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Case W111

Members:
PM Roach SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 6 October 1989.

P.M. Roach (Senior Member)

Section 222(1) of the Income Tax Assessment Act 1936 (``the Act'') (so far as is material) provides:

``Where a taxpayer... fails to furnish, when and as required under or pursuant to this Act or the Regulations to do so, a return,... relating to a year of income... the taxpayer is liable to pay, by way of penalty, additional tax equal to double the amount of tax payable by the taxpayer in respect to the year of income.''

2. The Commissioner contends that the applicant-company (``Dealers''), by reason of being 45 days late in complying with the obligation so created in relation to the year of income ended 30 June 1985 became liable, subject to sec. 227(3) of the Act, to a penalty of $1,684,234.96 [sic]. The case sought to be made for the taxpayer was that it did not infringe the provisions of sec. 222(1) of the Act and, accordingly, that there was no liability at all to any penalty.

3. The second contention sought to be made on behalf of the applicant was that in exercising his discretion to remit penalty conferred by sec. 227(3) of the Act, the Commissioner ought to have wholly remitted the penalty or, at least, remitted so much of it as would leave the penalty assessed at a sum less than $17,534. The applicant contends that, if the relevant return was ``late'' in any relevant sense, it was only so because of an omission on the part of its accountants to make a formal request to the Commissioner to fix a later lodgment date - a request which they confidently could have expected would have been granted. In consequence of that, it was said that the breach of obligation, if there was one, was a breach which occasioned no loss at all to the revenue.

4. The Commissioner, by his representative, responded to those submissions by contending that, first, there had been default in compliance with the provisions of sec. 222(1) of the Act; and, secondly, by contending that, once that breach was established the Tribunal in the circumstances of the case had no power at all to review further the Commissioner's exercise of discretion as to the remission of penalty.

5. The latter argument was founded upon the circumstance that sec. 193(2) of the Act provides:

ATC 877

``Notwithstanding Section 25 of the Administrative Appeals Tribunal Act 1975, the Tribunal does not have power to review decisions of the Commissioner relating to the remission of additional tax payable by a taxpayer except decisions relating to the remission of additional tax under Part VII where the additional tax payable, after the making by the Commissioner of a decision, exceeds -

  • (a) in the case of additional tax payable under Section 222 by reason of the refusal or failure to furnish a return... relating to a year of income - the amount calculated, in respect of the period commencing on the last day allowed for furnishing the return... and ending on the day in which the return... is furnished or the day on which the assessment of the additional tax is made, whichever first happens, at the rate of 20% per annum of the tax properly payable by the taxpayer in respect of the year of income;
  • ...''

That being so the merits of the exercise of that discretion were not canvassed during the hearing.

6. It is common ground that the relevant return of income was lodged with the Commissioner on 15 February 1986. It was lodged by a prominent firm of accountants (``Beta''). If the contention of the Commissioner be correct then, because the last day allowed for its lodgment was 31 December 1985, it follows that the return was 45 days late. The Commissioner allowed seven days of grace and accordingly, calculated the period of late lodgment as 38 days.

7. That being so, when on 27 May 1986 - over three months later - the Commissioner assessed the taxable income of the applicant as returned at the sum of $1,939,188, he proceeded to assess the following sums as due and payable: 

                                              $
      Tax                               892,026.48
      Less rebates                       49,909.00
                                        ----------
      Tax less rebates                  842,117.48
      Additional tax for late return     17,534.00
                                        ----------
                                        859,651.48

8. The amount assessed by way of penalty was calculated according to a formula of net tax multiplied by 20% multiplied by the number of days late divided by 365 with the following result: 

                    38     20
      $842,117.48 x --- x ---  =  $17,534.50
                    365   100

Objection was taken to the imposition of additional tax and to the failure to remit more liberally. The objection asserted that lodgment by 7 February 1986 - later extended to 14 February 1986 - had been approved by the Commissioner but no evidence was advanced in support of those assertions. Nor was any ground of objection stated proposing that the Tribunal should allow a further extension of time for lodgment of the return.

9. The evidence of what occurred is scant. It was not sufficient to persuade me that the Commissioner was asked by the firm, Beta, to approve an extended date or any particular date for lodgment of a tax return for the applicant. What I find more probably to be the relevant circumstances are as follows.

10. A partnership had traded to 30 June 1984. Its returns of income had been lodged by a firm of chartered accountants which I shall refer to as ``Alpha''. Alpha was responsible to the Commissioner under approved arrangements for lodgment of returns of its clients under an ``Alternative Lodgment Programme''. That program allowed that the return of income of the partnership for the year ended 30 June 1985 would be considered lodged within due time provided that it was lodged not later than 31 January 1986 and, possibly, not later than 28 February 1986.

11. In June 1984 Dealers was incorporated. With effect from 1 July 1984 it took over the business previously conducted by the partnership. At some time, which is wholly uncertain, Dealers requested Beta, a firm of chartered accountants and the auditors of Dealers, to accept responsibility for the lodgment of its income tax return to 30 June 1985. The evidence as to the date upon which Beta assumed that responsibility was so vague that I am not able to say whether those instructions were presented, and the responsibility accepted, on or before 13 December 1985, a date of some significance as will appear later.

ATC 878

12. I find that, upon accepting the instructions of Dealers, Beta failed to implement its own system for advising the Commissioner of its new client and to seek the fixing of a date for the lodgment of the return of Dealers. I find that Beta also had an approved ``Alternative Lodgment Programme'' for the lodgment of its returns. I find further that, had Beta approached the Commissioner on or before 13 December 1985, as a matter of probability a final date for lodgment of the return of Dealers would have been set no earlier than 31 January 1986 and, possibly, as late as 28 February 1986. I find that no such application was made.

13. I am satisfied that on 22 January 1986 the public officer of Dealers executed its return of income and that on 14 February 1986 Beta lodged that return with the Commissioner. I find as a fact that, at all material times, there had been a longstanding practice within the office of the Commissioner whereby the Commissioner did not consider any return of income of a company to be late so long as it was delivered to the Commissioner on or before 31 December next following the close of the year of income to which the return related (cf. para. 26 below).

14. In determining whether or not the return of Dealers was ``late'' in the relevant sense it will be necessary to have regard to the provisions of the Statute; to the regulations made thereunder; to notices published in the Gazette; and as to administrative practices as to the ``Standard Lodgment Programme'' and as to ``an Alternative Lodgment Programme'' and other practices which have developed in relation to these matters.

15. In addressing the questions which arise it is to be noted that sec. 222(1) does not provide for penalties to be set in any way as a function of any loss to the community. Furthermore, since tax only becomes due and payable after the issue of an assessment, it follows that advantages are to be had by all taxpayers whose assessments are delayed. Delay in presentation of a tax return can occasion a delay in the assessment. Some are able to defer assessments by withholding information with the consent of the Commissioner (as when the Commissioner approves an extended date for lodgment); others by the simple device of withholding information, even after the due date for the presentation of a return has passed; and some benefit from delays within the office of the Commissioner. Such problems could in large measure be overcome if the legislation provided that, in addition to liability to the tax assessed as due and payable, and to liability to interest upon the tax so assessed from the due date for payment until payment, provision was made that, from some earlier date which would be common to all persons, the taxpayers would in addition be liable to pay interest on the amounts assessed. In that way taxpayers who were favoured with an approved postponed date for return would not be in a position of advantage against those who were denied the advantage of such favourable consideration.

16. Against that background I proceed to consider how the due date for lodgment of returns is provided for. The obligation to file income tax returns has its foundation in sec. 161(1) of the Act. It provides:

``Every person shall, if required by the Commissioner by notice published in the Gazette, furnish to the Commissioner in the prescribed manner, within the time specified in the notice, or such extended time as the Commissioner may allow, a return signed by him...''

17. A notice in accordance with the requirements of subsec. (1) of sec. 161 was published in the Commonwealth of Australia Gazette on 2 July 1985. It provided (so far as is material):

``LODGMENT OF INCOME TAX RETURNS PURSUANT to the provisions of the Income Tax Assessment Act 1936 and the Regulations made under that Act, I hereby require a return of income derived during the year ended 30 June 1985 (...) to be furnished to me... on or before 31 August 1985 by every person described hereunder.

Persons required [sic] furnish returns:

(a)...

...

(g) every company (including every body or association, corporate or unincorporate not being a partnership), other than a non-profit company, that is a resident of Australia and

ATC 879

whose total income from all sources both in and out of Australia was $1 or more.

...

T.P. Boucher

Commissioner of Taxation''

18. It will be noted that, at least so far as companies so described are concerned, the obligation is universal and also in its terms absolute. The notice does not make allowance for, or recognise the possibility of, exceptions or of any extensions of time. However, sec. 161(1) does make provision for:

``such extended time as the Commissioner may allow.''

In my view such ``extended time'' may be allowed on a particular and individual basis or in general terms. It may be allowed on the application of the taxpayer or on the initiative of the Commissioner. Further, it may be allowed prospectively, that is to say, in advance of the date upon which the return is lodged or retrospectively, that is to say, it may be allowed after the return has been presented to the Commissioner.

19. The practice of the Commissioner in making arrangements with registered tax agents for ``lodgment programmes'' is one means whereby the Commissioner permits ``extended time''. Such allowances were set forth in a circular to tax agents published in the name of the Commissioner of Taxation in June 1985. It provided that:

  • ``Lodgment of returns'' will be permitted under one of the following programs:
  • ``(1) Standard Lodgment Programme
  • ...
  • (2) Alternative Lodgment Programme
  • Agents may enter into the Alternative Lodgment Programme in consultation with the taxation office.''
  • The circular dealt comprehensively with the proposed arrangements emphasising that:
  • ``(5) AGENTS ARE PRIMARILY RESPONSIBLE FOR MONITORING THEIR OWN PERFORMANCE.''
  • In particular, in relation to the matter of ``new clients'', the circular provided:

``(8) To ensure the inclusion of new clients in any approved lodgment arrangements, agents must provide details on the appropriate form available from the Tax Agent Liaison Centre, signed by the client, by 16 August where the previous return was not lodged through an agent, and by 13 December where the previous return was lodged by an agent.

(9) Taxpayers who engage agents after 13 December will not be eligible for inclusion in approved arrangements for lodgment, and additional tax for late lodgment will not normally be remitted in respect of such new clients. Where circumstances prevent notification of a new client by 13 December, a separate application for further time may be made setting out the particulars of the case.

(10) New clients who are specifically excluded from lodgment arrangements by circumstances stated in paragraph 13 will continue to be excluded regardless of the appointment of an agent. The appointment of an agent will not reduce the responsibility for a taxpayer to comply with any lodgment demand received.''

Paragraph 13 referred to ``taxpayers who have been identified as late lodgers or late payers'' and to taxpayers ``who on the basis of information available in taxation offices, have participated in artificial schemes to reduce their income tax liability...''. (In considering para. 9 of the circular, I observe that if the statement that additional tax ``will not normally be remitted'' had been implemented as seemingly threatened the penalties in this case would have been $1,684,234.96. Draco would have forfeited his place in history.)

20. The circular dealt with the subject of ``ADDITIONAL TAX FOR LATE LODGMENT'' and, so far as is material, stated:

``23. Additional tax for late lodgment will become payable on returns lodged outside the Standard or Alternative Lodgment Programme requirements. Subject to the statutory minimum of $20, penalty will normally be reduced to an amount calculated at the rate of 20% per annum of the lesser of the tax assessed or net amount payable for periods determined as follows:

ATC 880

  • (i)...
  • (ii) For returns lodged after 31 December where lodgment arrangements beyond this date have been suspended, or where the arrangement date has expired, from 31 December to the date of lodgment.
  • (iii)...''

The Standard Lodgment Programme detailed in the circular required that 6 and 7 level company returns should be lodged by 15 February 1986.

21. Dealers was such a company and it was at material times known to Beta as auditors to Dealers to be such a company. However, Dealers would not have been known to the Commissioner to be such a company, either because the existence of it was not known to the Commissioner or because, by reason of a ``nil'' return for 1984 it would have been considered to be a level 1 company. On lodgment of its return to 30 June 1985, its status as a level 7 company would have been known to the Commissioner.

22. It will be seen from a consideration of the circular that the allowance of time beyond 31 August 1985 was to be determined by reference to either one or the other of the Standard Lodgment Programme and the Alternative Lodgment Programme; but with provision being made (cf. para. 9 of the circular) for special arrangements. It will also be observed that the allowance to taxpayers was extended through agents rather than directly to taxpayers. That being so, the allowance extended only to such taxpayers as had their names appearing on ``client listings'' of the agent: listings based upon computer records of the Commissioner for lodgments in the previous year. It is also to be observed that taxpayers changing agents, or engaging an agent for the first time, were in a position of special disadvantage. An agent could always seek special arrangements for his client (para. 9), but, if the taxpayer's previous return had not been lodged through an agent, the general rule was that the newly-instructed agent must provide details by 16 August or, if the previous return had been lodged by an agent, by 13 December. Why those requirements should have been made is not clear. But upon a consideration of the circular this much at least can be observed: first, if Alpha had lodged a 1984 return and had filed the 1985 return, it would have sufficed that it did so under the Standard Lodgment Programme by 15 February 1985 or by such other date as may have been approved under any Alternative Lodgment Programme for Alpha: it being improbable that that latter date would have been any earlier than 15 February 1985. Secondly, if Dealers had lodged its own return for 1984, or if the 1985 return was to be its first return, it was necessary that Beta make application to add Dealers to its list by 16 August 1985. But, if Alpha had filed a 1984 return for Dealers, it would have sufficed that Beta make application by 13 December 1985.

23. Nothing in the evidence placed before me enables me to say that Beta had been instructed by 13 December 1985. If it had not been instructed by 13 December 1985 then, to bring Dealers within the ambit of any approved lodgment programme, it would have been necessary for Beta to present the return of Dealers through Alpha or for Beta to make a separate application for further time as provided for in para. 9 of the circular.

24. In those circumstances I am satisfied that Dealers had not been brought within the ambit of any approved lodgment programme for Beta or by reason of any separate application for further time such as was contemplated by para. 9 of the circular. On the other hand, I am satisfied that had application been made, whether by a para. 9 application or not, the time to be allowed for filing of the return of Dealers would have been extended to a date not earlier than 15 February 1986.

25. I find that, prior to lodgment on 15 February 1986, there had been no allowance to Dealers of ``extended time'' for lodgment as contemplated by sec. 161(1) of the Act and that, subject to one consideration yet to be mentioned, its return of income was ``late'', in the relevant sense, as soon as 31 August 1985 had passed. In consequence a penalty as high as $60,000 could have been imposed without being subject to review.

26. However, that was not the view taken by the Commissioner when the return was presented. Upon its presentation, an officer of the Commissioner endorsed the return as having an extended date for lodgment to 31 December 1985. It was said by the Commissioner's representative that that was a longstanding practice of the Commissioner.

ATC 881

27. Whether or not such a practice amounts to an allowance by the Commissioner of extended time, it was at least clear that in calculating penalties, the Commissioner did take the view that, in measuring the penalty to be imposed as 20% per annum of the relevant tax for the period during which lodgment was delayed, regard should be had to 31 December as a final lodgment date. In addition, as an act of grace, the Commissioner allowed a further seven days.

28. As a result of the foregoing, it follows that the Tribunal must declare itself to be incapable of granting relief to this taxpayer unless it claims power to review the Commissioner's decision as to an acceptable date for lodgment of the relevant income tax return. That being so, in order for the applicant to succeed it is necessary that it should:

  • (a) establish that the Tribunal has the power to review the determination of the Commissioner that the relevant return was ``late'';
  • (b) satisfy the Tribunal that in the present instance it has that power and that it should not decline to exercise it because of any deficiency in the notice of objection; and
  • (c) that, having established that the power is available to be exercised, the Tribunal should proceed to grant the relief sought.

The power of the Tribunal

29. The Commissioner argues that decisions by the Commissioner as to the due date for lodgment of returns and decisions as to extensions thereof, are purely administrative matters which form no part of the process of assessment and as to which this Tribunal is not invested with any authority by way of review or otherwise. In support of the submission he points to the decisions of the Federal Court of Australia in
Intervest Corporation Pty. Limited v. F.C. of T. 84 ATC 4744, and of the Full Federal Court in
Hadfield Finance Pty. Limited v. F.C. of T. 88 ATC 4300. If the submission is sound, it would follow that a review would not be open on the merits but only by the more limited procedures available upon application to the Federal Court of Australia pursuant to the provisions of the Administrative Decisions (Judicial Review) Act 1977 (``the ADJR Act'').

30. The applicant seeks relief in the matter of the imposition of additional tax. In the present instance the additional tax happens to have been imposed by reason of alleged lateness of return rather than by reason of the more commonly experienced impositions of additional tax for incorrect return. The power of this Tribunal, as the lineal successor to the Board of Appeal and the Taxation Boards of Review as constituted under successive Income Tax Assessment Acts has long been recognised. In
Richardson v. F.C. of T. (1932) 48 C.L.R. 192 Dixon J. said (at p. 204):

``Finally the very description `additional tax' gives rise to a presumption that it will be levied and collected in the same way as the principal tax to which it is accessory. Unless some contrary intention appears, the inclusion of additional tax in the assessment is a natural consequence of the view that the ascertainment of the tax, as well of taxable income, is part of the process of assessing... I think that the better interpretation of the statute is that the procedure of assessment, objection, review and appeal does apply to additional tax under sec. 67 [of the 1922 Act].''

Evatt J. in the same case said (at p. 215):

``The liability [to additional tax for incorrect return] assessed should, therefore, like an ordinary or amended assessment, be subject to objection and appeal. The result is both just and convenient, and I think that the Act secures that result.''

31. In
Jolly v. F.C. of T. (1935) 53 C.L.R. 206 the High Court affirmed the power of a Taxation Board of Review to review decisions of the Commission as to the remission of penalties by way of additional tax for incorrect return. Their Honours Rich and Dixon JJ. said (at p. 214):

``If it be a function of the Commissioner to consider an assessing to additional tax whether the case calls for an imposition of less than the full prima facie amount of the additional tax, why is this not a function which in exercising its power of review in relation to assessment of additional tax the Board obtains under sec. 44? It appears to us that sec. 44 must confer upon the Board the function which falls to the Commissioner under the proviso to sec. 67(1), unless the word `decision' in sec. 44 is not wide enough for the purpose. The powers and functions of the Commissioner

ATC 882

pass to the Board for the purpose, and for the purpose only, of reviewing his `decisions'. Now the act or determination of the Commissioner which they are called upon to review is the assessment of additional tax, and that includes the determination that one or other of the conditions of liability is satisfied, the calculation of the prima facie or maximum amount of liability, its reduction by remission, or, perhaps, in rare cases, as Richardson's case [(1932) 48 C.L.R. 192] suggests, by some process amounting to legal part satisfaction, and the final statement of the amount payable. Why should not all this be covered by the word `decision'? It is a word of the widest connotation. It has no technical meaning. The Board is only another executive body in an administrative hierarchy. The purpose of erecting it was to enable taxpayers to have a reconsideration or re-examination of the process by which liability had been imposed upon them, particularly in relation to matters where the Commissioner had a discretion. The important discretion given by sec. 67(1) possesses no features which make it less proper for the Board to review it. Indeed, we should think that all the arguments of fairness were on the side of a review of the ascertainment, including the discretionary remission, of an amount which may prove a ruinous imposition.''

32. But those cases were decided long before the enactment of legislation of general application empowering the courts to review, at least to some extent, administrative decisions. Such a power was first generally conferred by the ADJR Act. One result is that, whereas prior to 1977 the question would have been whether there was a power to review or none; the question now is in which institution the power of review is vested. If the Commissioner's submission is correct the problem now facing the applicant is to be likened to the problems faced generally by litigants before the reforms of the Judicature Acts - to identify which institution was competent to provide relief.

33. The problem has been addressed by the Federal Court in more recent times and to those decisions I now turn. In Intervest (ante) Smithers J. had to determine whether the Federal Court was invested with authority pursuant to sec. 5 of the ADJR Act to review a decision of the Commissioner refusing to determine a further period during which the applicant might have paid dividends for the purpose of making a sufficient distribution within the meaning of sec. 105A(1) of the Act. His Honour held that the Court did have authority. In doing so, he pointed to [at p. 4748]:

``The distinction between the Commissioner's assessment function and his administrative function... It is in his administrative function that he may or not sanction the taking of steps by a taxpayer which, if taken by him, may produce a state of facts by reference to which an amended assessment may be made which might differ from that upon which the assessment already made was made. When he approaches the task of making an assessment with reference to the facts before him and makes the necessary calculations for that purpose he is exercising his assessment function. But however widely the net is cast by the words of clause (e) [of the ADJR Act] it does not cover a decision not being part of the process of assessment and which relates only to the question whether a taxpayer shall be permitted to carry out transactions which may reduce the amount of income upon which he is liable to pay tax.''

In Hadfield (ante) the question arose upon appeal from a decision of this Tribunal. In Hadfield the taxpayer had sought an extension of time under sec. 105AA of the Act. Having refused the application, the Commissioner issued assessments for ``undistributed profits tax''. At the hearing before the Tribunal it was held that the Tribunal had no power to review the decision to refuse to grant the extension of time. That question was appealed to a Full Bench of the Federal Court. The appeal was dismissed. The Full Bench reviewed the decision of Smithers J. in Intervest and held that his Honour's decision quite correctly categorised a refusal of a request under sec. 105AA as being no part of the process of assessment under the Act. Accordingly, the Tribunal's decision that it had no power to review the respondent's decision was held to be correct in law.

34. Foster J. (with whose reasons for decision Woodward and Jenkinson JJ.

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concurred) referred [at p. 4305] to decisions such as
Brian Hatch Timber Co. (Sales) Pty. Ltd. v. F.C. of T. 71 ATC 4093; (1971-1972) 128 C.L.R. 28;
Kolotex Hosiery (Australia) Pty. Ltd. v. F.C. of T. 75 ATC 4028; (1974-1975) 132 C.L.R. 535;
Avon Downs Pty. Ltd. v. F.C. of T. (1949) 78 C.L.R. 353 and
Perron v. F.C. of T. 72 ATC 4169; (1972) 128 C.L.R. 595 as decisions which:

``provide strong arguments by way of analogy for the acceptance of the proposition that the refusal of additional time was truly part of the assessment process.''

His Honour then went on to say [at pp. 4305-4306]:

``In my view, the decisions made by the Commissioner in those cases under sec. 80A and 99A of the Act were quite clearly part of the process of assessment and different in kind from a decision of refusal under sec. 105AA. A decision within this section, as pointed out in the passages cited earlier, is one which either affords or denies the taxpayer company the opportunity of altering the factual basis upon which its assessment to tax is to be made. It is an opportunity which, if granted, need not necessarily be availed of. That is a matter within the company's own discretion, a discretion which is necessarily interposed between the discretion of the Commissioner to grant or refuse the request and the ultimate calculation of tax. The decisions in the cases referred to led directly to the assessment and were necessarily involved in it. The decisions indeed, in my view, point up the exclusion of the sec. 105AA decision process from the process of assessment.''

His Honour went on to consider an argument that policy considerations compelled a conclusion that the respondent's decision under sec. 105AA should be regarded as part of the assessment process. His Honour acknowledged that [at p. 4306]:

``it is to a high degree desirable that all discretionary decisions of the Commissioner which could have any relation to or bearing upon the making of an assessment should be reviewable on the merits by way of the appeal procedures put in place by the sections already set out.''

He then cited with approval portion of the passage previously quoted from Jolly. But he then went on to hold that:

``It may be that there is unfairness in restricting a taxpayer company, denied an opportunity to make sufficient distribution after the expiry of the prescribed period, to an appeal confined to administrative law considerations rather than affording it a reconsideration on the merits. However, this unfairness, if such it be, can, in my view, be remedied only by the legislature: it cannot be eliminated by any available construction of the Act.''

35. Applying the principles to be discerned from those decisions I am well satisfied that there are many circumstances in which decisions by the Commissioner as to the due date for lodgment of returns are purely administrative decisions which form no part of any process of assessment. I instance decisions such as the decision to select 31 August as the due date for lodgment to be gazetted; decisions as to Standard Lodgment Programs for agents; and decisions as to Alternative Lodgment Programs. It would be open to persons dissatisfied with such decisions to seek judicial review pursuant to the ADJR Act if they were so advised. Further, those decisions would not be open to challenge before this Tribunal by the procedures of objection and review provided for by Pt V of the Act.

36. But the decision now sought to be reviewed was an integral part of the process of raising the assessment. If the return was ``late'' in the relevant sense the statute made automatic provision for additional tax: additional tax which in the circumstances in the case amounted to $1,684,234.96. That statutory provision was of course subject to the power of the Commissioner to grant remissions. But for all that it was a liability to which the taxpayer was exposed if the return was ``late'' and whether the return was late by one day, one year or a decade; and whether the lateness occasioned substantial loss to the revenue or, as here, none. In order to determine whether the return was ``late'' in the relevant sense, it was necessary that the Commissioner should apply his mind to the question as to what would be a sufficient or acceptable date for lodgment of the return. He did so. He determined on 31 December 1985 as the appropriate date. Having

ATC 884

so determined and having found the return to have been lodged thereafter, there immediately arose, subject to remissions, a liability in the taxpayer to $1,684,234.96. Had he determined that the date of actual lodgment was an acceptable date for lodgment, there would have been no liability at all to additional tax for late return. That being so, I conclude that, in the circumstances of the present case, the decision whereby the Commissioner elected to treat as ``late'' that which he might have accepted as being within time was an integral part of the assessment process. Accordingly, I hold that it is subject to review before this Tribunal.

The discretion to review

37. Nothing in the notice of objection prepared for the taxpayer by its accountants was calculated to direct the Commissioner's attention to the possibility of any such argument as has been canvassed. If this reference had come forward at any time prior to 1 July 1986 it would have clearly been the duty of any Taxation Board of Review to uphold the determination of the Commissioner upon the objection. But the Tribunal is no longer bound to act unjustly. If the Tribunal so determines, the taxpayer need no longer be always held strictly to the grounds of his objection. In my view, in the present case it is open to the Tribunal to grant relief. Clearly, the applicant has objected to the imposition of additional tax and to the contention of the Commissioner that in fact the return was ``late''. What it failed to do was to give clear notice that one basis for such contentions was that the returns ought not have been considered to be late and ought not to have been considered to be ``late'' upon a proper exercise of the Commissioner's discretion.

38. Further, the possibility of procedural prejudice which might have arisen had the Tribunal proceeded to determine such an argument without providing the parties with an opportunity to make submissions in relation to it has been overcome by inviting and receiving those submissions. For that reason I conclude that it is open to the Tribunal to grant relief in this particular case should it be persuaded that it ought to do so.

The exercise of discretion

39. The issue of the Commissioner's decision as to extension of time having only been raised by the Tribunal after the hearing, the parties were provided with an opportunity to make submissions both in writing and orally. One of those submissions made for the Commissioner was that the Tribunal should first determine the foregoing questions and then only proceed to address the present question if the former questions were resolved in favour of the taxpayer. I determined to accept that submission. In consequence, I will direct the parties appear before the Tribunal on 13 November 1989 at 2 p.m. to enable them to present such further evidence and argument as to the exercise of discretion as they then wish to present.


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