Mustapha and Commissioner of Taxation (Taxation)

[2022] AATA 1519

Mustapha and Commissioner of Taxation (Taxation) [2022] AATA 1519 (7 June 2022)

Division:TAXATION AND COMMERCIAL DIVISION

File Numbers:        2020/4633
2020/4634

Re:Mohammad Mustapha

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President I R Molloy

Date:7 June 2022

Place:Sydney

The Objection decision is affirmed

.............................[SGD]................................

Deputy President I R Molloy

CATCHWORDS

TAXATION – Income Tax –objection to default assessment – applicant bears onus of proving taxable income – whether amended assessments excessive or unreasonable – ATM withdrawals – sole director and shareholder of company – decision affirmed

LEGISLATION

Income Tax Assessment Act 1936 (Cth)

Tax Administration Act 1953 (Cth)

CASES

Bosanac v Commissioner of Taxation [2019] FCAFC 116

Bosanac v Commissioner of Taxation [2019] HCA 41
Commissioner of Taxation v Dalco (1990) 168 CLR 614
Danmark Pty Ltd & Forestwood Pty Ltd v Federal Commissioner of Taxation (1944) 7 ATD 333
Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149
Gashi v Commissioner of Taxation (2013) 209 FCR 301
Hua-Aus Pty Ltd v Commissioner of Taxation (2010) 184 FCR 430
Imperial Bottleshops Pty Ltd v Federal Commissioner of Taxation (1991) 22 ATR 148
Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26
Rigoli v Commissioner of Taxation [2014] FCAFC 29

Trautwein v Commissioner of Taxation (1936) 56 CLR 63

REASONS FOR DECISION

Deputy President I R Molloy

7 June 2022

1. The applicant, Mr Mustapha, applies for review of an objection decision made on 29 May 2020 which:

   (a)partially allowed his objection to an amended assessment dated 29 July 2019 in respect of the year of income ended 30 June 2017; and

   (b)disallowed his objection to an amended assessment dated 29 July 2019 in respect of the year of income ended 30 June 2018.[1]

   [1] T2-7-9.

   BACKGROUND

2. On 28 September 2017, the applicant caused his 2017 Income Tax Return to be lodged declaring a taxable income of $171,816. A notice of assessment was issued on 5 October 2017.[2]

   [2] T3-16.

3. On 20 February 2019, the applicant caused his 2018 Income Tax Return to be lodged declaring a taxable income of $171,049. A notice of assessment was issued on 27 February 2019.[3]

   [3] T3-16.

4. A subsequent taxation audit identified bank accounts in the applicant’s name and accounts held jointly with his spouse or his brother.

5. The audit also identified that the applicant was a signatory and sole cardholder of a bank account in the name of a company PMG 300 Pty Ltd (“PMG”) with the Commonwealth Bank of Australia (“CBA”) opened on 20 February 2017.

6. The audit also revealed that on 15 August 2017, Mr Waail Matar was added as a signatory to the PMG account, but did not have a card or NetBank access.[4]

   [4] T3-17.

7. The respondent identified ATM withdrawals from the PMG account which were considered to be withdrawals of the applicant (as sole card holder) used for personal expenditure or other unexplained activities.

8. On 29 July 2019, the respondent issued default assessments under s 167 of the Income Tax Assessment Act 1936 (Cth) (“ITAA 1936”) for the relevant years taking into account the information obtained during the course of the audit, and subsequently on 9 August 2019 issued further amended assessments as follows:

   (a)for the year ended 30 June 2017 - $227,556;and

   (b) for the year ended 30 June 2018 - $593,857.

9. The respondent also applied shortfall penalties for each of the relevant years calculated on the basis that the applicant made statements that were false and misleading in a material particular and that this conduct amounted to intentional disregard of a taxation law under s 284-90 of the Taxation Administration Act 1953 (Cth) (“TAA 1953”).

10. This attracted a penalty of 75% applied against the tax shortfall amounts.The respondent increased the base penalty amount by 20% for the 2018 year pursuant to s 284-220 of the TAA 1953.

11. In addition, the respondent determined that the applicant was liable to pay shortfall interest charges on the additional amounts of tax for the relevant years.

12. On 20 September 2019, the applicant lodged an objection against the amended assessments for the relevant years (“Objection”).[5] The applicant limited his Objection to the following grounds:

    (a) he did not make the ATM withdrawals from the PMG account; and

    (b) a deposit on 21 November 2016 of $20,000 was transferred into a personal bank account.

13. The applicant did not object to the penalties imposed or to the shortfall interest charges.

14. On 29 May 2020, the respondent, in response to information provided by the applicant, allowed, in part, the Objection to the amended assessment in respect of the year ended 30 June 2017 to reduce the applicant’s taxable income by $20,000.

15. The respondent disallowed, in full, the Objection to the amended assessment in respect of the year ended 30 June 2018.[6]

    [6] T11.

    ISSUES

16. The issues are whether the applicant has discharged his onus of proving the amount of his taxable income in the relevant years, and whether the amended assessments issued by the respondent are excessive or otherwise incorrect.

17. Generally a taxpayer who seeks to establish that a default assessment made under s 167 of the ITAA 1936 is excessive must positively prove his 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.

18. The burden is on the applicant to establish, by evidence, his actual taxable income.[7] If his actual taxable income is less than the amount assessed, the assessment under s 167 of the ITAA 1936 would be “excessive” within the terms of s 14ZZK of the TAA 1953.

    [7] Gashi v Commissioner of Taxation (2013) 209 FCR 301, [63]; Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 621 and 631; Trautwein v Commissioner of Taxation (1936) 56 CLR 63 at 87; Bosanac v Commissioner of Taxation [2019] HCA 41, [30]; Bosanac v Commissioner of Taxation [2019] FCAFC 116, [57].

19. As submitted by the respondent, in challenging an assessment, it is for the taxpayer “to establish any fact demonstrating the assessment to be excessive”.[8] It “follows that if no evidence is adduced …; if such evidence as is adduced is not a reasonable explanation of why the assessment is excessive and in consequence, is not accepted as discharging the onus; or if such evidence is otherwise rejected, the [assessment] must prevail”.[9]

    [8] Hua-Aus Pty Ltd v Commissioner of Taxation (2010) 184 FCR 430 (“Hua-Aus”), [22], citing Danmark Pty Ltd v FCT & Forestwood Pty Ltd v FCT (1944) 7 ATD 333 at 337.

    [9] Hua-Aus, [23], citing Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89.

20. The Tribunal must proceed by reference to “rationally probative evidence” rather than on mere “suspicion or speculation”.[10] Further, “evidence of witnesses who have an interest in the outcome of litigation needs to be approached critically”.[11]

    [10] Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26, [62] (quoting Minister for Immigration and Ethnic Affairs v Pochi (1980) 31 ALR 666, 685).

    [11] Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149, [82].

21. That is not to say that a taxpayer’s uncorroborated evidence is to be regarded as prima facie unacceptable.[12]  But if, on the evidence before it, the Tribunal is not satisfied that the applicant has discharged the burden of proof, the application for review should be dismissed.[13]

    [12] Imperial Bottleshops Pty Ltd v Federal Commissioner of Taxation (1991) 22 ATR 148 at 155.

    [13] Rigoli v Commissioner of Taxation [2014] FCAFC 29, [26].

22. This is not a case in which the issues have been confined, for example, to certain transactions or a class of transactions, so that the applicant is relieved of the burden that generally falls upon a taxpayer challenging an assessment under s 167 of the ITAA 1936.

23. On the contrary, the respondent has made it clear, including in his Statement of Facts, Issues and Contentions, and his written submissions, both provided to the applicant in advance of the hearing, that he is putting the applicant to proof of his actual income.[14]

    [14] Respondent’s Statement of Facts, Issues and Contentions dated 28 April 2021, [28]-[29]; and Respondent’s Submissions dated 2 May 2022 (“Respondent’s Submissions”), [2], [39]-[50] and [57]-[58].

    EVIDENCE

24. The evidence led or relied on by the applicant was essentially confined to withdrawals from the PMG bank account. That the application was run in this way was of the applicant’s choosing. He did not adduce evidence of his actual income – which is a major deficiency in his evidence – and described in the respondent’s submissions as a “fatal flaw”.[15]

    [15] Respondent’s Submissions, [58].

25. But, even if the withdrawals from the PMG account were the only issue, the application would fail. I accept the respondent’s submission that the applicant has not adduced probative evidence to substantiate his contention that the various amounts withdrawn from the PMG bank account were not part of his taxable income in the relevant years.

26. I accept the respondent’s submission that the applicant’s evidence is minimal in detail, inexact, vague and unreliable.

27. The applicant has filed two affidavits in these proceedings dated 15 February 2021 and 15 March 2021. He has provided other evidence in writing including a letter to the Australian Taxation Office[16] and a statutory declaration both dated 17 May 2019.[17] The applicant also gave oral evidence at the hearing including under cross-examination.

    [16] T4-45-48.

    [17] T4-199.

28. PMG was incorporated on 17 February 2017. The applicant, an accountant, was the sole director and shareholder until 16 October 2017. He said in cross-examination he was the beneficial shareholder. The director and shareholder of PMG from 17 October 2017 was Mr Vaselios Karelis.

29. During the period from September 2013 to October 2018 the applicant was employed by Wentworth Williams Accounting (“WWA”). WWA was the accountant for PMG in the relevant years. The applicant’s role with PMG was not limited to providing conventional accounting services.

30. On 20 February 2017, the applicant opened the bank account with the CBA for PMG. The applicant was issued a card for that account in his name and in the name of PMG. The applicant was the sole signatory of the PMG Account with NetBank access.

31. From 15 August 2017, Mr Waail Matar was added as a joint signatory on the PMG account. However, the applicant remained the sole card holder for the PMG Account and the only person with NetBank access. The applicant said that one or two months after he resigned as shareholder and director he gave the card to Mr Matar.

32. There is a brief statutory declaration from Mr Vasileios Karelis dated 16 May 2019. He states he is a director of PMG and that under his direction Mr Matar, an employee, “had carriage of the debit card of the Company” issued by the CBA. He goes on to say, “all withdrawals from the debit card were utilised for day to day business expenses of the Company.”

33. The type of “day to day business expenses” to which the funds were applied are not specified by the applicant or Mr Karelis. It should have been relatively easy for Mr Karelis to have produced accounting or other business records of PMG substantiating the use of funds.

34. Mr Karelis was not called by the applicant to give evidence. The applicant said he could not do this because he did not know where Mr Karelis lived. He had no real answer when it was pointed out that Mr Karelis’s address was on his statutory declaration. The applicant did not suggest he made any enquiries to establish Mr Karelis’s location or make any other effort to have him attend to give evidence.

35. None of the assertions regarding Mr Matar’s use of the account are corroborated by Mr Matar himself. In the applicant’s affidavit dated 15 March 2021, he states in relation to Mr Matar (referred to as “Wail Matter”), “I had a meeting with Mr Matter who advised that he will not provide a statutory declaration admitting that he withdrew the cash”.

36. Mr Mustapha has experience in relation to Tribunal or court proceedings. He was aware that a summons could be issued to compel the attendance of witnesses to give evidence, or for the production of documents. There is no explanation why he did not effectively avail himself of this process.

37. There is surprisingly little information about PMG, its employees or activities. There is no satisfactory evidence of why PMG was established, or why the applicant would take on the roles of shareholder and director. The applicant said he had a summons issued for WWA to produce documents but said the person he asked had no access to the documents.

38. Given the applicant’s position in PMG and his shareholding, his knowledge of PMG was also surprisingly lacking. My observation was that he was either not sure, or unwilling to say, what PMG’s activities were. He described the company as being in the construction industry and accepted an involvement in labour hire.

39. The applicant said that he was sent emails to make payments from the company’s bank account. He says that once he stepped down as a director and shareholder, he continued to make payments on the company’s behalf through NetBank.

40. If the applicant did not make any withdrawals using the CBA card (as he contends), there would appear to be no reason for the card to have been issued to him in the first place. He says that the withdrawals were made by Mr Matar, but Mr Mustapha’s evidence is he did not give Mr Matar the card until late 2017.

41. There is no explanation provided as to why PMG did not take any steps to remove the applicant as a named authority on the PMG account following his resignation as director or cancel the card in his name.

42. There are numerous locations at which cash was withdrawn during the relevant years including Wollongong, Figtree, Dapto, Unanderra, Rockdale, Newington, Lakemba, Norwest, Regents Park, Bankstown and Shellharbour but no time frame indicated for those withdrawals.

43. The applicant relies on his mobile phone records with TPG Telecom Ltd (formerly Vodafone) as proof that he was not in the locations on the dates that some of the ATM withdrawals occurred.

44. The mobile phone records of themselves do not prove that the applicant did not make the withdrawals. Mr Mustapha admitted he had more than one mobile phone. And of course, the phone records do not exclude the withdrawals having been made at his direction, or that he ultimately received the cash withdrawn.

45. Mr Mustapha says it defies common sense that he would, for example, drive from Sydney to Wollongong to make ATM withdrawals. Even if that were accepted, it does not address the withdrawals in the Lakemba and Rockdale areas, where he was based, or the withdrawals taking place at his direction.

46. Mr Mustapha’s evidence is brief and at times implausible. He could have been reasonably expected to call Mr Karelis and Mr Matar to give evidence, and to have PMG and or its accountants produce relevant records. I am quite satisfied I am not getting anything near the whole story.

    CONCLUSION

47. Even if the application were reduced to the one issue, Mr Mustapha has been unable to show, with probative evidence, that the ATM withdrawals from the PMG account do not form part of his taxable income.

48. The failure of the applicant to focus on the key task of proving the amount of his actual taxable income inevitably results in the applicant failing to discharge his onus of proof.

49. Consequently, the Objection decision should be affirmed.

I certify that the preceding 49 (forty-nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President I R Molloy

........................................................................

Associate

Dated: 7 June 2022

Date of hearing:	19 May 2022
Applicant:	Mr M Mustapha in person
Counsel for the Respondent:	Ms E Bishop
Solicitor for the Respondent:	Mr D Chew, Australian Government Solicitor

[5] T9.