Robinson, Michael G. v Deputy Commissioner of Taxation [1984] FCA 232

Michael G. Robinson pay to the Deputy Commissiorer 1

Applicant AND: DEPUTY COMMISSTONER GF TAXATION Respondent REASONS FOR JUDGMENT LOCKHART J. This case raises the question whether the

Deputy Commissioner of Taxation has a duty to give particulars to a taxpayer of has reasons for disnullowing the taxpayer's

objection against an assessment made under the Income Tax and

Social Services Contribution Assessment Act 1936 as amended (the

The taxpayer, a Queengland solicitor. submitted his income tax return for the year ended 20 Tune 1982 in whicn no claimed a deduction of $29,679.99, being his share ef a lass said to nave been incurred by E.E. Gold Traders, a partnership of

which he was a member, which carried on the business of trading

in gold. The taxpayer's taxable income as returned Was $15,468.00, The Deputy Commissioner issued a notice af

assessment on 14 March 1983 to which was attached an "Adjustment

"Taxable income as returned 15,668 Add: E.E. Gold Traders 29,679

pursuant to s. 185 of the Assessment Act, an objection in writing

dated 11 May 1983 against the assessment in which he claimed that the assessment should be reduced by the sum of $26,579.09 ta $15,668.00 ag returned. The notice of objection set out many detailed grounds on which the taxpayer relied in support of his objection. Essentially the taxpayer asserted that the total amount of the relevant partrership less was allowable is 2

deauction under sub-s. 51(1> of the Assessment Act.

February 1984 disallowing the objection in these terms:-

"Your objection dated 11 May 1943 against the assessment which issued in respect of the year endea 30 June lyr2 has been considered and has been pactially allowed ra the extent of remission of Fection 226(2) additional tax amounting to $7,327.48.

A taxpayer dtizscatisfied with the derision may, within 6%) days after service of such notite. request the Commissioner either:

tb) to treat the objection as an appeal and to forward it to a Supreme Court specified by the taxpayer.

Any request that you do make must be in writing, be accompanied by a fee of $2 and be lodged within 60 days

after service of this notification. This fee will be refunded if the assessment is reduced either by amendment or as a result of the decision of the Board or Court but your request cannot be complied with if the amount of $2 is not included.

administrative tribunals, independent of the Commissioner of Taxation, set up to review decisions of the Commissioner which are referred to them. A Board makes 1ts decision on the basis of evidence given before zt at a hearing. You may appear before the Board in person or engage a representative to present your case to the Board. The date and place of the hearing 15

fixed by the Chairman of the Board of Review to which the request is referred.

TE you request Chat your objection be treated as an appeal to the Supreme Court, you should specify the State or Territory an which vou desire to have your appeal heard. In this regard it should be noted that appeals to the Supreme Courts of the Northern Territory and the Australian Capital Territory are restricted to cne taxpayers who reside in or whose principal piace of business is in the Tertitory concerned and to Trustees of trusts with assets ain the arcropriate Territory. '

The taxpayer subsequently sought from the Deputy Commissioner particulars of the grounds relied upon by him for

a@igallowing the objection. The reason advanced by the taxpayer

to the Deputy Commissioner in supporr of thi: request was ¢t

Rropcsed tro test the Deputy Commi s disallowance e.itner

cloner before a Board of Review or on appeal to a Supreme Court, but shat he preferred to appeal to a Supreme Court secause if he succeeded he would probaply obtain an order for costs against the Deputy Commissioner. The taxpayer told the Deputy Commissioner that in order to make an informed decision on whicn avenue of appeal to pursue he needed to know whether and, if so, to what axtent and in what cespects, the Deputy "Toarmissioner had exercised discretions or formed opinions unier provisions of the Assessment Act because only a Board of Review has power to review

those discretions or opinions. Reference was made in telexes

from the solicitors for the taxpayer to the Deputy Commissioner to discretions or opinions under sub-division D of Division 3 of Part III of the Assessment Act including sub-ss. 82KK(4), 82KL(2) and 177F(1). The Deputy Commissioner declined to provide this

information on the ground that he was under no duty to do so.

On 23 March 1984 the taxpayer filed an application, amended on 2 April 1984, seeking an order of review of the alleged fazlure of the Derguty Commissioner to provide the particulars requested by the taxpayer or, alternatively. to

Ww the Deputy Commissioner's alleged failure to serve upon the taxpayer written notice of his decision disallowing the

When the hearing of the applicaticn commenced before me last Friday counsel for the taxpayer sought an order from the Court having the same effect as A peremptory writ of mandamus

Pursuant to 9.54A r.27 of this Court s Rules requiring the Ceputy

Commissioner to perform his alleged duty to give appropriate particulars to the taxpayer of his aeciston to disallow the objection. This course was taken by the taxpayer in the event that he should fall in his primary application for an order of

review under the Judicial Review Act on the ground that, although

the Deputy Commissioner had a 'duty to give particulars of his grounds for disallowing the objection, nis deciston not co provide those particulars may be excluded from review tinder

Schedule I of the Judicial Review Act which relevantly excludes

"(e) decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax or duty, or

decisions disallowing objections to assessments or calculations of tax or duty, or decisions amending,

or refusing to amend, assessments or calculations of tax or duty, under any of the following Acts ... Income Tax Assessment Act 1936 ...

The taxpayer argued that, whatever may be the position

under the Judicial Review Act, the Deputy Commissioner's duty to

provide particulars still remained and was properly the subject of an order of mandamus. The Deputy Commissioner did not oppose

Mindful eof the difficulties rossibly created by the

exemption from the Judicial Peview Act of "decisions disallowing

objections to assessments ... of tax" under the Assessment Act in Scheduie I, counsel for the taxpayer did not seek to challenge tne decision cr the Deputy Commissioner disallowing the taxpayer's objection; but argued that the Deputy Commissioner had a duty to decide to give particulars of his reasons for disallowing the objection. Any such decision was said to be a separate and independent decision from a decision disatlowina the objection. The source of the duty was said to be s. 186 of the

"1986 The Commissioner shall consider the objection, and may either disallow it, of allow it either wholly or

in part, and shall serve the taxpayer by post or otherwise with written notice of his decision."

The taxpayer's case was put on two alternative bases:

first, that, although no such duty was imposed upon the Deputy Commissioner in terms by s. 186 (and it was conceded that no other section applied), the duty 15 inherent or implicit in the section; alternatively, that the duty necessarily springs from the obligation to give "written notice of his decision", that is

a notice which must specify the reasons for his decision.

The question of the taxpayer's entitlement to particulars from the Deputy Tommissioner has been discussed in a number of cases. I use the expression "Deputy Commissioner" to include the Commissioner of Taxation because the resvondent to this application is the Deputy Commissioner and it 1s therefore a more convenient veference notwithstanding that some cof the

authorities concern the Commigsioner. [cr 1s now established tha

the taxpayer has a right to obtain particulars from the Depury Commissioner in proceedings by way of an apreal to a Supreme

Court under para. 187(1)(b) of the Assessment Act to assist in

defining the issues in the appeal, inciuding particulars of the basis upon which the assessment has been made and the facts on

which the Commissioner based the assessment: Bailey v. The

Commissioner of Taxation (1977) 1356 C.L.R. 214. The power of a Supreme Court to order the Deputy Commissioner to give particulars in the course of litigation is general and 1s not limited to cases where the assessment is made under a section of the Assessment Act which makes it dependent upon the opinion of the Commissioner or on his being satisfied of some matter:

Bailey's Case. The source of a Supreme Court's power to order

particulars is under its rules or its inherent jurisdiction:

Where the taxpayer elects ta have the Deputy Commissioner's disallowance of his objection referred to a Board of Review (para. 187(1)(a)) the Deputy Commissioner is required

by para. 35(1)(c) of the Income Tax Regulations to furnish the

Board with a statement containing his reasons for disallowing the taxpayer's claim. He 1s required by sub-reg. 35(2) to furnish the taxpayer with a copy of that statement. A statement of the Deputy Commissioner's ultimate conclusions which does not reveal the steps in reasoning by which those conclusions were reached

satisfies para. 35(1)(c): Sutton v. Commissioner of Taxation

(1959) 100 C.L.R, 518 at p. 524 and R. v. Cain; Ex parte Evatt

£1975) 133 C.L.R. 37. The Board has no power to require the

Deputy Commissioner to give more reasons: Sutton's Case.

divergence of opinion on the question whether a taxpayer is

entitled to particulars from the Deputy Commissioner before an

appeal 1s Brought toa a Supreme Court. Tn 'sirta Bey. Limited -7.

The Commissioner of Taxation (1969) 119 C.L.R. 365 Barwick C.J.

"However, inmy opinior, the Commissioner 1s under 2 duty in each case to form an opinidn and the tayvpayer is entitled to be informed of it, and upon the taxpayer 3 request, the Commissioner should inform the taxpayer ot the facts he has taken anto account in reaching his conclusion."

The Chief Justice was there considering s. 99A of the

Assessment Act which gave the Deputy Commissioner authority to

dispense with the application of that section if he thought if

unreasonable to apply it to a particular taxpayer in respect of a

particular year of income. That passage was cited with approval

by Owen J. in The Commissioner of Taxation v. Brian Hatch Timber

Co. (Sales) Pty. Limited (1972) 128 C.L.R. 28 in relation to

cases arising under s. 80A of the Assessment Act which authorised

the Deputy Commissioner to disallow losses as deductions unless he was satisfied of certain matters specified in the section. Owen J. said at p. 60 that what Barwick C.J. stated in Giris's

Case in relation to s. 99A was "equally applicable in cases

arising under s. 89A". In Kolotex Hosiery 'Australia' Pty.

Limited v. The Commissioner of Taxation (1975) 132 C.L.R. 535

Barwick C.J. repeated at p. 541 in substance what he had said

Barliler in Giris's Case. In Barley's Case Aickin J., with whose

zazgons for judgment the ovner members of the High Court \ Barwick

C.J., Gibbs, Mason and Tacabs JJ.) agreed, expressly left open the yuestion whether a taxpayer is entitled to particulars from Che Deputy Commissioner at the time of the issuing of a notice of

uther statements have been made in the authorities which suggest that the Deputy Commissioner should in appropriate cases give particulars to a taxpayer of the bass of nis assessment soa that he may determine whether he will obiect toa the assessment and subsequently apeeal; but these views are obiter dicta and

snould do as a matter of fairness rather than as a matter ot

legal obligation: Snance v. Federal Toammissioner of Taxation (1967: L2L C.0.R. 272 pear Windever J. at p. 282; McClelland v. Commissioner of Taxation (1949) 118 C.L.8. 353 per Windever J. ar

2€1; Giris's Case per Windeyer J. at p. 384 'although his

Honour may have written in terms of legal obligation which he had not done in Spence's Case and McClelland's Case) and the Brian

Hatch Case per Menzies J. at p. 52. But in Balley's Case Mason J. said at p. 221:

Indeed, there 1s very much to be said for the view that fairness to the taxpayer demands that the Commissioner should be compelled to give particulars of his assessment when it issues so that the taxpayer is adequately ainformed as to the manner in which the assessment has been arrived at and may then determine whether he will object ta the assessment and subsequentiy appeal. But that is ai matter for the legislature. It goes quite beyond the scope of this case where we are concerned with the giving of

particulars ain litigation after an appeal has been instituted."

The researches of counsel and my own researches have not revealed any case where consideration was given in terms to the question whether particulars should be furnished of the grounds

for aAisallowance by the Deputy Commissioner of a taxpayer'

In my opinion fairness requires that the Deputy Commissioner should, in appropriate cases. intorm the taxpayer of the basis of his assessment. Where the Deputy Commissioner forms opinions or exercises discretions in making his assessment he should, especially 1f requested by the taxpayer, inform him or the grounds of his opinion and for the exercise of his discretion. The reason for this requirement of fairness 15 that

the taxpayer may be sufficiently informed of the basis of the

assessment and the grounds relied upon by the Deputy Commissioner

in making it so that the taxpayer may then make an informed

decision whether or not to object to the assessment.

Once the Deputy Commissioner has made his assessment and issued his notice of assessment and the taxpayer has decided to object, the Deputy Commissioner 15 required by s. 186 to consider the objection and to disallow it or allow it, wholly or in part, and to give the taxpayer written notice of his decision. The taxpayer then has a choice. He may accept the disallowance or decide to appeal; but may not be able to make an informed decision whether to appeal to a Supreme Court or have his objection referred to a Board of Review merely from the bald

statement of the Deputy Commissioner that the objection has been disallowed. In recent times there has been an increasing tendency to vest in the Deputy Commissioner wide discretions and opinions, even discretions as to which sections of the Assessment Act apply. Whether this 1s a desirable tendency 1s not for me to say; but it does mean that the citizen is increasingly subject to the powers of the Deputy Commissioner. In some areas of tax law this may be inevitable; but it is surely not asking too much to expect the Deputy Commissioner, when exercising discretions and forming opinions under the Assessment Act, to tell the taxpayer in appropriate cases what he has done and why he has done it. When the Deputy Commissioner disallows a taxpayer's objection fairness requires that he teli the taxpayer, in appropriate cases, not only of his disallowance or allowance, in whole or in part, of the objection, but of the reasons for his doing so sufficiently to enable the taxpayer to make an informed election

between a Supreme Court and the Board of Review 1£ he should

I have said that particulars should be given by the Deputy Commissioner both of his assessment and of his disallowance of objections in "appropriate cases". I chose this expression because I doubt 1f it is every case that requires the Deputy Commissioner to give this information to a taxpayer and it

may be open to abuse. It is a question of balancing the need for fair play to taxpayers on the one hand and the efficient and

proper administration of the Revenue on the other hand.

It does not follow, however, that the Deputy Commissioner 1s under a legal obligation to do those things which

fairness should lead him to do in appropriate cases.

The taxpayer relies on s. 156 as the source of a legal obligation; but I cannot construe the section this way. Section 196 is part of a legislative scheme designed to afford remedies to a taxpayer dissatisfied with the assessment or the disallowance of his objection. The section in terms requires the Deputy Commissioner to consider the objection and to either disallow it or allow it, wholly or in part, and to serve the taxpayer with written notice of his decision. Notwithstanding the tractability of the english language, the section cannot be

interpreted so as to provide a springboard for an entitlement of the taxpayer to obtain particulars of the Deputy Commissioner' 5

Also if must be remembered that the Deputy Commissioner.

when considering the objection, is not reviewing his earlier assessment. He may do this by issuing an amended assessment. He may, of course, look at the material which was before him when making his assessment and refresh his mind on the matters which led him to assess; but his duty 1s to consider the taxpayer's written objection. The objection is the taxpayer's document in which he states the grounds on which he relies in support of his objection. Indeed, the taxpayer is limited to those grounds in

There was an assumption, inherent in the form of some particulars sought by the taxpayer in his amended application in this case, that the particulars, 1f ordered, would reveal the

particular sectiens of the Assessment Act relied on by the

Deputy Commissioner when making his assessment and the discretions and opinions then exercised and formed by nim. This misconceives the distinction between the Deputy Commissioner's

powers of assessment and his duties when considering the

taxpayer's objection to the assessment. They are two separate steps arising at different times and involving iifferent considerations, although there may be some degree of overlap. For example, the taxpayer seeks in his amended application, inter

"{1z11) whether in determining the objection, a determination made or an opinion formed was relied upon pursuant to sub-section 177Fil:. sub-section 82KK(4) or sub-section 82KL(2) of the Act, and, if so, identify:

(a) each determination or opinion so made or formed;

(b) the action considered necessary to give effect to any determination in accordance

(c) each tax benefit alleged to have been obtained by the Applicant in connection with a scheme to which Part iV A applied;

(d) the scheme alleged to be one to which Part IV A applied and, if in writing identify it and insofar as the same is not in writing, the terms thereof, and if it be inferred from circumstances, what are the ec1lrcumstances;

(e) the parties to or participants in the scheme and, if participation 1s said to be

by or through agents, those agents; (ft) the amount of expenditure (if any )

considered to be an allowable deduction in a later year of uncome than that the subject of the objection in terms of sub-section 82KK(4); (g) the facts, matters orc upon in forming any e4 to sub-section 82KL(2).

st of the particulars sought in that paragraph of the

amended application go to matters which. if taken into account by the Deputy Commissioner at all, would have been considered by him when making his original assessment rather than when ruling on The taxpayer's abjection to the assessment. The reference to Sub-sections L77F(1), ®@82KK(4) and A2KL(2! 18 bo sections which are iunvolvei at the time of the assessment process. Other particulars ecught by the taxpayer. bub not ail of them, caflect

In my opinion che Deputy lommisstoner 1s not oblige to give particulars fo the taxpayer of the grounds of ais disallowance of the taxpayer's objection. It foilows that there

was no duty on rhe Deputy Commissioner which he fail

a@ to scerform or in respect of which ne 'tTaried to make a reievant decision for the purposes of 3.7 of the Judicial Review Act. An order

pursuant to 0O.54A r. 27 cannot be made as there 1s no relevant

duty of the Deputy Commissioner. If I had found otherwise, the

question would have arisen whether the Court's discretion should be exercised in favour of requiring the Deputy Commissioner to furnish appropriate particulars. The form of request appearing in the amended application and ina document handed to me by counsel for the taxpayer would not have been entirely appropriate and would have required amendment. I seriously doubt whether any form of request for particulars of the decision disallowing the objection would, if particulars were supplied, have armed the taxpayer with the information he sought to enable him to elect between a Supreme Court and a Board of Review as the appropriate forum, This, however, is an arguable question which I need not

preceding pages are a true copy of the Reasons for Judgment herein of his