Briggs v. Deputy Federal Commissioner of Taxation and Ors; Ex parte Briggs.Judges:
Full Federal Court
Bowen C.J., Sheppard and Beaumont JJ.
In proceedings for mandamus and prohibition brought by the prosecutor against the respondents, the Deputy Commissioner of Taxation and three other officers of the Australian Taxation Office, Sheppard J. has referred some questions of law to the Full Court. For this purpose, the parties have agreed upon the following facts:
The facts below stated are agreed by the Prosecutor and the Respondents for the purposes of and as the basis of the questions referred and not otherwise.
1. That on or about 7th June 1983 the Third and Fourth Respondents recommended to the First Respondent in the person of the Second Respondent, that he issue: -
- (i) Notices of Amended Assessments in respect of the Prosecutor for the years of income ended 30th June 1976, 1977 and 1978;
- (ii) Notices of Assessment in respect of the Prosecutor for the years of income ended 30th June 1979, 1980 and 1981.
2. That on or about 12th July 1983, consequent upon and in accordance with the recommendation in paragraph 1, the First Respondent in the person of the Second Respondent: -
- (i) issued Notices of Amended Assessments in respect of the Prosecutor for the years of income ended 30th June 1976, 1977 and 1978;
- (ii) issued Notices of Assessment in respect of the Prosecutor for the years of income ended 30th June 1979, 1980 and 1981.
3. Copies of the Notices of Assessment and Notices of Amended Assessment are attached hereto as Annexure `1' and form part of the agreed facts.
[There are annexed three documents headed `Notice of Amended Assessment Made' together with three other documents headed `Notice of Assessment Made'. The documents were in the same form. We reproduce the Notice of Amended Assessment for the year ended 30 June 1976 by way of illustration: [refer to p. 4751]
The notices purported to make an assessment of the prosecutor's taxable income in the amounts of $75,000, $100,000, $125,000, $150,000, $175,000 and $200,000 for the years ended 30 June 1976, 1977, 1978, 1979, 1980 and 1981 respectively.]
4. None of the Respondents, prior to the issue and service of the Notices of Amended Assessment and Assessment, made any attempt to ascertain the Prosecutor's taxable income, nor intended to undertake any relevant process of calculation but the First Respondent issued the said Notices for the purpose of forcing the Prosecutor to consult with him or his officers.
5. None of the Respondents carried out any or any proper investigation of the affairs of the Prosecutor prior to the making of the Amended Assessments and Assessments the subject of the Notices.
6. There was no material having any rational or logical probative force to justify the issue of the Notices of Amended Assessment and Assessment.
7. None of the Respondents took any steps to consider facts provided by the Prosecutor to the Respondents prior to the issue of the Assessments and Amended Assessments.
8. The Respondents failed to consult with the Prosecutor prior to the issue of the
INCOME YEAR ENDED AUSTRALIAN TAXATION OFFICE 10 FILE No. 30 JUNE 1976 NOTICE OF AMENDED ASSESSMENT MADE 623 024 180 PURSUANT TO THE INCOME TAX ASSESSMENT ACT 1936 AS AMENDED (Please quote in all or substituted correspondence)accounting periodTaxable Income Tax Assessed and Amounts Balances and Other Amounts Amount Other Amounts Credited Adjustments Payable or Payable Debited or Other or Credits Refundable 75000 A43460.00 G1340.00 L109814.00DR 106789.50DR B 1912.00 M 3024.50DR Other Details D65782.00 N106789.50DR For explanation of symbols and information re objections etc see overleaf DATE DUE AND ISSUE DATE PAYABLE 12 JUL83 Mr Peter Briggs 15AUG83 273 Oceanic Drive CITY BEACH 6015
THE FILE NUMBER
SHOWN AT THE TOP OF
THIS NOTICE SHOULD
BE QUOTED ON NEXT
Receipt by Cash Register will be printed belowCERTIFIED TRUE COPY R.A. GILL Deputy Commissioner of Taxation 1 St George's Terrace, PERTH 6000 F. MOTTERAM (SGD.) ------------------------------- DEPUTY COMMISSIONER OF TAXATION
TAX SHARING ARRANGEMENTS
State Government receives 20.72% of total Commonwealth taxes, including income tax, and Local Government receives 2% of personal income tax.
ATC 4752Notices of Assessment and Amended Assessment.
9. The First Respondent in the person of the Second Respondent decided to issue the Notices of Amended Assessment and Assessment knowing that they did not reflect any rational assessment of a liability of the Prosecutor or with reckless indifference to whether they did or did not reflect any such assessment.''
The questions reserved are:
``1. Whether by reason of the operation of Section 177 of the Income Tax Assessment Act 1936 the Court is precluded from determining all or any of the grounds of the Prosecutor's application.
2. Whether by reason of the operation of Section 177 of the Income Tax Assessment Act 1936 the Court is precluded from granting all or any of the relief sought by the Prosecutor.''
The grounds of the prosecutor's application for mandamus and prohibition may be summarised as follows. He says that the respondents' actions were beyond the powers conferred by the Income Tax Assessment Act 1936 (``the Act''). He alleges an abuse of power, bad faith, a collateral purpose and a denial of natural justice. He further contends that there was no evidence to support the respondents' decisions. He also charges fraud, as vitiating the respondents' actions, in these terms:
``Particulars of Fraud:
(i) The issue of the Assessments without any or any reliable material to support the calculation of the assessment leading to the Assessments.
(ii) The issue of the Assessments knowing that the Assessments did not reflect any rational assessment of a liability of the Prosecutor or reckless indifference.
(iii) The issue of Assessments for the purposes of compelling the Prosecutor to disclose information.
(iv) The issue of Assessments in the absence of a proper investigation and if an investigation was conducted (which is denied) such investigation being recklessly indifferent to the rights of the Prosecutor and to his income tax liability (if any).''
As to relief, the prosecutor seeks orders quashing the assessments, and prohibiting the first respondent or any officer delegated by him from further proceeding with or seeking the recovery of any tax allegedly due and payable pursuant to the assessments. Mandamus is also sought in the form of an order compelling the first respondent to issue notices of assessment in respect of the years of income ended 30 June 1976, 1977, 1978, 1979, 1980 and 1981 in accordance with law and in accordance with returns of income lodged by the prosecutor. Damages are claimed against all respondents in the exercise of the Court's accrued jurisdiction.
Section 177 of the Act provides:
``177(1) The production of a notice of assessment, or of a document under the 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. [Emphasis added]
(2) The production of a Gazette containing a notice purporting to be issued by the Commissioner shall be conclusive evidence that the notice was so issued.
(3) The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a document issued by either the Commissioner, a Second Commissioner, or a Deputy Commissioner, shall be conclusive evidence that the document was so issued.
(4) The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of or extract from any return or notice of assessment shall be evidence of the matter therein set forth to the same extent as the original would be if it were produced.''
Section 177 is found in Pt IV of the Act which deals with returns and assessments. The effect of some of the other provisions of that Part should be mentioned. From the returns, and from any other information in his possession, or from any one or more of these
ATC 4753sources, the Commissioner shall make an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon (sec. 166). (``Assessment'' is defined to mean the ascertainment of the amount of taxable income and of the tax payable thereon (sec. 6(1)).) If (a) any person makes default in furnishing a return; or (b) the Commissioner is not satisfied with the return furnished by any person; or (c) the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income, the Commissioner may make an assessment of the amount upon which in his judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of sec. 166 (sec. 167). The Commissioner may, subject to certain conditions not presently relevant, amend any assessment by making such alterations therein or additions thereto as he thinks necessary, notwithstanding that tax may have been paid in respect of the assessment (sec. 170(1)). Except as otherwise provided, every amended assessment shall be an assessment for all the purposes of the Act (sec. 173). As soon as conveniently may be after any assessment is made, the Commissioner shall serve notice thereof in writing by post or otherwise upon the person liable to pay the tax (sec. 174(1)). the validity of any assessment shall not be affected by reason that any of the provisions of the Act have not been complied with (sec. 175).
It is submitted on behalf of the respondents that the operation of the provisions of sec. 177(1), as explained in
F.J. Bloemen Pty. Ltd. v. F.C. of T. and Simons v. F.C. of T. 81 ATC 4280; (1980-1981) 147 C.L.R. 360, is fatal to the prosecutor's claims. The respondents say that once the notices of assessment are tendered in the proceedings, the Court will be deprived of jurisdiction to entertain the prosecutor's application for the issue of prerogative writs. (The respondents acknowledge that the claim for damages requires separate consideration (see
Lucas v. O'Reilly 79 ATC 4081;
Bourgoin S.A. v. Ministry of Agriculture, Fisheries and Food (1985) 3 W.L.R. 1027;
D. Baker, Maladministration and the Law of Torts (1985) 10 Adel. L.R. 207 at pp. 239 et seq.). We did not hear argument from any party on this aspect of the prosecutor's claim and we do not propose to deal with it.)
In Bloemen, the taxpayer sought declarations in the original jurisdiction of the Supreme Court that assessments of income tax were void on several grounds. It was said that they were not issued pursuant to the Act and that they were not issued bona fide but rather for collateral purposes, i.e., to support the issue of notices purportedly issued pursuant to sec. 218 of the Act and to harass the taxpayer. A preliminary question of law was argued as to the competence of the Court to entertain these allegations in its original jurisdiction. It was held that by virtue of the conclusivity provided by sec. 177(1), the Supreme Court was deprived of jurisdiction to deal with the matter except in proceedings on appeal against the assessment.
Before turning to consider the judgments in Bloemen, reference should be made to some of the earlier authorities dealing with the meaning and operation of sec. 177 or its precursor, sec. 39 of the Income Tax Assessment Act 1922-1925. In
The King v. D.F.C. of T. (S.A.); Ex parte Hooper (1926) 37 C.L.R. 368. Isaacs J. explained the character of ``an assessment'' for present purposes (at p. 373):
``An `assessment' is not a piece of paper: it is an official act or operation: it is the Commissioner's ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer. When he has completed his ascertainment of the amount, he sends by post a notification thereof called `a notice of assessment'... But neither the paper sent nor the notification it gives is the `assessment'. That is and remains the act or operation of the Commissioner.''
The rationale for the enactment of sec. 39 (and, thus, sec. 177) was indicated by Isaacs J in
F.C. of T. v. Clarke (1927) 40 C.L.R. 246 at p. 276:
``While the Commissioner is directed not to assess unless he has reason to believe attempted evasion or fraud, sec. 39 of the 1922-1925 Act (sec. 35 of the 1915-1918 Act) plainly makes 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.''
F.C. of T. v. Hoffnung & Co. Ltd. (1928) 42 C.L.R. 39, an assessment made under the War-time Profits Tax Assessment Act 1917-1918 was challenged. The parties admitted the facts for the purposes of the appeal. Paragraph 7 of the admitted facts read (at p. 41):
``7. The assessment originally and as altered up to 13th January 1922 did not include any deduction for excess profits duty paid in the United Kingdom under sub-sec. (4) of sec. 15 of the said Commonwealth Act, the Commissioner intimating when making such assessment that this matter remained to be adjusted and that pending such adjustment payment of tax was to remain in abeyance.''
It was held that no assessment had been made. Isaacs J. said (at pp. 54-55):
``But all this depends on whether the assessment of 26th April 1919 was an `assessment' contemplated by the Act and whether the notice of that date was a notice intended by the Act. In the first place, the notice itself does not on its face bear out those requirements. It describes the matter as `tentative'. The `assessment' and the notice of assessment required by the Act to fix the taxpayer with liability for a Crown debt carrying interest and penalties must be definite and certain, or, as it has been described throughout the argument, `definitive', as opposed to `provisional'. There is no evidence, or at all events no satisfactory evidence, to displace the self-description in the notice. The facts as admitted and the correspondence taken as a whole confirm the apparently provisional character of the assessment and notice. Since the apparent, that is, the `tentative', character of the departmental operation emanates from the Tax Office, the burden rests on the Commissioner to displace it. The more is this so when it is sought to shut the taxpayer out from establishing, if he can, a right he asserts is given to him by statute.''
Later, his Honour observed (at pp. 55-56):
``If an assessment definitive in character is made, it assumes that, so far as can there be seen, a fixed and certain sum is definitely due, neither more nor less. In short, it ascertains a precise indebtedness of the taxpayer to the Crown. But if an assessment is made which recognises that one matter is unsettled and remains for settlement, and until it is settled - and probably to the advantage of the taxpayer - then, if that is the basis of the assessment, it is not the assessment contemplated by the Act. Every assessment, of course, contemplates that it may appear thereafter that an alteration or addition is necessary. But that is a different thing - there is no then existing matter known to be a presently necessary factor and put aside for future adjustment. Reading the combined evidence as reasonably susceptible of two interpretations, and therefore as raising a fair matter of contest, I adopt the one which seems to me to operate in fact more justly.''
Starke J. was of the same opinion (at p. 65):
``But the Commissioner fails, in my opinion, because the facts establish that he never made a complete and final assessment - or perhaps I should say any assessment - under the Act, until the so-called amendment of July 1925. Everything else was `tentative' or subject `to further revision' or `remained to be finalised at an early date'. Only in July 1925 was a final, or what was called during argument a `definite', assessment made according to the true meaning and intent of the taxing Acts, of the war-time profits in respect of which the taxpayer was liable to tax.''
The leading judgment in Bloemen was given by Mason and Wilson JJ. After reviewing the earlier decisions, including
McAndrew v. F.C. of T. (1956) 98 C.L.R. 263 and
Batagol v. F.C. of T. (1963) 109 C.L.R. 243, Mason and Wilson JJ. said that there was no ground for thinking that ``assessment'' is used in sec. 177(1) otherwise than in its defined sense or that the comments in Hoffnung 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.'' (at ATC 4286; C.L.R. pp. 372-373).
Mason and Wilson JJ. observed at ATC pp. 4287-4288; C.L.R. p. 374 that in 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
ATC 4755sufficient to compel the conclusion that the document was not a notice of assessment for the purpose of the relevant Act.''
Their Honours were of the view that sec. 177(1) was intended to make it impossible for a taxpayer, in proceedings other than an appeal against it, to challenge an assessment on any grounds. They continued at ATC p. 4288; C.L.R. p. 375:
``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.''
It was held that the notice of assessment addressed to the taxpayer in Bloemen was in form an assessment and was appropriate to bring sec. 177(1) into operation. In Simons, the notice had to be read with the adjustment sheet which stated that the assessment ``will be reviewed upon determination of the objection against [an earlier] assessment...''. Even if read together, these documents were ``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.'' (at ATC p. 4290; C.L.R. p. 378). Thus the notice would, on production, bring sec. 177(1) into play.
In our opinion, the present case may be distinguished from both Bloemen and Simons. In each of those cases, and in Bloemen especially, there was nothing to indicate that the notice of assessment was something different from what, on its face, it purported to be. But here, the respondents have admitted that the documents issued by them were not, in truth, assessments of taxable income: according to para. 4 of the admitted facts, none of the respondents, prior to the issue and service of the notices of assessment, made any attempt to ascertain the prosecutor's taxable income, nor intended to undertake any relevant process of calculation; rather, the first respondent issued the said notices for the purpose of forcing the prosecutor to consult with him or his officers; and, by para. 9, the first respondent, in the person of the second respondent, decided to issue the notices of assessment, knowing that they did not reflect any rational assessment of a liability of the prosecutor or with reckless indifference to whether they did or did not reflect any such assessment. The respondents have thus elected to proceed upon a footing different from that contemplated by the Act, for the statute proceeds upon the hypothesis that the Commissioner will not be motivated in the exercise of his powers by improper or collateral purposes (see Bloemen, per Mason and Wilson JJ. at ATC p. 4288; C.L.R. p. 375). But, to adapt the language of Isaacs J. in Clarke, the present case does not involve a ``curial diving'' into ``confidential channels of information''. Rather it is a case, no doubt unusual, of the respondents' asserting that they have abused their powers. This assertion, it is true, is made in a statement of facts which is agreed on a limited basis only. None the less, we must accept the assertion as accurate.
A genuine attempt to ascertain the taxable income of a taxpayer, even if carried out cursorily or imperfectly, is one thing. But when regard is had to the whole of the facts and surrounding circumstances of the present case and it appears that the respondents never intended to embark and did not in fact embark, upon the process of ascertaining the taxpayer's income, no ``assessment'' is involved. So much is really conceded by the respondents in the agreed facts and that consideration takes the case beyond what was decided in Bloemen. It must follow that sec. 177(1) can have no operation.
We should add that the agreed facts are susceptible of another interpretation. It is possible to read in them a suggestion that what the respondents were really doing was making a provisional estimate of the prosecutor's taxable income pending further discussions between the parties. In other words, it is possible to construe the agreed facts as indicating that, short of abusing his powers of assessment, the first respondent was here endeavouring to make an ``ambit'' claim against the prosecutor with a view to issuing a further and, definitive, assessment once the prosecutor gave him the necessary information.
But, even if this be the appropriate construction of the agreed facts (and our
ATC 4756preference is to read the agreed facts as indicating that the respondents made no attempt at assessment at all) it will not assist the respondents. An ``assessment'' issued in such a tentative and provisional way cannot, for the reasons given in Hoffnung, attract the force of sec. 177(1).
We would answer both the questions referred in the negative.
THE COURT ORDERS THAT:
1. The answers to the following questions of law arising in the proceedings before Sheppard J. which were referred pursuant to sec. 25(6) of the Federal Court of Australia Act 1976 are as stated below:
- Whether by reason of the operation of sec. 177 of the Income Tax Assessment Act 1936 the Court is precluded from determining all or any of the grounds of the prosecutor's application.
- Whether by reason of the operation of sec. 177 of the Income Tax Assessment Act 1936 the Court is precluded from granting all or any of the relief sought by the prosecutor.
2. The Deputy Commissioner of Taxation for the State of Western Australia pay to Peter Briggs his costs of the reference.