Federal Commissioner of Taxation v. The Administrators of the Estate of Edward Maurice, deceased.
Judges:Aickin J
Court:
High Court of Australia
Aickin J.: This is an appeal by the Commissioner of Taxation (the ``Federal Commissioner'') against a decision of the Board of Review which by majority allowed an objection by the executors of the estate of Edward Maurice, deceased, against an amended assessment of estate duty issued by the Commissioner on 5th April 1974.
The facts upon which the questions arise were agreed between the parties and placed before the Court in documentary form. They may be summarized as follows. Edward
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Maurice died on 12th May 1972 leaving a will dated 6th March 1972 by which he appointed The Union Fidelity Trustee Co. of Australia and one R.K. Kirby, a solicitor, as executors and trustees of the will (they are referred to hereafter as ``the executors''). By his will he left the whole of his estate to two persons who were strangers in blood, but left him surviving a son. His will required the residue of his estate after paying debts, testamentary expenses and duties to be divided into fifteen parts, thirteen of which were to go to his housekeeper and two to a friend in Hong Kong, both being strangers in blood to the deceased.Pursuant to the provisions of the Estate Duty Assessment Act 1914-1972 (Cth.) (``the Act'') the executors lodged with the Federal Commissioner an estate duty return under cover of a letter dated 21st September 1972. The return and letter were duly received and placed on a file opened on 17th October 1972. The letter informed the Federal Commissioner that the executors expected that an application by the son would be made pursuant to Part IV of the Administration and Probate Act 1958 (Vic.). On about 21st September 1972 the executors also lodged a Victorian probate duty return with the Commissioner of Probate Duties for Victoria (the ``Victorian Commissioner'').
The estate duty return disclosed a balance for duty of $290,435.98 and referred to, but did not specify the amount of, probate duty and Commonwealth income tax for the period up to the date of death, neither of which had then been assessed. An income tax return for that period had been lodged with the Federal Commissioner on 5th July 1972.
On 26th October 1972 an originating summons was taken out under the provisions of Part IV of the Administration and Probate Act on behalf of the son of the deceased seeking an order for provision for him out of the estate (``the Part IV application'').
Pursuant to the Probate Duty Act 1962 (Vic.) on 15th November 1972 the Victorian Commissioner issued to the executors a document entitled ``Probate Duty Assessment'' which assessed the duty payable as $95,681.42. With that document there was an ``alteration and calculation'' sheet indicating the final balance as determined by the Victorian Commissioner and the mode by which the duty payable was calculated. On the same day he sent to the Federal Commissioner a copy of that alteration and calculation sheet.
On 17th November 1972 the executors informed the Federal Commissioner that the Part IV application had been made. After that date the Federal Commissioner and the assessor dealing with the matter on his behalf knew that the probate duty assessment had been issued and that the son had made an application under Part IV of the Act. On 17th November 1972 the executors advised the Victorian Commissioner that the Part IV application had been made.
On 29th November 1972 the assessor dealing with the matter on behalf of the Federal Commissioner completed the preparation of an assessment of estate duty which was calculated on the basis that Victorian probate duty payable was $95,681.42. On that day the Federal Commissioner made an assessment of estate duty on that basis. Notice thereof was sent to the executors on 12th December 1972.
The Federal Commissioner did not at the time of making that assessment know that there were certain additional assets and liabilities of the estate which are referred to below, though he was before that time aware of the facts which entitled the executors to a refund of $1,560.26 in respect of income tax for the period to the date of death. The income tax assessment was in fact made on 6th February 1973.
At the time of the making of the said assessment the executors had made a full and true disclosure of all the material facts necessary for the making of that assessment, save that they had failed to disclose the said additional assets and liabilities.
On 15th November 1973 an order was made in the Supreme Court of Victoria on the Part IV application granting provision for the deceased's son. The effect of the order was that the thirteen parts were left to the son subject to payment thereout of a legacy of $60,000 to the named beneficiary.
On 18th December 1973 the executors advised the Federal Commissioner of the existence of the additional assets and liabilities referred to above and of the making of the said
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order by letter as follows (a copy of that letter was also sent to the Victorian Commissioner):``We have been instructed to notify you of some additional assets and liabilities to the above Estate as follows:
Additional Assets Hospital Benefits Association of Victoria .............................$46.40 The Insurance Office of Australia - Commission due as an Agent .............................$20.44 Federal Income Tax for period from 30th June, 1971 to date of death refund ..............$1,560.26 ---------- $1,627.10 ---------- Additional Liabilities Mrs. D.F. Coates Long Service Leave .....................$317.00 Victorian Civil Ambulance Service ................................ $19.00 -------- $336.00 --------''
Upon receiving that information the Victorian Commissioner on some date prior to 22nd February 1974 caused an assessor in his office to re-calculate the amount and the distribution of the net balance of the estate of the deceased and the amount of probate duty payable thereon. That calculation showed that the amount of probate duty according to such re-calculation was $14,988.92 less than the amount of probate duty payable according to the previous assessment, which had in the meantime been paid by the executors. On 22nd February 1974 the Victorian Commissioner sent a letter to the executors stating that ``a refund of Probate Duty amounting to $14,988.92 has been approved''. The letter enclosed a form to the same effect as the form enclosed with the assessment previously issued but showing the new figures resulting from the incorporation of the figures given in the letter of 18th December 1973. This showed that duty payable on the new final balance was $14,988.92 less than the amount of the original assessment already paid. At some date subsequent to that letter the executors received from the Treasurer of Victoria a cheque for the amount of $14,988.92 but no other relevant document was issued by the Victorian Commissioner.
On 5th April 1974 the Federal Commissioner issued a notice of amended assessment which purported to amend the amount of estate duty payable by increasing it by taking into account the said amount of $14,988.92 received by the executors from the Treasurer of Victoria and the other items referred to in the letter of 18th December 1973. The amended assessment was accompanied by an alteration sheet which so far as material noted what it called:
``Additional Asset - letter 18/12/73... $1,627,
Victorian Probate Duty adjusted... $15,098, and
Deduction a/c: Additional Liabilities - letter 18/12/73... $336.''
The executors objected to the amended assessment on 7th May 1974 on the grounds that it was not authorized by sec. 20 of the Act and that the making of the refund of $14,988.92 in respect of probate duty did not affect the deduction allowable. On 20th June 1974 the objection was disallowed by the Federal Commissioner and on 27th June the executors requested him to refer the objection to a Board of Review. On 29th November 1976 the Commonwealth Taxation Board of Review (No. 2) by majority allowed the objection and determined that the amended assessment should be amended by deleting from the final balance the amount of $14,988.92 and by reducing the amount of estate duty payable accordingly.
The first point involved in the case depends on the operation in these circumstances of sec. 17 of the Act which provides that:
``For the purpose of assessing the value for duty of the estate of a deceased person, there shall, subject to this section, be deducted from the gross value of the assessable estate -
(a) if the deceased person was domiciled in Australia at the time of his death, all debts due and owing by him at the time of his death;
.....''
By sec. 3 it is provided that the term ``debts'' is to include ``probate and succession duties payable under any State Act''. The first point also involved an examination of the terms and
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effect of the Victorian Probate Duty Act in relation to assessments of probate duty and the making of refunds of amounts ``overpaid''. The second point was whether the Federal Commissioner was in the circumstances entitled under sec. 20 of the Act to amend the assessment.For the Commissioner to succeed on this appeal he must establish two propositions, first that the lower of the two amounts of Victorian probate duty is that which is ``payable'' within the meaning of the definition of ``debts'' and that in the circumstances of the case the Commissioner had power to issue an amended assessment in respect of estate duty. If he fails on either, the executors must succeed. Both points were argued and it is therefore desirable to deal with both, even though it may emerge from the decision on whichever point is considered first that it may not be necessary to proceed to the second in order to decide the case.
On the whole I think it convenient to begin with the question whether, if there were power to issue the amended assessment, the basis upon which it was issued was correct in law. The general scheme of the Probate Duty Act is that by sec. 11 every ``administrator'' is required to file a statement in the prescribed form specifying particulars of the property which is or is deemed to form part of the estate and its value, as well as particulars of debts and other amounts allowed as deductions under that Act, as well as the relationship, if any, to the deceased of the person or persons entitled to his estate. That statement is to be filed within the prescribed time (three months from the date of death) or within such further time as the Victorian Commissioner may allow. From that statement and from such other information as he may possess the Victorian Commissioner is then to cause the ``final balance'' to be determined and ``an assessment of the duty payable on the basis of the final balance to be made and notice of the assessment to be served upon the administrator or other person liable to pay the duty'' (sec. 11(4)). Section 19 provides for appeals to the Supreme Court against assessments made by the Commissioner. Section 25 is of importance and it is desirable to set out some of its provisions in full. Subsections (1), (2) and (3) are as follows:
``(1) Notwithstanding any assessment or payment of duty under this Act or of duty on the estate of any deceased person under any of the Acts hereby repealed, or any statement of the Commissioner that no duty is payable, in respect of the estate of any person whether dying before or after the passing of this Act, it shall be lawful for the Commissioner at any time thereafter, if it is discovered that any duty payable has not been fully assessed and paid, to make a further assessment of the duty so unpaid, and to recover the same in the same manner as if no previous assessment or payment had been made.
(2) The Commissioner may at his discretion at any time cause to be made all such alterations in or additions to any assessment as he thinks necessary in order to ensure its completeness and accuracy and notify the administrator or other person liable to pay duty accordingly.
(3) Where any alteration in an assessment has the effect of reducing the duty the Commissioner shall certify the amount of duty overpaid and the Treasurer shall refund that amount accordingly.''
Subsections (4) to (7) are not material.
The rates of duty payable under the Probate Duty Act are prescribed in the First Schedule and depend not only upon the amount of the final balance but also upon the relationship to the deceased of the persons to whom that final balance passes, the rates being higher for amounts which pass to strangers than they are in respect of amounts which pass to a widow, widower, child, grandchild, brother, sister or parent of the deceased. The details of the differences are not material. It is to this statutory scheme that one must seek to apply the definition of ``debts'' for the purpose of ascertaining the amounts which are deductible for purposes of estate duty in the factual circumstances of the present case.
Counsel for the Federal Commissioner described the first issue as being whether debts as defined in sec. 3 of the Act are limited to the amount made payable on a formal assessment, or should include the net sum ultimately paid by the executors. It has long been settled that ``debts'' as defined by sec. 3 and referred to in sec. 17(1) include probate and succession duties notwithstanding that they are not in the ordinary sense due and owing by the deceased himself at the date of his death. See
Equity Trustees Executors & Agency Co. Ltd. v. F.C. of T. (1936) 55 C.L.R. 459.
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The question then is how does sec. 17(1), when read with the definition in sec. 3 which speaks of ``probate and succession duties payable'', apply in relation to Victorian probate duty. It was contended that ``duties payable'' in this context means those duties which are properly exigible pursuant to the relevant State Act, i.e. the net sum which the estate is in the end made liable to pay. It was pointed out that the word ``payable'' is not a term of art but takes its meaning from its context. ``Payable'' was said in this context to mean ``liable to be paid'' or ``that which ought to be paid''.
It was then said that if duty is overpaid it follows that more has been paid than was properly payable. This may be so in some cases but it hardly fits the present circumstances where the original amount assessed for probate duty was properly payable by reason of the provisions of the Probate Duty Act within 30 days of the assessment. It was properly paid pursuant to a statutory obligation to pay that amount. It is clear that the word ``payable'' must at least include ``paid'' because the intention cannot be to deny a deduction of debts already paid at the date of assessment of estate duty but to allow a deduction of debts payable but not yet paid.
The problem arises from the fact that the amount of probate duty assessed was correct and was both due and became payable under the Probate Duty Act at the expiration of thirty days. It was in fact paid and estate duty was correctly assessed on that basis. Subsequent events (i.e. the making of the Part IV order) however produced a change which was for some purposes deemed to operate retrospectively, i.e. as from immediately prior to the death. That however did not mean that the probate duty previously assessed must be deemed not to have been payable at that time.
Looking at the matter in retrospect however it appears that the amount properly paid in the past was revealed as having been, by reason of the Probate Duty Act, the Administration and Probate Act, and the order of the Supreme Court, more than the correct amount of probate duty in the light of all the relevant facts as they subsequently became known.
That is one of the situations for which subsec. (2) and (3) of sec. 25 of the Probate Duty Act make provision, because subsequent events have revealed that the assessment was not complete and accurate, even though it was so on the facts as known at the time. If the newly discovered facts, or the newly occurring facts, have produced an increase in the amount of duty, then under subsec. (2) the Commissioner must notify the administrator or other person liable to pay duty. Such a notification is referred to in subsec. (4) and (7) as a ``further assessment''. Moreover it is only by an ``assessment'' that amounts of probate duty can become due and payable under the Act, notwithstanding the curious provision in sec. 27(1). If the result of taking the new facts into account produced a reduction in the amount of duty properly calculated under the Act, subsec. (3) requires the Commissioner to certify the ``amount of duty overpaid'' and imposes an obligation on the Treasurer to ``refund that amount accordingly''.
I do not regard it as correct to say, as was argued, that the amount of probate duty payable can only be ascertained when the Federal Commissioner is in possession of all the relevant facts. It must clearly be when the Victorian Commissioner is in possession of all the relevant facts and has issued an assessment, or a further assessment, based on those facts, subject however to the possibility that in some circumstances he may not be authorized to issue a further assessment though new facts which would otherwise affect the amount of duty have come to his knowledge - see sec. 25(5).
Section 25(1) however is expressed in terms which expressly cover only further assessments where it is discovered that the duty payable ``has not been fully assessed'' and authorizes a ``further assessment'' of the amount unpaid. Subsection (2) goes beyond that situation and covers any form of alteration, including reductions in duty, though the use of the expression notify the person ``liable to pay duty accordingly'' is somewhat imprecise. Nevertheless the intention of the legislation is clear that the section was to allow adjustments both up and down and the issue of a ``further assessment'' or the alteration of an assessment by reducing the amount of duty and the certification of the amount ``overpaid''. The use of that word does not in my view confine the operation of subsec. (2) to cases where the duty has already been paid. If the assessment is
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altered by reduction before payment, then only the reduced amount is due and payable, and that is the amount to be notified to the ``person liable to pay duty''. The provisions thus cover cases where the amount of probate duty originally assessed as payable is altered by increase or reduction, whether or not the original amount has been already paid.If a Part IV order were made making provision for a son at the expense of a stranger at a time when the assessment for probate duty on the basis of the will alone had not been paid, and the Victorian Commissioner had acted under sec. 25(2) by making such alterations to the assessment as he thought necessary in order to secure its completeness and accuracy (i.e. by reducing the amount of probate duty payable by taking into account the relationship to the deceased of the beneficiaries who were to take the estate in the light of the Part IV order), he would be obliged to ``notify the administrator or other person liable to pay duty accordingly''. The result would be to reduce the amount of probate duty ``payable'' from that originally notified. If at the stage the Federal Commissioner came to deal with the assessment of estate duty it could not, I think, be said that he could ignore the action taken by the Victorian Commissioner under sec. 25(2) and treat as a debt payable by the estate any figure other than that which, under the alteration to the probate duty assessment notified to the executors, was due and payable to the Victorian Commissioner. That would in fact be the amount which at that time was properly due and payable and no other amount could properly be so described. There would be no basis upon which the Federal Commissioner could go back to the original assessment made by the Victorian Commissioner prior to his having made such alterations as he thought necessary to ensure the completeness and accuracy of that assessment of probate duty.
Assuming that the Federal Commissioner has power to amend the assessment, there would seem to be no basis for denying his power to take into account the amount of probate duty ascertained at the time of his making the assessment. It would not matter that in the interim that amount had in fact been paid, or even overpaid, to the Victorian Commissioner because, as I have said above, it is impossible in the context to construe the term ``payable'' as not covering amounts ``paid'' as well as amounts due but not yet paid. paid.
The meaning of the term ``assessment'' in relation to the Income Tax Assessment Act 1936 (Cth.) (as amended), where it is defined as the ``ascertainment of the amount of taxable income and of the tax payable thereon'', was considered by this Court in
Batagol v. F.C. of T. (1963) 109 C.L.R. 243. It was there held that an assessment within the meaning of sec. 170(3) of that Act is not made until the Commissioner, having gone through the process of calculation, served upon the taxpayer a notice that he had assessed the taxable income and the tax at specified amounts. It was therefore held that until a notice of assessment was served upon a taxpayer the Commissioner did not need statutory authority to review any or all of the steps taken in his office or to correct any mistake made in those steps; accordingly, sec. 170 did not preclude him from subsequently giving notice of assessment in circumstances in which at an earlier stage he had formed the opinion that no tax was payable and accordingly had issued no notice of assessment, whatever the nature of the mistake. As was said by Kitto J. at pp. 251-252:
``Assessment in the sense of mere calculation produces no legal effect. No step that the Commissioner may take, even to the point of satisfying himself of the amount of the taxable income and of the tax thereon, has under the Act any legal significance. But if the Commissioner, having gone through the process of calculation, serves on the taxpayer a notice that he has assessed the taxable income and the tax at specified amounts, the tax becomes by force of the Act due and payable on the date specified in the notice.... Thus, and thus only, there is brought about an `ascertainment' of the taxable income and of the tax, in the sense that thereafter it is possible to say what could not have been said before: that amounts have been fixed so that they are to be taken for all purposes (except those of appeal: see sec. 177) to be the result flowing from the application of the Act in the particular case.''
Owen J. pointed out at pp. 256-257 that the view thus expressed was not contrary to the
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well-known statement of Isaacs J. inR. v. D.F.C. of T. for South Australia; Ex parte Hooper (1926) 37 C.L.R. 368 that: ``An `assessment' is not a piece of paper: it is an official act or operation; it is the Commissioner's ascertainment, on consideration of all relevant circumstances... of the amount of tax chargeable to a given taxpayer'' because it ``is concerned with the use of the word `assessment' not in its defined sense but as conveying the meaning that every necessary step has been taken to create a debt due and payable by the taxpayer to the Crown''.
These observations are of course used in relation to the Income Tax Assessment Act and do not necessarily apply to the Probate Duty Act. In the latter Act there is no statutory definition of the term ``assessment'', but under sec. 27(3) the duty payable is to be paid within one month after notice of assessment has been given to the administrator or other person liable to pay the duty. The scheme is thus similar in that it is only upon the issue of an assessment by the Commissioner that any amount of duty becomes due and payable. The same factors as were referred to by Kitto J. are thus applicable and produce the result that nothing becomes ``payable'' until there is a ``notice of assessment'' served upon or given to the administrator.
The difference between the parties in applying these conceptions is that it is said on behalf of the Federal Commissioner that what took place when the Victorian Commissioner notified the executors of the alterations in the assessment which he thought necessary in order to ensure its completeness (sec. 25(2)) and certified the amount of duty overpaid (sec. 25(3)) he was making an ``assessment'' or a ``further assessment'', whereas it was argued for the executors that all that had occurred was some informal proceeding involving the making of a refund. In my opinion what the Victorian Commissioner did was to make an alteration in the earlier assessment in order to secure its completeness and accuracy, and he notified the administrator accordingly within the meaning of sec. 25(2). It was true that at that time no amount of probate duty was ``payable'' and no further amount was made payable because the original (and larger) assessment had been paid in full. It seems to me however that the process was nonetheless one of assessment, the result of which was notified to the executors. It signified to the executors that, notwithstanding that a larger amount was previously assessed and the assessment notified to the executors and paid, the Victorian Commissioner had made alterations to the assessment to ensure its completeness and accuracy, and that he was notifying the executors accordingly when he sent a revised calculation of the amount of probate duty properly payable under the Act on the basis of the distribution revealed by the order of the Supreme Court. That alteration in the assessment had the effect of reducing the duty and accordingly the Victorian Commissioner certified the amount of duty overpaid in the document sent to the executors.
I do not think that it is correct to say that this process is not one of ``assessment'' and that what the Victorian Commissioner did was not to issue an assessment even though its effect was, not to make an amount of duty payable within a stated time of its service on the executors, but to reduce the amount of duty previously assessed. It does not in my opinion matter that the executors had already paid an amount in excess of the figure so ascertained.
It is in accordance with ordinary usage to regard an amount so ascertained as being the amount ``payable'' in respect of probate duty. The provisions of the Estate Duty Assessment Act are concerned with ``debts payable'' and I have already indicated that in my view that expression includes debts already paid at the date of assessment. Equally it includes the amount of probate duty properly payable in cases where that figure is ascertained only after an original assessment and a subsequent altered assessment or ``further assessment'' of probate duty. That is a view which appears to me to accord with the general scheme of both the Acts and not to do any violence to the language of either. I have given careful consideration to the views expressed in the two earlier decisions of Boards of Review to which I was referred Case A4,
69 ATC 15 and Case E57,
73 ATC 447. They dealt with the different problem of the making of ``rebates'' in respect of ``land used for primary production'' under the South Australian Succession Duties Act 1963 and the like provision in the Victorian Probate Duty Act - sec. 24. It is not necessary for present purposes to consider whether on this point those decisions were correct.
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Accordingly I am of opinion that, if the Federal Commissioner had waited until the determination of the Part IV application and the issue of the altered calculation sheet by the Victorian Commissioner before assessing estate duty, he would have been right to assess that duty upon the basis that the amount of probate duty payable was the amount shown in the ``altered'' or ``further'' assessment by the Victorian Commissioner. It follows from that view that, if the Federal Commissioner had power to issue an amended assessment in this respect, it would be correct to allow as a deduction only the amount of the altered figure for Victorian probate duty.
I turn therefore to the question whether he did have power to issue an amended assessment. That power depends upon sec. 20 of the Estate Duty Assessment Act. It is common ground that the executors did not, prior to the date of the assessment, make a ``full and true disclosure'' of all facts material to the assessment of the amount of estate duty. The material facts not disclosed were two additional assets totalling $66.84 and two additional liabilities totalling $336.00, as referred to in the letter quoted above, the disclosure of which would have reduced the amount of the dutiable estate by the sum of $269.16. They had already disclosed to the Federal Commissioner all the facts necessary for the ascertainment and assessment of the amount of income tax either payable or required to be refunded to the estate in respect of the year of income ended 30th June 1975. That amount was neither a debt then due, nor an asset then payable to the estate. The Federal Commissioner was the only person who could issue the ``assessment'' showing that a refund was due to the estate, but all the relevant facts had been placed before him. The executors had also informed the Federal Commissioner that the son of the testator had made a Part IV application. That application had not then been heard and there were no other facts which could have been communicated to the Federal Commissioner with respect to it. The making of the Part IV application was not a fact which at that time directly affected the making of an assessment. It was a fact that indicated that a further event might (but equally might not) occur which would in its turn have such a direct effect. It was therefore material to the making of the assessment only in the sense of showing that it might be wise to await the event before making it.
Section 20(2)(b) authorizes the Federal Commissioner to amend an assessment where there has not been made ``a full and true disclosure of all the material facts necessary for the making of an assessment, and there has been an avoidance of duty''. In my opinion the section makes it clear that both these aspects must be determined as at the date of the assessment. The Act is directed to ensure that, if at the time when the assessment was made, there had not been full and true disclosure and that as a result there has been an avoidance of duty, then an amended assessment may be made so as to correct or eliminate that avoidance. This appears from the concluding words of the subsections which say that the Federal Commissioner may ``amend the assessment by making such alterations therein or additions thereto as he thinks necessary to correct an error in calculation or a mistake of fact or to prevent avoidance of duty, as the case may be''. It is true that the power appears to extend beyond authorizing a correction to prevent the avoidance arising from the failure to disclose, and to include the correction of errors in calculation and mistakes of fact which may be unconnected with the failure to disclose.
In my opinion there was in this case no avoidance of duty, although there was not full and true disclosure of all facts material to the making of an assessment. The debts and liabilities of the deceased are just as material to the making of an assessment of estate duty as are his assets. It was suggested that non-disclosure of assets was itself sufficient to produce avoidance of duty, notwithstanding the contemporaneous non-disclosure of debts exceeding those assets. This argument does less than credit to the Commissioner and his task, which is to assess according to law on the basis of all assets and all liabilities. If the disclosure of facts material to the making of an assessment falls short of being full and true by reason only of the omission of two assets totalling $66.84 and two liabilities totalling $336.00, the result cannot be an avoidance of duty.
On that basis it is clear that sec. 20(2)(b) can have no operation because it is dependent on two factors in combination, namely lack of full and true disclosure and avoidance of duty. If one or the other is absent, that provision does
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not permit an amended assessment. Accordingly the present amended assessment falls outside the statutory power.An alternative view which leads to the same conclusion is that sec. 20(2)(b) requires a connexion between the lack of full disclosure and the avoidance of tax, a connexion which is lacking in this case. The alleged avoidance is said to be caused by the allowance by the Federal Commissioner of too large a deduction for Victorian probate duty. That avoidance was however caused by failure to await the result of the Part IV application before making an assessment, and not by non-disclosure of any material facts. For the Federal Commissioner it was argued that no connexion was required between the non-disclosure and the avoidance and, in effect, that non-disclosure gave power to amend in any respect whatsoever. Not only is that view contrary to what I regard as the plain grammatical meaning of the subsection, but also it renders the express reference to mistakes of fact and errors in calculation entirely superfluous.
This point does not appear to have been the subject of any express decision in this Court on this Act or the similar provisions in the Income Tax Assessment Act. There are however some statements, admittedly obiter, by members of this Court which suggest this view, and which are certainly consistent with it. See per Fullagar J. in
Australasian Jam Co. Pty. Ltd. v. F.C. of T. (1953) 88 C.L.R. 23, at p. 34 where he said: ``If the absence of full disclosure has in fact resulted in less tax being paid than ought to have been paid, there has been an avoidance of tax within the meaning of sec. 170(2)'' and per Kitto J. in
McAndrew v. F.C. of T. (1956) 98 C.L.R. 263 at p. 274 and p. 278. The only dictum to the contrary appears to be that of Williams J. in
McEvoy v. F.C. of T. (1950) 9 A.T.D. 206, at p. 211, a case which was overruled on its principal point by the Full Court in McAndrew v. F.C. of T. However there is a decision of Windeyer J., sitting in the original jurisdiction, which is consistent only with the view which I have expressed above. In
W. Thomas & Co. Pty. Ltd. v. F.C. of T. (1965) 115 C.L.R. 58 he dealt with an amended assessment of income tax which disallowed deductions previously claimed in respect of enumerated repairs to a newly acquired building as well as repainting the building. He said at p. 76 that the amounts spent on all the items of repairs were expenditure of a capital nature, but in respect of them there had been full and true disclosure of the material facts. The expenditure on painting also was held to be of a capital nature but in respect of it there was not full disclosure. In the result Windeyer J. allowed the taxpayer's objection to the amended assessment in respect of all the capital items as to which there had been full disclosure, and disallowed the objection as to the expenditure on painting. The distinction thus drawn is one with which I respectfully agree. What I have said above about the proper construction of sec. 20(2)(b) is I think entirely in accordance with that decision.
It was sought to sustain the amended assessment on the basis that it was to correct a mistake of fact and thus authorized by sec. 20(2)(b) or alternatively sec. 20(3). It was rightly conceded that nobody in November 1972 made any mistake of fact. It was said that the dispositions made by the will were matters of fact and that the Commissioner made what was called a ``deemed mistake''. It was also said that the amount of probate duty properly payable was a matter of fact and that the Federal Commissioner was mistaken as to that fact. In my opinion those arguments are inconsistent with the undeniable circumstance that when he made his assessment in November 1972 he made no mistake. The assessment which he made was correct and was the only assessment which he could then have made. The situation is not materially distinguishable from that dealt with in
Foster v. F.C. of T. (1951) 82 C.L.R. 606. Dixon J. there said at pp. 617-618:
``If at the time the assessment was made it was the only assessment that could lawfully be made, I do not see how it could be said that the amendment was `to correct a mistake of fact' even if it be true, as probably it is, that the deputy commissioner would never have issued the notice of assessment at that juncture had he been aware that an appeal had been instituted by the company and allowed.
I do not agree with the contention which I understand to be made for the commissioner that, if at the date when the amendment is made the facts are such that the original assessment no longer represents what would be the liability of the taxpayer were he to be thus assessed for the first time, that is enough to enable the
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commissioner to `correct' it, provided it appears that some misapprehension existed. I think that there must be something incorrect in the original assessment as at the time it was made, something then needing correction.In my opinion there was nothing incorrect in the assessment as at that date. It was the only assessment which at that time could have been made.''
In the present case the state of mind of the assessor and of the Federal Commissioner at the time of the original assessment do not appear in the agreed statement of facts beyond the statement that ``After the 17th November 1972 the Commissioner of Taxation and the said Shelley [the assessor] knew - (a) that the said probate duty assessment had been issued; (b) the said Part IV application had been made'' and the further statement that they did not know of the future events, i.e. the order of the Supreme Court made on 15th November 1973 and the alteration in the probate duty calculations. However the only mistake which could have been made was in issuing the notice of assessment then rather than awaiting the result of the Part IV application. If that be a mistake, it is certainly not a mistake of fact. It may be that what occurred was the following of some convenient administrative policy comparable to that referred to in
Levy v. F.C. of T. (1961) 106 C.L.R. 448 by Kitto J. at pp. 458-459 and in the Full Court per Owen J. at p. 470 but, even if that were so, it would not authorize the amended assessment.
In my opinion therefore the appeal should be dismissed and the objection against the amended assessment upheld.
ORDER
Appeal from Board of Review dismissed with costs. Taxpayers objection upheld. Amended assessment set aside and remitted to the Commissioner to issue a further amended assessment in accordance with these reasons for judgment.
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