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F.J. Bloemen Pty. Limited v. Federal Commissioner of Taxation.

Members: Stephen J

Mason J
Wilson J
Murphy J
Aickin J

Tribunal:
Full High Court

Decision date: Judgment handed down 5 June 1981.

Mason and Wilson JJ.

Does the Supreme Court of New South Wales in a statutory appeal under the Income Tax Assessment Act 1936 (as amended) (``the Act'') or in proceedings for declaratory relief have jurisdiction to determine that an assessment of a taxpayer to income tax under sec. 166 is invalid, notwithstanding that a notice of assessment is produced by the Commissioner and that the notice has the force of conclusive evidence (except in proceedings on appeal against the assessment) under sec. 177? That is the issue here. The case presented by each of the taxpayers is that the Commissioner did not in truth make final assessments but purported to make assessments which if made at all were only tentative or provisional, in neither case being authorized by the Act. The taxpayer, F.J. Bloemen Pty. Limited (``Bloemen''), also contends that the Commissioner did not make his assessments from the return, or from any other information in his possession, in accordance with sec. 166, and that his real purpose was not to make an assessment of the amount of taxable income, and of tax payable thereon, but to cause a debt for tax to come into existence so that he could exercise his powers under sec. 218. This section enables the Commissioner by notice in writing to require any person by whom any money is due to the taxpayer to pay to the Commissioner so much of the money as is sufficient to pay the amount due by the taxpayer in respect of any tax.

Bloemen has brought an appeal as of right and two special leave applications. It does not wish to proceed with one of the special leave applications (No. 1 of 1979). The appeal as of right and the other special leave application relate to the year of income ending 30 June 1968. Bloemen in its income tax return for the year ending 30 June 1968 showed a net loss of $484,354. The return disclosed that an amount of $478,478 had been received from Gold Coast City Council under an arbitration award. In his adjustment sheet the Commissioner added the net amount under the award ($439,922), thus reducing the loss for the year to $44,432. The Commissioner also disallowed another item of loss claimed by Bloemen, an amount of $137,500 for the hire of a dredge. After allowance was made for accumulated losses to 30 June 1967 the Commissioner assessed Bloemen to tax on a taxable income of $70,345. In an adjustment sheet accompanying an amended assessment issued on 4 September 1974 the Commissioner disallowed three items totalling $212,355. By his amended assessment the Commissioner assessed Bloemen on a taxable income of $282,700. It objected to the original and the amended assessments. The objections were disallowed. The taxpayer appealed to the Supreme Court of New South Wales.

On the hearing of a summons for directions in the appeal the question arose as

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to whether the Court had jurisdiction in the hearing of an appeal under the Act to entertain and give effect to the appellant's submissions that the assessments, original and amended, were not authorized by the Act. Bloemen then filed a second summons originating proceedings in the general jurisdiction of the Supreme Court for declaratory relief. This second summons (which we shall call the ``originating summons'') sought the same relief as had been sought in the summons for directions. It claimed:

``1. A declaration that both the original and amended Assessments of Income Tax and each of them bearing date respectively 28 May, 1971 and 4 September, 1974 issued in respect of income allegedly derived by the plaintiff during the financial year ended 30 June, 1968 are void and of no effect in law in that: -

  • (a) they did not nor did either of them issue pursuant to and their issuance was not authorised by Sections 166 and or 174 of the Income Tax Assessment Act 1936 (as amended) or any other provision of the said Act;
  • (b) they did not nor did either of them issue as a result of a bona fide exercise of the powers vested in the defendant pursuant to Section 166 and/or 174 of the said Act;
  • (c) each of them issued other than as a result of a bona fide exercise of the powers vested in the defendant in an attempt inter alia to place the defendant in a position:
    • (i) to support the issue of notices purportedly issued pursuant to Section 218 of the said Act;
    • (ii) to harass the plaintiff.
  • (d) They were not nor was either of them an assessment within the meaning of the said Act.

2. In addition to the matters stated in paragraph 1 hereof a declaration that the assessment of income tax in respect of income allegedly derived during the financial year ended 30 June, 1968 and issued to the plaintiff by Notice of Assessment dated 4 September, 1974 is void and of no effect in law for reasons set forth in paragraph 1 hereof and for the further reason that the conditions precedent required by Section 170(2) of the said Act have not been fulfilled.

3. A declaration that the Notices set out hereunder and purportedly issued pursuant to Section 218 of the said Act and upon the basis of the Assessments more fully referred to in paragraphs 1 and 2 hereof are void and of no effect.

The Notices addressed to:

The Council of the Shire of Hinchinbrook dated 27 November, 1974.

F.J. Bloemen dated 27 November, 1974.

F.J. Bloemen dated 27 November, 1974.

Commonwealth Trading Bank of Australia dated 4 December, 1974.

James George Thompson dated 12 December, 1974.

Arthur Gordon Dean dated 12 December, 1974.

William Samuel Simpson dated 12 December, 1974.

Anthony Neil Lee Atkinson dated 12 December, 1974.

Morris, Fletcher & Cross dated 13 December, 1974.

Dredging and Reclamation Limited dated 1 July, 1976.

4. Such further and other declaration as to this Honourable Court may seem appropriate.

5. Costs.''

By consent the two summonses were heard together.

The taxpayer's case was that, notwithstanding the finality in the form of the notices of assessment, the Court had jurisdiction to receive evidence as to whether the assessments were only tentative or provisional, and to hold that they were void if it found that they were tentative or provisional. The notices referred to in para. 3 of the relief claimed in the originating summons were notices given by the Commissioner under sec. 218 to persons from whom money was said to be due to Bloemen, requiring them to pay the debt to the Commissioner in payment of the tax which he had assessed under the assessments in question.

A very lengthy affidavit was filed on behalf of Bloemen containing documentary

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material derived from the Commissioner's files. The Commissioner, though denying that there was any substance in the claims made by the taxpayer, submitted that the Court had no jurisdiction to determine the claims made or to grant the relief sought.

The parties, with the acquiescence of the judge, decided that the question of jurisdiction should be argued and decided in the first instance. There was an obvious advantage in this course. The case proceeded on the footing that the Court was asked to determine whether, in the event that all the allegations of fact in the summons were true, the Court had power to make the declarations sought.

Rath J. held that it was open to the taxpayer in the proceedings for declaratory relief to raise the question whether the assessment to which the notices of assessment and of amended assessment referred was provisional in the sense explained in
F.C. of T. v. S. Hoffnung & Company Ltd. (1928) 42 C.L.R. 39 , but that it was not open for the taxpayer so to do in an appeal under the Act. His Honour dismissed the summons for directions in so far as it related to the relief sought in para. 1 and 3. He noted that para. 2, subject to some amendment, might be taken as an application for a separate hearing of the issue of the existence of the conditions for the exercise of the Commissioner's powers under sec. 170(2).

His Honour held that there was jurisdiction to make the declarations sought in para. 1 and 3 of the originating summons in so far as the issue raised was whether the process of assessment was complete at the date of issue of the notice of assessment and the notice of amended assessment.

His Honour concluded that Bloemen was not entitled to rely on the grounds of invalidity expressed in subpara. 1(b) and (c) of the originating summons because they invoked a principle which he considered to differ from that enunciated in Hoffnung . The principle invoked in the two subparagraphs was that of invalidity based upon collateral or non-statutory purpose. It was not available to invalidate an assessment or notice of assessment.

His Honour thought that the Court could not in the exercise of its general jurisdiction entertain the issue of the existence of conditions for the exercise of the Commissioner's powers under sec. 170(2) and that this issue should be dealt with in the statutory appeal. The declarations in the summons for directions were refused and it was ordered that there was jurisdiction to make the declarations sought in para. 1 and 3 of the originating summons.

Bloemen appealed and the Commissioner cross-appealed to the Court of Appeal in relation to the originating summons, the Court of Appeal having no jurisdiction in relation to the statutory appeal. By reason of judgments which had meantime been delivered by the Court of Appeal in
Dorney v. F.C. of T. 80 ATC 4206 and in
Simons v. F.C. of T. 80 ATC 4206 , the Court of Appeal dismissed the appeal and allowed the cross-appeal, dismissing the originating summons. Bloemen's appeal as of right to this Court is brought from these orders made by the Court of Appeal. Bloemen also seeks special leave to appeal from so much of the judgment of Rath J. as relates to the summons for directions. In ordinary circumstances an appeal would lie from that part of his Honour's decision to the Federal Court, but Bloemen submits that it is convenient that special leave should be granted so that the issues raised by the two summonses can be dealt with together.

We come now to the facts in the Simons appeal. It was the Court of Appeal judgment in Simons that foreclosed the Bloemen appeal to the Court of Appeal. The Commissioner issued a notice of assessment to Simons on 13 March 1979 in respect of the income year ending 30 June 1978. According to this notice of assessment the taxpayer's taxable income was $78,715 and the amount payable was $180,229.66. The latter figure was calculated after taking into account tax assessed $41,961.96, provisional tax $43,092, additional tax $20,980.98, less provisional tax credited $29,114, plus an amount payable of $103,308.72. An adjustment sheet accompanying the notice of assessment noted that the taxpayer in his return of income had claimed an overall loss of $399,859. According to the adjustment sheet the Commissioner had included in the taxpayer's income two amounts as a result of disallowing the whole of the losses claimed by the taxpayer in Siderin Trading Co. and

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Gladrella Co., being partnerships in which the taxpayer was interested. These two amounts totalled $478,808. It was largely as a result of the inclusion of these two amounts that the Commissioner arrived at a taxable income of $78,715.

The adjustment sheet contained the following notation:

``Your assessment will be reviewed upon determination of the objection against your assessment for 30 June 1977.''

In the Supreme Court of New South Wales, Simons sought a declaration that the Commissioner was not entitled to demand or recover the sum of $20,980.80 described in the notice of assessment as ``Additional tax'', and a declaration that the purported assessment of that sum as ``Additional tax'' was not authorized by the Act.

An order was made that the questions of law raised by para. 17 of the amended points of claim and para. 3 and 4 of the amended points of defence be decided separately from the other issues in the proceedings and that they be removed into the Court of Appeal. The question of law raised by para. 17 of the amended points of claim and disputed by para. 3 of the amended points of defence went to the constitutional validity of sec. 226. It has been abandoned. Paragraph 4 of the defendant's amended points of defence in substance repeats defences and arguments presented by the Commissioner in Bloemen .

The Court of Appeal by majority ( Hutley and Glass JJ.A., Mahoney J.A. dissenting) decided the question adversely to Simons and dismissed the proceedings with costs. Hutley and Glass JJ.A. held that the Supreme Court had no jurisdiction to decide whether the assessment was void and to grant the relief sought by Simons , though there was some divergence in their reasoning. Hutley J.A. considered that the provisions of the Act, notably sec. 175, denied jurisdiction to any court to declare an assessment void, except on constitutional grounds. His Honour distinguished the jurisdiction of a court in a statutory appeal to declare an assessment to be excessive and observed that in exercising that jurisdiction a court could set aside an assessment which was provisional or tentative only, though it would remain a valid assessment until so set aside. Glass J.A. thought that the question sought to be raised could not be dealt with except in a statutory appeal under Pt. V.

Mahoney J.A. considered that the Court had jurisdiction. He held that the existence of the statutory procedure for review of the assessment under Pt. V was an inadequate basis for the implication that the validity of an assessment could only be challenged under that Part. He held that the Court could in proceedings, not being proceedings under Pt. V, declare that the Commissioner had made no assessment at all, applying principles of general law.

The appellants seek to sustain the dissenting judgment of Mahoney J.A. Central to their argument is the proposition that when sec. 170, 175, 177, 185 and 190 speak of ``assessment'', they refer to an assessment that has taken place. Consequently, these sections cannot be read as supporting the view that the Act denies jurisdiction to a court to declare that an assessment has not been made at all. The appellants draw a distinction between the making of an assessment which is erroneous and the failure to make any assessment at all.

The argument turned very largely on sec. 175 and especially on sec. 177(1) and their relationship to the Commissioner's basic duty under sec. 166 to make an assessment of the amount of the taxable income of the taxpayer and of the tax payable thereon.

Section 175 provides:

``The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.''

This section does not relieve the Commissioner from the necessity of performing his duty to make an assessment. The section protects the validity of an assessment, once made, from the consequences which might otherwise flow from the Commissioner's failure to comply with any provisions of the Act. But it does not, and cannot, create a valid assessment where no assessment has been made at all. The section requires an actual assessment as a condition of its operation.

Section 177(1) provides:

``The production of a notice of assessment, or of a document under the

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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.''

Two questions arise in relation to sec. 177(1):

  • (a) Does the word ``assessment'' bear the meaning which the appellants seek to give it?
  • (b) Is the document conclusive evidence that an assessment has been duly made or is it conclusive evidence of the due making of an assessment that has been made?

The word ``assessment'' is defined in sec. 6 to mean, unless the contrary intention appears, the ascertainment of the amount of taxable income and of the tax payable thereon. In
Batagol v. F.C. of T. (1963) 109 C.L.R. 243 , the Court considered the meaning of ``assessment'' in the context of sec. 170 and the group of sections with which it is associated. Kitto J. observed (at p. 251):

``Assessment in the sense of mere calculation produces no legal effect. No step that the Commissioner may take, even to the point of satisfying himself of the amount of the taxable income and of the tax thereon, has under the Act any legal significance.''

until he serves a notice of assessment. Then and then only has an ``ascertainment'' been made. The amounts of taxable income and tax are then rendered certain. In this context, according to his Honour (at p. 252), ``assessment'' means:

``the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case.''

Owen J. reached a similar conclusion. Menzies J. agreed with both Kitto and Owen JJ. It was held that nothing done in the Commissioner's office can amount to more than steps which will form part of an assessment if, but only if, they lead to and are followed by service of a notice of assessment (see p. 252).

Batagol supports the view that the process of assessment is completed when the Commissioner inserts in the notice of assessment which is served on the taxpayer the amount of his taxable income and the amount of tax payable thereon. There is nothing in Batagol to suggest that the Court will go behind the assessment of a taxpayer's taxable income and tax payable as expressed in the notice of assessment served on him, unless it appears from the notice or an accompanying document that the notice is not in truth a notice of assessment.

In Hoffnung the assessments were expressed to have been made ``tentatively'' or ``subject to revision'' or ``to be finalized''. Accordingly, they were not assessments within the meaning of the War-time Profits Tax Assessment Act 1917-1918 (Cth.) and did not preclude objections to a complete and final assessment when made. The Commissioner had argued that the taxpayer could not object to the final assessment when made because he had not objected within the time stipulated in the statute to the tentative assessment. Isaacs (at pp. 53-55) and Higgins JJ. (at pp. 58-59) rejected this argument, pointing out that the notice of assessment described the assessment as tentative.

There is no ground for saying that ``assessment'' in sec. 177(1) is used otherwise than in its defined sense or that the comments in Hoffnung and Batagol do not apply to it. The subsection looks to a definitive ascertainment of the taxpayers' taxable income and of the tax payable thereon, not one which is merely tentative.

What then is the effect of sec. 177(1)? Does production of an appropriate notice of assessment or document provide conclusive evidence that an assessment was actually made, or does it merely provide conclusive evidence that an assessment, if made, was duly made? Although it was said that the second alternative reflected a more natural reading of the provision, our view is that the language of the section is equally susceptible of either reading and that the answer is to be found not so much in the language as in the

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context and in the scope and purpose of the Act.

We reject the submission that the appellants' case is supported by dicta in
George v. F.C. of T. (1952) 86 C.L.R. 183 , notably at p. 207 , and
McAndrew v. F.C. of T. (1956) 98 C.L.R. 263 , at p. 271 . Correctly understood, the judgments in these cases show that the language of the subsection, admittedly difficult, is to be read in its context so as to give effect to the scope and purpose of the Act. The distinction drawn by sec. 177(1) is between the procedure by which the taxable income is ascertained (the ``due making'' of the assessment of which the production of the notice of assessment is conclusive evidence) and the taxpayer's substantive liability to tax (``the amount and all the particulars of the assessment'' which may be challenged in Pt. V proceedings). See, for example, the passage in George , at pp. 206-207, and the comment, at p. 207:

``Obviously the `due making of the assessment' was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal.''

In McAndrew, Dixon C.J., McTiernan and Webb JJ. (at p. 271) noted that, although the existence of conditions giving rise to the exercise of the power to amend an assessment might be thought otherwise to be part of the ``due making'' of an assessment, the consequence of this interpretation would be to deny to the taxpayer the right to challenge the exercise of the power. Their Honours went on to say:

``Section 177[sic] (2) and (3) impose certain conditional time bars which in this dichotomy seem evidently to belong to substantive liability. From this it follows that fulfilment of the conditions which bring a case within s. 170(2) is part of the matter governed by the words of exception in s. 177(1), viz. `except in proceedings on appeal against the assessment'. An appeal, however, is a proceeding given by statute to a taxpayer for the purpose of impugning an assessment otherwise conclusively imposing liability upon him.''

These statements do not support the appellants. They acknowledge that the existence of the antecedent conditions is not part of the ``due making'' of an amended assessment, but they do not say that the ascertainment of the taxable income also stands outside that concept. Furthermore, as the power to amend, unlike the Commissioner's power to make his initial assessment, is conditioned in this way, it is natural that sec. 177(1) should be so interpreted as to permit the taxpayer to challenge the existence of the conditions giving rise to the exercise of a power which imposes on him a new substantive liability to tax. There is no like reason for reading the subsection so as to allow the taxpayer to contest the making of an original assessment, when a notice of assessment has been served, and the making of that assessment is not similarly conditioned, the taxpayer being entitled to contest his substantive liability to tax in Pt. V proceedings, without contesting the making of the initial assessment.

Nor are the appellants assisted by the comment of Lowe J. in
Kellow-Falkiner Pty. Ltd. v. F.C. of T. (1928) A.L.R. 276 , at p. 279 . There his Honour, referring to sec. 39(1)(a) of the Income Tax Assessment Act 1922, said:

``It is the `due making' of the assessment of which the due production of the notice is to be conclusive evidence, not of the validity of the assessment when duly made. I think that this sub-section is dealing with the formalities and procedure of the making, and is not even affecting to deal and does not deal with the validity of a purported assessment, though all the formalities of procedure in the making have been observed.''

His Honour was considering a case in which the Commissioner had assessed the taxpayer to additional tax, applying sec. 7 of the amending Act of 1924 which had no application to the income year in question. The application was relevant to the taxpayer's substantive liability. It may also be observed that both in Kellow-Falkiner and Hoffnung the document which was said to be a notice of an assessment bore evidence, if not on its face then in the supporting documentation, which denied it that character. Visual inspection alone was

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sufficient to compel the conclusion that the document was not a notice of assessment for the purpose of the relevant Act.

An explicit and, in our view, correct statement of the effect of sec. 177(1) was made by Taylor J. in McAndrew (at pp. 281-282). For the reasons there expressed his Honour concluded that ``s. 177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground''. He conceded that the word ``excessive'' in sec. 190(b) was inappropriate. However, he considered that an assessment ``made in purported but not justifiable exercise of a statutory power'' could properly be described as ``excessive'' (p. 282).

This interpretation gives expression to the policy which underlies, and is manifest in, the statutory provisions. The effect of this policy is that, once the Commissioner takes advantage of sec. 177(1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt. V.

Although sec. 190(b) places the onus on a taxpayer upon a reference or appeal of proving that the assessment is excessive, it enables him to contest his substantive liability to tax. It is then for the board upon a reference or the Court on an appeal, within the framework of the taxpayer's objection, to ascertain whether he is liable to tax and, if so, in what amount. The Pt. V procedures accordingly protect the taxpayer and enable him to have his liability to tax determined.

Of course, the appellants argue that this view of the operation of the Act does not offer sufficient protection to the taxpayer in the event of an abuse by the Commissioner of his powers. They point to the fact that notwithstanding that the assessment may be under review or appeal pursuant to Pt. V the tax assessed is payable and the Commissioner has access to the extensive powers prescribed in Pt. VI, including the garnishee power in sec. 218. It is true that Pt. VI contains large powers to enable the recovery of tax; powers the exercise of which may make life uncomfortable both for the taxpayer and perhaps others who owe money to the taxpayer. So much may be conceded, but the Act does not proceed upon the hypothesis that the Commissioner will be motivated in the exercise of his powers by improper or collateral purposes. As Isaacs A.C.J. observed in
F.C. of T. v. Clarke (1927) 40 C.L.R. 246 at p. 276 , after stating that sec. 39 of the Income Tax Assessment Act 1922-1925 (a provision analogous to sec. 177 of the Act) made the assessment unchallengeable:

``The Act so far trusts the Commissioner and does not contemplate, in my opinion, a curial diving into the many official and confidential channels of information to which the Commissioner may have recourse to protect the Treasury.''

It does not necessarily follow from what we have said that the Act excludes the general jurisdiction of the Supreme Court. Section 177(1) specifically operates by compelling a court, for example the Supreme Court, in the exercise of its jurisdiction to treat a notice of assessment on its production as conclusive evidence that the assessment has been duly made and thereby foreclosing that issue. In theory sec. 177 leaves the Supreme Court with jurisdiction to decide whether an assessment has been duly made in a case in which an appropriate document is not produced.

However, the rights of review given to the taxpayer by Pt. V are comprehensive. Quite evidently it was contemplated that the Commissioner would in every case take advantage of sec. 177(1) and foreclose the exercise of jurisdiction to decide whether an assessment has been duly made. The general tenor of the statutory provisions suggests that a taxpayer wishing to challenge a notice of assessment served upon him will be effectively confined to the Pt. V procedures.

Novel consequences will arise if the appellants' construction of sec. 177(1) be correct. If the actual making of an assessment be not comprehended by the expression ``due making'' then sec. 177(1) gives the Commissioner no evidentiary advantage in proceedings for recovery of tax. He would be obliged to prove that an assessment was made by calling an assessor. So much was ultimately conceded by the appellants' counsel. It is not to be supposed

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that Parliament intended that sec. 177(1) should have no application to the actual making of the assessment, thereby compelling proof by oral evidence in recovery proceedings that an assessment had been made. The consequence is so radical as to make the argument quite unacceptable.

The appellants also turn to sec. 185 in an attempt to find support for their contention. This section provides that any taxpayer ``dissatisfied with any assessment'' may within 60 days after service of the notice of assessment post to or lodge with the Commissioner ``an objection in writing against the assessment'', stating the ground on which he relies. How, it is asked, can a taxpayer bring himself within this section when his objection is that there has been no assessment at all? The answer to this question is again to be discovered in sec. 177(1) and the legislative policy on which it proceeds. Although the subsection is evidentiary and begins to operate when an appropriate document is produced in a court or board of review, and not before, its effect is to put the making of an assessment beyond challenge. In the nature of things the Commissioner will always rely on production of the notice of assessment or a copy of it. Section 185 proceeds on this assumption and on the footing that, once a notice of assessment is served, no question will arise as to the making of the assessment by reason of the Commissioner's reliance on sec. 177(1).

There is a further difficulty confronting the appellants. It is one thing to say that a notice of a tentative assessment is not touched by sec. 175 and 177. That is clearly correct. But it is difficult to understand how it can be said consistently with those sections that a notice which appears to be a final notice of assessment is nevertheless not what it appears to be because there was no assessment at all. As we have observed, the process of assessment requires the ascertainment of the taxpayer's taxable income, and of the tax payable thereon. As Barwick C.J. explained in
Bailey & Ors. v. F.C. of T. , 77 ATC 4096 at p. 4098; (1977) 136 C.L.R. 214 , at p. 217 .

``But the process of assessment requires the application of the Act to the facts as known to and accepted by the Commissioner. He must of necessity, as part of that process, adopt a view of the relevant facts.''

The Commissioner may be right or wrong in his view of the facts, but it would appear to be incontrovertible that the figure on the notice of assessment which records the Commissioner's view of the taxable income evidences that a process of assessment was actually undertaken however cursory or inadequate that process may have been. In George v. F.C. of T. (1952) 86 C.L.R. 183, at p. 204, Dixon C.J., McTiernan, Williams, Webb and Fullagar JJ. said:

``It is an error to treat the formation by the commissioner of a judgment as to the amount of the taxable income as if it were not the ascertainment of the taxable income which constitutes assessment or a necessary part of that process...''

In
Trautwein v. F.C. of T. (1936) 56 C.L.R. 63 , at pp. 87-88 , Latham C.J. was discussing the difficulty of the Commissioner's task in making an assessment when the materials were inadequate. He continued:

``The application of sec. 39 [cf. sec. 177] is not, in my opinion, excluded as soon as it is shown that an element in the assessment is a guess and that it is therefore very probably wrong. It is prima facie right - and remains right until the appellant shows that it is wrong.''

In our opinion, it must follow that a notice in proper form of an assessment necessarily compels the conclusion that there was an assessment made in fact.

Accordingly, in our opinion the Supreme Court is bound, on production of a notice of assessment, to rule that the assessment was duly made both in statutory proceedings and in the exercise of its general jurisdiction. In a given case a question may arise as to whether the notice produced by the Commissioner is a notice of assessment, e.g. a notice expressed to relate to a definitive assessment as distinct from a provisional or tentative assessment. Unless it can be characterized as a notice of an ``assessment'', sec. 177(1) will have no operation.

The Bloemen notice of assessment is in form an assessment. It sets out the ascertainment of the taxpayer's taxable income and the tax payable thereon. It is therefore appropriate to bring sec. 177(1) into operation. Its production will put beyond contention the due making of the assessment so that the Court cannot find that

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no assessment was made or that, if made, it was made for an inadmissible purpose.

The Simons notice, if read with the adjustment sheet, is more debatable. However, we read it as a definitive assessment by the Commissioner intended to create a legal liability to pay the tax specified, coupled with an intimation that the Commissioner will review the taxpayer's liability in a certain event. If it be assumed that the Commissioner lacks power to amend the assessment in the circumstances contemplated this does not affect our conclusion. It merely means that the Commissioner is mistaken in supposing that he has power to review. Accordingly, the notice of assessment will, on production, bring sec. 177(1) into play.

In the result we would dismiss the two appeals and the applications for special leave to appeal.


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