Kong and Commissioner of Taxation (Taxation) - [2021] AATA 2775

Kong and Commissioner of Taxation (Taxation) [2021] AATA 2775 (10 August 2021)
Division:TAXATION AND COMMERCIAL DIVISION
File Number:2019/4385-4393
Re:Sam Kong
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION
Tribunal:Member D Mitchell
Date:10 August 2021
Place:Brisbane

The Tribunal affirms the decision under review.
...............[SGD]..............................
Member D Mitchell
CATCHWORDS
TAXATION – income tax – default amended assessments – whether evasion - unexplained bank deposits – onus to prove assessment was excessive and what taxable income should have been – administrative penalty – whether reckless – whether administrative penalty should be remitted – whether shortfall interest charge should be remitted – decision under review affirmed
LEGISLATION
Income Tax Assessment Act 1936 (Cth)
Income Tax Assessment Act 1997 (Cth)
Taxation Administration Act 1953 (Cth)
CASES
Barripp v Commissioner of Taxation (NSW) (1941) 6 ATD 69
Binetter v Federal Commissioner of Taxation (2016) 249 FCR 534
Bosanac v Commissioner of Taxation [2019] FCAFC 116
BRK (Bris) Pty Ltd v Commissioner of Taxation (2001) ATC 4111
Commissioner of Taxation v Rigoli [2013] FCA 784
Commissioner of Taxation v White (No 2) [2010] FCA 942
Danmark Pty Ltd v FCT; Forestwood Pty Ltd v FCT (1944) 7 ATD 333; (1944) AITR 517
Denver Chemical Manufacturing Company v Commissioner of Taxation (NSW) (1949) 79 CLR 296
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614
Federal Commissioner of Taxation v R & D Holdings Pty Ltd [2007] FCAFC 107; (2007) 160 FCR 248
Federal Commissioner of Taxation v Rigoli (2013) ATC 20-407; [2013] FCA 784
Gashi v Commissioner of Taxation (2013) 209 FCR 301; [2013] FCAFC 30
George v Federal Commissioner of Taxation (1952) 86 CLR 183.
Hart v FC of T [2003] FCAFC 105; (2003) 131 FCR 203
HFTS and Commissioner of Taxation [2019] AATA 5164
Hourigan and Commissioner of Taxation [2018] AATA 3369
Imperial Bottle shops Pty Ltd and William John King Egerton v Federal Commissioner of Taxation (1991) 22 ATR 148
Ma v Commissioner of Taxation [1992] FCA 359; (1992) 37 FCR 225
McCormack v FCT (1979) 143 CLR 284
Millar v Commissioner of Taxation [2015] FCA 1104
Pascoe v FCT (1956) 6 AITR 315; 11 ATD 108
Raschta Coatings Pty Ltd and Federal Commissioner of Taxation [2013] AATA 34
Rigoli v Federal Commissioner of Taxation (2014) ATC 20-446; [2014] FCAFC 29
Sanctuary Lakes v Federal Commissioner of Taxation (2013) 212 FCR 483
Stewart and Commissioner of Taxation [2013] AATA 845
Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63
REASONS FOR DECISION
Member D Mitchell
10 August 2021
INTRODUCTION

Mr Sam Kong (the Applicant) is seeking review of an Objection decision of the Commissioner of Taxation (the Respondent) dated 7 June 2019 in relation to default amended assessments for the income years ended 30 June 2008 to 30 June 2016 (the years in dispute).[1]
[1] Exhibit List, Tab 1.36, T36, pages 391-393, Decision on Objection.
The reviewable Objection decision allowed the objection in part for income tax for the years in dispute and the associated administrative penalty imposed and disallowed the objection in relation to the remission of shortfall interest charge (SIC) for the income tax years ended 30 June 2008 to 2012.[2]
[2] Exhibit List, Tab 1.2, T2, pages 8-35, Reasons for Decision.
PATHWAY TO HEARING
The Respondent conducted an audit of the Applicant’s income tax affairs for the years in dispute using a bank statement analysis. The analysis conducted a review of the Applicant’s bank statements to identify unexplained deposits, which were credited to those accounts in the years in dispute. The Respondent determined that the Applicant had under-reported his income for the years in dispute[3] and:
(a)formed the opinion that the Applicant, in failing to declare such income, engaged in acts that constituted evasion;[4]
(b)issued default amended assessments for the years in dispute;[5]
(c)imposed an administrative penalty[6] at the rate of 75% on the basis that the Applicant had intentionally disregarded a taxation law,[7] which was increased by 20% in relation to the 2009-2016 income years by virtue of statute;[8] and
(d)imposed a shortfall interest charge.[9]
[3]     Exhibit List, Tab 1.12,T12, pages 52-110, B Tab 1.12, Audit finalisation letter enclosing Reasons for Decision.
[4]     Exhibit List, Tab 2.11, ST11, pages 734-739, Fraud or Evasion Opinion.
[5]     Exhibit List, Tabs 1.13-1.23, T13-T23, pages 111-150, Notice of amended assessment for the years ended 30 June 2008 to 30 June 2016.
[6]     Exhibit List, Tab 1.12, T12, page 57, Audit finalisation letter and Reasons for Decision.
[7]     Exhibit List, Tab 1.12, T12, pages 75-76, Audit finalisation letter and Reasons for Decision.
[8]     Exhibit List, Tab 1.12, T12, page 78, Audit finalisation letter and Reasons for Decision.
[9]     Exhibit List, Tab 1.12, T12, page 57, Audit finalisation letter and Reasons for Decision.
The overall effect of the amended assessments was that the Applicant’s total taxable income for the years in dispute increased by $3,132,770.00, resulting in a tax shortfall amount of $1,413,210.17.[10]
[10] Exhibit List, Tab T39, page 3335, paragraph 21, Respondent’s Amended Statement of Issues, Facts and Contentions.
The Applicant lodged an objection to the amended assessments and through his accountants, Ee & Associates provided submissions to address the findings of the audit.[11]
[11] Exhibit List, Tab, 1.24, T24, pages 151-163, Objection to notice of amended assessments.
As a result, having taken into consideration the information that had been provided by the Applicant, the Respondent allowed the objection in part in respect of each of the income years in dispute and reduced the shortfall penalty imposed to 50% of the Applicant’s income tax shortfall on the basis that the shortfall was a result of recklessness. The Respondent did not remit the penalty or the shortfall interest charge.[12]
[12] Exhibit List, Tab, 1.2, T2, pages 8-35, Reasons for Decision and Tab 1.36, T36, pages 391-393, Decision on Objection.
Following the Objection decision, the Respondent issued an amended assessment for each of the years in dispute.[13]
[13] Exhibit List, Tabs 2.14-2.22, ST14-ST22, pages 744-779, Notice of Amended Assessment for the financial year ended 30 June 2008 to 30 June 2016.
The overall effect of the Objection decision was that the Applicant’s total taxable income for the years in dispute was reduced to an increase of $820,083.00 resulting in a tax shortfall of $341,013.84[14] with administrative penalties of $203,468.97 and shortfall interest charge of $81,565.37.[15]
[14] Exhibit List, Tab 1.2, T2, page 12, Reasons for Decision.
[15] Exhibit List, Tab 39, page 3336, Respondent’s Amended Statement of Issues, Facts and Contentions.
The Applicant subsequently applied to this Tribunal for review of the objection decision.[16]
[16] Exhibit List, Tab T1.1, T1, 1-7, Application for Review.
A Hearing was conducted on 28, 29 and 30 July 2020. At Hearing all parties and witnesses appeared in person. Following the Hearing the Respondent provided their closing submissions in writing, which also dealt with the new material handed up[17] by the Applicant’s Representative on the final day of the Hearing.[18] The Applicant provided a submission in reply[19] of which some parts were objected to by the Respondent.[20] The Tribunal was clear at the Hearing that any submissions provided by the Applicant should not raise new evidence or argument.[21] In viewing the evidence as a whole the Tribunal upholds the Respondent’s objection in relation to certain parts of the Applicant’s submissions and overall finds those submissions to otherwise be consistent with the material provided and contentions made previously. The Tribunal considers that the Applicant’s submission in reply did not in any case advance his position.
[17]    BB, Tab 42, Applicant Documents with page reference 12.H1, 12.H1-2 and 12.G1 handed up at Hearing.
[18]    Respondent’s Outline of Submissions dated, 17 August 2020.
[19]    Applicant’s Response to the Respondent’s Outline of Submissions, dated 31 August 2020.
[20]    Respondent’s Objection to New Contentions, dated 19 October 2020.
[21]    Transcript of Proceedings, pages 247-248.
BACKGROUND
Since at least the point of audit the Applicant has been represented by Mr Ee and Mr Chan of Ee & Associates (Applicant’s Representatives). At Hearing the Applicant’s Representatives advised the Tribunal that this matter was their first at the Tribunal and as non-lawyers they were not familiar with the process. The Tribunal outlined the process and on a number of occasions outlined the principles of the onus of proof, which lies with the Applicant in this matter.
At the Hearing, by way of overview of the Applicant’s business history, the Applicant’s Representatives in opening submissions provided that the Applicant had been operating as a sole trader selling only local seafood since 1995. Then from 6 August 1999 he started trading under SE Holdings Pty Ltd until June 2012 at which time the Applicant commenced trading under Sunshine Bros Pty Ltd (Sunshine Bros) as trustee for the Sam Kong Trust. From early 2015, the Applicant started to import frozen prawns from China due to local demand. In 2016, as a result of the white spot virus, the importing of prawns was banned and the stock on hand had to be disposed of. By 2018 Sunshine Bros was no longer able to operate and was placed into liquidation. During the operation of both SE Holdings Pty Ltd and Sunshine Bros the Applicant only employed minimal staff, being himself, a part time employee to help deliver the frozen seafood and his wife to help with bookkeeping.[22] The Applicant at all times operated under the business name ‘Fame Seafood’. The Applicant confirmed this history at Hearing.[23]
[22] Transcript of Proceedings, page 6.
[23] Transcript of Proceedings, pages 41-44.
Despite the Applicant’s Representatives painting a picture of him operating as a “one man band” and “sole trader” and not having “got very good education in the, you know, in the recording and substantiation”[24] the Applicant gave evidence that he:
·Had seen all of the documents put together by his Representatives which were provided to the Tribunal and Respondent. He had provided the information contained in those documents and that they are correct. He provided the information and because his writing is not good his accountant did the writing, but he provided the numbers, bank statements and evidence.[25]
·Had been through the comparison of trading figures versus the bank deposits summary provided by his Representatives and that he had provided them with all of the information.[26]
·Was the one who ran the wholesale seafood business.[27]
·Was aware of the importance of keeping records and business records and that he was required to keep records for his income tax and also to keep business records for income tax purposes for 5 years.[28]
[24]    Transcript of Proceedings, page 11.
[25]    Transcript of Proceedings, pages 35-37.
[26]    Transcript of Proceedings, page 57.
[27]    Transcript of Proceedings, pages 42-43.
[28]    Transcript of Proceedings, pages51; 54.
Further the evidence before the Tribunal revealed that the Applicant has extensive experience operating within company and trust arrangements, which was confirmed by the Applicant at Hearing. This includes:[29]
·Being a shareholder and director of SE Holdings Pty Ltd.[30] SE Holdings Pty Ltd operated a wholesale retail seafood business between 2008 and 2012 operating under the business name of Fame Seafood.[31]
·Being the sole director and shareholder of Sunshine Bros Pty Ltd from May 2007.[32] Sunshine Bros was initially set up as the Applicant had a couple of partners so he could extend his business into importing, however it did not trade and the other two partners left the company. The Applicant decided to important seafood from China himself which is why he changed the operation of his business from SE Holdings Pty Ltd to Sunshine Bros Pty Ltd as trustee for the Sam Kong Trust.[33]
·Being a beneficiary of the Sam Kong Trust, of which Sunshine Bros was the trustee.[34] The SK Trust operated the business trading as Fame Seafood between 2013 and 2016.[35]
·Holding 50% of the ordinary shares in Lashel Pty Ltd.[36]
·Being a beneficiary of the Kong Family Trust of which Lashel Pty Ltd was the trustee.[37] Prior to 10 August 2009, the Applicant and his wife were the trustees of the Kong Family Trust.[38] The Kong Family Trust was a property investment trust that acquired a property in Parkinson on 23 December 2009 for approximately $1.4 million. He was the manager of the project, that was going to put a cold storage facility on the land, but the project fell through and the property was transferred to AKA Group Trust.[39]
·Being a director of Lashel Cold Storage Pty Ltd from 19 September 2010 and holding 65% of the ordinary shares.[40]
·Lashel Cold Storage Pty Ltd was the trustee of the AKA Group Trust.[41] The AKA Group Trust was a unit trust that was constituted on 17 September 2010.[42] The Kong Family Trust held an initial unit holding of 45% of the units in this unit trust. The Applicant managed the property project, which did not go ahead.[43]
·Being the trustee of and beneficiary of the WKLS Trust.[44] The WKLS Trust was a property investment unit trust that held property in Greenslopes. He held 33% of the units in the WKLS Trust.[45]
[29]    Transcript of Proceedings, pages 41-48.
[30]    Exhibit List, Tab 1.12, T12, page 59, Reason for Decision.
[31]    Transcript of Proceedings, pages 42-43.
[32]    Exhibit List, Tab 4.1, ST38, page 1759, ASIC company extract for Sunshine Bros Pty Ltd.
[33]    Transcript of Proceedings, pages 43-44,
[34]    Exhibit List, Tab 28, page 3147 Sam Kong Trust Financial Statements for the year ended 30 June 2014; and Tab 30, page 3174, Sam Kong Trust Financial Statements of the year ended 30 June 2015.
[35]    Transcript of Proceedings, page 43.
[36]    Exhibit List, Tab 4.3, ST 40, page 1769, ASIC company extract for Lashel Pty Ltd.
[37]    Exhibit List, Tab 4.57.1, ST 94.1, page 2773, Kong Family Trust Deed.
[38]    Exhibit List, Tab 4.57.2, ST 94.2, page 2780, Amended Kong Family Trust Deed.
[39]    Transcript of Proceedings, pages 45-46.
[40]    Exhibit List, Tab 4.2, ST39, pages 1765-1766, ASIC company extract for Lashel Cold Storage Pty Ltd.
[41]    Exhibit List, 4.56.1, ST 93.1, page 2716, AKA Group Trust Deed.
[42]    Exhibit List, Tab 4.56.1, ST 93.1, page 2716, AKA Group Trust Deed.
[43]    Transcript of Proceedings, pages 46-48.
[44]    Exhibit List, Tab 4.3, ST 50, pages 1819-1821, Income Tax Return for the Trustee for WKLS Trust for the year ended 30 June 2009.
[45]    Transcript of Proceedings, pages 44-45.
The Applicant told the Tribunal that he moved across to using company and trust structures after receiving advice that doing so would help with public liability and being able to borrow money from the bank.[46]
[46] Transcript of Proceedings, pages 48-49.
Based on the Applicant’s evidence at Hearing, the Tribunal formed the view, that contrary to the picture that his Representatives were attempting to paint, the Applicant had a good level of business acumen and was aware of the obligations to keep taxation records. Further the Applicant was, personally responsible for providing the information to his accountants that formed his income tax returns for the years in dispute and for providing the information that his Representatives provided to the Respondent and Tribunal throughout the objection and Tribunal processes.[47]
[47] Transcript of Proceedings, pages 35-37.
LEGISLATIVE FRAMEWORK AND PRINCIPLES
The relevant law in this matter includes the Income Tax Assessment Act 1936 (Cth) (ITAA 1936), Income Tax Assessment Act 1997 (Cth) (ITAA 1997) and the Taxation Administration Act 1953 (Cth) (TAA 1953).
Income Tax Assessments
Section 166 of the ITAA 1936 requires that the Respondent, from the returns and any other information in his possession, make an assessment of: the taxable income of a person; the tax payable thereon; and any tax offset refunds. This section effectively deals with situations where a taxpayer lodges an income tax return. Which in this case is what the Applicant did for each of the years in dispute.
However, where the Respondent is not satisfied with the return that has been furnished by a taxpayer he may pursuant to section 167(b) of the ITAA 1936 make an assessment of the amount upon which in his judgement income tax ought to be levied, and that amount shall be the taxable income of that taxpayer for the purpose of section 166. In such circumstances the Respondent may issue a default amended assessment of which an assessment is made in relation to an estimate of the amount of taxable income the Respondent considers the taxpayer should have been taxed on. The default assessment relates to a single amount of taxable income rather than a calculation of assessable income less allowable deductions to reach an amount of taxable income.[48]
[48] Definition of taxable income – section 4-15 of the ITAA 1997 and section 6(1) of the ITAA 1936.
In the present matter the Applicant’s taxable income was largely determined by reference to unexplained deposits occurring within the Applicant’s bank statements.
Ordinarily, individual taxpayers’ assessments can only be amended by the Respondent for a year of income within 2 or 4 years (whichever applies) of the day on which the Respondent gives notice of the assessment to the taxpayer.[49] However, pursuant to item 5 of section 170(1) of the ITAA 1936, the Respondent may amend an individual taxpayer’s assessment at any time if the opinion is formed that the taxpayer has avoided tax due to fraud or evasion.
[49] Section 170(1) of the ITAA 1936.
The taxpayer bears the onus of satisfying the Tribunal that the Respondent could not validly form the opinion that there was fraud or evasion in the relevant income years. If the taxpayer is able to do so then the statutory condition for the power to amend is not satisfied.[50]
[50] See Millar v Commissioner of Taxation [2015] FCA 1104 which was confirmed by the Full Federal Court in Binetter v Federal Commissioner of Taxation (2016) 249 FCR 534.
In this matter, the Respondent formed an opinion that the Applicant had avoided tax by evasion and as such amended the Applicant’s assessments back to the 2009 income tax year.[51] The onus lies with the Applicant to satisfy the Tribunal that the Respondent could not validly form that opinion for the 2009 to 2014 income tax years.
[51] Exhibit List, Tab 2.11, ST11, pages 734-739, Fraud or Evasion Opinion.
The consideration of evasion cannot be made in isolation of consideration of the circumstances that led to the amended assessment being issued for each income year.
Dixon J in Denver Chemical Manufacturing Company v Commissioner of Taxation(NSW) (1949) 79 CLR 296 at 313 considered the term evasion to mean:
…. More than avoid and also more than a mere withholding of information or the mere furnishing of misleading information. It is probably safe to say that some blameworthy act or omission on the part of the taxpayer or those for whom he is responsible is contemplated.
Intentional omission of income without adequate explanation, was held to be able to amount to evasion by McTiernan J in Barripp v Commissioner of Taxation (NSW) (1941) 6 ATD 69 at 71 who stated:
[b]ut the question whether the excuse offered could change the complexion of the facts proved is only an abstract one because the reality of the excuse was not established. The case therefore stands in this situation. The appellant intentionally omitted the income from the return and there is no credible explanation before the Court why he did so. His conduct in my opinion answers to the description of an avoidance of taxation at any rate by evasion.
Avenues for review and onus of proof

Where a person disagrees with an amended assessment issued by the Respondent they can object to that decision. Following a review of the objection, an objection decision is made by the Respondent.[52]
[52] Section 14ZY of the TAA 1953.
Where a taxpayer is dissatisfied with an objection decision made by the Respondent they may apply to the Tribunal for a review of the decision or appeal to the Federal Court against it.[53]
[53] Section 14ZZ of the TAA 1953.
The Applicant, in exercising his right to seek review of the Respondent’s objection decision has by virtue of section 14ZZK(b)(i) of the TAA 1936 has the burden of proving that the assessments for the years in dispute are excessive or otherwise incorrect and what those assessments should have been.
In relation to default assessments, of which this matter relates, case law authority has established that it is not sufficient for an Applicant to point to an error in the methodology applied by the Respondent in making the assessment, rather the Applicant must demonstrate what the actual amount should be. The applicable principles were explained by Pagone J in Federal Commissioner of Taxation v Rigoli (2013) ATC 20-407; [2013] FCA 784 as follows:[54]
[8]… In Gashi,[55] the court had held that a taxpayer wanting to challenge an assessment made under s 167 upon the asset betterment method of calculation could only do so by establishing the actual taxable income for the period in dispute saying at [63]:
A taxpayer who seeks to establish that a s 167 assessment based on the asset betterment method of calculation is excessive must positively prove his or her “actual taxable income” and, in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer: Dalco[56] at 623-5 and Trautwein[57] at 88. The taxpayer must show that the unexplained accumulated wealth was from non-income sources. The manner in which a taxpayer discharges that burden is not defined or specified – it varies with the circumstances: Dalco at 624.
The reason for this conclusion lay in the difference between assessments made under s 166 and those made under s 167 which at [53]-[55] the court had explained:
The s 167 power is necessarily different to that in s 166. Under s 166, the power is to “make an assessment of the amount of the taxable income”. The phrase “taxable income” is defined to mean “assessable income” minus “deductions”: s 4-15 of the 1997 Act and s 6(1) of the 1936 Act. Under s 167, that process of calculating taxable income as assessable income minus deductions is not possible (in whole or in part) because of one of the preconditions to the exercise of the power in sub-paras (a) to (c) of s 167 – a failure by a person to lodge a tax return, the tax return is deficient or the Commissioner has reason to believe that a person who has not lodged a return has derived taxable income. It is for those reasons that the balance of s 167 empowers the Commissioner to make an assessment of the amount upon which income tax ought to be levied and for that amount to be deemed to be the taxpayer’s taxable income for the purposes of s 166.
The third part of the section – the deeming provision – would be futile if it was necessary for the Commissioner to undertake a process of the kind referred to in s 166. As the Commissioner submitted, the assessment of the “amount” in s 167 is not constrained by a process of subtracting “deductions” from “assessable income”. Instead, in making his judgment of the “amount” that becomes taxable, the Commissioner may use what is known as the “asset betterment” method: Trautwein at 87, 99-100 and 105.
The asset betterment method, and the resulting assessment, is necessarily a guess to some extent and “almost certainly inaccurate in fact”: Trautwein at 87. It is therefore “no part of the duty of the commissioner to establish affirmatively what judgment he formed [under s 167 of the 1936 Act], much less the grounds of it, and even less still the truth of the facts affording the grounds”: George v Federal Commissioner of Taxation at 204.[58]
The need, therefore, for a taxpayer to prove the “actual taxable income” in order to establish the excessiveness of an assessment made under s 167 was not so much that the assessment in Gashi was based upon the asset betterment basis of calculation as that it was made under s 167 where the “process of calculating taxable income as assessable income minus deductions is not possible (in whole or in part)”. The figure arrived at by the Commissioner under s 167 may in any given case be based upon calculations similar to those where the taxpayer has furnished a return under s 166, but an assessment under s 167 is fundamentally different from one under s 166. A taxpayer seeking to establish that an assessment under s 167 is excessive needs to establish not that some element in the assessment is wrong but that “the amount upon which in [the Commissioner’s judgment] income tax ought to be levied” was the taxpayer’s actual taxable income. The primary obligation of a taxpayer is to furnish a return of income under s 166 and an assessment under s 167 does not provide a means by which taxpayers may be relieved of their obligation to establish their actual taxable income. It is, rather, a means by which the Commissioner may impose a liability where the taxpayer has failed to furnish a return.
[54]    Commissioner of Taxation v Rigoli [2013] FCA 784 at [8]. Pagone J’s reasoning was held to be “correct” on appeal to the Full Federal Court: see Rigoli v Federal Commissioner of Taxation (2014) ATC 20-446; [2014] FCAFC 29.
[55]    Gashi v Commissioner of Taxation (2013) 209 FCR 301; [2013] FCAFC 30.
[56]    Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614.
[57]    Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63.
[58]    George v Federal Commissioner of Taxation (1952) 86 CLR 183.
The Full Federal Court in Gashi v Commissioner of Taxation [2013] FCAFC 30 further provided at [63] to [66]:
[63] A taxpayer who seeks to establish that a s 167 assessment based on the asset betterment method of calculation is excessive must positively prove his or her “actual taxable income” and, in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer: Dalco at 623-5 and Trautwein at 88. The taxpayer must show that the unexplained accumulated wealth was from non-income sources. The manner in which a taxpayer discharges that burden is not defined or specified – it varies with the circumstances: Dalco at 624.
[64] So, for example, in Ma v Commissioner of Taxation [1992] FCA 359; (1992) 37 FCR 225 at 230, Burchett J said that, in seeking to establish that an assessment under s 167 was excessive, that burden may be discharged:
... [I]f a taxpayer denies any undisclosed source of income, provides acceptable evidence of how he spends his time, and demonstrates a reasonable explanation for any appearance of the possession of assets, he will generally discharge his burden of proof unless some positive reason is shown why he is to be disbelieved. ...
[65]Justice Burchett identified a number of steps – identification of sources of income, explanation of a taxpayer’s activities and an explanation of the source or sources of a taxpayer’s assets. The steps identified by Burchett J are not surprising. In addressing a s 167 assessment based upon an asset betterment statement, a taxpayer must account for an unexplained increase in assets. The taxpayer must explain the source or sources of those assets and then identify whether that source, or those sources, are taxable. Put another way, if the disclosed “actual” taxable income does not explain the increase in assets, then the taxpayer is unlikely to have discharged the burden of establishing the assessment is excessive. And, of course, that unexplained increase in assets cannot be viewed in isolation – it must also take into account the expenditure during that period.
[66]Consistent with that view, even if a taxpayer was able to prove that an item in the asset betterment statement was wrong or should not have been included, but did not adequately explain the source or sources for the otherwise unexplained increase in wealth, the taxpayer would not discharge the onus under s 14ZZO of the TAA.
The Tribunal considers that the case authority in relation to section 167 default assessments based on asset betterment statements equally apply to those default assessments that are based upon a bank statement analysis. Without a taxpayer establishing what their taxable income was for the period in question, the Tribunal is unable to be satisfied that that default assessments were excessive or what the actual tax position is.
The Applicant must in this case establish what his taxable income was for the years in dispute. That means he will need to demonstrate what his assessable income and allowable deductions for the years in dispute were to establish what he says his taxable income should have been assessed as for the years in dispute. The Applicant “will have to demonstrate by evidence both sides of the equation because the assessment involves the exercise of a power to make a lump sum assessment of the taxable income based on the information available to the [Respondent]”.[59]
[59] Bosanac v Commissioner of Taxation [2019] FCAFC 116 at [57] per Greenwood, Burley and Colvin JJ.
It is up to the Applicant to establish the facts he relies upon to displace the amended assessments. Latham J, in Danmark Pty Ltd v FCT; Forestwood Pty Ltd v FCT (1944) 7 ATD 333 at 337; (1944) AITR 517 at 586 stated that:
… upon an appeal the onus rests upon the taxpayer of establishing the facts upon which he relies and if it is necessary for him to establish a particular fact in order to displace the assessment he must satisfy the Court with respect to that fact.
As such, to be successful in this matter the onus falls on the Applicant to prove that the amended assessments were incorrect and what his taxable income actually was for the years in dispute.
Penalties
Administrative penalties may be imposed in a number of circumstances. Relevant to the present matter, section 284-75(1) of Schedule 1 to the TAA 1953 provides that administrative penalties may be imposed where:
284-75 Liability to Penalty
(1)you are liable to an administrative penalty if:
(a) you make a statement to the Commissioner or to an entity that is exercising powers or performing functions under a taxation law; and
(b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it.
Section 284-85 of Schedule 1 to the TAA 1953 outlines how the amount of penalty is to be calculated.
For current purposes section 284-90 of Schedule 1 to the TAA 1953 provides that the base penalty is 50% of the shortfall amount or part of the amount that resulted from recklessness by the taxpayer or their agent as to the operation of a taxation law.
The meaning of recklessness was described by the Tribunal in HFTS and Commissioner of Taxation [2019] AATA 5164 at [114]:
[144]The “recklessness” criterion referred to in TAA Schedule s 284-90(1) has been regarded as involving “gross carelessness” to the extent of indifference to, or actual disregard, of a risk that would be foreseeable to a reasonable person. This is the view that has been consistently taken of the concept in the taxation context:- see Federal Commissioner of Taxation v R & D Holdings Pty Ltd [2007] FCAFC 107; (2007) 160 FCR 248 at [70]. In Hart v FC of T [2003] FCAFC 105; (2003) 131 FCR 203 Hill and Hely JJ said this about the concept:
[43] Recklessness is a concept well known to the law, particularly in the fields of tort and criminal law. In those fields, recklessness will usually be found to have been established if the person’s conduct shows disregard of, or indifference to, consequences foreseeable by a reasonable person. In some contexts a subjective test is applied, but in others the test is objective. In BRK (Bris) Pty Ltd v Commissioner of Taxation (2001) ATC 4111 at 4129 Cooper J made the following observations in relation to recklessness in the context of s226H; Recklessness in this context means to include in a tax statement material upon which the Act or regulations are to operate, knowing that there is a real, as opposed to a fanciful risk, that the material may be incorrect, or be grossly indifferent as to whether or not the material is true and correct, and that a reasonable person in the position of the statement-maker would see there was a real risk that the Act and regulations may not operate correctly to lead to the assessment of the proper tax payable because of the content of the tax statement. So understood, the proscribed conduct is more than mere negligence and must amount to gross carelessness.
In this case, for the Applicant to be able to discharge his onus to prove that both he and his tax agent were not reckless he must do so on the balance of probabilities.[60]
[60] Commissioner of Taxation v White (No 2) [2010] FCA 942 at [18].
Section 284-220(1)(c) of Schedule 1 to the TAA 1953 provides that the percentage of the base penalty amount automatically increases by 20% where a penalty has been imposed in relation to prior income years on the basis of recklessness. As such, in the Applicant’s case the percentage of the base penalty amount automatically increased for the 2009 to 2016 income years as a penalty was imposed in the 2008 income year.
Section 298-20 of Schedule 1 to the TAA 1953 provides that the Commissioner, and therefore the Tribunal, has the power to remit all or a part of the penalty. Although the power to remit all or part of the penalty is unfettered, the discretion must be exercised for a proper purpose and in accordance with the objects of the TAA 1953 and according to law.[61]
[61] Sanctuary Lakes v Federal Commissioner of Taxation (2013) 212 FCR 483 at 521.
Section 280-100 of Schedule 1 to the TAA 1953 provides that a taxpayer is liable to pay shortfall interest charge on an additional amount of income tax that they are liable to pay as a consequence of the Respondent amending their assessment for an income year.
Section 280-160(1) of Schedule 1 to the TAA 1953 provides that the Commissioner, and therefore the Tribunal, has the power to remit all or part of an amount of shortfall interest charge where it is fair and reasonable to do so. A taxpayer can only object against a remission decision regarding shortfall interest charge if the amount of the charge that was not remitted is more than 20% of the additional amount.[62] In this matter the shortfall interest charge imposed in relation to the 2013 to 2016 income tax years was not more than 20% of the additional amount of income tax and as such the Applicant has no objection right in respect of the shortfall interest charge for those years.
[62] Section 280-170 of Schedule 1 to the TAA 1953.
ISSUES
The issues before the Tribunal are whether the Applicant has discharged his onus to prove:
(a)the opinion formed in relation to evasion should not have been formed for the years ended 30 June 2008 to 30 June 2014;
(b)the amended assessment for each of the years in dispute are excessive or otherwise incorrect and what the correct amount of the Applicants taxable income for the years in dispute is;
(c)that he should not be liable for administrative penalties imposed under section 284-75(3) of Schedule 1 to the TAA 1953 for the years in dispute, including the increased base penalty amount imposed under section 284-220(1) of Schedule 1 to the TAA 1953;
(d)that should he be liable for administrative penalties that the discretion to remit under section 298-20(1) of Schedule 1 to the TAA 1953 ought to be exercised in his favour; and
(e)that should he be liable for shortfall interest charge, that the discretion to remit the shortfall interest charge under section 280-160 of Schedule 1 to the TAA 1953 for the years in dispute ought to be exercised in his favour.
EVIDENCE AND CONTENTIONS
The Applicant contended that the Respondent’s Objection decision was incorrect and unsubstantiated based on the arguments stated in his objection submissions. The Applicant contended that if there is any unreported income it would be in the vicinity of $80,000.[63]
[63] Exhibit List, Tab 38, page 3314, Applicant’s Amended Statement of Issues, Facts and Contentions.
The Applicant’s Representatives took an initial high level approach to dealing with the amended assessments and made the following overarching submissions in the Amended Statement of Issues, Facts and Contentions dated 26 June 2020:[64]
[64] Exhibit List, Tab 38, pages 3314-3315, Applicant’s Amended Statement of Issues, Facts and Contentions. Note these contentions were repeated at Hearing.
……..
2. A majority of the cash and cheque deposits in the taxpayer’s personal account had already been declared as income in the taxpayer’s company/trust tax return.
3. There is no legal basis to justify the treatment of cash deposits, interbank transfers and cheque deposits in the taxpayer’s personal income as unreported income as these amounts were reported in the taxpayer’s company/trust tax return.
4. In the event that the taxpayer did have an unreported income of $820,083, the net asset value of the taxpayer would have significantly increased however the actual facts prove the opposite. Attached asset betterment schedule (AppU12) and Current Bank account balance (AppU13) of the taxpayer and his wife to illustrate the taxpayer’s financial position.
5. A schedule of the taxpayer’s and his spouse’s taxable income for the relevant period of audit has been provided to indicate the taxpayer’s ability to have these cash transactions. The total taxable income and tax-free capital gain is $1,633, 756 see (App U14) attached.
6. The ATO officer, [Ms. M], has earlier agreed to a partial substantiation of fuel and telephone receipts due to its low value (App.U1). However under T2[52] of Notice of Decision, the ATO has rejected our objection due to lack of probative evidence.
7. Notwithstanding Para 6 above, the burden of proof on substantiation of the business expenses is on the company/trust and not the individual taxpayer. The taxpayer has not claimed the business expenses, which have been reimbursed by the company/trust, as a tax deduction in his personal tax return and therefore the substantiation rules do not apply to him. The ATO has incorrectly extended the audit of the company/trust expenses to the individual taxpayer.
8. We have prepared a reconciliation of the Business Trading Income against Bank Deposits to the Business account (App W1). For the financial years 2008 to 2016, there was a surplus of $1,297,607 in the Trading Income against Bank Deposits.
9. From the Taxable Income Calculation spreadsheet provided by the ATO, we have updated the spreadsheet with our proposed adjustments on this appeal. (App U15)
The Applicant further provided submissions in relation to those deposits of which he asserted he could identify and of which were not income in nature, and in relation to reductions he contended should apply to reduce his revised taxable income.[65]
[65] Exhibit List, Tab 38, pages 3315-3321, Applicant’s Amended Statement of Issues, Facts and Contentions.
The Respondent’s overarching contentions, set out in the Outline of Submissions are as follows:[66]
[66] Respondent’s Outline of Submission, pages 13-15, paragraphs 71-74.
70.In very general terms, to discharge his onus of proving his taxable income, the Applicant must ascertain the amount of assessable income less any substantiated allowable deductions for each of the Income Years.
71.On the evidence before the Tribunal, the Commissioner submits that the Tribunal could not be satisfied that the Applicant has properly demonstrated this task of determining his taxable income for each of the Income Years has now been appropriately completed. That is, the Applicant:
71.1. has not discharged his onus to demonstrate that the amended default assessments are excessive; and
71.2. has not properly demonstrated, with the level of evidentiary satisfaction, what his taxable income should be.
72. More specifically, the Applicant has failed to demonstrate the default assessments are excessive as:
72.1. the vast majority of deposits made into the Applicant’s bank accounts, which were the basis for the increase in the Applicant’s taxable income on objection and which have categorised by the Applicant as “Pooled Deposits”, have no supporting corroborative evidence. There is no cogent evidence to determine the source or character of this income….;
72.2. the assumption that the Applicant deposited funds declared by other entities belies the fact that the source of these funds are unknown. The inference sought by the Applicant is not supported by cogent evidence, and should not be accepted by the Tribunal;
72.3. the basis of the Applicant’s Asset Betterment Spreadsheet omits material assets and does not reflect an accurate statement of the Applicant’s asset position…..;
72.4. the Commissioner allowed an amount of deposits and flows of cash between entities as not being on income account during the Objection Process. The deposits said to be asserted reimbursements have largely been considered. The Applicant has not demonstrated why further reductions should occur…..;
72.5. the deposits said to have been made in connection with friends as private payments or loans have sought to be evidenced by remarkably similar letters that: provide no detail of the transactions or their terms, are not supported by cogent evidence and do not afford the Tribunal comfort in being satisfied as to the character of the deposit….; and
72.6. the “Pooled Deposits” in respect of the 2014 to 2016 Income Years are asserted to have occurred by the redepositing of previously withdrawn cash and payment of wages. Putting to one side the fact that there is scant evidence of the actual payment of wages, nowhere has the Applicant sought to attribute any of these withdrawals to gambling activities. Many of these identified withdrawals occurred from ATMs at casinos, where the Applicant suffered significant losses. This supports the conclusion that is it unlikely that such funds were redeposited as asserted, and that the deposits instead originated from other unexplained sources. Further, the Applicant’s failure to attribute any of these withdrawals to gambling is concerning, and illustrates that the Applicant has not been candid with the Tribunal….
73. Further, the Applicant has not discharged his onus to show what his taxable income should be as:
73.1. the vast majority of the deposits that form the amended default assessments have no supporting cogent evidence. These “Pooled Deposits” have been considered as income in the amended default assessments. The Applicant has not shown why that is wrong or proved the nature and character of such deposits. Accordingly, the Applicant cannot demonstrate what the correct amount of his taxable income should be;
73.2. the Applicant has not revealed relevant evidence of related entities to which he has an interest, in these proceedings. The Applicant has banked various deposits from, even now, unknown sources, into bank accounts over which he has some ownership and control. It is unknown if the entirety of these transactions has been considered. Thus, the Applicant has not identified sources of income, or properly explained his activities or sources and extent of his assets. The Tribunal could not be satisfied that all potential income has been considered;
73.3. it remains unclear how the Applicant financed his lifestyle and related investments over the Income Years, in light of: the level of gaming undertaken, the fact that each related entity (in their financial statements, which are in evidence) is shown to have received a loan from the Applicant, and the extent of known acquisitions of real property that occurred. The Applicant’s failure to explain how he financed such activities and loans indicates that the Applicant has not declared income from all sources; and
73.4. the Applicant has not put before the Tribunal any cogent evidence supporting the income that has been declared, and what deductions have been claimed. The Tribunal could not be satisfied that what has been declared is correct.
74. Consequently, it follows that the Applicant has failed to discharge his onus to show what the correct amount of his taxable income should be in respect of each of the Income Years.

In opening submissions at Hearing the Applicant’s Representatives submitted that for a “one man band” business everything cannot be put into the book or be explained dollar for dollar, as long as they can provide the bigger picture of where the sources of the money is from. Further that if the Applicant did avoid some money his bank account would go up or his asset value would go up, but that is not the case, instead they have been maintained at the same level. It was submitted that the Applicant repeatedly put money in and out of the bank, using the “reasonable man concept” because he is short of money and has a cash flow issue, “if someone is going to avoid a lot of cash, he wouldn’t deposit the money today and take it out and deposit again and take it out.”[67]
[67] Transcript of Proceedings, pages 11-12.
In Summary, the Applicant sought to provide in his Amended Statement of Facts Issues and Contentions and the accompanying attachments and in evidence and submissions at Hearing, explanations as to:[68]
·what some of the identified cheques or other deposits relate to, or otherwise referred to these deposits as Pooled Deposits;
·why other outgoings from his account should be used to offset deposits by virtue of being reimbursement for business expenses he had previously paid personally;
·why repayment of director loans and wages paid to his wife should be offset against cash deposits which have been labelled as Pooled Deposits; and
·why some withdrawals from one account and then deposits to other accounts on the same day should be seen as transfers and not income.
[68] Exhibit List, Tab 38, pages 3314-3321, Applicant’s Amended Statement of Issues, Facts and Contentions.
In relation to the Pooled Deposits the Applicant provided no supporting evidence in relation to deposits in the 2008-2013 years.[69] In relation to the 2014, 2015 and 2016 years the Applicant provided an explanation that Pooled Deposits were “Cash from wages and withdrawals from personal bank accounts. Some cash were spent. This Cash deposit came from balance of unspent cash.”[70] The Applicant provided a Running Cash Balance outlining all cash deposits and cash withdrawals for the 2014-2016 years which show that at the end of each of these years there is a surplus in cash withdrawn to that which was deposited.[71] The Applicant provided that:[72]
The Running Cash Balance statement shows a positive balance at the end of the year which means that there is sufficient cash from earlier withdrawals to cover for all the cash deposits during the year, i.e. there is no external net cash flow in.
Assessing the taxpayer just based on cash deposits without taking account the source of the money is incorrect.
The Running Cash Balance is self-explanatory. As it is cash, it is not necessary to have a one to one match between withdrawals and deposits.
[69]    Exhibit List Tab 1.27, T27, pages 176-177; Tab 1.28, T28, page, 201; Tab 1.29, T29, page 215; Tab 1.30, T 130, pages 233-234; Tab 1.31, T31, pages 248-251; Tab 1.32, T32, pages 268-269, Unexplained deposits, cash deposits, rent and transfers from related entities for income tax years ended 30 June 2008 to 30 June 2013.
[70]    Exhibit List, Tab 1.33, T33, pages 276-279; Tab 1.34, T34, pages. 311-315 and Tab 1.35, T35, pages 354-357, Unexplained deposits, cash deposits, rent and transfers from related entities for income tax years ended 30 June 2014 to 30 June 2016.
[71]    Exhibit List, Tab 1.33, pages 280-281 (2014) (T33);. Tab 1.34, pages 316-320 (2015) (T34); and Tab 1.35, pages 358-361 (2016) (T35),
[72]    Exhibit List, Tab 38, page 3321, Applicant’s Amended Statement of Issues, Facts and Contentions.
Consequently, the Applicant contended that for the 2014 to 2016 years any surplus cash withdrawals (after his other adjustments were applied) should be offset to decrease the increase in taxable income that resulted at objection to zero.[73]
[73] Exhibit List, Tab 38, page 3321, Applicant’s Amended Statement of Issues, Facts and Contentions and Tab 36.40, U15, page 3294, Taxable Income Calculation.
The Applicant also provided a comparison of trading income vs business bank deposits for SE Holdings Pty Ltd and the Sam Kong Trust for the years in dispute and identified that their trading income was higher than the actual deposits into their relative bank accounts. The total surplus for the years in dispute is $1,297,607.[74] The Applicant contended that:[75]
….. the business has declared more income than money coming into the bank, so obviously the extra income has to come from somewhere else. We contend that it was from the Unreported Income in [the Applicant’s] personal bank account, i.e., the monies were deposited into [the Applicant’s] personal bank account and he has applied the monies to business purchases, and these transactions have been accounted for in the assessable income of the business when preparing the financial statements….
[74] Exhibit List, Tab 38, pages 3322-3324, Applicant’s Amended Statement of Issues, Facts and Contentions.
[75] Exhibit List, Tab 38, page 3322, Applicant’s Amended Statement of Issues, Facts and Contentions.
In order to support his contentions in relation to the deposits into his accounts that did not form part of the Pool Deposits, the Applicant provided a number of third party letters and called Mr Ooi, Mr Chiu and Ms Huang to give evidence at Hearing.
Mr Ooi’s statement of 10 October 2017 provided that on 7 August 2009, 21 February 2011 and 17 September 2013 the amounts of $50,000, $10,000 and $20,000 respectively were lent to the Applicant with $50,000 being repaid on 13 December 2013.[76]
[76] Exhibit List, Tab 36.8, U4.1.1, page 3257, Letter from Eric and Christine Ooi.
Mr Ooi’s statement of 13 January 2020 provided clarification on the spelling of his name and that he was known as both Simon and Eric.[77]
[77] Exhibit List, Tab 36.7, U4.1, page 3256, Letter from Simon Ooi.
At Hearing Mr Ooi told the Tribunal that he had been close friends with the Applicant for around 30 years and in relation to references to Simon Ooi and the incorrect spelling of his name said: “Well in actual fact many of the Chinese people here their skills of writing are no good and also they were – they did not grow up here.”[78] Mr Ooi told the Tribunal that the Applicant had helped him write the second letter however that the first letter was written for him by an ex-staff member or ex-employee of his.[79] Mr Ooi was unable to recall how or exactly when the amount of $30,000 had been repaid by the Applicant.[80]
[78]    Transcript of Proceedings, page 227.
[79]    Transcript of Proceedings, pages 225-227.
[80]    Transcript of Proceedings, pages 224-225.
Mr Chiu’s statement provided that he had lent the Applicant $20,000 on 12 March 2015 as a personal loan and that the money was repaid in monthly instalments of $500.[81]
[81] Exhibit List, Tab 1.34, T34, page 336, Letter from Mr Chiu.
At Hearing Mr Chiu told the Tribunal that he had been close friends with the Applicant for over 20 years. Mr Chiu said that a friend wrote the letter for him. When asked if he checked the date and amount set out in his statement when he signed the letter he said he did not check because the money had been saved up by him and it was cash. Mr Chiu said there was no loan agreement and that the repayments were made by the Applicant in cash and that he had kept no records of these arrangements.[82]
[82] Transcript of Proceedings, pages 233-235.
The Applicant also provided witness statements from Ms Huang dated 19 October 2017[83] and 1 August 2019.[84]
[83] Exhibit List, Tab 1.27, T27, page 188, Letter from Ms Huang.
[84] Exhibit List, Tab 36.2, U2.1, page 3251, Letter from Ms Huang.
In the letter dated 19 October 2017, Ms Huang provided that she had given the Applicant $20,000 on 19 October 2007 as a deposit and that that money was used for her homestay with the Applicant and his family during the period of 2 years from October 2007 to September 2009.[85]
[85] Exhibit List Tab 1.27, T27, page 188, Letter from Ms Huang.
In the letter dated 1 August 2019, Ms Huang provided the same information and in addition provided clarity in relation to her name.[86]
[86] Exhibit List, Tab 36.2, U2.1, page 3251, Letter from Ms Huang.
At Hearing, Ms Huang told the Tribunal she was the Applicant’s niece and that she had written the two letters with the assistance of a friend.[87]
[87] Transcript of Proceedings, pages 228-232.
The Applicant provided a letter from Baojing Mai dated 18 October 2017 that provided that they had lent the Applicant $22,000 on 29 October 2010 and that the money was repaid on a monthly basis over a period of 3 years.[88]
[88] Exhibit List, Tab 1.30, T30, page 238, Letter from Baojing Mai.
The Applicant further provided a letter from Mr Johnny Giang dated 18 October 2017 that provided that he borrowed $3,000 on 24 July 2009 from the Applicant and repaid that loan by making two separate payments.[89]
[89] Exhibit List, Tab 1.29, T29 page 219, Letter from Mr Jonny Giang.
There were similar letters provided by David Yuen dated 17 October 2017,[90] Mr Paul Su dated 17 October 2017[91]
[90] Exhibit List, Tab 1.27, T27, page 179, Letter from Mr David Yuen.
[91] Exhibit List, Tab 1.27, T27, page 182, Letter from Mr Paul Su.
On cross-examination the Applicant was asked whether he or his accountants wrote the letters for Mr Ooi, Mr Chui, Ms Huang, Mr Yuen, Baojing Mai, he said that his accountants did not write those letters and neither did he. The Applicant said that he had told them to write out the facts of the money they lent him and that they wrote them or had someone write them for them.[92] When it was put to him that the letters of Ms Huang, Mr Ooi, Baojing Mai and Mr Chiu use similar font and form, he agreed.[93] When put to the Applicant that those letters were written for these people he said: “Well, definitely these letters were not written by me. My English is no good however I did tell them what is the purpose of the letter and I just asked them to write out the facts. While yes, it is true they may look alike.”[94]
[92]    Transcript of Proceedings, pages 184-191.
[93]    Transcript of Proceedings, page 187.
[94]    Transcript of Proceedings, page 188.
The Applicant contended that if there was any unreported income it is in the vicinity of $80,000. The Applicant provided a table titled Taxable Income Calculation setting out the decision it seeks from the Tribunal in relation to what the Applicant’s assessments should have been for the years in dispute.[95] The Applicant did not provide the Tribunal with any details of what the assessable income, or claimed deductions related to. Nor did the Applicant provide any explanation for the amounts that he was conceding was income to the extent of $80,000.
[95] Exhibit List, Tab U15, page 3294,Taxable Income Calculation.
The Applicant contended that if he had substantial unreported income then this should be reflected by an increase in his assets or bank balance, however in this case he says they remained constant.[96] The Applicant sought to rely on the Asset Betterment Review from 2008 to 2016 he provided[97] and his current bank account balances as at 19 March 2020.[98]
[96]    Exhibit List, Tab 38, page 3315, Applicant’s Amended Statement of Issues, Facts and Contentions.
[97]    Exhibit List, Tab U12, page 3291, Asset Betterment Review from 2008 to 2016.
[98]    Exhibit List, Tab, U13, page 3292, Current bank account balance as at 19 March 2020.
The Applicant was cross-examined in relation to the details provided on the Asset Betterment Review.[99] The Applicant conceded that the Asset Betterment Review he provided was incomplete.[100] The evidence revealed that the Asset Betterment Review did not include all real property owned by the Applicant, contained assets that relate to his wife, did not include value of shares held by the Applicant, did not include details of beneficiary loans or director loans owed to the Applicant, did not include details of proceeds of sales of any real property made by the Applicant.
[99] Transcript of Proceedings, pages 151-179.
[100] Transcript of Proceedings, page 179.
Evidence in relation to transactions that relate to assets not included by the Applicant in the Asset Betterment Review reveal large amounts of funds being provided by him and his wife to the Kong Family Trust which were not properly explained by the Applicant.[101] There were also a number of large deposits across the 2008 to 2014 income years that went into the Applicant’s bank account of which the source is unclear, as is what the funds were subsequently expended on.[102] At Hearing the Applicant gave evidence that funds being transferred from a particular account was his NAB account,[103] however there is no evidence before the Tribunal in relation to that account. Further the Applicant gave evidence that the transfers were likely to have been related to activities where he “sold something and then the funds come in and then we need to – bought something and then the funds go out.”[104] The Applicant was unable to provide details of what was sold and bought. The Applicant further gave evidence in relation to an overseas bank account held by his wife.[105]
[101] Exhibit List, Tab 4.26, ST63, page 1937, Financial Statements for the Kong Family Trust for the year ended 30 June 2010.
[102] As provided in a summary provided in Annexure C to the Respondent’s Outline of Submissions, pages 70-73.
[103] Transcript of Proceedings, page 195.
[104] Transcript of Proceedings pages 196-198.
[105] Transcript of Proceedings, pages 200- 201.
In closing submissions, the Applicant’s Representatives submitted that the Asset Betterment Review was “only a simple version to illustrate the Applicant’s net asset value of his property. It is prepared in good intention to assist the tax office investigation of the taxpayer’s financial background”.[106]
[106] Transcript of Proceedings, pages 250-251.
On cross-examination the Applicant was taken to the Running Cash Balance sheets and bank statements for Sunshine Bros as Trustee for the Sam Kong Trust and other bank statements provided by him in relation to the 2013 to 2016 income tax years and was taken to descriptions of withdrawals that refer to Treasury ATM, Jupiters ATM and Brisbane Square ATM. The Applicant gave evidence that the withdrawals represented withdrawals made by him on the nominated dates at the nominated times at ATM machines either at the Treasury or Jupiters Casinos or at Brisbane Square (being located at the front of the Treasury Casino) and acknowledged that the Running Cash Balance Sheets do not always accurately reflect when cash withdrawals are happening at these locations.[107]
[107] Transcript of Proceedings, pages 77-102.
On cross-examination the Applicant told the Tribunal that it was correct to say that when he was at Treasury Casino or Jupiters Casino he did some gambling.[108]
[108] Transcript of Proceedings, page 94.
When taken to examples within the Running Cash Balance sheet the Applicant agreed that there is no way to tell whether withdrawals were spent or not or where the amount of the deposits came from.[109] The Tribunal notes that the cash deposits entered into the Running Cash Balance sheets accord with the amounts previously described as Pooled Deposits.
[109] Transcript of Proceedings, pages 94-95.
On cross-examination the Applicant was taken to Casino Records in relation to both his and his wife’s player history at Treasury Casino & Hotel and Jupiters Hotel & Casino for the period 1 July 2008 to 21 June 2016.[110] While being taken through the Casino Records as they relate to him, the Applicant confirmed that the records outlined his name, address and patron number and also showed times in and out when his players card was used on the slot machines or on the tables and also showed total in, total out and Win/Loss.[111] The Applicant said that the records show that his card was used but he could not say 100 percent that it was or was not him using the card or that the records were or were not correct.[112]
[110] Transcript of Proceedings, pages 104-139.
[111] Transcript of Proceedings, pages 102-112.
[112] Transcript of Proceedings, pages 111, 114-115.
The Applicant was taken to examples in the Casino Records showing times and dates where it is recorded that he was at the Casino and ‘amounts in’ that also accorded with the time that funds were withdrawn from his bank account that also appear on the Running Cash Balance Sheet.[113]
[113] Transcript of Proceedings, pages, 112-120.
The Applicant questioned the accuracy of the Casino Records stating that if he has $1,000 to put on a table, that is a $1,000 buy in, he gives them $1,000 cash and then if he won and he puts some in his pocket and $1,000 still remains on the table the casino would rate it as $1,000 because they do not know how much he has in his pocket and they are only rating him on the money on the table.[114]
[114] Transcript of Proceedings, pages 117-119.
When taken to the Casino Records that record him making a loss of $21,112.01 on gaming machines for the period 2014 to 2016 and asked what he says in that regard, the Applicant said that he could not say no but could not say yes. The Applicant confirmed that he does not have a document that says otherwise.[115]
[115] Transcript of Proceedings, pages 122-123.
On cross-examination it was put to the Applicant that he incurred losses of $433,608 in respect of Treasury tables for the period 2014 to 2016 according to the Casino Records, he said “…definitely say no. Because I know my change.”[116]
[116] Transcript of Proceedings, pages 125-126.
The Applicant gave evidence that in the same sense he could not say the Casino Records, as they relate to the Jupiters Casino were correct or incorrect.[117]
[117] Transcript of Proceedings, pages 127-128.
The Applicant gave evidence that his wife also gambled at the casino, he stated that they go together.[118]
[118] Transcript of Proceedings, page 129.
On cross-examination, a document titled ‘Summary of withdrawals from Running Cash Balances vs net losses per Casino Gaming Records’ that related to the 2014 to 2016 income tax years was put to the Applicant.[119] The summary showed that cash withdrawals as shown on the Running Cash Balance sheets for that period was $545,900 and that the total gaming losses for that period for the Applicant and his wife according to the Casino Records was $547,361.11. When asked if he would agree that looking at the Casino Records and then comparing them to his withdrawals that the amounts are almost equal, the Applicant said: “I’m not sure the amount withdraw is equal to that or not, but once it calculated out, it should be – should be right there.”[120]
[119] Exhibit List, Tab 41, Summary of withdrawals from Running Cash Balances vs net losses per Casino Gaming Records.
[120] Transcript of Proceedings, pages, 132-137.
When put to him that he and his wife incurred a total amount of gaming losses over the 2014 to 2016 income years of $547,361.11, the Applicant said he did not think he lost that much. The Applicant told the Tribunal that he likes to go to the casino however he is not a big gambler, he buys in with small amounts.[121]
[121] Transcript of Proceedings, page 138.
When put to him if the Casino Records are correct would he agree that the funds he withdrew could not then be redeposited, the Applicant said if on the night he wins, the money will go into his bank again.[122] The Applicant disagreed with the Casino Records, however agreed that he had no records to say otherwise and that if the records were correct and he lost that amount of money he could not have redeposited the amounts withdrawn.[123]
[122] Transcript of Proceedings, page 138.
[123] Transcript of Proceedings, page139.
The Applicant did not make any submissions directly in relation to the opinion of evasion reached by the Commissioner allowing the 2008-2014 income tax returns to be amended. The Applicant maintained that all (other than approximately $80,000) of the identified transactions could be explained.

The Respondent contended that the Applicant had not discharged his onus to prove that the opinion of evasion should not have been made for a number of reasons including:[124]
·The Applicant was director of at least two companies, a known beneficiary in respect of at least three trusts, has operated a business that consistently had a gross turnover exceeding $1.5 million, while engaging in various real property investments through the years in dispute. This indicates that the Applicant has a level of business sophistication and it would be expected that a person of the Applicant’s experience and business acumen would have produced further business records.
·It would have been expected that such a person would have had some record of funds received from his trading entitles, or had some document, notation or reconciliation of the various large deposits made into his bank account which would explain the sources of the deposits.
·The Applicant’s failure to explain the source of “Pooled Deposits” is concerning.
·In light of the net losses incurred in the Applicant’s and his wife’s names, it is not possible to accept the Applicant’s self-serving statement that, merely because he withdraws funds, it must necessarily be the same funds that were subsequently deposited.
·No credible explanation was given as to how, on their declared taxable income, the Applicant and his wife were able to fund such gaming activities and acquire significant assets in their names and in related investment trusts.
·The Applicant proffered an Asset Betterment Review which is clearly incomplete and inaccurate, and the extent of his interests in related entitles and bank accounts remain opaque.
[124] Respondents Closing Submissions, pages 48-50.
The Applicant’s Representatives at Hearing contended that the administrative penalty and shortfall interest charge should not be imposed, as by their calculation the new tax shortfall is only $77,439.00 and cannot be regarded as a blatant, abusive, intentional disregard of the taxation law.[125] Further, the Applicant’s Representatives contended that the penalties should be waived as the matter could have been easily resolved at the beginning and as a result of the Respondent disallowing the objection the Applicant has suffered for over two years, stress and loss of income and has incurred a tremendous sum of money for the Tribunal process.[126]
[125] Transcript of Proceedings, page 257.
[126] Transcript of Proceedings, pages 257-258.
In the Applicant’s Amended Statement dated 26 June 2020, he provided that:[127]
I believe there may be some small unreported income for the period Year 2008 to Year 2016 due to carelessness, mistakes or poor accounting documentation, but there is no recklessness to defraud the taxation system, therefore I request that there is no imposition of any administrative penalty.
[127] Exhibit List, Tab 6, pages 2816-2817, Amended Witness Statement of Sam Kong.
The Respondent contended that the administrative penalties for having shortfall amounts were correctly imposed.[128] At Hearing the Respondent contended that in relation to the imposition administrative penalties on the basis of recklessness that:[129]
The point to be made, in terms of penalty, is that [the Applicant] in his evidence noted that he was aware that he was required to keep records. He was aware that the business was required to keep records for five years. On his own case, he consistently comingled funds between himself and his business. He did so with inadequate records. This series of moneys that has been categorised as [pooled] deposits even now, and certainly at the time of making these assessments of this income tax return, we don’t see any source documents. We don’t see the basis upon which these funds have come to be what they are.
Now, a reasonable person in the circumstances of [the Applicant], and we understand from his evidence that he has been in business for some years, he operates even though as a one-man band, a business that has over $1 million in turnover. We see him undertaking property investments via property investment trusts. It indicates over a number of years he has a level of business acumen.
The fact that he understands he’s supposed to keep records, and didn’t, indicates - and given the amounts we are talking, large deposits that could come from a number of sources to which there is simply no records, supports the basis upon which the commissioner came to that decision.
[128] Respondent’s Closing Submission – pages 50, paragraphs 341-345.
[129] Transcript of Proceedings, page 279.
In relation to the remission of penalties, the Respondent contended that there is scant evidence before the Tribunal to suggest that the Applicant’s circumstances warrant the remission of penalty.[130]
[130] Respondent’s Closing Submissions, pages 53-54.
In relation to the remission of the shortfall interest charge, the Respondent contended that the finding of evasion and the imposition of penalties provide statutory context relevant to the Applicant and indicate that it would not be appropriate to remit the shortfall interest charge for the income years ended 30 June 2008 to 30 June 2012.[131]
[131] Respondent’s Closing Submissions, page 54.
CONSIDERATION
In considering the Applicant’s Amended Statement of Facts, Issues and Contentions, the Taxable Income Calculations he asked the Tribunal to accept and adopt as his true tax position for the years in dispute, in light of the documentary evidence before it, the submissions made and evidence given at Hearing, the Tribunal finds itself in a situation where it remains in the dark as to what Applicant’s true taxation position was for the years in dispute.
In effect, the Applicant ran his case by contending that he could explain deposits that did not fall into the category of Pooled Deposits, being business expenses for which he was reimbursed, repayments of directors loans and wages to his wife that were not taken into account and that all of these should apply to further decrease the increase in taxable income that resulted from the Objection decision. Where there was any excess amounts remaining in the 2014, 2015 or 2016 year, the Applicant contended they should be reduced to zero by applying the positive balance of the Running Cash Balance sheets. For the 2008 to 2013 years where any excess amounts of the increase to his assessable income remained after the Applicant’s proposed reductions were made, it is those amounts that the he contended should have been included in his assessable income. Interestingly, where the claimed additional reductions were greater than the Objection decision increase to assessable income the Applicant sought only to reduce the increased amount to zero, not to change the deductions or other items he initially provided as part of his income tax return.
The Applicant did not provide any details in relation to what each of the amounts that made up the $77,439.00 of which he referred to as ‘Revised ATO increase on AAT Appeal’ were. Rather the Applicant’s approach was one of offsetting rather than substantiating.
The Tribunal notes, that Deputy President Hanger QC, in Hourigan and Commissioner of Taxation [2018] AATA 3369 at [11]-[13] noted that an attempt to ‘chip away’ at amended default assessments will not discharge the Applicant’s onus:
[11] … The onus is not discharged by identifying a mere error by the Commissioner, by ‘chipping away’ at an asset betterment assessment or by showing only that some moneys treated as income are not in fact income.
[12]Even when the Applicant cannot discharge the onus to disprove the existence of tax fraud or evasion, the Tribunal will still consider whether the assessment made is excessive: Bai v Commissioner of Taxation [2015] FCA 973 at [34] and [35]. I do not understand the decision in Binetter or Dalco to be at odds with this proposition. The Applicant has not proven, on the balance of probabilities, his actual income in any of the subject years to my satisfaction but the Respondent has identified specific deposits which make up the great bulk of the asset betterment statements. I proceed on the basis that the asset betterment statements are correct and the Applicant has the onus of establishing they are wrong. To do that, he must at least deal with the items identified by the Respondent.
[13]Where, as in this case, an assessment has been made on the basis of an asset betterment method of calculation, and the Commissioner has identified specific deposits into a taxpayers account which it has treated as income, the taxpayer must prove, on the balance of probabilities, that it is not income and that can best be achieved by demonstrating its source. Such an exercise will ordinarily entail the “identification of sources of income, explanation of a taxpayer’s activities and an explanation of the source or sources of a taxpayer’s assets.
The Applicant did not provide any details in relation to the other income and deductions of which he had previously provided in his income tax returns for the years in dispute, rather he took them as being accepted. This is despite both the Tribunal and Respondent putting the Applicant and his Representatives on notice that he was required in this instance to establish the full picture of what his assessable income was for the years in question.
The Applicant’s Representatives sought to rely on the case of Raschta Coatings Pty Ltd and Federal Commissioner of Taxation [2013] AATA 34 on the basis that they say it was found that the taxpayer was not obliged to demonstrate to the very last dollar the precise way in which the default assessment were excessive. It was further submitted that:[132]
So in this case, … I think that is a very good support for my statement of contention, facts and issues because we have supplied numerous evidence, tables, taxable income, all this, I don’t think most people will go into that extreme effort to prepare all this documentation. ….
[132] Transcript of Proceedings, pages 256-257.
The Tribunal considers the Applicant’s Representatives contentions in this regard to be misinformed on two points. Firstly, it is the taxpayer’s, and as such in this case the Applicant’s onus to prove what he says his taxable income for the years in dispute was and to provide corroborating evidence. As such the provision of information is necessary to advance his case. Secondly, in Raschta the taxpayer was able to provide ledgers from start to finish, bank statements with notations that set out both sides of the transactions and loan documents or relevant supporting information. Consequently, Deputy President Hack SC was able to be satisfied what the source of the deposits in question was. Due to the lack of evidentiary documents and records, and on the Applicant’s own admission, incomplete or inaccurate records before this Tribunal, that is simply not the case in this matter. Each case turns on their own facts.
The Tribunal for the reasons outlined below was not satisfied with the Applicant’s explanation in relation to Pooled Deposits and why they should not be considered income. As such the Tribunal could not be satisfied of what the Applicant’s true taxable income was for the years in dispute. As said by Latham J in Danmark Pty Ltd v FCT; Forestwood Pty Ltd (1944) 7 ATD 33 at 337; (1944) AITR 517 at 586:
…. upon an appeal the onus rests upon the taxpayer of establishing the facts upon which he relies and if it is necessary for him to establish a particular fact in order to displace the assessment he must satisfy the Court with respect of that fact.
The Tribunal finds that the Applicant did not discharge his onus to prove that if the default amended assessments for the years in dispute were excessive or otherwise incorrect what the assessments should have been. The Applicant has not, to the satisfaction of the Tribunal established what his assessments should have been for the years in dispute. In accordance with the case authority set out above, as the amended assessments for the years in dispute were made pursuant to section 167 of ITAA 1936 the Applicant needed not to just point to an error in the methodology applied by the Respondent in making the assessments, rather he needed to demonstrate what the actual taxable income amounts should be for each of the years in dispute. This required the Applicant to demonstrate what his assessable income and deductions were in order to establish his taxable income, consistent with the requirements of section 4-15 of the ITAA 1997 and section 6-1 of the ITAA 1936, not just to chip away at the amended assessment as has been the approach taken by the Applicant in this matter.
On this basis, the Tribunal does not consider it to be necessary or expeditious to step one by one through each of the identified deposits, expenses or other items the Applicant was seeking to have offset against the increase in assessable income raised by the Objection decision. The Tribunal considered each of these items and the submissions put forward by the Applicant and considers that as a whole there was a lack of cogent corroborating evidence in relation to the Applicant’s contentions. The contention that for a number of the years the retention period for documents had passed did not stack up, in part, due to the fact that documents relevant to the proceedings, and within the retention period were either not retained, or if they were retained, they were not provided to the Tribunal.
Central to this matter are the deposits into the Applicant’s bank accounts during the years in dispute. The majority of the deposits are cash deposits, which without corresponding corroborating evidence in relation to the source and purpose of those deposits, make it difficult for the Applicant to establish that they are not income.
For each of the years in dispute, an overall surplus of funds from deposits was identified. This was evidenced in Attachment A to the Respondent’s Outline of Submissions which provides an analysis of the calculation of assessable income from the Objection decision for each year in dispute.[133]
[133] Respondent’s Closing Submission, Attachment A, pages 56-68.
The spreadsheets provided by the Applicant at objection in an attempt to address the issues raised at audit, provided, until the 2014 to 2016 income years no explanation as to the source of deposits (being cash deposits). For the 2014 to 2016 income years the Applicant asserted that the Pooled Deposits were “Cash from wages and withdrawals from personal bank accounts. Some cash were spent. This Cash deposit came from the balance of the unspent cash.” The Applicant sought to explain the Pooled Deposits by way of comparison of trading income of SE Holdings Pty Ltd and Sunshine Bros and the corresponding business bank deposits. The Applicant contended that given there was a surplus of trading income over bank deposits that those monies must have been deposited into the Applicant’s bank account and were applied for business purchases. The Applicant contended that these funds were already taxed in the hands of the business.
There is no corroborating evidence before the Tribunal that actually identifies what the source and character is of the cash deposits that form the “Pooled Deposits”. At Hearing the Applicant agreed that:
·the Pooled Deposits could have come from a number of sources;[134]
·it was not possible to tell where a particular Pooled Deposit was sourced from;[135] and
·the Unexplained Deposits spreadsheets put forward do not demonstrate if any such funds had in fact been previously declared as income by the Fame Seafood trading entities.[136]
[134] Transcript of Proceedings, pages 66-67.
[135] Transcript of Proceedings, pages 66-70.
[136] Transcript of Proceedings, page 66.
The lack of clarity around the amounts that form Pooled Deposits increases when considering the Applicant’s Running Cash Balance sheets for the 2014 to 2016 income years. The Applicant used these sheets to assert that the cash deposits into the Applicant’s accounts could been seen to be left over money from earlier withdrawals with often there being corresponding withdrawals and deposits made either on the same day or within a day or so of each other. However, once consideration is given to the Applicant and his wife’s Casino Records and that a substantial amount of the withdrawals that occur on the Running Cash Balance Sheet immediately before the Pooled Deposit amount, have been made at or near the relevant casino, the overall picture as to the purpose of the withdrawals from and deposits into the Applicant’s bank accounts becomes even murkier.
The Applicant in evidence told the Tribunal that he does not keep records of his cash deposits and withdrawals or of his casino gambling. Then on the other hand though, said he could not have lost the amount identified in the Casino Records in the 2014 to 2016 period as he “knows his change”. Both the Applicant and his Representatives put to the Tribunal that the Casino Records would not be correct as the Casino cannot correctly record when a player removes their winnings from the table without cashing in (for example by placing winning chips in their pocket). The combination of the Casino Records showing the extent of the Applicant and his wife’s gambling, cash withdrawals from in or around the casinos and the Applicant’s evidence in relation to casino methodology of recoding players gambling and his casino activity the Tribunal is left wondering how this all fits together. Alternatively, perhaps it does not all fit together as not all of the puzzle pieces are on the table.
The ‘Summary of withdrawals from Running Cash Balances vs net losses per Casino Gaming Records’ showed that the total cash withdrawals from the Applicant’s banks accounts as per the Running Cash Balance sheets for the 2014 to 2016 years was $545,900 and that the Applicant’s and his wife’s combined total gaming losses for the same period according to the Casino Records was $547,361.11. The Applicant was unable to explain the correlation.
The Tribunal notes that the Casino Records were provided to the Applicant’s Representatives in the form of Supplementary T-Documents on 12 June 2020, and although the Applicant’s Amended Statement of Issues, Facts and Contentions[137] and Amended Statement[138] were provided after that date, no submissions or references were made in relation to them prior to the Hearing, and even then was only addressed when the Respondent raised it during cross examination of the Applicant. While the Applicant asserted that these records were incorrect, he provided no clear evidence to establish how they were incorrect or what the true position was.
[137] Exhibit List, Tab 38, pages 3314-3321, Applicant’s Amended Statement of Issues, Facts and Contentions.
[138] Exhibit List, Tab 6, pages 2816-2817, Amended Witness Statement of Sam Kong.
The Tribunal considers the Applicant’s Representatives view of the reasonable man test and how it applies to the Applicant’s circumstances is misguided. The issue in this case is that the Applicant has not been able to establish what the true purpose of the withdrawals and deposits among his bank accounts were or what the source or sources of those deposits were. The reasonable man who is short of money (as put forward by the Applicant’s Representatives) is unlikely to have cash available to them to the extent the Applicant has in this matter, nor are they likely to have the gambling turnover that the Applicant had, all whilst running a business and being involved in the managing of other projects for associated entities.
Further the evidence before the Tribunal also showed that the Applicant held additional bank accounts, made other large sales and purchases of assets and personally lent money to related entities. The Applicant admitted to not providing an accurate Asset Betterment Review. There is no clear picture before the Tribunal that corroborates the Applicant’s assertions that his only assessable income for the years in dispute was that declared in his income tax returns and the additional amounts that add up to $77,439.00 all of his other activities are taken into consideration.

The Tribunal puts little probative weight on the evidence provided by Mr Ooi, Mr Chui and Ms Huang. All of these witnesses provided witness statements of a similar date, form and substance to each other, none of them had any supporting documentation in relation to the transaction to which they say occurred in them providing cash to the Applicant. The Applicant did not provide evidence that the relevant repayments disclosed were also made where a loan arrangement was said to have been in place. Each of the witnesses have a personal relationship with the Applicant and the majority of the asserted transactions were alleged to have occurred in cash. The Tribunal has taken the same view of the statements provided by Baojing Mai, Jonny Giang, David Yuen and Paul Su. While the Applicant provided that he told each person what to write about he said neither he nor his accountant wrote the letters for them, given the form of the letters and the dates and the picture the Applicant is trying to paint, the Tribunal is not convinced that at least coordination did not occur in relation to the statements provided.
The Tribunal is mindful that the evidence adduced by the Applicant should be considered carefully. Hill J in Imperial Bottle shops Pty Ltd and William John King Egerton v Federal Commissioner of Taxation (1991) 22 ATR 148 at 155 stated:
A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If he goes into the witness box and swears that he incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such a statement, like statements of purpose, or object or state of mind must, however, be “tested most closely, and received with the greatest caution”: Pascoe v FCT (1956) 6 AITR 315; 11 ATD 108 at 111. It would, of necessity, be a rare case indeed where a taxpayer, claiming to have expended a very large sum of money on trading stock and other business expenses, would succeed in satisfying the burden of proving that the assessment is excessive. Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed. It must however, be born in mind that the evidence of a taxpayer is not to be regarded as ‘prima facie unacceptable’, cf McCormack v FCT (1979) 143 CLR 284 at 302 per Gibbs J; 9 ATR 610; 23 ALR 583.
The Tribunal finds it concerning that the Applicant has a long history of association operating businesses, utilising trust structures and gave evidence that he understands the importance of keeping business records and provided all the information presented by his Representatives in this matter, appears to have been operating largely on a cash basis, however kept no records of his cash deposits into his bank accounts or cash withdrawals and how they may correspond to the payment of business expenses or receipt of business income. Overall, the Tribunal was left with the impression that the Applicant was not being fully frank in the evidence he was providing, rather it appeared to the Tribunal that the Applicant was trying to paint a picture for the Tribunal, that was perhaps devoid or at least a long way, from what the reality of the situation really was.
The Tribunal finds based on the evidence before it that the Applicant did not satisfy his onus to prove that the default amended assessments for the years in dispute were excessive.
In relation to the issue of the Respondent’s power to make amended assessments for the 2008 to 2014 years, the Tribunal considers that the Applicant has not discharged his onus to prove that the Respondent could not validly form the opinion that there was evasion in those years. The Applicant’s submissions in relation to this point were scant. Given that the Tribunal formed the view that the Applicant had not been fully frank in providing his evidence and that it has been left with an incomplete picture of the Applicant’s taxation affairs and potential sources of income in a situation where it was clear that the Applicant is far more business savvy and capable than the picture his Representatives were trying to paint, the Tribunal does not consider that the Applicant has proved that he had not intentionally omitted information from his income tax returns, or for that matter the process that has followed.
As such the Tribunal finds that the amended assessments made for the 2008 to 2014 years were properly made within power.
As the Tribunal has found that the tax shortfalls identified in the Objection decision have been properly imposed, the issue of imposition of penalties and any subsequent remissions must be considered.
Based on the information before it, the Tribunal finds that the administrative penalty was correctly applied under sections 284-75(1) and 284-90 of Schedule 1 to the TAA 1953 at the base rate of 50% as the shortfall amount resulted from the recklessness by the Applicant as to the operation of the taxation law.
Having made a finding that the Applicant has not discharged his onus to prove that the opinion formed by the Commissioner that his conduct amounted to evasion should not have been made, the Tribunal also finds that the Applicant’s behaviour in relation to the years in dispute amount to indifference to consequences foreseeable by a reasonable person. It is foreseeable to a reasonable person that if you do not properly return your assessable income you may be asked at some point to pay any tax shortfall and associated interest and penalties. Further, the Applicant acknowledged that errors occurred due to carelessness and poor accounting documentation.
Section 284-220(1)(c) of Schedule 1 to the TAA 1953 provides that the percentage of the base rate penalty is automatically increased by 20% where a penalty has been imposed in relation to prior income years as a result of recklessness. As such, given the Applicant has had an administrative penalty imposed in the 2008 year for recklessness, it follows that the percentage of the base rate of penalty for all following years is automatically increased by 20%.
The imposition of shortfall interest charge is a statutory outcome of section 280-100 of Schedule 1 to the TAA 1953, as such the Tribunal finds that in this case the short fall interest charge for the years in dispute has been correctly applied.
In whole, the Applicant failed to adequately address the issue of penalties and the shortfall interest charge imposition or remission, which in conjunction with the Tribunal’s findings set out above in relation to the Applicant’s taxable income, the Tribunal affirms the Objection decision in these regards. The Tribunal finds that there is no evidence before it that the refusal to remit the administrative penalties will result in an outcome that is harsh or produces an unjust, inappropriate or unreasonable outcome[139] or that it would be fair and reasonable in the present circumstances to remit the shortfall interest charge.
[139] Sanctuary Lakes Pty Ltd v Commissioner of Taxation (2013) 212 FCR, Griffiths J with whom Edmonds J agreed at [248]-[249]; Stewart and Commissioner of Taxation [2013] AATA 845, per Middleton J and Senior Member O’Loughlin at [104].
CONCLUSION
For the reasons set out above, the Tribunal has been left with an incomplete picture of the Applicant’s taxation affairs and potential sources of income. The Tribunal finds that the Applicant has not provided sufficient clear and reliable evidence to allow it to make a finding of fact in his favour.
The Tribunal finds that the Applicant has not discharged his onus to prove that the Respondent’s opinion formed in relation to evasion should not have been formed for the years ended 30 June 2008 to 30 June 2014. Consequently, the Tribunal finds that the default amended assessments made in relation to those years were within power.
The Tribunal finds that the:
(a)Applicant has not discharged his onus to prove that the amended assessments for the 2008 to 2016 income tax years were excessive or otherwise incorrect and what those assessment should have been;
(b)administrative penalties imposed pursuant to sections 284-75(1) and 284-220 of Schedule 1 to the TAA 1953 were correctly imposed;
(c)Applicant has not persuaded the Tribunal that the discretion in section 298-20 of Schedule 1 to the TAA 1953 in relation to the remission of the administrative penalty should be exercised;
(d)shortfall interest charges imposed pursuant to section 280-100 of Schedule 1 to the TAA 1953 were correctly imposed; and
(e)Applicant has not persuaded the Tribunal that the discretion in section 280-160 of Schedule 1 to the TAA 1953 in relation to the remission of the shortfall interest charge should be exercised.
Accordingly, the Objection decision under review is affirmed.

I certify that the preceding 129 (one hundred and twenty-nine) paragraphs are a true copy of the reasons for the decision herein of Member D Mitchell

...........................[SGD]......................................
Associate
Dated: 10 August 2021

Date of hearing:

Date of last submission:

28, 29 and 30 July 2020

19 October 2020

Representatives for the Applicant:
Mr R Ee and Mr L Chan

Ee & Associates

Counsel for the Respondent: Mr M Ballans

Solicitors for the Respondent: Australian Government Solicitor

Date of hearing: Date of last submission:	28, 29 and 30 July 2020 19 October 2020
Representatives for the Applicant:	Mr R Ee and Mr L Chan Ee & Associates
Counsel for the Respondent:	Mr M Ballans
Solicitors for the Respondent:	Australian Government Solicitor