The Commissioner's discretion to remit a penalty
44 The fourth ground advanced by the plaintiff is that the Commissioner has not properly exercised his discretion to consider remission of penalties under s 221YHL. The Commissioner submits that I am unable to deal with this ground, for two reasons. The first is said to be that the exclusive procedure for ventilating this matter is by objection under Part IVC of the TAA. The second is that a challenge to the Commissioner's exercise of discretion on administrative law grounds, may be heard only in the Federal Court, having regard to s 9 of the Administrative Decisions (Judicial Review) Act 1977 (Cth).
45 In the Hoare Bros case the Commissioner issued notices of assessment for income tax and when payment was not made, he served a statutory demand for the tax. The taxpayer applied to set the demand aside on the ground that there was a genuine dispute as to the amount of the debt, since it had lodged an objection to one of the assessments and was seeking an extension of time to lodge an objection against another assessment. Section 177 of the Assessment Act states that the production of a notice of assessment is conclusive evidence of the due making of the assessment, but the notice of assessment was not produced in the proceedings and so there was no occasion for the application of s 177.
46 In those circumstances the Commissioner relied on ss 204 and 208, which respectively provide that income tax assessed is due and payable on the date specified in the notice of assessment, and that when it becomes due and payable, income tax is a debt due to the Commonwealth payable to the Commissioner. He also relied on ss 14ZZM and 14ZZR of the TAA for the proposition that the tax remained due and payable notwithstanding that the taxpayer had lodged an objection which might lead to a review by the Administrative Appeals Tribunal or an appeal to the Federal Court.
47 The Full Court observed (at 4169):
'The structure of the ITAA strongly suggests a legislative intent that the issue and service of a notice of assessment (after expiry of the appropriate period) creates a debt that is immediately due and payable, and that the assessment can be challenged only in the manner provided for by the TAA, Part IVC. Thus, unless there is some genuine dispute about the validity of a notice which has been duly served, there can be no genuine dispute about the existence or amount of the debt specified in the notice (assuming the requisite period has elapsed since service of the notice). A company, or other taxpayer, served with a notice of assessment, is entitled to challenge the assessment through the procedures laid down in the TAA, Part IVC. In the meantime, however, the tax must be paid.'
48 Their Honours subsequently observed (at 4172) that 'the mere fact that the company had objected to the assessments, or sought review of the Commissioner's decision before the Administrative Appeals Tribunal, did not establish that there was a genuine dispute as to the existence or amount of the relevant debt'. They said:
'The position is not altered by the fact (if it be such) that the company's objections to the notices of assessment, or its application to the Administrative Appeals Tribunal, raised genuinely arguable issues. Any such issues, or disputes, do not affect the character of the debt to which the statutory demand relates.'
49 Ireland J reached the same conclusion as to the effect of the taxation legislation, especially ss 14ZZM and 14ZZR of the TAA, in Deputy Commissioner of Taxation v Ho (1996) 32 ATR 269, in the context of an application for a stay of recovery proceedings.
50 The present case is different from the Hoare Bros case in one respect. There the debt claimed by the Commissioner was for unpaid income tax, governed by ss 204 and 208 of the Assessment Act (as well as s 177, had it been invoked), and Part IVC of the TAA (including ss 14ZZM and 14ZZR) applied comprehensively to any dispute about the assessments. In the present case ss 221YHH, 221YHJ and 221YHN(1) have a combined effect equivalent to ss 204 and 208 in the case of income tax (except that penalties fall due and payable without any process of assessment or time for payment). But Part IVC of the TAA applies only to a dispute which arises about the exercise of the Commissioner's discretion to remit the 'principal' penalties. It is arguable that if the taxpayer contests his liability to pay a PPS penalty for a reason which does not bring into question a decision of the Commissioner with respect to remission of a 'principal' penalty, then there is no exclusive procedure for dealing with the objection and consequently the reasoning in the Hoare Bros case is inapplicable. If the taxpayer's grounds for challenge would lead to the conclusion that the amount claimed by the Commissioner does not fall within the statutory provisions which render a penalty due and payable, then arguably there is a dispute with respect to the existence of the penalty debt, which the taxpayer could raise as a basis for setting aside the Commissioner's statutory demand. But this is not so in the present case. The first three of the plaintiff's grounds for contending that there is a genuine dispute with respect to the existence of the debt have not been made out on the facts, for reasons which I have given. The fourth ground relates to the Commissioner's decision regarding remission of penalty, objection to which is governed by Part IVC of the TAA. To the extent that the plaintiff relies on this fourth ground, it must fail upon the application of the decision in the Hoare Bros case.
51 That being so, it is unnecessary for me to decide whether s 9 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) prevents me from entertaining the plaintiff's submissions on this fourth ground. However, it is far from obvious that a decision by this Court that there is a genuine dispute as to the existence or amount of a debt, which has become payable by the exercise of a discretion by an officer of the Commonwealth, would amount to or involve any 'review' of that exercise of discretion.