Scott and Commissioner of Taxation

[2002] AATA 494

DECISION AND REASONS FOR DECISION [2002] AATA 494

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No QT2001/559-561

TAXATION APPEALS DIVISION )          
           Re      DONALD IVOR SCOTT    
  Applicant
           And    COMMISSIONER OF TAXATION          
  Respondent

DECISION

Tribunal       Mr B J McCabe, Member  

Date21 June 2002

PlaceBrisbane

Decision      The Tribunal grants the applicant leave to expand the scope of his objection to include claims in respect of expenditure incurred on travel, food and beverages in 1993, 1994 and 1995 that were disallowed in the Notice of Assessment issued on 9 October 1997.        

...................(Sgd)......................
  B J McCabe
  Member
CATCHWORDS
PRACTICE AND PROCEDURE – application to extend grounds of objection – whether discretion to grant leave to extend grounds of objection should be exercised

Taxation Administration Act 1953
Income Tax Assessment Act 1936

Silly Solly Management Pty Ltd v Commissioner of Taxation [2001] FCA 710
Silly Solly v Commissioner of Taxation [2001] FCA 1095
Lighthouse Philatelics Pty Limited v Commissioner of Taxation (1991) 91 ATC 4942
Gilder v Federal Commissioner of Taxation (1991) 91 ATC 5062

REASONS FOR DECISION

21 June 2002          Mr B J McCabe, Member              

Introduction

1. The applicant has sought to extend his grounds of objection to an assessment by the Commissioner. The Commissioner disallowed the applicant's claims in respect of expenditure on travel and food and beverages in 1993, 1994 and 1995 in a Notice of Assessment issued on 9 October 1997. Objection was taken to other aspects of the assessment on 30 August 2000, but there was no formal objection taken to the Commissioner's attitude to the travel and food and beverage claims.

2. The applicant, along with other members of his family, is appealing the Commissioner's decisions in relation to a number of matters. He wishes the Tribunal to review the decision to disallow the travel, food and beverage claims alongside the other matters.
   The Relevant Law

3. Section 14ZZK of the Taxation Administration Act 1953 provides:

   "On an application for review of a reviewable objection decision:
   (a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and

   (b) the applicant has the burden of proving that:

   (i) if the taxation decision concerned is an assessment (other than a franking assessment)—the assessment is excessive; or
   (ii) if the taxation decision concerned is a franking assessment—the assessment is incorrect; or
   (iii)  in any other case—the taxation decision concerned should not have been made or should have been made differently."

1. It is therefore necessary to decide whether the Tribunal should order that the grounds of the objection be extended to include the disallowance of the claims in respect of expenses for travel, food and beverages.

2. The scope of the discretion to amend under s 14ZZK (and its counterpart applicable in appeals to the Federal Court, s 14ZZO) is wide. But leave will not always be given, and the Commissioner says it should not be given in this case. Counsel for the respondent referred me to the decision of Drummond J in Silly Solly Management Pty Ltd v Commissioner of Taxation [2001] FCA 710 (leave to appeal refused: [2001] FCA 1095). In that case, his Honour distinguished the earlier decision of the Full Court in Lighthouse Philatelics Pty Limited v Commissioner of Taxation (1991) 91 ATC 4942. In Lighthouse, the Court held there was a wide discretion to permit amendments to an objection under s 190 of the Income Tax Assessment Act 1936. Lockhart, Burchett and Hill JJ held (at 4949):

   "[T]he discretion whether to allow an amendment ought to be made on the same considerations of justice upon which such decisions are regularly made in litigation."

1. In Silly Solly, Drummond J found that the legislative scheme in Lighthouse was different to that considered here. His Honour said (at para 10) that the Court did not necessarily have "jurisdiction to deal at large with any issues that the taxpayer may wish to raise in relation to the particular assessment…".

2. The facts in Silly Solly must be borne in mind. In that case, the Court was not minded to deal with some of the additional matters raised by the taxpayer because the amendment might have necessitated an adjournment of a trial that could, in the circumstances, be difficult to reschedule in the foreseeable future because of other litigation by the parties and the National Crime Authority. His Honour was also satisfied that the proposed amendments were without merit. They constituted an attempt by the taxpayer to introduce irrelevant factual matters into the dispute (at para 5).

3. The Full Court declined to give leave to appeal in Silly Solly v Commissioner of Taxation [2001] FCA 1095. Whitlam, Kiefel and Conti JJ stated (at para 9):

   "…it is unnecessary for us to determine principles of statutory interpretation concerning the entitlement or otherwise of taxpayers to amend taxation objections and grounds of appeal."

1. Davies J suggested in Gilder v Federal Commissioner of Taxation (1991) 91 ATC 5062 (at 5072) that the discretion to amend was "unfettered". But his Honour warned that the tribunal or court should not lose sight of the need for taxpayers to deal with their affairs (including any challenges to the Commissioner's decisions) promptly and efficiently. The efficient administration of the system would be compromised if individuals were routinely permitted to avoid the time limits imposed in the legislation.

2. The lesson from the cases appears to be that the application for an extension must be scrutinised with some care, although the decision-maker should not be inflexible. The applicant should ordinarily have a good explanation for its failure to raise the matter earlier. (As the matter gets closer to a hearing, one would expect that the reasons for an earlier failure would need to be particularly compelling: see Gilder, where Davies J was critical of the applicant for raising a matter at a hearing where it could and should have been raised at a directions hearing). The court or tribunal will also be influenced by a want of merit in the amendments, and will be sensitive to suggestions that the other party is prejudiced or if the amendment will result in unreasonable delay. But if the matter can be dealt with along with other matters easily enough, and the other party is given adequate notice, an extension is permissible.

3. The applicant in this case does not have a good excuse for delay. The applicant's agent – who is related to the applicant - was facing a professional crisis when the objections were prepared. The matter is one of several related cases brought by other members of the same family. It is a complex and confusing dispute, and it is made worse by the failure to make objections in a timely manner. Even so, it is apparent the matter can be conveniently dealt with at the same time as the other matters in dispute. There will be no prejudice to the respondent, and it has not been suggested that the claim is devoid of merit.
   Conclusion

4. In the circumstances, I will permit the applicant to expand the scope of his objection to include claims in respect of expenditure incurred on travel, food and beverages in 1993, 1994 and 1995 that were disallowed in the Notice of Assessment issued on 9 October 1997.

   I certify that the 12 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B J McCabe, Member

   Signed:         Denise Burton
     Administrative Assistant

   Date of Hearing  29 April 2002
   Date of Decision  21 June 2002
   For the Applicant  Mrs Clara Scott
   Solicitor for the Respondent    ATO Legal Practice