The Taxpayer and Commissioner of Taxation

[2006] AATA 1057

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 1057

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No QT2006/46

TAXATION APPEALS DIVISION		)
Re		THE TAXPAYER

Applicant

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Senior Member B J McCabe

Date8 December 2006

PlaceBrisbane

Decision The Tribunal has jurisdiction to hear the application for review.

.......[Sgd]........

BJ McCabe

SENIOR MEMBER

CATCHWORDS

TAXATION – jurisdiction – applicant’s previous matter was set aside pursuant to s 42C of AAT Act – whether s 42C agreement implied reconsideration – power of the Tribunal under s 42C and s 43 – respondent able to issue fresh objection decision – Tribunal has jurisdiction

Administrative Appeals Tribunal Act 1975 s 42C, s 43

Income Tax Assessment Act 1936 s 170(2)(a)

Taxation Administration Act 1953 s 14ZZL

Macionis and Commissioner of Taxation [2004] AATA 926

Repatriation Commission v Nation (1995) 57 FCR 25

REASONS FOR DECISION

8 December 2006	Senior Member B J McCabe
introduction

1. The taxpayer originally objected to assessments made in respect of the 1996 and 1997 years of income. He asked the Tribunal to review the objection decisions. The proceedings were settled when the Tribunal set aside the objection decisions with the consent of the parties. Deputy President Muller’s consent decision pursuant to s 42C of the Administrative Appeals Tribunal Act 1975 (the Act) is dated 29 October 2004. After the decision, the Commissioner turned his mind to evidence obtained during a hearing in another matter. The Commissioner concluded there had been fraud or evasion in the taxpayer’s case. He issued amended assessments in respect of the 1996 and 1997 years of income. The taxpayer has objected to the amended assessments and has commenced proceedings in the Tribunal.

2. The taxpayer has asked the Tribunal to deal with a preliminary issue. He says the Commissioner is not able to issue amended assessments because the Tribunal has already decided the matter in the applicant’s favour in the consent decision of 20 October 2004. The Commissioner disagrees. He says the consent decision does not preclude him from subsequently making a finding of fraud or evasion pursuant to s 170(2)(a) of the Income Tax Assessment Act 1936 (ITAA36). Alternatively, he argues the consent decision set aside the decision under review but implicitly remitted the matter for reconsideration – leaving the way open for him to make a finding of fraud or evasion.

3.      A hearing of jurisdiction was held on 1 September 2006. The parties subsequently filed written submissions.

factual background to the dispute

4.      The applicant invested in an arrangement promoted by Mr Schoch. Mr Macionis invested in the same arrangement. Deputy President Muller explained the nature of the investment in the course of his decision in Macionis and Commissioner of Taxation [2004] AATA 926. DP Muller said the arrangement purported to take advantage of Div 10B of ITAA36 which permits accelerated deductions of capital expenditure on industrial property. The steps in the arrangement were set out in paragraph 8 of the decision. When the time came for submissions from the parties, Mr Schoch – who represented the applicant in that case – admitted the transactions were a sham. The objection decision was affirmed on 3 September 2004.

5.      Mr Curran wrote to Mr Schoch (who was still representing the taxpayer) on 14 October 2004 in the wake of the decision in Macionis. A copy of the letter is contained in the written submissions lodged on behalf of the taxpayer by his new representative, Mr Barry. The letter invites the taxpayer to consider a settlement of the proceedings in the Tribunal. It notes the amended assessments in respect of the 1996 and 1997 years of income were not properly made because more than four years had elapsed. There had been no finding of fraud or evasion made in connection with the assessments at that point. Mr Curran proposed those amended assessments be set aside – which meant the deductions would be allowed. The applicant would in turn agree to the objection decisions in respect of later years of income being affirmed.

6.      The final paragraph of the letter is important. It should be reproduced in full:

However, this concession in relation to the 1996 and 1997 assessments is not to be taken to mean that the Commissioner does not have the power subsequently to reconsider the making of a further assessment. If in the course of that reconsideration he makes a finding of fraud or evasion, a further amended assessment may be made.

7. The objection decisions in relation to the 1996 and 1997 years of income were set aside by consent on 29 October 2004. The Tribunal did not substitute its own decision for the decision it set aside. Nor did it indicate on the face of the decision the provision of the Act under which it was making the consent decision. I note Mr Curran’s letter of 14 October 2004 anticipates the parties inviting the Tribunal to exercise its powers under s 42C of the Act.

8. The respondent subsequently reconsidered its view in relation to the 1996 and 1997 years of income. The delegate of the Commissioner concluded there was evidence of fraud or evasion. Amended assessments were issued pursuant to s 170(2)(a) of ITAA36 disallowing the deductions. The taxpayer has objected to those assessments, and finds himself back before the Tribunal.

the tribunal’s power to make consent decisions

9. The Tribunal’s power to make a decision by consent is set out in s 42C of the Act. The section provides the Tribunal may, if the parties agree on the terms of a decision, make a decision in those terms. The Tribunal must be satisfied it has the power to make that decision and the agreement must be reduced to writing.

10. The Tribunal’s decision-making powers are set out in s 43. Section 43(1) provides:

For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:

(a) affirming the decision under review;

(b) varying the decision under review; or

(c) setting aside the decision under review and:

(i) making a decision in substitution for the decision so set aside; or

(ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal.

11. Section 42C must be read subject to s 43. When that is done, it is clear the Tribunal can only decide under s 42C to adopt one of the three courses set out in s 43. In the consent decision of 20 October 2004, Deputy President Muller resolved to set aside the decision under review. He did not affirm or vary it. But nor did he explicitly take the extra step anticipated in s 43(1)(c) of making a decision in substitution or remitting the matter for reconsideration.

12. A decision made under s 42C or 43 which purports to set aside the decision under review without explicitly or implicitly making a decision in substitution or remitting the decision for reconsideration is not, in fact, a decision that can be made by the Tribunal. Is that what happened here?

13.     The Commissioner says a decision or order that is ambiguous on its face may be interpreted having regard to surrounding circumstances. He relies on the decision of the Full Court in Repatriation Commission v Nation (1995) 57 FCR 25. In that case, Beaumont J observed (at 33) the terms of a judgment or order would ordinarily speak for themselves. Where the meaning of the order is unclear, however, his Honour said (at 33-34) it was permissible to have regard to the surrounding circumstances to assist in resolving the ambiguity. The most obvious point of reference will be the reasons for the judgment or decision.

14. There are no reasons given for the s 42C decision. It rests on the written agreement of the parties. There is no evidence that the Tribunal had any other material before it when Deputy President Muller signed the order. In particular, there is no evidence that the Tribunal was provided with a copy of Mr Curran’s letter of 14 October 2004. In the absence of evidence or agreement, the Tribunal could not substitute a decision of its own. The only alternative was for it was to remit the matter for reconsideration. The Deputy President could not have had any other option in his mind when he signed the consent decision. Given he was aware of the circumstances in Macionis and the potential for a finding of fraud or evasion against the taxpayer who invested in the same arrangement, it is obvious the Deputy President’s decision was made on the assumption that the Commissioner may not be finished with the applicant. Having regard to the circumstances, I am satisfied the decision should be interpreted as setting aside the decision under review and remitting it to the Commissioner for reconsideration.

15. The Commissioner has complied with the terms of that decision. It follows I do not accept the taxpayer’s argument that the Commissioner has failed to comply with the requirements of s 14ZZL of the Taxation Administration Act 1953. That section requires the Commissioner to give effect to Tribunal decisions after a specified time.

16.     The reconsideration has now occurred. The taxpayer is entitled to have the decision reviewed by the Tribunal. That will occur in due course.

17.     Although it is not necessary for me to do so, I would add that there is no basis for any suggestion that the Commissioner has acted in bad faith by settling the matter and then issuing amended assessments. Mr Curran’s letter made it clear the Commissioner reserved his rights with respect to a finding of fraud or evasion.

conclusion

18.     The Commissioner had the power to issue the amended assessments which gave rise to the objection decisions. The Tribunal is able to hear and determine the application for review made in relation to those objection decisions in the ordinary course.

I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member B J McCabe.

Signed:         Associate      Adam Ryan

Date of Hearing  5 September 2006
Date of Decision  8 December 2006
The applicant was represented by Mr Barry.
The respondent was represented by Mr Robertson QC and Ms Mellifont of Counsel.