CASE 15/94

MD Allen SM

Administrative Appeals Tribunal

Decision date: 3 March 1994

MD Allen (Senior Member)

At the conclusion of the hearing of this application to extend time, the terms of the decision intended to be made and the reasons therefor were stated orally. After service upon the Applicant of a copy of the direction that was in fact made the Applicant in purported reliance upon Sub- section 43(2A) of the Administrative Appeals Tribunal Act 1975 requested the Tribunal to furnish to the Applicant a statement in writing of the reasons of the Tribunal for its decision.

2. Although I consider that the decision to extend time was of an interlocutory nature and not a final decision determining the issues between the parties and to which Sub-section 43(2A) of the Administrative Appeals Tribunal Act refers, the reasons are now restated below and will be furnished to the Applicant and to the Respondent.

3. The oral reasons for decision have been transcribed by the Commonwealth Reporting Service. Whereas those oral reasons may reflect the inelegance of an extempore decision, they are in fact the reasons for the said decision.

4. The said transcript is annexed hereunto.


Mr Allen: In matters such as this being in the nature of interlocutory proceedings I believe I should give a decision immediately, notwithstanding it will not have the elegance of a written and considered decision. The application is to extend time in which to lodge a notice of objection to a taxation assessment. The Act seems clear that any objections should normally be lodged within 60 days but there does rest in the Commissioner a discretion in which to extend the time for lodging such objections.

If he declines to extend an application can be made to this tribunal and the role of the tribunal and that of the commissioner etcetera was clearly set out by his Honour Mr Justice von Doussa in
Windshuttle v DFC of T which is reported at 93 ATC 4992. At page 4994 his Honour said:

``In performing its review function the AAT stood in the shoes of the original decision- maker and exercised afresh the discretion under s. 188:
FC of T v Swift & Ors 89 ATC 5101 at 5112. In doing so the Tribunal had regard to the principles set out by Wilcox J in
Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1984) 58 ALR 305 at 310-312. His Honour was there considering the criteria relevant to the exercise of the discretion to extend time under s. 11 of the Administrative Decisions (Judicial Review) Act 1977. Those principles are, however, of a general nature applicable

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in other situations where there is a discretionary power to extend a procedural time limit. Those principles have been applied to the exercise of the power of the Commissioner to extend time for lodging objections:
Fardon v FC of T 92 ATC 4339. The parties to this appeal are agreed that the AAT correctly directed itself as to the matters relevant to the exercise of the discretion.''

That the commissioner, of course, must exercise his discretion on principles as set out by Wilcox J in Hunter Valley Developments supra is made clear by the decision of the Federal Court being the Full Court of the Federal Court in
Lighthouse Philatelics Pty Limited v FC of T 91 ATC 4942; (1991) 32 FCR 148. At ATC page 4948; FCR page 155 the court said:

``Nor does the fact that the proceedings in the Tribunal or the Court are expressed to be a review or an appeal, as the case may be, in relation to the Commissioner's decision on the objection assist the Commissioner. The Commissioner cannot be said to be confined in the course of considering the taxpayer's `objection' to the matters raised by the taxpayer in that `objection'. He has an obligation to administer the Act and may determine to allow the objection for grounds totally unrelated to those raised by the taxpayer, if that be the correct course, just as he could form the view, based on a reconsideration of the matter, that the assessment should be confirmed for reasons which he had not previously considered. His task is to ensure that the correct amount of tax is paid, `not a penny more, not a penny less'.''

The court then continued at ATC page 4949; FCR page 156:

``The decision whether to allow an amendment ought to be made on the same considerations of justice upon which such decisions are regularly made in litigation. It was in the past a reproach to the law that the real issues in taxation appeals could be refused a hearing for a defective objection, and Parliament has legislated to remove that reproach; an amendment under s. 190 should not be considered with reluctance, but on its merits.''

The same principles apply, of course, in relation to decisions whether to extend the time to lodge an objection or not.

As they said, Windshuttle's case to me made it clear that it also made it clear that the principles in Hunter Valley Developments should be applied. Those principles of course have received further endorsement, see for example
Maric v Comcare (1993) 40 FCR 244 and most recently, again a decision of the Full Court of the Federal Court in
Comcare v A'Hearn (1993) 119 ALR 85, of the principles referred to by Wilcox J. As his Honour pointed out that special circumstances need not be shown but added the caveat that the court will not grant the application unless positively satisfied that it is proper to do so and that the prescribed period, in that case 28 days, was not to be ignored.

One must consider whether there has been an explanation for the delay and any prejudice to the respondent. His Honour however pointed out the mere absence of prejudice is not enough to justify the grant and one must also take into account the substantial merits of the application.

Having consideration of those points the actual circumstances which gave rise to the situation where the objection is to be lodged and it was found that there had been a delay in lodging an objection was explained by the applicant. The explanation it seems, and I deliberately pass no comment on whether it is what might be termed a satisfactory explanation, is that there was an error in preparing the original return and that error remained undiscovered. The error was committed both by staff employed by the taxpayer to prepare its return and by employees of the firm of accountants who assisted.

It is unable to be said at this stage who was responsible for the error and why it took so long for it to be discovered. Suffice it to say that immediately the error was discovered steps were taken to alert the respondent and an objection decision lodged. It is noteworthy that the Full Court of the Federal Court said in Comcare v A'Hearn supra at page 88:

``We note that the tribunal used language that might be taken to suggest that it is a precondition for success in such an application that an acceptable explanation for the delay must be given. Although it is to be expected that such an explanation will

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normally be given, as a relevant matter to be considered, there is no rule that such an explanation is an essential precondition.''

In considering this matter I believe it is relevant that the commissioner holds the power to audit a taxpayer's affairs years after the lodgement of a return and amend. Hence, it cannot be held that he is in any sense prejudiced by the delay of an objection. It is not that sort of delay that the cases talk about. As his Honour, von Doussa J, said in Windshuttle supra at page 5003:

``The contention that prejudice arises because no money has been recovered on the assessment presupposes that the assessment is one that in law should have been raised on the true facts. This is the very issue in dispute. This is not prejudice of the kind to which the authorities refer. If it were, there would be prejudice in every case where an extension of some procedural time limit is sought, as the extension, if granted, would remove the bar to action in favour of the opposing party which would otherwise exist. The fact that the statute has provided a power to extend time is a recognition that the loss of the procedural bar that would otherwise apply is not to be a ground disqualifying someone from seeking an extension. The kind of prejudice which is relevant is prejudice that could arise to the opposing party in properly and fairly dealing with the subject matter of the dispute that will require determination if the extension of time is granted. Relevant matters will be whether witnesses have disappeared or their recollections have faded (provided of course that the evidence of the witnesses would have been material... and cannot be refreshed...); whether avenues of useful inquiry have dried up or become difficult to pursue; and whether material documents have been destroyed. In a case like the present it may be open to the party potentially entitled to recover money to establish that by reason of the delay, the financial resources of the applicant have so altered for the worse that the chance of recovery of whatever sum is ultimately found to be due has seriously diminished.''

I would only interpose there that none of those matters would seem to apply to an extension of time in a matter such as this. His Honour did go on to say:

``if a party against whom an extension of time is sought, intends to oppose that extension on the ground of prejudice, that party should adduce evidence which shows the nature and extent of that prejudice.''

In this matter there has been nothing put before me to show that the Commissioner of Taxation would in any way be prejudiced by the extension of time, except an argument that the extension should be refused on the basis that it would allow, or result in the payment of interest on overpaid tax which would not otherwise be payable.

Let me say at the outset that although the actual amount of overpaid tax has been refunded to the taxpayer, I consider that there is an arguable case that he is entitled to interest and I do not intend to go into that matter; except that if by reason of an objection the taxpayer does become entitled to interest, then I regard it as a totally improper exercise of the commissioner's discretion to disallow an extension of time on that basis.

In passing I would only mention too that I consider ruling IT2455 is bad law. I have no intention of following its principles because in my opinion it cannot stand with recent decisions of the Federal Court in relation to extension of time. I refer not only to Maric v Comcare but also to Comcare v A'Hearn supra. In this matter I have a discretion and I can see that no prejudice accrues to the respondent in exercising the discretion in favour of the taxpayer.

As I stated earlier it is a fact that the commissioner has had money to his use and benefit then, if it is to be refunded I see no reason why there should not be interest paid on that money to which he has had the use and benefit and if there is a provision under the law which allows that to be done, then the taxpayer is entitled to avail himself of that. The decision under review will be set aside and the tribunal substitutes its decision that the objection to the assessment or the time for lodging the objection to the assessment will be extended to the first day of September 1994.


FOR the reasons given orally at the conclusion of the hearing in this matter the decision under review is SET ASIDE and the Tribunal substitutes its decision that the time for lodging an objection to the assessment

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issued the 15th day of September 1992 be extended to the 1st day of September 1993.

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