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[1981] HCA 27
High Court of Australia
1968-06-30
Wilson JJ, Stephen J
Original judgment source is linked above.
High Court of Australia Stephen, Mason, Murphy, Aickin and Wilson JJ. FJ Bloemen Pty Ltd v Commissioner of Taxation (Cth); Simons v Commissioner of Taxation (Cth) [1981] HCA 27
ORDER F. J. Bloemen Pty. Ltd. v. The Commissioner of Taxation of The Commonwealth of Australia. Applications for special leave to appeal refused with costs. Appeal dismissed with costs. Simons v. The Commissioner of Taxation of The Commonwealth of Australia. Appeal dismissed with costs.
I have had the advantage of reading the reasons for judgment of Mason and Wilson JJ. I agree with those reasons and would accordingly dismiss each of these appeals and the applications for special leave to appeal.
Does the Supreme Court of New South Wales in a statutory appeal under the Income Tax Assessment Act 1936, as amended, ("the Act") or in proceedings for declaratory relief have jurisdiction to determine that an assessment of a taxpayer to income tax under s. 166 is invalid, notwithstanding that a notice of assessment is produced by the Commissioner and that the notice has the force of conclusive evidence (except in proceedings on appeal against the assessment) under s. 177? That is the issue here. The case presented by each of the taxpayers is that the Commissioner did not in truth make final assessments but purported to make assessments which if made at all were only tentative or provisional, in neither case being authorized by the Act. The taxpayer F. J. Bloemen Pty. Ltd. ("Bloemen") also contends that the Commissioner did not make his assessments from the return, or from any other information in his possession, in accordance with s. 166, and that his real purpose was not to make an assessment of the amount of taxable income, and of tax payable thereon, but to cause a debt for tax to come into existence so that he could exercise his powers under s. 218. This section enables the Commissioner by notice in writing to require any person by whom any money is due to the taxpayer to pay to the Commissioner so much of the money as is sufficient to pay the amount due by the taxpayer in respect of any tax.
Bloemen has brought an appeal as of right and two special leave applications. It does not wish to proceed with one of the special leave applications. The appeal as of right and the other special leave application relate to the year of income ending 30 June 1968. Bloemen in its income tax return for the year ending 30 June 1968 showed a net loss of $484,354. The return disclosed that an amount of $478,478 had been received from Gold Coast City Council under an arbitration award. In his adjustment sheet the Commissioner added the net amount under the award ($439,922), thus reducing the loss for the year to $44,432. The Commissioner also disallowed another item of loss claimed by Bloemen, an amount of $137,500 for the hire of a dredge. After allowance was made for accumulated losses to 30 June 1967 the Commissioner assessed Bloemen to tax on a taxable income of $70,345. In an adjustment sheet accompanying an amended assessment issued on 4 September 1974 the Commissioner disallowed three items totalling $212,355. By his amended assessment the Commissioner assessed Bloemen on a taxable income of $282,700. It objected to the original and the amended assessments. The objections were disallowed. The taxpayer appealed to the Supreme Court of New South Wales.
On the hearing of a summons for directions in the appeal the question arose as to whether the Court had jurisdiction in the hearing of an appeal under the Act to entertain and give effect to the appellant's submissions that the assessments, original and amended, were not authorized by the Act. Bloemen then filed a second summons originating proceedings in the general jurisdiction of the Supreme Court for declaratory relief. This second summons (which we shall call the "originating summons") sought the same relief as had been sought in the summons for directions. It claimed:
(a) they did not nor did either of them issue pursuant to and their issuance was not authorised by Sections 166 and/or 174 of the Income Tax Assessment Act 1936 (as amended) or any other provision of the said Act;
(b) they did not nor did either of them issue as a result of a bona fide exercise of the powers vested in the defendant pursuant to Section 166 and/or 174 of the said Act;
(c) each of them issued other than as a result of a bona fide exercise of the powers vested in the defendant in an attempt inter alia to place the defendant in a position:
(i) to support the issue of notices purportedly issued pursuant to Section 218 of the said Act;
(d) they were not nor was either of them an assessment within the meaning of the said Act.
The Council of the Shire of Hinchinbrook dated 27 November 1974.
Commonwealth Trading Bank of Australia dated 4 December 1974.
Dredging and Reclamation Limited dated 1 July 1976.
The taxpayer's case was that, notwithstanding the finality in the form of the notices of assessment, the Court had jurisdiction to receive evidence as to whether the assessments were only tentative or provisional, and to hold that they were void if it found that they were tentative or provisional. The notices referred to in par. 3 of the relief claimed in the originating summons were notices given by the Commissioner under s. 218 to persons from whom money was said to be due to Bloemen, requiring them to pay the debt to the Commissioner in payment of the tax which he had assessed under the assessments in question.
A very lengthy affidavit was filed on behalf of Bloemen containing documentary material derived from the Commissioner's files. The Commissioner, though denying that there was any substance in the claims made by the taxpayer, submitted that the Court had no jurisdiction to determine the claims made or to grant the relief sought.
The parties, with the acquiescence of the judge, decided that the question of jurisdiction should be argued and decided in the first instance. There was an obvious advantage in this course. The case proceeded on the footing that the Court was asked to determine whether, in the event that all the allegations of fact in the summons were true, the Court had power to make the declarations sought.
Rath J. held that it was open to the taxpayer in the proceedings for declaratory relief to raise the question whether the assessment to which the notices of assessment and of amended assessment referred was provisional in the sense explained in Federal Commissioner of Taxation v. S. Hoffnung & Co. Ltd. [2] but that it was not open for the taxpayer so to do in an appeal under the Act. His Honour dismissed the summons for directions in so far as it related to the relief sought in pars. 1 and 3. He noted that par. 2, subject to some amendment, might be taken as an application for a separate hearing of the issue of the existence of the conditions for the exercise of the Commissioner's powers under s. 170 (2).
His Honour held that there was jurisdiction to make the declarations sought in pars 1 and 3 of the originating summons in so far as the issue raised was whether the process of assessment was complete at the date of issue of the notice of assessment and the notice of amended assessment.
His Honour concluded that Bloemen was not entitled to rely on the grounds of invalidity expressed in sub-pars. 1 (b) and (c) of the originating summons because they invoked a principle which he considered to differ from that enunciated in Hoffnung . The principle invoked in the two sub-paragraphs was that of invalidity based upon collateral or non-statutory purpose. It was not available to invalidate an assessment or notice of assessment.
His Honour thought that the Court could not in the exercise of its general jurisdiction entertain the issue of the existence of conditions for the exercise of the Commissioner's powers under s. 170 (2) and that this issue should be dealt with in the statutory appeal. The declarations in the summons for directions were refused and it was ordered that there was jurisdiction to make the declarations sought in pars 1 and 3 of the originating summons.
Bloemen appealed and the Commissioner cross-appealed to the Court of Appeal in relation to the originating summons, the Court of Appeal having no jurisdiction in relation to the statutory appeal. By reason of judgments which had meantime been delivered by the Court of Appeal in Dorney v. Federal Commissioner of Taxation and in Simons v. Federal Commissioner of Taxation, the Court of Appeal dismissed the appeal and allowed the cross-appeal, dismissing the originating summons. Bloemen's appeal as of right to this Court is brought from these orders made by the Court of Appeal. Bloemen also seeks special leave to appeal from so much of the judgment of Rath J. as relates to the summons for directions. In ordinary circumstances an appeal would lie from that part of his Honour's decision to the Federal Court, but Bloemen submits that it is convenient that special leave should be granted so that the issues raised by the two summonses can be dealt with together.
We come now to the facts in the Simons appeal. It was the Court of Appeal judgment in Simons that foreclosed the Bloemen appeal to the Court of Appeal. The Commissioner issued a notice of assessment to Simons on 13 March 1979 in respect of the income year ending 30 June 1978. According to this notice of assessment the taxpayer's taxable income was $78,715 and the amount payable was $180,229.66. The latter figure was calculated after taking into account tax assessed $41,961.96, provisional tax $43,092, additional tax $20,980.98, less provisional tax credited $29,114, plus an amount payable of $103,308.72. An adjustment sheet accompanying the notice of assessment noted that the taxpayer in his return of income had claimed an overall loss of $399,859. According to the adjustment sheet the Commissioner had included in the taxpayer's income two amounts as a result of disallowing the whole of the losses claimed by the taxpayer in Siderin Trading Co. and Gladrella Co., being partnerships in which the taxpayer was interested. These two amounts totalled $478,808. It was largely as a result of the inclusion of these two amounts that the Commissioner arrived at a taxable income of $78,715.
The adjustment sheet contained the following notation: "Your assessment will be reviewed upon determination of the objection against your assessment for 30 June 1977."
In the Supreme Court of New South Wales, Simons sought a declaration that the Commissioner was not entitled to demand or recover the sum of $20,980.80 described in the notice of assessment as "Additional tax", and a declaration that the purported assessment of that sum as "Additional tax" was not authorized by the Act.
An order was made that the questions of law raised by par. 17 of the amended points of claim and pars 3 and 4 of the amended points of defence be decided separately from the other issues in the proceedings and that they be removed into the Court of Appeal. The question of law raised by par. 17 of the amended points of claim and disputed by par. 3 of the amended points of defence went to the constitutional validity of s. 226. It has been abandoned. Paragraph 4 of the defendant's amended points of defence in substance repeats defences and arguments presented by the Commissioner in Bloemen .
The Court of Appeal by majority (Hutley and Glass JJ.A., Mahoney J.A. dissenting) decided the question adversely to Simons and dismissed the proceedings with costs. Hutley and Glass JJ.A. held that the Supreme Court had no jurisdiction to decide whether the assessment was void and to grant the relief sought by Simons, though there was some divergence in their reasoning. Hutley J.A. considered that the provisions of the Act, notably s. 175, denied jurisdiction to any court to declare an assessment void, except on constitutional grounds. His Honour distinguished the jurisdiction of a court in a statutory appeal to declare an assessment to be excessive and observed that in exercising that jurisdiction a court could set aside an assessment which was provisional or tentative only, though it would remain a valid assessment until so set aside. Glass J.A. thought that the question sought to be raised could not be dealt with except in a statutory appeal under Pt V.
Mahoney J.A. considered that the court had jurisdiction. He held that the existence of the statutory procedure for review of the assessment under Pt V was an inadequate basis for the implication that the validity of an assessment could only be challenged under that Part. He held that the court could in proceedings, not being proceedings under Pt V, declare that the Commissioner had made no assessment at all, applying principles of general law.
The appellants seek to sustain the dissenting judgment of Mahoney J.A. Central to their argument is the proposition that when ss. 170, 175, 177, 185 and 190 speak of "assessment", they refer to an assessment that has taken place. Consequently, these sections cannot be read as supporting the view that the Act denies jurisdiction to a court to declare that an assessment has not been made at all. The appellants draw a distinction between the making of an assessment which is erroneous and the failure to make any assessment at all.
The argument turned very largely on s. 175 and especially on s. 177 (1) and their relationship to the Commissioner's basic duty under s. 166 to make an assessment of the amount of the taxable income of the taxpayer and of the tax payable thereon.
The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with. This section does not relieve the Commissioner from the necessity of performing his duty to make an assessment. The section protects the validity of an assessment, once made, from the consequences which might otherwise flow from the Commissioner's failure to comply with any provisions of the Act. But it does not, and cannot, create a valid assessment where no assessment has been made at all. The section requires an actual assessment as a condition of its operation.
The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct.
Two questions arise in relation to s. 177 (1): (a) Does the word "assessment" bear the meaning which the appellants seek to give it? (b) Is the document conclusive evidence that an assessment has been duly made or is it conclusive evidence of the due making of an assessment that has been made? The word "assessment" is defined in s. 6 to mean, unless the contrary intention appears, the ascertainment of the amount of taxable income and of the tax payable thereon. In Batagol v. Federal Commissioner of Taxation [3] , the Court considered the meaning of "assessment" in the context of s. 170 and the group of sections with which it is associated. Kitto J. observed [4] : "Assessment in the sense of mere calculation produces no legal effect. No step that the Commissioner may take, even to the point of satisfying himself of the amount of the taxable income and of the tax thereon, has under the Act any legal significance", until he serves a notice of assessment. Then and then only has an "ascertainment" been made. The amounts of taxable income and tax are then rendered certain. In this context, according to his Honour [5] "assessment" means "the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case". Owen J. reached a similar conclusion. Menzies J. agreed with both Kitto and Owen JJ. It was held that nothing done in the Commissioner's office can amount to more than steps which will form part of an assessment if, but only if, they lead to and are followed by service of a notice of assessment.
Batagol [6] supports the view that the process of assessment is completed when the Commissioner inserts in the notice of assessment which is served on the taxpayer the amount of his taxable income and the amount of tax payable thereon. There is nothing in Batagol to suggest that the court will go behind the assessment of a taxpayer's taxable income and tax payable as expressed in the notice of assessment served on him, unless it appears from the notice or an accompanying document that the notice is not in truth a notice of assessment.
In Hoffnung [7] the assessments were expressed to have been made "tentatively" or "subject to revision" or "to be finalized". Accordingly, they were not assessments within the meaning of the War-time Profits Tax Assessment Act 1917-1918 Cth and did not preclude objections to a complete and final assessment when made. The Commissioner had argued that the taxpayer could not object to the final assessment when made because he had not objected within the time stipulated in the statute to the tentative assessment. Isaacs J. [8] and Higgins J. [9] rejected this argument, pointing out that the notice of assessment described the assessment as tentative.
There is no ground for saying that "assessment" in s. 177 (1) is used otherwise than in its defined sense or that the comments in Hoffnung [10] and Batagol [11] do not apply to it. The sub-section looks to a definitive ascertainment of the taxpayer's taxable income and of the tax payable thereon, not one which is merely tentative.
What then is the effect of s. 177 (1)? Does production of an appropriate notice of assessment or document provide conclusive evidence that an assessment was actually made, or does it merely provide conclusive evidence that an assessment, if made, was duly made? Although it was said that the second alternative reflected a more natural reading of the provision, our view is that the language of the section is equally susceptible of either reading and that the answer is to be found, not so much in the language, as in the context and in the scope and purpose of the Act.
We reject the submission that the appellants' case is supported by dicta in George v. Federal Commissioner of Taxation [12] , notably at p. 207, and McAndrew v. Federal Commissioner of Taxation [13] . Correctly understood, the judgments in these cases show that the language of the sub-section, admittedly difficult, is to be read in its context so as to give effect to the scope and purpose of the Act. The distinction drawn by s. 177 (1) is between the procedure by which the taxable income is ascertained (the "due making" of the assessment of which the production of the notice of assessment is conclusive evidence) and the taxpayer's substantive liability to tax ("the amount and all the particulars of the assessment" which may be challenged in Pt V proceedings). See, for example, the passage in George [14] and the comment, at p. 207:
Obviously the "due making of the assessment" was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal. 1. (1952) 86 C.L.R. 183. 2. (1956) 98 C.L.R. 263, at p. 271. 3. (1952) 86 C.L.R., at pp. 206-207.
In McAndrew [15] , Dixon C.J., McTiernan and Webb JJ. noted that, although the existence of conditions giving rise to the exercise of the power to amend an assessment might be thought otherwise to be part of the "due making" of an assessment, the consequence of this interpretation would be to deny to the taxpayer the right to challenge the exercise of the power. Their Honours went on to say:
Section 177 [sic] (2) and (3) impose certain conditional time bars which in this dichotomy seem evidently to belong to substantive liability. From this it follows that fulfilment of the conditions which bring a case within s. 170 (2) is part of the matter governed by the words of exception in s. 177 (1), viz. "except in proceedings on appeal against the assessment". An appeal, however, is a proceeding given by statute to a taxpayer for the purpose of impugning an assessment otherwise conclusively imposing liability upon him. These statements do not support the appellants. They acknowledge that the existence of the antecedent conditions is not part of the "due making" of an amended assessment, but they do not say that the ascertainment of the taxable income also stands outside that concept. Furthermore, as the power to amend, unlike the Commissioner's power to make his initial assessment, is conditioned in this way, it is natural that s. 177 (1) should be so interpreted as to permit the taxpayer to challenge the existence of the conditions giving rise to the exercise of a power which imposes on him a new substantive liability to tax. There is no like reason for reading the sub-section so as to allow the taxpayer to contest the making of an original assessment, when a notice of assessment has been served, and the making of that assessment is not similarly conditioned, the taxpayer being entitled to contest his substantive liability to tax in Pt V proceedings, without contesting the making of the initial assessment. 1. (1956) 98 C.L.R., at p. 271.
Nor are the appellants assisted by the comment of Lowe J. in Kellow-Falkiner Pty. Ltd. v. Federal Commissioner of Taxation [16] . There his Honour, referring to s. 39 (1) (a) of the Income Tax Assessment Act 1922, said:
It is the "due making" of the assessment of which the due production of the notice is to be conclusive evidence, not of the validity of the assessment when duly made. I think that this sub-section is dealing with the formalities and procedure of the making, and is not even affecting to deal and does not deal with the validity of a purported assessment, though all the formalities of procedure in the making have been observed. His Honour was considering a case in which the Commissioner had assessed the taxpayer to additional tax, applying s. 7 of the amending Act of 1924 which had no application to the income year in question. The application was relevant to the taxpayer's substantive liability. It may also be observed that both in Kellow-Falkiner [17] and Hoffnung [18] the document which was said to be a notice of an assessment bore evidence, if not on its face then in the supporting documentation, which denied it that character. Visual inspection alone was sufficient to compel the conclusion that the document was not a notice of assessment for the purpose of the relevant Act. 1. [1928] A.L.R. 276, at p. 279. 2. [1928] A.L.R. 276. 3. (1928) 42 C.L.R. 39.
An explicit and, in our view, correct statement of the effect of s. 177 (1) was made by Taylor J. in McAndrew [19] . For the reasons there expressed his Honour concluded that "s. 177 (1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground". He conceded that the word "excessive" in s. 190 (b) was inappropriate. However, he considered that an assessment "made in purported but not justifiable exercise of a statutory power" could properly be described as "excessive" [20] .
This interpretation gives expression to the policy which underlies, and is manifest in, the statutory provisions. The effect of this policy is that, once the Commissioner takes advantage of s. 177 (1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt V.
Although s. 190 (b) places the onus on a taxpayer upon a reference or appeal of proving that the assessment is excessive, it enables him to contest his substantive liability to tax. It is then for the board upon a reference or the court on an appeal, within the framework of the taxpayer's objection, to ascertain whether he is liable to tax and, if so, in what amount. The Pt V procedures accordingly protect the taxpayer and enable him to have his liability to tax determined.
Of course, the appellants argue that this view of the operation of the Act does not offer sufficient protection to the taxpayer in the event of an abuse by the Commissioner of his powers. They point to the fact that notwithstanding that the assessment may be under review or appeal pursuant to Pt V the tax assessed is payable and the Commissioner has access to the extensive powers prescribed in Pt VI, including the garnishee power in s. 218. It is true that Pt VI contains large powers to enable the recovery of tax; powers the exercise of which may make life uncomfortable both for the taxpayer and perhaps others who owe money to the taxpayer. So much may be conceded, but the Act does not proceed upon the hypothesis that the Commissioner will be motivated in the exercise of his powers by improper or collateral purposes. As Isaacs A.C.J. observed in Federal Commissioner of Taxation v. Clarke [21] , after stating that s. 39 of theIncome Tax Assessment Act 1922-1925 (a provision analogous to s. 177 of the Act) made the assessment unchallengeable:
The Act so far trusts the Commissioner and does not contemplate, in my opinion, a curial diving into the many official and confidential channels of information to which the Commissioner may have recourse to protect the Treasury. 1. (1927) 40 C.L.R. 246, at p. 276.
It does not necessarily follow from what we have said that the Act excludes the general jurisdiction of the Supreme Court. Section 177 (1) specifically operates by compelling a court, for example the Supreme Court, in the exercise of its jurisdiction to treat a notice of assessment on its production as conclusive evidence that the assessment has been duly made and thereby foreclosing that issue. In theory s. 177 leaves the Supreme Court with jurisdiction to decide whether an assessment has been duly made in a case in which an appropriate document is not produced.
However, the rights of review given to the taxpayer by Pt V are comprehensive. Quite evidently it was contemplated that the Commissioner would in every case take advantage of s. 177 (1) and foreclose the exercise of jurisdiction to decide whether an assessment has been duly made. The general tenor of the statutory provisions suggests that a taxpayer wishing to challenge a notice of assessment served upon him will be effectively confined to the Pt V procedures.
Novel consequences will arise if the appellants' construction of s. 177 (1) be correct. If the actual making of an assessment be not comprehended by the expression "due making" then s. 177 (1) gives the Commissioner no evidentiary advantage in proceedings for recovery of tax. He would be obliged to prove that an assessment was made by calling an assessor. So much was ultimately conceded by the appellants' counsel. It is not to be supposed that Parliament intended that s. 177 (1) should have no application to the actual making of the assessment, thereby compelling proof by oral evidence in recovery proceedings that an assessment had been made. The consequence is so radical as to make the argument quite unacceptable.
The appellants also turn to s. 185 in an attempt to find support for their contention. This section provides that any taxpayer "dissatisfied with any assessment" may within sixty days after service of the notice of assessment, post to or lodge with the Commissioner "an objection in writing against the assessment", stating the ground on which he relies. How, it is asked, can a taxpayer bring himself within this section when his objection is that there has been no assessment at all? The answer to this question is again to be discovered in s. 177 (1) and the legislative policy on which it proceeds. Although the sub-section is evidentiary and begins to operate when an appropriate document is produced in a court or board of review, and not before, its effect is to put the making of an assessment beyond challenge. In the nature of things the Commissioner will always rely on production of the notice of assessment or a copy of it. Section 185 proceeds on this assumption and on the footing that, once a notice of assessment is served, no question will arise as to the making of the assessment by reason of the Commissioner's reliance on s. 177 (1).
There is a further difficulty confronting the appellants. It is one thing to say that a notice of a tentative assessment is not touched by ss. 175 and 177. That is clearly correct. But it is difficult to understand how it can be said, consistently with those sections, that a notice which appears to be a final notice of assessment is nevertheless not what it appears to be because there was no assessment at all. As we have observed, the process of assessment requires the ascertainment of the taxpayer's taxable income, and of the tax payable thereon. As Barwick C.J. explained in Bailey v. Federal Commissioner of Taxation [22] :
But the process of assessment requires the application of the Act to the facts as known to and accepted by the Commissioner. He must of necessity, as part of that process, adopt a view of the relevant facts. The Commissioner may be right or wrong in his view of the facts, but it would appear to be incontrovertible that the figure on the notice of assessment which records the Commissioner's view of the taxable income evidences that a process of assessment was actually undertaken however cursory or inadequate that process may have been. In George v. Federal Commissioner of Taxation [23] , Dixon C.J., McTiernan, Williams, Webb and Fullagar JJ. said: It is an error to treat the formation by the commissioner of a judgment as to the amount of the taxable income as if it were not the ascertainment of the taxable income which constitutes assessment or a necessary part of that process . In Trautwein v. Federal Commissioner of Taxation [24] Latham C.J. was discussing the difficulty of the Commissioner's task in making an assessment when the materials were inadequate. He continued: "The application of sec. 39" (cf. s. 177), "is not, in my opinion, excluded as soon as it is shown that an element in the assessment is a guess and that it is therefore very probably wrong. It is prima facie right - and remains right until the appellant shows that it is wrong." In our opinion, it must follow that a notice in proper form of an assessment necessarily compels the conclusion that there was an assessment made in fact. 1. (1977) 136 C.L.R. 214, at p. 217. 2. (1952) 86 C.L.R., at p. 204. 3. (1936) 56 C.L.R. 63, at pp. 87-88.
Accordingly, in our opinion the Supreme Court is bound, on production of a notice of assessment, to rule that the assessment was duly made both in statutory proceedings and in the exercise of its general jurisdiction. In a given case a question may arise as to whether the notice produced by the Commissioner is a notice of assessment, e.g. a notice expressed to relate to a definitive assessment as distinct from a provisional or tentative assessment. Unless it can be characterized as a notice of an "assessment", s. 177 (1) will have no operation.
The Bloemen notice of assessment is in form an assessment. It sets out the ascertainment of the taxpayer's taxable income and the tax payable thereon. It is therefore appropriate to bring s. 177 (1) into operation. Its production will put beyond contention the due making of the assessment so that the Court cannot find that no assessment was made or that, if made, it was made for an inadmissible purpose.
The Simons notice, if read with the adjustment sheet, is more debatable. However, we read it as a definitive assessment by the Commissioner intended to create a legal liability to pay the tax specified, coupled with an intimation that the Commissioner will review the taxpayer's liability in a certain event. If it be assumed that the Commissioner lacks power to amend the assessment in the circumstances contemplated this does not affect our conclusion. It merely means that the Commissioner is mistaken in supposing that he has power to review. Accordingly, the notice of assessment will, on production, bring s. 177 (1) into play.
In the result we would dismiss the two appeals and the applications for special leave to appeal.
The correctness of an income tax assessment cannot be challenged except in accordance with Pt V of the Income Tax Assessment Act 1936, as amended ("the Act"). Both the appellants concede this. Part V is a procedural code which impliedly excludes the exercise of any other jurisdiction to examine the correctness of an assessment.
However the appellants contend that a taxpayer may apply to the Supreme Court of New South Wales for declaratory relief in order to go behind what purports to be an income tax assessment to show that it is not in law an assessment because it was not made bona fide or for the purpose for which the assessment power was conferred or was made without due regard to the interests of those affected. In short, they contend that it is open to a taxpayer to show that a purported assessment was not duly made. But, s. 177 (1) (in Pt IV) provides that "The production of a notice of assessment, or of a document purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct." The appellants' contention was that, despite s. 177 (1), production of the notice or copy is not conclusive, but only inconclusive evidence of due making. Ultimately the appellants retreated to the extreme contention that production of the notice or copy was no evidence of due making. Acceptance of the appellants' contention is precluded by the decision in In re Noonan; Ex parte Deputy Commissioner of Taxation [25] in which this Court (Barwick C.J., Taylor, Windeyer and Owen JJ.) dismissed an appeal from a decision by the Federal Bankruptcy Court (Clyne J.) that an assessment could be challenged only in the manner provided by the income tax legislation. (See also Batagol v. Federal Commissioner of Taxation [26] ; McAndrew v. Federal Commissioner of Taxation [27] ). Section 177 (1) operates so that production of a notice or document purporting to be a copy of a notice of assessment is conclusive evidence of due making, and so prevents an inquiry directed to establishing that there has been no assessment. Such production prevents any challenge to the fact, validity or correctness of an assessment, except in proceedings on appeal, when the correctness only of the assessment can be challenged. Part V provides an elaborate scheme (of objections and appeals) for questioning and establishing whether the assessment is excessive.
The appellant Mr. Simons also seeks a declaration that there has been no assessment in his case because the notice was not a definite assessment but tentative only as in Hoffnung's Case (Federal Commissioner of Taxation v. S. Hoffnung & Co. Ltd. [28] ) because the adjustment sheet accompanying the notice stated "Your assessment will be reviewed upon determination of the objection against your assessment for 30 June 1977". However this aspect does not give the Supreme Court jurisdiction in declaratory proceedings such as these to determine whether there has been an assessment. It has no such jurisdiction.
If in an appropriate proceeding an issue should arise whether a purported notice of assessment accompanied by an adjustment sheet containing the statement, is a notice of assessment, then the answer should be in the affirmative. The adjustment sheet was not part of the assessment (see Neasey J. in Federal Commissioner of Taxation v. Reynolds [29] ). The adjustment sheet reference to a review did not destroy the definiteness of the assessment any more than would a statement that the assessment was subject to amendment.
The appeals and applications for special leave should be dismissed.
In these matters I have had the advantage of reading the joint reasons for judgment prepared by my brothers Mason and Wilson JJ. I agree with their reasons and conclusions in the case of F.J. Bloemen Pty. Ltd.
That reasoning covers substantially the whole of the appeal by Simons. There remains however the question whether that case can be assimilated to the decision of this Court in Federal Commissioner of Taxation v. S. Hoffnung & Co. Ltd. [30] . In that case it was held that a purported notice of assessment was a nullity, imposed no liability and did not present a bar to objection to a subsequent "amended assessment". The facts are most fully set out in the judgment of Higgins J. [31] . In that case the Commissioner at the time of making the "assessment" had intimated to the taxpayer that "this matter remained to be adjusted and that pending such adjustment payment of tax was to remain in abeyance". Higgins J. said [32] :
On the question of deduction of the British excess profits duty under the British Finance Act, the substantial question here, it is expressly stated in par. 7 of the admissions that "the assessment originally and as altered up to 13th January 1922 did not include any deduction for excess profits duty paid in the United Kingdom under sub-sec. 4 of sec. 15 of the said Commonwealth Act, the Commissioner intimating when making such assessment that this matter remained to be adjusted and that pending such adjustment payment of tax was to remain in abeyance. " Admissions 8-12 give details of the several alterations in figures; but until the alteration of 18th August 1923 there was nothing to affect the figures by virtue of any payment of any British excess profits duty; and, by the alteration of that date, the words in the form of notice of amended assessment as to the time for objections to that assessment were struck out - showing that the notice was not a definitive notice to the taxpayer, in accordance with the scheme of the Act.
In my opinion, the Commissioner in his so-called assessment as well as in his so-called alterations or amended assessments has adopted a course which is not that permitted by the Act. The Act contemplates an assessment which is definitive, so as to bind the taxpayer subject to the power of the Commissioner to make all such alterations in or additions to any assessment as he thinks necessary (sec. 23). Here, the notice of the original assessment itself (exhibit E), is accompanied by a paper giving details, but headed thus: - Tentative - War-time Profits Tax - Assessment. If the notice is "tentative" merely, how can the taxpayer be expected to lodge an objection within thirty days, or be for ever silent (see sec. 28)? The course which the Commissioner has adopted, that of a "tentative" or experimental assessment or alteration of assessment may be convenient in certain circumstances; but it does not put the taxpayer under an obligation to pay within thirty days after notice of the assessment (secs. 32 and 34), or within thirty days after notice of the amended assessment. In this case, the taxpayer has made payments in fact. But the Act does not forbid an objection after the thirty days under the circumstances; for the so-called amended assessment notified on 20th August 1923 was not definitive, inasmuch as the words of the form prescribed intimating that objections may be lodged within thirty days from the notice were struck out by the Commissioner; so that the first real definitive notice of the mode in which the Commissioner meant to deal with the payments of excess profits duty appears in the notice of 10th July 1925. On this basis, the whole question as to the proper mode of bringing into the accounts their payments for excess profits duty is open to the taxpayer under its objections sent on 20th July 1925.
See also per Isaacs J. [33] , per Starke J. [34] and per Knox C.J., at first instance [35] . In that case it is important to observe that, as well as the fact that the paper accompanying the original assessment described it as tentative, in the notification of the amendment of the assessment made in August 1923 the Commissioner struck out the printed words on the notice which specified the time within which an objection could be lodged. 1. (1928) 42 C.L.R. 39. 2. (1928) 42 C.L.R., at pp. 57-59. 3. (1928) 42 C.L.R., at pp. 58-59. 4. (1928) 42 C.L.R., at pp. 54-56. 5. (1928) 42 C.L.R., at pp. 63-65. 6. (1928) 42 C.L.R., at pp. 45-46.
In the present case the notice of assessment had attached to it a paper headed "Adjustment Sheet" which has been correctly treated as part of the notice of assessment. It bore the note "Your assessment will be reviewed upon determination of the objection against your assessment for 30 June 1977". That notification conveyed no more than that there was an outstanding objection in respect of the preceding year of income, the determination of which might require an amendment of the assessment notified by the notice of assessment, including the alteration sheet. It does not convey the meaning that the notice or the assessment are tentative or that payment of tax should remain in abeyance. There is in my opinion no warrant for having regarded the assessment as other than "definitive". The notification did no more than inform the taxpayer of what its officers no doubt knew, namely that the determination of its objection for the previous year might affect its liability for tax in that year and therefore possibly give rise to a credit prior to the due date for payment of the current assessment. These circumstances fall far short of the situation dealt with in Hoffnung's Case [56] . There is in my opinion no basis for regarding the notice of assessment as being other than what it appears on its face to be.
Accordingly I agree that the appeal by Simons should be dismissed.
FJ Bloemen Pty Ltd
Commissioner of Taxation