Taxation, Deputy Commissioner of v Loftus [2002] VSC 68

11. On 14 September 2001 the Deputy Commissioner filed a summons in the court seeking summary judgment in respect of the amount then outstanding.

14. The summons ultimately came before Master Wheeler on 11 December 2001. At the hearing the Deputy Commissioner sought to establish his case by producing the relevant Notices of Assessment and Amended Assessment to the Court. In doing so the Deputy Commissioner relied upon the provisions of s.177 of the Income Tax Assessment Act 1936, the relevant sub-sections of which read:

"177(1) 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 IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct." "(4) The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of or extract from any return or notice of assessment shall be evidence of the matter therein set forth to the same extent as the original would be if it were produced."

18. Before the Master and before me today the defendant sought to defeat the Deputy Commissioner's application by raising a number of matters including allegations that the assessments were not made bona fide, that they did not relate to the subject matter of the taxation legislation, that they were void or invalid, and that they were not in fact assessments or amended assessments as contemplated by the Act.

21. The Master rejected the defendant's contention, apparently on the basis that by virtue of the provisions of s.177, the defendant could not go behind the assessments and amended assessment, and entered judgment against the defendant in the sum of $1,677,882.07, that being the sum outstanding as at that date. The Master also ordered that the defendant pay the Deputy Commissioner's costs of the proceeding including reserved costs.

24. On 14 December 2001 the defendant filed a Notice of Appeal in the Court against the orders of the Master. It is that appeal which is now before me.

27. Once again the defendant sought to go behind the Notices of Assessment and Notice of Amended Assessment.

30. The contention of the Deputy Commissioner is that by virtue of the provisions of s.177(1) of the Act the defendant cannot challenge the assessment before this Court and his appeal should be dismissed.

33. In that regard the Deputy Commissioner relied upon the decisions of the High Court in F.J. Bloemen Pty Ltd v. Federal Commissioner of Taxation[1] and Deputy Commissioner of Taxation v. Richard Walter[2] and the decision of McDonald, J. in Deputy Commissioner of Taxation v. Collie[3].

36. In Bloemen's case Mason and Wilson, JJ., with whom Stephen and Aickin, JJ. agreed, said at p.375:

"An explicit and, in our view, correct statement of the effect of s.177(1) was made by Taylor J. in McAndrew [(1956) 98 C.L.R., at pp. 281-284]. For the reasons there expressed his Honour concluded that 's.177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground'. He conceded that the word 'excessive' in s.190(b) was inappropriate. However, he considered that an assessment 'made in purported but not justifiable exercise of a statutory power' could properly be described as 'excessive' [(1956) 98 C.L.R., at p.282]. This interpretation gives expression to the policy which underlies, and is manifest in, the statutory provisions. The effect of this policy is that, once the Commissioner takes advantage of s.177(1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has not complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt V. Again at 376 their Honours said: Section 177(1) specifically operates by compelling a court, for example the Supreme Court, in the exercise of its jurisdiction to treat a notice of assessment on its production as conclusive evidence that the assessment has been duly made and thereby foreclosing that issue. In theory s.177 leaves the Supreme Court with jurisdiction to decide whether an assessment has been duly made in a case in which an appropriate document is not produced."

"In recovery proceedings by the Commissioner of Taxation concerning a deed entered into between the commissioner and the taxpayer, notices of assessment tendered by the commissioner in reliance on s.177 of the Income Tax Assessment Act 1936 (Cth), where service of the notices on the taxpayer was not in dispute, foreclosed against the taxpayer the issues of whether the assessment was valid, bona fide and final and whether the deed was entered into by the taxpayer in consequence of economic duress exerted by the commissioner."

44. When the matter came before me this morning counsel for the defendant, in a detailed written submission, contended that Collie's case was no longer good law and should not be followed and that, having regard to the reasons of Mason, C.J., Brennan, Deane and Gaudron, JJ. in Richard Walter, Bloemen is no longer binding authority in circumstances in which it is contended that a notice of assessment was not bona fide, did not relate to subject matter of the taxation legislation, or was not reasonably capable of reference to the power given to the Deputy Commissioner.

47. A similar argument concerning the effect of Richard Walter was advanced to McDonald, J. in Collie.

50. After a careful consideration of the reasons given by the Court in Richard Walter, McDonald, J. concluded that whilst Richard Walter may be authority for the proposition that the matters sought to be raised by the defendant in the present case might be pursued in proceedings brought by a taxpayer against the Deputy Commissioner in the Federal Court of Australia pursuant to s.39B of the Judiciary Act, it was no authority for the proposition that those issues could be raised and pursued by a taxpayer in this Court. At p.112 his Honour said, referring to Richard Walter:

"These statements of the members of the court, comprising the majority, provide authority for the proposition that in proceedings brought in the Federal Court pursuant to s.39B of the Judiciary Act a plaintiff may pursue issues such as are sought to be pursued by the defendant in these proceedings and previously referred to. However, the decision of the court in Richard Walter Pty. Ltd. does not provide authority to permit those issues to be raised and pursued by the defendant in these proceedings. Rather, in these recovery proceedings the statements of Mason and Wilson JJ. in Bloemen bind this court. Accordingly, where in reliance on s.177(1) of the Act the plaintiff has produced and tendered in evidence the copy notices of assessment relied on and service on the defendant is not in issue, the matters sought to be raised and put in issue by the defendant in respect of the assessments, as referred to, are foreclosed against him and they are not able to be pursued in these proceedings."

54. I have carefully considered McDonald, J.'s reasons for judgment in Collie and I agree with them.

57. In my opinion Richard Walter does not alter the situation as it existed following the decision of the Court in Bloemen, namely, that s.177(1) of the Act compels this Court to treat a notice of assessment on its production as conclusive evidence that the assessment has been duly made, thereby foreclosing that issue.

60. That was the view I expressed when first called upon to consider this matter (see Deputy Commissioner of Taxation re Rashid Aziz Investments Pty Ltd[4]), and nothing which has occurred since then has caused me to alter that view.

63. The appeal, therefore, will be dismissed with costs to be taxed, including any reserved costs.

[1] [1981] HCA 27; (1981) 147 C.L.R. 360.

[2] [1995] HCA 23; (1994) 183 C.L.R. 168.

[3] [1998] 2 V.R. 106.