SAMBA v FC of T

Judges:
Lee J

Court:
Federal Court

MEDIA NEUTRAL CITATION: [2005] FCA 798

Judgment date: 22 June 2005

---

Lee J

This is an ``appeal'' on a question of law brought under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) from a decision of the Administrative Appeals Tribunal (``the Tribunal'') made on 24 December 2003 [reported at
2004 ATC 2003]. The decision of the Tribunal affirmed deemed decisions of the respondent which disallowed objections by the applicant to assessments of the liability of the applicant to income tax for the years of income ending 30 June 1996, 30 June 1997 and 30 June 1998.

2. The relevant facts found by the Tribunal are set out in the following paragraphs of the Tribunal's reasons for decision [ATC at 2005-2015]:

``3. Mrs Samba was married to Mr Les Samba in 1979 and there are two children of the marriage, born in 1980 and 1983. For some years prior to 1995 Mr Samba was a full-time horse trainer but had retired by 1995 and did not derive any income from horse training in the years in question in these proceedings. Throughout the relevant period Mrs Samba was employed as a receptionist.

4. In March 1997 Mrs Samba submitted her income tax return for the year ended 30 June 1996. The return disclosed salary and wages of $19,051.00 as the only income and the respondent issued an assessment for that year in April 1997 based upon a taxable income of $19,051.00. In June 1998 Mrs Samba submitted her income tax return for the year ending 30 June 1997. That return disclosed wages and salary income of $18,882.00, interest income of $1,094.00 and a net capital gain from the sale of four

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ATC 4528

horses of $57,171.00. A deduction for work related car expenses of $940.00 was claimed for a total declared taxable income of $76,207.00 and in June 1998 the respondent issued an assessment for the 1997 tax year based upon a taxable income of that amount. Mrs Samba's income tax return for the year ended 30 June 1998 was submitted in January 1999 and disclosed wages and salary income of $17,846.00, interest income of $3,102.00, deductions of $3,948.00 and total capital gains of $10,060.00 - against which were offset net capital losses carried forward of $49,854.00. In February 1999 an assessment for that year was issued on the basis of a taxable income of $17,000.00.

5. In August 1997 the respondent received information from the Western Australian Turf Club (WATC) and the South Australian Thoroughbred Racing Authority (SATRA) concerning the involvement of Mr and Mrs Samba in the purchase and sale of a number of horses. The information suggested that Mr and Mrs Samba may have had access to a substantial amount of funds and may have derived profits from the sale of horses in 1996 and 1997. At that time Mrs Samba had lodged tax returns up to the year ended 30 June 1996 and Mr Samba had lodged tax returns up to the year ended 30 June 1995. The respondent commenced an investigation of the financial and taxation affairs of Mr and Mrs Samba in August 1997 in relation to the years ended 30 June 1996 and 1997. The investigation was subsequently expanded to include the year ended 30 June 1998. The investigation involved obtaining information from Mr and Mrs Samba as well as from a number of external sources including the National Crime Authority (NCA), horse racing authorities in Western Australia, South Australia, Victoria and New South Wales, blood stock agents in Western Australia and New South Wales, various horse trainers and agistment and stud farms in Western Australia, horse transport companies, banks, the Immigration Department, Austrac and the Department of Land Titles in South Australia.

6. The investigations carried out were concluded by March 2001 and the respondent concluded that Mr and Mrs Samba had an undisclosed source of funds amounting to $1,277,856.00 for the period 1 July 1995 to 30 June 1998 as follows:

   Year      Amount
  --------------------
   1996   $378,961.00
  --------------------
   1997   $662,563.00
  --------------------
   1998   $236,332.00
  --------------------
          

...

14. The purpose of the audit was to inquire into whether Mr and Mrs Samba had access during the audit period to a source of funds not disclosed in their tax returns and whether those funds constituted assessable income in their hands. The methodology of the audit and the report prepared subsequently in relation to it was to trace the cash expended by Mr and Mrs Samba on horses and other items in each year of the audit period and to compare those amounts with the cash and other sources of funds identified as being available to fund the expenditure. The difference represented the alleged amount of the undisclosed source of funds.

15. The result of the audit was a lengthy report, including Appendices A to J, (which showed how the allegedly undisclosed source of funds was calculated for the three years of the audit period) and Attachments A, B and C - which provided, respectively, analyses of the many cash transactions identified, the horse-related activities undertaken by Mr and Mrs Samba, and the gambling activities of Mr Samba.

16. The analyses undertaken were based on information provided by Mr and Mrs Samba or obtained from third parties. Throughout the period of the investigation Mr and Mrs Samba had the benefit of legal and accounting advice and there was considerable liaison between the officers of the Commissioner and Mr and Mrs Samba and their advisors.

17. In addition, during the period in which the audit was being undertaken Mr and Mrs Samba were interviewed by the NCA in relation to their financial affairs and their association with another person whose name was mentioned in these proceedings several times and whom I shall refer to as Mr A.

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The Commissioner's investigators had access to the evidence given to the NCA.

18. In relation to the cash funds expended by Mr and Mrs Samba, the investigators examined horse-related expenditure, bank accounts, property-related expenditure, loan repayments to financial institutions, motor vehicle-related expenditure, interstate and overseas travel, payments on an American Express card and ANZ Visa card, private loans, purchase of shares and paintings, general living expenses and non-agistment expenses.

19. In relation to horse-related expenditure, the investigators examined expenditure in connection with 32 horses that were registered to the names of Mr and/or Mrs Samba in the period 1 July 1995 to 30 June 1998. Of those horses, 26 were registered solely to Mrs Samba, one was registered to Mr and Mrs Samba, two were registered solely to Mr Samba and three were registered to Mrs Samba and third parties.

20. Throughout the course of the audit Mr and Mrs Samba maintained that they did not keep records of the expenditure incurred on the purchase and upkeep of the horses. They estimated the date and the amount of the purchase for each horse, but they were unable to provide estimates of the upkeep costs because they could not recall where the horses were stabled or agisted. They relied heavily on cash to pay for horse- related expenditure. The investigators prepared a separate schedule of expenses for each horse over the three year period, examining the purchase and sale transactions and estimating the maintenance expenses for the horses including agistment fees, stud and farm expenses, and trainers' fees. The report concluded that the amount of cash expended on the purchase and maintenance of horses for the period of the audit was as follows:

                           1996          1997          1998
                  -----------------------------------------
   Purchase Price   $223,500.00   $506,000.00   $169,000.00
                  -----------------------------------------
   Maintenance       $32,528.00    $93,461.00   $142,168.00
                  -----------------------------------------
   TOTAL            $256,028.00   $599,461.00   $311,168.00
          

21. In relation to identified cash funds available, the investigators considered as a source of cash funds expended cash on hand at 1 July 1995, cash proceeds from the sale of horses, cash wages received by Mrs Samba from her employment and cash withdrawals from bank accounts.

22. The investigation having identified that Mr and Mrs Samba apparently had an undisclosed source of funds of more than $1.2m in the audit period, Mr and Mrs Samba submitted to the investigators that the source of those funds was the winnings from Mr Samba's gambling on horses. In an attempt to verify this claim the investigators obtained information from Mr and Mrs Samba as well as from TAB records, bookmaker's cheques, cash deposits in bank accounts described as gambling wins, newspaper clippings of winning horses previously trained by Mr Samba, statements from bookmakers and a friend confirming Mr Samba's gambling, a record of Mr Samba's betting transactions for a period of nine months and a number of betting tickets relating to 11 horses.

23. In October 1997 the investigators suggested to Mr Samba that he maintain a record of betting for a period of six months to support the claim that he betted regularly and could derive substantial funds from gambling. That suggestion was not accepted at the time it was made but, on 31 July 2000, Mr and Mrs Samba produced to the investigators a record of what purported to be Mr Samba's betting transactions for the period 5 October 1997 to 27 June 1998. The record consisted of the date of the race meeting, the location of the race meeting, the name of the race horse, the cost of the bet, the net winnings for each race horse and the win dividend for each race horse. A

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ATC 4530

record of the names of the outlets where the betting tickets were purchased was not provided.

24. The investigators identified a number of anomalies in the record. These included that the dates recorded for each betting transaction was the day after each race meeting; on a number of occasions the location of the race meeting was incorrectly recorded; on a number of occasions immigration and other records showed that Mr Samba was overseas when he was reported to have purchased betting tickets; and the record did not include all known betting transactions of Mr Samba. For these and other reasons the investigators concluded that the record provided of Mr Samba's alleged betting transactions was not an accurate account of his gambling activities. The investigators concluded that although there was some evidence Mr Samba gambled on horses there was no persuasive evidence that he derived cash winnings from gambling of the amount he claimed.

25. As noted above, the investigators concluded that Mr and Mrs Samba had an undisclosed source or sources of funds amounting to more than $1.2m over the three years of the audit. They took the view that the undisclosed source should be evenly distributed between Mr and Mrs Samba in those years because they had engaged together in a business or undertook a venture which required joint decision making in relation to:

• • the purchase of horses and in whose name the horses would be registered;
• • who should declare capital gains or losses in relation to the horses;
• • the use of funds in a joint bank account;
• • a decision to place funds in an account in Mrs Samba's name only;
• • the sale of horses (because Mrs Samba as registered owner would have had to agree to the sale);
• • the use of the funds derived from the sale of the horses; and
• • generally, the operation of joint credit cards in respect of which a majority of card payments were made with funds from an undisclosed source.

...

54. There having been no attack on the methodology adopted by the investigators or the conclusions reached by them concerning the amounts expended, compared with the amounts of money known to be available, I am prepared to accept the report's conclusions that a source of funds did exist to which access was had for various purposes during the audit period. It is clear that considerable sums of money were expended on horse-related matters and for other purposes and that the known income of Mr and Mrs Samba from wages and other activities (such as the sale of some horses) was in no way sufficient to meet such expenditure. I therefore find that a source of funds did exist and that in the audit period that fund of money was accessed to the extent of approximately $1.277 million as per the conclusions of the investigation report as set out in para 6 above, and that the amount was expended in the ways disclosed in the report.

...

57.... It is clear on the evidence (and I find) that the funds did not arise from buying and selling horses, gambling winnings, racing prize money or any other activity that Mrs Samba was willing or able to give evidence about. At the same time, Mr Samba was not called to give evidence that might have cast light on the source and I consider that the evidence he gave to the NCA is of no assistance in identifying the source.''

3. The respondent treated the sum of $1 277 856 obtained from the ``undisclosed source'' as assessable income derived jointly by the applicant and Mr Samba in the relevant years. On 26 April 2001, pursuant to s 167(b) of the Income Tax Assessment Act 1936 (Cth) (``the Act''), the respondent made amended assessments of the applicant's liability to income tax for the years of income ending 30 June 1996, 30 June 1997 and 30 June 1998 by, inter alia, adding to the taxable income of the applicant one-half of so much of the foregoing sum as was said to have been derived in each of those years.

4. The applicant objected to the amended assessments. The respondent did not make an

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objection decision within the time provided by s 14ZYA(3) of the Taxation Administration Act 1953 (Cth) (``Tax Administration Act'') and was deemed to have made a decision under s 14ZY(1) of the Tax Administration Act to disallow the objections.

5. Pursuant s 14ZZ of the Tax Administration Act, the applicant applied to the Tribunal for review of the deemed objection decision of the respondent. Section 14ZZK(b)(i) of the Tax Administration Act provided that the burden was on the applicant to prove that the amended assessments were excessive.

6. The applicant made a threshold submission to the Tribunal that the respondent was not authorised by s 167(b) of the Act to make the amended assessments unless the requirements of s 170 of the Act were satisfied, namely, that an avoidance of tax had occurred in each year. The Tribunal determined that pursuant to s 167(b) of the Act the respondent had decided that he was not satisfied that the income tax returns furnished by the applicant stated the applicant's true position in relation to liability to income tax and that the respondent had formed a judgment about the amount of the taxable income on which the applicant's liability to tax was to be assessed. Thereafter the applicant had to show that in arriving at that judgment the respondent had included in the assessable income of the applicant amounts that did not constitute income and that, therefore, the applicant's liability to taxation assessed by the respondent was excessive. The Tribunal noted that the applicant did not argue that if the foregoing amounts were properly included by the respondent in the assessable income of the applicant, failure by the applicant to include those amounts in the income tax returns lodged by the applicant did not constitute an ``avoidance of tax'' for the years of income ending 30 June 1997 and 30 June 1998 under s 170(2)(b) of the Act or an ``avoidance of tax... due to fraud or evasion'' for the year of income ending 30 June 1996 under s 170(2)(a) of the Act. (See:
FC of T v Dalco 90 ATC 4088 at 4091-4092; (1990) 168 CLR 614 at 621-623 per Brennan J;
Kajewski & Ors v FC of T 2003 ATC 4375 at 4400 [111]; (2003) 52 ATR 55 at [ 111]).

7. Counsel who appeared for the applicant on the ``appeal'' accepted that the issue whether the respondent had been authorised under the Act to make the amended assessments was subsumed within, and dependent upon, the applicant's argument that the amended assessments were excessive.

8. The applicant submitted to the Tribunal that the amended assessments were excessive in that the only assessable income derived by the applicant was as set out in the income tax returns lodged by her. Alternatively, the applicant contended that in respect of the further amounts added to the applicant's assessable income by the respondent and on which the amended assessments had been based, the applicant had provided a satisfactory explanation of how Mr Samba had provided monies to her in the relevant years of income and had shown that those amounts did not constitute further assessable income derived by the applicant. The applicant's submissions on ``satisfactory explanation'' relied upon the principles set out in
Ma v FC of T 92 ATC 4373; (1992) 37 FCR 225.

9. The applicant further submitted that she had not carried on business as an owner or trainer of, or dealer in, horses either on her own account or in conjunction with Mr Samba and, therefore, had not derived income from the conduct of such a business. Alternatively, the applicant submitted that if the Tribunal found that the applicant had carried on such a business in the purchase, upkeep, training, racing and sale of horses, the expenditure and outgoings in respect of those activities identified in the audit report were outgoings that had to be deducted from the ``alleged income'' before it could be calculated whether any assessable income had been derived therefrom by the applicant. The applicant submitted that in the absence of such a process the amended assessments of her liability to tax were excessive.

10. The Tribunal found that in important respects the applicant was not a truthful witness and determined that the applicant had not provided a satisfactory explanation of the circumstances in which she had received and expended cash sums over and above the monies available to her from the assessable income declared in the income tax returns lodged with the respondent. The Tribunal noted that the applicant did not contend that the audit report upon the financial affairs of the applicant and Mr Samba erred in concluding that a sum of $1,277,856 had been obtained from ``an undisclosed source of funds'' in the course of

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the years of income ending 30 June 1996, 30 June 1997 and 30 June 1998.

11. The Tribunal found that sum to have been obtained from an undisclosed ``joint enterprise'' carried on by the applicant and Mr Samba, not being the joint activity of purchasing and selling horses. The Tribunal also found that the sum had not been obtained from gambling winnings or prize monies received from the racing of horses. The Tribunal had regard to the ``horse-related activities'' of the applicant and Mr Samba as part of the evidence of the manner in which the applicant and Mr Samba ``structured their affairs''. The Tribunal concluded that, ``as with the horse-related activities'', the activity that produced the undisclosed funds was likely to have been a ``joint enterprise'' conducted by the applicant and Mr Samba.

12. The relevant findings of the Tribunal in that regard were expressed as follows [ATC at 2015-2018]:

``61. Although the horse-related activities were not the source of the undisclosed income, the cash expenditures during the audit period related significantly to horses and the way in which the horse activities were undertaken cast light on how Mrs Samba and her husband structured their affairs. Mrs Samba argued that she knew nothing about horses and was not connected with any expenditure on them. Nevertheless, it was argued that the presumption of advancement was applicable and that the horses registered in Mrs Samba (sic) name by her husband were gifts by him to her. Mrs Samba adopted the position that she owned the horses when it was to her advantage to do so, such as asserting that she was the owner of the horses to the various horse racing authorities and in a loan application made to the Commonwealth Bank. She benefited from expenditure on the acquisition, maintenance and disposal of the horses.

...

68. As noted earlier, it is clear on the evidence that Mr and Mrs Samba's financial affairs were intermingled. They operated a joint bank account, although Mrs Samba also maintained an account in her own name. Into these accounts they both made deposits (from sources such as tax returns, salary, proceeds of the sales of horses, insurance payouts when a horse died, and repayments of loans made by Mr Samba). Payments were made from the accounts in respect of both personal expenses and expenses related to the purchase and maintenance of horses. At the same time, however, considerable amounts of cash were expended on personal expenses, horse- related expenses and other items such as travel.

69. Mrs Samba benefited substantially from the use of the funds from the unknown sources in that the declared taxable income of Mr and Mrs Samba was self evidently insufficient to support the level of expenditure disclosed in the audit report. Much of the expenditure was to her benefit, including the purchase of horses in respect of which she subsequently shared in the proceeds of sale of, a substantial cash payment for the purchase of her vehicle, payments for interstate and overseas travel by her and her husband, payments on credit card (sic) jointly operated by them, the deposit on the home acquired by her, and general living expenses. Much of the expenditure was on the purchase and maintenance of horses which I consider formed part (indeed, the major part) of a joint activity between Mr and Mrs Samba. Within the time frame of the audit period Mrs Samba was able to obtain sufficient money to purchase a residence for more than $500,000 - the funds for which (except for $100,000.00 from the Commonwealth Bank) were obtained from the disposal of horses acquired during the audit period or money contributed by her husband from sources that have not been satisfactorily explained.

...

72. In these circumstances I agree with the contentions of the respondent that, as with the horse-related activities, the applicant was involved in a joint enterprise of some sort with her husband in respect of the activity that generated the undisclosed source of funds. I also agree with the respondent's contention that the way in which Mrs Samba and her husband used cash to meet nearly all forms of expenditure (including normal living expenses and substantial purchases) is significant in respect of how they structured

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their tax affairs. I believe that Mr Samba's evidence to the NCA that he used cash to avoid investigation by the Commissioner... entitles me to infer that Mrs Samba and her husband arranged their affairs so that most of the money available to them was not declared and a false impression of the financial circumstances was presented in their income tax returns. I consider that Mrs Samba knew of, participated in, and benefited from those arrangements.

73. It would have been open to Mrs Samba to attempt to dispel the inferences that arise from the intermingling of income expenses and assets with those of her husband, her connection with the source of funds as disclosed by the benefits she derived from their expenditure, the manner in which they jointly conducted enterprises such as the horse activities, and the manner in which she and her husband arranged their tax affairs. She could have tried to do this by disclosing the source of the funds and in that way might have demonstrated that she did not have any connection with or access to the funds. However, she chose not to reveal the source. It might be said that Mrs Samba simply did not know what the source was. I do not believe that to be the case - but, even if it were, it was open to Mrs Samba to call her husband to give evidence about matters that he undoubtedly knew a great deal about. Her failure to do so entitles me to infer that whatever he may have given would not have assisted Mrs Samba's case, bearing in mind that Mrs Samba was legally represented in these proceedings:
Jones v Dunkel (1959) 101 CLR 298.''

13. The material put before the Tribunal included testimony from the applicant and a written statement by the applicant to which was attached a transcript of the evidence she had given to the NCA in December 1999. Mr Samba did not give evidence on behalf of the applicant but the Tribunal had before it a transcript of evidence Mr Samba gave to the NCA, in which Mr Samba claimed that at material times he held cash obtained from winnings on gambling which sum may have exceeded $500 000 from time to time. The Tribunal rejected that explanation and noted that the applicant did not challenge the conclusion of the audit report that the source of the undisclosed funds was not winnings from gambling.

14. The Tribunal was unable to identify what activities produced the cash monies to which the applicant and Mr Samba had access but concluded that they came from a ``joint enterprise of some sort'' and that the funds were assessable income derived jointly by the applicant and Mr Samba. The reasons provided by the Tribunal for that conclusion were as follows [ATC at 2018]:

``74. In all the circumstances I consider that Mrs Samba had a connection with, access to, and benefited from the undisclosed source of funds as identified in the investigation report. I consider these funds to be ordinary income in her hands, essentially for the reasons contended by the respondent: the funds were substantial, they were available to Mr and Mrs Samba for their daily use, they were available throughout the audit period and were apparently replenished during that period, and they were used to pay living expenses, to acquire assets and to generally meet nearly all of the expenditures of Mr and Mrs Samba.

75. Mrs Samba did not characterise the funds comprising the undisclosed source of funds as being of a nature that would indicate that they were not assessable income. She did not contend in her notice of objection or Statement of Facts and Contentions that if it was found that she did have access to an undisclosed source of funds that the funds did not constitute assessable income in her hands. Had she been prepared to identify the source of the funds she may, for example, have been able to show that they were a gift or a lottery win or some other form of non-assessable income. In this context I note that Mrs Samba did not challenge the conclusion in the investigation report that that the undisclosed funds were not gambling winnings. In my opinion, having chosen to not reveal the nature of the undisclosed funds she was not in a position to dispute that they were assessable income once it was established, as I find, that she had access to those funds.''

15. Although the Tribunal did not say so in express terms it is apparent that the Tribunal concluded that the applicant and Mr Samba engaged in a ``joint enterprise'' for the purpose

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of profit or gain and that monies obtained from the conduct of that enterprise bore the character of income according to ordinary concepts and usage. That is to say, the applicant and Mr Samba carried on some undertaking, venture or activity for profit or gain, or carried on a business of some description. Although the Tribunal was unable to ascertain the nature of the ``joint enterprise'' it appeared to involve continuing activities producing gains or profits. It was not suggested to the Tribunal that the additional funds identified by the audit report lacked the character of revenue as gifts, bequests or other sums in the nature of capital. As noted above the Tribunal rejected the applicant's reliance on the explanation offered by Mr Samba to the NCA that the funds comprised windfall gains obtained from gambling.

16. The Tribunal also rejected the applicant's assertion that the activities of Mr Samba alone generated the funds concerned and that the use by the applicant of such monies resulted from gifts to the applicant from Mr Samba or from directions by Mr Samba to apply the monies for the use and benefit of the applicant; of Mr Samba; or, of the applicant and Mr Samba jointly.

17. With regard to the applicant's alternative submission that if it were found that the applicant and Mr Samba carried on business in the purchase, upkeep, training, racing and sale of horses the outgoings applied to such activities had to be deducted to enable the assessable income derived by the applicant to be ascertained, the Tribunal said as follows [ ATC at 2018]:

``77. One final point needs to be considered, namely the contention made on behalf of Mrs Samba that the cash expenditure identified in the audit constituted deductions that should be allowed against the assessed income represented by the undisclosed source of funds. On this point I agree with the contention of the respondent that it misconceives the nature of the funds and the methodology of the audit report. The expenditures identified were not expenditures on the activity undertaken to generate the undisclosed source of funds. Rather, the expenditures show how the undisclosed source of funds were spent - not earned - and provides the means of establishing the existence of the funds and estimating their amount. Mrs Samba provided no evidence to show that the expenditures were allowable deductions - they did not relate to the income assessed against her and she did not disclose the source of that income. I find that the expenditure was not deductible by Mrs Samba.''

18. The question of law relied upon by the applicant to ground the jurisdiction of the Court to deal with the matter of the ``appeal'' was whether the Tribunal erred in law by failing to duly apply the Act to the facts found by the Tribunal or by having regard to irrelevant considerations in reaching its decision. (See:
Jolley v FC of T 89 ATC 4197 at 4199; (1989) 86 ALR 297 at 299 per Burchett and Lee JJ;
Lombardo v FC of T 79 ATC 4542 at 4544-4545; (1979) 28 ALR 574 at 576-577 per Bowen CJ.)

19. The grounds on which the applicant sought to establish an error of law on the hearing of the ``appeal'' were; first, that the Tribunal erred in law in requiring the applicant to do more than provide a satisfactory explanation for the source of the monies used by her to meet family expenditures and to acquire assets for the applicant to prove that the amended assessments were excessive; second, that the Tribunal erred in law in concluding that by failing to call Mr Samba to give evidence on her behalf the applicant had not provided a satisfactory explanation of her circumstances; and third, that by failing to have regard to the outgoings incurred by the applicant and Mr Samba in gaining or producing the assessable income that the Tribunal found to have been jointly derived by the applicant and Mr Samba, the Tribunal erred in law in determining that the applicant had not shown the amended assessments to be excessive.

20. In further written submissions filed with leave subsequent to the hearing of the ``appeal'', the applicant sought to further amend the grounds of ``appeal'' to include the following:

``4.22 In the alternative , the Tribunal failed to properly exercise its jurisdiction to determine whether the amended assessments were excessive by:

• ...
• (b) finding that the applicant had engaged in a jointly conducted horse

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  ATC 4535

  related activity in which she shared in the proceeds of sale but failing to consider and determine the proper basis in law for assessing the applicant on the net income from that activity .''

21. The respondent in written submissions in reply contended that the proposed amended ground could not be raised by the applicant on the ``appeal'' in that it was not a ground of the taxation objections lodged by the applicant with respect to the amended assessments. It is appropriate to deal with that submission and the related ground of appeal forthwith.

22. The respondent submitted that the jurisdiction of the Tribunal was confined by the limits of the applicant's taxation objections and that the applicant could not assert that the Tribunal had erred in law by failing to have regard to issues or propositions not raised in those objections. (See:
Liedig v FC of T 94 ATC 4269; (1994) 50 FCR 461;
FC of T v La Rosa 2002 ATC 4709; (2002) 196 ALR 139;
FC of T v Glennan 99 ATC 4467; (1999) 90 FCR 538;
FC of T v Softex Industries Pty Ltd 2001 ATC 4184; (2001) 107 FCR 111).

23. So much may be accepted but where the power provided by s 14ZZK(a) of the Tax Administration Act is exercised by the Tribunal to extend the grounds of objection, the jurisdiction of the Tribunal to review an objection decision is enlarged accordingly.

24. The question in the instant matter is whether, albeit informally, the Tribunal permitted the applicant to raise a further ground over and above those stated in the taxation objections.

25. In a Statement of Facts and Contentions filed by the applicant pursuant to directions made by the Tribunal for the preparation of the matter for hearing it was stated by the applicant that:

``At no stage did the Applicant carry on business as a horse trainer, horse owner, horse dealer or otherwise.''

26. That statement of fact was part of a paragraph in which the applicant recited that she had derived capital gains from the sale of horses given to her by Mr Samba. It may be taken that the applicant was asserting that at no time did she carry on such a business, either as a sole trader or in partnership with Mr Samba.

27. The principal contentions of the applicant in the Statement of Facts and Contentions were that the assessable income derived by the applicant had been disclosed in her income tax returns and that the additional monies made available for her use were gifts of money from Mr Samba which constituted neither assessable income nor capital gains.

28. The Statement of Facts and Contentions concluded as follows:

``Alternatively, should it be found that the Applicant either alone or together with her husband, carried on business in the purchase, upkeep, training, racing and sale of horses, the Applicant contends that the amounts of expenditure identified in the [ audit report] constitute allowable deductions for the purposes of s 48 and s 51(1) of [the Act]...and are allowable in full. As the alleged income is equal to such expenditure, the Applicant contends that there is no taxable income on which she is liable to pay tax.''

29. Pursuant to that contention it was submitted to the Tribunal that if, contrary to the applicant's denial, the Tribunal found that a business of ``horse-related activities'' was carried on by the applicant and Mr Samba, a share in the gross and not the net income of that business in the relevant years of income had been treated as the assessable income of the applicant.

30. The reasons of the Tribunal show that the Tribunal accepted that deductibility of outgoings incurred for ``horse-related activities'' was an alternative contention raised by the applicant in the Statement of Facts and Contentions if, contrary to the applicant's principal contentions, the Tribunal determined that the additional funds applied by the applicant and Mr Samba to their use were proceeds obtained from a business of ``horse- related activities'' carried on by the applicant and Mr Samba. Although no formal order was made that the grounds of the applicant's objections be amended accordingly, it was clear that the Tribunal permitted the scope of the review to be enlarged to include the alternative argument on the deductibility of the outgoings.

31. The Tribunal found, however, that expenditure incurred in respect of ``horse- related activities'' were not outgoings incurred to obtain the funds generated by the undisclosed ``joint enterprise''. The Tribunal was unable to ascertain what enterprise was carried on by the applicant and Mr Samba to obtain the additional

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funds but it was satisfied that ``horse-related activities'' did not produce any part of that sum. It was not submitted to the Tribunal that irrespective of the source of the additional funds the applicant and Mr Samba carried on a business that consisted of the ``horse-related activities'', or a business of ``horse-related activities'' and the ``joint enterprise'', the profits or losses of which had not been duly accounted for in the amended assessments made by the respondent. The Tribunal, therefore, was not required, and did not make, any finding of fact on whether the applicant and Mr Samba carried on such a business or whether profits or losses had been returned therefrom. It may be that the ``horse-related activities'' to which the Tribunal referred bore ``badges of trade'' that could have pointed to the conduct of a business by the applicant and Mr Samba. (See:
Puzey v FC of T 2003 ATC 4782 at 4792 [48]; (2003) 131 FCR 244 at [48] per Hill and Carr JJ.) However, the applicant denied that she carried on such a business either on her own account or in partnership with Mr Samba, and the grounds of the applicant's objections did not require the Tribunal to make a finding one way or the other in that regard.

32. Therefore, the amendment that the applicant now seeks to make to the grounds of the ``appeal'' goes beyond the grounds of the objections on which review of the objection decision was conducted by the Tribunal. The Tribunal was not required to consider whether horses sold by the applicant were, in fact, sales made by a business conducted by the applicant and Mr Samba and, therefore, was not required to address any consequential issues that could arise therefrom. Accordingly, leave to further amend the grounds of ``appeal'' must be refused and the related ground of appeal must fail.

33. With regard to the other grounds of appeal relied upon, neither contention of the applicant can be sustained.

34. First, the Tribunal did not require the applicant to do more than provide a satisfactory explanation of the source of the means used by her to meet personal or family outgoings and to acquire assets. The Tribunal did not accept the explanation provided by the applicant as to the source and nature of the funds used by her and found her account to lack credibility in significant respects. In those circumstances the Tribunal found, correctly, that the applicant had not discharged the burden of proof imposed upon her by the Tax Administration Act to show that the amended assessments were excessive. (See:
George v FC of T (1952) 10 ATD 65 at 67; (1952) 86 CLR 183 at 201.)

35. Second, the Tribunal did not act on the assumption that the applicant's explanation had to be rejected unless the applicant called Mr Samba as a witness in her case. As discussed above the Tribunal found the applicant not to be a credible witness in significant respects and rejected her explanation on those grounds. In reaching that decision the Tribunal took comfort from the circumstance that Mr Samba, a person able to corroborate the applicant's claims, had not been called to give evidence from and drew the inference that there was no evidence he could give that would assist the applicant's case. (See:
Jones v Dunkel (1959) 101 CLR 298.) No error of law has been demonstrated in the Tribunal's treatment of that issue.

36. The applicant also submitted that it was not enough for the Tribunal to conclude that the applicant and Mr Samba had been engaged in a ``joint enterprise of some sort''. The applicant contended that for it to be shown that the applicant had derived assessable income from such an enterprise there had to be circumstances that demonstrated that the monies produced by the enterprise had ``come home'' to the applicant.

37. The insuperable problem for the applicant in that argument is the finding of fact by the Tribunal that the applicant and Mr Samba were jointly engaged in the enterprise which produced the funds. Even if it were accepted that Mr Samba controlled any proceeds obtained from that enterprise that fact would not compel the Tribunal to conclude that the applicant and Mr Samba were not joint participants in the enterprise. The applicant did not seek to contend otherwise in the ``appeal''.

38. It follows that it was open to the Tribunal to conclude that the gains or profits of the enterprise were gains or profits derived by the applicant and Mr Samba jointly and that in the absence of any evidence that the funds identified by the audit report were other than the net income of that enterprise, or that the entitlement to those funds was other than joint, the Tribunal could conclude that the undisclosed monies identified in the audit report

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ATC 4537

constituted assessable income derived jointly by the applicant and Mr Samba.

39. From the standpoint of the applicant and Mr Samba, they regularly used monies received from the undisclosed source to meet expenses incurred for their maintenance, improvement and advancement in life and for the acquisition of assets. In other words, they depended upon the regularity of the funds so produced to support their daily life-style. (See:
FC of T v Dixon (1952) 10 ATD 82 at 85; (1952) 86 CLR 540 at 556 per Dixon CJ and Williams J). The regularity of the flow of such monies stamped the sums received and used by the applicant and Mr Samba as revenue. (See:
Egerton- Warburton v DFC of T (1934) 3 ATD 40; (1934) 51 CLR 568.) Once the monies received were shown to be marked with the character of income it was not necessary to identify the means by which those receipts had been generated. (See: RW Parsons, Income Taxation in Australia, Law Book Company, Sydney, 1985 at [2.175]-[2.177]).

40. The Tribunal was satisfied that the way in which the applicant and Mr Samba organised their affairs suggested that it was likely that each contributed to the conduct of the activities that produced the funds applied to their mutual use and benefit and that, therefore, the funds received and used should be taken to be the net return of a joint enterprise and to constitute assessable income derived by the applicant and Mr Samba jointly. That was a finding open to the Tribunal. The Tribunal concluded, correctly, that having found that the applicant's explanation could not be accepted the applicant had not satisfied the onus cast upon her by the Tax Administration Act to show that the assessments of her liability to income tax were excessive.

41. It follows from the foregoing that the ``appeal'' must be dismissed.

THE COURT ORDERS THAT:

1. The ``appeal'' be dismissed.

2. The applicant pay the respondent's costs.