Nestle Australia Limited v. Federal Commissioner of Taxation.Judges:
There are before the Court two proceedings - each brought under the Administrative Decisions (Judicial Review) Act 1977 and heard together - whereby Nestle Australia Limited challenges two separate decisions made on behalf of the Commissioner of Taxation declining, amongst other things, to extend time to pay disputed taxation assessments totalling $19,435,261.
The case has some unusual features. Firstly, the liability arises under amended assessments issued in 1985 in relation to the years of income ended 30 June 1971 to 30 June 1982 inclusive. Tax assessed in accordance with the returns
ATC 4412submitted by Nestle for each of those years has already been paid. The amended assessments were issued by the Commissioner under sec. 136 of the Income Tax Assessment Act 1936. That section, as it stood prior to its repeal in 1982, provided that, amongst other situations, where a business is carried on in Australia by a company a majority of the shares in which is held by or on behalf of non-residents and it appears to the Commissioner that the business produces less than the amount of taxable income which might be expected to arise from the business, "the person carrying on the business in Australia shall... be liable to pay income tax on a taxable income of such amount of the total receipts... of the business as the Commissioner determines". The issue of these amended assessments following an investigation by the Australian Taxation Office, extending over a period of nine years, of the affairs of Nestle. The applicant is a subsidiary of a Swiss corporation, Nestle SA. It sells much of its product to a Bahaman corporation, Nestle Products Ltd., another subsidiary of Nestle SA. The Commissioner apparently takes the view that these sales have been at prices lower than might have been obtained on the open market.
Secondly, a period of almost two years elapsed between the issue of the amended assessments and the date of hearing these applications. The major cause of that delay was disputation regarding discovery of documents, as to which I made orders on 14 February 1986 - see 86 ATC 4130; (1986) 10 F.C.R. 78 - and on 30 July 1986 - see 86 ATC 4499; (1986) 67 A.L.R. 128. These orders were the subject of an appeal to a Full Court which was dismissed on 5 November 1986: see 86 ATC 4760; (1986) 69 A.L.R. 445. However, notwithstanding the time which has elapsed and the Commissioner's refusal formally to extend the time for payment of the assessed tax, he has not taken any action to recover the tax. Moreover, the Commissioner appears to have not yet reached a firm decision as to the amount of the tax which ought to be paid. I was told at the hearing that he was currently considering the possibility of issuing further amended assessments claiming a greater total sum.
The June 1985 requests
Each of the 12 amended assessments was issued on 16 May 1985. Each required payment by 19 June 1985. On that day the debt became due and payable - see sec. 204 of the Act - and a debt due to the Commonwealth - see sec. 208. On 17 June 1985 Mr J.H. Cherry, of Cherry and Partners, chartered accountants acting on behalf of Nestle, wrote a letter to the Commissioner whereby he made two requests. Firstly, he sought an extension of the time for payment of the assessments until the date upon which the Commissioner notified Nestle of his decision to allow "the objections presently being prepared" by Nestle against the assessments, or, should the Commissioner disallow the objections, the date 30 days after the decision of a Board of Review upon the reference of the objections. This request was made under sec. 206 of the Income Tax Assessment Act which relevantly provides as follows:
"206(1) The Commissioner may in any case grant such extension of time for payment of tax, or permit payment of tax to be made by such instalments and within such time as he considers the circumstances warrant; and in such case the tax shall be due and payable accordingly.
The second request was that the Commissioner determine that the date of payment pursuant to that extension of time be the date from which there is to be computed any liability for additional tax pursuant to sec. 207 of the Act or, alternatively, that he remit any such additional tax. Section 207 imposes a liability to pay, by way of penalty, additional tax, calculated at the rate of 20% per annum on the unpaid tax from the date upon which the tax became due and payable; or would but for sec. 206 have become due and payable. However, the section goes on to empower the Commissioner, under certain circumstances, to remit the additional tax in whole or in part.
Mr Cherry put a number of matters in support of his application. Firstly, he put a general proposition, based upon what he called "the very size of the amount of tax claimed". He stated that the amount was such as "virtually to necessitate an extension of time". He did not claim that Nestle would be unable to raise such a sum by the due date but he said that "a claim for nearly $20m. on, in effect, one month's notice cannot be accepted with equanimity by any Australian enterprise". He referred to the effect of such a payment upon
ATC 4413the "resources available for the company's ongoing capital expenditure program". Particular mention was made of a proposal by Nestle to restructure its plant at Gympie.
Mr Cherry dealt in detail with the history of the investigation of Nestle's affairs conducted by the Australian Taxation Office, concluding with an allegation that the amended assessments "represent no more than a step in what is perceived within the ATO to be an ongoing process of negotiation towards what is seen by the ATO as a satisfactory basis of assessment of what should be (rather than what in fact is) the profits of" Nestle. He suggested that there were good grounds for saying that such an assessment is not in reality an assessment at all but that, in any event, it was "clearly inappropriate that the tax levied by assessments raised in such circumstances... should be collected until the dispute is indeed resolved". He claimed that the assessments were "based upon what in another context would be called an ambit claim: one much more than the amount ultimately hoped to be obtained but asserted in order to leave room for compromise". The letter went on to state that "objections are presently in preparation, and indeed are with counsel to be settled". He specified five grounds which would, he said, be included in the objections. Under a heading "Equity" Mr Cherry said:
"Finally we would point out that the Commissioner has taken since at least March 1978, when it was said that only formal steps remained before an assessment would issue, to prepare and forward to the company a statement of his position on the Section 136 dispute. In that time, the only information the Commissioner has given the company as to the basis of his views is a folder of cryptic schedules based on source materials withheld from the company. In contrast, the company has throughout this period and at great expense and inconvenience to management supplied to the Commissioner all the information sought from the company to the extent that such provision is within its power. It is to ask for no more than basic equity that after so long a gestation the company should not be called upon to meet the financial burden of the Commissioner's assessments before it is allowed the opportunity to examine, challenge and obtain an independent review of them."
Mr Cherry's letter was considered by Mr J.W. Osborne, Senior Assistant Deputy Commissioner, Sydney. He decided to refuse both applications and he caused to be sent to Mr Cherry a letter dated 21 June 1985 which included the following:
"In your letter you foreshadowed the lodgment of objections against the assessments raised by the Commissioner and indicated that the company was seeking penalty free extension arrangements pending resolution of the dispute.
In this regard your attention is drawn to the contents of Income Tax Rulings 2091 and 2156 which state, inter alia:
- • It is regarded as one of the basic responsibilities of the Commissioner of Taxation to ensure that, as far as practicable, income tax will be collected within the financial year in which the liability falls due for payment.
- • The statutory rate of penalty of 20 per cent per annum arises under the Income Tax Assessment Act automatically upon late payment of tax.
- • Where an extension of time for payment is granted it would normally be expected to be subject to additional tax from the original due date. That is, while an extended due date for payment may be granted, the date from which additional tax is to be measured remains the original due date.
- • With the exception of taxpayers affected by natural disasters, all extensions of time are to be granted subject to additional tax from the original due date. That is, use of an extended due date to alter the date from which penalty is calculated is restricted to natural disaster situations.
- • The tightening of the rules for remission of additional tax for late payment effected by the amendments to section 207 creates a situation in which there is no room for remission simply because there is a dispute about the
ATC 4414extent of the taxpayer's liability. This was made clear in the Treasurer's Second Reading Speech on the amending legislation, and is further borne out by the provisions of the Taxation (Interest on Overpayments) Act which allow for interest to be paid on refunds of overpayments where assessments are reduced as a result of the allowance of objections or appeals.
- • In respect of genuine dispute cases, there will be a special basis for granting an extension of time in addition to the arrangements set out in Taxation Ruling No. IT 2091. In these cases an offer by the taxpayer to pay 50 per cent of the tax in dispute (plus the full amount of any tax not in dispute), with the balance being subject to additional tax for late payment from the original due date, and any overpayment accruing interest to the taxpayer, is to be accepted as sufficient to defer legal recovery action for the period of the stage of the dispute in which the payment is made.
Although formal objections have not as yet been lodged against the assessments, the company is invited to consider its position in terms of the guidelines encompassed in ITR 2156 covering `genuine dispute cases'.
Should the company decide to pay 50 per cent of the tax in dispute, this would be sufficient to defer legal action until the dispute is resolved. Meanwhile as an indication of the company's good faith in reaching a satisfactory payment arrangement, urgent steps should be taken to achieve, before 30 June, payment of a significant part of the tax now overdue. If it is still the company's intention, as a result of further consideration, to proceed with an objection, the amount of this payment could be the whole or a substantial part of the 50 per cent of tax outstanding.
Finally, you are reminded that late payment is accruing at the statutory rate of 20% per annum from the due date of the assessments."
On 27 June 1985 Nestle's solicitors wrote seeking clarification of what decisions had been made and requesting reasons under sec. 13 of the Administrative Decisions (Judicial Review) Act. Before there was any reply, on 3 and 5 July 1985, an objection to each amended assessment was lodged with the Commissioner. On 16 July 1985 Mr Osborne replied, by letter to Cherry and Partners, to the solicitors' letter:
"In our letter of 20 June 1985 your attention was drawn to the provisions of Section 206 and Section 207 of the Income Tax Assessment Act and the Commissioner's guidelines, as set out in ITR 2091 and 2156, covering extensions of time for payment and remission of additional tax for late payment. In the absence of formal objections the company's extension request was considered under the guidelines relating to non-disputed assessments as set out in ITR 2091 and our response was intended to point out areas where the company failed to satisfy the requirements of that ruling.
Under the guidelines laid down in ITR 2091, an extension to alter the date from which penalty is calculated is restricted to natural disasters and, in other cases, an extension, if granted, is subject to additional tax from the original due date. As far as your client company's extension request is concerned there is insufficient information for concluding that the financial position or liquidity of the company is such that the company was unable to pay its tax on or before the due date. Consequently we were unable to accede to the company's request.
Should the company proceed with the lodgment of objections the matter may be re-negotiated in terms of ITR 2156 whereby recovery action may be deferred, upon payment of 50% of the amount in dispute and the balance being subject to additional tax for late payment from the original due date.
Turning now to the question of remission of additional tax, you are reminded that any request for remission of additional tax for late payment must be considered in terms of Section 207(1A) of the Income Tax Assessment Act with due regard to the taxpayer's performance in meeting the terms of any arrangement to finalise the outstanding account. As a prerequisite the company must demonstrate that it did not have the means necessary to discharge the liability when it fell due. Other provisions of Section 207(1A) must then be satisfied.
We trust that you will now be in a position to make satisfactory arrangements for early settlement of the outstanding liability or to consider a firm proposal in consequence of the objections foreshadowed in your earlier memorandum."
The explanation given in this letter was amplified by Mr Osborne in his statement of reasons under sec. 13 sent to the solicitors on 13 August 1985:
"Findings on Material Questions of Fact
1 The amount owing in respect of the abovementioned assessments (i.e.) $19,435,261.09 remained unpaid at 19 June 1985 - the date on which the assessments were due and payable and the date on which the extension request lodged by Cherry & Partners on 17 June 1985 was considered.
2 In support of the request for extension. Cherry & Partners advised that the taxpayer proposed to object against the assessments under consideration but at the time their request was considered there was no record of objections having been lodged. Consequently the request was considered with reference to the provisions of Sec. 204, Sec. 206 and Sec. 207 of the Income Tax Assessment Act 1936 and the Commissioner's guidelines relating to non-disputed assessments as set out in Income Tax Ruling 2091.
3 I was not satisfied on the basis of statements made in support of the request for extension that the taxpayer was unable to pay its tax on or before the due date.
4 In the circumstances I could not reach a conclusion that the taxpayer company satisfied the Commissioner's guidelines as set out in Income Tax Ruling 2091, for the granting of extension arrangements, nor was any reason apparent for the exercising of a discretion to depart from those guidelines in order to grant the extension of time sought.
5 It was considered, however, that in the event of objections being lodged against the assessments, it would be appropriate to consider a further extension request in terms of the guidelines covering genuine disputes (Income Tax Ruling 2156) whereby recovery action would be deferred upon payment of 50% of the amount in dispute with the balance being subject to additional tax for late payment from the original due date.
Evidence or Other Material on Which My Findings Were Based
In making my decision I had regard to the following -
- • The letter dated 17 June 1985 written on behalf of Nestle Australia Ltd. by Cherry & Partners.
- • An extract from the Taxpayer's computer record showing, inter alia, the relevant tax outstanding at 19 June 1985.
- • Secs. 204, 206 and 207 of the Income Tax Assessment Act 1936.
- • Income Tax Rulings 2091 and 2156.
Reasons for My Decision
The reasons for my decision were that -
- • There was insufficient information for concluding that the financial position of the company was such that the company was unable to pay its tax on or before the due date.
- • The circumstances of the case, including the fact that the company proposed to lodge objections against the assessments in question, were not considered exceptional circumstances which warranted granting an extended date due and payable for the purposes of additional tax pursuant to Sec. 207 of the Income Tax Assessment Act 1936 nor were there sufficient grounds stated for the remission of additional tax that may become payable.
No decision had been made to exact payment of tax due and payable as it was considered appropriate to defer consideration of further action pending lodgment of objections against the disputed assessment."
The November 1986 requests
On 18 July 1985 Nestle filed in this Court Application No. G.184 of 1985. That application sought review of both the decision not to extend time for payment of the tax claimed by the amended assessments and the decision not to alter the date from which is computed any liability for additional tax, or alternatively, to remit any such additional tax.
No decision was made by the Commissioner upon the objections lodged on 3 and 5 July 1985 until, on 16 September 1986, Nestle commenced mandamus proceedings to compel the Commissioner to determine its objections. The Commissioner responded on 8 October 1986 by disallowing all the objections. Six days later Nestle requested the Commissioner to refer his decisions on the objections to the Administrative Appeals Tribunal, which had on 1 July 1986 taken over the jurisdiction previously exercised by the Taxation Boards of Review. It took the Commissioner six months to comply with that request; the decisions finally being referred on 10 April 1987, a few days before the hearing of the present proceedings.
On 19 November 1986, shortly after the determination of the Full Court appeal on discovery already referred to, Mr Cherry again wrote to the respondent. He made fresh requests, in the same terms as before, in relation both to the extension of time for payment of the assessments and in regard to additional tax under sec. 207. He asked the Commissioner, in considering that application, to take into account the material in certain affidavits filed in matter G. 184 of 1985 and the history of those proceedings. Particular reference was made to the delay associated with discovery and inspection and with the Commissioner's unsuccessful appeal thereon. Mr Cherry submitted "that it is unreasonable for the Commissioner to refuse to grant an extension of time to pay tax when by his own behaviour he has delayed judicial proceedings brought to review a decision on that very question".
The affidavit material referred to in this letter included an affidavit of Mr T.E. Gordon, manager of the Finance and Control Division of Nestle, dated 1 October 1985. In that affidavit Mr Gordon stated that Nestle would need to pay about 17% per annum to borrow the funds needed to pay the assessment. This would cost $3,303,944 in the first year, compounding in subsequent years. He expressed the view that any such cost would be treated by the Australian Taxation Office as non-deductible for income tax purposes, as being a cost incurred in relation to the payment of tax rather than in relation to the carrying on of business by Nestle. Mr Gordon accepted that, upon allowance of any objection, Nestle would receive interest, under the Taxation (Interest on Overpayments) Act 1983, upon its payment. This interest would be calculated at 14.026% per annum but would be taxable, meaning that, at a tax rate of 46%, the effective interest yield would be 7.574% per annum. The result would be that the company - though successful in its objection - would suffer a loss of about $2,000,000 for each year during which the matter was unresolved. If Nestle paid one-half of the amount claimed by the assessments, the loss would be about $1,000,000 per annum. Mr Gordon referred to the 63rd report of the respondent, covering the year 1983-1984, in which it was recorded that at 30 June 1984 there were 53,681 submissions awaiting transmission to the Taxation Boards of Review and that, in the year ended 30 June 1984, the Boards had dealt with fewer than 1,000 submissions. [It should be said that the figure of 53,681 includes a total of 12,754 cases deferred for various reasons. None the less 40,927 cases were said to be "in course of preparation for transmission to the Head Office or Boards". During the year only 767 cases had actually been transmitted to the Boards.]
On 17 December 1986 hearing dates were fixed for matter G.184 of 1985, being 22 and 23 April 1987 (subsequently changed to 15 and 16 April). On 24 December 1986 Mr Osborne replied to Mr Cherry's letter of 19 November 1986:
"You refer to the current litigation commenced by Nestle Australia Ltd. in the Federal Court seeking judicial review of my decision not to grant an extension of time for payment of the tax owing by NAL in accordance with the assessments issued on 16 May 1985.
I have been advised that these proceedings have been set down for hearing in the Federal Court on 22 and 23 April 1987. In my view, in these circumstances, it would not be appropriate to now consider your further request to exercise the discretion under s. 206 of the Income Tax Assessment Act.
If, however, your Federal Court Application should prove to be successful, requiring review of the prior decision, regard would be had to the contents of your letter dated 19 November 1986 together with any such material as may be sought to be placed
ATC 4417before me for the purposes of exercising the discretion conferred by s. 206 of the Income Tax Assessment Act."
The motion for summary dismissal
Application N.S.W. G.31 of 1987 was filed on 2 February 1987. It seeks review of the decision of Mr Osborne not to accede to the requests made by Mr Cherry on 19 November 1986.
By notice of motion dated 3 March 1987 the respondent sought the summary dismissal of that application pursuant to O. 20 r. 2(1) of the Federal Court Rules. The subrule provides:
"2(1) Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding -
- (a) no reasonable cause of action is disclosed;
- (b) the proceeding is frivolous or vexatious; or
- (c) the proceeding is an abuse of the process of the Court,
the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding."
In the present context the subrule must be read with O. 54 r. 6:
"6. In applying Order 20, rule 2 to applications under the Administrative Decisions (Judicial Review) Act 1977 that rule shall be construed as if paragraph (1)(a) read `no reasonable basis for the application is disclosed'."
By consent it was directed that matter G.31 of 1987, and the notice of motion therein, be listed for hearing at the same time as matter G.184 of 1985.
I dealt with the notice of motion as a preliminary matter. Two arguments were put, neither of which had any substance. In the first place, it was said that application G.31 of 1987 was an abuse of the process of the Court because the same relief was sought in that proceeding as in G.184 of 1985. Reference was made to two cases,
Williams v. Hunt (1905) 1 K.B. 512 and
McHenry v. Lewis (1882) 22 Ch.D. 397, in which it was held to be an abuse of process for a litigant to claim in later proceedings relief identical to that claimed in an earlier action. But the argument overlooks the fact that, although orders to the same effect are sought in each proceeding, those orders relate to different decisions. It cannot be said, in the words of Cotton L.J. in McHenry v. Lewis at p. 406, that this is a case of "double vexation by the same party with reference to the same matter". The "matter" which is the subject of application G.184 of 1985 is the validity of the decision made by Mr Osborne on behalf of the Commissioner on 21 June 1985. The subject matter of application G.31 of 1987 is the validity of his decision of 24 December 1986. The validity of each decision has to be separately addressed. It is theoretically quite possible for one decision to be valid and the other invalid. For example, the earlier decision may have taken into account the whole of the then existing relevant circumstances, yet the later decision might be invalid because it ignored a supervening relevant circumstance. Or, conversely, the earlier decision might have failed to have regard to a relevant matter, or might have had regard to an irrelevant matter; yet the defect might have been cured on the second occasion.
The second submission put in support of the notice of motion was that there was no reasonable basis for the application. It was said that the respondent had not in fact made a decision on the application of 19 November 1986 so that there could be no review under sec. 5 of the Administrative Decisions (Judicial Review) Act. Counsel submitted that, Mr Osborne having already made a decision, in June 1985, not to exercise his discretions under sec. 206 and 207 of the Income Tax Assessment Act in favour of the applicant, he was under no duty to determine the applications to like effect of 19 November 1986; so that sec. 7 of the Administrative Decisions (Judicial Review) Act had no application. Section 7 permits review of a failure to make a decision by a person having a duty to make a decision to which the Act applies.
I do not think that it is correct to say that the Commissioner failed to make a decision on the applications of 19 November 1986. It is true that he did not consider the applications upon their merits. But he did respond to the applications by refusing to exercise in favour of the applicant the discretions entrusted to him by sec. 206 and 207. I think that it should be held that he refused the applications. However, it
ATC 4418does not matter whether this is correct or not. As the repository of the discretions conferred by sec. 206 and 207 the Commissioner had a duty to consider any application made to him for the exercise of those discretions in favour of a particular taxpayer. It is not necessary to determine what the Commissioner's obligation might be in the extreme case postulated by his counsel, where a taxpayer made repeated applications without any change of material circumstances. In this case the circumstances had changed significantly between 21 June 1985 and 19 November 1986; not least because, in the meantime, objections had been lodged and disallowed and the applicant had requested reference of the decisions to disallow to the Administrative Appeals Tribunal.
For the above reasons I dismissed the notice of motion. By consent the two principal proceedings were then heard together, evidence in each matter - to the extent that it was relevant - being treated as evidence in the other.
Admissibility of evidence regarding the investigation
The applicant filed extensive affidavit evidence regarding the course of the investigation undertaken by the Australian Taxation Office into its affairs. The evidence included reference to statements said to have been made from time to time by various taxation officers. Much of this evidence was filed only a few days before the hearing, well outside the time limited for the filing of affidavits on behalf of the applicant. I was informed by counsel for the respondent that there had been no opportunity to obtain instructions on this late material and that, if this evidence was held to be relevant, an application would be made for an adjournment for the purpose of considering, and replying to, the affidavits. However, an objection to relevance having been taken, I decided to consider that question first.
In support of their submission that the course of the investigation was relevant to the present proceedings, counsel for the applicant drew attention to the allegation made by Mr Cherry, in his letter of 17 June 1985, that the amended assessments constituted an "ambit claim". They said, correctly I think, that in that letter Mr Cherry clearly challenged the bona fides of the Commissioner in issuing the amended assessments. It was material, counsel submitted, to the exercise of his discretions under sec. 206 and 207 for the Commissioner to consider whether in truth the amended assessments were genuine estimates of the applicant's taxation liability or whether they were merely a device to extract from Nestle by negotiation taxation payments beyond those previously assessed and paid. The material in the affidavit, it was said, was evidence which tended to show that, if Mr Osborne had investigated the allegation made by Mr Cherry, he would have found a lack of bona fides.
For the purpose of considering the submission as to relevance I shall assume that the evidence to which I have referred is capable of supporting the inference that the amended assessments were not made bona fide, that they constituted an "ambit claim" for negotiating purposes. But, because a want of bona fides in the exercise of a statutory discretion is an extremely serious matter, I should emphasise that I have not reached any conclusion to that effect. I have not considered the material in any detail. Consequently, I have formed no opinion as to whether the evidence is even capable of supporting the claim made by Mr Cherry. And, there having been no opportunity for the respondent to reply to this evidence, still less have I any opinion upon the question whether the evidence ought to be accepted and, if so, whether in fact it supports the claim.
I accept the submission put on behalf of the applicant that it was a matter relevant to Mr Osborne's decision that Mr Cherry had claimed to him that the amended assessments were not made in the bona fide exercise of the Commissioner's powers. It is true, as was submitted by counsel for the respondent, that sec. 177 of the Income Tax Assessment Act provides for a conclusive presumption as to the validity and correctness of any assessment made under sec. 174 of the Act. Section 177 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.
(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."
However, the presumption provided by sec. 177 is for the purposes of recovery proceedings. It has no application to collateral proceedings challenging the bona fides of an assessment: see
Briggs v. D.F.C. of T. and Ors; Ex parte Briggs 86 ATC 4748 at p. 4755.
Section 170 of the Act gives to the Commissioner power to amend any assessment. If material comes to his notice which satisfies him that an assessment is bad in law or that it reflects an incorrect view of the facts, the Commissioner would not be prevented by sec. 177 from rectifying the position by an appropriate amendment, even to nil.
Ordinarily in considering an application under sec. 206 or 207 the Commissioner will not be obliged to address himself to the likely result of any pending objection or appeal: see
Barina Corp. Ltd. v. D.F.C. of T. 85 ATC 4186 at pp. 4195-4197; (1985) 59 A.L.R. 401 at pp. 413-415 and the cases there discussed. But that proposition is subject to two qualifications. First, there may be cases in which the merits are so obvious, or their determination so imminent, that fairness requires them to be taken into account; especially if it appears that the effect of a refusal of the application will be to occasion great hardship. See, for example,
A.R.M. Constructions Pty. Limited & Ors v. D.F.C. of T. 86 ATC 4213 at pp. 4220-4221; (1986) 65 A.L.R. 343 at pp. 351-352. Secondly, it is always a relevant matter that the liability for tax is disputed: see
Ahern v. D.F.C. of T. 83 ATC 4698 at pp. 4707-4708; (1983) 50 A.L.R. 177 at p. 190, Barina at ATC p. 4197; A.L.R. p. 415. As was pointed out in Ahern at ATC pp. 4705-4706; A.L.R. p. 187 the cumulative effect of financial hardship and the existence of a genuine dispute may be such as to warrant an extension of time.
The Commissioner himself has recognised the relevance of the question whether the assessment is claimed to be incorrect. His standing policies regarding applications under sec. 206 and 207, referred to in Mr Osborne's letter of 21 June 1985, distinguish between cases in which assessments are disputed and cases where they are not. The policies even draw distinctions based on the type of dispute: whether it is an "artificial scheme" case or not. A fortiori it must be relevant to take into account an allegation that assessments are not merely wrong in fact but invalid because issued in bad faith.
The case sought to be made by the applicant in connection with this matter is that, Mr Osborne being obliged to consider Mr Cherry's "ambit claim" allegation, he failed to do so. If, in fact, he failed to do so, the case is made out. The decision is invalid because of a failure to take into account a relevant circumstance. If he did not fail to consider the matter, the case is not advanced - subject to one qualification - by showing that the better view is that the allegation was in fact justified. There would still have been a discharge of the obligation to consider the allegation, the determination of which was a matter for the statutory decision-maker.
The qualification to which I have referred is that, in some cases, evidence may demonstrate that a finding of fact is so erroneous as to be unreasonable; in the sense that no reasonable person could have arrived at that decision. See sec. 5(2)(g) of the Administrative Decisions (Judicial Review) Act and per Mason J. in
Minister for Aboriginal Affairs & Anor v. Peko-Wallsend Ltd. & Ors (1986) 66 A.L.R. 299 at p. 310. Also compare the test stated by Lord Diplock in
Bromley London Borough Council v. Greater London Council (1983) A.C. 768 at p. 821: a decision "that looked at objectively, (is) so devoid of any plausible justification that no reasonable body of persons could have reached it".
In order to make out such a case a party may need to put before a court evidence of the true
ATC 4420facts - or at least such of them as were within the actual or constructive knowledge of the decision-maker or which would have been within his knowledge if he had acted reasonably: see
Secretary of State for Education and Science v. Tameside Metropolitan Borough Council (1977) A.C. 1014 per Lord Russell of Killowen at p. 1076,
Prasad v. Minister for Immigration and Ethnic Affairs (1985) 6 F.C.R. 155 at pp. 169-170.
However, in the present case it cannot be suggested that the material sought to be adduced would support a finding that a rejection by Mr Osborne of Mr Cherry's allegation would be bad for unreasonableness. This is not a case, for example, of an admission by the officer responsible for the issue of the amended assessments that he had simply made up the figures. Rather the material was said to show illogical conclusions, inconsistencies of approach, uncertainties by various investigating officers and a desire to issue the amended assessments before 30 June 1985 in order to meet a bureaucratic target. However, in issuing the assessments the Commissioner had available to him a mass of information other than this material. By reason of the limited nature of the order for discovery much of this information has not been disclosed to the applicant. And a desire to issue an assessment before a particular date does not, in itself, indicate that it was incorrect or invalid. Even if, upon the evidence subject to objection, it would have been unreasonable to conclude that the amended assessments were genuine estimates of liability under sec. 136, the possibility would remain open that other material - available to the Commissioner but not in evidence - justified the conclusion that the assessments were genuine estimates.
Under these circumstances it seemed to be irrelevant to my task to consider whether the proffered material undermined confidence in the genuineness of the amended assessments. Accordingly, I rejected the tendered material.
The decision of June 1985
As I have already indicated, Mr Osborne's letter of 21 June 1985 drew attention to two Income Tax Rulings issued by the Commissioner. These rulings were statements of standard policy. Taxation Ruling IT 2091 is entitled "Extensions of time to pay under section 206 and remissions under subsection 207(1A) of additional tax payable under subsection 207(1) of the Income Tax Assessment Act 1936". The salient provisions, in relation to sec. 206 and 207 respectively, are summarised in para. 9 and 10 of the Ruling:
"9. In brief, the position in relation to the granting of extensions of time to pay is as follows:
- (i) Extensions of time for payment should be seen as an alternative to legal action in respect of a taxpayer who is clearly unable to pay the debt when it falls due but has the ability or potential to pay at some time in the future.
- (ii) Taxpayers who suffer serious financial hardship as a result of drought, flood, bushfire or other natural disaster may be granted an extended due date with penalty accruing from that extended due date.
- (iii) With the exception of taxpayers so affected by natural disasters, all extensions of time are to be granted subject to additional tax from the original due date. That is, use of an extended due date to alter the date from which penalty is calculated is restricted to natural disaster situations.
- (iv) Extensions of time are to be considered on two levels. Firstly, short-term arrangements to pay, where the debt will be discharged within three months of the due date, and in any event before 15 June, may be approved where the taxpayer provides reasonable arguments. Secondly, long-term payment arrangements (i.e., those exceeding three months or going beyond 15 June) should only be approved after careful consideration of the taxpayer's ability or potential to pay.
- (v) Where an extension of time is granted, all recovery action should be held in abeyance and only recommence if the taxpayer defaults on the terms of the payment arrangement.
- (vi) The period of the extension should not go beyond the expected due date of the taxpayer's next tax liability.
10. In relation to remission of subsec. 207(1) additional tax the position, in brief, is as follows:
- (i) Requests for remission of additional tax must be considered within the terms of subsec. 207(1A). Apart from cases where `special circumstances' (as referred to in (iii) below) exist, the taxpayer must be able to demonstrate that because of certain circumstances he or she was unable to pay the tax when it fell due and secondly, that all reasonable efforts to mitigate, or mitigate the effects of, those circumstances have been made.
- (ii) Where the circumstances were beyond the control of the taxpayer additional tax may be remitted in full. Where the circumstances were the result of the taxpayer's actions, additional tax may be remitted if it is fair and reasonable to do so but the remission should not bring the additional tax below 10 per cent per annum.
- (iii) Remissions under the `special circumstances' limb of subsec. 207(1A) are normally limited to:
- • hardship cases;
- • those where the levying of additional tax is considered not worthwhile; and
- • those where additional tax is to be reduced because of a credit amendment."
[These guidelines are said by para. 8 of the document to be provided "with no intention of laying down any conditions which may restrict a Deputy Commissioner in the exercise of the discretion".]
That Taxation Ruling IT 2091 is not designed to cover cases where the taxpayer disputes the issued assessment is apparent from para. 41-43, dealing with "Disputed Assessment Cases":
"41. Where a taxpayer has lodged an objection or appeal against an assessment and the Commissioner accepts that the taxpayer does have a genuine difference of opinion about his or her taxation liability, a special basis for granting an extension of time to pay, in addition to the other arrangements set out in this ruling, is available.
42. Specifically, an offer by the taxpayer to pay 50 per cent of the tax attributable to the matters at issue (plus the full amount of tax that would remain payable irrespective of the result of the dispute) subject to the balance attracting additional tax for late payment from the original due date, will be accepted as sufficient to defer legal action. Where the objection is determined against the taxpayer, that arrangement would reasonably be allowed to continue in those cases where a reference or appeal is involved.
43. Full details of the general policy applicable to the collection and recovery of tax in cases of disputed income tax assessments are provided in Taxation Ruling IT 2101."
Taxation Ruling IT 2101 was superseded by Taxation Ruling IT 2156. It is entitled "Income Tax: Collection and recovery of tax in disputed assessment cases". In para. 12 and 13 a distinction is made between artificial schemes, and frivolous objections, on the one hand, and genuine disputes upon the other:
"12. The collection and recovery policy to be applied in relation to disputed assessments depends initially on whether the dispute is in respect of an artificial scheme of tax avoidance, or is a genuine dispute.
13. Where an objection, request for reference or an appeal is considered to be frivolous or completely without merit the long-standing policy that deferment arrangements should not be made is to be continued."
Paragraph 14 applies to artificial scheme cases the general rules contained in Taxation Ruling IT 2091; that is such cases are to be treated as being undisputed. Paragraph 17 postulates a general rule that, upon determination of an objection relating to an artificial scheme, legal recovery action should commence. By contrast para. 21 to 36 deal with what the Ruling calls "Genuine Dispute Cases". That section of the Ruling includes the following:
"21. In respect of genuine dispute cases, there will be a special basis for granting an extension of time in addition to the arrangements set out in Taxation Ruling IT 2091. In these cases an offer by the taxpayer to pay 50 per cent of the tax in dispute (plus the full amount of any tax not in dispute), with the balance being subject to additional
ATC 4422tax for late payment from the original due date, and any overpayment accruing interest to the taxpayer, is to be accepted as sufficient to defer legal recovery action for the period of the stage of the dispute in which the payment is made...
22. Where a taxpayer makes such an offer at the objection stage, the offer is to be accepted pending the determination of the objection but it is to be made clear that the deferral of recovery action lapses on determination of the objection.
23. Where a taxpayer offers to pay an amount less than 50 per cent of the tax in dispute because of his or her financial circumstances, the case should be treated as being one in the category of a general request for extension of time for payment. Providing the criteria for granting extensions as set out in Taxation Ruling IT 2091 are satisfied, the taxpayer's offer should be accepted.
27. Where the objection has been determined against the taxpayer and the taxpayer requests a reference to a Board of Review or appeal to a Court, an offer by the taxpayer to pay 50 per cent of the tax in dispute plus any tax not in dispute following determination of the objection is to be accepted for purposes of deferring legal action for recovery. Similarly, where a taxpayer paid 50 per cent of the tax in dispute plus all tax not in dispute at the objection stage, and does not wish to pay the full amount of tax assessed until the matter at issue is finally resolved by a Board of Review or Court, the Commissioner will be agreeable to extending the earlier arrangement entered into with the taxpayer to defer legal recovery action.
28. In all cases where legal action is deferred at the reference or appeal stage, it should be made clear to the taxpayer that such an arrangement will subsist only until resolution of the dispute in the taxpayer's case or in another case that is regarded by the Commissioner as on all fours with the taxpayer's case, and provided that the taxpayer is reasonably co-operative in ensuring that the reference or appeal proceedings are not delayed.
29. Where a taxpayer requesting a reference or appeal is not prepared to pay 50 per cent of the tax in dispute plus any amount of tax not in dispute, and the other conditions for granting an extension of time do not apply, legal recovery action should be commenced, subject to:
- (i) the matter at issue not being one on which there is a decision against the Commissioner...
- (ii) the taxpayer's reference or appeal or a case clearly representative of it having been processed through Head Office and sent on to a Board of Review or Court,...; and
- (iii) agreement has been obtained from Head Office for the legal action to be initiated..."
Mr Osborne considered the applications made by Mr Cherry on 17 June 1985 by reference only to Taxation Ruling IT 2091. This was made fairly clear in the letter of 21 June 1985, with its rejection of the applications coupled with an invitation to Nestle "to consider its position in terms of the guidelines encompassed in Taxation Ruling IT 2156 covering `genuine dispute cases"'. But the matter was put beyond doubt in the letter of 16 July 1985 wherein Mr Osborne stated that, in the absence of formal objections, "the company's extension request was considered under the guidelines relating to non-disputed assessments as set out in Taxation Ruling IT 2091". It was reaffirmed in para. 4 of the sec. 13 statement in which Mr Osborne said that he could not reach a conclusion that the taxpayer satisfied the guidelines in Taxation Ruling IT 2091.
On behalf of Nestle it was said that, in dealing with Mr Cherry's application of 17 June 1985, Mr Osborne erroneously failed to take into account three relevant matters: that the assessments were in fact disputed, that the dispute went not only to the correctness in fact and in law of the assessments but to the question whether they were a bona fide exercise of the Commissioner's power to make an assessment of tax under sec. 174 of the Act and the circumstance that, after an investigation lasting some nine years, the assessments required payment within a period of little more than one month of a total sum of almost
ATC 4423$20,000,000. I think that there is substance in each claim.
In relation to the first point, I have already referred to cases which support the view that, in considering an application under sec. 206 or 207, the Commissioner is obliged to take into account the fact that an objection has been lodged or a review or an appeal is pending. In the present case no objection had, on 21 June 1985, been lodged. But this did not mean that it was appropriate for Mr Osborne to deal with the application on the basis that the assessments were undisputed. It should be noted that Taxation Ruling IT 2156 deals with what it calls "genuine dispute cases". No doubt the existence of a dispute will ordinarily be manifested by an objection having been lodged by the taxpayer or, at a later stage, by the fact of a pending review or appeal. But the Act allows a taxpayer a period of 60 days after assessment within which to lodge an objection (see sec. 185) whereas, as in this case, the assessment may require payment within a lesser period. Consequently it may be necessary for a taxpayer to deal with the liability, whether by payment or by an application for an extension of time, before the expiration of the 60 days objection period. The terms of an objection are important, limiting as they do the grounds upon which the taxpayer may dispute liability before the Administrative Appeals Tribunal or a court: see sec. 190. For the Income Tax Rulings to have limited the notion of disputed cases to those in which there is already an objection would have been to prejudice those applicants under sec. 206 or 207 required to pay in less than 60 days after assessment who take the statutory period to formulate their objection. The Income Tax Rulings were obviously drafted to avoid that situation; the draftsman preferring to cover all cases of genuine dispute rather than to confine the notion of dispute to those cases in which particular procedural steps had been taken.
The letter sent by Mr Cherry in the present case clearly indicated that Nestle disputed the assessments. Mr Cherry said that formal objections were being settled by counsel. Without stating them exhaustively, or in their final form, Mr Cherry specified five grounds of objection upon which the company would rely, each of which raised an important question. Moreover he claimed that the assessments were not genuine assessments of liability under the Act but were merely an ambit claim in aid of negotiations. It would be difficult to imagine a more explicit challenge to the assessments.
Counsel for the Commissioner contends that Mr Osborne must be taken to have given consideration to all the matters mentioned in Mr Cherry's letter, he having stated in his sec. 13 reasons that in making his decision he had regard, inter alia, to that letter. However, Mr Osborne put immediately out of mind all matters other than those which were made relevant by Taxation Ruling IT 2091. This is shown not only from the positive statements made in his letters and in the sec. 13 statement but also by the failure of Mr Osborne to make any findings of fact on any question other than whether the case fell within Taxation Ruling IT 2091. As Burchett J. pointed out in A.R.M. Constructions at ATC p. 4220; A.T.R. p. 350, there are numerous decisions to the effect that a failure to include in a sec. 13 statement findings of fact upon a particular matter may justify a court in inferring that that matter was not taken into account. In the result, although Mr Osborne knew that Nestle disputed its liability and that formal objections were being prepared, he regarded these matters as irrelevant to his decision, choosing to treat the case as one of undisputed liability. In taking that course he failed to give those matters proper consideration. To take a matter into account means to evaluate it and to give it due weight, having regard to all other relevant factors. A matter is not taken into account by being noticed and erroneously discarded as irrelevant.
The second submission of the applicant concerns Mr Osborne's failure to take into account the allegation that the assessments were not genuinely made. I have already expressed the view that this allegation was a material matter. Mr Osborne read Mr Cherry's letter but the point was ignored; as is shown not only by the fact that Mr Osborne treated the assessments as being undisputed but also from the circumstance that he made no finding concerning the truth of the allegation.
Similarly, in regard to the third matter: the circumstance that the amended assessments were issued suddenly, after a nine year investigation, and that they required payment of almost of $20,000,000 within about one month. Mr Cherry indicated reasons why this shortness of time would occasion difficulties to the company. Those difficulties did not necessarily
ATC 4424compel a decision to accede to either or both of his applications. There were considerations upon the other side, including the general policy of the Act: see per Jackson J. in
A.R.M. Constructions Pty. Limited v. D.F.C. of T. 87 ATC 4151 at pp. 4155-4156. But Mr Osborne had a duty fairly to consider the position of the taxpayer, as it had been made known to him. He did consider whether the company was unable to pay the tax, but that was all. He gave no consideration to the different question whether, although the company could pay, an undue burden had been placed upon it by the shortness of the time allowed. Taxation Ruling IT 2091 makes reference to hardships suffered by pensioners or as a result of natural disasters but there are other forms of hardship. That Mr Osborne ignored any question of hardship is demonstrated, once again, by the absence of any finding of fact upon the matter raised by Mr Cherry.
I make two concluding comments upon the June decisions. First, the central problem with those decisions was the narrowness of Mr Osborne's approach. This case had a number of features not contemplated by either of the Income Tax Rulings. It was not possible to dispose of the applications by a simple and mechanistic application of either ruling; still less the ruling devised for undisputed cases. But Mr Osborne did not even apply the rulings correctly. Not only did he read "disputed" as meaning only cases in which formal objections had been lodged; he ignored para. 8 of Taxation Ruling IT 2091 which clearly indicated that the Ruling was not intended to confine the exercise of discretion in respect of relevant matters not mentioned in the document.
Secondly, Mr Osborne appears to have been under the belief, at least when he wrote his letter of 16 July 1985, that it was a prerequisite of the exercise of discretion under sec. 207 that the company "demonstrate that it did not have the means necessary to discharge the liability when it fell due". Section 207 imposes no such limitation. If the Commissioner extends time under sec. 206, he may under sec. 207(1) - without restriction as to circumstances - determine the date from which additional tax is to be computed. Under sec. 207(1A) the Commissioner may remit the additional tax, or part of the additional tax, amongst other situations, where he "is satisfied that there are special circumstances by reason of which it would be fair and reasonable" to do so. As I have said, Mr Osborne was entitled to take into account, in the exercise of his discretion, the policy of the Act that, generally speaking, additional tax shall be payable as from the due date. But he was not entitled to refuse to consider an application simply because it failed to comply with a qualification which he and/or his colleagues had devised.
The decision of December 1986
In his application of 19 November 1986 Mr Cherry relied upon all the matters previously put by him, together with the subsequent events. None of these matters were considered by Mr Osborne. He simply took the view that, having regard to the pendency of matter G. 184 of 1985, it was inappropriate to consider the request on its merits. The fallacy in this approach is similar to that already discussed in connection with the notice of motion to dismiss matter G.31 of 1987 as an abuse of process: that the question for his consideration was the same question as he had considered in June 1985. It was not. The question in December 1986 was whether, upon the then facts, it was appropriate then to exercise discretion under sec. 206 or 207 in favour of Nestle. The facts had changed significantly in the meantime. Mr Osborne's approach resulted in the absurdity that he treated a case in which the taxpayer was actively seeking referral to the Administrative Appeals Tribunal as being covered by a decision given upon the basis that the assessments were undisputed.
The appropriate relief
It follows from the views I have expressed that the decisions made by Mr Osborne in relation to each application must be set aside. The applicant, however, contended that the Court should do more than refer the application back to the Commissioner for further consideration. Counsel submitted that this is a case in which any decision other than to accede to the applications would be so unreasonable that no reasonable person could reach such a conclusion. Consequently, refusal not being legally open to the Commissioner, the Court should direct the Commissioner to accede, in whole or in part, to these applications. In support of that submission counsel referred to the history of the matter since the issue of the amended assessments.
ATC 4425They pointed out that, notwithstanding the nine years of investigation which had preceded the amended assessments, the Commissioner did not determine the objections for 15 months; and then only after mandamus proceedings were commenced. Despite a prompt request for referral of those decisions to the Administrative Appeals Tribunal, no action was taken until the eve of this hearing six months later. Counsel pointed out that the concept behind sec. 207 is the imposition of a penalty, not the recovery of interest on overdue tax: see
D.T.R. Securities Pty. Limited v. D.F.C. of T. 87 ATC 4156. It would be unreasonable, they submitted, for the Commissioner to fail to accede at least to so much of their application under sec. 207 as related to the two periods, totalling 21 months, during which the Commissioner delayed the progress of the matter.
The Court has power, under sec. 16(1)(d) of the Administrative Decisions (Judicial Review) Act, to make an order, in an appropriate case, that a decision-maker decide a matter in a particular way: see
Minister for Immigration and Ethnic Affairs v. Conyngham & Ors (1986) 68 A.L.R. 441 at p. 448. Examples of appropriate cases are those in which any other decision will represent an error of law or be unreasonable, in the sense used in sec. 5(2)(g): see Conyngham at p. 449. Counsel reminded me of what I said on 14 February 1986 - see 86 ATC 4130 at p. 4133; (1986) 10 F.C.R. 78 at p. 81 - regarding delay:
"It may well be proper for the Commissioner - in this or in another case - to refuse an extension of time in relation to payment of tax due under an assessment but it is in my opinion totally unacceptable that he simultaneously frustrate the exercise by the taxpayer of his statutory right to challenge the correctness of that assessment. This is not the less so in a case where the matter has already had attention over a period of nine years and where the assessment is based not upon admittedly received income but upon notional income; that is upon income not actually received by the taxpayer but said to be within the earning potential of the taxpayer's business."
These words fell on deaf ears. Another eight months were allowed to go by before the objections were determined. Moreover, although my comments were endorsed and elaborated by the Full Court - see 86 ATC 4760 at p. 4767; 69 A.L.R. 445 at p. 454 - the Commissioner took five months after the Full Court decision to refer the matters to the Administrative Appeals Tribunal.
Notwithstanding the considerable force of the matters mentioned by counsel, I do not think that, upon the material presently before the Court, I can say that the refusal to accede to Mr Cherry's applications of 19 November 1986 - or either of them - was so devoid of plausible justification that no reasonable person could have reached that decision. I am conscious of the fact that Mr Osborne did not enter into the merits of those applications so that I do not know what justification might have been advanced. Furthermore, in the case of the sec. 206 application the position has now changed; the matters have been referred to the Administrative Appeals Tribunal. However critical one may be about the delay in responding to the applicant's request for reference, the position is that the matters are now before the Tribunal. There is no reason to doubt that the Commissioner will co-operate with Nestle in obtaining such early hearing date as the Tribunal may be able to make available. Whether time for payment of the tax should be extended pending the Tribunal's decision is a matter - at least in the first instance - for the Commissioner. Any decision which he may make upon any application to that effect is a decision which will itself be susceptible of review upon all the usual grounds, but with the benefit of whatever reasons are expressed for that decision.
Similarly in relation to the application under sec. 207. Although I find it difficult to imagine circumstances that would justify the delays occasioned by the Commissioner, Mr Osborne did not deal on the merits with the application under sec. 207. Consequently, the Court does not presently have the benefit of any view expressed on behalf of the Commissioner. Nor is there any evidence as to the reasons for the delays. Once again this matter should be for the Commissioner to determine, subject to any application for review which may be made.
In my opinion the appropriate course is to set aside each of the decisions made by Mr Osborne and to refer the two applications back to the Commissioner for determination
ATC 4426according to law. The respondent must pay the costs of the applicant, but not including the costs relating to the affidavits regarding the history of the investigation which I rejected as irrelevant.
I make one final comment. I have during the course of these reasons found it necessary to criticise the way in which this matter has been handled within the Australian Taxation Office. Those criticisms include the extent of the consideration given to Mr Cherry's applications and the delays which have occurred. They relate entirely to the administration of the matter, not to the fundamental issues between the parties as to the validity and the correctness of the amended assessments. Those matters have not been in issue before me and I express no opinion about them. If the Commissioner continues to be of the opinion that those assessments are correct, it is his duty to maintain and to defend them. If he forms the view that the assessments require further amendment he is entitled, subject to the provisions of sec. 170, to take that course. Nothing in these reasons should be read as inhibiting the course to be taken on the substance of the matter. But whatever course is taken should be attended with procedural fairness, including the provision of an early opportunity for Nestle to contest before the Administrative Appeals Tribunal or a court whatever assessments are ultimately pressed against the company by the Commissioner.
THE COURT ORDERS THAT:
1. The decision made on behalf of the respondent to refuse the applications made on behalf of the applicant on 19 November 1986 for an extension of time under sec. 206 of the Income Tax Assessment Act 1936 and for determination of a date of payment - or alternatively remission of tax - under sec. 207 of the Income Tax Assessment Act be set aside.
2. The said applications be referred back to the respondent for further consideration according to law.
3. The respondent pay to the applicant its costs of this proceeding, such costs not to include the costs relating to the preparation of that part of the affidavit evidence which related to the course of the investigation undertaken by the Australian Taxation Office into the affairs of the applicant the tender of which was rejected at the hearing.