Naboulsi v Commissioner of Taxation
[2000] FCA 813
•16 JUNE 2000
FEDERAL COURT OF AUSTRALIA
Naboulsi v Commissioner of Taxation [2000] FCA 813
OMAR NABOULSI v COMMISSIONER OF TAXATION
N 736 OF 1999OMAR NABOULSI v COMMISSIONER OF TAXATION
N 737 OF 1999LEHANE J
16 JUNE 2000
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 736 OF 1999
N 737 OF 1999
BETWEEN:
OMAR NABOULSI
APPLICANTAND:
COMMISSIONER OF TAXATION
RESPONDENTJUDGE:
LEHANE J
DATE OF ORDER:
16 JUNE 2000
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1. The applications be dismissed.
2. The applicant pay the respondent’s costs of the applications.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 736 OF 1999
N 737 OF 1999
BETWEEN:
OMAR NABOULSI
APPLICANTAND:
COMMISSIONER OF TAXATION
RESPONDENT
JUDGE:
LEHANE J
DATE:
16 JUNE 2000
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The applicant, Mr Naboulsi, appeals under s 14ZZ(c) of the Taxation Administration Act 1953 (Cth) (the “Administration Act”) against two appealable objection decisions of the respondent Commissioner. By each of those objection decisions, the Commissioner disallowed a taxation objection lodged with the Commissioner against an amended assessment made by the Commissioner under s 167 of the Income Tax Assessment Act 1936 (Cth) (the “Assessment Act”). One of those assessments relates to the year which ended on 30 June 1996, the other to the year which ended on 30 June 1997.
Background facts
Mr Naboulsi is, and has been for many years, a taxi owner and driver. During the two income years in question he owned, successively, two taxi cabs. He drove them himself during the day on most weekdays and also, commonly, on Friday evenings. The cabs were driven by other drivers at other times, principally during the evening on weekdays other than Fridays, and on Saturdays. Those drivers made payments to Mr Naboulsi following their shifts. Thus, in broad terms, Mr Naboulsi derived income by way of takings which he received when he drove the cabs himself and by way of payments from other drivers. He incurred expenses in relation to the operation of the cabs.
Mr Naboulsi employed a firm of tax agents known as Alect Taxation Services to prepare his income tax returns for both the 1996 and the 1997 year. The principal of that firm was Mr Ali Oygur; the actual task of preparing the returns was, apparently, delegated to an employee of that firm, Mr Trevor Ward. Mr Naboulsi’s tax return for each of the years in question disclosed, as his only assessable income, income derived from the taxi business and no allowable deductions other than expenses incurred in that business. The 1996 return disclosed a total business income of $29,825.00. It disclosed total expenses of $17,342.00, made up of interest expenses of $2,013.00, depreciation expenses of $284.00, motor vehicle expenses of $9,231.00 and other expenses of $5,814.00. On that footing, the taxable income was the difference between income and expenditure, namely $12,483.00. The 1997 return disclosed total business income of $31,255.00 and expenses amounting to $17,254.00. The expenses claimed were interest of $746.00, depreciation of $629.00, motor vehicle expenses amounting to $9,371.00 and other expenses of $6,508.00. The resulting net, or taxable, income was $14,001.00. The Commissioner issued an assessment for each year in which he assessed Mr Naboulsi to tax in accordance with the returns.
On 10 December 1997, an officer of the Australian Taxation Office wrote to Mr Naboulsi informing him that the Office was conducting a “National Project on the Taxi Industry”. He was asked to provide information, in relation to the 1996 and 1997 years of income, by completing what was described as a “taxi operator questionnaire” and by providing profit and loss statements for the two years. The questionnaire was completed (apparently by the tax agents), Mr Naboulsi signed it and it was sent to the Australian Taxation Office. Profit and loss statements were also sent, apparently in the form of Schedule B to the form of income tax return. Those showed, for each year, gross receipts and total expenses (and therefore net income) of the same amounts as had been returned. Nothing turns on the detail of the profit and loss statements.
Mr Naboulsi was interviewed by officers of the Australian Taxation Office, in company with Mr Ward, on 1 June 1998 and again on 22 October 1998. On 10 March 1999 the Commissioner issued, under s 167(b) of the Assessment Act, two notices of amended assessment. The amended assessment for 1996 was based on an amended taxable income of $56,123.00. In addition to the tax and Medicare levy assessed on that taxable income, the Commissioner imposed “Understatement Penalty and Interest” of $7,462.83. The amended assessment for 1997 was based on an amended taxable income of $59,186.00. The assessment included a penalty and interest amounting to $5,443.18. Mr Naboulsi lodged an objection to each amended assessment; the objection decisions disallowing those objections are the subject of the present appeals.
Principles and issues
It is common ground that, in the case of each amended assessment, the “amounts assessed represent the Commissioner’s bona fide judgment as to the amount of the taxpayer’s taxable income and the power to make the assessment was validly exercised” (Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 624 per Brennan J). It is thus common ground also that Mr Naboulsi bears the burden, under s 14ZZO(b)(i) of the Administration Act, of proving that the assessments are excessive. The Commissioner is “entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment”: Dalco at 624 per Brennan J.
Mr Naboulsi has sought to discharge that burden by proving the actual amount of his assessable income and allowable deductions for each of the two years. Mr Naboulsi did not seek to maintain that his tax returns were correct. He concedes that they were not. The two principal respects in which he accepted that the returns were wrong were, first, that they claimed as an allowable deduction an amount of interest, a substantial portion of which was incurred for private, not business, purposes and, secondly, that they understated Mr Naboulsi’s income, though to a much lesser extent than would be the case if his taxable income were as stated in the amended assessments. The parties spent no time, in evidence or argument, on any controversy about allowable deductions. The substantial controversy is about Mr Naboulsi’s business income: whether that income was indeed as recorded in a blue book (which is in evidence) which was described as a “cash book”, and on the basis of which two accountants called by Mr Naboulsi gave evidence as to the amounts of his income and his expenses.
In short, the outcome of the appeals depends upon whether I accept Mr Naboulsi’s evidence that the cash book, so called, correctly records all his income from his business in the 1996 and 1997 years. If I accept that evidence, the appeals will succeed, the objection decisions will be set aside and the objections will be remitted for reconsideration according to law. If, on the other hand, I do not accept Mr Naboulsi’s evidence, the appeals will fail.
Cash book and other records
The cash book is a fairly rudimentary document. It records, for each day, takings received by Mr Naboulsi during the shifts when he drove, amounts paid to him by other drivers for their shifts and expenses incurred. Each category is totalled for each week. The week which began on 22 April 1996 may be taken as an example:
“ DAILY TAKINGS EXPENDITURE
DATE TOTAL PARTICULARS PURCHASES 22.4 Monday 67 00 46 00 23.4 Tuesday 70 00 55 00 24.4 Wednesday 78 00 60 00 25.4 Thursday OFF ANZAC DAY OFF 26.4 Friday 145 00 OFF 4. TYRES TRANSMISSION(S) 303 00 27.4 Saturday 75 00 60 00 28.4 Sunday OFF OFF Wk. End 435 221 656 00 ”
The word “OFF” indicates, according to Mr Naboulsi’s evidence, that the taxi was not operated during the period in question (or at least – I shall return to this in relation to the evidence about whether the taxi was driven on Sunday – that Mr Naboulsi received no income from it in respect of that period). “OFF” is written in each column for 25 April, Anzac Day: that is typical of entries in the book for public holidays. The book indicates also that the taxi was off the road for the period of two weeks beginning on 1 January 1996 for “holidays”, for the period between 18 November 1996 and 6 December 1996 (during this period, according to Mr Naboulsi’s evidence, the cab which he owned up to that time was written off as a result of an accident and he acquired the second cab) and, again for holidays, during the fortnight beginning on 30 December 1996. Consistently with what the book records in relation to other public holidays, it records the Easter public holidays in 1996 as “OFF”. In 1997, atypically, it records the week beginning on 31 March as “Easter holiday” and records takings for 28 and 29 March, which appear to have been Good Friday and Easter Saturday (that was not a matter explored in oral evidence). At the conclusion of the weekly records for each financial year, there is a summary of total takings and expenses. That for the year ended 30 June 1996 is as follows:
“
RENT Electricity
Telephone
Postage,
Advertising,
Printing and
Stationery
Repairs and
Maintenance
TRAVELLING
AND
CAR EXP.
PRIVATE
DRAWINGS
SUNDRIES
TOTAL
TAKING FOR YEAR 1995 96 WAS 35,772 00 EXPENSES MOTOR VEHICLE EXPENSES 10,895 00 GREEN SLEEP [sic] 3 690 00 THIRD PARTY INSURANCE 1 500 00 RTA REGO 358 00 WORKER’S COMP 465 00 PETROL & L.P.G. 3 750 00 SELF AID INSURANCE = MY VEHICLE 1 372 00 22,040 00 ”
That for the year ended 30 June 1997 reads:
“
RENT Electricity
Telephone
Postage,
Advertising,
Printing and
Stationery
Repairs and
Maintenance
TRAVELLING
AND
CAR EXP.
PRIVATE
DRAWINGS
SUNDRIES
TOTAL
TAKING FOR 1996 ‑ 97 WAS 32 974 00 EXPENSES MOTOR VEHICLE 11 240 00 GREEN SLEPP [sic] 3 879 00 THIRD PARTY 1 089 00 R.T.A. REGO 644 00 WORKER’S COMP. 449 00 PETROL = L.P.G 3 000 00 SELF AID = MY VEHICLE INSURANCE 1 640 00 21,941 00 ”
The cash book is not a contemporaneous record of the transactions which it records. Mr Naboulsi’s evidence, which in this respect there is no reason to doubt, was that it was prepared after he became aware that his tax affairs were to be audited, and for the purpose of the audit. His evidence was, however, that the cash book is simply a tidy copy of what was described as a “dirty white cash book” which, according to his evidence, Mr Naboulsi kept on the top of the refrigerator in his home and which he entered up at the end of each week by transcribing, from records made daily on slips of paper, a record of the takings for each shift (including “pay‑ins” from other drivers) and the expenses incurred during the week. He disposed of the dirty white cash book, he said, when he had copied the entries from it into the new cash book. The slips recording takings were disposed of also, though there is no very clear evidence about when that happened.
Because the cash book is crucial to the outcome of the appeals, it is necessary to examine, in a little more detail, the evidence as to the way in which it came into existence. Mr Naboulsi swore an affidavit on 17 December 1999. Counsel for Mr Naboulsi read most of that affidavit as part of Mr Naboulsi’s evidence in chief, but did not read certain of the passages in it dealing with the provenance of the cash book. The portions which were not read are, however, in evidence because they were tendered, without objection, by counsel for the Commissioner. Paragraphs 3 to 8 of the affidavit read as follows (with square brackets indicating the portions which counsel for Mr Naboulsi did not read):
“3.[The cash book which is to be found at pages 15 to 38 of Exhibit SAS1 relating to the 1996 and 1997 year of income was written up by me at home at the end of each week.]
4.The system I had for keeping a record of my income was to keep a note on a sheet of paper of the cash takings which I took at the end of each shift that I worked during the day time and to also keep a note of the pay‑in provided to me by way of rental for my taxi cab at night time which was used by my drivers who operated my cab at night.
5.I also kept until the end of each month the cab charge dockets which either I had received in the course of my operation of the taxi cab during the day time or which had been provided to me by my drivers in payment of their use of the taxi cab at night time. Both as between myself and my drivers and amongst the various drivers where they would subcontract work out to each other, the cab charge dockets were at all times used as a form of currency until banked at the Premier Taxi Co‑operative.
6.At the end of each week I would then tally up the amount of cab charge dockets that I had received either from customers directly or from my drivers for their night shift pay‑ins and I would add that to the amounts that I had recorded on a sheet of paper for my daily takings or daily cash pay‑ins from my drivers.
7.I would then write up my cash book at the end of each week noting not only the amount of cash takings received by me directly or from my drivers but also expenses incurred during the week for the operation of my taxi which I had paid in cash.
8.[At the end of each financial year I would then rewrite my cash book neatly, usually within the first two or three [sic] of the new financial year, before consulting my tax agent, Trevor Ward, so that he had a neater copy of my cash book than the less tidy copy which I had written on a week‑by‑week basis.] The copies of the cash book which are contained in the pages 15 to 38 of Exhibit SAS1 for the 1996/1997 years of income are the replica neat copies of my cash book which I rewrote [within the first two or three months of each new financial year relating to the financial year just completed so that Trevor Ward could prepare my tax returns with a neatly written cash book noting all of my cash receipts and cash expenses and also the cab charge docket income which I received each week but which was cashed in by me at the Premier Taxi Co‑operative at the end of each month.]”
The officers of the Australian Taxation Office who interviewed Mr Naboulsi were Ms Sue Christine Hird and Mr Steven William Hackett. Each swore an affidavit on 3 April 2000. Each deposed to conversations between Mr Naboulsi, Mr Ward, Ms Hird and Mr Hackett. Mr Hackett’s version of part of the conversation during the first interview was as follows:
“4.During the interview Ms Hird referred to our initial audit letter and said to the applicant and his agent words to the effect:
“What records have you brought in answer to our letter?”
Mr Ward said words to the effect:
“Mr Naboulsi has a cashbook recording all his income and expenses and a diary showing drivers’ names.”
5. Later in the interview Ms Hird said words to the following effect:
“What working papers were provided to the tax agent who prepared the tax returns?”
Mr Ward said words to the effect:
“There were no working papers. Everything was keyed directly onto the computer. The returns were prepared based on a discussion between Mr Naboulsi and his agent Ali Oygur.”
6.Ms Hird then referred to the cashbook that the applicant had brought along to the interview and said words to the effect:
“What about the cashbook, wasn’t Ali Oygur provided with this?’
Mr Ward said words to the effect:
“Mr Naboulsi prepared the cashbook for this audit. Mr Naboulsi advised the tax agent of his gross income based on weekly estimates.”
Ms Hird said words to the effect:
“How were your taxi takings recorded?’
Mr Naboulsi replied in words to the effect:
“I recorded them daily on pieces of paper and stored them in a box.”
Mr Ward then said words to the effect:
“The daily takings were transcribed into a book once a year for two years, then the pieces of paper were thrown away.”
Ms Hird’s account is substantially similar. It also includes a statement by Mr Naboulsi that he did not know that he was required to keep “pay‑in sheets or roster sheets or driver daily work sheets.”
Then, in an affidavit sworn on 27 April 2000, Mr Naboulsi denied what Ms Hird and Mr Hackett attributed to Mr Ward. According to Mr Naboulsi, Mr Ward said:
“I relied on handwritten records of takings for each shift, on expense invoices and receipts and on a cash book that Mr Naboulsi had provided to Ali Oygur. I keyed the information in those records directly into my computer and returned the records to Ali. Ali then gave the records back to the client each year.”
Mr Naboulsi said that Mr Ward could not have prepared the returns in the way attributed to him. Before April 1998, Mr Naboulsi had met Mr Ward only once. He only consulted Mr Oygur, who took a note of his instructions and with whom Mr Naboulsi left his business records. Mr Naboulsi then turned to the subject of preparation of cash books:
“4.…The blue cash book [that is the document in evidence, to which I have been referring as the cash book] is the cash book that I gave to Ms Hird. The white cash book is the cash book that I gave to Ali Oygur each year. The blue cash book is an accurate copy of the white cash book. I no longer have the white cash book. It was thrown out shortly after the audit commenced. I prepared the blue cash book shortly after I received the letter from the Tax Office advising me that I was to be audited. It was when I read that letter that I decided to write up the white cash book more neatly for the Tax Office officers.
5.I wanted to be able to show a neat cash book to the Tax Office officers who were coming to investigate my taxi cab business. It was at that time that I threw out the white cash book. I was embarrassed about the white cash book because it was written up untidily and was dirty and dusty as I had been using it for the previous four financial years. I had kept it on the fridge at home and it got very dusty there. I was in the habit of writing it up after my last shift each week when my hands were dirty as I wrote it up before I washed my hands for dinner after that last shift. Once I had the neater blue book I decided that I did not need the white cash book any more and I did not want the Tax Office officers to see a dirty cash book.”
In oral evidence, Mr Naboulsi maintained that that was what had happened. There was at least a degree of confusion when, during cross‑examination, portions of his earlier affidavit which had not been read were put to him. I think, however, that it was only confusion and that Mr Naboulsi did not intend to give evidence contrary to the account in his affidavit of 27 April.
Mr Oygur also gave evidence. Although he was called by Mr Naboulsi, counsel for Mr Naboulsi placed no reliance on Mr Oygur’s evidence, accepting (even positively contending) that it was worthy of no weight. I cannot, however, simply disregard it, or the circumstances in which it was given. A document was filed and served on behalf of Mr Naboulsi which purports to be an affidavit of Mr Ward. Some two days before the trial, the Commissioner gave notice to Mr Naboulsi’s solicitors that Mr Ward was among those required for cross‑examination. Counsel for Mr Naboulsi informed me that Mr Ward had arranged to be in Brisbane during the week of the trial on business. He did not seek, on the basis that the notice requiring Mr Ward for cross‑examination had been given unreasonably late, to have Mr Ward’s affidavit admitted into evidence without cross‑examination. Instead, he sought leave to file in Court, and to read, an affidavit of Mr Oygur of 29 April 2000 by way of replacement for Mr Ward’s evidence, on the footing that Mr Oygur was the principal of the firm of taxation agents of which Mr Ward was an employee. I gave leave; Mr Oygur’s affidavit was read and he was cross‑examined. Mr Oygur’s affidavit evidence is consistent with Mr Naboulsi’s affidavit of 27 April 2000. Mr Oygur deposed that he took the instructions from Mr Naboulsi for the preparation of his 1996 and 1997 tax returns and delegated the task of preparing the returns to Mr Ward, giving to Mr Ward Mr Naboulsi’s file containing the documents which Mr Naboulsi had delivered when instructing Mr Oygur. Mr Oygur recalled that:
“Mr Naboulsi handed to me – and I placed into his file – at the start of the 1997 and 1998 income years the following book keeping records relating to the 1996 and 1997 income years:
(i)handwritten slips of paper of Mr Naboulsi relating to his takings from each shift in respect of the conduct of his taxi cab business;
(ii)various expense invoices and receipts relating to the running a taxi cab [sic];
(iii)a dirty white cash book containing entries from Mr Naboulsi’s takings and those of his drivers and entries for the expenses paid in cash relating to the conduct of his taxi cab for the 1996 and 1997 income years.”
Mr Oygur’s affidavit also included this statement:
“On the week commencing 1st May, 2000 Mr Ward, by prior arrangement, is required to fly to Brisbane to undertake work in relation to some taxation audits for my firm’s clients and see clients in relation to certain matters and therefore will be unable to give evidence in this matter. He is unable to give evidence under cross‑examination on one working day’s notice that he is required to attend to give evidence.”
Three matters of some significance emerged during Mr Oygur’s cross‑examination. One was that he did not know precisely when Mr Ward had gone to Brisbane or whether, indeed, he had actually done so (he gave evidence that he had tried unsuccessfully to telephone Mr Ward at the office – in Sydney – during the day on which he gave evidence, the first day of the trial). Nor did he have any clear idea of what Mr Ward was supposedly doing in Brisbane. In short, it appeared that he had no good ground to support his assertion that Mr Ward was required “to be in Brisbane to deal with tax audits” or anything else. Secondly, Mr Oygur gave evidence in cross‑examination about the cash books which was quite different from his affidavit evidence: he said, and upon being invited repeatedly confirmed, that at the end of each income year Mr Naboulsi had produced a dirty white cash book; he had asked Mr Naboulsi to take it away and come back with something legible; and Mr Naboulsi had come back with a neat blue cash book. Thirdly, Mr Oygur gave evidence about the document which purported to be Mr Ward’s affidavit (that document is not in evidence – I rejected its tender by counsel for the Commissioner – but Mr Oygur’s evidence discloses some significant aspects of it). Mr Oygur identified the signature on the document, purporting to be that of the deponent, as his own; he identified as Mr Ward’s the signature purporting to be that of the attesting justice of the peace. Mr Oygur accepted that the document included what purported to be statements by Mr Ward to the effect that he wrote up the cash books; that he did so on the basis of records including shift takings records supplied by Mr Naboulsi; and that the records which he had used to write up the cash books (and prepare the returns) were no longer available to him.
I should add that Mr Oygur produced a medical certificate about his condition and he gave evidence that he suffered from a serious illness, had recently been in hospital and was unwell. There is no reason to disbelieve that evidence. Additionally, English is not Mr Oygur’s first language and I think he had some difficultly in understanding, at least at first, some matters which were put to him. Neither of those circumstances, however, detracts from the significance of the three aspects of his evidence which I have mentioned.
Mr Naboulsi’s case is dependent upon the acceptance of the integrity of the cash book as a faithful transcription of what had appeared in complete and accurate contemporaneous records, those contemporaneous records having been delivered to Mr Naboulsi’s tax agents so that they might prepare his tax returns. In those circumstances, there are obvious difficulties where evidence given by the principal of the firm of tax agents, to whom the contemporaneous documents are said to have been handed, does not give evidence which can be relied upon; where (as happened) a submission by counsel for the Commissioner based on Jones v Dunkel (1959) 101 CLR 298 to the effect that an adverse inference should be drawn from the absence from the witness box of the employee of the tax agents who prepared the returns and participated in the interviews, is resisted by counsel for Mr Naboulsi on the footing that the circumstances revealed by Mr Oygur’s evidence demonstrated that Mr Ward could have given no reliable evidence; and where the income as returned (in the returns prepared by the tax agents) bears no apparent relationship to the amounts of income recorded in the cash book (there are some errors of addition in the cash book, but they are very minor and do not affect the comparison). For the 1996 year, the total business income returned was $29,825.00. The amount recorded in the cash book is $35,772.00. In the 1997 year, the discrepancy is smaller: the total business income returned was $31,255.00; the total takings recorded in the cash book are $32,974.00.
On the assumption that the cash book is an accurate transcription of the records given to the tax agents, there is no obvious explanation for either discrepancy. Mr McAuley, an expert accountant called by Mr Naboulsi, could offer none. They are hardly likely to have resulted from a simple error in arithmetic and plainly do not result from a careless transposition of numbers. The explanation suggested by counsel for Mr Naboulsi was that the evidence amply revealed that the work of the tax agents was not to be relied on in circumstances where it was clear that they had made blunders (for example, by claiming as a deduction interest incurred for a private purpose); and the appropriate finding was simply that, as a result of great carelessness, they had got the returns wrong. But, if it is accepted that Mr Naboulsi gave Mr Oygur the records which he claimed to have given him, the neglect of the tax agents must have involved a total disregard of the records they were given.
In that context, the evolution of Mr Naboulsi’s account cannot be overlooked. His initial version in his affidavit of 17 December 1999 includes a statement very like the evidence which Mr Oygur gave in cross‑examination: the untidy cash book was written up weekly and a tidy version (the documents in evidence) was prepared at the end of each financial year and given to the tax agents. Then, after the affidavits of Ms Hird and Mr Hackett were filed and served, Mr Naboulsi gave the different account (similar to that of Mr Oygur in his affidavit evidence) which he maintains. Counsel for Mr Naboulsi submitted that what were to be regarded as mistakes in Mr Naboulsi’s first affidavit were to be explained largely by language difficulties giving rise to misunderstandings between Mr Naboulsi and the solicitor who drew the affidavit. Although Mr Naboulsi has lived in Australia – and driven cabs – for many years, English is not his first language. He explained in evidence that his English is adequate for the conduct of his business as a taxi owner and driver but he has difficulties with discussion of legal and accounting matters. He claimed not to understand a number of questions which were asked in cross‑examination and he asked that a number of questions be repeated or simplified. I think it is true that at least many of the difficulties which arose during cross‑examination were due to lack of comprehension. Nevertheless, there remains a question of how it was that he gave instructions which a solicitor understood in the way reflected in par 8 of the affidavit of 17 December 1999 and how Mr Naboulsi came to swear the affidavit in that form – particularly in circumstances where, as his counsel pointed out, he or Mr Ward had already told the officers of the Australian Taxation Office, during the first interview, that the cash book had been prepared for the purpose of the audit.
I shall return to those matters after considering other aspects of the evidence said to bear upon the reliability, or otherwise, of the cash book.
Other matters relied on in relation to the credibility of Mr Naboulsi and the reliability of the cash book
(a) Illness
Mr Naboulsi gave evidence that his wife had been substantially disabled by illness for a period of about a year following the birth of their youngest child. A note prepared by Ms Hird of matters discussed during the first interview with Mr Naboulsi and Mr Ward makes it clear that Mr Naboulsi informed Ms Hird and Mr Hackett of his wife’s illness, and that he provided various medical documents, by way of explanation for the circumstance that his income during the two years in question was unusually small. Mr Naboulsi gave evidence that, in consequence of his wife’s illness, he had to interrupt his normal driving shifts in order to help with the children and with domestic matters. I accept the evidence that Mr Naboulsi’s wife was ill during the period following the child’s birth. There are two difficulties, however, about giving a great deal of weight to the evidence in relation to the reliability of the cash book. One is that, surprisingly, it is not at all clear what was the period in question. Ms Hird recorded that she was told that the baby had been born late in 1996. Some of the submissions before me proceeded on the basis that that was the date. Nevertheless, it was submitted that the illness should be taken to have affected both the tax years in question. In cross‑examination, Mr Naboulsi, prompted somewhat by the cross‑examiner, gave the baby’s date of birth as 27 August 1995. The exchange between Mr Naboulsi and cross‑examining counsel demonstrates the confusion. Mr Naboulsi gave evidence that there was one year during which he did not work much because he had family problems. The cross‑examination continued:
“No, and what was the one year? – Well, between, when I had my last baby and then I have to refresh my memory now, now I have to ask my wife that question now.
Well, you can ask me, about August, about August 1996? – When did we have the last baby? I think my wife should answer that question.
I think I might be able to help you, let me see if I can, 27 August 1995, is that right? That’s when Sharene was born? – That’s right, yes, that’s it.”
Having regard to that evidence, and to what appeared to be (despite other things that were said) a common assumption that the illness affected both the tax years in question, I think it is highly likely that the child was born on 27 August 1995. I do not think it is necessary, or helpful, to make a finding about it. That is so because it would not assist much in relation to what appears in the cash book. If the child was born in August 1995, it might be expected that the income recorded for the 1996 year would be less than that recorded for the 1997 year; but the reverse is the case, to an extent that cannot be explained merely by reference to the period during which the first cab was off the road because of the accident and the second cab had not been acquired. But if, alternatively, the child was born in August 1996, it might be expected, having regarded to Mr Naboulsi’s evidence, that the difference between the income earned for the two years would be substantially greater than as recorded (particularly, having regard to the period in the 1997 year when Mr Naboulsi had no cab on the road). More generally, if the cash book reflected the events of which Mr Naboulsi gave evidence, one would expect to see the daily takings, for shifts when Mr Naboulsi himself drove, significantly reduced from their previous level and (if the period straddled the two years) significantly less than those recorded subsequently. But no such phenomenon is evident. That particular aspect of the matter was not put to Mr Naboulsi in cross‑examination. It was made clear, however, that the reliability of the cash book as a true record of transactions was under challenge; it was specifically put to Mr Naboulsi that there were no white cash books; and a number of particular matters were the subject of detailed cross‑examination. In those circumstances, I think it is proper to take account of the apparent difficulty of reconciling the evidence about a bad year with what actually appears in the cash book.
(b) Sundays
The cash book records no takings for any Sunday during the two years in question and, in relation to all but one, the word “OFF” is written in both the “day” and “night” columns. Ms Hird obtained from Cabcharge Australia Pty Ltd records relating to the Taxi Transport Subsidy Scheme (TTSS) which that company administers. The TTSS is a State subsidy scheme for disabled people: the passenger who is entitled to the benefit of the scheme pays half the fare and completes a Cabcharge docket in relation to the other half. Dockets relating to Mr Naboulsi’s cab for the period from 5 October 1995 to 30 June 1997 indicate that vouchers had been completed for trips said to have occurred on seventeen days during that period when, according to the cash book, no income was earned from Mr Naboulsi’s cabs. The days in question included four during the period when, according to the cash book and Mr Naboulsi’s evidence, the first cab had been written off in an accident and the second cab was not yet ready for use. Of the other days, three fell during what Mr Naboulsi claimed (and the cash book records) to have been a holiday at the end of 1996 and the beginning of 1997. Another is Wednesday, 2 April 1997, during what is recorded as “Easter holiday”. The remaining days are Sundays, six of which are in 1997 (that is, from January to June 1997).
This matter assumed importance, because Ms Hird identified it as the one respect in which there was objective evidence at odds with what appeared in the cash book. Mr Naboulsi’s evidence was that commonly passengers do not date Cabcharge vouchers. They complete the amount of the fare, so that the driver cannot inflate the amount, but usually that is all. Mr Naboulsi at intervals took to the Premier Taxi Co‑operative the vouchers which he had received, either during his own shifts or from other drivers, and presented them so that he might get a cheque for their amount in return. Premier, however, would not accept undated vouchers. Mr Naboulsi would not have his shift records with him when presenting the vouchers, so his practice was, as expressed in his affidavit of 16 February 2000:
“… to write any date on the docket – I usually try to estimate the approximate date of the journey if I can remember it, otherwise I write any date down before I give the dockets for the last month to the cashier.”
Mr Naboulsi repeated that evidence, in substance, in cross‑examination. The effect of the evidence, of course, was that when Mr Naboulsi could not remember the date of a particular trip he would simply select a date at random so that it was not particularly surprising that the dates on some of the vouchers might be Sundays or other days when the cab was off the road. The position was complicated somewhat when, during cross‑examination, Mr Naboulsi was permitted to add an explanation in relation to answers he had given earlier. The explanation was that during 1997 and 1998 the cab had been driven on Sundays by a family friend who had financial difficulties; Mr Naboulsi received no payment for those Sundays; but there were times during 1997 when the cab was indeed being driven for reward ‑ by the family friend – on Sundays.
Mr Naboulsi was cross‑examined about that explanation on the footing that it revealed something never previously disclosed. On balance, however, I accept Mr Naboulsi’s explanation as to the way he dealt with Cabcharge vouchers. It is, in substance, an explanation which he offered to Ms Hird and Mr Hackett during their second interview (and was described by Mr Hackett in his handwritten notes as a “possible explanation”). The number of Sundays involved is relatively small and there is no apparent pattern: in other words, the picture is consistent with the random selection of dates. And, though the contrary was suggested, in my view the fact that dates were recorded which occurred during the period when, according to the cash book, the first cab was written off and the second cab had not been acquired supports Mr Naboulsi’s evidence, rather than otherwise. That is so, I think, simply because there is objective evidence, in the form of insurance and other documents relating to the acquisition and fitting out of the new cab, which suggests that it was not on the road earlier than Mr Naboulsi claimed and the cash book records.
Counsel for Mr Naboulsi submitted that a finding in favour of Mr Naboulsi on this point would be highly significant on the overall question whether Mr Naboulsi should be accepted as a reliable witness and the cash book as a true record, because what was revealed by the TTSS records was the only matter relied upon by the Commissioner as a discrepancy between what the cash book suggested and what other objective evidence revealed. I shall return to that aspect of the matter later in these reasons.
(c) “Pay‑ins” from other drivers
Mr Naboulsi gave the following evidence:
“Those drivers who drove at night paid you money for the privilege of driving the cab and earning their incomes. Is that right? ‑ Yes.
You say your case is that you recorded the information that they gave you as to their takings and then you received some amount of it yourself. Is that right? – What I used to do, I used a set amount of money, not half half.
What was your set amount of money in 1996 and 1997? – Well, $65, jump up to $70 and then jump up to $75. For every driver is the same. Every driver is different, sorry I mean to say and I got not only one driver.”
The cash book shows no consistent pattern of receipts of those amounts from drivers. For example, the three week period commencing on 4 September 1995 shows successive payments (ignoring “off” nights) of $38.00, $46.00, $55.00, $60.00, $55.00, $61.00, $70.00, $70.00, $40.00, $49.00, $54.00, $69.00 and $60.00. That period is by no means atypical of the year ended 30 June 1996. The pattern in the 1997 tax year is similar. There are some periods during which the amounts recorded are greater and more regular. But that is not the general rule. The period of three weeks beginning on 10 March 1997 is by no means unique: $40.00, $45.00, $55.00, $50.00, $60.00, $39.00, $40.00, $55.00, $57.00, $60.00, $33.00, $35.00, $42.00, $50.00, $52.00.
Mr Naboulsi gave three explanations. One is foreshadowed in the passage I have quoted: not every driver would pay the same set amount. The second was that the pay‑in would be reduced for shifts when trade was slack. The third was that there would be a reduction when something went wrong with the car: for example, when it had to be off the road for a period for service or repair. The difficulty is that, if the cash book is taken at face value, the stated exceptions are the rule and the stated rule the exception.
(d) Loans; bank dealings; level of income; social security payments
If the cash book is substantially correct, Mr Naboulsi’s net income for the 1996 tax year was about $13,700.00 and for the 1997 tax year was about $11,000.00. In his affidavit of 17 December 1999, Mr Naboulsi gave the following evidence:
“15.Almost all of my income from the operation of my taxi cab in each of [the financial years in question] was expended in making loan repayments to the Commonwealth Bank for a loan that I had taken out for house renovations and also related to the purchase of my taxi.
16.I recall that in each of the 1996 and 1997 financial years I had virtually no money left at all after paying those loan repayments.
17.In each of the 1996 and 1997 financial years I was totally reliant for the day‑to‑day financial support of myself, my wife and my five children on a low income supplement from the Department of Social Security of approximately $485 per fortnight.”
During each income year Mr Naboulsi paid $1,080.00 per month to the Commonwealth Bank. That was slightly less than Mr Naboulsi’s net income (as recorded in the cash book) for the 1996 year and significantly more than his net income for the 1997 year. In November 1996, Mr Naboulsi purchased a new motor vehicle for $8,000.00. That money, he said, was provided by way of a loan of $10,000.00 from a brother living in Sydney. Mr Naboulsi and members of his family travelled overseas in 1994 and 1998. The money for those trips, according to Mr Naboulsi, came at least substantially from his wife’s family. In 1999 Mr Naboulsi, while retaining the house in which he and his family lived, purchased land at Guildford for $191,000.00. His evidence was that he intended to build on that land and then sell his present home. For the purchase, he borrowed $75,000.00 from the Commonwealth Bank. The balance, he said, came by way of loan from a brother in Lebanon. The applicant tendered two bank cheques drawn on what is apparently a branch in Lebanon of Arab Bank Plc, each dated 10 May 1999 and each for $50,000.00. Both cheques are drawn in favour of Mr Naboulsi. They indicate clearly enough that Mr Naboulsi received $100,000 from Lebanon in May 1999; but they show no more than that.
Finally, on this aspect of the matter, the Commonwealth Bank loan on which Mr Naboulsi was making repayments in 1996 and 1997 was a loan of $25,000 borrowed in order to make some extensions to Mr Naboulsi’s house. Mr Naboulsi was shown bank documentation relating to the loan, and he gave this evidence:
“You told the bank, didn’t you, in 1989, that you were earning clear of expenses, $550 to $600 per week? – That’s right.
And that you were in addition, renting out the vehicle on shifts for a further $300 a week, is that right? – Yes.
So clear of expenses in 1989 you were earning about $50,000 a year out of this cab, weren’t you? – According to this paper, yes.
And that was the fact of the matter, wasn’t it? – Well, you see, if you want to get a loan from the bank, firstly they won’t let you swear on the Bible or on the Koran, you have to tell them to get loan from the bank, anybody can do it. They get paperwork from everywhere. I know there is a not true in somewhere to get the loan, but they still can pay because the bank, what’s happening with the bank, if you tell them, ‘I want 25,000 and my income is 250’, they won’t give you anyway.
Are you suggesting that you told the bank something that was untrue? – That’s right.”
Counsel for Mr Naboulsi submitted that he had provided a believable explanation of his sources of funds for his day‑to‑day outgoings, his overseas trips and his purchases, and that the explanation should be accepted. Counsel for the Commissioner contended that the explanation was improbable and that I should disbelieve it.
(e) The questionnaire
This is the document which the Australian Taxation Office sent to Mr Naboulsi for completion in December 1997. The document was completed in handwriting (of someone other than Mr Naboulsi, no doubt someone in the tax agents’ office) and dated 2 February 1998. There are several indications that the document was completed carelessly and without regard to information which might have been obtained from documents of which the cash book was said to be a faithful copy. Cross‑examination and submissions concentrated on two aspects of the document. First, Mr Naboulsi was asked in the questionnaire whether between 1 July 1995 and 30 June 1997 there were any periods greater than one week when the taxi was not operated and, if so, to provide details and reasons. The answer given was “24‑11‑96 — 5‑12‑96 due to accident”. The period during which the cash book states that the taxi was off the road began on 18 November. Additionally, no mention is made, in the answers to the questionnaire, of the two week holiday Mr Naboulsi claimed to have taken in January of each year. The effect of Mr Naboulsi’s evidence was that he did not himself complete the form; he did not properly understand what was required; and he relied on the tax agent to get it right.
Secondly, the questionnaire contained questions asking, for each financial year, the amount of total takings when Mr Naboulsi drove the taxi and the total amount he received from arrangements with other drivers. The figures given for takings when Mr Naboulsi drove for the 1996 and 1997 years were, respectively, $29,825.00 and $31,255.00. Those are the amounts of total business income stated in the tax returns which, as I have mentioned, do not correspond with the amounts recorded in the cash book. Whoever completed the form made two attempts in answering the question about amounts received from other drivers. First, “N/A” was inserted for each year. That was crossed out. The figures $2,000.00 and $2,250.00 were then inserted for 1996 and 1997 respectively. That, on any view, was plainly and seriously inaccurate.
Counsel for Mr Naboulsi submitted that I should accept that Mr Naboulsi relied on the tax agents. I should conclude that their performance in completing the questionnaire was no better than their efforts in completing the tax returns. Counsel for the Commissioner contended that, if there had been a white cash book containing the information transcribed into the cash book prepared for the audit, it would have been used and, if it had been, the questionnaire would have been completed very differently.
(f) Evidence of Ms Hird and Mr Hackett
Both Ms Hird and Mr Hackett gave affidavit evidence, and were cross‑examined, about the interviews they had conducted with Mr Naboulsi and Mr Ward. Counsel for Mr Naboulsi criticised their evidence in several respects and submitted that, where their account differed from that given by Mr Naboulsi, I should prefer the evidence of Mr Naboulsi. Ms Hird was in charge of the investigation of Mr Naboulsi’s tax affairs. Mr Hackett, though her senior, assisted her in the investigation and was at least the principal note taker during the interviews. It is not disputed that handwritten notes identified by Mr Hackett are indeed notes which he made during the interviews. Ms Hird also identified a set of handwritten notes as a contemporaneous note which she made while conducting the first interview with Mr Naboulsi. Additionally, there is in evidence a typewritten narrative account of the first interview: Ms Hird’s evidence was that she prepared it either on the day of the interview or the following day, basing it on the two sets of handwritten notes and her recollection. Again, it was not contended that the typewritten note is not what it purports to be. It was submitted, however, that I should disbelieve Ms Hird’s evidence that she made a handwritten note at the meeting. The basis of that submission is evidence of Mr Naboulsi that Mr Hackett alone was taking notes during the interview and the proposition that, as Ms Hird was principally conducting the interview and asking the questions, faced with the necessity frequently of repeating and explaining matters for Mr Naboulsi whose understanding of English was imperfect, she could not, at the same time, have made notes.
I do not accept that submission. There is no apparent reason why Ms Hird, who had Mr Hackett’s note and in any event prepared no later than the following day a typewritten account of the meeting, should at some unspecified time have thought it sensible to produce some brief handwritten notes and then falsely to claim that they were made during the interview. It is, I think, a matter of common experience that people make notes during interviews which they conduct or meetings in which they participate; the notes may be less full than they would be if the note taker were merely that and not also a participant. Ms Hird’s notes are laconic. It is a matter about which Mr Naboulsi might readily be mistaken; there is no reason to suppose that his evidence on the topic was deliberately false. But I accept Ms Hird’s evidence that she took notes during the interview.
Counsel for Mr Naboulsi submitted also that, despite evidence given by each of Ms Hird and Mr Hackett to the contrary, I should find that they consulted each other in relation to the preparation of their affidavits. Particular passages in each affidavit were relied on. I have read both affidavits, both sets of handwritten notes and the typewritten account of the interview. I am unpersuaded by the submission. The accounts are by no means identical; and similarities are readily to be explained by reference to the notes and the typed account (in saying that I am anticipating my discussion of another aspect of the criticism of the evidence, mentioned below). A particular similarity between the affidavit evidence of Ms Hird and that of Mr Hackett relates to the statement attributed to Mr Ward, to the effect that there were no working papers but that the gross income was entered directly into the computer based on discussions with Mr Naboulsi. It was said that that similarity, particularly, showed collusion because, although Mr Hackett gave evidence that that statement by Mr Ward “floored” him, there is no handwritten note of it and it is not recorded in the typed account. Certainly it is true that the handwritten notes are, at least, cryptic on the general topic. The notes are written underneath what appears to be a proforma series of questions. Mr Hackett wrote some additional notes on a separate sheet of paper. I shall set out the relevant questions and the answers noted respectively by Ms Hird and Mr Hackett.
“16. How are your taxi takings recorded?
Ms Hird:records daily takings on paper. Completed cash book for 2 years.
Mr Hackett: recorded daily on a piece of paper – transferred to the book once a year then paper thrown away.
…
18.What records were submitted to the tax agent for preparation of tax returns, in regards to income?
[Neither Ms Hird nor Mr Hackett wrote a note underneath this question.]
19. How do you calculate the gross income returned?
Ms Hird: based on estimate of weekly takings
[Mr Hackett did not record an answer to this question.]
20. What other records are used in the preparation of income tax returns?
Ms Hird:papers not kept.
Mr Hackett: taking written on paper but once transferred to book – papers thrown out.”
The notes are brief and, it is fair to say, somewhat sketchy. The typed account is a good deal fuller. The relevant passage reads:
“Firstly I asked what records had been brought as per our written request. Trevor advised that Mr Naboulsi had a cash book in which he recorded his daily takings and expenses. No roster sheets, diary or pay‑in sheets had been recorded or kept. Mr Naboulsi had his driver’s [sic] names, addresses and authority numbers in a pocket diary which he showed us. He stated he had no other records relating to his income. During the interview it came out, whilst asking about what had been provided to the tax agent to prepare tax returns, that the cash book had been prepared by Mr Naboulsi in preparation for the audit. He stated he had recorded his daily takings on pieces of paper kept in a box at home, he had transcribed these to the cash book for the 1996 and 1997 financial year. Mr Naboulsi also advised that he had not kept the papers, he had disposed of them.
Trevor advised that the gross income figure in Mr Naboulsi’s returns were not estimates, though they did contain some estimation. He said Mr Naboulsi advised Ali the amount of his weekly takings and that Mr Naboulsi knows how much he earns on a weekly basis. Trevor was asked for the working papers for the preparation of Mr Naboulsi’s tax return. He advised that working papers were not prepared, tax return details were entered directly into the computer.”
That records, in substance, among other things what is attributed to Mr Ward by both Ms Hird and Mr Hackett. If Mr Ward said what is attributed to him, there is at least a degree of mystery, if it is also true that Mr Oygur took instructions from Mr Naboulsi and Mr Ward prepared the tax returns but did not meet Mr Naboulsi, as to how the process actually occurred. But what both Ms Hird and Mr Hackett record in their affidavits reflects what Ms Hird had recorded in her account of the interview written very shortly after it took place. Subject to one matter to which I shall come, it is I think more likely that each had access to the contemporaneous account than that they colluded.
Mr Hackett, as I have said, gave evidence that he did not consult with Ms Hird in relation to the preparation of his affidavit. He also gave evidence that when he prepared his affidavit he had his own handwritten notes; with what appeared to be considerably less certainty, he gave evidence that he did not recall having the typewritten account which Ms Hird had prepared after the interview. It strikes me as rather improbable that Mr Hackett would have recalled precisely what he recorded in his affidavit, aided only by his handwritten notes. But I think it is a good deal more probable that he was mistaken in saying that he did not have the typed account than that he lied when he said that he did not collude. There is a passage in his affidavit which received no particular attention in cross‑examination, as follows:
“Exhibited hereto and marked ‘H‑1’ is a copy of my handwritten notes taken during the 1 June 1998 interview. Ms Hird’s typed summary of the interview is Exhibit SCH‑6 to her affidavit sworn 3 April 2000.”
That at least suggests that he saw a copy of the typed account marked as an exhibit to Ms Hird’s affidavit. It does not necessarily mean that he had the opportunity to read the affidavit as well and, in view of his sworn evidence and of the course of cross‑examination, I find that he did not. However that may be, if there was an invention by the officers about Mr Ward’s observations, it happened not when the affidavits were prepared but when Ms Hird prepared the typewritten account: and there is no basis for a finding that that is what occurred. In any event, as will appear, Mr Ward’s admission is perhaps not as surprising as it might have first seemed.
A further attack was made on the evidence of Ms Hird and Mr Ward. It was said that they did not give full accounts, in their affidavits, of the interviews and, particularly, did not mention matters which corroborated particular evidence given by Mr Naboulsi: for example, the fact of his wife’s illness and its effect on his takings; the “possible explanation” of the discrepancy between the Cabcharge vouchers and the cash book; and the circumstance that it had been admitted, from the outset, that the cash book was not a contemporaneous record. That submission has no substance. The affidavit accounts did not purport to be complete. The contemporaneous documents incorporating the matters favourable to Mr Naboulsi were made available.
In short, in my view the attack on the credit of Ms Hird and Mr Hackett fails.
Consideration; conclusion
Counsel for Mr Naboulsi submitted, correctly, that the burden on Mr Naboulsi is, in practical terms, to establish – but only on the balance of probabilities – that the cash book is a genuine record of the takings and the expenses of Mr Naboulsi’s taxi business during the income years in question. If he discharges that burden, then he can rely on the evidence of the two expert accountants whom he called, Mr McAuley and Mr Sayed, to establish that the assessments are excessive. Again in practical terms, that means that the question I have to decide (on the balance of probabilities) is whether Mr Naboulsi’s account of the way in which the cash book was created, and of the way in which he kept the records from which he said it was derived, is true.
It was submitted that Mr Naboulsi gave his evidence carefully and with candour. Candour was demonstrated, it was said, by the circumstance that when Mr Naboulsi realised that his earlier affidavit was wrong he gave the correct information in a later affidavit and did not read the relevant passages of the earlier one. It was submitted, as I have mentioned, that Mr Naboulsi was able to explain matters of particular concern to the officers of the Australian Taxation Office and that his explanations were credible. It was said also that in important respects there had been a consistency about his account from the time when he was first confronted with questions about his tax affairs, particularly a ready admission (which might not have been expected) that the cash book had been prepared only for the purposes of the audit. Mr Naboulsi’s account of the reasons why he had not kept his primary records (he did not realise he had to, the Taxi Co‑operative did not require him to and he was unaware of other governmental requirements) should be accepted. So, having regard to the fact that Mr Naboulsi was born overseas and does not have English as his first language, should his explanation that he thought he should prepare a clean cash book for the Tax Office rather than keep, or give the Tax Office, a messy one. And, it was said, much of the difficulty that emerged during cross‑examination arose simply because of Mr Naboulsi’s difficulty with the language of a court room. It was said also that the fact that the family received Social Security payments was corroboration of Mr Naboulsi’s evidence that his income was of the order recorded in the cash book.
Certainly I found Mr Naboulsi to be an engaging witness, not an obviously evasive one. But he has lived in Australia since he was aged 20. He has owned taxi cabs since 1983. He has children who were born here and who attend schools in Sydney. He has for some time employed tax agents to prepare his income tax returns. Though some difficulty with the terminology of questions in cross‑examination is not at all surprising, the different accounts as between the first and last affidavits is much more so: the concepts are hardly complex, Mr Naboulsi knew what he had done, and he must be taken to have been in a position to take the time needed in discussion with his solicitors to make sure that his affidavit evidence was correct.
But the fundamental difficulty with Mr Naboulsi’s case, given the circumstances in which, and the documents on the basis of which, his tax returns were prepared, is the extent of the discrepancy between his tax returns and the cash book. If the returns were indeed prepared on the basis of takings records or cash books made up from them (now reflected in the cash book prepared for the audit), the differences are, in my view, inexplicable. They are not such as to be readily explained by mere – even gross – carelessness, occurring as they did in both years. And the disowned evidence of Mr Oygur, combined with the circumstances in which Mr Ward did not give evidence, hardly inspires confidence that there might be a convincing explanation consistent with the proposition that the cash book reflects primary records which formed the basis of the tax returns. The statement attributed to Mr Ward in the evidence of Ms Hird and Mr Hackett would at least explain why the cash book and the tax returns bear no apparent relationship to each other.
The questionnaire must, I think, also be regarded as significant. There is no reason not to accept Mr Naboulsi’s evidence that the tax agents prepared the answers. They prepared them, and Mr Naboulsi signed the document, at a time when each knew – the letter from the Tax Office said so – that there was a general investigation in progress in relation to the taxi industry and that questions were being asked as to Mr Naboulsi’s own tax affairs during the 1996 and 1997 income years. Even if one makes a substantial allowance for Mr Naboulsi’s arrival in Australia only at the age of 20 and attributes a high level of incompetence to the tax agents, it is still not easy to accept that, if primary records were available showing the true takings and expenses of Mr Naboulsi’s business during the two years, they would not have been referred to and reflected in the answers, and retained. Quite apart from takings and expenses, if Mr Naboulsi had a record which clearly indicated the precise period during which his cab had been off the road, it is surprising indeed that that record (the existence of which, according to his evidence, was known to the tax agent) was not referred to and reflected in the answers. Returning to the conflict of evidence between Mr Naboulsi, on the one hand, and Ms Hird and Mr Hackett on the other, as to what Mr Ward said during the first interview, a comparison between the cash book on the one hand, and the returns and questionnaire on the other, suggests that the evidence of Ms Hird and Mr Hackett is more likely correct.
The other matters referred to in evidence and argument are in my view, by comparison with that fundamental difficulty, of little importance. The discrepancy between the cash book and Mr Naboulsi’s evidence about the basis on which he received payment from other drivers is, perhaps, another, though relatively minor, indication that the cash book may be unreliable. So, perhaps, is the difficulty of finding in the cash book any specific reflection of Mr Naboulsi’s evidence about his wife’s illness and its effect. Receipt of Social Security payments is not, I think, an indication particularly one way or the other. And it is unnecessary to make any finding about other matters, such as the evidence about the various loans and family payments.
For those reasons I find that Mr Naboulsi has not discharged the burden of establishing that the cash book truly reflects the takings or income of his taxi business. It follows that he has not established that the assessment, for either year of income, is excessive. Accordingly, the applications will be dismissed with costs.
I certify that the preceding fifty‑eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.
Associate:
Dated: 16 June 2000
Counsel for the Applicant: C J Bevan Solicitor for the Applicant: McGrath Dicembre & Company Counsel for the Respondent: D B McGovern Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 1, 2, 3 and 4 May 2000 Date of Judgment: 16 June 2000
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