Kennedy v Administrative Appeals Tribunal

Link copied
Case Copied 21 min read

FEDERAL COURT OF AUSTRALIA

Kennedy v Administrative Appeals Tribunal [2008] FCAFC 124

ADMINISTRATIVE LAW – jurisdiction of Administrative Appeals Tribunal – challenge to validity of assessments of income tax – whether assessments made in bad faith – whether Tribunal can make determination on assumption assessments valid.

ADMINISTRATIVE LAW – powers of the Administrative Appeals Tribunal – power to require lodgement of additional documents – relevance of additional documents sought – procedural fairness of decision not to exercise power.

TAXATION – amended assessments of income tax – Commissioner’s decision to disallow objections against assessments – review by Administrative Appeals Tribunal – power of Tribunal in proceeding under Part IVC of the Taxation Administration Act 1953 (Cth) to consider challenge to validity of assessments.

Administrative Appeals Tribunal Act 1975 (Cth) ss 37(1), 37(2)
Evidence Act (Cth) s 135
Income Tax Assessment Act 1936 (Cth) ss 167, 170(2)
Taxation Administration Act 1953 (Cth) s 14ZZF(1)(b), Pt IVC
Taxation Laws Amendment Act (No. 3) 1991 (Cth)

Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 considered
Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 24 ALR 307 cited
Cosco Holdings Pty Ltd v Federal Commissioner of Taxation (1997) 37 ATR 432 cited
Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 considered
F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 considered
F J Bloemen Pty Ltd v Federal Commissioner of Taxation [1978] 2 NSWLR 468 considered
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 considered
George v Federal Commissioner of Taxation (1952) 86 CLR 183 considered
Glennan v Federal Commissioner of Taxation (2003) 198 ALR 250 considered
Kennedy v Wallace (2004) 208 ALR 424 distinguished
Kim v Minister for Immigration and Citizenship [2008] FCAFC 73 cited
McLachlan v Australian Securities Commission (1998) 28 ACSR 473 cited
Minister for Immigration v Ahmed (2005) 143 FCR 314 considered
Woodroffe v National Crime Authority [1999] FCA 1128 cited
Zubair v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 139 FCR 344 cited

TREVOR JOHN KENNEDY v ADMINISTRATIVE APPEALS TRIBUNAL and THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

VID 23 OF 2008

FRENCH, TAMBERLIN AND MANSFIELD JJ
4 JULY 2008
SYDNEY (BY VIDEOLINK TO MELBOURNE)


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

VID 23 OF 2008
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:

TREVOR JOHN KENNEDY
Appellant

AND:

ADMINISTRATIVE APPEALS TRIBUNAL
First Respondent

THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
Second Respondent

JUDGES:

FRENCH, TAMBERLIN AND MANSFIELD JJ

DATE OF ORDER:

4 JULY 2008

WHERE MADE:

SYDNEY (BY VIDEOLINK TO MELBOURNE)

THE COURT ORDERS THAT:

1.The appeal be dismissed.

2.The appellant pay the respondents’ costs of the appeal.

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


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

VID 23 OF 2008
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:

TREVOR JOHN KENNEDY
Appellant

CaseChat AU logo

Keep reading for free

Create a free CaseChat account to read Kennedy v Administrative Appeals Tribunal and more:

  • Read every judgment in full
  • Ask AI and get answers linked to paragraphs
  • See how each paragraph was cited in later cases
  • Download judgments as PDF or Word
Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details
Case
[2008] FCAFC 124
Decision Date

CaseChat Overview and Summary

In this case, Mr Kennedy, the appellant, sought review of decisions made by the Commissioner, the second respondent, regarding amended assessments of income tax. These assessments included amounts that Mr Kennedy had allegedly failed to include in his assessable income for specified years. The case reached the High Court of Australia following a refusal by a Presidential Member of the Administrative Appeals Tribunal to exercise the power under s 37(2) of the Administrative Appeals Tribunal Act 1975 (Cth) to require the Commissioner to provide additional documents relevant to the validity of the assessments and Mr Kennedy's substantive liability. The central legal issue was whether the additional documents sought by Mr Kennedy were necessary for the Tribunal to review the Commissioner's decisions. The court needed to determine if the additional documents were relevant to the validity of the assessments or Mr Kennedy's liability, and if the challenge to the assessments being made in bad faith could be raised in the review proceedings.

The court addressed the issue by examining the nature of the review process under the Taxation Administration Act 1953 (Cth) and the Administrative Appeals Tribunal Act 1975 (Cth). It considered the principles established in previous High Court decisions, such as Dalco and George, which clarified that the Commissioner's judgment as to the amount of tax owed is part of the assessment process itself and that the taxpayer must prove the assessment is excessive. The court found that the additional documents were not necessary because they were not relied upon by the Commissioner in forming the judgment, and the challenge to the assessments being made in bad faith was not pertinent in the review proceedings. The court concluded that the primary focus in such proceedings is on the excessiveness of the assessment rather than the Commissioner's motives.

The court dismissed the appeal and ordered Mr Kennedy to pay the respondents’ costs of the appeal. This decision underscored the limitations of the review process under the relevant Acts, reaffirming that the burden of proof lies with the taxpayer to demonstrate that the assessment is excessive, and certain challenges, such as the Commissioner's motives, are not within the scope of the review proceedings.

Orders

Orders of the court

1. The appeal be dismissed.

2. The appellant pay the respondents’ costs of the appeal.

Background

Background to the litigation

This is an appeal from a decision of a Presidential Member of the Administrative Appeals Tribunal (“the Tribunal”), who refused to exercise the power under s 37(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”), as modified by s 14ZZF(1)(b) of the Taxation Administration Act 1953 (Cth) (“the TAA”).BACKGROUND The appellant (“Mr Kennedy”) applied to the Tribunal for review of objection decisions by the second respondent (“the Commissioner”) in respect of the years of income ended 30 June 1993 to 30 June 1996 inclusive and 30 June 1998 to 30 June 2000 inclusive. The “objection decisions” were that the Commissioner disallowed objections lodged by Mr Kennedy against amended assessments of income tax issued by the Commissioner, in which the Commissioner included in Mr Kennedy’s assessable income for each of the relevant years of income an amount which the Commissioner alleges Mr Kennedy failed to include. The amount totalled approximately $6.96 million (including penalties). In making the amended assessments and disallowing the objections made by Mr Kennedy, the Commissioner relied on a number of documents which have been described throughout the proceeding as “foreign documents”. These included a transcript of examination of Mr Kennedy in Switzerland, a transcript of examination of another person and a number of letters. Shortly before the hearing in the Tribunal, the Commissioner filed and served further documents, including copies of the letters referred to above, which the Commissioner did not have at the time of providing the original set of documents pursuant to s 37(1) of the AAT Act. Under s 37(1), where a decision-maker has made a decision that is the subject of an application for review by the Tribunal, the decision-maker must lodge with the Tribunal a statement which sets out the findings on material questions of fact with references to the material on which the findings were made, the reasons for the decision, and any other documents in the decision-maker’s possession or control which are relevant to review of the decision by the Tribunal. Before the Tribunal, Mr Kennedy submitted that the Tribunal should, pursuant to its powers under s 37(2) of the AAT Act, require the Commissioner to lodge with the Tribunal, in addition to six volumes of documents already lodged under s 37(1) of the AAT Act, the documents identified in the Schedule to the Presidential Member’s reasons. Mr Kennedy submits that these additional documents are relevant to the validity of the Commissioner’s amended assessments, which validity is challenged on the ground that the assessments were not made in good faith or were made for an improper purpose. Mr Kennedy also submits that the additional documents are relevant to his substantive liability under the assessments, if valid. On this latter point, the essence of Mr Kennedy’s submissions is that the Commissioner’s function of deciding the amount on which tax should be paid miscarried because of the “doubtful authenticity” of some of the material on which the Commissioner relied to make the objection decisions. He argues that the additional documents are relevant to whether the foreign documents are authentic and reliable, and they affect the weight which ought to be given to the foreign documents. Mr Kennedy also says that the documents are relevant to the formation by the Commissioner of the opinion that there was fraud and evasion by Mr Kennedy for the purposes of s 170(2) of the Income Tax Assessment Act 1936 (Cth) (“the ITAA”).

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

FRENCH, TAMBERLIN AND MANSFIELD JJ
In considering the first premise, his Honour relied on the decision of the High Court in Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 623, where Brennan J said: “The ground of objection on which the taxpayer here relies is error in the formation of a judgment as to the amount on which tax ought to be levied. But mere error in the formation of that judgment by the Commissioner does not warrant the setting aside of the amount assessed. Given the validity of the exercise of the power to make an assessment under s 167(b), the ultimate question is whether the amount of the assessment is excessive. The amount of the assessment might not be excessive in fact, though the reasons which led to the assessment were erroneous.”(Emphasis added.) The High Court in Dalco 168 CLR 614 referred to an earlier decision in George v Federal Commissioner of Taxation (1952) 86 CLR 183 at 200, where the taxpayer submitted that the assessment was excessive because the judgment contemplated by s 167 of the ITAA had not been formed “by the right person and that in any case it had been formed on no material.” The High Court refused to order the furnishing of particulars relating to that issue, stating at 203-204:“The formation of the judgment as to what is the amount of the income that ought to be taxed is no condition precedent to the power to assess. It is part of the very process of assessment itself. … The fact is that unless the taxpayer discharges the burden laid upon him by s 190(b) of proving that this ascertainment or judgment is excessive, he cannot succeed and it can be no part of the duty of the commissioner to establish affirmatively what judgment he formed [for the purposes of s 167], much less the grounds of it, and even less still the truth of the facts affording the grounds. Yet that is what is involved when the demand for particulars of the sources alleged of the appellant’s income is justified by reference to s 167.” In relation to the second premise on which Mr Kennedy’s challenge was based, his Honour accepted the submission of the Commissioner that none of the additional documents sought by Mr Kennedy were relied on by the Commissioner for the purpose of forming the judgment as to the amount on which tax ought to be levied. His Honour found that, in any event, Mr Kennedy’s Statement of Facts, Issues and Contentions did not challenge the formation of the Commission’s judgment other than to contend there was in fact no fraud or evasion on the part of Mr Kennedy. His Honour also decided that the challenge by Mr Kennedy to the validity of the assessments on the ground they were made in bad faith could not be raised in review proceedings commenced in the Tribunal, or in appeal proceedings commenced in this Court, pursuant to Part IVC of the TAA. This is because, his Honour found, the issue in such proceedings is whether the assessment was excessive, and the proceedings are predicated on there being an assessment against which the taxpayer may object, and an objection decision which could be reviewed or appealed if a taxpayer so elects. His Honour referred to the reasons of Mason CJ in Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 at 187, where his Honour said:“… the paramount purpose of the [ITAA] is to ascertain the liability of taxpayers to tax and … the [ITAA], 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 inadmissible purpose on the part of the Commissioner plays no part.” (Emphasis added).

Ratio Decidendi

Legal Principle Established

Established by: FRENCH, TAMBERLIN AND MANSFIELD JJ

Full text does not contain this section.