Nguyen and Commissioner of Taxation (Taxation)
[2016] AATA 1041
•19 December 2016
Nguyen and Commissioner of Taxation (Taxation) [2016] AATA 1041 (19 December 2016)
Division
TAXATION & COMMERCIAL DIVISION
File Number(s)
2015/1862, 2015/1863, 2015/1864, 2015/1865, 2015/1866
Re
Hue Thi Nguyen
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal F D O'Loughlin, Senior Member
Date 19 December 2016 Place Melbourne The Tribunal affirms the decision under review.
........................[sgd]................................................
F D O'Loughlin, Senior Member
INCOME TAX – whether amended assessments excessive – burden of proof on applicant taxpayer – balance of probabilities - fraud or evasion - whether requisite opinion formed – onus on applicant to show fraud or evasion opinion should not have been formed
Legislation
Administrative Appeals Tribunal Act 1975 s 37
Income Tax Assessment Act 1936 ss 167, 170
Income Tax Assessment Act 1997
Taxation Administration Act 1953 ss 14ZZK, 284-75, 284-90, 284-220
Cases
Bai v Federal Commissioner Taxation [2015] FCA 973
Binetter v Commissioner of Taxation [2016] FCAFC 163
Chief Executive Officer of Customs v JMI Trading Pty Ltd [2000] VSC 537
Commissioner of Taxation v Dalco (1990) 168 CLR 614
Comptroller-General of Customs v Parker (2006) 200 FLR 44
Davis v Commissioner of Taxation (2000) 171 ALR 654
Denver Chemical Manufacturing Co v Commissioner of Taxation (NSW) (1949) 79 CLR 296
Evans v Federal Commissioner of Taxation 89 ATC 4540
Federal Commissioner of Taxation v Australian Petroleum Suppliers Pty Ltd [2003] VSC 240
Federal Commissioner of Taxation v Futuris Corporation Limited (2008) 237 CLR 146
Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149
Galea v Federal Commissioner of Taxation (1990) 21 ALD 722
Gauci v Commissioner of Taxation (1975) 135 CLR 81
George v Commissioner of Taxation (1952) 86 CLR 183
Imperial Bottleshops Pty Ltd & Egerton v Federal Commissioner of Taxation 91 ATC 4546
Kennedy v Administrative Appeals Tribunal (2008) 168 FCR 566
Ludwigs Canberra Bond Cellar Pty Ltd v Sheen (1982) 46 ACTR 13
McAndrew v Commissioner of Taxation (1951) 98 CLR 263
Moreau v Commissioner of Taxation (1926) 39 CLR 65
Parry v Federal Commissioner of Taxation 2004 ATC 2333
Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402
Saffron v Federal Commissioner of Taxation (1993) 93 ATC 4456
Trautwein v Commissioner of Taxation (1936) 56 CLR 63
Vu v Commissioner of Taxation [2006] FCA 889
Secondary Materials
Law Administration Practice Statement PS LA 2007/24
REASONS FOR DECISION
F D O'Loughlin, Senior Member
19 December 2016
For the 2008 to 2012 income years[1] the Commissioner[2] invoked s 167 of the 1936 Assessment Act[3] and amended the Applicant’s income tax assessments to include various unexplained deposits to bank accounts she controlled and unexplained cash presented by her at casinos totalling $2,471,789.00. The Commissioner imposed penalty under item 1 in s 284-90(1) of Schedule 1 to the Administration Act[4] at the rate of 75% for intentional disregard of a taxation law for the first year, and increased the rate to 90% under s 284-220(1)(c) of Schedule 1 to the Administration Act for each of the 2009 to 2012 income years. The 2008 to 2010 income years’ amended assessments were made after the Commissioner formed an opinion that there had been fraud or evasion for the purposes of item 5 of the table in s 170(1) of the 1936 Assessment Act.
[1]An income year being the 12 month period ending on 30 June 2016.
[2]The Respondent Commissioner of Taxation of the Commonwealth of Australia.
[3]The Income Tax Assessment Act 1936 (Cth).
[4]The Taxation Administration Act 1953 (Cth).
Following the Commissioner’s decision on the Applicant’s objections to the amended assessments and penalties, only the 2008, 2010 to 2012 income years remain in dispute. Table 1 shows the taxable income amounts returned, the adjustments made in the amended assessments issued, the objection adjustments and the assessed amounts that continue to be in dispute.
Table 1
3. Year
4. 2008
5. 2009
6. 2010
7. 2011
8. 2012
9.
10. $
11. $
12. $
13. $
14. $
15. Taxable income/(loss) returned
16. 27,431
17. 29,624
18. 2,142
19. -110
20. -35,469
21. Unexplained bank deposits
22. 195,304
23. 90,000
24. 366,142
25. 118,750
26. 466,066
27. Unexplained cash presented at casinos
28.
29. 78,075
30. 16,242
31. 1,141,210
32.
33. Amended taxable income
34. 222,735
35. 197,699
36. 384,526
37. 1,259,850
38. 430,597
39. Objection adjustment
40. 0
41. 168,075
42. 183,270
43. 0
44. 109,000
45. Post objection taxable income assessed
46. 222,735
47. 29,624
48. 201,256
49. 1,259,850
50. 321,597
Penalties continue to be in dispute but the quantum has been adjusted to accord with the revised taxable incomes post the objection decisions.
In reviewing the Applicant’s tax affairs, the Commissioner adopted an approach of identifying:
(a)deposits to the Applicant’s bank accounts amounts that were not explained by an accompanying narrative;
(b)amounts that he accepted as casino winnings; and
(c)amounts of cash presented at casinos that were not explained by either prior winnings or a bank account withdrawal,
and made amended assessments accordingly.
In her objections the Applicant contended that:
(a)the adjustments made by the Commissioner were not amounts of the Applicant’s assessable income because they were not ordinary or statutory income;
(b)the deposits to the Applicant’s bank accounts and any cash held were attributable to:
(i)significant gifts from family members;
(ii)significant loans from her friend, George Morris;
(iii)occasional wins from betting at various casinos; and
(iv)income from working as a beauty therapist as an employee, and a sole trader;
(c)there was no avoidance of tax due to fraud or evasion for the 2008 and 2010 income years and therefore the Commissioner was prohibited from raising any amended assessment for these years;
(d)the assessments were invalidly issued and were motivated by improper considerations in contravention of Practice Statement PSLA 2007/24;
(e)no penalties could be imposed as there was no tax shortfall for any income year; and
(f)if there were any shortfalls, the Applicant took reasonable care in lodging her tax returns and was otherwise protected by the safe harbour provisions in s 284-75(6) of Schedule 1 to the Administration Act.
The Commissioner was satisfied that the Applicant’s husband’s family had given some amounts to her however, he was not satisfied that the Applicant had received monies by way of loan from her friend Mr Morris or that there were additional wins from casinos that he had not already taken into account. The decisions on the objections were as reflected in Table 1 above.
ISSUES
The issues to be decided are:
(a)whether the Applicant has demonstrated that the post objection decision amended income tax assessments for the 2008 and 2010 to 2012 income years are excessive by showing the provenance of the deposits and amounts presented to casinos;
(b)whether the Applicant has demonstrated that the Commissioner was wrong in forming an opinion that there was fraud and evasion in respect of the 2008 and 2010 income years;
(c)whether the Tribunal has jurisdiction to determine whether the amended assessments were invalidly issued; and
(d)whether the penalties were correctly imposed.
The Applicant has not agitated remission of penalties.
EVIDENCE AND FACTS
The evidence led included:
(a)the documents lodged under s 37 of the AAT Act[5] which included:
(i)a statutory declaration made by a Mr Morris who is alleged to be a friend of the Applicant;
(ii)copies of enquiries made of Mr Morris, who is claimed to have loaned sums of money to the Applicant during the relevant income years, and his responses. Included in the responses were extensive statements for various of Mr Morris’s bank accounts which were annotated/highlighted to show cash withdrawals said to support his statement that he had loaned cash to the Applicant;
(iii)personal details concerning Mr Morris including his bankruptcy and his return lodgement history;
(iv)extensive records of the Applicant’s gambling activities maintained by casinos in Queensland, Melbourne and Perth; and
(v)immigration records in respect of the Applicant’s relatives;
(b)written statements made by the Applicant and one of her friends, Ms Hang Nguyen, who loaned her sums of money, but not sufficient to explain the amounts identified by the Commissioner; and
(c)oral evidence given at the hearing by the Applicant and Ms Hang Nguyen.
[5] Administrative Appeals Tribunal Act 1975 (Cth).
The Applicant was born in Vietnam and has been living in Australia for nine years. She currently lives in Queensland. The Applicant has limited education and limited command of the English language and either worked as an employee Nail Technician in a nail salon or operated her own nail salon and beauty services business in the Brisbane CBD. She frequently gambles at Crown Casino in Queensland, less frequently at the Melbourne Casino and occasionally at the Perth Casino. She makes very short visits to both Melbourne and, while less frequently, Perth.
The Applicant relies on the services of a registered tax agent for lodgement of her income tax returns.
The facts of the deposits to the Applicant’s bank accounts, and the cash presented to the Casinos are not disputed.
The Applicant claims to have borrowed $2.555 million from a Mr Morris who is a resident of Victoria. The Applicant relies on these loans to explain the majority of the funds either deposited by her to her bank accounts and/or presented by her at the casinos.
Mr Morris did not attend the Tribunal in person and his statutory declaration was not subjected to any scrutiny. In the statutory declaration Mr Morris said that:
(a)he lent the Applicant large sums on various occasions;
(b)the amounts were handed over in cash;
(c)that he withdrew amounts from bank accounts to provide to the Applicant; and
(d)he had money on hand from some years past.
Among the criticisms of Mr Morris’s statutory declaration are that:
(a)there are no records or documentation concerning the loans between parties who claim to be unrelated;
(b)no security was provided for the alleged loans;
(c)no repayments appear to have been made;
(d)the entries in the bank statements identified by Mr Morris as supporting the cash advances he said were handed to the Applicant make those statements implausible. In one account Mr Morris identified 187 withdrawal entries over the period from 4 July 2008 to 30 September 2009, the vast majority of which were made from locations in Melbourne, with an aggregate value of $186,485. Notwithstanding that Mr Morris resides in Victoria and the Applicant resides in Queensland, at least 102 withdrawals totalling $174,645 were made while the Applicant was in Brisbane;
(e)some of the withdrawals from Mr Morris’s bank accounts contain notations suggesting purposes other than loans to the Applicant, for example payments to Mr Morris’s related entities; and
(f)Mr Morris’s statement that he had money on hand from some years ago is not consistent with the fact that bank accounts do not show a reserve of funds being drawn upon, rather they show an ebb and flow of money deposited and withdrawn, and Mr Morris was bankrupt during this time.
It is unnecessary to address the remaining criticisms of Mr Morris’s statutory declaration. In circumstances where Mr Morris’s statutory declaration is relied on heavily by the Applicant, and where it appears inherently improbable that the statutory declaration is true, and Mr Morris is not able to be scrutinized in respect of his statutory declaration, none of the content of that statutory declaration can be accepted as proven or true.
That leaves the Applicant with an uncorroborated assertion of an improbable source of funds to explain the majority of the bank deposits and amounts produced at casinos that the Commissioner has assessed.
The Applicant had personal gambling record facilities at the Queensland, Melbourne and Perth casinos she frequented. The records show at least some of her gambling activities. Those reports do not record all of the amounts shown as presented to the Casino that are alleged to be gambling winnings. The Applicant’s explanation of the differences between what the casinos’ records show and the amounts she claims to have won, is her contention that she did not transact all of her gambling activities through the casinos’ personal gambling record facilities, and that from time to time she maintained a stock of gambling chips that were not cashed in. That being so, there is no evidence that corroborates the provenance of all of the amounts presented to casinos that the Commissioner has relied on in making the amended assessments.
The Applicant claims to have received gifts from her relatives in Vietnam. Gifts of $500,590 in the 2009, 2010 and 2012 income years have been verified and accepted by the Commissioner. The Applicant alleges that there were further gifts of $9,000 each time her relatives visited. The number of visits recorded in Department of Immigration records does not support the Applicant’s contentions concerning the unverified gifts.
There is evidence of amounts loaned to the Applicant by Ms Hang Nguyen but not in the amounts requires to account for the unexplained money.
The necessary conclusion is that the Applicant has failed to demonstrate the character of the sources of money available to her.
ANALYSIS
Burden of proof
This matter is inescapably a burden of proof case where the scope of s 14ZZK of the Administration Act is enlivened.
The burden of proof imposed by s 14ZZK of the Administration Act requires a taxpayer to establish that the relevant assessment is excessive. In this context, excessive means the amount of the assessment exceeds what it should be.[6] What this means is that a taxpayer must establish the claim he or she asserts.[7] It is not enough to show that the Commissioner made an error[8] or that an assessment may be wrong.[9] Taxpayers must go further and show what the correct position should be,[10] or what correction should be made to make the assessment right or more nearly right,[11] or the amount that should be assessed for tax,[12] or show that he or she has been assessed to a liability which the Assessment Acts[13] does not impose.[14]
[6]Commissioner of Taxation v Dalco (1990) 168 CLR 614, 621 per Brennan J with whom Mason CJ and Dawson, Gaudron and McHugh JJ agreed and 631 per Toohey J. McAndrew v Commissioner of Taxation (1951) 98 CLR 263.
[7]Trautwein v Commissioner of Taxation (1936) 56 CLR 63, 87 per Latham CJ, Moreau v Commissioner of Taxation (1926) 39 CLR 65, 70 per Isaacs J.
[8]Trautwein above, 87 per Latham CJ, Dalco above, 621 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed.
[9]Trautwein above at 112 per Dixon and Evatt JJ, Dalco above, 625 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed, 631 and 633 per Toohey J.
[10]Trautwein above at 87 per Latham CJ.
[11]Trautwein above at 88 per Latham CJ.
[12]Trautwein above at 103/4 per Starke J., Dalco above at 625 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed.
[13]The Income Tax Assessment Act 1997 (Cth) and the 1936 Assessment Act.
[14]Trautwein above at 111 per Dixon and Evatt JJ., Dalco above at 624 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed and 626 per Deane J and 631 per Toohey J, George v Commissioner of Taxation (1952) 86 CLR 183 at 201 per Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ.
There is no onus on the Commissioner under the Assessment Acts[15] or the Administration Act and there is no requirement that an assessment be supported by evidence.[16] It is not necessary for the Commissioner to show that a taxpayer’s assessable income was at least a particular figure or that a particular amount is assessable. And if the Commissioner chooses to make such an assertion and fails to prove it, that failure does not bear upon whether the taxpayer has discharged the statutory burden of proving an assessment is excessive.[17]
[15]The 1936 Assessment Act and the Income tax Assessment Act 1997 (Cth).
[16]Gauci v Commissioner of Taxation (1975) 135 CLR 81, 89 per Mason J (in the minority but not on this point, see Dalco above per Brennan J at 624).
[17]Vu v Commissioner of Taxation [2006] FCA 889, 9 per Finn J., Galea v Federal Commissioner of Taxation (1990) 21 ALD 722 per Hill J.
The manner in which a taxpayer’s burden might be discharged varies with the circumstances. If a dispute concerns assessability of an identified amount, then a taxpayer may show that the assessment is excessive by demonstrating that that amount is not assessable without any examination of the balance of the assessment.[18] This might be shown by demonstrating that the amount was derived by someone else.[19] If a dispute is not so confined then any shortfall in proof of the amount by which an assessment is excessive is problematic for a taxpayer.[20] In these circumstances, a taxpayer needs to prove the actual amount that should be assessed.
[18]Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 624 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed.
[19]Dalco above at 626 per Deane J.
[20]Dalco above at 624 per Brennan J with whom Mason CJ and Dawson Gaudron and McHugh JJ agreed.
There are two further principles connected to the burden of proof principles outlined above that have a particular relevance in this proceeding.
(a)The first concerns self-serving evidence. The evidence of witnesses who have interests that turn on whether that evidence is accepted, typically parties to an application in the Tribunal, needs to be approached critically,[21] and will necessarily be the subject of careful scrutiny.[22] Similar principles ought be applied to the evidence of those who have close relationships with parties to a proceeding, such as a director and shareholder. In Imperial Bottleshops,[23] where business expenditures were said to have been incurred, Hill J expanded on the caution required and said:
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 has 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 Federal Commissioner of Taxation (1956) 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 borne in mind that the evidence of a taxpayer is not to be regarded as "prima facie unacceptable", cf McCormack v Federal Commissioner of Taxation (1978-9) 143 CLR 284 at 302 per Gibbs J.[24]
Importantly, in Imperial Bottleshops, there was substantial, corroborating evidence from two employees of a supplier to the taxpayer and six current or former employees of the taxpayer. In addition, the statement of wealth did not show unexplained accumulations of assets that were inconsistent with the taxation position asserted by the taxpayer. The corroborating evidence, together with a rational reason for an absence of records, allowed Hill J to form a view that the taxpayer should be believed.[25]
(b)The second concerns the limited circumstances in which inferences can be drawn. They can be drawn from observed facts. Mere assumptions, guesswork and speculation are not accommodated in the process of arriving at conclusions.[26] There must be a body of evidence that might reasonably sustain a relevant finding of fact or permit the Tribunal to draw an inference.[27]
[21]See Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149, 81- 82 per Ryan, Jessup and Perram JJ and their explanation of the remarks of Fullagar J in Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402, 403.
[22]See Davis v Commissioner of Taxation (2000) 171 ALR 654, 47 per Hill J.
[23]Imperial Bottleshops Pty Ltd & Egerton v Federal Commissioner of Taxation 91 ATC 4546.
[24]At 4552.
[25]Imperial Bottleshops, 4554-4555.
[26]See Tisdall v Webber (2011) 193 FCR 260, [128] per Buchanan J, with whom Tracey J agreed.
[27]See Tisdall, above, at [127] per Buchanan J, with whom Tracey J agreed.
In cases where the burden of proving an assessment is in issue, two things are possible: first it may be the case that the amount of the assessment made by the Commissioner may not be the true taxable income and tax payable determined by applying the Assessment Acts to the taxpayer’s circumstances if adequate proofs were available, and, second, a taxpayer may well be giving an honest account in his her or its evidence, but the evidence does not demonstrate that the assessment is excessive in the requisite sense.
In the present case, the Applicant has not discharged the burden on her as noted above.[28]
[28] See paragraph [21]
Fraud and evasion
The Applicant contends that there is no fraud where there is a subjective belief in the truth of the relevant statement (or tax return), that evasion requires either a finding of behaviour that keeps the Commissioner in the dark or a blameworthy act and that it entails:
(a)something more than avoidance, or the mere fact of non-payment; and
(b)more than mere withholding of information or furnishing of misleading information;
(c)that evasion falls between innocent mistake, and the intention to defraud;
(d)omitting income from a return, or wrongly claiming a deduction (intentionally or otherwise) without any credible or excusable explanation for either;
(e)an enquiry as to whether a taxpayer has acted honestly and reasonably in relation to his public obligations;
(f)a conscious act of will by the taxpayer beyond an accident or mistake;
and refers to a range of cases that have addressed what constitutes evasion and contends that none of the positive findings of evasion apply to her circumstances because:
(g)the Applicant has limited education background and limited command of the English language;
(h)it is not possible for her to enter into any systematic scheme to defraud the Commissioner;
(i)in the decided cases relied on by Commissioner there was a presumed business activity that would generate an income that is proportionate to the amount that was assessed by the Commissioner;
(j)the amended assessable income was far too large and hence would be unreasonable or excessive for a Nail Technician, like the Applicant;
(k)the Commissioner has failed to establish that there was a business that would generate a realistic income;
(l)the sources of the funds in question have been established;
(m)importantly, that a failure to discharge the burden under s 14ZZK of proving an assessment is excessive does not equate with a failure to discharge the burden of proving there was no fraud or evasion or, in relation to penalties, that there was no intentional disregard of a taxation law.
The propositions in paragraphs (a) to (g) above may be true. However, those in paragraphs (h) to (m) do not resolve the case in favour of the Applicant. This is not a case where the Commissioner has pointed to a particular behaviour and asserted that that constitutes fraud or evasion. If he had, the principles in the Denver Chemical[29] decision, and the decisions that have followed or applied that decision,[30] may be enlivened.
[29]Denver Chemical Manufacturing Co v C of T (NSW) (1949) 79 CLR 296
[30]Examples are CEO Customs v JMI Trading Pty Ltd [2000] VSC 537 at [27] to [30] per McDonald J, Saffron vF. C. of T. (1993) 93 ATC 4456, Ludwigs Canberra Bond Cellar Pty Ltd v Sheen (1982) 46 ACTR 13 at 20 Gallop J, F. C. of T. v Australian Petroleum Suppliers Pty Ltd [2003] VSC 240 at [11] & [12] Bongiorno J, Parry v F. C. of T. 2004 ATC 2333 at [51] & [52], Comptroller-General of Customs v Parker (2006) 200 FLR 44 (NSWSC) at [117] & [118] Simpson J, and Evans v F. C. of T. 89 ATC 4540 at 4554 Hill J.
This is a different case where the Commissioner, relying on Bai[31], says that the Applicant bears the onus of showing that, on the balance of probabilities, there was no fraud and evasion. In the Commissioner’s words:
…In circumstances where the applicant is unable to discharge her burden of showing that the amended assessments are excessive and the source of the funds deposited in to her bank accounts and presented at the casinos remains unexplained, the applicant will have failed to discharge that burden.
It follows that, the question of whether there was fraud or evasion will depend upon whether the applicant’s evidence as to the source of the funds is otherwise accepted.[32]
[31]Bai v FCT [2015] FCA 973 at [34].
[32]Commissioner’s Outline of Submissions at [31]-[32].
The decision in Bai was the subject of the appeal decision in Binneter & Ors.[33]Perram and Davies JJ begin to the effect that a taxpayer carries the onus of showing that there was no fraud or evasion[34] or that the Commissioner had not formed the requisite opinion,[35] and explain that there is no onus on the Commissioner to show that the assessment was correctly made,[36] and that while this Tribunal can re-examine whether, on the evidence before it, there was fraud or evasion, and can substitute its opinion for the Commissioner’s, the issue for this Tribunal is whether the taxpayer has discharged the onus of showing that the fraud or evasion opinion should not have been formed. If a taxpayer does not do that, the amended assessments stand.[37]
[33]Binetter v Commissioner of Taxation [2016] FCAFC 163. The relevant decision concerning fraud or evasion and the burden of disproving it being the joint decision of Perram and Davies JJ. Siopis J agreeing in these aspects of the joint reasons.
[34]At [2016] FCAFC 163 [80].
[35]At [2016] FCAFC 163 [81].
[36]At [2016] FCAFC 163 [92].
[37]At [2016] FCAFC 163 [93].
The manner in which a taxpayer would achieve such a goal in an income case depends on the particular circumstances. A taxpayer could demonstrate there was no omission of income and therefore no avoidance of tax. Alternatively a taxpayer could demonstrate that the amounts, while assessable, were not included in assessable income returned for a reason that shows that while there was a shortcoming, it was a shortcoming that fell short of a blameworthy act in the Denver Chemical[38] sense.
[38]At (1949) 79 CLR 313 Dixon J.
Provided the Commissioner has formed the requisite opinion, in an income case, the effect of the Binneter decision, and those on which it is based, may well be to make a fraud or evasion finding unchallengeable independently of the challenge to the assessability of the relevant amount. If that is so that is not a matter that the Tribunal can alter. Thus the Applicant’s contention at paragraph [29(m)] above, in the present circumstances, and notwithstanding the possibility noted at paragraph [27] above, cannot be accepted.
Where the character of an amount remains unestablished, the taxpayer has not proven the amount is not assessable, it is difficult, if not impossible to:
(a)form any view as to the level of shortcoming, if there be one;
(b)form a view as to whether there has been an innocent mistake or a blameworthy act; and
(c)say that the taxpayer has demonstrated that there was not fraud or evasion.
Validity of the amended assessments
Whether an assessment is invalid cannot be agitated in this Tribunal: [39] and in any event the assessment would be valid unless the Futuris[40] principles apply. Futuris principles do not apply here.
[39]Kennedy v AAT (2008) 168 FCR 566.
[40]F. C. of T. v Futuris Corporation Limited (2008) 237 CLR 146 at [23]-[25]
Further, the Law Administration Practice Statement PS LA 2007/24 relied on is not a binding ruling. Even if it were not followed, and it is not necessary to embark upon an enquiry addressing that question, the Commissioner would not be acting beyond his power.
Penalty
The considerations concerning the approach to challenging the fraud or evasion opinion[41] apply to the penalty imposition. The failure to demonstrate that the amounts were not assessable as income means the level of seriousness of any shortcoming has not been established and whether there was reasonable care or otherwise, or more serious shortcomings have not been established or disproven as the case may be. Similarly, whether the safe harbor rules apply has not been established.
[41]Paragraphs [28] to [34], particularly paragraph [31].
Again, in an income case this may make the penalty unchallengeable independently of the substantive assessment challenge. Again, if that is so, it is not something the Tribunal can alter.
Decision
The Tribunal affirms the decisions under review.
I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of F D O’Loughlin, Senior Member
......................[sgd].....................................
Associate
Dated 19 December 2016
Date of hearing 3 March 2016 Date final submissions received 29 March 2016 Solicitors for the Applicant Essen Lawyers, Mr S Nguyen Counsel for the Respondent Mr E Wheelahan Solicitors for the Respondent Minter Ellison, Ms F Anwar
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