross-examination did not automatically warrant the exclusion of evidence in a civil matter. Instead, the Tribunal would weigh the probative value of the statement against the potential for unfair prejudice, considering all surrounding circumstances.

The Tribunal ordered that the witness statement of Mr Ibrahim be admitted into evidence. However, it indicated that the weight to be attributed to the statement would be affected by the absence of an opportunity for cross-examination, a factor that would be considered when determining the ultimate outcome of the applications for review.