[1992] FCA 444; (1992) 38 FCR 68

[1992] FCA 444; (1992) 28 ALD 501 (extract)

Administrative Law - income tax - judicial review - whether assessment duly made - meaning of 'decisions made under an enactment' - decision exempted from judicial review.

Income Tax - judicial review - power to issue assessment - statutory transfer of liability under State legislation - meaning of 'an assessment' - meaning of 'taxpayer' - rights of objection to assessment - whether objection that assessment 'excessive'.

Income Tax Assessment Act 1966 ss. 6, 166, 177, 185, 216, 220, Part V.

Administrative Decisions (Judicial Review) Act 1977 ss. 3, 5, Schedule 1 para (e).

Judiciary Act 1903 s. 39B

Co-operatives Act S.A. 1983 s. 60

Clyne v. Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1

F. J. Bloemen Proprietary Limited v. The Commissioner of Taxation of the Commonwealth of Australia [1981] HCA 27; (1981) 147 CLR 360

Smorgon v. The Australia and New Zealand Banking Group Ltd [1976] HCA 53; (1976) 134 CLR 475

McAndrew v. Federal Commissioner of Taxation [1956] HCA 62; (1956) 98 CLR 263

Aitken v. The Federal Commissioner of Taxation [1936] HCA 53; (1936) 56 CLR 491

Trautwein v. Federal Commissioner of Taxation [1936] HCA 77; (1936) 56 CLR 63

The Federal Commissioner of Taxation v. S. Hoffnung and Company Limited (1928) 42 CLR 39.

Australian Broadcasting Tribunal v. Bond [1990] HCA 33; (1990) 94 ALR 11

Federal Commissioner of Taxation v. Dalco [1990] HCA 3; (1989) 90 ALR 341

Re Deputy Commissioner of Taxation (W. A.); Ex parte Briggs (1986) 69 ALR 185.

Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256

David Jones Finance and Investment Pty Ltd v. Federal Commissioner of Taxation 90 ATC 4,730

Winter v. Deputy Federal Commissioner of Taxation 87 ATC 4,912

Deputy Federal Commissioner of Taxation v. Truhold Benefit Pty Ltd 84 ATC 4,912

Winter v. Inland Revenue Commissioners (1961) 3 All ER 855

Counsel for the applicant: Mr M. Robertson QC with Mr Hamilton

Counsel for the respondent: Mr G. Pagone with Miss Vivic

2. The injunction made on 12 October 1990 is discharged.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

This is an amended application by Independent Holdings Ltd ('Independent Holdings') for an order of review pursuant to the Administrative Decisions (Judicial Review) Act 1977 ('the ADJR Act'). The applicant seeks review of decisions by the Deputy Commissioner of Taxation recorded in a letter dated 29 June 1990, wherein the applicant says that the Deputy Commissioner indicated that he would either issue or raise assessments or amended assessments of income tax against the applicant with respect to the income of Associated Grocers Co-operative Ltd ('AGC') for the years of income 1983-1989 (inclusive), or issue or raise assessments or amended assessments of income tax against AGC relating to the income of AGC for the years of income 1983-1989 inclusive. AGC was a co-operative registered under the Co-operatives Act (S.A.) 1983 as amended, ('the Co-operatives Act') but was dissolved on 30 May 1989.

2. It is claimed by Independent Holdings that there is no power or authority by virtue of the Income Tax Assessment Act 1966 ('the Act') to issue assessments or amended assessments against either Independent Holdings or against AGC with respect to the income of AGC for 1983-1989. In particular it is said that there is no power or authority by virtue of the Act to issue assessments or amended assessments against a non-existent entity, the claim being that on the undertaking of AGC having been taken over by Independent Holdings, AGC ceased to exist. Independent Holdings claims that the Deputy Commissioner is in error in asserting that pursuant to s. 60(3)(c) of the Co-operatives Act, the tax liability of AGC had been assumed by Independent Holdings.

3. The first ground of the application is that the decision was not authorised by the Act, in pursuance of which it was purported to be made. This ground is based upon s. 5(1)(d) of the ADJR Act. By way of particulars it was said there was no provision in the Act which authorises the issue of notices of assessment or amended assessments to a taxpayer relating to the income of another taxpayer, nor was there any provision which authorises or permits the issue of notices of assessment or amended assessments to a non-existent entity.

4. The second ground asserts that the making of those decisions was an improper exercise of the powers conferred by the Act, that ground being based on s. 5(1)(e) of the ADJR Act. The improper exercise of the power is said to be the taking into account of an irrelevant consideration, namely, the conclusion that s. 60(3)(c) of the Co-operatives Act enabled the Deputy Commissioner to raise assessments or amended assessments against Independent Holdings, this being based upon s. 5(2)(a) of the ADJR Act; and the failure to take into account a relevant consideration, being the absence of power in the Act to authorise or permit the raising of assessments or amended assessments to a taxpayer which relates to the income of another taxpayer or the raising of such assessments or amended assessments against a non-existent entity: these particulars being based on s. 5(2)(b) of the ADJR Act. Section 39B of the Judiciary Act 1903 is also relied on, it being said that, for the reasons earlier particularised, the decision to raise assessments or amended assessments was beyond the power of the Deputy Commissioner or, alternatively, was an abuse of power.

5. In addition to declarations based on the grounds for appeal, the amended application sought an order quashing the decision of the Deputy Commissioner to raise assessments or amended assessments against Independent Holdings and injunctive relief restraining him from raising or issuing such assessments or amended assessments against Independent Holdings or the former AGC for the income tax years 1983-1989 inclusive.

6. There was a notice of objection to competency filed by the Deputy Commissioner which objects to the jurisdiction of this Court to try the application, to the extent that it is an application under the ADJR Act, on the ground that "the purported decision was not a decision to which the Act applies by reason of its being a decision in the class of decisions described in paragraph (e) of Schedule 1 of the Act. "

7. By s. 3(1) of the ADJR Act, "decision to which this Act applies" means:

"a decision of an administrative character made, proposed to

be made, or required to be made, as the case may be (whether

in the exercise of a discretion or not) under an enactment,

other than...a decision included in any of the classes of

decisions set out in Schedule 1; "

8. Paragraph (e) of Schedule 1 of the ADJR Act relevantly exempts from the application of that Act:

"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:

...

Income Tax Assessment Act 1936. "

9. The response by the applicant to this apparently formidable difficulty is that what the Deputy Commissioner was threatening to do was not in truth an assessment or amended assessment at all. It will be necessary to consider this aspect of the matter in some detail later.

10. The applicant was incorporated as a shelf company under the Companies (South Australia) Code on 9 September 1988 and changed its name to Independent Holdings Ltd on 18 November 1988. Prior to the incorporation of Independent Holdings there were two co-operatives, AGC and Independent Grocers Co-operative Ltd ('I.G.C.'). Until about 1987, AGC owned and operated Arrow Supermarkets and supplied plant, equipment and staff to I.G.C. for use in the wholesale grocery business of I.G.C. As appears from correspondence between the parties to this application, AGC in 1982 acquired Target Food Stores, subsequently called Arrow Supermarkets, from Myer Ltd.

11. In about 1987 Arrow Supermarkets was transferred by AGC to a publicly listed company called Arrow Limited which thereafter has owned and operated the supermarkets. AGC for some time thereafter continued its other role of supplying plant, equipment and staff to I.G.C. On 22 February 1989 AGC, pursuant to a special resolution, resolved to request the Corporate Affairs Commission to transfer its undertaking to Independent Holdings pursuant to s. 60(1) of the Co-operatives Act.

12. Section 60 of that Act provides:

"(1) A registered co-operative may, in pursuance of a special

resolution, request the Commission to transfer its

undertaking to a body corporate incorporated under some

other Act.

(2) Upon receipt of a request under subsection (1), the

Commission may, by instrument published in the Gazette,

transfer the undertaking of the co-operative to the body

corporate specified in the request.

(3) Upon the publication of an order under subsection (2) -

(a) the registered co-operative is dissolved;

(b) the property of the registered co-operative becomes

the property of the body corporate referred to in the

order;

and

(c) the rights and liabilities of the registered

co-operative (whether certain or contingent) become

rights and liabilities of the body corporate referred

to in the order. "

13. Paragraph 60(3)(c) is of central importance in these proceedings.

14. On 1 June 1989 the Corporate Affairs Commission transferred the undertaking of AGC to Independent Holdings pursuant to s. 60(2) of the Co-operatives Act and by s. 60(3)(a), AGC was thereupon dissolved. It has not since been reconstituted as a co-operative.

15. About 31 January 1989 the Deputy Commissioner wrote to Independent Holdings indicating that he wished to examine IGC's accounting systems and general taxation affairs as part of the audit programme conducted by the Taxation Office. By a letter dated 14 March 1990 the question of inter-company services fees between I.G.C. and AGC for each of the years ended 30 September 1983 to 1988 was raised. It was asserted by the Australian Taxation Office that the level of fees did not reflect actual costs associated with the provision of various services to I.G.C. but had the effect, intended by management, of a break-even result for AGC, with profits being transferred to I.G.C.

16. On 30 April 1990 Independent Holdings made a detailed reply which, inter alia, included the claim that all profits generated by IGC had been remitted to members with minimum retentions and that:

"These rebates are assessable income in the hands of the

recipients. Accordingly, we would strongly argue that all

profit has been returned as assessable income and that, in

fact, there has been, or will be, no loss to the revenue."

"As you are no doubt aware, the business undertaking of

Associated Grocers was transferred to Independent Holdings

Limited on 1 June, 1989 pursuant to Section 60(1) of the

South Australian Co-operatives Act. At that date,

Associated Grocers was dissolved and a completely new and

separate legal entity commenced operations. We would,

therefore, contend that any adjustment against Associated

Grocers would be meaningless and ineffective. "

17. On 29 June 1990 the Deputy Commissioner wrote a letter recording what are said to be the decisions of which review is sought. The letter stated, in part:

"As you are aware, a review has been undertaken of

transactions relating to the Inter-Company Service Fee

between Associated Grocers Co-operative Ltd and Independent

Grocers Co-operative Ltd for the years ended 30 September

1983 to 1988 inclusive.

We have given full consideration to all correspondence and

documentation relating to the matter and to the relevant

income tax return. We consider that the matters raised on

your behalf in correspondence to date have little or no

relevance to the questions at issue. In our opinion the

circumstances support the conclusion that the transactions

involving service fees were arranged for the predominant

purpose of gaining a tax benefit.

It is intended therefore to effect adjustments to the

returns in question and where appropriate impose additional

tax in respect of false or misleading statements.

Based on information presently available, the following

adjustments are proposed to the returns for the respective

years:

Year ended 30th September 1983 $1731108

" " " " 1984 1434902

" " " " 1985 1684809

" " " " 1986 1979302

" " " " 1987 1083917

Reliance for the proposed adjustments will be placed on the

provisions of Part IVA or alternatively Sub-section 51(1)

and on the basis that the tax liability of Associated

Grocers Co-operative Ltd has been assumed by you pursuant to

Section 60(3)(c) of the Co-operatives Act 1983 (SA).

The purpose of our correspondence is not to force "your

client to settle" as stated in Mr Dunne's letter of 8th

June 1990. However, we recognise that a settlement may

result if both parties adopt a reasonable approach to

resolving this matter.

... "

18. There is a preliminary question that can conveniently be dealt with at this point.

19. Notwithstanding submissions on behalf of the Deputy Commissioner to the contrary, I am satisfied that the decisions the subject of the present application are decisions made under an enactment as required by the ADJR Act. In Australian Broadcasting Tribunal v. Bond [1990] HCA 33; (1990) 94 ALR 11, Mason C.J. said at 22:

"The fact that the ADJR Act is a remedial statute providing

for a review of administrative action rather than some form

of appeal from final decisions disposing of issues between

parties indicates that no narrow view should be taken of the

word 'decision'. In this respect it is significant that s 5

does not speak of 'final decision'. It is also significant

that the jurisdiction of the Federal Court to grant

declaratory relief is not confined to granting relief in

respect of ultimate decisions. "

"...a reviewable 'decision' is one for which provision is

made by or under a statute. That will generally, but not

always, entail a decision which is final or operative and

determinative, at least in a practical sense, of the issue

of fact falling for consideration. A conclusion reached as

a step along the way in a course of reasoning leading to an

ultimate decision would not ordinarily amount to a

reviewable decision, unless the statute provided for the

making of a finding or ruling on that point so that the

decision, though an intermediate decision, might accurately

be described as a decision under an enactment. "

"Another indication that s 3(2)(g) of the ADJR Act is not

confined to the exercise of or refusal to exercise a

substantive power is to be found in Schs 1 and 2 to that Act

which respectively exclude certain classes of decisions from

the operation of the Act and the operation of s 13 of the

Act. By para (e) of Sch 1 there are excluded from the Act

'decisions...forming part of the process of making, or

leading up to the making of, assessments or calculations of

tax or duty' under specified tax Acts. "

"A decision under an enactment is one required by, or

authorised by, an enactment. "

20. In my opinion, the making of an assessment by the Commissioner is expressly provided for by s. 166 of the Act, and is accurately described as "a decision under an enactment".

21. The central submission of the applicant is that the Deputy Commissioner cannot rely on s. 60(3) of the Co-operatives Act to issue an assessment to Independent Holdings in respect of income that was derived by AGC. Assuming that tax is a liability or contingent liability of AGC within s. 60 of the Co-operatives Act, it was submitted that the Deputy Commissioner could not, by reliance on s. 60, make Independent Holdings a taxpayer. It was said that the power in the Commissioner to issue an assessment had to be found in the Act. If the Deputy Commissioner wished to issue assessments in relation to the taxable income of AGC it was said that he must apply for reinstatement under s. 61 of the Co-operatives Act to "recreate the taxpayer".

22. By s. 6(1) of the Act, "taxpayer" means "a person deriving income or deriving profits or gains of a capital nature". It was said that the reference to "a person deriving income" is a reference to the person who will ultimately receive the assessment for deriving that income.

23. Omitting matters of certain trust income, interest or additional tax, not presently relevant, "assessment" by s. 6(1) means:

"(a) the ascertainment of:

(i) the amount of taxable income;

...

and of the tax payable on that taxable income... "

"Taxable income" relevantly means:

"...the amount remaining after deducting from the assessable

income all allowable deductions..."

"Assessable income" in s. 6(1) means:

"the amounts which, under the provisions of this Act, are

included in the assessable income"

"Every person must, if required by the Commissioner by notice

published in the Gazette, furnish to the Commissioner:

...

a return...in relation to:

(d) the income...and profits or gains of a capital nature,

derived by the person during the year of income; and

(e) any deductions or losses, being losses of a capital

nature, claimed by the person.

" From the returns, and from any other information in his

possession, or from any one or more of these sources, the

Commissioner shall make an assessment of the amount of the

taxable income of any taxpayer, and of the tax payable

thereon. "

"Where under this Act any person is liable to pay tax, the

Commissioner may make an assessment of the amount of such

tax. "

"The Commissioner may, subject to this section, at any time

amend any assessment by making such alterations therein or

additions thereto as he thinks necessary, notwithstanding

that tax may have been paid in respect of the assessment. "

"As soon as conveniently may be after any assessment is made,

the Commissioner shall serve notice thereof in writing by

post or otherwise upon the person liable to pay the tax. "

24. It was submitted by the applicant that the regime established by the Act is that the person liable to pay the tax is the person who is nominated in the assessment, who is the taxpayer who earned the income the subject of the assessment. Finally s. 177(1) provides:

"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

under Part V on a review or appeal relating to the

assessment, that the amount and all the particulars of the

assessment are correct. "

25. The applicant submits that what the Deputy Commissioner proposes is not "an assessment", there being no power in him to go outside the Act to determine whether there is a liability to pay tax and, in particular, it is not competent for him to rely on s. 60 of the Co-operatives Act to justify a purported assessment. It was said that, if the Deputy Commissioner did as he suggested in the letter of 29 June, it would not be "an assessment" within the definition of that term in the Act; it would be beyond his power and therefore is subject to review and subject to injunctive relief to prevent him from so acting.

26. In Smorgon v. The Australia and New Zealand Banking Group Ltd [1976] HCA 53; (1976) 134 CLR 475, Stephen J. considered the word "assessment" in s. 264 of the Act dealing with the power of the Commissioner to obtain information. His Honour rejected the narrow meaning contended for by the taxpayer, namely, the completed process which has resulted in the attachment of a liability upon a taxpayer, in favour of the definition in s. 6(1) of the Act where 'assessment' is defined as "the ascertainment of the amount of taxable income and of the tax payable thereon". Stephen J. said at 480:

"...the use of the word in par. (b) appears to me to be one

descriptive of the entire process whereby, from the

interaction of taxable income and allowable deductions,

there first emerges a taxpayer's taxable income, from which

his tax may then be calculated and notified to him. In R.

v. Deputy Federal Commissioner of Taxation (S.A.); Ex parte

Hooper [1926] HCA 3; (1926) 37 CLR 368, at p 373, Isaacs J. referred

to part of this process as 'the Commissioner's

ascertainment, on consideration of all relevant

circumstances, including sometimes his own opinion, of the

amount of tax chargeable to a given taxpayer'; see also

Batagol v. Federal Commissioner of Taxation (1963) 109

CLR 243, per Kitto J. (1963) 109 CLR at p 251, and

per Owen J. (1963) 109 CLR at pp 255-257. "

27. The applicant relies on Re Deputy Commissioner of Taxation (WA); Ex parte Briggs (1986) 69 ALR 185 to meet the argument on behalf of the Deputy Commissioner that the interpretation of s. 177(1) as explained in F.J. Bloemen Proprietary Limited v. The Commissioner of Taxation of the Commonwealth of Australia [1981] HCA 27; (1981) 147 CLR 360, is fatal to the claims of the applicant.

28. The High Court held in Bloemen that once a document satisfying s. 177(1) is produced, the notice has the force of conclusive evidence that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities, except in proceedings on appeal against the assessment. In The Federal Commissioner of Taxation v. S. Hoffnung and Company Limited (1928) 42 CLR 39, a document was issued by the Deputy Commissioner which was described as a "tentative" assessment. In Bloemen, Mason and Wilson JJ. said at 372-3:

"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. "

"...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. "

29. Similarly, in Briggs, the Full Court of the Federal Court (Bowen C.J., Sheppard and Beaumont JJ.,) said, at 191, that on the facts of that case:

"...the respondents have admitted that the documents issued

by them were not, in truth, assessments of taxable income:

according to para. 4 of the admitted facts, none of the

respondents, prior to the issue and service of the notices

of assessment, made any attempt to ascertain the

prosecutor's taxable income, nor intended to undertake any

relevant process of calculation; rather, the first

respondent issued the said notices for the purpose of

forcing the prosecutor to consult with him or his officers;

and, by para. 9, the first respondent, in the person of the

second respondent, decided to issue the notices of

assessment, knowing that they did not reflect any rational

assessment of a liability of the prosecutor or with reckless

indifference to whether they did or did not reflect any such

assessment. The respondents have thus elected to proceed

upon a footing different from that contemplated by the

Act..."

"A genuine attempt to ascertain the taxable income of a

taxpayer, even if carried out cursorily or imperfectly, is

one thing. But when regard is had to the whole of the facts

and surrounding circumstances of the present case and it

appears that the respondents never intended to embark and

did not in fact embark, upon the process of ascertaining the

taxpayer's income, no 'assessment' is involved. "

30. As a consequence, the Full Court held that s. 177(1) could have no operation.

31. The applicant sought also to rely on the judgment of Shepherdson J. in Deputy Federal Commissioner of Taxation v. Truhold Benefit Pty Ltd 84 ATC 4,912. In that case, an application to enter summary judgment against the taxpayer was rejected on the basis that, despite the terms of s. 177 of the Act, it was arguable that there had not been in law an assessment capable of attracting the conclusive force of that section. This was because for each of the relevant years of income, there were mutually contradictory assessments in respect of the same income. The argument was they could not both be correct and that, if the Deputy Commissioner was entitled by virtue of s. 177 to insist upon his right to judgment in respect of the one on which he chose to sue, he could equally at a later stage pursue the other to an inconsistent judgment. It was on this basis that Shepherdson J. thought that the decision in Bloemen could be distinguished.

32. In Winter v. Deputy Federal Commissioner of Taxation 87 ATC 4,065, Burchett J. was concerned with an application by a taxpayer for an extension of time for bringing an amended application for judicial review of various decisions of the Commissioner. The decisions for review were the Commissioner's decisions to issue assessments against the taxpayer personally and against the trustee of two trust estates and his decision to seek summary judgment of tax in the Supreme Court. The taxpayer argued that inconsistent assessments had been issued in which the same income had been attributed to more than one person and that the assessments could not all stand together. It was therefore argued that the assessments were only tentative or provisional and did not therefore attract the force of s. 177.

33. After referring to the judgments in Truhold Benefit and Briggs, Burchett J concluded at 4,067 that it was arguable that each of the assessments fell short of being an "ascertainment of the amount of taxable income and of the tax payable thereon" within the meaning of s. 6(1) of the Act and so did not constitute "an assessment" within the meaning of s. 166 of the Act. He said:

"If that be so, it seems to me it must be arguable also that

the decisions referred to in para. 1, 2 and 3 of the amended

application do not fall within Sch. 1(e) of the Judicial

Review Act. "

34. In answer to the suggestion that the Act had to be understood as a complete and exclusive code about who constitutes a taxpayer for the purpose of raising assessments, the Deputy Commissioner submitted that the existence and origin and the rights and obligations of AGC and Independent Holdings are all governed by South Australian law. The taxpayer can exist only by South Australian law and the rights, duties and obligations that flow from that existence also depend on South Australian law. It was submitted that s. 60(3) of the Co-operatives Act provided the basis on which the Deputy Commissioner might issue the assessments foreshadowed in the letter of 29 June 1989.

35. The applicant submitted that Independent Holdings, not being a "taxpayer" within the meaning of s. 6 of the Act, would not be able to rely on s. 185(1) of the Act which provides:

"A taxpayer dissatisfied with any assessment under this Act

may, within 60 days after service of the notice of

assessment, lodge with the Commissioner an objection in

writing against the assessment stating fully and in detail

the grounds on which he relies. "

36. It was submitted then that the rationale of Bloemen, namely that on an assessment being served, proceedings under Part V are the only proceedings available to a taxpayer, had no application.

37. For the Commissioner it was submitted that the "taxpayer" in s. 185 did not have the defined meaning in s. 6 but meant, in the context in which it appears, a person who has the obligation of paying tax and upon whom the notice of assessment has been served, and that once assessments were served on the applicant, Independent Holdings could proceed under Part V of the Act. In this regard the provisions of s. 216 were contrasted with those of s. 220.

38. Section 216 deals with the case where tax has not been assessed or paid at the time of a taxpayer's death. The section therefore is concerned with a non-corporate taxpayer, although it might be said the analogy of the death of a natural person to the dissolution of a corporation would not be far-fetched. The section gives the Commissioner the same powers and remedies for the assessment and recovery of tax from the trustees of the estate of the taxpayer in respect of the liability to which the taxpayer was subject as he would have had against the taxpayer if the taxpayer were still living. Importantly, there is no express provision of a right in the trustee of the estate of the taxpayer to object to any assessment issued by the Commissioner. It was submitted on the Commissioner's behalf that the trustee, albeit not a "taxpayer" in the s. 6 definition, would have the rights of objection etc. under Part V of the Act.

39. Section 220 is concerned with a case where no probate nor letters of administration have been taken out within six months of the death of the taxpayer and, inter alia, tax has not been assessed or paid on the whole of the income derived by the taxpayer up to the time of the death. The section permits the Commissioner to make an assessment of the tax payable by the estate of the taxpayer and requires him to cause notice of the assessment to be published twice in the daily newspaper circulating in the State in which the taxpayer resided.

40. Section 220(3) provides that a person claiming an interest in the estate may, within a defined time, lodge an objection in writing against the assessment and further provides that the provisions of the Act relating to objections, reviews and appeals shall apply in relation to the objection as if the person so claiming an interest were the taxpayer.

41. It was submitted for the Deputy Commissioner that where in s. 220 there was no liability to tax imposed on the beneficiaries, a right of objection against assessment was conferred in express terms. This position is to be contrasted with s. 216 where there is no express power of objection given to the trustees liable to pay the tax of the deceased taxpayer.

42. The High Court held in Aitken v. The Federal Commissioner of Taxation [1936] HCA 53; (1936) 56 CLR 491, that s. 62 of the Income Tax Assessment Act 1922-34, the terms of which are similar to s. 216(1) of the Act, made the executors of a deceased taxpayer liable to pay tax on the whole of the income of the testator up to the time of his death. It appears from the facts in the Case Stated, at 492-494, that the executors had lodged a return, but denied liability to taxation; the Commissioner issued an assessment; the executors gave notice of objection, which was disallowed, and the executors requested the Commissioner to treat the objections as an appeal and forward the objection to the High Court, which the Commissioner did.

43. In that case, the liability to tax was held to be created by s. 62 of the Income Tax Assessment Act 1922-34: the liability was not in "who derived income or who derived profits or gains of a capital nature", (pace s.6 of the present Act), yet the objection procedures were applied seemingly without comment. In this context, I simply note the submission of the Commissioner concerning the availability of Part V procedures to Independent Holdings should assessments issue as foreshadowed.

44. Finally, there was a further interesting submission on behalf of the applicant, namely that in the absence of an assessment being served on AGC, there was no liability to tax in AGC as at the date of its dissolution nor was there any contingent liability to tax at that time. The concern as to whether there was, at that date, any liability to tax by AGC, whether certain or contingent, stems from the terms of s. 60 of the Co-operatives Act, which is the fundamental source of the Commissioner's claim against Independent Holdings.

45. As to contingent liabilities, Lord Reid in Winter v. Inland Revenue Commissioners (1961) 3 All ER 855 said, at 858 in a passage relied on by the Commissioner in the present case:

"No doubt the words 'liability' and 'contingent liability'

are more often used in connexion with obligations arising

from contract than with statutory obligations. But I cannot

doubt that if a statute says that a person who has done

something must pay tax, that tax is a 'liability' of that

person. If the amount of tax has been ascertained and it is

immediately payable it is clearly a liability; if it is only

payable on a certain future date it must be a liability

which has 'not matured at the date of the death' within the

meaning of s. 50(1). If it is not yet certain whether or

when tax will be payable or how much will be payable why

should it not be a contingent liability under the same

section. "

At 859, his Lordship quoted from Erskine's Institute of the Law of Scotland, Vol. 2; (Book III, title I, s. 6):

"Obligations are either pure, or to a certain day, or

conditional...Obligations in diem...are those in which the

performance is referred to a determinate day. In this

kind...a debt becomes properly due from the very date of the

obligation, because it is certain that that day will exist;

but its effect or execution is suspended till the day be

elapsed. A conditional obligation, or an obligation granted

under a condition the existence of which is uncertain, has

no obligatory force till the condition be purified; because

it is in that event only that the party declares his

intention to be bound, and consequently no proper debt

arises against him till it actually exist: so that the

condition of an uncertain event suspends not only the

execution of the obligation, but the obligation

itself...Such obligation is therefore said in the Roman law

to create only the hope of a debt. Yet the granter is in so

far obliged that he hath no right to revoke or withdraw that

hope from the creditor which he had once given him. '

"So far as I am aware that statement has never been

questioned during the two centuries since it was written and

later authorities make it clear that conditional obligation

and contingent liability have no different significance. I

would, therefore, find it impossible to hold that in Scots

law a contingent liability is merely a species of existing

liability. It is a liability which, by reason of something

done by the person bound, will necessarily arise or come

into being if one or more of certain events occur or do not

occur. If English law is different - as to which I express

no opinion - the difference is probably more in terminology

than in substance. "

"The essence of a contingent liability must surely be that it

may never become an existing legal liability because the

event on which it depends may never happen. "

46. The gravamen of the applicant's submission in this respect is based on the observations of Mason J. in Clyne v. Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1 with which are to be contrasted the observations of Gibbs C.J. in that case and earlier in Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256.

47. In Mendonca, notices of amended assessment of income tax were posted to the debtor on 25 November 1968. In each notice the date on which tax was due and payable was shown as 30 December 1968. In early December, he withdrew money from his bank and borrowed sums from a finance company. The taxpayer left his house on 13 December 1968 and on 14 December 1968 left for Europe. The Commissioner of Taxation presented a petition in respect of the amounts due for payment on 30 December 1968 and the petition was based on the acts of bankruptcy constituted by the taxpayer departing from Australia on 14 December with intent to delay or defeat his creditors and a departure from his dwelling house on 13 December 1968 with a similar intent. The primary question that Gibbs J. (as he then was) had to decide was whether there was owing to the Commissioner on 13 and 14 December 1968, which were the dates of the acts of bankruptcy alleged, a debt sufficient to enable him to present his petition. Gibbs J. said at 259:

"The question in the present case is whether the debts for

tax were in existence at the dates of the acts of

bankruptcy, and were then liquidated sums, payable

immediately or at a certain future time, notwithstanding

that the dates specified in the notices of assessment as

those on which the tax was due and payable had not then

arrived.

Section 17 of the Income Tax Assessment Act 1936-1968

provides:

' Subject to this Act, income tax at the rates declared by

the Parliament is levied, and shall be paid, for the

financial year that commenced on the first day of July,

One thousand nine hundred and sixty-five, and for each

succeeding financial year, upon the taxable income

derived during the year of income by any person...'

By s. 204 it is provided that, subject to the provisions of

Pt. VI, 'any income tax assessed shall be due and payable by

the person liable to pay the tax on the date specified in

the notice as the date upon which the tax is due and

payable, not being less than thirty days after the service

of the notice, or, if no date is so specified, on the

thirtieth day after the service of the notice'. By s. 208,

income tax, when it becomes due and payable, shall be a debt

due to the King on behalf of the Commonwealth and payable to

the Commissioner in the manner and at the place prescribed,

and by s. 209 any unpaid tax may be sued for and recovered

in any court of competent jurisdiction by the Commissioner

or a Deputy Commissioner suing in his official name. It is

now settled that the effect of these and similar provisions

is that the liability to inmcome tax is imposed by the

statute itself and that assessment is only a method of

ascertaining the extent of the liability, so that the tax is

a debt due and owing, although not payable, notwithstanding

that no assessment has been made (Commissioner of Stamps

(W.A.) v. West Australian Trustee, Executor and Agency Co.

Ltd. [1925] HCA 20; (1925) 36 CLR 98, at pp 105, 116, 118; Aitken v.

Federal Commissioner of Taxation [1936] HCA 53; (1936) 56 CLR 491, at p

497; In re Brown (1950) 15 ABC 74, at pp 80-84; cf.

Deputy Federal Commissioner of Taxation v. Brown (1958) 100

CLR 32, at pp 58, 63. "

48. His Honour concluded that at the dates of the acts of bankruptcy the tax in respect of which the notices of assessment had issued calling for payment on 30 December 1968, was therefore due and owing, since at those dates the notices of assessment had been issued fixing both the time for payment and the amount payable, the debt was for a liquidated sum payable at a certain future time.

49. In respect of the year 1968, as no assessment had been issued at the dates of the acts of bankruptcy, his Honour indicated at 260 that:

"...although the tax was owing at those dates, it was then

neither liquidated nor payable either immediately or at a

certain future time. "

50. In Clyne v. Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1, the Commissioner had served a notice of assessment on the taxpayer on 9 July 1979, which notice stated that the amount assessed (which was $236,922.31) was due and payable on 8 August 1979. On 10 July 1979 the Commissioner served two notices under s. 218 of the Act on the Commonwealth Trading Bank branch at Kings Cross, at which the taxpayer had three interest bearing deposits totalling $70,000.00 repayable to the taxpayer on 21 September 1979, 9 April 1980 and 20 April 1980. On 4 September 1979, the taxpayer by deed assigned those deposits to a third party as security for future advances to be made by the assignee to the taxpayer and gave notice of assignment to the bank. The High Court held that the notices of assessment bound the bank to pay the amount of the deposits and interest, not exceeding the amount claimed for income tax, to the Commissioner on the respective maturity dates unless the tax had been paid in the meantime. The Court held that the reference in s.218(1)(a) to money "due" meant money due and payable. The reference in sub-paragraph (i) to the amount due by the taxpayer in respect of any tax fines and costs meant an amount "owing". The High Court concluded that income tax was due when it was assessed and notice of assessment was served. Gibbs C.J. said at 8:

"The word 'due' is ambiguous; it can mean owing, although not

payable until some future date, or it can mean presently

payable. The meaning of the word must be determined by the

context. In ss. 204, 205, 206, 207 and 208 of the Act,

which deal with the payment of tax, and in s. 170(2), (3),

(4) and (6), which deal with the amendment of assessments,

the expression 'due and payable' is used, and although the

expression appears on any view to be tautological, the

change of words appears to be intended to indicate a change

of meaning, so that 'due' in that phrase must mean 'owing'."

"Section 17 of the Act provides that, subject to the Act,

income tax at the rates declared by the Parliament is levied

and shall be paid upon the taxable income derived during the

year of income by any person. These provisions suggest that

the tax is due, in the sense of owing, once the taxable

income during a year of income has been derived because

there then arises a legal liability to pay it,

notwithstanding that the extent of the liability remains to

be ascertained and that payment is to be made in the future."

" On the other hand it has been said that tax is not due until

it is assessed (see George v. Federal Commisisioner of

Taxation [1952] HCA 21; (1952) 86 CLR 183, at p 207; and per Dixon C.J.

in Deputy Commissioner of Taxation v. Brown (1958) 100

CLR at p 40). This may be the correct view for most

practical purposes. Certainly a notice under s. 218 could

not be given before the taxpayer had been assessed, for

until that time 'the amount due by the taxpayer' could not

be ascertained. "

"At the latest when tax is assessed it becomes a debt due to

the Crown although it is not payable until the later date

specified in the notice of assessment. For these reasons

when the word 'due' is used in the Act, without the

accompanying words 'and payable', it will prima facie mean

simply owing. "

51. These comments are to be contrasted with the observations of Mason J. at 16-17, where his Honour said:

"...the correct view in my opinion is that income tax is due

when it is assessed and notice is served of that assessment

and that the tax does not become payable before the date

fixed by s. 204. Dixon C.J., McTiernan, Williams, Webb and

Fullagar JJ. in George v. Federal Commissioner of Taxation

[1952] HCA 21; (1952) 86 CLR 183, at p 207 said that 'tax is only due

after it is 'assessed' (see, for example, s. 204)'. I

recognize that on other occasions members of this Court have

said that 'tax is a debt due and owing, although not

payable, notwithstanding that no assessment has been made',

in the words of Gibbs J. in Re Mendonca; Ex parte Federal

Commisisioner of Taxation (1969) 15 FLR 256, at p 259."

52. Mason J. concluded that a liability to tax in the sense of the tax becoming "due" or "owing", does not arise until the income tax is assessed and notices of that assessment served. Since service of any such assessment on AGC is now no longer possible, the submission by the applicant is that there was thus at the date of dissolution of AGC no contingent liability to tax in AGC.

53. I have set out the rival contentions concerning the issues between the parties, but in the view I take of the matter it is neither necessary nor desirable to express my opinion concerning every one of them, though I must say I can see no good reason for contending that the Commissioner is precluded from relying on the plain wording of s. 60 of the Co-operatives Act, if there be a contingent liability of AGC to tax prior to its dissolution. I can see no sensible basis of distinguishing liability to tax from any other liability.

54. In my opinion, in the circumstances of this case, it is not competent for the applicant to seek the relief claimed either pursuant to the ADJR Act or under the general law. So far as the application under the ADJR Act is concerned, in my view the application falls within the exemption created by paragraph (e) of Schedule 1 to that Act and insofar as the claim is based on the Judiciary Act, my opinion is that both Bloemen and Lucas v. O'Reilly 79 ATC 4,081 establish that such rights as the applicant has are restricted to proceedings under Part V of the Act.

55. The decision which the applicant seeks to restrain the Deputy Commissioner from making, in my opinion, is clearly within paragraph (e) of Schedule 1 of the ADJR Act. The threatened "assessment" was not merely tentative as in Hoffnung nor one which did not reflect a rational assessment of the liability of Independent Holdings or made with reckless indifference as to whether the assessment did or did not reflect any such liability, as in Briggs. The threatened assessments are not mutually inconsistent in the sense considered by Shepherdson J. in Truhold or as accepted by Burchett J. as being arguably inconsistent in Winter. Rather the claim is that the Commissioner has no power to issue to Independent Holdings an assessment based on the tax liability of AGC.

56. In Federal Commissioner of Taxation v. Dalco [1990] HCA 3; (1989) 90 ALR 341, the High Court concluded that mere error in the formation of a judgment as to the amount on which tax ought to be levied by the Commissioner does not warrant the setting aside of the amount assessed. The question is whether the amount of the assessment is excessive and the taxpayer, on appeal or review, has to show that the amount of money for which tax is levied by a notice of assessment exceeds the actual substantive liability of the taxpayer. It was further held that the term "excessive" in s. 190(b) relates to the "amount" of the assessment which is mentioned in s. 177(1).

57. Brennan J. referred to Trautwein v. Federal Commissioner of Taxation [1936] HCA 77; (1936) 56 CLR 63 and said at 346:

" In Trautwein's case Latham C.J. (at 88) expressed a possible

qualification upon the general rule that the taxpayer must

show 'not only negatively that the assessment is wrong, but

also positively what correction should be made in order to

make it right or more nearly right'. He added:

'I say "as a general rule" because, conceivably, there might

be a case where it appeared that the assessment had been

made upon no intelligible basis even as an approximation,

and the court would then set aside the assessment and remit

it to the Commissioner for further consideration. '

His Honour evidently had in mind an error which not only

affected the correctness of the amount assessed but vitiated

the purported exercise of the power to assess conferred by

ss 166 and 167. Such a case would be exceptional, and a

court must be careful to maintain the distinction between an

error in exercising the power to make an assessment and an

error which deprives a purported assessment of validity: see

Re Moore; Ex parte Co-operative Bulk Handling Ltd (1982) 56

ALJR 697; 41 ALR 221; and R. v. Taylor; Ex parte

Professional Officers' Association - Commonwealth Public

Service [1951] HCA 1; (1951) 82 CLR 177 at 186. If there could

conceivably be such a case as Latham C.J. had in mind, this is

not it. The amounts assessed represent the Commissioner's

bona fide judgment as to the amount of the taxpayer's

taxable income and the power to make the assessment was

validly exercised. "

58. In David Jones Finance and Investment Pty Ltd v. Federal Commissioner of Taxation 90 ATC 4,730, O'Loughlin J. distinguished Briggs and applied Bloeman, concluding at 4,736:

"It seems to me therefore that Pt V of the Act is in the

nature of a Code that controls the rights of a taxpayer who

seeks to challenge an assessment. In Briggs' case facts

that were admitted by the Commissioner enabled the Court to

find, as a matter of law, that no assessment had issued -

and that was its distinguishing feature: cf. the similar

result in Hoffnung's case. "

59. In my opinion, the matter is concluded by the observations of Taylor J. in McAndrew v. Federal Commissioner of Taxation [1956] HCA 62; (1956) 98 CLR 263 at 282-3, which observations Mason and Wilson JJ. said in Bloemen at 375 represented "(a)n explicit and, in our view, correct statement of the effect of s. 177(1)...". Taylor J. said at 282:

"In my view s. 170(1) should be understood as precluding a

taxpayer in proceedings other than an appeal (or a

reference) under the Act from challenging an assessment on

any ground. This means, of course, that where a taxpayer

objects to an amended assessment on the ground that there

was no failure to make a full and true disclosure, he

alleges, in the words of s. 177(1), that the assessment,

both in amount and the specified particulars, is not

correct. "

Later, on the same page, Taylor J. said in response to a submission that the expression "excessive" was limited to questions relating to the quantum of the assessment and did not extend further:

"...the word 'excessive' is capable of a much wider meaning

than that ascribed to it by the appellant's argument and

there is no reason for thinking that an assessment, made in

purported but not justifiable exercise of a statutory power,

may not properly be described as excessive; it purports to

impose a specified liability and, upon appeal, the claim of

the appellant is that he is not liable to pay any part of

it. Whether the particular ground upon which he seeks to

escape or reduce the liability merely touches the accuracy

of the assessment or assails its validity as an assessment,

he is, in the words of s. 185, 'dissatisfied with' the

assessment because it purports to impose upon him a

liability in excess of that to which he may lawfully be

subjected and I can see no reason why, in either case, his

complaint may not be accurately described as a complaint

that his assessment is excessive. "

60. In this case, the claim of the applicant is that the threatened assessments would be made in a "purported but not justifiable exercise of a statutory power"; the applicant "assails its validity as an assessment". I acknowledge the characterisation of the applicant's attacks, but, consistently with the observations of Taylor J. in my opinion the assessment may be challenged under Part V and only under that Part.

61. I would uphold the notice of objection to competency. The application is dismissed with costs.