TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation

[1988] FCA 119

Re: ROGERS FOUNDRY AND ENGINEERING PTY LTD
And: THE COMMISSIONER OF TAXATION
No. QLD G260 of 1987
Income Tax

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Income Tax - appeal - additional tax for incorrect return - power to remit - particulars ordered of circumstances taken into account in decision not to remit.

Income Tax Assessment Act 1936, s.226

HEARING

BRISBANE

#DATE 24:3:1988

Counsel for the Applicant: Mr A.D. Robb

Solicitors for the Applicant: Messrs Conwell Kirby & Lilley

Solicitors for the Respondent: Australian Government Solicitor

ORDER

The respondent, within 21 days, furnish the best particulars he presently can of the facts, matters and circumstances taken into account in any decision not to remit the additional tax referred to in the notice of assessment mentioned in the notice of objection, the subject of these proceedings, and of the date on which any such decision was made;

NOTE: Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

JUDGE1

In this and a number of other related matters, the respondent has referred to this Court his decision on an objection against an assessment of income tax. Particulars have been sought by the applicant and supplied by the Commissioner in each case.

1. In this case, counsel for the applicant, Mr. Robb, has asked that an order be made for the supply of further particulars; I understand that a similar problem arises in some of the other matters. I propose to deal with the matter as an application made in this case only. The parties may be inclined, in other matters to which my decision applies, to act in accordance with it; if not, then no doubt specific further applications may be made.

2. The assessment to which the proceedings relate was arrived at by disallowing an amount described in the adjustment sheet as "superannuation deduction paid to Rogers Superannuation Fund". The result was an assessment for the relevant year, being that ended 30 June 1978, in a sum of $2,262.74 tax and the same amount for "Additional tax for incorrect return".

3. The applicant, as to the additional tax, requested particulars as follows:
   
   

"In respect of the sum included in the said assessment and described as 'Additional tax for incorrect return':

(a) give full particulars of each respect in which it is alleged that the return of the applicant was incorrect;

(b) if the respondent formed the opinion, pursuant to sub-section 226(3), that only part of the additional tax otherwise imposed by the Act should be remitted, give full particulars of the formation of the said opinion including:

(i) the date the opinion was formed;

(ii) who on behalf of the respondent formed the opinion;

(iii) identification of all material considered by the said person in forming the opinion;

(iv) details of all determinations and conclusions of fact and law made by the said person for the purpose of or in the course of forming the opinion."

1. The respondent Commissioner has declined to give the particulars sought.

2. At relevant times, s.226(2) of the Income Tax Assessment Act 1936 imposed a liability to pay additional tax upon any taxpayer who "omits from his return any assessable income or includes in his return as a deduction for, or as a rebate in respect of, expenditure incurred by him an amount in excess of the expenditure actually incurred by him ..." The reference to "Additional tax for incorrect return" in the notice of assessment presumably refers to tax under s.226(2).

3. Section 226(3) provided at the relevant time:
   
   

"The Commissioner may in any case, for reasons which he thinks sufficient, and either before or after making any assessment, remit the additional tax or any part thereof."

1. It was argued, in effect, that the applicant is entitled to know why there was thought not to be sufficient reason for remitting the additional tax. Clearly enough, the respondent decided not to remit, at some time before the assessment issued.

2. The case is one in which the exercise of a discretionary power is challenged; Mr Robb pointed out that the appeal can be based only on errors of law, there being no right to have a Court review the exercise of the respondent's discretion fully.

3. In Federal Commissioner of Taxation v. Brian Hatch Timber Co. (Sales) Pty Limited (1972) 128 CLR 28, the High Court had to consider a loss which was, by the Act, made not deductible unless the taxpayer satisfied the Commissioner of certain facts relating to beneficial ownership of shares. The challenge to the disallowance of the deduction failed. Menzies J. thought it "unfortunate that the basis for the Commissioner's not being satisfied of what was requisite for allowing the deduction claimed was not revealed" (p.52). His Honour said that the taxpayer "might properly have inquired from the Commissioner why he was not so satisfied". Owen J., at pp.59 and 60 said:
   
   

"The taxpayer, however, did not take that course nor does it appear to have taken any steps to ascertain what material was before the Commissioner in making his assessment or to inquire from him what matters he had considered in disallowing the deduction claimed or why he had failed to be satisfied about the state of the shareholding at the relevant times. Had this been done I have no reason to think that the Commissioner would not have paid due regard to a passage in the judgment of Barwick C.J. in Giris Pty. Ltd. v. Federal Commissioner of Taxation in which his Honour said (1969) 119 CLR 365, at p 373:

'... the Commissioner is under a duty in each case to form an opinion and the taxpayer is entitled to be informed of it, and upon the taxpayer's request, the Commissioner should inform the taxpayer of the facts he has taken into account in reaching his conclusion.'"

1. See also a reference to the same point in the dissenting judgment of Barwick C.J. in Kolotex Hosiery (Australia) Pty Ltd v. Federal Commissioner of Taxation (1975) 132 CLR 535 at p 541.

2. In the leading case on this topic of particulars in tax cases, Bailey v. Federal Commissioner of Taxation (1977) 136 CLR 214, Aickin J., with whom the other members of the Court agreed, said at p 228:
   
   

"The argument which was advanced on behalf of the Commissioner and accepted in the Supreme Court was that particulars could only be obtained from the Commissioner of the basis of his assessment in cases where the assessment was made under a section which made it dependent on the opinion of the Commissioner, or on his being 'satisfied', as to some matter. It was said that in such cases the basis of the opinion must be stated by the Commissioner because otherwise the assessment would be unchallengeable in court."

Aickin J. rejected that argument, holding (at p 229), that the Court's power was not so confined, but his Honour indicated no disapproval of the giving of particulars as to the basis of exercise of the Commissioner's powers, where that exercise depended on his holding an opinion.

1. It can be seen that the giving of such elaborate particulars as are here sought might be onerous. The decision not to remit which the applicant challenges was made ten years ago. Discovery has been ordered (by consent), and it may be that the documents discovered will disclose, wholly or in part, the basis on which the Commissioner decided not to exercise the power of remission. If they do not, one would be surprised if the officer who actually dealt with the matter would now have a full independent recollection of the circumstances he took into account.

2. Mr Robb pointed out that, for all the applicant knows, there might have been considered, as a matter bearing upon the exercise of the discretion, some erroneous factual assumption. Unless the applicant knows what basis, if any, underlay the decision, even the limited right of challenge afforded by the statute must be rather ineffective.

3. I am disinclined to make an order against the respondent founded on a pre-supposition that all the matters then considered can, insofar as not actually recorded in writing, now be brought to mind. On the other hand, it may turn out that the discretion was exercised in accordance with some practice or in a routine way and that there is no difficulty in explaining the basis of the decision.

4. It will therefore be ordered that the respondent, within 21 days, furnish the best particulars he presently can of the facts, matters and circumstances taken into account in any decision not to remit the additional tax referred to in the notice of assessment mentioned in the notice of objection, the subject of these proceedings, and of the date on which any such decision was made.