White Industries Australia Ltd v Commissioner of Taxation

REASONS FOR JUDGMENT 1 The applicants, White Industries Australia Limited ('White Industries') and GB & AB White Holdings Pty Limited ('White Holdings') (together 'the Taxpayers'), claim that documents issued in December 2001 by the respondent, the Commissioner of Taxation ('the Commissioner'), are notices of assessment for the purposes of the Income Tax Assessment Act 1936 (Cth) ('the Act') that supersede and displace notices of amended assessment issued under the Act by the Commissioner to the Taxpayers on 30 November 2001. 2 Section 161(1) of the Act relevantly provides that every person must give to the Commissioner a return for each year of income. Section 166 requires the Commissioner to make, from the return of a taxpayer, and from any other information in his possession, an assessment of the amount of the taxable income of that taxpayer and of the tax payable thereon. Section 166A(1) provides that, where a taxpayer that is a 'relevant entity' within the meaning of Div 1B of Pt VI furnishes a return in respect of income of a year of income: (a) the Commissioner is taken to have made, on the day on which the return is furnished, an assessment of the relevant taxable income and of the tax payable on that taxable income, as specified in the return; and (b) on and after the day on which the Commissioner is deemed to have made the assessment, the return is deemed to be a notice of the deemed assessment; and (c) such notice is deemed to have been served on the entity on the day on which the Commissioner is deemed to have made the assessment. 3 Section 174(1) provides that, as soon as conveniently may be after any assessment is made, the Commissioner must serve notice thereof in writing upon the person liable to pay the tax. Section 204(1) provided at the relevant time that any income tax assessed was to be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the thirtieth day after the service of the notice. 4 Section 175A provides that a taxpayer who is dissatisfied with an assessment made in relation to that taxpayer may object against it in the manner set out in Pt IVC of the Taxation Administration Act 1953 (Cth) ('the Administration Act'). Under the Administration Act, the time for lodging an objection is gauged by reference to the date of service of notice of assessment pursuant to s 174(1) of the Act. 5 Section 177(1) provides that the production of a notice of assessment is to be conclusive evidence of the due making of the assessment and, except in proceedings under Pt IVC of the Administration Act on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct. 6 Each of the Taxpayers was, in 1997, a relevant entity within the meaning of Div 1B of Pt VI of the Act. On 1 December 1997, each of them furnished a return to the Commissioner in respect of the year of income ended 30 June 1997. 7 The return lodged on behalf of White Industries disclosed the following: 'Taxable Income - $44,748,564.00 Gross Tax - $16,109,483.04 Other Credits - $ 1,589,173.92 Balance - $14,520,309.12'. 8 The return lodged on behalf of White Holdings disclosed the following: 'Taxable Income - $124,013,976.00 Gross Tax - $ 44,645,031.36 Other Credits - $ 44,645,031.36 Balance - $ Nil '. 9 The effect of s 166A(1) of the Act was that:

No reliance was placed on s 177F in relation to White Holdings and, accordingly, there was no power for the Commissioner to make an amended assessment at the date of the notice of 19 December 2001. 23 The December Notices are not duplicates of the November Notices. They bear on their face different dates of issue and different due dates. The December Notice addressed to White Holdings also shows a variation, albeit infinitesimal in the context, in the amount payable. The Taxpayers contend, therefore, that the December Notices are notices of assessment for the purposes of the Act and, must, therefore, be taken to have superseded or replaced the November Notices. 24 The Commissioner, on the other hand, contends that the assessment process undertaken in relation to amended assessment of each of the Taxpayers was complete upon the delivery to that Taxpayer of the relevant November Notice. He says that the December Notices were no more than pieces of paper, the delivery of which had no juridical consequences under the Act. 25 The scheme of the Act and the Administration Act draws a distinction between the process of assessment, on the one hand, and the giving of notice of assessment on the other. However, the process of assessment is only completed when the Commissioner, having inserted in a notice of assessment the amount of the taxable income and the amount of tax payable thereon, serves the notice on a taxpayer. Service of the notice of assessment on a taxpayer fixes the ascertainment of the amount of the taxable income and the amount of the tax payable by that taxpayer. That service brings to an end the process of assessment. If the Commissioner, having gone through the process of calculation, serves on a taxpayer a notice that he has assessed the taxable income and the tax at specified amounts, the tax becomes, by force of the Act, due and payable on the date specified in the notice: Commissioner of Taxation (Cth) v Prestige Motors Pty Ltd (1994) 181 CLR 1 at 14. 26 While it is not essential to the validity of a notice of assessment that it state the name of the taxpayer liable to pay the tax, it is necessary that the notice should bring to the attention of the person on whom it is served that the assessment to which it relates is an assessment of that person's tax. That is because the principal purpose of a notice of assessment is to bring to the attention of the person on whom it is served that such person is liable to pay, on the due date, the amount of tax assessed in the notice on the income stated in the notice: Commissioner of Taxation (Cth) v Prestige Motors Pty Ltd (at 14). 27 Thus, while the giving of notice of assessment brings about the completion of the process of assessment, the function of the notice is to bring to the attention of the taxpayer the fact of the liability that arises upon the giving of the notice. There is no liability until the notice is given but, once given, there is nothing further to be done in order to complete the process of assessment that gives rise to a liability to pay tax on the part of the relevant taxpayer. 28 There has been no suggestion on behalf of the Taxpayers that the November Notices are not valid notices of assessment within the meaning of s 174(1) of the Act. Further, the Taxpayers expressly eschewed any suggestion that the December Notices relate to any amended assessment different from those of which notice was given by the November Notices. It follows, therefore, that there was no reason for the Commissioner to have issued the December Notices. The only possible explanation for them is that they were the consequence of a mistake such as that referred to in the Commissioner's letter of 21 December 2001. 29 The Taxpayers contend in effect that the December Notices are amended notices of the amended assessments. It may be that, where a clerical error resulted in a notice of assessment that was inconsistent with an assessment actually made by the Commissioner, the Commissioner could give an amended notice of that assessment. It might also be that such an amended notice of assessment could only be given within the time within which the original notice of assessment could have been given. However, neither of those questions arises in the present case. 30 When an alteration or addition is made to a standing assessment, the assessment thenceforth exists as altered or added to and not as previously existing, plus independent alteration or addition: Federal Commissioner of Taxation v S Hoffnung & Co Ltd (1928) 42 CLR 39 at 54. However, the question in issue in the present proceeding is not concerned with amended assessments and the relationship between an original assessment and the amendment. As I have said, the Taxpayers do not suggest that the December Notices refer to any amended assessment different from those referred to in the November Notices. The only question is whether the December Notices are notices of assessment within s 174(1) that supersede and displace the November Notices. 31 I do not consider that the December Notices had any such effect. The assessment process was complete in relation to each of the Taxpayers upon receipt by them of the respective November Notices directed to them. Each of the November Notices was valid. Where a perfectly valid and complete notice of assessment has already been given to a taxpayer, the giving of another notice of the same amended assessment will not supersede or displace that earlier valid notice. 32 Whether or not the Commissioner could have made further amended assessments after 1 December 2001, he has not purported to do so and the Taxpayers do not suggest that he has done so or purported to do so. The only question is whether the December Notices can be characterised as notices of assessment pursuant to s 174(1). In my view they cannot, because there was simply no work under the Act for them to do. The Act confers no authority on the Commissioner to give a notice of an assessment or an amended assessment that has any juridical consequences where he has already given valid notice of that assessment or amended assessment. 33 The position might, of course, have been different if the November Notices had never been received by White Industries or White Holdings as the case may be. In such a case, the December Notices would have had effect as notices pursuant to s 174. To that extent, they might have been characterised as notices of assessment pursuant to s 174(1) and would have had work to do under the Act. The fact that they were out of time, of course, might be a different matter. However, once notice of an assessment (or an amended assessment) has been given in accordance with s 174, that is an end of the matter. 34 The application should be dismissed with costs. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

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