Rigoli v Commissioner of Taxation

Federal Court of Australia (Full Court)|2016-03-15|Before: Moshinsky JJ

The appeal be dismissed.
The appellant pay the respondent's costs of the appeal, to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 This is an appeal from a judgment of a judge of this Court, upholding a decision of the Administrative Appeals Tribunal (the Tribunal). By its decision, the Tribunal had affirmed certain objection decisions made by the respondent (the Commissioner) in relation to the 1994 to 2001 years of income. The proceeding before the primary judge was an appeal from the decision of the Tribunal under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth). 2 The Commissioner had issued assessments for those years under s 167 of the Income Tax Assessment Act 1936 (Cth) on the basis that the taxpayer had defaulted in furnishing returns. During the hearing before the Tribunal the taxpayer sought to discharge the onus on him to show that the assessments were excessive by relying (in part) on an affidavit by a chartered accountant, referred to as a report, put into evidence by the Commissioner. The report contained calculations of the income of a partnership, of which the taxpayer was a partner, for the years of income in question, based on the information and documents that were available to the expert accountant. The taxpayer sought to rely on the figures in the report, together with a finding in his favour from an earlier hearing before the Tribunal in relation to depreciation. The Tribunal affirmed the decisions under review. 3 Before the primary judge and also before this Court on appeal, the taxpayer's main contention was that the Tribunal had erred because it had excluded consideration of the report per se because it was not evidence led by the taxpayer. 4 The primary judge held that the Tribunal should not be understood as deciding that a taxpayer may not rely on probative material solely because it was not led in evidence by the taxpayer; the Tribunal's reason for rejecting the taxpayer's reliance upon the report was, rather, that it did not establish his taxable income. 5 For the reasons stated below, the primary judge was correct to read the Tribunal's decision this way. We also consider that the other contentions put by the taxpayer on appeal should not be accepted and, accordingly, the appeal should be dismissed.

Procedural history 6 In order to understand the issues raised by the taxpayer on appeal, it is necessary to say something about the (rather lengthy) procedural history of this matter. 7 The taxpayer objected to the assessments issued by the Commissioner in January 2002. 8 On 19 December 2008, the Commissioner made the relevant objection decisions. In relation to the 1994 to 2000 years of income, the objections were allowed in part; in relation to the 2001 year, the objection was disallowed. The reasons for decision considered the net income or loss of a partnership, of which the taxpayer was a partner, which carried on a business of manufacturing and sale of polystyrene boxes. The reasons referred to an analysis of the gross income, expenses and change in net assets of the partnership for each of the 1994 to 1997 years of income carried out by Ferrier Hodgson, an accounting firm. (The analysis also dealt with earlier years, but that is not relevant for present purposes.) The analysis was based on the documents and information provided to the firm by the Australian Taxation Office (ATO). The reasons stated that, in relation to the years of income 1998 to 2001, the ATO auditor had been requested to use the same methodology as Ferrier Hodgson, to provide an analysis of the gross income, expenses, and change in net assets of the partnership for each of those years. The reasons then set out the amounts that were considered to be the net income or loss of the partnership for each of the years of income, based on those analyses. The reasons stated that, as a partner, the taxpayer was liable to include in his assessable income his interest in the partnership net income and he was entitled to a deduction for his share of the partnership loss. After taking into account diesel fuel rebates, benefits received from Centrelink and capital gains, the reasons set out the amounts considered to be the taxable income of the taxpayer for each of the years of income. 9 The taxpayer applied to the Tribunal for review of the objection decisions. A hearing took place over a number of days between September 2011 and June 2012 and the Tribunal handed down its decision on 1 November 2012. For the purposes of the hearing, the Commissioner relied on an affidavit of Mr George Kompos, a chartered accountant and an executive director of Ferrier Hodgson, dated 8 December 2010. (Although this is an affidavit, it has been referred to by the parties in their submissions on this appeal as the "Kompos report" and it is therefore convenient to refer to it in this way.) In the report, Mr Kompos stated that he had been retained by the Commissioner in the proceedings to prepare analyses relating to the partnership's financial affairs. He stated that he had initially been requested to provide an analysis of the gross income, expenses, and change in net assets of the partnership for each of the 1994 to 1997 years of income (that is, the analysis relied on in the reasons for decision). He was then requested to provide his opinion on the ATO auditor's analysis of these matters in respect of the 1998 to 2001 years of income. To be in a position to properly respond to this request, Mr Kompos stated that he had prepared his own analysis with respect to the later years of income. He also reviewed and updated his analysis with respect to the 1994 to 1997 years. Mr Kompos then set out details of the methodology adopted, the information and documents available to him, and the results of his analysis. In the course of the hearing before the Tribunal in 2011-12, the taxpayer accepted the Commissioner's estimate of his income in the relevant years of income, and submitted that the only issue remaining was the depreciation expenses which ought to have been taken into account in assessing his taxable income in the relevant years. The Tribunal decided that the objection decisions were incorrect insofar as they disallowed the taxpayer's claims for depreciation deductions on certain capital items. The Tribunal set aside the objection decisions and remitted the matter to the Commissioner for reassessment taking into account the depreciation deductions. 10 The Commissioner appealed to this Court on a question of law. On 7 August 2013, a judge of this Court allowed the appeal: Commissioner of Taxation v Rigoli [2013] FCA 784. The judge held that the Tribunal had erred in concluding that the taxpayer had discharged the burden of proving that the Commissioner's assessments were excessive, by permitting the taxpayer, in effect, to concede some of the elements upon which the assessments had been made and allowing him to establish his claim for depreciation allowance for specified items. The judge ordered that the decision of the Tribunal be set aside and that the proceeding be remitted to the Tribunal. 11 The taxpayer appealed from that judgment to a Full Court of this Court. His appeal was dismissed: Rigoli v Commissioner of Taxation [2014] FCAFC 29. After setting out s 14ZZK of the Taxation Administration Act 1953 (Cth) and s 167 of the Income Tax Assessment Act 1936 (Cth), and referring to the reasons of the primary judge, the Full Court held (at [20]) that the "onus was squarely on [the taxpayer] to prove the elements of his challenge in the [Tribunal]. The elements are identified by s 14ZZK and s 167. That burden was not discharged by the concession that was made". The Full Court also said (at [22]) that "[n]o finding was reached at any time by the [Tribunal] on the income component and no evidence was adduced on it by [the taxpayer]. It follows that the [Tribunal] did not form, and did not purport to form, 'a judgment of an amount for the purposes of s 167' of the 1936 Act as [the taxpayer] contends". In addition to dismissing the appeal, the Full Court ordered that the orders of the primary judge be supplemented by an order that, in the Tribunal, subject to any order of the Tribunal for proper cause, the remitted proceeding be heard and determined on the evidence which was before the Tribunal in the proceeding which resulted in its decision of 1 November 2012. 12 A second hearing before the Tribunal took place on 12 November 2014. The hearing was before the same senior member as the first hearing. The taxpayer did not make an application to adduce further evidence. In the course of this hearing, in order to establish his taxable income for the years in question, the taxpayer sought to rely on the Kompos report, subject to the findings the senior member had made on the first hearing of the matter regarding depreciation. On 24 March 2015, the Tribunal decided that the objection decisions should be affirmed. While it will be necessary to refer, later, to other parts of the Tribunal's reasons, it is convenient at this point to set out paragraph [73] of the Tribunal's reasons: To discharge the onus of proving that the assessment was excessive, the taxpayer must prove, on the balance of probabilities, that he or she did not derive from any source taxable income to the amount of the assessment (George [v Federal Commissioner of Taxation (1952) 86 CLR 183], at 189). While it is true to say that a taxpayer can discharge the burden of proof in a manner which may depend on the circumstances, Mr Rigoli did not adduce any evidence of the amount or source of his income for any [of] the income years in issue. He simply sought to rely on the report prepared by Mr Kompos. That report was prepared for the purpose of enabling the Commissioner to make an assessment of the amount upon which, in his judgment, income tax ought to have been levied. It was not intended to and did not establish, even on the basis of an estimate, the actual taxable income of Mr Rigoli from all sources for the income years in question. 13 As indicated earlier, the taxpayer challenged the Tribunal's decision in this Court pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). The Commissioner filed a notice of objection to competency and a notice of contention, but these can be put to one side for present purposes. On 7 August 2015, the primary judge dismissed the appeal. It is this decision which is the subject of the appeal to the Full Court.

The proceeding below 14 Before the primary judge, the taxpayer contended that the Tribunal had fallen into error, and had failed to discharge the review function of the Tribunal, when it found that the taxpayer could not discharge his burden of proof by relying upon the Kompos report. The questions of law and grounds of appeal raised by the taxpayer are set out in the reasons for judgment of the primary judge and it is unnecessary to set them out again. The grounds relied upon by the taxpayer were, in essence, that he was entitled to rely upon the Kompos report to discharge the burden imposed on him by s 14ZZK of the Taxation Administration Act and that the Tribunal erred in not finding that he could do so. 15 In paragraph [10] of his reasons, the primary judge referred to the taxpayer's claim that the Tribunal wrongly concluded that the Kompos report could not be relied upon as evidence in the discharge of the taxpayer's burden of proof. The primary judge then said (at [10]): It may be that some parts of the Tribunal's reasons appear to be expressed as stating that Mr Rigoli was not permitted to rely upon evidence produced to the Tribunal by the Commissioner for another purpose, but the Tribunal's reasons need to be read and understood in the context of the issues before the Tribunal and the way in which the parties had presented their respective cases. The fundamental issue before the Tribunal in the remitted proceeding became whether Mr Rigoli could discharge his burden of proof by reliance upon the opinion of an expert whose task had been to undertake a different, albeit potentially overlapping, exercise than the one required for Mr Rigoli to undertake to discharge his burden of establishing that the assessments were excessive. Mr Rigoli had not furnished returns and the Commissioner had retained Mr Kompos to undertake the task of providing an opinion on the income, expenses and change in net assets of a partnership of which Mr Rigoli was a partner. The process undertaken in producing the Kompos report had similarity with a taxpayer's return of income but it was not in form or in substance evidence of Mr Rigoli's taxable income. Mr Kompos had not been asked to prepare, nor did he purport to prepare, a report which assessed Mr Rigoli's taxable income, although Mr Kompos used material which bore upon that topic and expressed opinions upon which Mr Rigoli could have relied in support of his case. The Tribunal should not be understood as deciding that a taxpayer may not rely upon probative material solely because it was not led in evidence by the taxpayer or because it had been placed before the Tribunal by the Commissioner for some other purpose. The Tribunal's reasons for rejecting Mr Rigoli's reliance upon the Kompos report was, rather, that it did not establish Mr Rigoli's taxable income. (emphasis added) 16 The primary judge then set out paragraph [73] of the Tribunal's reasons (set out above in these reasons) and continued (at [10]): The Tribunal's description of the Commissioner's purpose in obtaining the Kompos report in part explained why it did not establish Mr Rigoli's taxable income. The report provided the Commissioner with a reasonable basis for raising assessments in the absence of what Mr Rigoli ought to have furnished but it was not the preparation by Mr Kompos of Mr Rigoli's returns of income for the years in question. The Tribunal found as a fact that the Kompos report did not establish Mr Rigoli's taxable income. 17 The primary judge next set out paragraphs [17]-[21] of the Tribunal's reasons, which contain the senior member's analysis of the Kompos report, and continued (at [10]): The Tribunal found, as it was entitled to find on the material before it, that the Kompos report, and its methodology, was incomplete and did not establish Mr Rigoli's taxable income. The Tribunal's finding was not a rejection of the Kompos report as evidence nor a conclusion that Mr Rigoli could not rely upon evidence which had been produced by the Commissioner for another purpose, but a finding that the report did not establish that which Mr Rigoli needed to establish. 18 In paragraphs [11] and [13], the primary judge considered other parts of the Tribunal's reasons which the taxpayer pointed to in support of the proposition that the Tribunal had wrongly rejected the Kompos report on the basis that an expert report produced by the Commissioner could not be relied upon by a taxpayer as probative evidence to discharge the statutory burden of proof. The primary judge held (at [13]) that the Tribunal's observations in the relevant passages needed to be understood in light of its finding that the particular report relied upon did not satisfy the Tribunal that it provided probative evidence of that which the taxpayer needed to prove.

The appeal grounds 19 The taxpayer's notice of appeal from the decision of the primary judge sets out essentially two grounds of appeal: 1. The primary Judge erred in making the following findings: 1.1 That the Administrative Appeals Tribunal (the AAT): (a) had not denied the Appellant the opportunity to rely on evidence produced by the Respondent to the AAT (the Kompos report) as the means by which the Appellant discharged the burden of proof imposed on him by s 14ZZK(b) of the Taxation Administration Act 1953 (the TAA), because that evidence: (i) had been prepared for and tendered by the Respondent; and (ii) had not been prepared for and tendered by the Appellant; but (b) had rejected the Appellant's reliance on the Kompos report because that report did not establish the Appellant's income. 1.2 That the AAT had not, by refusing to allow the Appellant to rely on the Kompos report as the means of discharging the burden of proof imposed on him by s 14ZZK9B0 of the TAA: (a) failed to exercise its review function by ignoring relevant material − contrary to Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 351 [82]; and (b) left incomplete its review function because it had not addressed an aspect of the evidence relevant to determining the excessiveness of the assessments - contrary to Haritos v Commissioner of Taxation [2015] FCAFC 92 at [218]-[219]. 2. The primary judge erred in not making the following findings: 2.1 That the AAT had erred in finding that the Appellant was required, before he could be said to have discharged the burden imposed on him by s 14ZZK(b) of the TAA: (a) to prove that he did not derive from any source taxable income to the amount of each of the assessments; and (b) in so doing, to prove that there was no other possible source, other than the sources identified in the assessments or otherwise asserted by the Respondent, from which he could have derived taxable income; 2.2 That the AAT had erred in not finding that the Applicant could rely on: (a) the Kompos report; (b) the Appellant's evidence regarding depreciation claimed for various items of plant and equipment, as found by the Tribunal in its earlier decision …; and (c) the other evidence before the Tribunal; as sufficient to: (d) establish, or provide a proper basis for drawing inferences as to, the Applicant's taxable income for the 1994-2011 income years; and (e) prove that the assessments made by the Respondent for the 1994-2011 income years were excessive. 2.3 That, by refusing to allow the Appellant to rely on the Kompos report as the means of discharging the burden of proof imposed on him by s 14ZZK(b) of the TAA, the AAT had: (a) failed to exercise its review function by ignoring relevant material …; and (b) left incomplete its review function because it had not addressed an aspect of the evidence relevant to determining the excessiveness of the assessments … 20 The Commissioner filed a notice of contention to the effect that the judgment of the primary judge should be affirmed on the basis that the taxpayer did not provide the Tribunal with a probative foundation upon which factual conclusions could be based about the amount included in his assessable income or allowable as a deduction, or the amount of his actual taxable income, for any relevant income year.

Taxpayer's submissions on appeal 21 The taxpayer had two main submissions on the hearing of the appeal. The first was that the Tribunal had erred in excluding consideration of the Kompos report per se because it was not evidence led by the taxpayer (and the primary judge had erred in not so holding). In support of the proposition that the Tribunal had excluded the Kompos report from consideration on this basis, the taxpayer pointed to particular parts of paragraphs [73], [84] and [86]-[88] of the Tribunal's reasons. In relation to paragraph [73] (set out above), the taxpayer highlighted the words "Mr Rigoli did not adduce any evidence of the amount or source of his income for any [of] the income years in issue". In relation to paragraph [84] of the Tribunal's reasons, the taxpayer pointed to the words emphasised in the following quotation: The three cases I have referred to above are all cases in which the taxpayer was able to establish, on the balance of probabilities, circumstances which deprived receipts treated as income by the Commissioner of that character, or was able, by evidence, to disclose expenditure in the earning of income liable to tax even though precise amounts could not be established. They do not assist Mr Rigoli in this matter because his evidence did not establish his actual taxable income. Although Mr Kompos provided a thorough but inexact assessment of what he considered Mr Rigoli's partnership income might have been in the years in question, that does not assist Mr Rigoli. Mr Rigoli was unable to discharge the onus of proving that the assessment was excessive because he did not lead evidence of his actual income from all sources. (emphasis added) 22 In relation to paragraphs [86]-[88] of the Tribunal's reasons, the taxpayer pointed to, in particular, the words emphasised in the following quotation: [86] The point to note for present purposes from the above decision by Jessup J is that the decision of the Tribunal, although made by inferences drawn from indirect evidence, nevertheless resulted from the evidence produced by the taxpayer. Once again, this is clearly essential because it is the taxpayer who has the onus of proving that the assessment made by the Commissioner was excessive. [87] What Mr Clough submitted was that it was open to the Tribunal to draw inferences from the entirety of the evidence before it notwithstanding that Mr Rigoli did not have complete documentation of his assessable income and expenditure. In light of the cases I have referred to above, I must reject that submission. [88] The Commissioner made an assessment of the amount on which, in his judgment, income tax should be levied based essentially on the report of Mr Kompos. Regardless of the methodology employed by Mr Kompos, his calculations cannot be substituted for the actual taxable income of Mr Rigoli from all sources. Not only does Mr Rigoli bear the onus of proving what his actual taxable income was in each of the income years, as Ms Harding submitted, in any event, Mr Kompos' assessment dealt only with his best estimate of partnership income. It follows, in my opinion, that in this case it is not open to me to draw inferences about Mr Rigoli's actual taxable income from any material which the Commissioner used in arriving at his assessment. 23 The taxpayer further submitted that, in the context of the Tribunal's earlier comments, at paragraphs [18]-[21] of its reasons, to the effect that the Kompos report was a reasonable reconstruction of the partnership accounts that should have been prepared, it was apparent that the Tribunal had rejected the report simply because it was not evidence led by the taxpayer. In support of this submission, the taxpayer relied on the parts of paragraphs [18]-[21] emphasised in the following quotation: [18] Effectively, what Mr Kompos did was produce a complex and detailed report based on numerous primary financial documents including bank statements and passbooks, invoices, receipts, cheques, deposit and withdrawal slips, correspondence from suppliers and all creditors, diesel fuel rebate statements and witness statements from suppliers and/or creditors. He also conducted an analysis from the available information identifying amounts which were of a capital nature; of a private nature; or cash transactions. From those available documents, he also identified asset purchases of the partnership setting out in tabulated form the amounts of expenditure and a depreciation table. He calculated the gross income derived and expenses incurred by the partnership for each year of income and allowed an amount for depreciation. Mr Kompos also calculated a change in the net assets of the partnership for each year of income. He made allowances for personal living expenses based on figures published by the Melbourne Institute of Applied Economic and Social Research. He used seasonally adjusted household disposable income figures for each year of income for a single adult and a couple. [19] Despite doing the best he could with the information available to him, Mr Kompos frankly admitted that he used a mixture of cash accounting and accruals accounting in making his assessment. Because of the way the partnership conducted its affairs, including a large number of cash transactions, he found he could not rely solely on information which appeared on bank statements and other documents. Furthermore, he could not adopt an accruals accounting method because many source documents for income and expenses were not available. [20] Clearly, Mr Kompos' analysis is not a precise account of the financial transactions for the years in question. It is his best estimate of the true financial position of the partnership in those years. Nevertheless, the important point to note is that the analysis conducted by Mr Kompos is in fact a reasonable reconstruction of the financial statements which should have been prepared by the partnership in the relevant years. It is not merely a guess. Furthermore, relying on Mr Kompos' report, the Commissioner, in arriving at each of the assessments, has done so by taking into account estimates of gross income and expenses including depreciation of assets likely to have been used in the production of assessable income. He has also taken into account later income tax returns lodged on Mr Rigoli's behalf by William Buck which resulted in the allowance of some of his objections. [21] The Commissioner has not simply drawn inferences from figures which bear no direct relationship to income or expenses. In fact, it should be said that the Commissioner has thoroughly and properly applied his mind to arriving at the best possible estimate of the partnership's true financial position in each of the years in question. (emphasis added) 24 The taxpayer's second submission was that the Tribunal had erred in concluding that the Kompos report did not provide a sufficient probative evidentiary basis for findings as to the taxpayer's actual taxable income (and the primary judge had erred in not so holding). The taxpayer submitted that, although the Kompos report did not provide a precise account of the financial transactions for the years in question, it was nevertheless (as the Tribunal found at paragraph [20] of its reasons) a "reasonable reconstruction" of the financial statements which should have been prepared by the partnership, and "not merely a guess". The taxpayer also relied on the finding at paragraph [21] of the Tribunal's reasons that the Commissioner had thoroughly and properly applied his mind to arriving at the "best possible estimate" of the partnership's true financial position in each of the years in question. It was submitted that, in light of these findings, the Tribunal erred in concluding that the Kompos report was insufficient to discharge the burden of proof on the taxpayer.

Disposition of the appeal 25 In our view, the taxpayer's first submission should not be accepted. The Tribunal's reasons need to be read as a whole and, when so read, we do not accept the submission that the Tribunal was excluding consideration of the Kompos report per se because it was not evidence led by the taxpayer. The Tribunal's essential reasoning on whether the taxpayer had discharged the burden of proof on him is, in our view, contained in paragraph [73] of its reasons (set out above). This paragraph followed extensive consideration of the cases dealing with the burden on the taxpayer to show that the assessment is excessive: see, in particular, paragraphs [36], [52], [62], [68]-[72] of the Tribunal's reasons. In paragraph [62], the Tribunal set out the following passage from the judgment of Brennan J in Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 624: If the Commissioner and a taxpayer agree to confine an appeal to a specific point of law or fact on which the amount of the assessment depends, it will suffice for the taxpayer to show that he is entitled to succeed on that point. Absent such a confining of the issues for determination, the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment, though the taxpayer is limited to the grounds of his objection. 26 The Tribunal set out, in paragraph [68], the following passage from the judgment of Kitto J at first instance in George v Federal Commissioner of Taxation (1952) 86 CLR 183 at 189: But s 190(b) places the burden of proving that the assessment is excessive upon the appellant; and in order to carry that burden he must necessarily exclude by his proof all sources of income except those which he admits. His case must be that he did not derive from any source taxable income to the amount of the assessment. That will involve him, of course, in accounting for the increase in his assets, and it may well be that the commissioner will direct his efforts mainly or even wholly to endeavouring to meet the evidence the appellant adduces on this point. But the source of the increase in the assets is not the actual issue in the case; even if it were proved, for example, that that source consisted of winning bets on the racecourse, the issue would still be whether or not from any source the appellant derived as much taxable income as the assessment treats him as having derived. The object of the present application is really to have the commissioner say whether he is prepared to assign a source or sources for the moneys included in taxable income in the assessment over and above those disclosed as taxable income in the return, and to admit that if they did not come from that source, or from one or more of those sources, those moneys were not liable to be included in the appellant's taxable income. The commissioner may, if he chooses, voluntarily narrow the possible range of evidence in that way, but there could be no justification for ordering him to do so, under the guise of ordering particulars. If he attempts to prove derivation from a particular source and fails, he is none the less entitled under the Act to point to another source, or, without troubling about source at all, to stand upon his assessment and submit that the presumption in its favour has not been displaced. 27 In paragraph [69], the Tribunal set out the following passage from the judgment of Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ in George v Federal Commissioner of Taxation (1952) 86 CLR 183 at 201: The word "assessment" is defined by s 6(1) to mean the ascertainment of the amount of taxable income and of the tax payable thereon. In conformity with this definition s 166 directs the commissioner to make an assessment of the amount of the taxable income of any taxpayer and of the tax payable thereon. From these provisions both in their present form and in their slightly different earlier form, the law has always been taken to be that in an appeal from an assessment the burden lies upon the taxpayer of establishing affirmatively that the amount of taxable income for which he has been assessed exceeds the actual taxable income which he has derived during the year of income: … "The justice of that burden cannot be disputed. From the nature of the tax, the commissioner has, as a rule, no means of ascertainment but what is learnt from the taxpayer, and the taxpayer is presumably and generally, in fact, acquainted with his own affairs. The onus may prove to be dischargeable easily or with difficulty according to the circumstances", per Isaacs ACJ, Federal Commissioner of Taxation v Clark. (footnotes omitted) 28 Then, in paragraph [72], the Tribunal said: Given the above authorities, in the absence of the Commissioner's consent to confine the issues for determination to the assessment of partnership income as set out in Mr Kompos's report, Mr Rigoli's claim to rely on Mr Kompos's report cannot be sustained. The Commissioner has not agreed to confine the issues for determination to the partnership income as assessed by the Commissioner's expert, Mr Kompos, and in fact, to the contrary, has insisted that Mr Rigoli discharge the onus of proving that the assessment was excessive by establishing his actual income from all sources, not solely the partnership. Even if the Commissioner had agreed to confine the issues in this case to Mr Rigoli's assessable income, Mr Rigoli would not discharge his onus of proof by simply referring to the Kompos report. (emphasis added) 29 In the context of these passages, paragraph [73] of the Tribunal's reasons is to be understood as saying, not that the taxpayer could not rely on the Kompos report because it was not evidence led by the taxpayer, but rather that it was insufficient to discharge the burden on the taxpayer of establishing his actual taxable income. The Tribunal acknowledged in paragraph [73] that "a taxpayer can discharge the burden of proof in a manner which may depend on the circumstances". The statement that "Mr Rigoli did not adduce any evidence of the amount or source of his income for any [of] the income years in issue" was merely recording the fact that the taxpayer had not, through his own evidence, sought to establish his actual taxable income from all sources; it was not saying that such evidence needed to be adduced by him. The essence of the Tribunal's reasoning is captured in the last sentence of paragraph [73], where the Tribunal said that the Kompos report "was not intended to and did not establish, even on the basis of an estimate, the actual taxable income of Mr Rigoli from all sources for the income years in question". That sentence makes clear that the Tribunal was not excluding the report from consideration because it was not evidence led by the taxpayer, but rather was saying that it was insufficient to establish his actual taxable income from all sources. 30 The Tribunal's conclusion that the Kompos report did not seek to, and did not, establish the taxpayer's actual taxable income from all sources is consistent with its earlier comments (in paragraphs [18]-[21] of its reasons) about the scope and methodology of the Kompos report, and the inherent limitations of the report due to the lack of information available to the expert. The Tribunal found that the Kompos report was merely the expert's best estimate, based on the information available to him, of the partnership's financial position for the years in question. 31 In relation to paragraphs [84] and [86]-[88] of the Tribunal's reasons, when these paragraphs are read as a whole and in context, in our view, the Tribunal was not excluding the Kompos report from consideration because it was not led by the taxpayer, but rather saying that it was insufficient to discharge the burden on the taxpayer. For example, in paragraph [84], the Tribunal said: "Although Mr Kompos provided a thorough but inexact assessment of what he considered Mr Rigoli's partnership income might have been in the years in question, that does not assist Mr Rigoli." Read in context, the Tribunal was saying that the report did not seek to, and did not, establish the taxpayer's actual taxable income from all sources. That is why it did not assist the taxpayer. In the last sentence of paragraph [84], the Tribunal said: "Mr Rigoli was unable to discharge the onus of proving that the assessment was excessive because he did not lead evidence of his actual income from all sources." In the context of what had come before, the point the Tribunal was making was that the taxpayer had not sought to establish his actual taxable income, not that such material needed to be led by him. 32 In paragraph [86], while the Tribunal states that it is "clearly essential" that the evidence be "produced" by the taxpayer, we think this is a reference to the production of sufficient information and documents from which the taxpayer's actual taxable income can be established. The statement, read in the context of the reasons generally, is not addressing whether the evidence relied upon in a proceeding needs to be led by the taxpayer rather than by the Commissioner. In our view, paragraph [88] does not support the taxpayer's submission; to the contrary, read in context it makes clear that the Tribunal was saying that the Kompos report did not seek to establish the actual taxable income of the taxpayer, and therefore was insufficient to discharge the burden on him. 33 For these reasons, which are largely the same as those of the primary judge in relation to the same submission put below, we do not accept the taxpayer's first submission. 34 In relation to the taxpayer's second submission, in our view, the Tribunal's conclusion that the Kompos report was insufficient to establish the taxpayer's actual taxable income from all sources was a finding of fact which it was open to the Tribunal to make. We have set out above paragraphs [18]-[21] of the Tribunal's reasons, which contain the Tribunal's findings in relation to the scope, methodology and inherent limitations of the Kompos report. As has been noted, the Tribunal concluded in paragraph [73] that the Kompos report "was not intended to and did not establish, even on the basis of an estimate, the actual taxable income of Mr Rigoli from all sources for the income years in question". It was open on the material for the Tribunal to conclude that the material relied on by the taxpayer was insufficient to discharge his burden of proof. It has not been shown that the Tribunal adopted an incorrect approach as to what the taxpayer needed to prove to discharge his burden of proof. We agree with the conclusion of the primary judge, in paragraph [10] of his Honour's reasons (see paragraph [17] above), that the Tribunal found, as it was entitled to find on the material before it, that the Kompos report, and its methodology, was incomplete and did not establish the taxpayer's income. 35 We note for completeness that the taxpayer relied, in his submissions on appeal, on Ma v Commissioner of Taxation (1992) 37 FCR 225 at 232-233, Martin v Federal Commissioner of Taxation (1993) 27 ATR 282 at 286-287 and Kimche v Federal Commissioner of Taxation (2004) 57 ATR 28, regarding ways in which a taxpayer may prove that an assessment is excessive. The Tribunal considered these decisions in paragraphs [81]-[84] of its reasons. The approach taken by the Tribunal was not inconsistent with the passages in these cases relied on by the taxpayer on appeal. 36 Given these conclusions, it is unnecessary for us to deal with the Commissioner's notice of contention.

Conclusion 37 For these reasons, the appeal will be dismissed. There is no basis shown, nor indeed suggested, to indicate that costs should not follow the event. Accordingly, there will also be an order that the appellant pay the respondent's costs, to be taxed if not agreed. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kenny, Davies and Moshinsky.

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