Case K62

Judges:
MB Hogan Ch
P Gerber M
GW Beck M

Court:
No. 3 Board of Review

Judgment date: 26 October 1978.

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M.B. Hogan (Chairman); Dr. P. Gerber and Dr. G.W. Beck (Members):

BOARD'S RULING

In this case, the taxpayer objected to the surplus from the sale of mining shares being included in his assessable income in the years now under review. The Commissioner decided the objections adversely to the taxpayer. So much is common ground. When the matter was called on for hearing, Mr. Conti, senior counsel for the Commissioner, raised a preliminary point; viz. that he was instructed to submit that the Commissioner maintains that no requests for a reference were received. He likewise maintains that the prescribed fees were not received within the time laid down in sec. 188. Mr. Conti submitted:

``The stand that the Commissioner takes in relation to that is that, without prejudice to his contention there has been no valid reference, the matter has been referred to you today, and in that regard he is following a course which was suggested by the High Court in Trautwein's case many years ago. We would seek to raise an issue - this

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question of jurisdiction - in the first place.''

On this basis, the whole of the first day was taken up with the factual issue whether, and if so, how and/or when these requests and/or fees were forwarded to the Commissioner's Parramatta Office. Both sides called evidence, the taxpayer and his witness sought to affirm that both the requests and fees in the amount of $14 (or $16) were lodged within time; the Commissioner sought to establish that no request for a Reference was received, nor were any fees paid within the relevant period of time. During the overnight adjournment, the Board took the opportunity to consider this matter, and on the resumed hearing the next day, the following discussion took place:

``Chairman: As you are probably aware, the way this matter has proceeded, the Board is placed in a fairly difficult situation, more or less in one sense, by the way the matter has proceeded, being asked to become arbitrators of the limits of our own jurisdiction in a lot of ways. We have given some attention to the point overnight and Dr. Gerber has reduced it to writing and I ask him to read out what we think is our position as we see it at the moment.

Mr. Conti: Could I be so presumptuous as to interrupt for one moment. Did you have the benefit before you of a decision on this question of jurisdiction of the No. 1 Board, which we were able to obtain this morning, the matter of a reference No. 90/1974?

Dr. Gerber: We had the advantage of being aware of its existence, but we penned our thoughts independently of it and no doubt you can deal with it, if you so wish, at a subsequent stage. What we have penned at this stage, in the knowledge of the No. 1 Board dealing with the point, is this: At the commencement of proceedings yesterday you, Mr. Conti, as senior counsel for the Commissioner, indicated that the question would be raised whether a valid written request for a reference to a Board of Review had been served on the Commissioner and, if so, whether it had been accompanied by the fees prescribed by sec. 187.

Since it was submitted on behalf of the Commissioner that he regarded this as a jurisdictional question going to the Board's competence to entertain the reference, the Board suggested that it might be preferable to deal with this issue as a preliminary question, and both parties readily agreed to this procedure being adopted. In the result, the whole of yesterday's proceedings were taken up with the taxpayer seeking to establish, and the Commissioner to rebut, that these requests and the accompanying fees were in fact received within the time prescribed by the Act.

Fundamental to the adoption of this course is the assumption by both parties that the resolution of this question in favour of the taxpayer would enable the Board to deal with the issues raised in the objection and the Commissioner's decision thereon.

The Board has given some thought to this issue during the overnight adjournment and, without having reached any concluded opinion, has reached the tentative view that, being an administrative tribunal rather than a court, it lacks the competence to decide a preliminary issue going to its own jurisdiction of the kind here raised.

Section 187 of the Income Tax Assessment Act enables a taxpayer, dissatisfied with the Commissioner's decision on the objection, to request a reference to a Board for review. Such requests must be made within 60 days of the receipt of such decision.

Section 188 compels the Commissioner to refer his decision on the objection to a Board if the request is accompanied by a fee of $2.00. Our reading of that section is that the payment of the fee is a condition precedent for any such referral, and it is incompetent, in our view, as presently advised, for the Commissioner to waive compliance with such requirement.

If on the receipt of such notice pursuant to sec. 188 the Commissioner maintains that no valid request has been received, it appears to us that a taxpayer's sole remedy is to proceed against the Commissioner by way of mandamus to compel the Commissioner to perform the

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statutory duty imposed on him by the Act, a duty which is unqualified by any discretionary judgment still remaining to be exercised. The Commissioner, being the person charged by the Crown with the collection of revenue, cannot waive strict compliance with the Act by ignoring, in the instant case, the alleged failure to serve him with the requisite notice.

If a court, on an application for mandamus, subsequently finds as a fact that a valid notice had, in fact, been served, mandamus will issue and the Commissioner will be ordered to refer the matter to a Board. We do not, at this stage, believe that this procedure can be circumvented by the Commissioner taking the initiative and, whilst maintaining that the taxpayer has not complied with the Act, nevertheless refer the matter to a Board of Review, so to speak, under protest; a Board, we might add, whose sole and limited function is to review the Commissioner's decision on objections. In other words, we entertain considerable doubt at this stage whether the Commissioner can, by his own conduct, confer a jurisdiction on the Board it does not otherwise appear to possess, whilst at the same time raising `this question of jurisdiction in the first place'.

In other words, we do not think that the Commissioner can `blow hot and cold'. Nor is there a `submission' to the jurisdiction merely because the Commissioner appears ready to defend his decision on the objection.

Whilst it is true that an unconditional appearance usually disqualifies a party so appearing from challenging the jurisdiction, whilst a qualified appearance does not, we do not, at this stage, believe that a Board of Review, having only limited competence, can have a jursidiction conferred upon it by any action of the Commissioner which falls outside the obligations cast upon him by sec. 188, or that it is open to the Commissioner to enter something akin to a conditional appearance.

Likewise, no conduct on the part of the Commissioner can operate as an estoppel against the operation of the Act (see Kitto J.,
F.C. of T. v. Wade (1951) 84 C.L.R. 105 at p. 117). It would therefore seem to us, at this stage, that where there is a statutory provision, compelling the exclusive adoption of certain procedures by the Commissioner, the principle of estoppel cannot be invoked to negate such provision. In other words, the Commissioner cannot, by referring the matter to a Board of Review, any more than be any other means, raise against himself an estoppel so as to create a state of affairs which he is under a legal disability from creating.

As we said at the outset, these are merely random thoughts which have occurred to us since yesterday's adjournment. We though we would mention these at the outset before counsel addressed us on the issue. Of course, we are mindful that, in fact, the No. 1 Board, in the decision referred to by Mr. Conti, came to a conclusion different from the thoughts that we have accumulated at this stage. However, we would refer counsel to a decision of Mr. Justice Brennan in
Re Adams and the Tax Agents Board, reported in Vol. 7 A.T.R. 87. The issue in that case, of course, was very different from the issue currently before this Board and is readily distinguishable.

The issue there was whether or not a Board, somewhat similarly constituted as this one is, was competent to decide whether or not a provision of the Income Tax Assessment Act was constitutional. Brennan J. made an observation which, it appears to us at this point, is nevertheless germane and apposite to the issues which we have been asked to decide on this reference. He said this at p. 89:

• `An administrative body cannot therefore lawfully exercise authority merely because it is of the opinion that it has the authority. Its opinion is not the charter of its powers and discretions. It derives its powers and discretions from and in accordance with the law. It is the court's judgment and not the administrative body's opinion which defines the extent of (as well as the constitutional support for) its statutory authority.' (emphasis added)

His Honour goes on, citing a dictum of

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Lord Justice Farwell in
The King v. Shoreditch Assessment Committee ex parte Morgan, (1910) 2 K.B. 859 a passage which, I might add, has been cited with approval subsequently by Lord Wilberforce:

• `It is a contradiction in terms to create a tribunal with limited jurisdiction and unlimited power to determine such limit at its own will and pleasure - such a tribunal would be autocratic, not limited - and it is immaterial whether the decision of the inferior tribunal on the question of the existence or non-existence of its own jurisdiction is founded on law or fact.'

Brennan J. then goes on to say:

• `Blackburn J. sitting in an administrative jurisdiction in
  Re Cilli's Objection (1970) A.L.R. 813 at 815; 15 F.L.R. 426 at p. 428 noted that an administrative body `must satisfy itself that all its proceedings are in accordance with the law. It must, therefore, receive and consider, whenever the point is taken, an argument that it has no jurisdiction. To say that is, in truth, to say no more than that it must at all times act lawfully'.'

Brennan J. concluded:

• `When an administrative body declines to exercise a power in consequence of its opinion as to the limits of the authority conferred upon it by statute, the administrative body thereby seeks to conform with the expressed will of the legislature.'

As the Chairman indicated, these are in no sense concluded views, and we thought that perhaps at the outset we should air what tentative opinion we have formed, if only to alert counsel to this situation, and to enable counsel to deal with what we regard as a fairly fundamental issue raised at the outset by Mr. Conti's contention that his client did not receive the statutory request for a reference, and from which it would follow, as we see the issue at this stage, that the reference to this Board is incompetent.

In other words, it is not for this Board to decide whether or not such notice was received as a threshold question which, in turn, determines its own jurisdiction. In short, the Commissioner cannot bypass the ordinary remedy provided by way of prerogative writ by the device of remitting the matter to a Board of Review.

I do not know whether you gentlemen wish to consider this matter. It is obviously a position different from the one adopted by No. 1 Board which, I may hasten to add, none of us had the chance to read. It may contain wisdom we are not apprised of at this stage. We would appreciate any assistance we can get from submissions both you gentlemen may be able to bring to bear on this.''

2. Having now considered this matter at leisure, we have come to the conclusions that, if the Commissioner maintains that he did not receive requests to refer his decisions in this case to a Board, he was in error in forwarding the references to the Board. The Commissioner is bound by the Income Tax Assessment Act like anyone else, and unless his action is sanctioned by law, it is, in our opinion, a nullity. The Commissioner's powers in relation to references are precisely defined by statute; viz. he shall forward a request if, and only if,

• (a) it is received within the time prescribed by the Act; and
• (b) the request is accompanied by the prescribed fee.

We must reject the submission by Mr. Cohen, solicitor for the taxpayer, that the Commissioner has a discretion to waive strict compliance with this statutory requirement. If the Commissioner asserts that (a) and/or (b) above has/have not been observed, he cannot forward what is neither a ``reference'' nor an ``appeal''. The matter is henceforth one going to the Board's jurisdiction, and a taxpayer who wishes to contact a jurisdictional fact must proceed by way of mandamus to a court of competent jurisdiction which can determine the issue; a Board of Review cannot. A taxpayer cannot come to a Board of Review as an alternative merely because the Commissioner has ``consented'' to such a course on a ``without prejudice'' basis.

3. It was submitted by Mr. Conti that this alternative procedure had been, somehow,

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legitimated by
The King v. F.C. of T.; Ex parte Trautwein (1936) 56 C.L.R. 63. We cannot accede to that submission. For present purposes, it will suffice if we set out the facts taken from the headnote in the report: (pp. 63-64)

``A taxpayer, who had not kept proper records or books of account, objected to assessments for Federal income tax made in respect of his income during each of seven consecutive years. His liability to tax was reviewed by the Commissioner in the light of a report by the taxpayer's accountants, which showed that as between the beginning and the end of the seven years period there had been a large unaccounted-for accretion of assets, which the Commissioner regarded as of an income and not of a capital nature. The Commissioner added a seventh part of the amount of this accretion to the assessable income of each of the seven years. The assessments were then amended. In six of the assessments the amount of assessable income was increased, and in one reduced. Three days later the Commissioner notified the taxpayer that his objections to the previous assessments had been allowed to the extent shown in the amended assessments, and his attention was directed to his right of appeal. The taxpayer did not request that his objections be treated as appeals, but lodged objections against the amended assessments. Upon the disallowance of these objections he requested that they be treated as appeals.''

With respect to one year (1925) the Commissioner caused a series of notices of amended assessments to be given to the taxpayer, starting with £5,093, thence reduced to £2,725, then increased to £2,733, again increased to £38,601 and finally reduced to £20,193. It was conceded that a valid notice requesting the Commissioner to treat the objection as an appeal had been received. Nonetheless, the Commissioner refused to forward same to the Court on the somewhat quaint notion that ``no notice of objection lies against the assessment... it being a reduced amount''. The reasoning behind this view was, apparently, based on the fact that the last amended assessment sent to the taxpayer had arrived at an amount of taxable income less than the amount shown in the previous amended assessment. In the result, there was a ``reduced amount'' - hence no appeal, and hence the refusal to forward the taxpayer's request to the court. As a consequence, there was in fact no appeal before the Court. From this refusal the taxpayer applied for a writ of mandamus to compel the Commissioner to treat the objection to the final amended assessment for the year ended 30th June, 1925 as an appeal and to forward it to the Court. Evatt J. granted an order nisi returnable before the Full Court and reserved (inter alia) the following question for the opinion of the Full Court:

``... is the appellant entitled to have his notice of objection... treated as an appeal and forwarded to this court...?''

This question was answered by Latham C.J., Starke, Dixon and Evatt JJ. as follows: -

per Latham C.J.

``No appeal as to this year is before the Court and the question asked therefore cannot be answered upon this case.''

(at p. 98)

per Starke J.

``No appeal is before the court as to this year, and the question cannot be answered.''

(at p. 104)

In the joint judgment of Dixon and Evatt JJ., the following appears at p. 110:

``... it would be more convenient if the Commissioner adopted a practice of complying with the taxpayer's request to forward the objections to the court, notwithstanding that the Commissioner considers no appeal lies. His contention that an appeal cannot be entertained would not be prejudiced by his doing so and he could, in forwarding the objections, notify the registrar and the taxpayer that he had given his decision and forwarded the objection subject to and under the cover of an objection on his part that the alteration or addition was not subject to objection and appeal by the taxpayer. It may be true that under secs. 50(4) and 51A(1) an absolute duty is not imposed on the Commissioner to forward the objection if the objection is one which

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does not in truth lie and he has treated it as incompetent. It is not necessary for us to decide the point, for the Commissioner has said that he will forward the objection if it appears to the court that the amended assessment was open to appeal.''

The first thing to observe is that the above statement by Dixon and Evatt JJ. is an obiter dictum (``it is not necessary for us to decide the point''). Be that as it may, dictum at this level deserves the closest scrutiny. Thus two of the four judges opined: -

• (i) ``it would be more convenient'' if the Commissioner were to forward an appeal if requested to do so, notwithstanding that he considers that no appeal lies;
• (ii) that the Commissioner can safeguard his position by forwarding the appeal on a ``without prejudice'' basis;
• (iii) ``it may be true'' that no absolute duty is imposed on the Commissioner by the Act to forward such objection ``if the objection is one which does not in truth lie and he has treated it as incompetent'';
• (iv) in the circumstances of this case, the point did not require final determination.

It is worth noting that in Trautwein, the Court was there dealing with a request for an appeal which ex facie, was valid. What the Commissioner appeared to be doing in that case was to usurp the function of the Court, by determining himself what was clearly an issue of law; i.e. does an appeal lie from a ``reduced amount''? This notwithstanding, the Court refused to answer the question in the absence of an appeal strictu sensu. This is a far cry from the position in this case, where the Commissioner maintains that no reequest was received at all. Furthermore, there is a world of difference between a court and a Board of Review. Insofar as Mr. Conti's argument is based on Trautwein's case, we are unable, with the greatest respect for his well reasoned argument, to reach his conclusion. We should add that neither the Act, nor the rules provide a procedure enabling the Commissioner to enter before a Board of Review an appearance under protest, which, it appears to us, Mr. Conti is seeking to do here.

4. There is a further and equally formidable hurdle in the taxpayer's way, even assuming that it is open for the Commissioner to come before a Board and at the same time contest its jurisdiction. Underlying this view is the assumption that a Board of Review is competent to determine whether a reference is properly before it. On further reflection we do not believe that it has that competence. The Act exclusively defines the limits of the Board's jurisdiction; viz. to review the decisions of the Commissioner on objections which are referred to it under the Act (s. 192). This does not mean any referral but only a lawful one, one the validity the Commissioner himself does not and cannot contest. In
R. V. Commissioners for Special Purposes of Income Tax (1888) 21 Q.B.D. 313, Lord Esher M.R. stated:

``When an inferior Court or tribunal or body, which has to exercise the power of deciding facts, is first established by Act of Parliament, the Legislature has to consider what powers it will give that tribunal or body. It may in effect say that, if a certain state of facts exists and is shown to such tribunal or body before it proceeds to do certain things, it shall have jurisdiction to do such things, but not otherwise. There is not for them conclusively to decide whether that state of facts exists, and, if they exercise the jurisdiction without its existence, what they do may be questioned, and it will be held that they have acted without jurisdiction.''

(at p. 319)

On this view, the matter is ultimately one of statutory interpretation: Does sec. 192 contain, in effect, a Scott v. Avery clause conferring on the Board arbitral powers dealing with the administrative actions of the Commissioner? In our view it does not; to do so would involve ``asking the wrong questions''. We are unable to divine any such intent in the provisions which established Boards of Review whose sole purpose is to review the Commissioner's decision upon objections. Such a tribunal must confine itself within the powers specially committed to it on a true construction of the Act. Furthermore, it seems to us, as Farwell L.J. already pointed out in the Shoreditch case (supra) over half a century ago, that it is a contradiction in terms to create a tribunal with limited jurisdiction and unlimited power to determine such limit at its own will and pleasure. Having carved out an area of

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enquiry and conferred it on Boards of Review; viz. to review decisions on objections, it does not lie within the power of such tribunal to enquire into facts which deal with the question whether the referral is properly before it. On this view, it is an exercise in futility to call collateral evidence before such a tribunal and invite it to make a finding of fact, extending beyond its statutory powers, on the outcome of which its jurisdiction is said to depend. Nor can a finding by such a tribunal validate a subsequent ``determination'' on the merits any more than a conviction for bigamy by a magistrate can be upheld merely because two or more ceremonies of marriage had been proved beyond reasonable doubt. Yet here it is solemnly argued that the Board should determine - not the Commissioner's decision on the objection - but the conflict in evidence as to whether, and if so how the requests for a reference were forwarded to the Commissioner. We are satisfied that a Board of Review, as presently constituted under the Act, cannot competently enter into such an enquiry. We are further satisfied that if the Board were to embark upon such an enquiry, it would commit a ``broad'' jurisdictional error of the kind adverted to in
Adisminic Ltd. v. Foreign Compensation Commission (1969) 2 W.L.R. 163.

5. We were, as pointed out before, referred to a Ruling handed down by No. 1 Board of Review entitled 90/1974, where the Board, on facts indistinguishable from those now under review, laid down:

``We hold that the Commissioner acted correctly in transmitting the reference to the Board and was entitled on the information then in his possession to do so without prejudice to his view that no valid request for reference had been made within the terms of s. 187 of the Act...

We hold further that the Board has jurisdiction to determine whether a reference has been made within the time limitations imposed by the Act. Where that question is raised the onus is on the party who asserts that the reference is out of time.''

6. We concur in the opinion, expressed by our colleague, Mr. Fairleigh Q.C. in several recent decisions, that Boards of Review, being mere administrative tribunals, lack the competence to create binding precedents. We are furthermore of opinion that the same reasoning applies to rulings. For the reasons outlined above, we regret that we are unable to follow the procedure adopted by that Board. No doubt it is unfortunate that different rulings should apply, depending on which Board determines the reference. However, we fear that this state of affairs must continue until the matter is resolved, one way or the other, by a court lacking the restraints imposed upon Boards of Review, whether it be by mandamus or certiorari.

7. In the event of this matter going further, we propose to make a ``finding'' on the evidence of receipt by the Commissioner of the requests for a reference. As we have concluded that no request for a reference was received we are satisfied that no ``decision'' on the merits is required.

8. Since the finding of ``receipt'' is purely one of fact, we see no point in publishing our findings beyond making a copy of same available to both parties.