Saunders, B. v The Commissioner of Taxation
[1987] FCA 747
•16 Dec 1987
.- b.
IN THE FED- COURT OF AUSTRALIA ) SOUTH AUSTRALIAN DISTRICT REGISTRY 1 No. SA G62 of 1986
GENERAL DIVISION ) IN THE MATTER of the TAXATION ( UNPAID COMPANY TAX1 ASSESSMENT ACT 1982
and
IN THE MATTER of the INCOME TAX ASSESSMENT ACT 1936 and
IN THE M A T E R of an appeal
thereunder an against assessment of promoter recoupment tax dated the 30th day of October, 1984 for
unpaid undistributed profits tax of H. W. Holdings Pty. Ltd. for the year of income
ended the 30th June, 1978
: - B BARRY SAUNDERS Appellant
m: THE COMMISSIONER OF TAXATION
OF THE COMMONWEALTH OF
AUSTRALIA
Respondent
Motion for an order for further particulars of an assessment of promoters recoupment tax. CORAM: Jenkinson J. DATE:
December, 16 1987 REASONS FOR JUDGMENT
The motion is in an appeal against the respondent's
decision disallowing the applicant's objection against the
assessment. The respondent furnished particulars of the assessment which included the assertion that notice of an assessment of undistributed profits tax in relatlon to a company,
H. W. Holdings Pty. Ltd., concerning which the promoters
recoupment tax assessment had been raised, had been served "in
accordance with the provisions of sub-section 15(71" of the Taxation (UnDaid ComDanv Tax) Assessment Act 1982 ( " the 1982 Assessment Act"). Sub-section 15(7) of the 1982 Assessment Act is concerned only with service of what are in s.15 called notional assessments, which are authorised by sub-sectlons 15(3) and 15(4) to be made in certain circumstances defined in 6.15, of ordinary company tax or undistributed profits tax that would be payable by
a company in relation to a year of income if the company had not
ceased to exist. Section 15 is a provision supplementary to the scheme of taxation which has been described in MacCormlck v.
Federal Commissioner of Taxation (1984) 158 C.L.R. 622.
Sub-section 15(3) authorises the making of an amended
assessment after the company has ceased to exist. There is
nothing in the material before me to suggest that it was that sub-section upon which the respondent relied. Sub-section 15(4)
provides: .
"(4) Where - (a) the company ceased to exist before an assessment was made of the ordinary company tax or undistributed profits tax
payable by the company in relation to a year of income (in this section also referred to as the 'relevant year of
income'), being the year of income in which the last sale time or last purchase time in relation to the scheme occurred
or a preceding year of income; and (b) the Commissioner is of the opinion that,
if the company had not ceased to exist
and an assessment had been made of the
ordinary company tax or undistributed profits tax, as the case may be, payable
by the company in relation to the relevant year of income -
(i) ordinary company t x or undistributed profits tax, as the
case may be, would have become dueand payable by the company in
relation to the relevant year of income; and
( ii) if that ordinary company tax or
undistributed profits tax, as the case may be, had remained unpaid,
recoupment tax would have become payable by a person or persons in relation to the ordinary company tax or undistributed profits tax,
as the case may be, payable by the
company in relation to he relevant year of income,
the Commissioner may make an assessment (in this section also referred to as the
'notional assessment') of the ordinary
company tax (in this section also referred to as the 'notional ordinary company tax') or undistributed profits
tax (in this section also referred to as
the 'notional undistributed profits
tax'), as the case may be, that would be payable by the company in relation to the
relevant year of income if the company
had not ceased to exist."
Paragraph 4 of the applicant's request for particulars is in these terms :
"Insofar as the respondent relies upon 6.15 of the Act state:
(a) Each act, fact, matter, thing and
circumstance (including dat s the
thereof) upon which the respondent relies
to support he contention that the company ceased to exist;
(b) What, if any, opinion was formed by the
respondent under paragraph 15(4)(b) of the Act including the date thereof;
(c) Each act, fact, matter, thing and circumstance upon which the respondent relied to form his opinion (if any) that if the company had not ceased to exist and an assessment had been made of the undistributed profits tax payable by the company in relation to the year of income ending 30 June 1978, undistributed profits tax would have become due and payable by the company in relation to
that year of income. I'
The respondent's statement in written response to that request was :
"The Respondent objects to provide the particulars sought on the ground that they are not relevant and are unnecessary to the determination of the issues in the Appeal."
The applicant moves for an order that the respondent furnish the particulars requested in paragraph 4, which I have quoted.
If, as in their submissions counsel for the parties
assumed to be the case, the company in relation to which the promoters recoupment tax assessment was made, namely H. W. Holdings P$y. Ltd., ceased to exist before the assessment was made
of the undistributed profits tax upon which the promoters taxable amount has been taken to exist, then the particulars sought, at least in paragraph 4(b), cannot be described as "not relevant", as
in the respondent's statement of objections which I have quoted
they are described. The existence of a promoters taxable amount r
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depends on there having been due and payable by that company at a particular time an amount of undistributed profits tax in relation
to a particular year of income in respect of which an assessment
has been made : see s.7(l)(d), (f) of the 1982 Assessment Act. A
notional assessment under sub-section 15(4), which for the
purposes of the 1982 Assessment Act is required by s.15(11) to be treated as if it were an assessment made under the Income Tax
Assessment Act 1936 of ordinary company tax or undistributed profits tax, as the case may be, payable by the company, may be made only if the condition specified in paragraph (a) of sub-section 15(4) is satisfied. The particulars sought in paragraph 4(b) of the applicant's request are of circumstances which by that paragraph are constituted a condition of the power to make a notional assessment. If one of the conditions were not
fulfilled, the purported notional assessment would not In my opinion satisfy the requirement specified in s.7(l)(d) and it
would follow that no promoters taxable amount would have existed
upon which to found the liability to promoters recoupment tax.
The grounds of the applicant's notice of objection against the assessment of promoters recoupment tax raise the contention that
15(4) were not satisfied. On this question of relevance I Conditions specified in paragraphs (a) and (b) of sub-sectlon respectfully adopt what Beaumont J. observed in Criaas and Jones
Holdinus Ptv. Ltd. v. Federal Commissioner of Taxation (1987) 18
A.T.R. 673 at 602:
"Read literally, s.l5(4)(b) requires the formation by the Commissioner of the opinion
previously mentioned before a 'notional'
assessment may be made. There is no reason to depart from the ordinary meaning of the words used in this provision. It follows that the power to issue a 'notional' assessment in the present case was dependent upon the formation of the requisite opinion by the Commissioner.
Since that question was not addressed by the Commissioner, it further follows that the antecedent conditions to the making of the assessments were not satisfied. Accordingly, the assessments were bad unless aved by some other statutory provision: see Giris (l19 CLR)
at 374, 379, 381-2, 384 and 388-3; W.J. & F. Barnes Ptv. Ltd. v. FCT (1957) 6 AITR 386 at 394, 400; 96 CLR 294 at 304, 311.
I should add, in this connection, that it was
also submitted on behalf of the Commissioner
that the formation of the requisite opinion
was 'legally irrelevant'. It was said that that the target company had disappeared was beside the point - the non-existence of the company could not alter the fact that it was llable for ordinary company tax and Div 7 tax. So much may be
the fact
accepted, but it is still not open to the Commissioner to ignore the statutory requirements of s.l5(4)(b) that he must form the stated opinion before he can issue a special 'notional' assessment which may bind third parties. It is hardly necessary to say that the Commissioner has no power to dispense
with this requirement."
Beaumont J. was dealing with a case in which the taxpayer questioned not the existence of the circumstances specified in paragraph 15(4)(a) of the 1982 Assessment Act, but the existence
of circumstances specified in paragraph 15(4)(b). The submissions of Mrs. Moshinsky of counsel for the
respondent were directed to demonstrating, not the irrelevance, but the inutility of providing particulars of the kind sought by paragraph 4 of the applicant's request. The production, at the hearing of the appeal, of a document under the hand of the respondent purporting to be a copy of the notice of the notional
assessment which the respondent had made would afford, according to Mrs. Moshinsky's submission, conclusive evidence of the due making of that assessment and conclusive evidence that the amount and all the particulars of the assessment are correct. Such a
document was given that conclusive evidentiary effect, it was submitted, by s.177(1) of the Income Tax Assessment Act 1936,
which provides:
"The production of a notice of assessment, or
of a document under the hand of the
Commissioner, a Second Commissioner, or a
Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive
evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct."
If s.177(1) were to have on the hearing of this 'a1
the effect which Mrs. Moshinsky's submission attrlbutes to it,
that would not in my opinion have for a consequence that
particulars of the kind sought by the applicant would be
irrelevant to the issues in the appeal, as those issues might be
stated at any time before the document was received in evidence. The consequence would be that the conclusive evidentiary effect of a document of the description contained in s.177(1) would, after that document had been received in evidence, make other evidence on any of those issues pointless and, according to Cross on
Evidence (3rd Aust. ed.) p.209, inadmlssible. (Cf. Wiumore on
Evidence (3rd ed.) vol. IX, para. 2492.) But, strictly, it cannot be certainly known until the document is tendered in evidence on the hearing of the appeal that tender of any such a document will be made by the respondent. And it cannot, strictly, be certalnly known until the close of the evidence that the judge will accept the document as being what it is tendered as being.
It is a question whether s.177(1) of the Income Tax
Assessment Act 1936 has any operation in respect of an assessment
of the kind which is authorised by s.15(4) and is thereln called a“notional assessment”.
Mr. Judd of counsel for the applicant submitted that
tender on the hearing of the appeal of a document purporting to be
the notice, or a copy of the notice, of the notional assessment in respect of H. W. Holdings Pty. Ltd. would not afford any evidence of the due making of that assessment or of the correctness of the
amount or particulars of that assessment because s.177(1)
comprehends by the words “a notice of assessment“ therein only such a document as has been served upon the person liable to pay the tax assessed. Read in the context which Part IV of the Income Tax Assessment Act 1936 supplies, sub-section 177(1) is to be
construed as referring only to notices of assessment of the kind which s.174(1) contemplates, according to the submlssion. Section 174(1) provides:
“As soon as conveniently may be after any assessment is made, the Commissioner shall serve notice thereof in writing by post or otherwise upon the person liable to pay the tax. “
Service of notional assessments is directed by 6.15 to be made on persons identified by characteristics related to recoupment tax liability. Support for the submission was found in reasoning of
Bryson J. in Re Beavis Bros Construction Ptv. Ltd. (in lia.):
Deputy Commissioner of Taxation (N.S.W.) v. Hutchins (1987) 19
A.T.R. 172. Upon an appeal to the Supreme Court of New South
Wales against a liquidator's rejection of the D puty
Commissioner's proof of debt copies of notices of assessment of income tax payable by the company in liquidation were received in
evidence. The evidence did not persuade Bryson J. that any of thenotices had been served on the company otherwise than in the mode
indicated by 6.18 of the 1982 Assessment Act, that is to say by delivering them to persons identified by characterlstics other
than a connection, at the time of delivery, with the company. Nor did the evidence persuade him that service of any of the notices
had been effected in accordance with the provisions of sub-section
18(1) or 18(4) or 18(5) or 18(9), each of which identifies persons service on whom in the circumstances specified in the sub-section is declared to constitute service on the company. Nor was evidence adduced, as his Honour found, that circumstances had
existed which would have authorised service in accordance with any
of those provisions. In the course of dealing with several
submissions on behalf of the Deputy Commissioner and with what his
Honour found to be unsatisfactory evidence, Bryson J. made
observations on which Mr. Judd sought to rely. "The plaintiff's counsel referred me to the
Taxation (Unpaid ComDanv Tax) Act 1982,
particularly 6.18. It is necessary to notice the provisions of 6.18 in order to understand
some passages in the evidence, which show that
measures have been taken with respect to
recovery or attempted recovery of recoupment tax against persons other than the company.
It would of course be observed from the terms
of 6.18 that when 6.18 is complied with the
company does not receive notice of the
assessment, and if actual notice of the assessment is received by the company as a
result of action under 6.18 that is no more
than an accidental consequence of the delivery of the notice to somebody else. However, the present case is not concerned with any alleged
liability for recoupment tax and the alleged
liability of the company does not depend on the legislation of 1982." (19 A.T.R. at 178) "In view of provisions found in s.lE of the Taxation (Unpiid Companv Tax) Assessment Act 1982 it would be rational for the Commissloner
to serve copies of notices of assessment on
persons other than a company taxpayer and to
omit to serve such notices on the company itself, in the course of some attempted compliance with one of the provisions of 6.18.
There is not evidence before me which establishes that there has been compliance
with any of those provisions, but references
here and there in the evidence to recoupment
tax suggest that the Commissioner may have
been proceeding in a way in which deliberate
omission of service of notices on the company
itself could possibly have been his chosen
course. The Commissioner does not before me
establish or attempt to establish that, notices having been given to other persons
under some provision of 6.18, there is no need
to give notice to the company itself. For
example, dealing with sub-6 (l), the
Commissioner's evidence did not identify a person by whom vendor's recoupment tax is likely to become payable or establish any relevant opinion formed by the Commissioner. If the Commissioner had done so the question might have arisen whether the section has the effect of binding not only the persons to whom notice is given but also the company itself to the assessment without the company's having had any opportunity in fact to object, and in
that case whether its operation to that effect was valid. At one point, the Commissioner's
counsel seemed to claim some benefit from
s.18(5), but as there is no basis in the
evidence for findings establishing that that subsection applies, for example, proof of the non-application of sub-S (1) or of the opinion ,referred to in sub-6 (51 , I am left to
understand that that is not ultimately the Commissioner's case." (19 A.T.R. at 180)
"The plaintiff's sole course has been to
tender and rely on the notices of assessment,
relying only on s.177(1) of the Income Tax Assessment Act. Section 177(1) refers to 'a notice of assessment' and to a purported 'copy of a
notice of assessment' and its internal
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language shows as must otherwise be very plain
that the notice of assessment referred to is a
different thing to an assessment. It alsomust be plain that in the language of the
subsection, notice a of assessment is
conceived of as a piece of paper, a well established use of the word 'notice' but at least originally a figurative use of that word; it is quite plain that notice in another literal sense of knowledge of an assessment is
not what is referred to. Section 177(1) follows closely on 6.174 which creates a duty
on the Commissioner to serve notice of an
assessment as soon as conveniently may be after any assessment is made. It is necessary to ask what circumstances must exist In relation to a piece of paper if it is to be 'a notice of assessment' referred to in s.177(1)?
The references in the subsection both to a notice of assessment which may be produced in
evidence, and also to a copy of it appear to
have regard to commonplace principles of the
law of evidence with respect to documents,
under which the original of a document IS ordinarily required to be tendered or Its absence explained, which being explained the
copy may be tendered; the contemplation is
plain in sub-6 (1) that the notice itself is adifferent thing to a copy and that the notice
itself may be produced and tendered in evidence. A document containing particulars
of an assessment made within one of the
meanings attributed to that word in 6.6, or
specifying matters required to be specified by s.174(2) is not in my opinion a notice of assessment unless the process of service of notice upon the person liable to pay the tax, referred to in s.174(1) has been carried out in relation to it. A document is not a notice
and it seems to me that it is not possible to unless it is notified to or served on someone, adopt any view of the meaning of 'a notice of
assessment' in s.177(1) which is divorced from
a process such as 6.174 requires of bringing
the notice to the notice or knowledge of
somebody or serving it on somebody. In my ppinion a document purporting to be a notice of assessment which has not been served upon
the person liable to pay the tax in the manner
in which the Commissioner is directed to serve it in s.174(1) is not a notice of assessment within the meaning of those words in s.177(1),
and the conclusive results for which that
subsection provides are a consequence of the fact that the document is anotice of assessment in this sense. Mere production of a piece of paper does not establish that it has been so served, and hence does not
establish that it is a notice of assessment
with those conclusive consequences; and sub-ss
(3) and (4) of 6.177 do not do that work. In mv view the findina which I have ~ ~I made with
respect their not having been served
disqualifies the documents in evidence from being notices of assessment within the meaning
of s.177(1).
The documents are no more than they otherwise
would be notices of assessment because they have been brought to the notice of persons
other than the taxpayer, the company in these
proceedings. Service of the document on the
persons said to be vendor shareholders is simply irrelevant. A document does not become
a notice by being served on some extraneous
person, nor is the process assisted or
affected by the fact that service on or delivery to that extraneous person was
authorised or required by some other
legislation; the dealings with the notices or
copies of the notices under the Taxation (Unpaid Companv Tax) Act 1982 do not in my
opinion affect he question whether the document is a notice of assessment within the meaning of the Income Tax Assessment Act 1936,
question a which is answered with the assistance only of the provisions of that Act relating to such notices." (19 A.T.R. at 181-182)
Shortly before judgment was given in the Beavis Case
judgment was given in Hutchins : Re Jarlas Ptv. Ltd. v. Federal
Commissioner of Taxation (1987) 87 A.T.C. 4582. I adhere to the
opinion expressed in that case (87 A.T.C. at 4587-4588) that service in accordance with the provisions of sub-section 18(1) is "service of the notice of assessment" within the meaning of that
phrase in s.185(1) of the Income Tax Assessment Act 1936: "The
submission that service of the notice of assessment in compliance with the provisions of sec. 18(1) does not constitute such a service as sec. 185 contemplates cannot in my opinion be accepted. It is contradicted by the legislative assertion in sec. 18(1) that 'the notice shall, notwithstanding sec. 174 of the Assessment Act, r
13.
be served on the company by being served on' the person or persons
indicated in para. 18(l)(c) or para. 18(l)(d). That is, I think,
both a direction as to what shall be done by way of service of the notice of assessment in the events specified in para. 18(l)(a) and
18(l)(b) and a declaration of the effect, for the purposes of
assessment of income tax under the Income Tax Assessment Act 1936 as well as for the purposes of the assessment of recoupment tax under the 1982 Assessment Act, of compliance with the direction,
namely the effecting of service of that notice on the company."
Section 15 of the 1982 Assessment Act presents quite
different questions from those which 6.18 of that Act raised. Section 18 identifies persons, other than the company assessed,
upon whom service of a notice of the assessment is to be served in certain circumstances. And in two cases (those to which sub-sections 18(1) and 18(4) relate) express provision is made that "the notice shall, notwithstanding section 174 of Cthe Income
Tax Assessment Act 19361, be served on the company by being served on" the persons other than the company who are respectlvely
identified. But 6.15 provides for a process of ascertainment by
the Commissioner of an amount which cannot be the measure of any
debt or liability of the company to which the process relates.
The company has ceased to exist before the process ordained by the section is.undertaken, and the amount assessed can have relevance
only to the existence and measurement of the liability of persons
other than the company. Notwithstanding those circumstances, 6.15 makes provision for a notice of the result of the process of ascertaining what would, if the company had not ceased to exist,
have been its income tax liability, and for service of that notice, and for conferment on particular persons of rights, in relation to a "notional assessment", of the kind which the company would have enjoyed under Division 2 of Part V of the Income Tax Assessment Act 1936 in relation to an actual assessment of its
income tax liability if it had not ceased to exist. Sub-sections 15(6), (71, ( E ) , (g),
(lO), (ll), (12) and (13) provide: "15(6) Where all of the recoupment tax referred to in sub-section (3) or (4) is
promoters recoupment tax, the Commissioner shall serve notice of the notional assessment referred to in that sub-section on the person, or one of the persons, as the case may be, referred to in paragraph (3)(c) or
sub-paragraph (4)(b)(ii), as the case may be. 15(7) Where sub-section ( 6 ) does not apply in relation to the notional assessment, the
following provlslons have effect:
(a)
the Commissioner shall serve notice of the notional assessment on -
(i) where paragraph (3)(c) or sub-paragraph (4)(b)(ii), as the case may be, applies in relation to only one person in relation to recoupment tax that is vendors recoupment tax - that person; and
(ii) in any other case - any of the
persons referred to in paragraph
3(c) or sub-paragraph (4)(b)(ii), as the case may be,
in relation to recoupment tax
that is vendors recoupment tax;
and
Ib) where notice of the notional assessment is served in accordance with sub-paragraph (a)(ii) - the
Commissioner shall serve a copy of the notice of the notional assessment on
each person (other than the person on
whom the notice of the notional assessment was served) who is included in the representative class in relation to the vendors recoupment tax referred to in sub-paragraph (a)(ii).
15(8) Where notice of the notional assessment and a copy or copies of that notice are served persons on under sub-section ( 7 1 , the Commissioner shall notify each of the persons
of the identity of each of the other persons.
15(9) Where notice of the notional assessment
is served under sub-section ( 6 ) or (7) -
(a) if the notice was served under
sub-section (6) or sub-paragraph
notice was served; and (7)(a)(i) - the person on whom the
(b) if the notice was served under sub-paragraph (7)(a)(ii) - one person
who -
(i) is included in the representative class in relation
to the recoupment tax referred to in paragraph ( 3 1 (c) or
(4)(b), as the case may be, that
is vendors recoupment tax; and
(ii) is nominated, by notice signed by more than one-half of the
persons included in that class
the with lodged and Commissioner,
has the same rights under Division 2 of Part V
of the Assessment Act in respect of the
notional assessment as the company would have had if it had continued to exist and the notional assessment were an assessment of ordinary company tax or undistributed profits tax, as the case may be, payable by the
company in relation to the relevant year of those rights by the person, the provisions of income and, for the purpose of the exercise of that Division apply in relation to notional
assessment in like manner as those provisions
apply in relation to an assessment under the
Assessment Act.
.l5(10) For the purposes of this section, the
following const tute persons the representative class in relation to vendors
recoupment tax:
(a) each person, not being a company, whose
whereabouts is k n O W the to Commissioner and in relation to whom the vendors recoupment taxis
recoupment tax on a primary taxable amount;
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(b) each company (including a company in the capacity of trustee) that, in the opinion of the Commissioner, is carrying on business and in relation to
which the vendors recoupment tax is
recoupment tax on a primary taxable amount; and
(C) the other persons referred to in sub-paragraph (7)(a)(ii) or, if those persons exceed 5 in number, 5 of those
persons selected by the Commissioner as appropriate representatives of those persons.
15(11) For the purposes of this Act -
(a) the notional ssessment shall be
treated as if it were an assessment made under the Assessment Act of ordinary company tax or undistributed profits tax, as the case may be, payable by the company in relation to
the relevant year of income; and
(b) the notional company tax that, at a
particular time, is applicable in accordance with sub-section (12) in relation to the company in relation to the relevant year of income by virtue
of the notional assessment shall be treated as if it were an amount of
ordinary company tax or undistributed
profits tax, as the case may be, that
has become due and payable by the
company in relation to the relevant year of income and remains unpaid at that time.
15(12) For the purpose of ascertaining the notional company tax that is applicable, at a particular time, in relation to the company in relation to the relevant year of income by
virtue of the notional ssessment, he
provisions of the Assessment Act apply in relation to the notional assessment and the
notional ordinary company tax or notional
undistributed profits tax, as the case may be,
to which the notional assessment relates as if -
(a) the notional ssessment were an assessment of the ordinary company tax
or undistributed profits tax, as the case may be, payable by the company in relation to the relevant year of income; and
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17.
(b) the notional ordinary company tax or
notional undistributed profits tax, as
the case may be, were ordinary company
tax or undistributed profits tax, as the case may be.
15(13) Without limiting the generality of
sub-section (12). sections 170 and 207 of the
Assessment Act apply for the purpose of determining the notional company tax that is applicale, at a particular time, in relation
to the company by virtue of the notional assessment. “
Sub-sections 4(1) and ( 2 ) of the 1982 Assessment Act
provide :
“4(1) Unless the contrary intention appears in this Act, sections 6 and 7A, Part 11, section
21, Parts IV and V, Division 1 of Part VI, andParts VI1 and VI11 of the Assessment Act, and
regulations made under that Act, apply for the
purposes of the assessment and collection of
recoupment tax, and the collection of late
payment tax, in like manner, mutatis mutandis,
as those provisions apply for the purposes of
the assessment and collection of income tax under the Assessment Act.
( 2 ) A reference in this Act to a provision
of the Assessment Act shall, unless the
contrary intention appears, be read as a
reference to that provision ts in
application, in accordance with sub-section
(11, for the purposes of this Act.”
Section 177 of the Income Tax Assessment Act 1936 falls within Part IV of that Act.
Mr. Judd submitted that such a contrary intention as
sub-section 4(1) contemplates was manifested in sub-sections
15(11), (12) and (13). Those sub-sections provided for such
application as the legislature intended of the Income Tax Assessment Act 1936 in relation to a notional assessment, it was submitted, and thereby excluded the operation of sub-section 4(1)
in relation to that special creation of 6.15.
If the submission were accepted, yet in my opinion
paragraph 15(12)(a) would attract the application of s.177 of the
Income Tax Assessment Act 1936 to a notice of the notional
assessment as if that notice were a notice of an assessment of the undistributed profits tax payable by the company in relation to the relevant year of income. The scheme of the unpaid company tax legislation accords with that construction of sub-section 15(12). Sections 15 and 18 alike contemplate, as do paragraphs 5(l)(f) and
7(l)(e), a resolution of any question concerning the income tax
liability of what has been judicially described as "the target company" by recourse to the procedures for review ordained by Division 2 of Part V of the Income Tax Assessment Act 1936, by the company (except in a case where it has ceased to exist) or by a person on whom the right of recourse is conferred by section 15 or 18. It is not contemplated that resolution of such a question
should be undertaken in the course of review under Division 2 of Part V of a recoupment tax assessment, in my opinion. It is consonant with that legislative scheme that 6.177 should apply to a notional assessment and should be available to facilitate proof, in a proceeding such as this appeal, of the matters specified in paragraphs 7(l)(d) and (f) of the 1982 Assessment Act. Section 177 not only facilitates proof, it precludes litigation in more than one proceeding of the same question of the liability of the target company to income tax; and that accords well, in my
opinion, with the legislative scheme disclosed by the 1982 Assessment Act.
Mr. Judd submitted also that, if no such an opinion as
paragraph 15(4)(b) postulates were held by the respondent, the
purported notional assessment was no assessment at all, and s.177(1) was left with nothing upon which it might operate.
Therefore, the submission concluded, particulars concerning theexistence of the opinion should be ordered.
The reasons for judgment in F.J. Bloemen Ptv. Ltd. v.
Federal Commissioner of Taxation (1981) 147 C.L.R. 360 and in
Deautv Commissioner of Taxation (W.A.); Ex Parte Briuus (1986) 69
A.L.R. 185 establish, in my opinion, on the one hand that a mere failure on the part of the respondent, by reason of some error, to
fulfil the condition specified in paragraph 15(4)(b) could not be
proved in contradiction of the conclusive evldence afforded on the
hearing of this appeal by production of "a notice in proper form of an assessment" (147 C.L.R. at 378) purportedly made in
pursuance of sub-section 15(4), but, on the other hand, that production of such a notice would not preclude proof, on the
hearing of the appeal, that the issue of the original notice had
not been preceded by any attempt to do what sub-section 15(4)
authorises the respondent to do.
I do not apprehend that the applicant intends by any of
the particulars of objection against the assessment to contend
that the respondent had not attempted to do what sub-section 15(4) authorises him to do. ..
l-
20.
"Particulars fulfil an important function in the conduct of litigation. They define the issues to be tried and enable the parties to know what evidence it will be necessary to have available and to avoid taking up time
with questions that are not in dispute. On
the one hand they prevent the injustice thatmay occur when a party is taken by surprise;
on the other they save expense by keeping the conduct of the case within due bounds. These
considerations are no less important in revenue cases than in other cases." (per Gibbs J. in Bailev v. Federal Commissioner of Taxation (1977) 136 C.L.R. 214 at 219.)
If a notice of the notional assessment in question in this appeal has come into existence and if that notice or another document of a description contained in s.177(1) is to be tendered in evidence on the hearing of the appeal, it may be that none of
the purposes which Gibbs J. has stated that particulars are
intended to serve would be served by requiring the respondent to furnish particulars of the kind now sought. On the other hand, if the applicant is undertaking to establish, in relation to the respondent's assertion that he has made a notional assessment,
facts which the reception into evidence of such a document will not preclude him from proving, it may be that some order for
particulars ought to be made. Counsel for the parties did not, as
I apprehend, regard the hearing of the motlon as having
irrevocably concluded when I reserved my decision. As I understood them, they had intended to advance submissions of general application to a motion of the kind now under
consideration in an appeal involving a notional assessment which
is alleged to have been made without satisfaction of the
conditions specified in sub-section 15(4), and to reserve the
right to be further heard on the motion after I had stated my ..
conclusions upon those submissions. Discovery has been had by the
applicant, as I infer from the circumstance that it was ordered to
be given by the respondent before the end of October, 1987.
Unless discovery was unjustifiably limited under the influence of the mistaken conception of relevance disclosed by the statement of
the respondent’s objection to furnishing particulars which I have quoted, the applicant should now be in a position to state
precisely what issues he desires to raise in relation to the
notional assessment, and in a position to demonstrate some
evidentiary basis for raising those issues. The respondent should
be in a position to produce on the hearing of this motion a
document of a description contained in s.177(1) in relation to the
notional assessment he asserts that he has made, so that
inspection may be made of the document to determine whether it
appears to be “a notice in proper form of an assessment“ or a copy thereof.
I will hear counsel for the parties further before
determining the motion.
I certify that this and the 20
preceding pages are a true copy of the Reasons for Judgment herein of
Honourable the Mr. Justice Jenkinson.
Dated: 16 December, 1987
..
2 2 .
Counsel for the Applicant Mr. J . G . Judd Solicitors for the Applicant : Anderson, Rice Counsel for the Respondent Mrs. A. Moshinsky Solicitor for the Respondent : Australian Government Solicitor
Dates of Hearing 12 and 13 October, 1987
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