ARMIRTHALINGAM v FC of T

Tribunal:
Administrative Appeals Tribunal, Melbourne

MEDIA NEUTRAL CITATION: [2012] AATA 449

S A Forgie Deputy President

Mr Kanagantharan Amirthalingham has applied for review of an objection decision made by a delegate of the Commissioner of Taxation (Commissioner) on 29 October 2009. The objection decision disallowed Mr Armirthalingham's objection to the Commissioner's notices of amended assessments made on 15 July 2008 in respect of the income years ending 30 June 2000, 2001 and 2002. Those amended assessments had been made on the basis that Mr Amirthalingham had understated his income by $190,929, $243,204 and $169,675 in those years and that he had incorrectly claimed motor vehicle expenses due to an incorrectly maintained logbook. An indirect measurement tool, known as the T Account Method, was used to make that estimate. Mr Amirthalingham said that the only explanation for the understatement of his income in those three years was that his income included winnings he had received from gambling. His winnings had, for the same years, been $25,333, $138,800 and $104,450 respectively. The termination of his employment had meant that he could not obtain his original log book and he had reconstructed it using his personal diaries.

2. At the hearing, Mr Amirthalingham conceded that he could not properly claim motor vehicle expenses on the basis of the log books he had reconstructed when he was unable to locate the originals but maintained his claim that he had not understated his income. I have decided that Mr Amirthalingham has not discharged his burden of proof and have affirmed the Commissioner's objection decision dated 29 October 2009. As that objection decision affirmed the amended assessments issued on 15 July 2008 in respect of the 2000, 2001 and 2002 income years, the effect of my decision is that they remain in place.

BACKGROUND

3. In this section of my reasons, I set out the findings of fact that I have made on matters forming the background to the issues in dispute. They are not controversial and I have referred to the evidentiary material on which the findings are based in the footnotes.

Mr Amirthalingham's employment

4. Mr Amirthalingham was first employed by the Broadmeadows City Council in October 1990. When that council was abolished and subsumed in other councils in approximately 1994, Mr Amirthalingham became an employee of the Hume City Council (HCC).^[1] Mr Amirthalingham’s statement dated 18 January 2011; Exhibit A at [1]. I note that highlighting and comments handwritten in ink and pencil were made by the member conducting the conciliation conference. They do not form part of this exhibit or any other document on which they appear and to which I refer in the course of these reasons. I have paid them no regard in coming to my decision.

5. On 8 February 2001, Mr Amirthalingham entered a Total Employment Package Agreement for the position of a Landfill Services Coordinator (Agreement) with HCC.^[2] T documents; T3 at 73-80 This was a Senior Executive Officer position supervising waste disposal. His ordinary hours of work were set at 42.5 each week and were worked from Monday to Sunday. Any hours worked in excess of those hours in order to meet operational requirements were deemed to be included in the annual salary.^[3] T documents; T3 at 73-80

6. The Agreement between Mr Amirthalingham and HCC was to the effect that his annual salary included all penalties, allowances and loadings unless otherwise specified in that agreement. In so far as penalty loadings were concerned, the salary package included Mr Amirthalingham's attending up to ten call outs each year and award travel expenses to the value of $2,500 at 0.58 cents per kilometre. Towards the end of his period of employment, the HCC allowed Mr Amirthalingham to use one of its vehicles to travel on its business as he had complained that his large 4WD was too costly to run.^[4] T documents; T22 at 244

7. On 8 October 1992, Mr Amirthalingham was stood down from his employment with HCC on full pay while the Victoria Police (VicPol) investigated allegations that monies had been misappropriated by employees at the HCC's waste disposal premises. This followed HCC's review of the revenue it obtained from its two tips. It found that it was substantially less than it had been.

8. On 8 December 2003, Mr Amirthalingham was dismissed from his employment by the HCC.^[5] T documents; T67 and T68 at 462 and 463 He was charged with various offences but eighteen charges relating to Theft and False Accounting were permanently stayed by Kelly DCJ of the Victorian County Court on 21 July 2006 due to the loss or destruction of evidence.^[6] T documents; T83 at 525-546 and T68 at 463 Amounts involved in the eighteen charges totalled $1,163.

Mr Amirthalingham lodges income tax returns for 2000, 2001 and 2002

9. On 24 December 2003, Mr Amirthalingham lodged his income tax returns for the income years of 2000, 2001 and 2002.^[7] T documents; T4-T6 at 81-134

The Commissioner's audit, pre-interview questionnaire and issue of notices of amended assessments

10. As part of VicPol's investigation, the Commissioner was asked to audit Mr Amirthalingham's financial records. The Commissioner used the T account method to ascertain Mr Amirthalingham's taxable income.

A. The T account method

11. Section 166 of the Income Tax Assessment Act 1936 (ITAA36) requires the Commissioner to make an assessment of the amount of the taxable income, or that there is no taxable income, from the returns lodged by a taxpayer and from any other information in his possession. The Commissioner must make an assessment of the tax payable, or that there is no tax payable, in the same way. Section 167(b) allows the Commissioner to make an assessment on a different basis if one of three circumstances arises. The first arises if the taxpayer defaults in furnishing a return and the third if the Commissioner has reason to believe that a person, who has not furnished a return, has derived taxable income. The second arises if the Commissioner is not satisfied with the return furnished by a person. In that case:

… the Commissioner may make an assessment of the amount upon which in his or her judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purposes of section 166."^[8] ITAA36, s 167(b)

12. Relying on s 167(b), the Commissioner chose in this case to prepare "T accounts". This is a method that was described by Branson J in
Favaro v Federal Commissioner of Taxation:^[9] [1996] FCA 877 ; (1996) 34 ATR 1

"… 'T' accounts are a technique used as an indirect method of ascertaining a taxpayer's taxable income. They compare cash available at the beginning of a period plus cash on hand at the end of the period. With full and accurate information, the two sides of the exercise should balance. …"^[10] [1996] FCA 877 ; (1996) 34 ATR 1 at 5

The exercise leads to the preparation of an Excess Expenditure Statement. As an example, that prepared by the Commissioner on 17 June 2008 for the 2000 income year is reproduced at Attachment A. That led to the Commissioner's Adjusted Estimate of Underestimated Income shown in the Table at [14] below. Information identifying account numbers and the like have been omitted. References to "FA" and "NA" are references to Mr Amirthalingham's wife.

B. The amended Notices of Assessment

13. In the course of the audit, Mr Amirthalingham was interviewed by officers of the Australian Taxation Office (ATO). He had previously completed a pre-interview questionnaire on 22 September 2004 (pre-interview questionnaire) in which he estimated that he had won approximately $100,000 from 1996 to 2001 and had lost some $50,000 in 2002.^[11] T documents; T19 at 201-220 He had made these estimates on the basis of a "gut feel" and not upon any analysis he had undertaken.^[12] Exhibit A at [5] Following the audit, the Commissioner issued amended Notices of Assessment to him for the 2000, 2001 and 2002 years of income.

14. In the following table, I have set out details, omitting cents, from: the income tax returns as lodged by Mr Amirthalingham; the assessments; the pre-interview questionnaire; the Commissioner's initial estimate of understated income; his adjusted estimates; and the amended assessments.^[13] The table is based on the Notices of Amended Assessment at T documents; T95-T99 at 589-593, the Notices of Assessment at T7-T9 at 135-137, the Income Tax Returns at T4-T6 at 81-134 and the pre-interview questionnaire at T19 at 201-220.

THE EVIDENCE

Mr Amirthalingham's employment with the HCC

A. Mr Amirthalingham

15. I have referred above to the Total Employment Package Agreement that Mr Amirthalingham entered with HCC. Mr Amirthalingham described his employment arrangements with HCC as follows:

"From 1997 to 2000, I was part of an in-house tender group called 'Land Fill Services Team' which was awarded a three year contract to man and operate the weighbridges in Broadmeadows and Sunbury for the Council. That contract was extended for two years in 2000 until December 2002. The Council was intending at that time to re-Tender."^[19] Exhibit B at [2(b)]

16. Mr Amirthalingham said that the purpose of manning the weighbridge at the tips was to weigh the loads that came in to be tipped. He would key in the registration number of the vehicle. If it had been at the tip before, he would weigh it once and the computer would work out the weight of the load given the previous weight of the vehicle. If it had not been to the tip before, its weight would be recorded both before and after shedding its load. Charges were imposed on the basis of both weight and the classification of the type of waste and calculated by the computer.

17. Mr Amirthalingham supervised the weighbridge and had access to the computer, he said. He did not take money for the transactions and denied that some transactions were not recorded in the computer system. As far as he knows, the receipts that he was required to give customers reflected the data recorded in the computer but he was not always there. Mr Amirthalingham denied that it was possible to produce dummy transactions on the system allowing him to pocket the difference between a duplicate receipt and the receipt shown on the system. He had not stolen anything and this was not the source of the money he had used for gambling.

18. Mr Amirthalingham said in cross examination that he would work 38 to 42.5 hours each week but that he could swap with people as needed. When asked if he worked from 8:00am to 4:00pm, he replied that, on some days, he worked an hour or an hour and a half. Some days, he would start at the Town Hall and then go to a weighbridge but he could exchange with other workers. The contract was to keep the weighbridge open and the workers could swap if they needed to do something. That happened quite often, he said. It could be that he would swap a half day or leave early.

B. Notes of conversations between ATO officers and HCC

19. Mr Amirthalingham was the team leader in charge of two gatehouses and the weighbridges at the Bolinda Road tip at Campbellfield and the Sunbury tip. Both tips were open from 8:00am to 4:00pm. He was based at Bolinda Road but would travel to Sunbury approximately once each week.^[20] T documents; T21 at 243 The round trip was approximately 60 kilometres in length.^[21] Statement of Mr Amirthalingham dated 19 May 2011; Exhibit B at 2(g) and two Google maps attached Every day, he would make at least one trip from Bolinda Road to the Town Hall in Pascoe Vale Road at Broadmeadows to deliver paperwork and/or petty cash. The round trip was approximately ten to twelve kilometres.^[22] T documents; T22 at 244 Sometimes, he would pick up his son when he was on the way home from the tip.

Mr Amirthalingham's son's schooling

20. Mr Amirthalingham's son attended a private college in the relevant years of income. He would pick him up from after school care located at the school and would do so between 4:00 and 5:00pm each day. It took him over an hour to travel from Bolinda Road to the school. That happened most days, he said, and HE would drop off the money from the tip at the Town Hall between 5:00 and 5:30pm.

Mr Amirthalingham's property

A. Real estate

21. In his answers to the Commissioner's pre-interview questionnaire, Mr Amirthalingham stated that he had sold a unit in Swanston Street, Melbourne, that he had owned since approximately 1994 or 1995 for the sum of $180,000. He did so on 20 February 2002.^[23] T documents, T19 at 210 That was a property from which he had received rental of $31,077.60 from July 1999 to February 2002. He continued to own another unit at the same address and had received rentals of $29,530.31 over the same period. That unit he valued at $170,000.00. His own home he understood to be valued at $550,000.

22. Mr Amirthalingham had entered a Flexi-Plus Mortgage agreement with the National Australia Bank (NAB) on 14 May 1998 for the sum of $70,000.00. It was repayable at the rate of $1,000.00 each month. He had repaid it in May 2001.

23. Earlier, on 8 April 1997, Mr Amirthalingham had obtained a Tailored Home Loan from NAB for the sum of $305,000.00. The monthly payments were $2,772.00 until he sold the unit in February 2002 and repaid part of the loan. The monthly payments were reduced to $1,000.00.^[24] T documents, T19 at 214

B. Motor vehicles

24. On 5 August 1999, Mr Amirthalingham purchased a Toyota Land Cruiser for the sum of $73,837.00. He traded in his Toyota Prado and funded the balance of $32,105.70 through a hire purchase agreement. He repaid that loan in May 2001.^[25] T documents, T19 at 213 and 214

Mr Amirthalingham's holidays

25. In his pre-interview questionnaire, Mr Amirthalingham declared that he had travelled overseas on holiday in September (20) and October (2) 1999, February (10) and June (10) 2000, September (17) 2001 and January (14) 2002. I have shown the length of each holiday in brackets after the month. The destinations and his estimates of their cost were, in order, Malaysia ($2,000.00), New Zealand ($1,000.00), Malaysia and Philippines ($2,000.00), Singapore and Malaysia ($2,000.00), Philippines and Malaysia ($3,000.00) and Malaysia and India ($2,800.00).^[26] T documents, T19 at 215

Mr Amirthalingham's income

26. Mr Amirthalingham said that he won $25,333, $135,600 and $104,450 in the 2000, 2001 and 2002 years of income. As a result of this he understated his income in 2000 and 2001 by $79,183 and $61,008 respectively. He understated it by $54,397 in 2002 leaving a total understatement over the three years of $85,794.

Mr Amirthalingham's liabilities

27. In addition to the sum of $30,000 or so that should be deducted for motor vehicle expenses, Mr Amirthalingham had previously notified the Commissioner that adjustments should be made for additional interest income.

Mr Amirthalingham's gambling

A. Gambling Patterns

28. Mr Amirthalingham said in giving evidence that he spent a lot of time gambling at Crown during the years from 2000 to 2002. In his pre-interview questionnaire, Mr Amirthalingham stated that he and his wife had won approximately $100,000.00, or $500.00 net each month, from Crown Casino (Crown) during the years from 1996 to 2001. In 2002, they had lost approximately $50,000.^[27] T documents, T19 at 216 He estimated that they spent approximately $500.00 each month from their income from sources other than gambling together with approximately half of the amounts that they won.

29. In 1999, he was given a ranking as a T200 Mahogany player meaning that he was one of the top 200 players in the Mahogany Room at Crown in terms of turnover. Turnover, Mr Troost said in re-examination, is the cumulative total of all bets in the betting session. Mr Jack Troost is the Legal Counsel at Crown. He said that Mr Amirthalingham had retained that ranking until he was banned by Crown as a result of the criminal investigation. Mr Troost said that the Mahogany Room was staffed by Crown's most experienced staff. It is completely separate from the rest of the Casino and membership is by invitation only. It has a Cage, which is part of Crown's Bank. Players would cash cheques there and buy chips and make deposits into their own accounts so that they did not have to carry large sums of cash or large numbers of chips with them. Usually, they would buy chips at the table using a voucher obtained from the Cage.

30. As part of the audit, the Australian Taxation Office (ATO) obtained copies of Player Rating Transaction Reports (PRTR) and Player Monthly Transaction Reports (PMTR) for each of Mr Amirthalingham and his wife from the Crown Casino.^[28] T documents at 140-167 They show that both were regular attendees. Mr Amirthalingham initially estimated that he spent 7.5 hours gambling each week but revised this to 6.6 hours in his further statement.^[29] Exhibit B at [7] In his third statement, he said that he would be at Crown some four times each week and sometimes on the weekends as well. Due to his high level of turnover, Crown would give him and his wife accommodation at Crown Towers. He and his wife would spend the weekend there from Friday to Sunday at Crown's expense. Crown would also pay for his wife and son to sit in its box at the Melbourne Cricket Ground (MCG) to watch the Australian Open as well as to attend the Melbourne Cup. Crown would invite him and his wife to exclusive Christmas parties and to the New Year's Ball it held each year. Accommodation would be provided. Dinner would be provided at the gambling table if he indicated he wanted to leave to have dinner. His drinks and cigarettes would be brought to him when he arrived at the table. If he did not attend the Casino for a week or so, Crown would send flowers and telephone to make sure he was all right. Crown took care of its T200 members, Mr Amirthalingham said, and the members formed links among themselves so that they played together.

31. As far as Mr Amirthalingham was concerned, Crown provided all of these sorts of things to its T200 members on a complimentary basis. It did not do so because he had a certain number of reward points. As a consequence, he did not care whether his turnover was being recorded accurately. He rarely showed his T200 membership card as the staff knew his name.

32. Mrs Amirthalingham gave evidence confirming the benefits that she and her husband received. She would go to Crown with him two or three times each week. At times, she would go shopping with chips worth $5,000. She would ask her husband for them and he would give them to her. He did not have to tell the dealer or anyone else that he had done so. She would pay for her purchases either with the chips or with cash she had obtained by exchanging the chips for cash. Mr Troost said that he had heard that people used chips to pay for goods in the leased premises at Crown. On one occasion, Mrs Amirthalingham said, her husband had purchased a Rolex watch for himself. Mrs Amirthalingham said that she never kept records of the money or chips that she spent. She could not recall when she made purchases. Mrs Amirthalingham said that she never had any difficulty in paying household bills between 1990 and 1992. Her husband had only his job at HCC. They paid their son's school fees from his Crown winnings.

33. Mr Amirthalingham said that he played mainly Baccarat and Black Jack at Crown. He explained the rules of Baccarat. It is a game in which players bet on whether the Bank or a Player will achieve either a particular card value or a higher value of cards dealt to them according to set rules or whether they will tie:

• (1) If the Banker and Player tie, those who bet on a tie are paid at odds of 8:1.^[30] There are usually only two or three ties in 64 games, Mr Amirthalingham said.
• (2) Bets on either the Banker or Player are paid at odds of 1:1 but, in the case of bets on the Banker, they are paid less 5% commission payable to Crown.

34. Mr Amirthalingham said that his normal practice:

"… would be to start with a $100 bet, and win, so that I would have $200. I would then bet $200, and then win so that I would have $400. If I then bet $300 and lost I would actually still have my starting stake with me: the recorded loss of $300 would be a paper loss because I only lost the money I had won during the game and not the money I started the game with. In the player rewards reports this would show as a $100 buy in and $300 loss but in real terms I would not be behind or ahead.

However, although I almost never lost my starting stake, in the calculations I have made on the PRTs and about which I have given evidence in my first 2 statements I am acknowledging that where I lost, I have had to allow for the loss of my starting bet as well. However, the losses which I had won in the game and then lost should not count towards my overall losses because they did not affect my bottom line: the most I could ever lose was my starting amount. I usually stopped before I lost my starting stake - I would never go down to zero as I would always try to keep my luck for another day. When the PRTs show I lost my entire buy in, what actually happened is that I would have won money during the game at least as high as my buy in and that would cover the loss. So I would not leave with nothing, I would leave with my starting stake intact, having lost only the amounts I had won during the game."^[31] Exhibit C at [26]-[27]

35. His starting money was between $5,000 and $10,000 and he obtained that, he said, from previous winnings kept either in his Crown account or his bank account.

36. Ms Eva Ko was a member of the Mahogany Room from approximately 1998 to 2004. She has known Mr Amirthalingham since 1999 and continues to see him. She said in her statement^[32] Exhibit G that she would see him in the Mahogany Room quite often and would sometimes meet up there. Normally, that would be at the weekend, she explained in cross examination. They would gamble on Baccarat together and she would see him gambling amounts of $500 and $2,000. She saw him win amounts which were normally in the order of a few thousand, she said. He always had luck, she told Dr Bender. Ms Ko said that she saw Mrs Amirthalingham use her husband's chips from his gambling and that, normally, she would go off shopping happily.

37. From her own experience as a Baccarat player, Ms Ko said, it is possible to pool or piggy back bets in Baccarat. Pooling is not common but piggy back bets happen more often when a player has a long run of wins.

38. Whenever a player moved to a new table, Ms Ko said, the supervisor always checked the players' chips and recorded them as a Buy In at the new table. The supervisor would always check the player's chips at the end of play but, she told Dr Bender in cross examination, they might have put chips in their pockets in between tables.

39. She did not know whether all of her wins and losses had been correctly recorded on her rewards card. Crown was supposed to do that so that she could obtain points for her turnover. She agreed with Mr Amirthalingham's description of how the game of Baccarat is played and how the rewards are recorded.

B. Losses recorded in the Player Rating Transaction Reports maintained by Crown and wins claimed by Mr Amirthalingham

40. The following details are taken from the Commissioner's Excess Expenditure Statements and Mr Amirthalingham's first statement:^[33] Exhibit A at [11]

The losses assessed by the Commissioner match those calculated by Mr Troost in his second statement.^[37] Exhibit 2 at [14]

41. The Commissioner and Mr Amirthalingham used different methods to reach these figures. Taking the entries from the PRTRs for 18 August 1999 as an example,^[38] T documents; T100 at 622 the following table records the Commissioner's approach in bold and Mr Amirthalingham's approach and his comments in italics. The information relating to Buy In and Win and Loss are common to each and are shown in plain typeface.

C. Crown's records

C.1 Player Rating Transaction Reports

42. Mr Jack Troost is the Legal Counsel at Crown. He has given oral evidence and written evidence in the form of three statements and has also been engaged in discussions with both parties in this matter. He explained the PRTRs. Copies dating from 16 July 1999 to 5 February 2003 are included in the T documents^[39] T documents, T12 at 142-167 but he illustrated their interpretation by reference to a PRTR from an unidentified player having, he said, a similar playing profile to that of Mr Amirthalingham. I will reproduce only some of the entries.^[40] Exhibit 2 at JTF1 At the top of the PRTR is a record of the patron's name and membership number. There then follow a number of headings including:^[41] I have omitted the headings Issued Date, Issued Time, Issued Licensee, Issued Employee and Issued Station as no entries have been recorded under them.

43. The way in which the PRTR is intended to be read is as follows:

"This is a game-by-game report, detailing the time the membership card was swiped at a table or inserted into a gaming machine, the time the transaction(s) ceased and the location of the activity. The heading Buyin cites the total amount of monies known to have been exchanged for gaming chips at a casino table; AveBet is the estimated average bet per round of play; Hours is the total recorded gaming activity in hours and minutes. If the player has recorded a net win, the amount will be preceded by a negative sign (-), whereas a net loss to the player is presented as a positive figure. Finally, the report details the points earned for that activity. The heading Date, refers to the 'gaming day'. Gaming day means the 24 hour cycle from 6:00am to 6:00am."^[42] Exhibit 2 at JTF1 Mr Troost said in cross examination that a day is taken to run for those 24 hours. Therefore, for example, 21:54 on 5 November is recorded as that day but so too is 03:32 and 03:34 to 05:04 the following day: T documents; TT12 at 165.

44. Mr Troost said that PRTRs are compiled from information entered in a computer by dealers and supervisors at Crown at the gambling tables when a patron produces a membership card or is known to them. He could not guarantee that the reports were a complete or accurate record. Their accuracy depends upon members' producing their membership cards or on their being identified by staff. Nevertheless, Crown staff are expected to know and to be able to identify regular gamblers. That would have been the case in the Mahogany Room. Mr Amirthalingham would have been such a person. In addition, it is in the interests of members to produce their cards if they wish to accrue points. Staff are trained and experienced in the entry of accurate information. Accuracy is important because Crown relies on the records to operate its reward scheme and as part of its marketing strategy. It is important both to Crown and to its members that the scheme operates accurately. Members often check their records to watch the accrual of points, Mr Troost said. Points are awarded against turnover. The PRTRs are not used to calculate Crown's tax liability.

C.2 Patron Activity Inquiry Screen

45. Behind each line of the PRTR is a Patron Activity Inquiry (or Audit) Screen (PAI). Mr Troost illustrated the entry in the third line of the PRTR that I have reproduced above by reference to the relevant PAI annexed to his further statement.^[43] Exhibit 2 at JTF1 The PAI shows personal details relating to a patron playing roulette^[44] Exhibit 2 at [7(b)] and then sets out the details of the transaction:

46. Mr Troost explained the meaning of this information:

"… In this transaction, the patron arrives at the table at 18:07. They bring $1000 worth of chips to the table ('Chips In') and buy an additional $300 dollars worth of chips ('Cash In'). They play 6 hands ('hands played') in the space of 14 minutes ('Time Played'). They finish playing at 18:21 ('End Time') by which time they have lost their $1300 starting amount ('Actual Win'). They walk away from the table with no chips remaining ('Chips Out')."^[45] Exhibit 2 at [22]

A nil entry next to "Cheque In" refers to the fact that no cash was exchanged for a cheque at the Cage. The actual win was $1,300 for the Casino, and not for the player, who lost all of the chips that he brought to the table.

47. Mr Troost also explained that:

• "a. if a buy in is recorded at $0 then a player may still make a loss. This will be the case where they have brought chips to the table (as in [the] Line … referred to above);
• b. if there were a buy in of (say) $400 at the commencement of a line and a loss in the game of $800 (ie Actual Win = $800), there are two possible explanations. This might occur because the player brought $400 worth of chips to the table or because incomplete information was entered by the supervisor in charge of the table.
• c. The record of the amount won or lost by a player (ie Actual Win) is not affected by amounts won or lost during the time at the table. Actual Win records a net win or loss ie the amount the player started off with minus the amount they finished with."^[46] Exhibit 2 at [24]

48. Explaining that further in cross examination, Mr Troost said that the Buy In figure of $300 shown in the entry for 18:07 on 1 February 2011 of the example PRTR can be less than the ultimate loss for the patron because of further chips that were brought to the table. They were not recorded in the PRTR entry but are shown in the PAI. If a supervisor were to omit to record a patron's bringing chips to the table, that would make no difference to the win or loss recorded against the patron. Therefore, if a patron were to be recorded as having a Buy In of $400 but a loss (and so a win to the Casino) of $800, that would not mean that the supervisor had inaccurately recorded a Buy In of only $400.

C.3 Monthly Player Rating Transaction Reports

49. Crown also prepares a Monthly PRTR in relation to each patron's activities. Again as an example, I set out the details from the month of August 1999:

50. The reference to "Days" is a reference to the number of days that the patron was recorded as attending Crown during that month and the "Hours" are the "Total hours the patron was recorded in the Casino for that month". An "AveBet" is "The estimated average bet per round of play" and the "Buy In":

"Cites the total amount of monies known to have been exchanged for gaming chips at a casino table. If the patron brings chips to the table a buy in is not recorded."^[47] Exhibit 2 at [13]

51. A Monthly PRTR is interpreted in the same way as a PRTR in relation to the first six columns. It is a summary of the PRTRs and, overall, contains less detail. The information in its last three columns reflects:

52. Taking the month of August 1999, the total loss incurred by Mr Amirthalingham was $8,367. Apart from the number of days recorded under the heading of "Days", the information matches that shown on the PRTRs for the entries relating to his gambling on the days from 6 to 18 August 1999. In particular, the wins and losses shown on the PRTRs show that Mr Amirthalingham lost $8,367 and that figure is matched on the Monthly PRTR for that month. So too do the number of hours gambled by Mr Amirthalingham in that month, Mr Troost agreed.

53. Mr Troost explained the difference between the number of days shown on the PRTR and the Monthly PRTR. The PRTRs show the number of days on which Mr Amirthalingham gambled whereas the Monthly PRTR shows the days on which he used his membership card. They can be different. Taking the entry for May 2002 as an example, he said that Mr Amirthalingham did not gamble at all during that month but used his card and spent $150 worth of points. Therefore, the figure "1" appeared on the Monthly PRTR but no days were shown on the PRTRs. In the same way, the number of days shown on the Monthly PRTR relating to Mr Amirthalingham's gambling in August 1999 was six but only five are shown on the PRTRs for that month.

54. Points are accumulated on the basis of turnover alone. Buy In has nothing to do with it and nor does how much is won or lost. Turnover is an estimate, rather than a precise calculation, Mr Troost said. It is based on a cumulative total of average, rather than actual, bets. He could not explain how the figure of $4,031 was assessed as Mr Amirthalingham's turnover on 16 July 1999.^[49] T documents; T12 at 166 His Buy In was $350 and his ultimate loss $50. Given that he spent from 21:08 to 00:53, Mr Troost said, Mr Amirthalingham had to have been having wins along the way. Otherwise, he would have been out of there in about 75 minutes. While he was playing, an eye would have been kept on what he was betting and the figures prepared at the end of the session.

55. Mr Troost said that food and drink is free to some in the Mahogany Room. The practice has fluctuated over the years and he could not be sure what the practice was in 1999 to 2002. It was a regular thing to offer free accommodation, free tickets to the MCG and the Australian Open and to invite certain patrons to Christmas and to the New Year's Ball. Airfares were offered to VIPs as well as a free limousine service. Complimentary betting vouchers might be offered. Flowers were sent to VIPs. There is an area in Crown responsible for VIPs and they have to manage all of these matters within a budget.

56. A Monthly PRTR relating to Mr Amirthalingham was prepared by Crown for the months from July 1999 to May 2003.^[50] T documents at 167 On Mr Troost's analysis, they showed that Mr Amirthalingham had incurred a net gambling loss in the three years of income in issue in this case.^[51] Exhibit 2 at [14] That loss was:

57. Returning to the entries for CompVal and CompExp, Mr Troost said that they relate to the rewards programmed operated by Crown. Points can be used to purchase accommodation and for shopping in the Crown shops. They can be used to pay for car parking but some patrons receive complimentary parking for a number of entries. One point equals one cent but the CompVal and CompExp figures are shown in the Monthly PRTRs in dollar figures. Points can also be earned by shopping at specific retail outlets. In the years in issue, those outlets were to be found only at the Crown complex. The programme has since been extended to include others.

C.4 The accuracy of Player Rating Transaction Reports

58. In his third statement, Mr Troost illustrated that the PRTRs may be incorrect. He took the third entry in the example I have given above. Information that I have not reproduced shows that the patron was playing roulette. The entry shows that he played six hands in 14 minutes and had an average bet of $200 with a turnover of $1,213. This, Mr Troost said, shows that the PRTR is not an accurate record. He explained in his third statement that:

• "(d) the patron came to the table (location 2501) and exchanged $300 cash for chips and that is recorded as the 'buy in' in the PRTs. At some stage, the patron also produced a chip(s) to the value of $1,000 - the only possible explanation is that he produced it from his pocket. He cannot have won it during the game given the number of bets, his average bet size and turnover. The $1,000 worth of chips ought to have been included as part of the BuyIn which would then mean that … the net loss was $1,300 and the player finished with nothing, therefore the amount the player started off with (BuyIn) was $1,300;
• (e) it is not possible for the example given to occur. The following two examples are the closest to it:-
  

  Bet	Win/Loss	Remaining Funds
  $300	Loss	$1,000
  $200	Loss	$800
  $200	Loss	$600
  $200	Loss	$400
  $200	Loss	$200
  $200	Loss	$0

  This means that $1,300 was spent with an average bet of $216.67.

  
  

  Bet	Win/Loss	Remaining Funds
  $200	Loss	$1,100
  $200	Loss	$900
  $200	Loss	$700
  $200	Loss	$500
  $200	Loss	$300
  $200	Loss	$100

  This produces an average bet of $200 according to the Audit screen but leaves $100 remaining whereas the patron ended up with $0.

  …"^[52] Exhibit F at [7]

59. Mr Luis Legaspi is a friend of Mr Amirthalingham's and lived with him for a number of years. He also has a Bachelor of Arts in Industrial Education, majoring in Industrial Electronics, and has passed the Teachers Professional Board Examination. He has completed a number of computer programming courses and courses in related disciplines. Since 1995, he has been employed by a multinational company specialising in the delivery of information technology. He has analysed the entry in the PRTR relating to the same patron playing the six games of roulette. He and Mr Troost both agreed that it was impossible to play six hands in the space of 14 minutes and incur a loss of $1,300 with an average bet of $200. The lowest average bet was $216.67. It was impossible for the patron to have won any amount in those six hands for, to do so, would have caused the total amount he spent to exceed $1,300. Mr Legaspi attached Excel spread sheets that he created demonstrating that there are 794 scenarios which each produce the lowest possible average bet of $216.67.^[53] Exhibit H at [3] I note that the Excel spread Sheets show that 793 permutations are possible when six hands are played and the total spent is $1,300.

60. In Mr Amirthalingham's case, Mr Troost said, the PRTRs were likely to have a better chance of being accurate because he had been made a member of the Mahogany Room due to his frequently gambling there and the level of his spend. That room had one supervisor to every two to four tables whereas the main gambling rooms had one supervisor to every eight tables. As eight to ten players sit at a Baccarat table, that means that a supervisor needs to keep track of some 20 people seated at the tables and, if there are players standing behind them, up to 30 people. Higher levels of supervision meant that recording errors were less likely to occur, Mr Troost said. Crown had not conducted any independent audit to check the accuracy of its records.

61. In his oral evidence, Mr Troost said that the PRTRs are "largely right" but he could not say that they are 100% accurate. There are too many variables for him to estimate just how far below 100% they fall. There could be an error by the supervisor in entering the information, a supervisor could forget to enter the details, there could be outstanding wins and losses or an underestimation of them. Despite that, Mr Troost maintained his position that the PRTRs were largely accurate but could never to be said to be 100% accurate.

62. In accruing points, Mr Troost said, the main focus was on the amount of money spent by a player. The time that player spends at a table is not relevant for points. No one would be fussed were a supervisor to write down the wrong time but they do have to reconcile their float. They know how many chips they began with and how many chips they requested during the day.

63. Taking the PRTRs for 8 and 12 December 1999 as examples, Mr Troost said that they show that Mr Amirthalingham won $200 on 8 December 1999 and lost $400 on 12 December 1999. They were the net wins and losses for those days. They read:

64. Precisely what is meant by the "Buy In" figure was a matter of some discussion. In his first statement, Mr Troost said that:

"A buy in should be recorded in the PRTs as having occurred at a Table (a buy in is never recorded as having occurred at the Cage) when a patron:-

• (a) Comes to a Table with chips having purchased them at the Cage (via money paid, or the withdrawal of money from the Applicant's account) or otherwise, such as having won chips at the previous Table and then taken to the next Table;
• (b) Purchases chips at the Table via:-
  • (i) cash;
  • (ii) money taken from the patron's account;
  • (i) a Chip Purchase Voucher (whether purchased from the Table or from the Cage previously); and
• (c) Withdraws cash at the Cage and subsequently converts the cash to chips at the Table."^[54] Exhibit E at [7]

65. In his second statement, Mr Troost said that The "Buy In" figure records the amount of chips purchased at either the table or at the Cage in the room concerned. It does not, Mr Troost said, necessarily record all of the chips purchased and brought to the table by the patron. Therefore, [7(a)] of his first statement was "… incorrect in its entirety" and:

• "b. On occasions where the Applicant moved tables during a gambling session while still holding chips, the chips brought to the new table are not recorded in the buy in figure in the PRTRs.
• c. On occasions where the Applicant bought chips to a table from a previous session, no buy in would have been recorded.
• d. On occasions where the Applicant bought chips at the cage and then came to a table, no buy in would have been recorded.
• e. On occasions where the Applicant purchased a chip purchase voucher but did not purchase chips at a table, a buy in would not have been recorded."^[55] Exhibit 2 at [25]$400

66. In his third statement, Mr Troost said that:

"… in relation to paragraph 7(a), a BuyIn should be recorded in the PRTs in those circumstances. However, this is clearly not the case as is evidenced by the Patron Activity Screen referred to in paragraph 22 of my Second Statement. The same applies to paragraphs 25(b) to (d) of my Second Statement. Paragraph (e) of my Second Statement would have no effect on gambling activities."^[56] Exhibit F at [8(d)]. The Patron Activity Screen to which Mr Troost refers in this paragraph of his statement is reproduced at [45]. Paragraph [25] of his second statement, to which he also refers, is reproduced in part in [65] above.

67. In cross examination, Mr Troost agreed that this statement was not correct for it is not correct to say that Chips In should be recorded as a Buy In. The Patron Activity Inquiry Screen, to which I will now turn, separates Cash In and Chips In. A patron may take chips from the Mahogany Room and take them outside the Casino and come back with them on another day or never bring them back. If he comes to the Table with chips, they are not recorded as a Buy In. They are not recorded in the PRTR as chips in hand. Therefore, it does not follow, as Mr Amirthalingham would have it, that a zero Buy In means that he must have won money. All that it means is that a patron brought chips to the Table. The same is true when the Buy In is less than the patron's loss. That meant that he had been incorrect in his first statement in saying that:

• "(a) if a buy in is recorded at $0 then a loss cannot occur in that line unless, during the course of that game, there was a win by the Applicant of an amount at least as large as the loss; and
• (b) if there was a buy in of (say) $400 at the commencement of a line and a loss in the game of $800, this could only occur if there was a win during the game of at least $400."^[57] Exhibit E at [3]

68. His second statement in which he had said that, on gaining further information and clarification, he could not agree with his first statement that Mr Amirthalingham's analysis was correct was itself correct.^[58] Exhibit 2 at [26] His statement in his third statement at [8(a)] that his first statement was correct was not correct whereas his statement at [26(b)] in his second statement that it was incorrect was itself correct. This meant that he did not agree with the fourth line of the analysis made by Mr Amirthalingham in [26] of his first statement when he concluded that a Buy In of $600 and a win (and so a loss for Mr Amirthalingham) of $1,000 meant that he had to have won at least $400 in the game. That example was given for 18 August 1999.^[59] T documents; T12 at 165 To the extent that Mr Legaspi's analysis annexed to his statement was based on the assumption that a zero Buy In or a Buy In less than the losses showed a win for Mr Amirthalingham, it was incorrect, Mr Troost said. So too was his own statement at [9(b)] of his first statement when he had said that Mr Amirthalingham must have won at least as much as he had lost in situations in which the loss is greater than the Buy In.

C.5 Patron Gaming Cheque Report

69. A Patron Gaming Cheque Report dated 13 July 2007 shows that Crown had issued ten cheques to Mr Amirthalingham between 27 December 2000 and 6 August 2001. Four were for $5,000 and the others for $6,000, $7,000, $8,000, $10,000, $20,000 and $25,000 respectively.^[60] T documents at 522 Mr Amirthalingham said that these cheques reflected his winnings because Crown will not issue cheques unless they are verified as winnings.

70. In the period from 1999 to 2002, Mr Troost said in giving evidence, Crown had a policy that it would not give a cheque in exchange for chips unless the staff were satisfied that the player had been playing to a level that was consistent with his or her holding those chips. If not satisfied, the staff would telephone the pit boss to check whether it was so. In more recent years, a cheque is issued.

71. In cross-examination, Mr Troost said that that a cheque would be issued if Crown was satisfied that the patron was gambling. If a patron broke even so that he left with the amount he arrived with, Crown would issue a cheque if he had been shown to be gambling. A patron would also be given a cheque if he or she arrived at Crown with $50,000 in chips, gambled, lost $30,000 and left with $20,000.

C.6 Patron Transaction Report

72. A Patron Transaction Report (PTR) appears at T27 of the T documents covering the period from 27 January 2000 to 15 January 2002. It shows amounts deposited and withdrawn by Mr Amirthalingham from his account at Crown. Mr Troost said that it was not possible to use the report to identify whether the amounts deposited came from winnings at the Casino or not. A deposit could come from a patron's salary. There are, however, deposit slips that relate to the reference numbers given against each entry on the PTR. Those deposit slips show whether the deposit came from chips, cash or a cheque. If it came from chips, the voucher will have a reference number.

C.7 Patron Receipts

73. Documents described as "Patron Receipts" (Patron Receipts) show details of deposits and withdrawals made in Mr Amirthalingham's account at Crown.^[61] They are bundled together in Exhibit A.5 In so far as withdrawals are concerned, they can be divided into withdrawals in the form of Chip Purchase Vouchers, cash and, on one occasion, a cheque. Deposits took the form of Cash Chips only.

74. Four of the Patron Receipts were issued on 11 February 2001. The first was issued at 17:27 on 11 February 2001 and showed that Mr Amirthalingham had cashed chips worth $10,000. The balance of his deposit account was $37,000. The identity code on the Patron Receipt, Mr Troost said, showed that it had been issued at the Cage in the Mahogany Room. He agreed that there is no mention on the receipt that the chips came from gambling wins. It was "entirely possible", he said in cross examination, that they could have been bought earlier, taken away, brought back and exchanged for cash. That meant that he could cash in chips for amounts that did not reflect gambling winnings in related PRTs.

75. In his first statement, Mr Troost had said at [9(a)] that:

"there are five Patron Receipts dated 13 January 2010 (the first one), 24 January 2001 (the first one), 27 January 2001 and 11 February 2001 (both of them) where the Applicant purchased a Chip Purchase Voucher via his account at either the Cage or a Table and these are not recorded in the PRTs. This is evidence that the Applicant has had a greater level of winnings than is recorded in the PRTs."

76. I have set out all of the entries shown on the PRTRs for 13 January 2001 as well as the following days on which gambling is recorded i.e. 14 and 18 January 2001:

77. The Patron Receipt issued at 00:07 on that day shows Cash Chips for $5,000. Mr Troost agreed that nothing showed that the chips came from winnings. It is possible that the chips had been purchased earlier. I will set out the information that I have for 13 January 2001 in the Patron Receipts as well as that for the following day, 14 January 2001:

78. The entries for 24 January 2001 in the PRTRs are:

79. The entries for 24 January 2001 in the Patron Receipts are:

80. In cross examination, Mr Troost agreed that it "could be" the case that the withdrawal at 06:01 of $1,000 is reflected in the Buy In figure of $1,200 at 06:05 and that it was supplemented by $200 that Mr Amirthalingham took from his pocket.

81. The entries shown on the PRTRs for 11 February 2001 are:

82. The entries for 11 February 2001 in the Patron Receipts are:

83. Mr Troost agreed that it was likely that Mr Amirthalingham had used the Chip Purchase Voucher obtained at 01:28 on 11 February 2001 as part of his Buy In at 15:23 later on the same day. At the same time, events recorded in the Patron Receipts before 06:00 are likely to show up on the PRTRs as occurring on the previous day.

84. The Patron CPV Reports shown at T78 of the T documents list the Chips Purchase Vouchers purchased. They match the Patron Receipts and can be cross-matched. The same cross-matching cannot be made between the Patron CPV Reports and the PRTRs, Mr Troost agreed. The Chip Purchase Voucher issued at 15:25 on 11 February 2001 matches the entry for the same time, date and location and with the same reference number in the Patron CPV Reports.^[63] T documents; T77 at 494 The Chip Purchase Voucher issued earlier at 01:28 on 11 February 2001 is shown on the Patron CPV Reports as having been issued on 10 February 2001. The details recorded otherwise match those on the Chip Purchase Voucher. Mr Troost agreed that the entries reflected each other and corresponded with the entry in the PRTRs for 10 February 2001 at 02:00.^[64] T documents; T77 at 494; T12 at 155 The Buy In was for the sum of $7,000 but that, Mr Troost agreed, was likely to include the sum of $5,000 withdrawn as a Chip Purchase Voucher at 01:28 on 11 February 2001. Mr Troost said that withdrawals will not show up on PRTs if withdrawn in cash at the Cage but will otherwise show up. Deposits will not show up at all.

D. Odds favour the Casino

85. Mr Troost agreed with Dr Bender that, in order to make a profit, the Casino must make a margin on gambling. Furthermore, the odds on the Casino's winning any game have to favour it and not the player. In roulette, for example, there are an equal number of red and black numbers but zero shifts the odds in the Casino's favour. Mr Troost agreed that this means that the odds favour Crown overall but said that some patrons sit outside the norm. When asked whether Crown monitors particular patrons, he replied that it did not monitor patrons as much as tables. Each table has an expected win range. If that table is not holding to that range, Crown will look at who is playing at it and to historical data. If Crown suspects a card counter is playing Black Jack, the play is taped. He said that the detection methods are quite sophisticated and can distinguish between a good lead and systematic counting. Those players are then placed on a list and subject to increased monitoring. To his knowledge, Mr Amirthalingham had never been on such a list. He was banned when charged with offences because Crown has processes in place if proceeds of crime are involved. It has to protect itself and the integrity of gambling, he said.

Motor vehicle expenses

A. Mr Amirthalingham

86. Mr Amirthalingham said that he was not entitled to seek reimbursement for his motor vehicle expenses over and above the $2,500 provided for in his contract of employment.^[65] Exhibit B at [2(e)] He had claimed $23.00 for motor vehicle expenses in the 2002 income year because he had incurred a parking fine while attending a course at HCC's request. He had maintained a log book to record his actual motor vehicle expenses but it had been taken during the police investigation. He was unable to recover it and had reconstructed it. These were included in the T documents for the period from 1 July 1999 to 30 June 2002.^[66] T documents; T43, 44 and 45 at 296-346

87. Mr Amirthalingham said that he gave his reconstructed log book to his accountant who calculated the percentage of work use of the motor vehicle in each year to be 81%. That led to the claims for deductions shown in the table at [14] above. They included claims for deductions for use of his motor vehicle.

Comparison of reconstructed log book and PRTRs against school and work commitments

88. Dr Bender took Mr Amirthalingham through some of the entries from his reconstructed log book and those in the PRTRs for the same period. I have added the information from the PRTRs in the last two columns for comparison as well as some additional entries to show the context and pattern of the records in the log book. In the first entry for 28 March 2000, I have entered each of the times recorded on the relevant PRTR. Apart from the entry for 12 June 2001, the later figures show only the first and last times as they reflect a similar pattern of times. Odometer readings have been omitted where they are illegible:

89. Mr Amirthalingham agreed that he could not have picked up his son from school on the days on which he attended Crown in the previous table. In relation to the entries for 5 April 2000, he said that, had his son finished school at 3:15pm, he could have picked him up and sent him home. When reminded that he had said that he picked him up between 5:00 and 5:30pm, Mr Amirthalingham said that he was "just giving you a possibility".

90. Mr Amirthalingham insisted that the entry for 19 May 2000 was correctly made for his mileage even though he spent the whole of the working day at Crown.

91. In relation to the entries for 12 June 2001, Mr Amirthalingham said that he had spent most of the day at Crown but travelled for work in the three hour break after 6:00pm. He acknowledged that was after the tip had closed for the day but said that they could have called him and he travelled to the tip. The travel time would have amounted to 80 minutes as it took him 40 minutes to travel from the tip to Crown. That left him with an hour to deal with the problem. He did not know whether he could have picked his son up from school.

92. Mr Amirthalingham agreed with Dr Bender that the entries for the 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 July 1999 all show private usage of 12 kilometres each day. The same is true for the entries in September and October 1999. The trip from his home to Bolinda Road was approximately 20 kilometres. The Sunbury tip is further away. It might be correct to say that the distance from Bolinda Road to Crown was about 28 kilometres. He had said that the trip took him 40 minutes. When asked how he showed 12 kilometres each day for private use when he only occasionally picked his son up from school on a work trip and the trip from his home to Bolinda Road is approximately a 35 to 38 kilometres round trip, Mr Amirthalingham replied that the trip from home to work is a claimable expense. When asked what the figure of 12 kilometres represented, Mr Amirthalingham replied that it was a distance that he had decided not to claim. He did not know what it represented.

B. Other evidence

93. A file note kept by Mr Peter Maxell, an officer of the ATO, recorded that HCC would reimburse Mr Amirthalingham at the per kilometre rate if his travel exceeded $2,500. It would do so as part of his wages after he had lodged a claim. Mr Amirthalingham claimed $23 reimbursement from the HCC in the 2002 income year but not in the earlier years.^[67] T documents; T 21 at 243

Taxation returns

94. Mr Frankie Yin has been an accountant since approximately 1996. He assisted Mr Amirthalingham during his taxation audit and prepared the returns for him for the three years in issue. When asked in cross examination what advice he had given Mr Amirthalingham regarding his claim for vehicle expenses, Mr Yin replied that he had asked whether the travel was for work purposes. It could not be travel from home to work. There are a few methods that could be employed including the maintenance of a log book. Mr Yin said that Mr Amirthalingham had not shown him his log book at the time he prepared his returns. Instead, he showed him depreciation which Mr Yin calculated to be 81%. Mr Yin said that he queried why it was so high and Mr Amirthalingham had told him that he travelled between sites and his office at the Town Hall. He could not recall if he was ever given the original log books. He had not seen the reconstructed log books when he prepared the returns and had first seen it during the audit.

SUBMISSIONS ON BEHALF OF MR AMIRTHALINGHAM

95. Ms Ellyard submitted, the issue in this case is whether Mr Amirthalingham had assessable income in excess of the amounts he declared to the Commissioner as assessable income. The focus, she submitted was whether he incurred all the expenses he was said to have incurred. If he did, I had to decide whether he met those expenses from undeclared income. The PRTRs, Ms Ellyard submitted, are not evidence of losses on which I should rely. They are not sufficiently reliable to establish anything to do with wins and losses. If I am not of the same view, I should find that they support a finding that Mr Amirthalingham won, rather than lost, at Crown in each of the years in question. The PRTRs and other documents prepared by Crown cannot be raised to the status of financial records.

96. Relying on authorities to which I will refer below, Ms Ellyard submitted that it is appropriate for a taxpayer to satisfy the burden of proof imposed by s 14ZZK of the Taxation Administration Act 1953 (TA Act) by inferences from all of the evidence. There is no onus on the Commissioner to prove that Mr Amirthalingham has had another job or engaged in illegal activity but it is relevant to consider the extent to which the Commissioner showed those other sources. This is not to reverse the onus of proof placed upon the Commissioner but to assess the evidence.

97. Ms Ellyard submitted that I should accept Mr Amirthalingham's denial that he had other employment, had another source of income or was engaged in illegal activity. No evidence was found of the latter after an extensive investigation. She referred to the judgment of Judge Kelly. I should also accept his estimate of how his week was divided up among his activities as well as how he gambled and what he did with his winnings. By 1997, he had bought a watch for $27,000 and he regularly took winnings from the table during a game so that they could not be counted. His evidence in this regard was supported by that of his wife and Ms Ko as well as by Mr Troost.

98. The figure of "86413" should not appear in the Commissioner's Excess Expenditure Statement for the 2000 year of income as "Kana's casino losses". Mr Amirthalingham said that he met any expenses with gambling winnings. Therefore, any expenses that exceeded his assessable income were funded with the proceeds from gambling. His evidence is supported by the high level of turnover shown on the PRTRs.

99. If I were not to accept that submission, Ms Ellyard's alternative submission was that the amounts shown on the Commissioner's Excess Expenditure Statements as Mr Amirthalingham's losses should be removed. In their place, I should find that he had won minimum amounts of $25,333 in 2000, $135,600 in 2001 and $104,450 in 2002. She handed up revised excess expenditure statements showing that Mr Amirthalingham's understated income would be $89,782 in 2000, $70,465 in 2001 and -$44,715 in 2002.

100. Those statements reflected Mr Amirthalingham's abandonment of his claimed deductions for motor vehicle expenses. He had been entitled to claim $6,616 in each of the tax years using the 12% depreciation model and so two thirds of the amount he actually claimed. The original penalty imposed was 50% but, Ms Ellyard submitted, no penalty should be imposed as there is no sign that he was reckless. He used his best efforts to recreate the log books and gave his best estimation. At its highest, he could be said to have been no more than negligent. Given everything that was going on in his life at the time, he did the best he could.

101. The penalty imposed by the Commissioner in respect of the claimed understatement of his income should also be remitted in its entirety on the basis that Mr Amirthalingham is a witness of truth who should be found to have obtained his unexplained earnings from gambling. If that is not accepted, it has been established that he gambles. The only thing that has not been established is that his winnings reflect his unexplained income. Therefore, at its highest, the penalty should be imposed at the rate of 25% and not of 50%.

CONSIDERATION

Burden of proof

A. Statutory provisions

102. Section 14ZZK of the TA Act provides:

"On an application for review of a reviewable objection decision:

• (b) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
• (c) the applicant has the burden of proving that:
  • (i) if the taxation decision concerned is an assessment (other than a franking assessment) - the assessment is excessive; or
  • (ii) …
  • (iii) in any other case - the taxation decision concerned should not have been made or should have been made differently."

B. Standard of proof unaltered: balance of probabilities

103. Section 14ZZK does not alter the standard of proof that generally applies in the Tribunal. That means that a person who bears a burden of proof may meet it by producing to the Tribunal evidence and other material that is relevant and probative and that satisfies it of the existence or non-existence of relevant factual issues on the balance of probabilities rather than simply on the basis of possibilities.

C. How a taxpayer may satisfy the burden

104. The case of
McCormack v Federal Commissioner of Taxation^[68] [1979] HCA 18 ; (1979) 143 CLR 284 ; 23 ALR 583 ; 9 ATR 610 ; 53 ALJR 436 ; 79 ATC 4111 illustrates the nature of a taxpayer's task in satisfying the burden. It does so in a case in which the Commissioner had treated the net profit from the sale of a property as assessable income on the basis that it arose from the sale of a property Mrs McCormack had acquired for the purpose of profit-making by sale within the meaning of s 26(a) of ITAA36 as it was then in force. Gibbs J explained Mrs McCormack's task:

"… The taxpayer bears the burden of proving that the assessment was excessive. To discharge that burden in a case such as the present he must prove affirmatively, on the balance of probabilities, that the property was not acquired for the purpose of profit-making by sale. The burden may be discharged by drawing inferences from the evidence. In some cases in which all the relevant facts are known, and there is no material upon which it might properly be concluded that the property was acquired for the relevant purpose, the inference may properly be drawn that the property was not acquired for the relevant purpose. But it is not enough, even when all the facts are known, that there is no material upon which it may be concluded that the property was acquired for the purpose mentioned in s. 26(a). If a taxpayer can succeed, simply because there is no evidence from which it can be concluded that the relevant purpose existed, that must mean that the burden of proving the existence of that purpose lies on the Commissioner. That in my respectful opinion would be to invert the onus of proof. The taxpayer will succeed if the proper inference from the evidence is that the property was not acquired for the relevant purpose, but if there is no evidence as to the purpose for which the taxpayer acquired the property the appeal must fail."^[69] [1979] HCA 18 ; (1979) 143 CLR 284 ; 23 ALR 583 ; 9 ATR 610 ; 53 ALJR 436 ; 79 ATC 4111 at [11]; 303; 597; 443; 622; 4,121

105. If all of the material facts were known and the amount of a taxpayer's taxation liability turned on the application of the law to those facts, the taxpayer could discharge the burden of proof by establishing that the Commissioner had erroneously included in the assessed taxable income an amount that should not have been included.^[70] Federal Commissioner of Taxation v Dalco [1990] HCA 3 ; (1990) 168 CLR 614 ; 90 ALR 341 ; 20 ATR 1370 ; 64 ALJR 166 ; 90 ATC 4088 at 625; 347; 1375-6; 170; 4094 per Brennan J

106. It is open to the taxpayer to attack the Commissioner's power to make an assessment^[71] McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 ; 30 ALJR 464 at 270-271; 465-466 per Dixon CJ, McTiernan and Webb JJ or the calculation of the amount of an assessment. If the taxpayer chooses to attack the calculation of the amount of the assessment:

"… mere error in the formation of that judgment by the Commissioner does not warrant the setting aside of the amount assessed. Given the validity of the exercise of the power to make an assessment …, the ultimate question is whether the amount of the assessment is excessive. The amount of the assessment might not be excessive in fact, though the reasons which led to the assessment were erroneous. …"^[72] Federal Commissioner of Taxation v Dalco [1990] HCA 3 ; (1990) 168 CLR 614 ; 90 ALR 341 ; (1990) 20 ATR 1370 ; (1990) 64 ALJR 166 ; 90 ATC 4088 at 623; 345; 1374; 169; 4092 per Brennan J

107. Therefore, merely establishing on the balance of probabilities that the Commissioner has made an error cannot satisfy the taxpayer's burden of proof under s 14ZZK(b)(i) in relation to an assessment for the burden is to prove that "the assessment is excessive". The point was made in Dalco:

"… A taxpayer who shows on the facts that are known a mere error by the Commissioner in assessing the amount of the taxpayer's taxable income does not show that his objection should have been allowed or that the appeal against the assessment must be allowed. …"^[73] [1990] HCA 3 ; (1990) 168 CLR 614 ; 90 ALR 341 ; (1990) 20 ATR 1370 ; (1990) 64 ALJR 166 ; 90 ATC 4088 at 625; 347; 1375-6; 170; 4094 per Brennan J with whom Mason CJ, Dawson, Gaudron and McHugh JJ agreed

D. No burden of proof on Commissioner and no obligation to put forward material establishing a particular view

108. Referring to a similar burden formerly imposed on the taxpayer by s 190(b) of ITAA36, Mason J said in
Gauci v Federal Commissioner of Taxation^[74] (1975) 135 CLR 81 ; Barwick CJ and Jacobs JJ; Mason J dissenting (Gauci):

"The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s. 190 (b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail."^[75] (1975) 135 CLR 81 at 89 and approved by Brennan J in Dalco [1990] HCA 3 ; (1990) 168 CLR 614 ; 90 ALR 341 ; 20 ATR 1370 ; 64 ALJR 166 ; 90 ATC 4088 at 624; 160; 1375; 170; 4,093

109. His Honour also explained the rationale for imposing a burden upon the taxpayer when he said:

"… There is nothing inherently unfair in the provision which places the onus on the taxpayer to prove his case when the purpose for which an asset was acquired depends so much on his intentions and on circumstances of which he, rather than the Commissioner, has comprehensive knowledge."^[76] (1975) 135 CLR 81 at 89

110. In
Galea v Commissioner of Taxation,^[77] [1990] FCA 456 ; (1990) 90 ATC 5060 ; 21 ATR 1108 Hill J said:

"To the extent that the applicant seeks to rely upon the description of what the Commissioner did here as being an attempt to mount a positive case, it is not clear to me at all why this has any relevance. As is clear from Dalco , supra, and as the tribunal itself said, it was not necessary for the Commissioner to seek to establish affirmatively that the applicant's assessable income was at least a particular figure. The fact that the Commissioner sought so to do and failed has no bearing, at the end of the day, on the question whether the applicant has discharged the onus of showing, as he is required by s 190(b) of the Act to show, that the assessment is excessive. The Commissioner's failure to establish a positive case, if that is what he sought to do, leaves the tribunal in no different position than it would have been in if the Commissioner had not sought at all to advance a positive case."^[78] [1990] FCA 456 ; (1990) 90 ATC 5060 ; 21 ATR 1108 at [34]; 5,067; 1116 See also Vu v Commissioner of Taxation [2006] FCA 889 ; (2006) 63 ATR 341 at [9]; 344 per Finn J

E. Burden of proof with specific reference to income claimed to be attributable to gambling

111. The High Court considered the burden of proof that lies on a taxpayer who claims that unexplained income has come from gambling winnings in circumstances in which the Commissioner has made an assessment on an asset betterment basis. It did so in
Krew v Federal Commissioner of Taxation^[79] (1970) 70 ATC 4213 ; Walsh J (Krew). The majority of a Tax Board of Review had considered a submission based on s 98B of the Evidence Act 1958-1970 (Vic)^[80] Section 98B provided: “ Subject to the provisions of this Division the books of account of a business shall in all legal proceedings be prima facie evidence of the matters transactions and accounts therein recorded .” and on certain judicial observations made in the High Court that the taxpayer's production of his books of account of his business and the evidence he had given as to their accuracy together with his evidence concerning his gambling was sufficient, as a matter of law, to satisfy the burden of proof.

112. Justice Walsh acknowledged the qualification in
Henderson v Federal Commissioner of Taxation^[81] (1970) 70 ATC 4016 (Henderson) that it may be enough in some cases for a taxpayer to show that the assessment has proceeded on a wrong basis or upon wrong principles. He decided it had no application in the case before him in which he found:

"… it is not sufficient … for the appellant to make it seem probable that the overall discrepancy of about £70,000 disclosed by the betterment statement is not wholly correct. Each year must be considered separately and it must be shown in respect of a particular year that the challenged assessment is wrong. If it is not provided that the whole of the amount of income which is in dispute has been wrongly included as taxable income, then material must be provided upon which the amount of income which should have been excluded can be ascertained. …"^[82] (1970) 70 ATC 4213 at 4216

113. As to the submission that had been made on behalf of the taxpayer, his Honour said:

"It is one thing to say that failure of the respondent to produce positive evidence of activities of the appellant, which produced money not recorded in the books of his business of dealing in metal and other goods, is a matter to be taken into account when deciding the question whether his evidence should be accepted. It is a different thing to say that as a matter of law the appellant must succeed if the respondent has not proved affirmatively that the disputed receipts were taxable income, because (as was submitted) there is no presumption that they were. The former proposition is correct. The latter proposition is, in my opinion, plainly wrong. I think that the appellant can derive no assistance at all from sec. 98B of the Evidence Act 1958-1970 (Vict.). … That has no relevance to the issues in the present case."^[83] (1970) 70 ATC 4213 at 4217

114. In
Ma v Commissioner of Taxation,^[84] [1992] FCA 359 ; (1992) 37 FCR 225 ; 23 ATR 485 ; 27 ALD 601 Burchett J considered a case in which the Commissioner had issued amended assessments to Mr Ma after concluding that his bank accounts showed much more money had been paid into them than could be attributed to his known sources of income. Mr Ma objected on several bases. Among them were his betting activities. He would withdraw money, place cash bets on a race meeting and redeposit the sum minus his losses or plus his winnings. Whether he won or lost, that meant that the Commissioner repeatedly counted at least some of the same money. No other reason had been put forward in the evidence in the Tribunal although it had been revealed that Mr Ma had been acquitted of a charge to import heroin at an earlier time. Justice Burchett decided to remit the matter to the Tribunal for rehearing and commented that:

"Whether, ultimately, Mr Ma should be believed is not, of course, a matter for me. Nor, it were, could be decided upon the written record alone. The decision must take account of the onus under s 190(b). But if a taxpayer denies any undisclosed source of income, provides acceptable evidence of how he spends his time, and demonstrates a reasonable explanation for any appearance of the possession of assets, he will generally discharge his burden of proof unless some positive reason is shown why he is to be disbelieved. Any other view would introduce a degree of arbitrariness into liability for tax. In the present case, the very lack of a clear refutation of the applicant's case at present (I emphasise the words 'at present', because on a rehearing of the picture they change colour altogether) reinforces my impression that the Tribunal saw the matter entirely or substantially to the spectacles of its view of the law.

If the tribunal, on the other hand, should be taken to have found in strong language of the addendum (as it expressly said it was not finding in its reasons) against Mr Ma's case on the general ground of his credit, it should certainly have explained why it did not believe him, and how it could reconcile its view with the unchallenged independent evidence of Mr Ma's frequent and regular betting activities.…"^[85] [1992] FCA 359 ; (1992) 37 FCR 225 ; 23 ATR 485 ; 27 ALD 601 at [9]-[10]; 230; 489-490; 605

115. Relying on the judgment of Walsh J in Krew, Burchett J said:

"… the making of estimates upon inexact evidence, which is so much a feature of both judicial and administrative decision-making, cannot be uniquely excluded from appeals against betterment assessments. To refuse to consider the credit, not only of the applicant, but also of his independent and unchallenged witnesses, simply because the effect of the evidence was to support his accountant's generalisations about double-counting rather than to hit upon a precise figure, was to fall into an error of law.…"^[86] [1992] FCA 359 ; (1992) 37 FCR 225 ; 23 ATR 485 ; 27 ALD 601 at [18]; 233; 492; 608. The principles were applied in Hua-Aus v Federal Commissioner of Taxation [2010] FCA 341 ; (2010) 184 FCR 430 ; 76 ATR 1 per Edmonds J

116. Returning to the statement made by Burchett J in
Ma v Commissioner of Taxation. I do not think that his Honour can be understood as saying that Mr Amirthalingham can meet his burden of proof by simply denying any undisclosed sources of income, providing acceptable evidence of how he spends his time and demonstrating a reasonable explanation for appearing to possess any particular assets or, I would add, incurring any particular expenditure. His Honour adds, he will not do so if there is some positive reason why he is to be disbelieved. This seems to me to take a path that begins with the statement of the taxpayer and concludes with a decision whether there is any reason to disbelieve what the taxpayer asserts.

117. After considering the authorities such as McCormack and Gauci, his Honour's statement might give rise to a suggestion that the burden of proof shifts from the taxpayer to the Commissioner once that taxpayer has made an assertion and given an explanation of the sources of income. To do so would be contrary to s 14ZZK of the TA Act. Justice Burchett cannot have intended himself to be understood in that way. Instead, I respectfully suggest that he intended that a decision-maker should have regard to all of the evidentiary material, including the taxpayer's evidence, before deciding whether the burden of proof has been discharged. That evidence is to be assessed and findings of fact made.

118. In assessing the evidentiary material, it must be remembered that:

"A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If he goes into the witness box and swears that he has incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such a statement, like statements of purpose, or object of state of mind must, however, be 'tested most closely, and received with the greatest caution':
Pascoe v FCT (1956) 6 AITR 315; 11 ATD 108 at 111. It would, of necessity, be a rare case indeed where a taxpayer, claiming to have expended a very large sum of money on trading stock and other business expenses, would succeed in satisfying the burden of proving that the assessment is excessive. Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed. It must, however, be borne in mind that the evidence of a taxpayer is not to be regarded as 'prima facie unacceptable',
McCormack v FCT (1979) 143 CLR 284 at 302 per Gibbs J;
9 ATR 610; 23 ALR 583."^[87] Imperial Bottleshops and Egerton v Federal Commissioner of Taxation (1991) 22 ATR 148 at 155 per Hill J

119. It must also be remembered that inferences may be drawn from the evidence but, in doing so, care must be taken to follow some guiding principles:

• (1) "… the search is always for the existence of a body of evidence which might, reasonably, sustain a relevant finding of fact or, conceivably, permit a particular inference to be drawn."^[88] Tisdall v Webber [2011] FCAFC 76 ; (2011) 193 FCR 260 ; Greenwood, Tracey and Buchanan JJ at [127]; 297 per Buchanan J, with whom Tracey J agreed
• (2) "It is important to bear in mind also that the inferential process is not one where speculation, guesswork or mere assumption is accommodated. So far as the work of courts is concerned, where the application of a judicial method is expected, the process of drawing an inference from available facts is not to be equated with conjecture, surmise or guesswork. The arbitrary selection of one possibility over others from an available number of possibilities by such a method is not merely lacking in logic; it fails to conform to the necessity that inferences be drawn as matters of legitimate deduction, based on probative values."^[89] [2011] FCAFC 76 ; (2011) 193 FCR 260 at [128]; 297
  • (a) "A conjecture may be plausible, but it is effectively still a mere guess. An inference is a deduction from the evidence, and if reasonable can be treated as part of the legal proof to be considered in making a factual determination in any particular proceeding. Whilst sometimes it may be difficult to distinguish between conjecture and inference, nevertheless the distinction is an important one."^[90] Bell IXL Investments Ltd v Life Therapeutics Ltd [2008] FCA 1457 at [14] per Middleton J
  • (b) "… Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between a criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof is not available, it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture…. But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought, though the conclusion may fall short of certainty, it is not be regarded as mere conjecture or surmise…'"^[91] Bradshaw v McEwans Pty Ltd [1951] HCA 480 quoted with approval in Luxton v Vines (1952) 85 CLR 352 at 358 per Dixon, Fullagar and Kitto JJ

Consideration: taxable income

120. In this case, I am satisfied that Mr Amirthalingham's memory has been shown to be flawed and his accuracy questionable in certain instances. I will give two examples. The first relates to his reconstructed motor vehicle log books. He reconstructed these from his personal diaries, he said. I do not have those personal diaries but I do have his evidence that he would pick his son up from after school care between 4:00 and 5:00 pm. The journey from Bolinda Road to the school would take over an hour, he said, and yet the records do not reflect what is clearly a trip taken wholly for private purposes. Even if the trip was combined with a trip from Bolinda Road to the Town Hall, the trip from the Town Hall to the school would have been a trip for private purposes. These were trips that were greater in distance than 12 kilometres and yet that is the distance that Mr Amirthalingham either showed, or effectively showed, in his reconstructed log books as his private travel each day. I have set out examples from 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 July 1999 and, in the Table at [88] from the months of March, April and May 2000 and June 2001.

121. There are also, I find, discrepancies between some of the entries in the log books and Mr Amirthalingham's attendance at Crown and picking up his son. It is difficult to see how he could claim to have driven for work and attended Crown during a substantial number of the opening hours of the tips on 19 May 2000 and 12 June 2001. The overlap of hours is shown in the Table at [88] above. Similar difficulties arise in relation to the entries for 28 March and 2 May 2000. These are examples I have drawn from the records rather than isolated instances.

122. Mr Amirthalingham has suggested that he had flexible arrangements with regard to his working hours. That is consistent with his apparent understanding that he and others tendered for the waste management work and that he worked independently provided the task was completed. The agreement that he had with HCC suggests more stringent arrangements. This might be a discrepancy but I do not make any findings about it. What I do find is that he frequently attended at Crown in what I find to be the operating hours of the tips at Bolinda Road and Sunbury i.e. 8:00 to 16:00.

123. The second area in which Mr Amirthalingham has had some difficulties in his memory relates to his assessment of his gambling winnings and losses. At the time of the pre-interview questionnaire, he assessed his losses in 2002 as $50,000. In the previous five years or so from 1996 to 2001, he estimated that he had won approximately $100,000. Even so, I agree with Dr Bender's submission that $50,000 would have been a significant loss in 2002 given that his salary was $58,510 in that year. It would have been particularly significant in view of Mrs Amirthalingham's evidence that their son's school fees were paid from winnings from Crown. In those circumstances, it is not a loss that I would have expected Mr Amirthalingham to have made a mistake about. Quite apart from the impact that such a loss could have been expected to have on his family's budget, Mr Amirthalingham estimated that he had incurred that loss in responding to the pre-interview questionnaire when he knew that the Commissioner was undertaking an audit. I accept that he would have been under some strain from the criminal investigation being undertaken at the time but, given that he took his accountant to the interview, I find that he took the audit seriously as well.

124. His later evidence that he had made these estimates on the basis of a "gut feel" and not upon any analysis he had undertaken must be considered in light of that earlier evidence. So too does his evidence that he has made considerable winnings in the three years in question. They have the appearance of self-serving statements in the sense that it is in Mr Amirthalingham's interests to claim winnings in those years in order to support his claim that he has funded his expenditure from non-assessable income. Whether they are in fact accurate statements cannot be determined by simply having regard to a comparison of an earlier and later statement per se. I must look to other evidence and see them in that context before coming to a conclusion.

125. Other evidence is found in the PRTRs and in related documents kept by Crown. On the basis of Mr Troost's evidence, I am satisfied that the PRTRs, and so the Monthly PRTRs which are based on them, cannot be regarded as accurate in every detail. That is illustrated by Mr Legaspi's evidence regarding an entry in a PRTR showing a patron having played six games of roulette in 14 minutes. That patron had a Buy In of $300 and then added $1,000 in chips. His playing resulted in a turnover of $1,213 but I accept Mr Legaspi's evidence that the PRTR was incorrect when it showed an average bet of $200. It should, as he said, have shown that the lowest average bet was $216.67. My acceptance of that does not lead to a conclusion that the PRTRs cannot be relied on. Rather, it is consistent with what they are claimed to be i.e. the croupier's or supervisor's assessment of what is happening at a table in relation to a particular patron. The difference between the figure of $200 shown in the PRTR as the average bet and what could be the lowest average bet given the amounts bet, the amount lost by the patron and the number of games shows how close to the mark that the assessment was. It supports the reliability of the PRTR's provided they are not regarded as having pinpoint accuracy.

126. A comparison of the PRTR with the PAI relating to it supports this view in relation to the amount of cash and chips played by the patron. I do not have any PAIs that relate to Mr Amirthalingham's PRTRs.^[92] Mr Troost suggested that the ATO should have obtained them from Crown before they were destroyed seven years after they were created. He was unaware of the burden of proof that rests with the taxpayer and that the Commissioner is not under an obligation to seek such information. I also note the PRTRs in the T documents were printed on 1 July 2004. Whether they were shown to Mr Amirthalingham at that time is not known to me but I find that his gambling and his winnings were clearly matters of interest at his interview at the ATO on 22 September 2004. The PAIs would still have been available for the PRTRs in each of the income years in question. Mr Amirthalingham had certainly seen the PRTRs and other documentation when he spoke with an ATO officer on 21 August 2007 (T documents; T84 at 548), sent an email on the following day (T documents; T85 at 549) and another on 28 September 2007 attaching a list of question for Crown staff to answer (T documents; T87 at 572-575). Most, if not all, of the PAIs would still have been in Crown’s possession at this time. Officers of the ATO itself had spoken with Mr Troost in the course of these events on 2 July 2007 (T documents; T79 at 496). The note of the conversation records that Crown had provided reports to the ATO in relation to Mr Amirthalingham. It appears that it had not provided the PAIs as part of those reports. It, like Mr Amirthalingham no doubt, was dependent upon its providing it with information. So too does a comparison with the Patron Receipts that I have although I acknowledge that I have only a limited number of them. I have set out three sets of PRTRs with related Patron Receipts at [76]-[82] above. The first set relates to 13, 14 and 18 January 2001. The PRTRs show that Mr Amirthalingham had a Buy In of $5,000 when he started gambling at 21:01 on 13 January 2001. That figure of $5,000 matches the Patron Receipt at 00:37 nearly nine hours earlier that same day when he cashed chips for $5,000.^[93] Unlike the PRTRs, the Patron Receipts show the actual day and do not deem a day to extend from 06:00 to 06:00 on the following day. The pattern of play and his wins and losses matches the pattern of his three withdrawals on that day. So too do the patterns in the other examples I have given and that finding accords also with the evidence of Mr Troost.

127. Finding that the PRTRs are reliable estimates rather than precise records is one thing. Their interpretation is another. Mr Amirthalingham's evidence and that of Mr Legaspi is to the effect that, when a Buy In is recorded as either nil or as an amount less than the figure shown as a net loss at the end of a game, he must have won during the course of play. It may well be that he did have winnings during the course of the game as he says but a nil Buy In on a PRTR reflects only that he did not have a Buy In as recorded by Crown in that document. I find that the figure does not reflect the chips brought to the table from another game or from another day or that he had purchased from the Cage on the same day. In this regard, I accept the evidence of Mr Troost that the Buy In figure does not show chips in those circumstances. His evidence was confirmed by Ms Ko, who viewed the matter from a player's, rather than Crown's, perspective. A player might purchase chips and take them outside Crown and return with them on another day. They would not be recorded. That leads me to conclude that I do not accept Mr Amirthalingham's interpretation of the PRTRs. A nil Buy In followed by a loss does not mean that he must have won at least the amount of the loss during the game.

128. The Patron Receipts support my finding that he purchased chips. The fact that the figure given as the "Actl. Win" is a net figure of wins and losses also supports it. It is the difference between what he is recorded in the Buy In as having brought to the table and what he walks away with be it a positive amount for Crown (and a loss for him) or a negative amount (a win for him). It takes no account of the wins and losses during the course of playing a particular game that has, on the records I have, lasted minutes or a couple of hours. All that it records, I find, is the amount that a player began with less the amount that he or she finished with at the end of the game. Taking into account my findings in the previous paragraph, this means that I do not accept Mr Amirthalingham's method of counting his wins and losses by adding as a winning the amount shown as a loss when his Buy In was nil.

129. I have also considered Mr Amirthalingham's argument that I should have regard to his wife's taking his chips during the course of a game or, at least, while they were at Crown, in order to go shopping. I accept his evidence that she did so and it is supported by that of Ms Ko. My doing so does not assist Mr Amirthalingham. There is nothing in the Excess Expenditure Statements that reflects expenditure made with chips from Crown or from venues accepting Crown chips as payment for goods. Certainly, there are private living expenses totalling, in the 2000 example at Attachment A, $140,395. That is calculated by reference to withdrawals from various accounts and credit card payments but not by reference to expenses paid for with gaming chips. Given that the Excess Expenditure Statements show net losses only from Crown, they would not show purchases made with cash Mr and Mrs Amirthalingham obtained by first cashing chips in at Crown.

130. While I accept that the Patron Gaming Cheque Report dated 13 July 2007 shows that Crown had issued ten cheques totalling $81,000 to Mr Amirthalingham between 27 December 2000 and 6 August 2001, I do not accept that these cheques represent winnings. Even when Crown had, on Mr Troost's evidence, a policy that it would not give a cheque in exchange for chips unless the staff were satisfied that the player had been playing to a level that was consistent with his or her holding those chips, that did not mean that the cash for which the cheques were given came from winnings.

131. I have explored whether the date of issue of the cheques matches his pattern of play in general and his winnings in particular. Using the information from the Patron Gaming Cheque Report and the PRTRs, I have compiled the following table. I have also shown the sums recorded in the Patron Transaction Report has having been withdrawn from Mr Amirthalingham's account in the days up to two days before and after the dates shown on the cheques:

132. This table shows that there is no obvious correlation between Mr Amirthalingham's gambling and his receiving cheques. I have attempted to find some by cross checking the dates on which the cheques were issued with the dates and amounts of transactions shown in the Patron Transaction Report but have found no precise match. There is some matching of four of the cheques made on 27 December 2000 and 14, 18 and 21 May 2001 if I look to the entries in the Patron Transaction Report that are two days either side of those dates. The days on which the cheques were drawn were not days on which Mr Amirthalingham is shown on the PRTRs as having gambled. That makes it difficult to draw a conclusion that the cheques necessarily reflected his winnings. He did gamble on the other days on which cheques were drawn but the table shows no correlation between winnings and the amounts on the cheques. In fact, he lost a total of $26,200 on 10 June 2001 and 1 July 2001 but, on the same days, obtained cheques totalling $49,000. There is also a lack of correlation between his cheque for $5,000 on 6 August 2001 and his win of $400.

133. It may be that the cheques reflect his winnings in some way but it is not a way that is apparent from the documents I have. It may be the case but the conclusion that they came from other moneys, such as his earnings from his employment, is equally open. I have not, for example, been taken to his own financial records so that I can discount them as a source of the moneys. I have not been taken to records that he might have maintained showing his winnings. I have not been taken down a trail to follow the money and I am not satisfied that, on the balance of probabilities, the cheques reflect his winnings from Crown.

134. Mr Amirthalingham has not sought to show that the T Account Method is flawed. I am not satisfied that the assessment that the Commissioner made using that method is excessive. In view of my findings, I am not satisfied that Mr Amirthalingham has shown the Commissioner's assessments of his income is excessive and affirm his objection decision in relation to the assessment of tax payable on the taxable income as assessed for each of the 2000, 2001 and 2002 income years.

Consideration: penalties

A. Legislative framework

135. In so far as the 2001 and 2002 income years are concerned, the penalty provisions are found in Schedule 1 to the TA Act. Those relating to the 2000 income year are found in Part VII of ITAA36. The substance of the provisions remains the same. Therefore, I have set out the provisions from the TA Act relating to 2001 and 2002 and referred to those of ITAA36 in the footnotes.

136. A taxpayer is liable to an administrative penalty if one of the four circumstances set out in s 284-75 of Schedule 1 to the TA Act applies. Only that in s 284-75(1) is relevant in this case. It applies if a taxpayer or a taxpayer's:

• "(a) … agent makes a statement to the Commissioner …; and
• (b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it; and
• (c) you have a shortfall amount as a result of the statement."^[94] TA Act, Schedule 1, s 284-75(1)

137. In the context of this case, a taxpayer has "a shortfall amount if an item in this table applies to … [that taxpayer]. That amount is the amount by which the relevant liability … is less than or more than it would otherwise have been."^[95] TA Act, s 284-80(1) For the 2000 income year, see ITAA36, s 222A(1), definition of “ tax shortfall ”. Only item 1 of the table set out in the section is relevant to Mr Amirthalingham's circumstances. It provides that a taxpayer has a shortfall amount if "A tax-related liability of yours for an accounting period … worked out on the basis of the statement is less than it would be if the statement were not false or misleading."

138. Section 284-85 specifies the way to work out the amount of the penalty. It requires the base penalty to be worked out under s 284-90 first and then that figure either to be increased under s 284-220 or reduced under s 284-225 of Schedule 1 to the TA Act. The base penalty amount is worked out by determining the Item in s 284-85 applicable to the taxpayer's circumstances. In this case, the Commissioner has relied on Item 2 of s 284-90, which provides that the base penalty amount is 50% of the shortfall amount or part when the taxpayer has:

"… a *shortfall amount as a result of a statement described in sub-section 284-75(1) or (4) and the amount, or part of the amount, resulted from recklessness by … [the taxpayer]or … [taxpayer's]agent as to the operation of a *taxation law (other than the *Excise Acts)".^[96] For the 2000 income year, see ITAA36, s 226H applying where a taxpayer has a shortfall amount and that amount, or part of it, was caused by “ … the recklessness of a taxpayer or of a registered tax agent with regard to the correct interpretation of this Act or the regulations .”

139. On behalf of Mr Amirthalingham, Ms Ellyard submitted that Item 3 is to be preferred. It provides that the base penalty amount is 25% of the shortfall amount or part when the taxpayer has:

"… a *shortfall amount as a result of a statement described in sub-section 284-75(1) and the amount, or part of the amount, resulted from a failure by … [the taxpayer]or … [taxpayer's]agent to take reasonable care to comply with a *taxation law (other than the *Excise Acts)".^[97] For the 2000 income year, see ITAA36, s 226G applying where a taxpayer has a shortfall amount and that amount, or part of it, was caused by “ … the failure of a taxpayer or of a registered tax agent to take reasonable care to comply with this Act or the regulations .”

140. The Excise Acts have no application in this case. In the context of these provisions, the reference to "taxation law" is a reference to an Act administered by the Commissioner and regulations made under such an Act and to the Tax Agents Services Act 2009 and regulations.^[98] ITAA97, s 995-1(1) and TA Act, s 3AA(2) It includes the TA Act as well as ITAA36 and the Income Tax Assessment Act 1997 (ITAA97).

B. When is a "statement is false or misleading in a material particular"?

141. In the case of
Pearson v Deputy Commissioner of Taxation^[99] [2009] FCA 558 ; (2009) 74 ATR 437 (Pearson) Spender J considered s 223(1)(a)(i) of ITAA36 which was the predecessor of the provisions of ITAA36 applicable to the 2000 income year. It too was predicated, in part, on a taxpayer's having made "… a statement to a taxation officer, or to a person other than a taxation officer for a purpose in connection with the operation of this Act or the regulations, that is false or misleading in a material particular". Justice Spender considered a submission that a taxpayer did not make a false statement simply by submitting a return later found by the Commissioner to be incorrect. At the time, s 223(7) provided, in part, that:

"Where a person omits from a return furnished under or pursuant to this Act or the regulations, being a return of income derived by the person … during a period, any assessable income derived by the person … during the period, the person shall, for the purposes of this section, be taken to have made a statement in the return to the effect that the person … did not derive the assessable income during the period."

142. His Honour said:

"The word 'false' in the former s 223 means 'wrong':
Reliance Finance Corporation Pty Ltd v FCT (1987) 18 ATR 224; 87 FLR 305; 87 ATC 4146. It is not necessary for the respondent to show that the statement was deliberate or fraudulent:
FCT v Turner (1984) 15 ATR 379; 73 FLR 24; 84 ATC 4161.

In my opinion, the omission of assessable income derived by the appellant … is to be treated as a false statement within the meaning of s 223(1)(a)(i).

…

The provisions of s 223 apply even if the appellant was ignorant of the accounting matters giving rise to the additional income …".^[100] [2009] FCA 558 ; (2009) 74 ATR 437 at [23]-[26]; 443

143. Justice Emmett applied the same principles in
Brown v Commissioner of Taxation^[101] [2001] FCA 596 (Brown) when he concluded that: "Having found that the Taxpayer's claim that the Benefits were partnership income was spurious, it was open to the Commissioner to find that the Taxpayer intended to make a false statement."^[102] [2001] FCA 596 at [140]

144. The TA Act does not have a section in terms that are precisely equivalent to s 223(7) but it seems to me that its principles have been incorporated in s 284-75(1). That provision specifically requires an assessment to be made about whether a statement is false or misleading on the basis of things in that statement or omitted from it. That incorporates the notions in s 223(7) and cases such as Brown and Pearson remain relevant. So too does
Kajewski v Federal Commissioner of Taxation,^[103] [2003] FCA 258 ; [2003] ATC 4375 in which Drummond J also considered s 223(1)(a)(i) of ITAA36 saying:

"121. A taxpayer makes a false or misleading statement in a return within s 223(1)(a)(i) if a return which the taxpayer furnishes to the Commissioner in obedience to s 161(1) contains a statement that is erroneous or incorrect: no element of deceitful or dishonest conduct on the part of the taxpayer or anyone else needs to be established. This is the position where the return containing the false statement is prepared by the taxpayer's agent and the taxpayer is not aware of the falsity. …"^[104] [2003] FCA 258 ; [2003] ATC 4375 at [121]; 4,402

145. What is meant by the expression "false or misleading in a material particular " (emphasis added) was considered by the Full Court of the Federal Court in
Minister for Immigration v Dela Cruz^[105] [1992] FCA 71 ; (1992) 34 FCR 348 ; 110 ALR 367 ; 26 ALD 663 ; Black CJ, Davies and Neaves JJ (Dela Cruz) in the context of s 20(1) of the Migration Act 1958. In summary, that section applied to a person who had made a statement to an officer or person exercising powers under that legislation in respect of an entry or visa that was false or misleading in a material particular. The Full Court said:

"… The term 'material' requires no more and no less than that; the false particular must be of moment or of significance, not merely trivial or inconsequential.

… In the context of s 20(1), a statement will be false or misleading in a material particular if it is relevant to the purpose for which it is made …. A statement will be relevant to that purpose if it may - not only if it must or if it will - be taken into account in making a decision under the Act as to the grant of the visa or entry permit in respect of which the statement is made.

For present purposes, it is sufficient to say that a statement made to an immigration official by a person seeking to enter Australia, which conveys a false or misleading impression of the person or of his or her circumstances, would be false or misleading in a material particular. Immigration officials are entitled to seek and to be told the truth about a person applying to enter Australia, so that they may be in a position to evaluate the application made to them. They may consider it desirable to ask further questions about the subject matter of the statement made to them and, with answers to further questions, the statement may be more useful. But it does not follow that, without further questions, the statement is not material in the sense in which the word is used in s 20(1)."^[106] [1992] FCA 71 ; (1992) 34 FCR 348 ; 110 ALR 367 ; 26 ALD 663 at [12]-[14]; 352; 371; 666

146. The principles established in Dela Cruz seem equally applicable in this case. A statement claiming a deduction when none is claimable is false in a material particular. Disclosure of a taxpayer's taxable income is a fundamental aspect of a taxpayer's obligation under the ITAA36 and ITAA97 to pay the amount of tax that he or she should properly pay. It is the base line from which the Commissioner carries out his functions under that legislation. A taxpayer may properly reduce what would otherwise be the amount of taxable income for any year of income by claiming a deduction. The proper assessment of a taxpayer's taxable income lies at the heart of the assessment of the tax that is, or is not, payable on it. Speaking in general terms, false statements about amounts that may be deducted from that taxable income strike at the heart of that process.

147. That does not mean that every false claim for a deduction is false "in a material particular". Regard must be had to the impact of the false statement upon the assessment of a taxpayer's taxable income and tax payable upon it. In this case, Mr Amirthalingham's claim for deductions had a significant impact upon the assessment of his taxable income and so the tax that would otherwise be payable upon it.

C. Has Mr Amirthalingham made a statement that is false or misleading in a material particular?

148. In this case, I am satisfied that Mr Amirthalingham has made a statement regarding his assessable income in the sense that he has made a statement that it is less than I have found it to be. In that sense, it is a false statement. It is also a false statement in a material particular for his statement has had a material bearing on the amount of tax that he was obliged to pay under the taxation law. The consequence of that finding is that I find that Mr Amirthalingham has a shortfall amount and he is liable to an administrative penalty under s 284-75(1) of the TA Act.

C. What is meant by "recklessness" and "failure to take reasonable care"?

149. The word "recklessness" has been considered in a number of cases. Some were gathered together by Senior Member McCabe in Re Dixon ATF the Dixon Holdsworth Superannuation Fund and Federal Commissioner of Taxation^[107] [2006] AATA 130 ; (2006) 62 ATR 1001 ; 2006 ATC 2092 when considering Item 2 of the TA Act:

"24. The taxpayer is liable to pay the penalty in this case if either he or his agent was reckless. Recklessness is not defined in the TAA, but it is has been discussed in a number of cases. In
Reed (Albert E) and Co Ltd v London and Rochester Trading Co Ltd [1954] 2 Lloyds Rep 463, Devlin J said (at 475) recklessness 'means deliberately running an unjustifiable risk'. In
Shawinigan Ltd v Vokins and Co Ltd [1961] 3 All ER 396 at 403, Megaw J said 'recklessness is gross carelessness' or 'a high degree of carelessness'. His Honour continued:

The only test, in my view, is an objective one. Would a reasonable man, knowing all the facts and circumstances which the doer of the act knew or ought to have known, describe the act as ' reckless ' in the ordinary meaning of that word in ordinary speech?

25. That approach has been followed by the Tribunal in other cases. In
Jones and Commissioner of Taxation [2003] AATA 84, I suggested at paragraph 26: 'recklessness means more than mere carelessness. It incorporates an element of rashness or heedlessness': see also
Re Taxpayer and Commissioner of Taxation [2004] AATA 1304 at paragraph 94;
Arrow Pearl Co Pty Ltd and Commissioner of Taxation [2005] AATA 340 at paragraph 98. Recklessness falls short of a finding of intentional disregard, where the taxpayer or the agent presses a claim they know to be wrong. Similarly, a finding of recklessness does not imply the applicant or his agent were dishonest: see
Hart v Commissioner of Taxation (2003) 131 FCR 203 at 214 per Hill and Hely JJ."^[108] [2006] AATA 130 ; (2006) 62 ATR 1001 ; 2006 ATC 2092 at 1006; 2096

150. In
Hart v Commissioner of Taxation^[109] [2003] FCAFC 105 ; (2003) 131 FCR 203 ; 53 ATR 371 ; Hill and Hely JJ; Spender J dissenting (Hart), Hill and Hely JJ considered these concepts and adopted the observations that had been made by Cooper J about the notion of recklessness in the context of s 226H of ITAA36. That section equated with what is now Item 2 in s 284-90 of ITAA97. Justice Cooper had said:

"… Recklessness in this context means to include in a tax statement material upon which the Act or regulations are to operate, knowing that there is a real, as opposed to a fanciful risk, that the material may be incorrect, or be grossly indifferent as to whether or not material is true and correct, and that a reasonable person in the position of the statement-maker would see there was a real risk that the Act and regulations may not operate correctly to lead to the assessment of the proper tax payable because of the content of the tax statement. So understood, the proscribed conduct is more than mere negligence and must amount to gross carelessness."^[110] BRK (Bris) Pty Ltd v Commissioner of Taxation [2001] FCA 164 ; (2001) 46 ATR 347 at [77]; 364 cited in Hart [2003] FCAFC 105 ; (2003) 131 FCR 203 ; 53 ATR 371 at [43]; 214; 381

151. Failure to take reasonable care is at the heart of Item 3. What amounts to reasonable was considered by Senior Member Sweidan in Re Hutson and Commissioner of Taxation:^[111] [2009] AATA 574 ; [2009] ATC 10-099

• "104. Reasonable care is determined objectively. As to the Trust, it is the care that a reasonable person, in the same circumstances as the Trust, would be likely to exercise in making the statement: MT 2008/1 at [27]-[29].
• 105. Regard must be had to the nature of the obligation requiring the exercise of reasonable care and the particular circumstances in which the taxpayer under that obligation finds itself, i.e. what would be done by a reasonable person in the circumstances of the Trust:
  Confidential v Commissioner of Taxation [2008] AATA 415 at [57] & [60].
• 106. It thus involves consideration of the relative size of the shortfall, type of item, complexity of the law and underlying transactions and the difficulty or expense to avoid the risk of making an error. The Commissioner's position is that it is necessary to consider the personal attributes of the taxpayer and what care a reasonable person with those attributes would have taken in the taxpayer's particular circumstances: MT 2008/1 at [45]. …"^[112] [2009] AATA 574 ; [2009] ATC 10-099 at [104]-[106]; 3,006-3,007 For the reasons I gave in Re Sinclair and Commissioner of Taxation [2010] AATA 902 ; (2010) 80 ATR 972 at [78]-[93]; 993-997, I agree with Senior Member Sweidan’s analysis.

D. Has Mr Amirthalingham's shortfall arisen from his recklessness as to the operation of, or failure to take reasonable care to comply with, a taxation law?

152. I will begin with Mr Amirthalingham's claim for a deduction in relation to his car expenses. He conceded his claim early in the hearing and acknowledged that he has included journeys to and from his home as work related journeys in his log book and that they may not be claimed. Despite his concession, the fact that he claimed them remains relevant when considering the imposition of penalties.

153. Car expenses and their deductibility are the subject of Division 28 of Part 2-5 of ITAA97. Although there are others applying in restricted circumstances, four main methods are recognised for calculating the amount that might be claimed as a deduction: the cents per kilometre method; 12% of original value method; one-third of actual value method; and log book method. Substantiation is not required for the first two methods but is for the last two. In each method, regard must be had to the "business kilometres travelled by the *car in the income year". They are defined for each method as:

"… kilometres the *car travelled in the course of:

• (a) producing your assessable income; or
• (b) your *travel between workplaces. You calculate the number of business kilometres by making a reasonable estimate."^[113] ITAA97, ss 28-25(3); 28-50(2); 28-75(2); and 28-90(5)

154. Sub-division 28-G prescribes the way in which a log book is to be kept if the log book method is chosen. Section 28-125(2) specifies that a journey is recorded in the log book by specifying the odometer readings at the start and end of the journey, the day it began and ended, how many kilometres the car travelled and why the journey was made. The record must be made at the end of the journey or as soon as possible afterwards. The log book must also reflect the overall use of the car. This is the subject of s 28-125(4). So, for example, it must record the car's odometer readings at the beginning of the period covered by the log book and at the end. It must record the total number of kilometres travelled over that period as well as the number travelled in the course of the taxpayer's producing assessable income. The latter is then expressed as a percentage of the total number travelled.

155. Mr Amirthalingham's log books do not meet these criteria. I have set out an extract at [88] above. They do not show the odometer readings at the start and end of the journey said to be made for the purpose of earning assessable income. Rather, they show the odometer reading at the beginning and end of the day and so at the beginning and end of all travel in the car during that day whether it be personal or for the purpose of earning assessable income. The reason for the journey is very broadly stated. The word "work" does not, I suggest, give a description of the reason for the journey that supports a finding that it is a journey that is either between workplaces or in the course of a taxpayer's gaining assessable income. Reference would have to be made to other material to ascertain the reason for making the journey at all.

156. In addition to these matters, I have already referred to the inconsistencies and inaccuracies in Mr Amirthalingham's reconstructed log books relating to the use of his motor vehicle. This demonstrates lack of care in their compilation at the very least. I would add that it also demonstrates he paid no regard to what he was actually entitled to in claiming for car expenses. I have been unable to find any reference to, or adjustment made for, the motor vehicle allowance that he was given by HCC as part of his contract with it. That allowance was in the amount of $2,500 assessed at 0.58 cents per kilometre and represented his travelling to attend upon up to ten call outs each year. I have noted that, towards the end of his period of employment, the HCC allowed Mr Amirthalingham to use one of its vehicles to travel on its business. As I have no evidence as to whether that was the case for part of the income years in issue or not, I have assumed that Mr Amirthalingham was using his own motor vehicle at all relevant times.

157. I accept that Mr Amirthalingham had a lot going on in his life at the time that he reconstructed his log books but, one of those things, was to do with his taxation. Mr Yin said that he advised him that he could not claim for journeys from home to work. Whether he did or did not, the responsibility for checking what he could and could not claim lay with Mr Amirthalingham. ITAA97 sets out how to maintain a log book. The log book that Mr Amirthalingham did have for the period from 1 July 1999 to April 2001 has a section headed "Notes on the use of the Log Book and Odometer Record".^[114] T documents; T43 at 296 Under that are notes entitled "How to keep a log book" and further notes entitled "How to keep odometer records for a car for a period". Those notes reflect the requirements of Division 28 of ITAA97 relating to log books.

158. Having regard to all of these matters, I am satisfied that Mr Amirthalingham made his claim for deductions in relation to car expenses reckless as to whether the log books on which he based his claim complied with the law set out in Division 28. It is not to the point that, had he used the depreciation model, he would have been entitled to claim two thirds of the amount he actually claimed in each year. He has chosen a method and his claim is considered on that basis. It is not a case in which Mr Amirthalingham has tried to make a claim based on accurate records but has slipped or even made a careless mistake of the sort that could be regarded as a failure to take reasonable care. Rather, he has been entirely without care of what the law requires of him. He has acted with recklessness. I am satisfied that the Commissioner's decision to impose a penalty at the rate of 50% under Item 2 of s 284-80 is the proper decision.

159. I have reached the same conclusion in relation to the penalty imposed in respect of the remaining amounts contributing to Mr Amirthalingham's shortfall. I am satisfied that he has significantly understated his assessable income over the three years of income in issue. Mr Amirthalingham has not disputed that he omitted to disclose his wife's credit card accounts to the Commissioner. Those cards were used to meet the expenses of daily living. He has attributed the income that is over and above his salary from HCC to his gambling winnings. There is no suggestion that Mr Amirthalingham was gambling in a way that could lead to the conclusion that he was carrying on a business of gambling. Had he been, he would have been obliged by s 262A of ITAA36 to keep records recording and explaining all transactions and acts in which he engaged and which are relevant for the purposes of tax law. Even in the absence of an obligation, he would have been well advised to keep records of that sort as well as receipts and the like to assist him in identifying accurately the source of his income and being able to identify it as assessable or non-assessable when preparing his returns for each of the three income years in issue. Instead, I find that he prepared his returns solely on the basis of his income from HCC and claims related to that income. He has ignored other income in its entirety. In the circumstances which have included other inaccuracies in recording and reporting, that is more than a failure to take care, reasonable or otherwise. It is to act without regard to what is required by the tax law and so to act recklessly. I am satisfied that the Commissioner's decision to impose a penalty at the rate of 50% under Item 2 of s 284-80 of Schedule 1 of the TA Act on the remaining part of the shortfall is the proper decision as well.

E. Remission

160. Under s 298-20(1) of Schedule 1 of the TA Act, the Commissioner may remit all or part of a penalty. No criteria are set out in the section to guide the Commissioner in the exercise of his discretion but its predecessor in ITAA36, s 227(3), has been considered by the Federal Court. It seems to me that the authorities establish the following more particular principles:

• (1) Factors relevant in the exercise of the discretion are shaped and limited by the subject matter, scope and purpose of the taxation law and of the particular power conferring discretion.^[115] Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission and Others [2000] HCA 47 ; (2000) 203 CLR 194 ; 174 ALR 585 at 205; 591 and see also Drake v Minister for Immigration and Ethnic Affairs [1979] AATA 179 ; (1979) 24 ALR 577 ; 2 ALD 60 at 590; 70 per Bowen CJ and Deane J and 602; 80 per Smithers J
• (2) The existence of special circumstances is not a prerequisite to any exercise of the Commissioner's power to remit a penalty under s 298-20 of Schedule 1 to the TA Act.^[116] Dixon v Federal Commissioner of Taxation [2008] FCAFC 54 ; (2008) 167 FCR 287 at [21]; 291-292 per Spender, Ryan and Emmett JJ
• (3) Whether or not a taxpayer has the benefit of a shortfall amount or the Commissioner is deprived of that amount, the fact that there is, or is not, a shortfall amount has nothing to do with the remission of administrative penalties:
  • (a) If there is, the Commissioner is compensated for any harm he might suffer as a result by the taxpayer's obligation to pay interest by way of a General Interest Charge;^[117] Dixon v Federal Commissioner of Taxation [2008] FCAFC 54 ; (2008) 167 FCR 287 at [23]; 292 and
  • (b) It is not permissible to have regard to the fact that the Commissioner became aware of the false statement before any harm was done.^[118] Dixon v Federal Commissioner of Taxation [2008] FCAFC 54 ; (2008) 167 FCR 287 at [21]-[25]; 292
• (4) "Broadly speaking, the main consideration relevant to the discretion … was whether any part of the penalty should be remitted on the basis that the outcome is so harsh so as to provide an unjust result, having regard to the particular circumstances of the taxpayer …",^[119] Commissioner of Taxation v Traviati [2012] FCA 546 at [78] per Middleton J

161. In this case, I am satisfied that there is no basis on which I should exercise the discretion to remit all or part of the penalties. Mr Amirthalingham has chosen to act recklessly with regard to his obligations under a legislative scheme that depends upon his engaging in a process of self-assessment. The outcome that attaches to his having acted in that way is not harsh or unjust when viewed having regard to his particular circumstances. No reference has been made to his personal circumstances that might throw a different light upon my conclusion. Certainly, he has faced costs arising from the criminal charges but it has not been suggested to me that the imposition of the penalties would impose a burden that could be regarded as harsh or unjust.

DECISION

162. For the reasons I have given, I affirm the Commissioner's objection decision dated 29 October 2009 and affirming his amended assessments dated 15 July 2008 and relating to the income years ending 30 June 2000, 30 June 2001 and 30 June 2002.

ATTACHMENT A

EXCESS EXPENDITURE STATEMENT IN THREE PAGES^[120] ST documents; ST 1 at 746-747

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