Deputy Federal Commissioner of Taxation v. Clyne.

Hunt J

Supreme Court of New South Wales

Judgment date: Judgment handed down 11 March 1982.

Hunt J.

The Deputy Commissioner of Taxation sues to recover income tax assessed against the taxpayer, Mr. Peter Clyne, in respect of the financial years ending 30 June 1977, 1978 and 1979. The amount of tax claimed by the Deputy Commissioner is $340,487.36 plus additional tax for late payment which, as at the commencement of the proceedings on 19 December 1980, amounted to $41,518.94 and which has since that date increased at the rate of ten per cent per annum on the amount of primary tax payable.

At the conclusion of the evidence, it was conceded on behalf of the taxpayer that, subject to three matters, the Deputy Commissioner had established his case. The other many and varied matters raised in the taxpayer's defence were not pressed.

The first matter argued by the taxpayer is directed to the amount of tax owing which

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has been established by the Deputy Commissioner. The taxpayer tendered the Notice of Assessment he received for the 1980 financial year. This Notice showed, under the heading ``LESS CREDIT FOR... F. Provisional Tax'' an amount of $131,799 which was in fact the amount of provisional tax notified as payable in the Notice of Amended Assessment received by the taxpayer for the previous financial year. The legend on the back of the 1980 Notice explains the symbol ``F.'' as indicating ``Provisional tax credited''. It was submitted by the taxpayer that upon its face this later Notice of Assessment constituted an admission by the Deputy Commissioner either that he had received payment for that amount or that for some other reason he no longer claimed in respect of that amount.

The Income Tax Assessment Act 1936, sec. 221YE, provides that provisional tax may be credited against the income tax payable only where that provisional tax has been paid. In the present case, it is not disputed that the provisional tax notified in the Notice of Amendment Assessment for the 1979 financial year has never been paid. The officer responsible for compiling the information from which the 1980 Notice of Assessment was made out showed the unpaid amount of provisional tax from the previous year as a credit in accordance with what I accept to be the usual practice of the Department. This practice treats the heading ``CREDITS FOR... Provisional Tax'' in effect as if it read ``Previous allowance for Provisional Tax''. This practice makes sense - even if not strictly in accordance with the statute - when it is realised that the amount of provisional tax notified is part of the equation which the Notice contains to show the end balance payable for each financial year (called the ``Total Amount Payable'' in the Notice), and that the Notice for each year must be read separately. If the amount of provisional tax previously notified was not so allowed in the next year's Notice of Assessment, there would be an accumulation from year to year to the distinct detriment of the taxpayer. The problem, of course, lies in the use of the word ``CREDIT'' somewhat inappropriately when the provisional tax has not been paid. This seems to me to be a matter which would repay some attention by the draftsman of the Notice. I am, however, satisfied upon all the evidence that the 1980 Notice of Assessment received by the taxpayer does not constitute any admission against the Deputy Commissioner that he was no longer claiming the amount of $131,799. I should add that it has not been suggested that the Deputy Commissioner is in any way estopped by reason of this amount being shown as a credit (cf.
F.C. of T. v. Wade (1951) 84 C.L.R. 105 at p. 117).

A further argument was put that, as the ``CREDIT'' of $131,799 was one of the ``particulars of the assessment'' in the 1980 Notice of Assessment, that Notice amounted by virtue of sec. 177 of the Act to conclusive evidence of the fact that this amount was no longer claimed by the Deputy Commissioner. If the Notice is made conclusive evidence by virtue of sec. 177, then it follows that the Deputy Commissioner cannot rely upon the explanation which I have accepted upon the basis that the description of this amount as a credit is relied upon by the taxpayer merely as evidence by way of an admission.

But the ``particulars of the assessment'' do not, in my view, include the ``CREDIT'' with which we are presently concerned. What the Commissioner is bound by sec. 166 to assess is the amount of the taxable income and the amount of the tax payable thereon. These amounts are the only ``particulars of the assessment'' to which sec. 177 refers. This means that the ``TAXABLE INCOME'' stated at the top of the Notice and the figure in the first column under the heading ``Tax Assessed'' are conclusively established by the production of the Notice. It is also submitted by the Deputy Commissioner that the particulars stated of any additional tax imposed by way of penalty for a late or an incorrect return would similarly be conclusively established also: see
Richardson v. F.C. of T. (1932) 48 C.L.R. 192, at pp. 202-204 and 215. That submission may well be correct. But none of the other items on the Notice which form part of the equation leading to the end balance payable is a particular of the assessment which attracts the evidentiary provisions of sec. 177. They might perhaps in some circumstances be properly described as particulars of the Notice, but they are not, in my view, particulars of the assessment itself. And it is only the latter category of particulars which comes within sec. 177.

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The first matter argued by the taxpayer therefore fails.

The second matter arises in the following way. The Deputy Commissioner's claim as it relates to the 1979 financial year depends upon two Notices of Assessment. On 9 July 1979, the Commissioner assessed the amount of the taxpayer's income for the relevant period as $206,042. The Notice of Assessment issued on that date shows as the end balance payable the amount of $236,922.31. The taxpayer objected to that assessment on 24 August. The terms of that objection are not in evidence, but on 29 November the Deputy Commissioner notified the taxpayer that he proposed to allow the objection in part and he issued an amended adjustment sheet. This was accompanied by a Notice of Amended Assessment which showed the taxpayer's income as assessed at $218,791 (an increase of some $12,750) and the end balance as $342,660.39 (an increase of some $105,740).

The taxpayer submitted that the Commissioner is not entitled to amend his assessment by increasing it when allowing an objection unless the restricted circumstances permitting the issue of an amended assessment (and defined in sec. 170) exist. That clearly is a matter which may be debated in the taxpayer's taxation appeal from those two assessments, but it is not a matter which I can decide in these recovery proceedings:
F.J. Bloemen Pty. Ltd. v. F.C. of T. 81 ATC 4280 at pp. 4289-4290; (1981) 35 A.L.R. 104 at p. 115.

The taxpayer nevertheless sought still to take advantage in these proceedings of the restrictions imposed by sec. 170 in this way. The relevant particulars in a document purporting to be a Notice of Amended Assessment were not, he submitted, given conclusive status by sec. 177 unless there is proof that, by reason of the circumstances defined in sec. 170, the Commissioner was entitled to amend the original assessment and to issue that Notice of Amended Assessment. As none of these circumstances had been established, the taxpayer said, the Deputy Commissioner could not rely upon the amended assessment; and, as the particulars of the amended assessment were accordingly not conclusively established, the whole basis of the judgment of the High Court in F.J. Bloemen Pty. Ltd. (supra) falls to the ground, permitting the taxpayer to raise this matter in the recovery action. In support of these submissions, the taxpayer argued that sec. 173, which provides that an amended assessment is an assessment for all the purposes of the Act, does not widen the application of sec. 177; it does not, for example, provide that every reference in the Act to an ``assessment'' shall be read as including an ``amended assessment'' (cf., for example, sec 221YA(2)).

But an assessment which has been amended (upon whatever basis) nevertheless in my opinion remains, by virtue of sec. 173, an assessment for all the purposes of the Act, and a Notice of Amended Assessment, therefore, is a Notice of Assessment for the purposes of sec. 177, and a document purporting to be a copy of that Notice of Amended Assessment is, by virtue of that section, made conclusive evidence of the particulars of the amended assessment: see
McAndrew v. F.C. of T. (1956) 98 C.L.R. 263 at pp. 269, 274 and 281-282. In these circumstances, the taxpayer remains in the situation where he is not permitted to raise in these recovery proceedings any argument based upon sec. 170, and the second matter he argued also fails.

The third matter argued by the taxpayer is the constitutional issue upon which yesterday he sought unsuccessfully from the High Court an order removing these proceedings into that Court pursuant to the Judiciary Act 1903, sec. 40. The argument is this. The procedure whereby the Commissioner is entitled by virtue of the Income Tax Assessment Act, sec. 175, 177, and 201, to recover and to retain tax notwithstanding pending taxation appeals, with an obligation subsequently to repay (without interest) should the taxation appeal be successful, amounts to the acquisition of property upon unjust terms, contrary to the Commonwealth Constitution, sec. 51(xxxi).

F.C. of T. v. Clyne (1958) 100 C.L.R. 246, Dixon C.J. (with whom the other members of the Court agreed) rejected a similar argument which the present taxpayer presented in relation to the requirements of Div. 3 that provisional tax be paid (also without interest). In the course of dealing with that argument, his Honour described (at

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p. 263) the imposition of taxation as the acquisition of money for public purposes. ``Money'' clearly is property. The retention of the taxpayer's property without compensation by way of an obligation to pay interest, the taxpayer submits, thus amounts to the acquisition of property upon unjust terms. He distinguishes the failure of his argument in his earlier appeal upon the basis that, whereas a taxpayer may re-assess his provisional tax, he has no such right in relation to primary tax which is sought to be recovered by the Commissioner prior to the hearing of a taxation appeal.

Notwithstanding Sir Owen Dixon's description of the imposition of taxation as the acquisition of money for public purposes, that imposition creates only a debt (sec. 208); it does not compulsorily acquire property and it does not amount to the acquisition of property within the meaning of sec. 51(xxxi):
TPC v. Tooth & Co. Ltd. & Anor. (1979) ATPR ¶40-127 at pp. 18,392-18,393; (1979) 26 A.L.R. 105 at pp. 229-230 (per Aickin J., with whom Mason J. agreed). Although that case dealt with a quite different legislative field of endeavour, the judgment of Aickin J. to which I have referred constitutes, in my respectful view, a careful examination of the application of sec. 51(xxxi) to a number of different fields, including taxation. Gibbs J. (as he then was) also gave detailed consideration to whether the compulsory divesting of property in various fields amounted to an acquisition within the meaning of sec. 51(xxxi). His Honour concluded (at ATPR pp. 18,364-18,365; A.L.R. pp. 192-193) that sec. 51(xxxi) ``obviously'' did not apply to laws for the imposition of taxation. Stephen J. (at ATPR p. 18,373; A.L.R. p. 204) described sec. 51(xxxi) as contemplating the taking of property ``for the purpose of putting it to a particular use'', and reference was made to
W.H. Blakeney & Co. Pty. Ltd. v. The Commonwealth (1953) 87 C.L.R. 501 at pp. 518-519. Upon this test, also, Sir Owen Dixon's description of the imposition of taxation as the acquisition of money for public purposes does not bring the laws of taxation within the contemplation of sec. 51(xxxi).

In these circumstances, I am satisfied that the constitutional issue raised by the taxpayer must fail.

The plaintiff is thus entitled to judgment. He seeks judgment in the sum of $334,826.25, which sum includes the additional tax imposed for late payment up to and including today and also takes into account by way of credit all the amounts which have been either paid by the taxpayer or seized by the Commissioner.

I direct the entry of judgment for the plaintiff in the sum of $334,826.25. I order the defendant to pay the plaintiff's costs.

I grant liberty to either party to apply.

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