CASE Y41

Members:
P Gerber

Tribunal:
Administrative Appeals Tribunal

Decision date: 15 August 1991

Dr P Gerber (Deputy President)

The point I have to decide is a narrow one and turns upon the effect of the Crown's alleged non-compliance with the procedure laid down in the Income Tax Assessment Act (``the Act'') relating to a Part IVA assessment. I therefore propose to limit my summary of the facts to the narrow particularity with which I am asked to deal.

2. The applicant was at all relevant times a beneficiary of the John Smith Family Trust (``the Trust''). The Trust was a discretionary trust, the trustee being Claremont Nominees Pty Ltd (``Claremont''). The directors of Claremont were the applicant and her husband.

3. In the relevant year of income, the Trust returned a net income of $55,610 which was distributed pursuant to a resolution of the directors of Claremont, dated 24 June 1982 variously amongst the beneficiaries of the Trust by crediting of the said amount to the beneficiaries in the books of the Trust. The effect of said distribution for present purposes was that, after some minor distributions to various family members, the balance of the income ``including 50% of Capital Gains not assessable for taxation purposes'' was credited to the applicant.

4. In her return of income for the 1982 tax year (lodged on or about 15 December 1982), the applicant returned $65,349 as her taxable income, which sum included an amount of $50,010 as her share of the net income of the Trust.

5. On 30 December 1982, the respondent issued an assessment (``the original assessment'') to the applicant for a taxable income of $65,349.

6. The income of the Trust in the relevant year of income included interest and dividend

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income received from investments, profit from speculation in property, as well as a distribution from the Vapour Engineering Unit Trust (``VEUT'') of $9,905.

7. During the relevant year VEUT carried on business, inter alia, as personnel hire, placement and as a consultancy. The unit holders were Claremont as trustee of the Trust (1,050 units) and Alan Gore Management Services Pty Ltd as trustee for the Alan Gore Family Trust (150 units).

8. VEUT's personnel hire, placement and consultancy business was sold on 26 March 1982 to an unrelated party. However, the VEUT trust continued to operate as an investment trust for the balance of the tax year.

9. In its return of income for the 1982 tax year (lodged on 9 December 1982) VEUT returned a net income (for taxation purposes) of $11,320 after taking into account $28,165, being losses carried forward from the previous year as well as a loss from an investment in ``Film Production (Limited Partnership) No 281'' (``Filmprod'') of $157,934. The trustee of VEUT was VEUT Engineering Pty Ltd, the public officer of which was John Smith, the applicant's husband.

10. In or about April/May 1982, the directors of VEUT Engineering Pty Ltd became aware of the possibility of investing in UAA Film partnerships and instructed its accountant to look for suitable long-term investments for the funds which would become available from the sale of the business. In the result, the VEUT trust invested some $45,000 in Filmprod on 11 June 1982. The applicant asserts that Filmprod was constituted by a partnership agreement dated 18 June 1982 and registered as a Limited Partnership on 29 June 1982 under the Limited Partnerships Act 1909 (WA), the general partner being United American & Australasian Film Productions Pty Ltd.

11. In or about December 1982, the general partner lodged a return of income for the year ended 30 June 1982 for Filmprod, disclosing a partnership loss, calculated under sec 90 of the Income Tax Assessment Act (``the Act'') of $615,065.

12. The individual interest of the trustee of the VEUT trust in the partnership loss ($157,933.33) was claimed under sec 92 as a deduction. It was allowed and thus ultimately reflected in the applicant's share of the net income of the John Smith Family Trust to which she was ``presently entitled''.

13. Exhibit 3(d) is a copy of a determination by a Mr William Shakespeare, a taxation officer, made on behalf of Mr SC Levy, the (then) Deputy Commissioner of Taxation, Perth under sec 177F(1) in the following terms:

``INCOME TAX ASSESSMENT ACT

1936

DETERMINATION

UNDER SUB-SECTION 177F(1)

I, SYDNEY C. LEVY, in the exercise of the powers and functions conferred upon me as Deputy Commissioner of Taxation by delegation from the Commissioner of Taxation under the provisions of the Taxation Administration Act 1953, hereby determine for the purposes of sub-section 177F(1) of the Income Tax Assessment Act 1936 that, in respect of the taxpayer named in Column 1 below who in the year of income specified in Column 2 had obtained, or would but for the operation of section 177F obtain, a tax benefit in connection with a scheme to which Part IVA of that Act applies, the whole of the amount otherwise not included in the assessable income of that taxpayer as specified in Column 3, being the amount that would have been included, or might reasonably be expected to have been included in the assessable income of that taxpayer of that year of income if the scheme in connection with which the trustee of the Vapour Engineering Unit Trust claimed a deduction in respect of its individual interest in the partnership net loss of Filmprod had not been entered into, shall be included in the assessable income of the taxpayer of that year of income. 

                         Column 2
         Column 1       Year Ended       Column 3
      Mrs Smith        30 June 1982    $138,192.19

(Sgd) S.C. LEVY

DEPUTY COMMISSIONER OF

TAXATION

Determination made and stamped by me.

(Sgd) William Shakespeare

TAXATION AUDITOR GR. 5 (CLASS 9)

8/3/1984

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In exercise of the authority granted to me by S.C. Levy, Deputy Commissioner of Taxation, I, William Shakespeare Taxation Auditor Grade 5 (class 9) hereby remit an amount equal to 97.5 percent of the additional tax that would otherwise be payable under sub-section 226(2A).

W.S. (Initials)

(Sgd) W. Shakespeare

TAXATION AUDITOR, GR. 5 (CLASS 9)

8/3/1984''

14. On or about 28 May 1984, an amended assessment (``the amended assessment'') issued to the applicant, increasing her taxable income by $138,192 to $203,541. The amended assessment was accompanied by an adjustment sheet which provided the following reason for the adjustment:

``ADD

It has been determined for the purpose of sub-section 177F(1) that the whole of the additional amount which might reasonably be expected to have been included in your assessable income if the scheme in connection with the trustee of the VEUT Trust claimed a deduction for its individual interest in the net loss of Filmprod had not been entered into shall be included in your assessable income - $138,192.''

The amended assessment imposed upon the applicant a further liability of $82,915.20 in respect of her income tax (together with additional tax in the amount of $4,145.76 for ``incorrect return'').

15. On 4 July 1984, the applicant lodged an objection against the amended assessment.

16. By notice dated 2 May 1985, the Deputy Commissioner Perth disallowed the taxpayer's objection in full.

17. Between the lodgment of the objection and its disallowance, the Perth Office of the Commissioner was a beehive of activity. Thus, on 18 September 1984, William Shakespeare, the taxation auditor who made the sec 177F(1) determination of 8 March 1984, purported to make a further determination under sec 177F(2) in the following terms:

``In accordance with sub-section 177F(2), I hereby determine that the income specified in Column 3 above is deemed to be included in the assessable income of the taxpayer specified in Column 1 for the year ended 30 June 1982 by virtue of section 97 of the Income Tax Assessment Act 1936

(Sgd) W Shakespeare

Taxation Auditor Gr. 5 (Class 9)

18/9/1984''

18. Having made the sec 177F(2) determination, no one in the Perth Office made any attempt to send a copy of said determination to the applicant or her advisers which first came to light by way of discovery.

19. In due course the matter was transmitted to this Tribunal for review and it was agreed between the parties that the substantive issue, ie whether the taxpayer obtained a ``tax benefit in connection with a scheme'' as defined in sec 177C, be deferred, pending the determination of the applicant's preliminary submissions that the amended assessment is invalid; alternatively, that the determination under sec 177F(1) of 8 March 1984 is invalid; alternatively, if valid, is incapable of being carried into effect as no determination under sec 177F(2) was made by the Commissioner before the issue of the amended assessment or at all, and that the Commissioner was now statute-barred from issuing a fresh amended assessment under Part IVA.

20. The Commissioner, without conceding that the determination(s) were invalid, submits that the applicant, not having raised the issue of invalidity in her objection, is now debarred from relying on any alleged invalidity.

21. The determination of the preliminary point requires a brief excursus into the background dealing with the authority of the various taxation officers who were involved with the amended assessment and the correspondence leading up to the issue of the sec 177F(2) determination.

22. This epic begins on 13 November 1979, when the (then) Commissioner of Taxation delegated the powers conferred on him by sec 8 of the Taxation Administration Act 1953 to the person for the time being occupying, or performing, the duties of the office of, inter alia, Deputy Commissioner of Taxation, Perth:

``All of [his] powers and functions except those under section 8, section 14, sub-sections (5) and (6) of section 51AA, section 55, section 136, section 147,

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sub-section (1) of section 160AL, section 188, section 189, section 196, section 200, sub-sections (1), (2) and (5) of section 220, sub-sections (1) and (2) of section 221S, sub-sections (1) and (2) of section 221T and section 262.''

23. On 17 October 1983, Mr S Levy, the (then) Deputy Commissioner, Perth authorised William Shakespeare, Supervisor Class 9 Compliance Branch:

``... to exercise the powers and functions under sub-section 177F(1) involving the making of determinations for the purposes of Part IVA of the [Income Tax Assessment] Act and the taking of such further action as may be necessary to give effect to such determinations. This authority is to be exercised only in relation to participants in the UAA film partnership arrangements.''

24. The original return of this taxpayer, which was made an exhibit, contained the following direction dated 9 March 1984:

``Assessor

Refer to the determination for the purposes of sub-section 177F(1) of the Income Tax Assessment Act 1936 at folio 1 in respect of the abovenamed taxpayer's claim for an interest in the partnership net loss of Filmprod (Refer claim at folio and item 11 of return.)

In accordance with that determination assess the taxpayer's 1982 assessment to disallow his [sic] claim of $138,192 for a share of the net loss of that partnership and impose additional tax under sub-section 226(2A) remitted under sub-section 226(3) to the extent of 97.5% of that additional tax (i.e. impose additional tax at 5% of the tax avoided).

The adjustment sheet is to read as follows:

  • `It has been determined for the purpose of sub-section 177F(1) that the whole of the additional amount which might reasonably be expected to have been included in your assessable income if the scheme in connection with which the trustee of the Vapour Engineering Unit Trust claimed a deduction for its individual interest in the net loss of Filmprod had not been entered into shall be included in your assessable income.'

(Sgd) Francis Bacon''

25. A note attached to the return, dated 9 March 1984, states:

``In accordance with sub-section 177F(2), I hereby determine that the income specified in Column 3 above is deemed to be included in the assessable income of the taxpayer specified in Column 1 for the year ended 30 June 1982 by virtue of section 97 of the Income Tax Assessment Act 1936.

William Shakespeare

Taxation Auditor Gr. 5 (Class 9)

18/9/1984''

(the ``Column 3'' referred to above quantifies the amount as $138,192.19, see para 13 supra).

26. As already noted, it is conceded that no copy of this sec 177F(2) determination was sent to the taxpayer. The question thus arises: can there be determinations which, like cardinals, are in pectore?

27. For present purposes, the statutory scheme set out in sec 177F provides:

28. Mr Owen-Conway, of learned counsel for the Crown, put the issue in disarmingly simple terms; viz that there is nothing in the Act which compels a determination pursuant to Part IVA to be in writing, and that when Mr Shakespeare made his sec 177F(1) determination on 8 September 1984, after having carefully examined the various notations on the file, he must have made a sec 177F(2) determination. Counsel put it thus:

``Mr Shakespeare said that the movement slip indicated to him that Mr Bacon had examined the return to decide what determination to prepare. He said the fact that it was signed off on 9 March (1984) indicates that Mr Bacon had finished with the matter by then. Now, in my submission, those facts constitute a determination within sub-section F(2) made by Mr Shakespeare immediately prior to the time, or contemporaneously with the time that he executed the sub-section (1) determination, probably contemporaneously with it.... So, in my submission, the evidence is before you from which it is open to draw an inference that Mr Shakespeare had turned his mind to the question and formed a concluded view, and, in my submission, this is all that a sub-section (2) determination requires. It need not be in writing, it need not be communicated to any person.''

(pp 111-112 tr)

29. With the utmost respect to Mr Owen-Conway, I cannot take the above proposition seriously, nor accept that Part IVA is satisfied by that chummy degree of informality displayed on this occasion.

30. It is trite to point out that Part IVA is a general anti-avoidance provision which was inserted into the Act by Act No 110 of 1981. It is structurally different from the former sec 260 which it was designed to replace, in that it does not operate of its own force, but requires the Commissioner, having identified a ``tax benefit'', to make a determination pursuant to sec 177F(1). As I read the section, having made a sec 177F(1) determination to cancel the whole or part of the amount referable to a tax benefit, he must then make a further determination identifying ``such provision of this Act'' pursuant to which the assessable income is deemed to be included. The two determinations are complementary and, until both determinations are made and the taxpayer advised thereof, any assessment or amended assessment made pursuant to sec 177F is defective. It remains to determine what effect - if any - this defect has in the instant case.

31. I therefore reject counsel's submission that what occurred here constituted an ``oral determination'' which ``need not be communicated to any person''. If there is such a thing as an oral determination - of which I have not been persuaded - it is about as effective as an oral contract for the sale of land which the vendor has not bothered to communicate to the purchaser. On this aspect, I would respectfully adopt the words of Barwick CJ in
Giris Pty Ltd v FC of T 69 ATC 4015; (1968-1969) 119 CLR 365 where, at ATC p 4018; CLR p 373 the learned Chief Justice notes, albeit in a different context, that ``the Commissioner is under a duty in each case to form an opinion and the taxpayer is entitled to be informed of it'' (my italics).

32. Although not strictly necessary for my decision, one can make an intelligent guess why this assessment was approached with such nonchalance and lack of formality. It seems that no one contemplated that sub-sec 177F(2) determinations in UAA Film partnerships were needed since the partners in the scheme were claiming their proportionate losses in the partnership, thus obviating the need for a sub-sec 177F(2) determination. It is therefore instructive to peruse the communications between National Office, Canberra and the Deputy Commissioner, Perth.

33. This epistolary epic commenced on 18 May 1984, when Mr Conwell, a Senior Assistant Commissioner, Canberra, wrote to the Deputy Commissioner, Perth as follows:

``Deputy Commissioner of Taxation PERTH W.A. 6000

INCOME TAX: PART IVA

UAA FILM PRODUCTIONS PTY LTD

I refer to your memorandum of 8 March

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1984 requesting advice on assessing action to be taken to clear unassessed current year returns for participants in the UAA arrangements.

2. The assessing action set out below should be adopted to clear all unassessed returns for participants, other than those participants who have withdrawn their prior year claim(s) or otherwise have indicated that they do not wish to pursue that claim(s). For the latter cases, the assessing action outlined in my memorandum of 7 May 1984 should be adopted.

INDIVIDUALS AND COMPANIES

(a) Where income from a UAA partnership is included in returned assessable income

3. If the taxpayer is in a positive taxable income situation, the assessment should issue including the amount of the UAA income. If the UAA income reduces a sub-section 80(1) loss, it should likewise be included in the taxpayer's assessable income. Until the application of Part IVA to these arrangements has been settled no action should be taken that may prejudice the taxing of this income;

(b) Where a first year loss claim gives rise to a carry-forward loss

4. Determinations should be prepared under both paragraphs 177F(1)(a) and (b) for the year in which the claim is made. Because part of the tax benefit of this action will accrue in a later year of income, no sub-section 226(2A) additional tax is imposed on that part of the tax benefit by reason of the reference in paragraph 226(2A)(c) to `relevant year of income'. It has been decided essentially for administrative reasons to make the determination for the whole of the scheme deduction in the year the deduction is sought rather than when that part of the carry-forward loss created by the UAA deduction is recouped in a subsequent year(s). Additional tax should be imposed on that part of the scheme deduction that is subject to the paragraph 177F(1)(a) determination.

(c) Where a first year loss claim increases a carry-forward loss

5. A determination under paragraph 177F(1)(b) should be prepared disallowing the whole of the claim for the scheme deduction in the year in which the deduction is claimed. As the tax effect of this action will arise in a subsequent year of income, no additional tax under sub-section 226(2A) is imposed.

(d) Where a further, but relatively small, UAA loss is claimed

6. These claims are probably for `wash-up' losses from 1980/81 or 1981/82 partnerships. If so, paragraph 177F(1)(b) determinations should be prepared disallowing the claim on the same basis as the claim for the original loss. If these claims are not for `wash-up' losses you should contact this office (by telephone if large assessments are involved) to have the matter resolved.

TRUSTS

(a) Where the trust has included `income' from a UAA partnership in its gross income

7. The UAA income should be included in the assessable income of the beneficiaries in whose favour and to the extent that the trustee has exercised his discretion or the trust deed provides or, if it reduces the amount of any trust carry-forward loss, should be permitted to have that effect.

(b) Where a first year loss claim gives rise to a carry-forward loss

A paragraph 177F(1)(b) determination should be made on the trustee to reduce the carry-forward loss to nil. A determination under paragraph 177F(1)(a) should then be prepared for the remainder of the loss claim assessing the income to the trustee under section 99 or 99A, if the trust deed does not specify a taker in default. If the trustee is able to satisfy you that a different result would have occurred had there been no UAA loss, e.g. by distributing the income in specified proportions or amounts to a beneficiary or beneficiaries, amended assessments based on a varied sub-section 177F(1) determination may be issued to give effect to that result as the basis for settlement of any objection and on the understanding that such a result will be accepted by the beneficiaries without objection.

(c) Where a first year loss claim increases an existing carry-forward loss

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9. A determination should be prepared in respect of the trust disallowing the claim in the year the claim is made.

(d) Where a trustee claims a `wash-up' loss

10. If the effect of this claim is only to reduce the net income distributed to a beneficiary or beneficiaries, determinations for those beneficiaries should be prepared in the usual way. If this `wash-up' loss claim gives rise to, or increases, a carry-forward loss, the appropriate procedure outlined in paragraph 8 or 9 should be adopted.

11. Where a paragraph 177F(1)(a) determination is prepared, sub-section 177F(2) requires the Commissioner to determine the provision of the Act under which the amount is deemed to be included in the assessable income of the taxpayer. An annotation at the foot of the copy of the determination attached to the taxpayer's return would be an appropriate way of recording this determination.

12. Each Deputy Commissioner is being asked to provide you with the information necessary for the preparation of determinations in the manner specified above.''

34. Mr Conwell followed this up with a further missive dated 19 June 1984:

``Deputy Commissioner of Taxation,

PERTH W.A. 6000

INCOME TAX: PART IVA

UAA FILM PRODUCTIONS PTY LTD

Two matters have arisen as a result of my memorandum of 18 May 1984 dealing with assessing action to be taken on unissued returns for participants in the UAA arrangements, namely:

  • (a) the level of additional tax that should be imposed under sub-section 226(2A) where a claim for a share of `wash-up' loss has been disallowed; and
  • (b) the action necessary to satisfy the requirements of sub-section 177F(2).

(a) Additional tax on claims for `wash-up' losses:

2. It has been decided that, regardless of the year in which the claim for a share of a `wash-up' loss is made, additional tax under sub-section 226(2A) should be imposed at 5 per cent of the tax avoided, i.e. the additional tax otherwise payable should be remitted by 97½ per cent.

(b) Sub-section 177F(2) determinations:

3. Where a paragraph 177F(1)(a) determination has been made, sub-section 177F(2) requires the Commissioner to determine under which provision of the Act the income is deemed to be included in the assessable income of taxpayer. The use of the word `determine' in this context is seen to involve the same processes as for sub-section 177F(1) determinations. However, it is not intended that the Perth Office will be responsible for making the sub-section 177F(2) determinations. As the question of under which provision of the Act additional income is assessed to the taxpayer depends entirely on the facts of the particular case, it is considered that this decision should be made in the office of assessment.

4. If you are not personally to consider and make a determination in each case, it will be necessary for you to authorise a senior officer to act on your behalf. The form of authorisation to be used is set out in Attachment A to this memorandum. No departure from this form should occur. We do not consider that it is necessary for these determinations to be as formal as the sub-section 177F(1) determinations, and I confirm the advice in paragraph 11 of my memorandum of 18 May 1984 that an annotation at the foot of the sub-section 177F(1) determination will suffice. The annotation should be in the following form:

  • In accordance with sub-section 177F(2), I hereby determine that the income specified in Column 3 above is deemed to be included in the assessable income of the taxpayer specified in Column 1 for the year ended 30 June 19 by virtue of section [] of the Income Tax Assessment Act 1936.

[signed]

[name of officer]

[designation]

5. I understand that no sub-section 177F(2) determinations have been made for

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assessments based on paragraph (1)(a) determinations that issued before my memorandum of 18 May 1984. While section 175 should ensure the validity of those assessments, the absence of the sub-section (2) determination should nevertheless be rectified in those cases subject to dispute. It will be necessary, therefore, to have the returns for assessments in that category extracted and for the authorised officer to add the sub-section (2) determination. The determination should be dated the day on which it is made.

6. While the existing authorisations for Mr William Shakespeare and Mr Francis Bacon could be interpreted as extending to the making of sub-section 177F(2) determinations, to put the matter beyond doubt would you please add `and sub-section 177F(2)' after `sub-section 177F(1)' to the wording of the existing authorisations and re-issue authorisations to these two officers.''

35. It seems to me that the above advice given by Mr Conwell is flawless. I would have awarded it 10/10 if, in para 5 of his memorandum dated 19 June 1984, he had added to the advice that the sub-section (2) determination should be dated the day on which it is made the words ``and a copy sent to the taxpayer''.

36. On the whole of the evidence, I am satisfied that the Perth Office of the respondent was on notice some two weeks before the taxpayer lodged her objection on 4 July 1984, that its amended assessment in this case was defective, lacking a sec 177F(2) determination. This notwithstanding, it did nothing until 18 September 1984, when Mr Shakespeare issued his sec 177F(2) determination in pectore and pinned it to the return.

37. What legal consequences flow from this deficit in the assessment process?

38. The first thing to observe is that there is nothing in sec 177F which demands that sec 177F(1) and 177F(2) determinations be made contemporaneously. It would seem at first blush therefore, that there is no statutory bar to the Commissioner - having made a sec 177F(1) determination and issued an amended assessment within the time constraints imposed by Part IVA - from making a sec 177F(2) determination at any time thereafter. On the other hand, the purpose of including the requirement of making a sec 177F(2) determination is surely that taxpayers are made aware under what provision of the Act the additional amount is to be included in their assessable income, thus enabling them to object to the inclusion of that income more meaningfully than with respect to assessments raised under other provisions of the Act, where they have to hazard a guess on what basis or bases they are being assessed - hence ``kitchen sink'' objections.

39. On balance, I am satisfied that, although Part IVA requires the making of determinations under both sub-sec 177F(1) and 177F(2), there is no statutory requirement that they must be made contemporaneously and/or, having made a sub-sec 177F(1) determination, that a 177F(2) determination must be made prior to the issue of the assessment (or amended assessment). Even if I am wrong in this, it seems to me (although the point was not argued) that where - as here - the Commissioner has made a 177F(1) determination the validity of which is beyond challenge, any laches in making a 177F(2) determination in circumstances where - as here - there is no prejudice to the taxpayer is a defect of the kind ``saved'' by sec 175 of the Act. In the circumstances I am satisfied that the amended assessment is not ineffective.

40. The same result is reached by a different route. In an application to the Tribunal under Part V of the Act, the onus of proof is upon the taxpayer to show that the assessment complained of is excessive. Given the structure of the Act, that onus is not discharged by demonstrating that the Commissioner has failed to advert to a particular provision which requires him to identify the provision which renders the amount liable to tax. In other words, if the amount of $138,192.19 formed part of the taxpayer's assessable income - a question yet to be decided - its inclusion in the taxpayer's assessable income in the course of making the assessment cannot be challenged merely by establishing that there had been a failure strictly to comply with sec 177F(2). ``No conduct on the part of the Commissioner could operate as an estoppel against the operation of the Act'' per Kitto J,
FC of T v Wade (1951) 9 ATD 337 at p 344; (1951) 84 CLR 105 at p 117. Applied to this case, the

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applicant has not been misled into acting to her detriment. The ``guts'' of the case is whether the amount claimed by the Vapour Engineering Unit Trust in respect of its individual interest in the partnership loss incurred by Filmprod should be allowed to that trust, not by what provision of the Act the additional amount thus assessed is to be included in the taxpayer's assessable income if the scheme had not been entered into.

41. Much time was spent on whether the objection was wide enough to raise the question whether the determination(s) is/are defective? In view of my finding on the preliminary point, it is strictly unnecessary to deal with this argument. However, in deference to both counsel, who dealt with the argument at length, I will also briefly deal with it.

42. The Notice of Objection, dated 4 July 1984 contains 21 pages. Unlike most objections of such length, this one is not ``off the peg'' in that it excludes the usual flotsam and jetsam, such as that the assessment is unconstitutional and/or ultra vires and/or illegal etc, but appears to have been tailored to the specific case it purports to deal with. It commences with the statement that the amended assessment is invalid on the following grounds:

``(a) that the Amended Assessment was issued in error;

(b) that the Amended Assessment was made in an arbitrary manner and was not made in good faith;

(c) that in making and issuing the Amended Assessment the Commissioner committed a misfeasance in the exercise of a statutory duty;

(d) that the Amended Assessment is unauthorised and beyond the power of the Commissioner;''

It goes on to state:

``the issue of the Amended Assessment is not authorised by Section 170 or by any other provision of the Act.''

For good measure, the objection contains a section devoted to ``Interpretation'', which states, inter alia:

``... the taxpayer contends that the Amended Assessment has not been made in accordance with the Act and that the Commissioner has not made a lawful assessment for the purposes of the Act in that he has made and issued the Amended Assessment without having given consideration to the facts and circumstances of the Partnership and the Taxpayer, and also those facts and circumstances herein referred to and, as a result, there has been a denial of natural justice.''

43. Much has been written about the need for specificity of objections. It is now beyond doubt that the grounds need not be stated in legal form, but can be expressed in ordinary language; cf
Archer Brothers Pty Ltd v FC of T (1953) 10 ATD 192; (1952-1953) 90 CLR 140. The main reason why taxpayers are limited to the grounds of objection as ``pleaded'' is one of procedural fairness in the sense that the Commissioner is not to be caught by surprise, but should have his attention directed to the particular respects in which a taxpayer contends that the assessment is erroneous, and his reasons for this contention. However, procedural fairness cuts both ways. Applying the scienter rule to the Commissioner, he knew his sub-sec 177F(2) determination was defective in that he had failed to give the required particulars. He was thus on notice that these amended assessments had become an animal ferae naturae requiring special care. It therefore ill behoves him to comb through the objection with respect to this defective amended assessment with a fine-tooth comb to see whether this taxpayer has rumbled to the procedural deficit with exact specificity.

44. On the whole of the evidence, I am therefore satisfied that a ``plea'' that the amended assessment ``is not authorised by Section 170 or by any other provisions of the Act'' is, in the circumstances, sufficiently explicit to have alerted the Commissioner to the fact that the ``authority'' of the amended assessment was in issue. If the Commissioner has himself failed to abide by the provisions of the Act, it is churlish of him to maintain that a dissatisfied taxpayer must identify with precision just where the Commissioner has gone wrong, the more so where the Commissioner insists that he made an effective ``oral'' sub-sec 177F(2) determination which he then hid under the carpet, a fact known only to him. In short, if he is prejudiced by the taxpayer's failure to particularise his own procedural deficit, as was urged upon me by Mr

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Owen-Conway - a courageous submission on the evidence - the cause of that prejudice is self-induced; in delictual terms, this is not a case of contributory negligence, but a clear example of the Commissioner being volens.

45. It follows from the above that the application to amend the objection so as to raise the issue of invalidity, strenuously opposed by the Crown, need not be considered.

46. The matter is to be referred to the Registry to list for hearing on the substantive issues raised by the objection.

 

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