conclusion on application for leave
29 The applicant submits that the decision of French J is attended by sufficient doubt to warrant reconsideration on appeal, and, that significant prejudice or injustice would result to him if leave were refused supposing the decision to be wrong: Décor Corp Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398 - 399.
30 The applicant submits that there is sufficient doubt attending the decision of French J because there is conflict between the decisions of French J in the present case, and of Smithers J in Intervest Corporation Pty Ltd v Federal Commissioner of Taxation at 594, as to the proper construction and operation of cl (e) of the First Schedule to the ADJR Act. Further, the applicant submits, there is doubt because there has been conflicting academic comment as to the proper construction of the clause; see for example "Restricting the Judicial Review of Income Tax Assessments: The Scope and Purpose of Schedule 1(e) of the ADJR Act" by Morabito and Barkoczy in (1999) Syd L Rev 36 and "Statutory Judicial Review of the Administration of the Income Tax Assessment Act 1936" by Carbone in (1996) 6 Revenue LJ 104.
31 In Intervest Corporation, the taxpayer sought judicial review under the ADJR Act of a decision of the Commissioner to refuse a request of the taxpayer that there be determined a further period within which the company might make a sufficient distribution of dividends within the meaning of s 105A(1) of the ITAA pending determination of the taxpayer's objection to the assessments of tax and additional tax made by the Commissioner. The Commissioner challenged the competency of the application for review, contending that the decisions were not decisions to which the ADJR Act applied because the decisions were included in a class of decisions set out in the First Schedule to the ADJR Act.
32 Clause (e) of the First Schedule stated :
"... decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax, charge or duty, or decisions disallowing objections to assessments or calculations of tax, charge or duty, or decisions amending, or refusing to amend, assessments or calculations of tax, charge or duty, under any of the following Acts: ..."
The list of Acts included the ITAA.
33 The Commissioner submitted that the decisions in issue were decisions making or forming part of the process of making, or leading up to the making, of an assessment or calculation of tax or decisions amending or refusing to amend an assessment or calculation of tax within the meaning of cl (e).
34 Smithers J rejected the submissions of the Commissioner and in his reasons made the following observations (at 593 - 594) :
"A refusal of a request made under s 105AA after service of a notice of assessment is relevant to the liability of the applicant to pay the tax demanded in the notice of assessment which has been issued. If the request is granted a reduction in liability may result. If it is refused the chance of any such reduction is eliminated. But there is no sense in which a decision to refuse the request is a decision making an assessment or calculation of tax, or a decision forming part of the process of making an assessment or calculation of tax. A decision refusing a request denies to the taxpayer making the request an opportunity to change the basis of fact by reference to which an assessment, or an amended assessment, depending upon appropriate calculations, might be made.
Also, a decision granting or rejecting a request is not, in my opinion, a decision leading up to the making of an assessment or calculation of tax. Of course a refusal of a request made after the notice of assessment has been given does not in any sense lead up to an assessment. In that case the only assessment ever made is the one already made. Also, the grant of a request which is made after service of a notice of an assessment cannot lead up to an assessment. If it leads up to anything in the nature of an assessment it could only, putting the matter at best for the taxpayer, lead up to the making of an amended assessment. But a decision leading up to the making of an amended assessment is not a decision within the scope of cl (e) of the First Schedule to the ADJR Act. In so far as that clause refers to decisions which lead up to assessments or calculations of tax, they are decisions 'leading up to the making of assessments or calculations of tax' and not 'decisions amending or refusing to amend assessments or calculations of tax'."
(Emphasis added)
35 His Honour, after reference to the decision of a Full Court of this Court (Bowen CJ, Lockhart and Fitzgerald JJ) in Deputy Commissioner of Taxation (Qld) v Clarke and Kann (1984) 1 FCR 322 continued, (at 595) :
"The distinction between the Commissioner's assessment function and his administrative function is relevant in this case. It is in his administrative function that he may or may not sanction the taking of steps by a taxpayer which, if taken by him, may produce a state of facts by reference to which an amended assessment may be made which might differ from that upon which the assessment already made was made. When he approaches the task of making an assessment with reference to the facts before him and makes the necessary calculations for that purpose he is exercising his assessment function. But however widely the net is cast by the words of cl (e) it does not cover a decision not being part of the process of assessment and which relates only to the question whether a taxpayer shall be permitted to carry out transactions which may reduce the amount of income upon which he is liable to pay tax. It may result in the making of an amended assessment. But it is so far removed from the assessment process that it does not, in the relevant sense, lead up to the making of an assessment. It provides an opportunity for the taxpayer to make payments the making of which will introduce new elements into his financial affairs by reference to which the amount of income on which he is liable to pay tax may be reduced and the amount of his taxable income may be ascertained. Decisions making or forming part of the process of making an assessment or calculation of tax are clearly made in the process of assessing tax. Decisions leading up to the making of an assessment may not necessarily be so confined. But, in my view, a decision not being connected directly or indirectly with the process of the making of an assessment is not within the category specified in cl (e) of the schedule merely because the making of an assessment or a particular assessment thereafter was a consequence of business dealings which flowed from the decision and affected its income position and tax liability but did not otherwise operate upon or have any other significance in respect of the assessment."
36 The correctness of the decision in Intervest Corporation came up for consideration in a Full Court of this Court (Woodward, Jenkinson and Foster JJ) in Hadfield Finance Pty Ltd v Federal Commissioner of Taxation (1988) 79 ALR 249. The case also involved a decision of the Commissioner to refuse a request made by the taxpayer under s 105AA of the ITAA for a determination of a further period in which it might pay dividends for the purpose of making a sufficient distribution. In the judgment of Foster J, agreed in by the other members of the Court, his Honour declined to find that the decision in Intervest Corporation was wrongly decided, and found that it was correct and in accord with the reasoning of the Full Court in Clarke and Kann, and of Ellicott J at first instance in Tooheys Ltd v Minister for Business and Consumer Affairs (1981) 54 FLR 421, and on appeal to a Full Court of this Court in Minister for Industry and Commerce v Tooheys Ltd (1982) 60 FLR 325. The reasoning adopted by the Full Court in Hadfield Finance to hold that the decision in Intervest Corporation was correct, involved the drawing by the Full Court of a clear distinction between the Commissioner's administrative functions and his assessment functions, with the latter category only being subject to the exclusion from review rendered by the operation of s 3(1) of the ADJR Act and cl (e) of the First Schedule to it.
37 There is a consistent body of authority which supports the maintenance of such a distinction and the consequence of the distinction in terms of the operation of cl (e): see for example Clarke and Kann at 325; Bennett Honda Pty Ltd v Deputy Commissioner of Taxation (1984) 4 FCR 99 at 104 - 105; Re O'Reilly; Ex parte Bayford Wholesale Pty Ltd (1983) 151 CLR 557; Mercantile Credits Ltd v Commissioner of Taxation (No 1) (1985) 8 FCR 510 at 514 - 516; Balnaves v Commissioner of Taxation (1985) 8 FCR 589 (FC) at 593; Domaine Finance Pty Ltd v Commissioner of Taxation (1985) 8 FCR 538 at 544 - 545; Constable Holdings Pty Ltd v Commissioner of Taxation (1986) 11 FCR 136 at 138 - 139.
38 It is necessary therefore to properly characterise the decision in question in terms of the Act under which it was made: Tooheys v Minister for Business and Consumer Affairs (1981) 54 FLR 421 at 434 - 435; Domaine Finance at 545; Mercantile Credits at 514 - 515.
39 When a decision is characterised for the purposes of cl (e) of the First Schedule as not one forming part of the process of making, or leading up to the making of an assessment or calculation of tax because it is not connected or related directly or indirectly with the process of the making an assessment, the decision is not within cl (e): Clarke and Kann at 325; Domaine Finance at 544; Intervest Corporation at 595; Hadfield Finance at 255. A decision which does not have a sufficient connection with, or is not sufficiently related to, the process of assessment, even if it leads to a decision to amend an existing assessment or calculation of tax, is not a decision within cl (e).
40 In our view, the comments of Smithers J in Intervest Finance (at pp 593 - 594) upon which the applicant relies, are to be read in the light of his Honour's later observation (at 595) :
"... a decision not being connected directly or indirectly with the process of the making of an assessment is not within the category specified in cl (e) of the schedule merely because the making of an assessment or a particular assessment thereafter was a consequence of business dealings with flowed from the decision and affected its income position and tax liability but did not otherwise operate upon or have any other significance in respect of the assessment."
41 His Honour did not say, and should not be interpreted as saying, that a decision which is sufficiently connected or related to the process of making, or leading to the making, of an assessment or calculation of tax, is thereby excluded from the operation of cl (e) because the assessment or calculation leads to the amendment of an assessment already made under the relevant Act.
42 For present purposes, the question is whether or not the making of a determination under s 177F(1) or (2A) of the ITAA is sufficiently connected or related to the making of an assessment of tax under the ITAA to come within the exception in cl (e) of the First Schedule to the ADJR Act.
43 The making of determinations under ss 177(1) and (2A) of the ITAA are part of the process of assessment and give rights of objection and appeal under Part IVC of the Taxation Administration Act 1953 (Cth): Deputy Commissioner of Taxation v Richard Walter Pty Ltd at 178, 183 - 184, 199, 203. For the purpose of Pt IVA of the ITAA, no distinction is drawn in respect of the exercise of the power under s 177F(1) as to whether or not there is an existing assessment. Section 177F(2A), which requires the Commissioner to do what is necessary to give effect to a determination under s 177(F)(1), and s 177G which permits the amendment of assessments, contemplate that in some cases there will be an existing assessment which will require amendment following a further assessment consequent upon a determination under s 177F(1)(a) of the ITAA. In Deputy Commissioner of Taxation v Richard Walter Pty Ltd, some of the assessments in issue were assessments amended in consequence of a determination under s 177F(1)(a). All determinations were held to be within the "due making of the assessment" provision for the purposes of the operation of s 177(1) of the ITAA.
44 It follows, in our view, that the decisions made under s 177F(1)(a) of the ITAA in the present case fell within cl (e) of First Schedule to the ADJR Act and were thereby excluded from judicial review under that Act.
45 The argument in respect of judicial review under s 39B of the JA can be quickly disposed of. The amended notices of assessment which issued following the determination under s 177F(1)(a) of the ITAA were in evidence before French J. Section 177(1) of the ITAA operated to make the amended notices of assessment conclusive evidence of the due making of the assessment. As the making of the determination under s 177F(1)(a) was part of the process of making the assessment to which the notice related, French J was obliged to find that the determination under s 177(F)(1)(a) had been duly made: Deputy Commissioner of Taxation v Richard Walter Pty Ltd at 188, 203, 223, 234, 243. Accordingly, the proceedings seeking to invoke the jurisdiction of this Court under s 39B of the JA were bound to fail and for that reason liable to be struck out under O 20 r 2(1) of the Rules.
46 The orders of French J were correct in our view. The applicant fails to make out a ground for leave to appeal on this account. Further, the applicant has rights of review and appeal under Part IVC of the Taxation Administration Act 1953 (Cth), which he has availed himself of, and in which he may challenge the validity of the determination made under s 177F(1)(a) of the ITAA. To refuse leave does not therefore result in significant prejudice or injustice to the applicant.
47 The application for leave to appeal should be refused and the appeal dismissed as incompetent. The costs of the application for leave to appeal, and of the purported appeal should follow the event and be paid by the applicant.
I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Lee and Cooper.