VMQD and Commissioner of Taxation (Taxation)
[2017] AATA 846
•19 May 2017
VMQD and Commissioner of Taxation (Taxation) [2017] AATA 846 (19 May 2017)
Division:TAXATION & COMMERCIAL DIVISION
File Numbers: 2016/5637
2016/5638
Re:VMQD
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:The Hon. Dennis Cowdroy OAM QC, Deputy President
Date:19 May 2017
Date of written reasons: 9 June 2017
Place:Sydney
The application made by the Applicant pursuant to s 37(1) of the Administrative Appeals Tribunal Act 1975 (Cth) as modified by s 14ZZF of the Taxation Administration Act 1953 (Cth) is dismissed.
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The Hon. Dennis Cowdroy OAM QC, Deputy President
Catchwords
PRACTICE AND PROCEDURE - lodging of documents with the Tribunal - application for an order that the respondent lodge additional documents - claim that documents that may be relevant to the decision under review are in the possession of the respondent but have not been lodged - modification of s 37 of the Administrative Appeals Tribunal Act 1975 by s 14ZZF of the Taxation Administration Act 1953 - respondent only obliged to produce documents considered necessary to the review - application dismissed
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) ss 34, 37
Taxation Administration Act 1953 (Cth) s 14ZZF
Cases
Binetter v Commissioner of Taxation [2016] FCAFC 163
Federal Commissioner of Taxation v Dalco [1990] 168 CLR 614
Kennedy v Administrative Appeals Tribunal & Anor [2008] FCAFC 124
McAndrew v Federal Commissioner of Taxation [1956] 98 CLR 362
VLKG v Commissioner of Taxation [2011] AATA 915
W R Carpenter Holdings Pty Ltd v Federal Commissioner of Taxation [2008] 237 CLR 1986WRITTEN REASONS FOR ORAL DECISION
The Hon. Dennis Cowdroy OAM QC, Deputy President
9 June 2017
In this application for review, the applicant challenges an assessment of income tax issued by the respondent (“the Commissioner”). The Commissioner has claimed that taxes are owing by the applicant as the result of evasion. However, an interlocutory question has arisen concerning the extent to which the Commissioner is obliged to produce documents to the applicant. That is the subject of this application.
The parties have identified, by the filing of a statement of agreed issues, the matters to be determined by the Tribunal when it comes to hear the merits of the application. Those issue are identified as follows:
(a)whether the taxable income of the applicant should be reduced by the following amounts:
(i)$6,767,980, or any other amount, in respect to the income year ended 30 June 2001 (the 2001 income year); and
(ii)(ii) $10,586,248, or any other amount, in respect to the income year ended 30 June 2002 (the 2002 income year).
(b)whether the applicant has discharged his burden of proving that the assessments were excessive on the ground that there was no evasion in either the 2001 income year or in the 2002 income year.
(c)whether the applicant is liable to administrative penalties under division 284 of schedule 1 to the Taxation Administration Act 1953 (“TAA 53”) of:
(i)a 75% base penalty amount in respect of the 2001 income tax year; and
(ii)a 90% increased base penalty amount for the 2002 income year.
By a letter dated 13 December 2016, the applicant sought a direction from the Tribunal that, pursuant to s 37(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”), as modified by s 14ZZF of the TAA 53, the respondent lodge and provide to the applicant “every document considered by him to be necessary to this review”. Included in the request were documents falling into the categories described in a schedule to the request, all of which will be referred to as the “s 37(1) application”. Alternatively, the applicant seeks that a notice be issued to the respondent, pursuant to s 37(2) of the AAT Act (as modified by section 14ZZF of the TAA 53), requiring lodgement with the Tribunal and supply of documents falling in the same categories (hereafter referred to as the “s 37(2) application”).
The applicant submits that an audit conducted in 2003, which has resulted in the issue of a challenged assessment, concerns the unwinding of an agreement made between a company (to be referred to as “Company X”), and the Western Australian Government, pursuant to which Company X was to supply a car fleet under a financing transaction.
The applicant has been assessed by the Commissioner in respect of matters arising out of such transaction. The applicant claims that he was a stranger to significant aspects of the transactions and is not aware of the documents on which the Commissioner relied on to undertake his investigation and to issue the challenged assessment.
The applicant submits the Commissioner obtained records and documents arising out of a 2003 audit, and the applicant wished to see and review such documents as are set out in schedule 1 to submissions 37(1) application filed in support of his application. Those documents include records relied upon to form the opinion that the applicant was guilty of evasion and all documents considered by the Commissioner in reaching his conclusion that evasion had occurred.
Further, the applicant seeks access to documents passing between the Australian Taxation Office and personnel of a firm of accountants relating to the settlement reached between various parties concerning the termination of the Company X fleet leasing transaction. Other persons are also involved who are strangers to the applicant.
Company X has been placed in liquidation. The applicant seeks access to documents held by the Commissioner relating to Company X. Such documents include transcripts of interviews, correspondence with the liquidator of Company X, an allotment journal of the Company X Financial Group Unit Trust and other documents as set out in schedule 2 to the s 37(1) application.
In addition, the applicant seeks correspondence passing between various persons, including from the Commissioner to various named persons and the relationship to the applicant being unexplained, tax returns of a corporation (to be referred to as “Company Y”), working papers and trial balances relating to the 2000 income tax return of Company Y’, and other documents relating to the formation by the Commissioner of the decision to conduct the review in 2003 as set out in schedule 3 to the s 37(1) application.
The applicant states that his case will necessarily involve a large number of documents, many of which are solely in the possession of the Commissioner, and to which both the Tribunal and the taxpayer will require access in order to consider his application. Further it is submitted that the applicant will be unable to engage all of the issues in the absence of such documents.
STATUTORY REQUIREMENTS
The obligation to provide documents to the Tribunal, as provided by s 37 of the AAT Act includes the provision of a statement setting out the findings on material questions of fact, referring to evidence or other material to which those findings are based, and giving reasons for the decision (as set out in s 37(1)(a), and “…every other document is in the person’s possession or under the person’s control and is relevant to the review of the decision by the Tribunal”: s 37(1)(b).
The obligation to produce documents is extended by the provisions of s 37(2), which relevantly provides:
(2) Where the Tribunal is of the opinion that particular other documents or that other documents included in the particular class of documents may be relevant to the review of the decision by the Tribunal, the Tribunal may cause to be given to the person notice in writing stating that the Tribunal is of that opinion and requiring the person to lodge with the Tribunal…copies of each of those other documents...
However, in respect of matters arising under the TAA 53, express modification is made of the obligation under s 37 of the AAT Act by virtue of s 14ZZF which requires that where there is an application before the Tribunal of a reviewable objection decision, the requirement of section 37(1) of the AAT Act is varied, requiring lodgement with the Tribunal of a copy of the statement of reasons for the decision, the notice of taxation, the taxation objection, the notice of the objection decision (see 14ZZF(1)(a)(i)-(iv); and relevantly
(v) Every other document that is in the Commissioner’s possession or under the Commissioner’s control and is considered by the Commissioner to be necessary to the review of the objection decision concerned.
In passing it should be noted that by virtue of this sub-section, it is the Commissioner who determines whether the provision of such documents are necessary to the review of the objection decision.
Further, s 14ZZF(1)(b) of TAA 53 modifies the power of the Tribunal under s 37(2) of the AAT Act to cause a notice to be served, imposing a requirement of the right to make a statement at a conference held in accordance with s34(1) of the AAT Act, and to require lodgement of a copy of documents that are in the person’s possession or control and relevantly, s 14ZZF(1)(b)(iii)
a power, by such notice, to make such a statement and impose a requirement that the person lodge with the Tribunal within the time specified in the notice, a copy of the list of documents in the person’s possession or under the person’s control, considered by the person to be relevant to the review of the objection decision concerned.
Accordingly, the requirements of section 14ZZF of TAA 53 substantially alter the scope of the obligation in taxation matters to lodge documents which would otherwise be required in other matters pursuant to section 37 of the AAT Act. Scope is afforded to the Commissioner to determine those documents which he considers necessary to produce documents considered to be relevant to the review.
CONSIDERATION
The interpretation of the above section has been considered by the Tribunal in VLKG v Commissioner of Taxation [2011] AATA 915. In that decision the Tribunal at [5]-[13] considered the modification introduced by s 14ZZF of TAA 53, to s 37 of the AAT Act. At [11] of this decision, the Tribunal observed that the modification did not take the same approach in s 37(2) as it did for s 37(1), stating:
[11]…in the modified section 37(2) the test for the enlivening of the Tribunal’s power to issue a notice to the decision-maker is whether the Tribunal is of the opinion that “particular other documents” or “documents included in a particular class of documents” may be relevant (as opposed to the test of necessity in the modified s 37(1)).
What is plain is that pursuant to s 37(1) of the AAT Act, as amended by s 14ZZF of TAA 53, the Commissioner is only obliged to produce those documents which the Commissioner considers necessary to the review. Further, pursuant to the amended s 37(2), the obligation rests upon the applicant to demonstrate the relevance of the documents.
In the present circumstances, no evidence has been filed which establishes any link or association between the applicant and the other parties, some of whom or even all of whom may be strangers to the applicant. Relevance will largely depend upon the issues to be determined. In the agreed statement of issues it is not apparent how the documents referred to in the applicant’s schedules are relevant to the issues to be determined.
During the course of the hearing the Tribunal received, in effect, a submission of the applicant’s solicitor describing the relevance of the documents. However, it is apparent from such statement that the issues referred to therein extended well beyond the issues referred to in the agreed statement of issues. Accordingly, the Tribunal must be guided by the agreed statement which was directed to be filed by the parties at a directions hearing earlier this year and which was required to specify the very issues in dispute.
There is a further matter for consideration which arises on this application, namely the obligation of the taxpayer when challenging an assessment of income tax. The Commissioner alleges that the applicant has been guilty of evasion of tax and this constitutes the basis of his assessment. In these circumstances the obligation rests upon the taxpayer to disprove the basis of the assessment. That is, the Commissioner is not required to justify the assessment.
In Binetter v Commissioner of Taxation [2016] FCAFC 163 (“Binetter”) the Full Court of the Federal Court of Australia confirms that position, relying upon earlier decisions such as Federal Commissioner of Taxation v Dalco [1990] 168 CLR 614; McAndrew v Federal Commissioner of Taxation [1956] 98 CLR 362; W R Carpenter Holdings Pty Ltd v Federal Commissioner of Taxation [2008] 237 CLR 1986.
At [93] in Binetter, the Full Court said, inter alia:
Although the Tribunal re-examines whether, on the evidence before it, there was an avoidance of tax due to fraud or evasion, and is able to substitute its opinion for the Commissioner, the issue for the Tribunal is whether the taxpayer has discharged the onus showing that the opinion that there was fraud or evasion should not have been formed, and therefore that the statutory condition for the power to amend is not satisfied.
At [95] the Full Court said, inter alia:
The Tribunal is correct to hold that Mrs Binetter bore the onus of proving that the conditions for the exercise of the amended power did not exist…
In Kennedy v Administrative Appeals Tribunal & Anor [2008] FCAFC 124, the taxpayer sought to challenge the Commissioner’s assessment on the basis that it was made in bad faith. At [27] the Full Court said:
In the present case, Mr Kennedy’s allegation that the assessments were made in bad faith is made without any evidentiary basis or any pleadings to substantiate the claim in relation to specific documents. In substance, Mr Kennedy is seeking the additional documents in order to explore whether there is any possible foundation for raising such an allegation. The present application seeks to cast a wide net, without any foundation in the evidence, for the purpose of ascertaining if any basis exists on which to challenge the Commissioner’s assessment and for this reason the request for documents should be refused: see Cosco Holdings Pty Ltd v Federal Commissioner of Taxation [1997] 37 ATR 432.
On the evidence placed before the Tribunal in support of this application, there is nothing to suggest that the documents sought to be lodged with the Tribunal are relevant to the issues agreed between the parties. The onus rests on the applicant to demonstrate an absence of evasion and it is not apparent that the documents sought by the applicant are relevant to any such issue.
DECISION
For the above reasons the application is dismissed.
I certify that the preceding 27 (twenty-seven) paragraphs are a true copy of the reasons for the decision herein of The Hon. Dennis Cowdroy OAM QC, Deputy President
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Associate
Dated: 9 June 2017
Dates of hearing: 5 and 19 May 2017 Counsel for the Applicant: Mr N Williams SC and Mr A Russionello Solicitors for the Applicant: Mr C Suttie, Speed and Stracey Lawyers Pty Limited Counsel for the Respondent: Mr G O'Mahoney Solicitors for the Respondent: Mr P Poulos, Minter Ellison
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