Case W37
Members:PM Roach SM
Tribunal:
Administrative Appeals Tribunal
P.M. Roach (Senior Member)
Introduction
1977 must have seemed to Ann to be a good year. Married for 16 years, she was the mother of four children and the wife of Dick - a man well settled in a responsible position in the Public Service - and so enjoying the security and advantages of such employment, little appreciated by those who enjoy them: best understood by those who by their default have lost them. It proved to be both a busy year and a successful one. In February she received $30,000 as her half-share in a lottery win with a friend. Before the year was out she was able to give up her interest in a TAB agency in expectation of the birth of her fifth child. The agency had provided her with an income to supplement the family's finances but, upon giving it up, she hoped not to return to work. In the latter part of the year, the family home of many years was sold and a new, better home was purchased. Along with the new home came a number of incidental purchases: carpets; electrical goods; and the like. The old car was sold and a new car was purchased. As a result of her lottery win, Ann was able to make a substantial financial contribution to the cost of the new home. In addition, she was able to lend $4,000 to her brother. Inter-family relationships were very good. For many years Dick and her father had held a joint bank account. In December 1977, her father transferred to Dick for no consideration, but to be held for the grandchildren, a seaside block on which a small cottage had been constructed. It was valued at the time at $24,500. At about the same time Dick paid to her father $5,000 to compensate him for expenses incurred in the construction. By the time the new baby was born in November 1977, life must have seemed to be very satisfactory.
2. Whatever satisfaction there may have been was not to last long. At 6.45 a.m. on 17 March 1978 Federal Police called at the family home and searched it for financial records maintained by Dick. When they left the premises at approximately 9.00 a.m. that morning, Dick accompanied them. He was later arrested and charged with forging and uttering a cheque for $10,620.99. The crime was alleged to have happened in May 1977. Although neither Dick nor Ann referred to it in the course of giving evidence, banking records as annotated indicate that in March 1978 a cheque
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for $1,000 had to be drawn to provide for bail. The cheque giving rise to the charges laid was in fact a tax refund cheque issued by the Commissioner on 10 May 1977 in favour of a company which I shall refer to as ``Wal-Co''. That, no doubt, was a matter of some concern to the Commissioner. However, what was of far greater concern to the Commissioner was the circumstance that Dick was one of his trusted officers: an officer entrusted with substantial responsibility in investigating the affairs of taxpayers with a view to identifying (inter alia) dishonest taxpayers.3. The quality of the tax system depends upon the proclamation of wisely framed laws, and the skilful administration of those tax laws by an able staff of the Commissioner. But capacity for skilful administration is nothing unless the officers of the Commissioner are honest. Further, in that regard, it is important that the community perceives the officers of the Commissioner to be honest. The Commissioner and his officers have long been accustomed to being accused by some of being aggressive, oppressive, ignorant, biased, lacking in understanding, wanting in judgment and incompetent. They suffer many insults and many injustices. For the most part they have long been inured to such complaints, although far from being insensitive to them. But such is the quality of tax administration in this country that accusations of dishonesty are rarely made, and they very rarely prove to be well-founded. When such allegations are made, they are understandably matters of grave concern to the Commissioner and to the community. In the circumstances, it is hardly surprising that the Commissioner reacted to the problem as he did. Whether his initiatives were taken in response to the police action or, in fact, led to it, is a matter as to which I make no finding.
Investigation
4. What I do find is that the matter of the investigation was given high priority. First one officer, and later two more, were brought from interstate - presumably because initially the Commissioner had no idea whether any other officers in the local taxation office were involved. In a period of several weeks, those three officers, all experienced, were engaged full-time in the investigation. As a result, they discovered a network of false accounts and other transactions which indicated the existence of an enterprise to exploit the public as customers of the business; to defraud Wal-Co, as a taxpayer which had been under investigation; and to defeat community interests through tax evasion. The Commissioner's officers identified three persons as the conspirators: Tom - an investigation officer who had been appointed to investigate the tax affairs of Wal-Co; Dick - another investigation officer, the present applicant; and Harry - a former officer of the Commissioner. There is nothing before me which suggests that the circumstances whereby Harry left the service of the Commissioner are in any way related to the matters in issue in these proceedings.
5. The conspiracy alleged by the Commissioner flowed out of the affairs of Wal-Co. Wal-Co was a company which carried on business from Sydney. It was controlled by a New Zealander (``Suter''). Its business was to generate revenue by soliciting by mail advertising subscriptions from business houses on the promise of publishing commercial directories. It was an effective technique. Subscriptions flowed in by mail directed to a private G.P.O. box. The conduct of the business involved the printing of materials which was carried out by a suburban printery operated by a printer (``Caxton''). The preparation of mail for despatch was carried out by a suburban typing service controlled by a lady related to Caxton. The collection and banking of subscriptions was carried out by the same lady and, possibly, the distribution of directories. Subscriptions came from all States, except Tasmania and South Australia. Subscribers included many institutions of supposed commercial acumen. A directory printed in 1978 was produced in evidence as a sample of what Dick believed to have been published. It was a poor example of the art of advertising, even to the point of being badly proof-read with obvious errors uncorrected.
6. The investigators were able to satisfy themselves that the scheme had involved some or all of the conspirators in:
- (a) obtaining access to the G.P.O. box of Wal-Co and diverting cheques drawn in favour of Wal-Co to accounts controlled by the conspirators;
- (b) incorporation of two companies using fictitious names adopted for the purpose by at least two of the conspirators;
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- (c) thereafter using those companies to carry on the business previously carried on by Wal-Co;
- (d) carrying on business in those names - one of which (Walbank) was superficially similar to the name of Wal-Co - the other (Grant-Co) was not; and
- (e) despositing moneys received thereafter to accounts in the names of Walbank and of Grant-Co; to accounts in false names controlled by Tom; and to accounts in false names controlled by Dick.
The investigators completed their initial investigation and the investigating officers then jointly produced and signed a detailed written report (9 June 1978) before returning interstate to await further instructions.
7. In late October 1978 committal proceedings commenced against Tom and Dick. Dick was committed for trial and, on 5 November 1979, he appeared in the District Court represented by one of Her Majesty's counsel. He pleaded guilty to the offences charged and sentence was passed. No custodial sentence was imposed. Instead, he was bound over to be of good behaviour and ordered to make restitution of $5,310: one-half of the face value of the cheque which had been forged and uttered. He made compensation. How and when was not explained.
8. The processes of the criminal law being complete, one interstate investigator (``Holmes'') was recalled to Sydney. He was to spend several weeks more completing his investigation which resulted in a final report presented to his superiors in Sydney on 18 January 1980. By 30 November 1979 the work of calculating the total income generated by the scheme was complete, or at least virtually so. To finalise his report Holmes was required to make recommendations as to the amounts of omitted income to be taxed and the identity of the persons to whom, and the amounts in which, the increased taxable income should be attributed. In approaching that problem, Holmes acted honestly and in a manner which is readily understandable. Having identified only Tom, Dick and Harry as the participants, he confined his further attentions to them. Having regard to what he knew, Holmes was not prepared to accept uncritically what he might be told by Dick. For example, he was not confident that he had identified, or could identify, all relevant assets held by Dick. He was conscious that, if anyone should be well informed as to how to hide information from a tax investigator, it ought to be an experienced tax investigator. On the other hand, Holmes was not so suspicious of Dick, or so believing of all the information which had been passed to him, that he was not prepared to check any explanations Dick might give and, where appropriate, confirm them. Holmes was aware that he might not have uncovered the full extent of income generated by the scheme. He was aware that there may have been expenses that he had not taken into account. As to such possible expenses he took the view that only such expenses as were substantiated should be taken into account in his calculations (cf. $720 bulk postage).
9. He understood that the conspirators may not have participated equally in the scheme, either by way of contribution or by way of benefit; or have been involved throughout the full term of the project; or shared beneficially in the same proportions throughout the term. He did not have regard to the possibility of other conspirators. I accept that that was because he believed that there were no other participants. His understanding was that, if he under-assessed the income proper to any one of the three conspirators the Commissioner would have no power to later amend his assessment to increase it against another or others. The possibility of attributing to each conspirator so much as would result in the total additional amount assessed exceeding the total of the identified untaxed income did not come to his mind. Faced with no information which would enable him to trace any portion of the identified income into the hands of Dick, and not having any information which would enable him to point to assets under the control of Dick with which the money could be identified, or to the dissipation of the moneys derived, and unable to exclude the possibility of unidentified assets, he did what he judged to be the best he could: he recommended that the identified moneys be assessed against the three conspirators in equal shares.
The assessments
10. The recommendation was adopted to the extent that, following Dick's response to pressures in January 1980 for him to lodge his 1978 income tax return, on 27 February 1980 the Commissioner issued amended assessments
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against Dick in relation to the years of income ended 30 June 1976 and 1977 and an original assessment for the year of income ended 30 June 1978. I am satisfied that the adjustments were made up as follows: Year ended 30 June 1976 1977 1978 Total
$ $ $ $
Previously assessed/
returned 13,617 14,328 12,878 40,823
ADD omitted interest 34 328 319 681
ADD one-third
investigation
income 8,547 14,507 12,615 35,669
------- ------- ------- -------
Income as assessed $22,198 $29,163 $25,812 $77,173
------- ------- ------- -------
Additional tax for incorrect return was also levied at $3,518, $6,202 and $4,497 - total of $14,217. That resulted in a total claim for $32,897.35 made up as follows:
Year ended 30 June 1976 1977 1978 Total
$ $ $ $
Increase in tax 4,691.15 8,270.85 6,122.72 19,084.72
Additional tax 3,518.00 6,202.00 4,497.00 14,217.00
-------- --------- --------- ---------
8,209.15 14,472.85 10,619.72 33,301.72
Tax admitted 3,077.39 3,077.39
--------- ---------
13,697.11 36,379.11
LESS credits
and rebates 3,481.76 3,481.76
--------- ---------- ---------- ----------
$8,209.15 $14,472.85 $10,215.35 $32,897.35
--------- ---------- ---------- ----------
In accordance with the practice of those days additional tax less remissions was determined upon as a simple percentage of tax avoided. As a result, the penalty chosen in the assessment of Dick (as it seems it was for Harry) was 75% of tax allegedly avoided: and that for Tom, 60% of tax allegedly avoided - a reduced percentage recommended on account of Tom's ill-health.
11. The result was that Dick became liable to pay $32,897.35 to the Commissioner on 31 March 1980 [sic]. Had Dick been so indebted to anyone other than the Commonwealth, for tax, by ordinary standards the claim would have become irrecoverable by court action on 31 March 1986.
The appointment
12. The decision to so assess on the basis of attributing to Tom, Dick and Harry an equal share each in the profits of the scheme was a decision of critical importance, but it should be understood for what it was. At the time the decision was taken to assess Dick as having derived one-third of the scheme profit, the Commissioner was not able to point to any of the scheme profit having reached Dick's hands to be retained by him as a person beneficially entitled. The earlier statements that some $40,000 could be traced to Dick had been abandoned. Although the investigators had correctly found that large sums of money had flowed through accounts under the control of Dick, they had not obtained any evidence that any of the moneys had remained beneficially with him. Further, as will be seen, alternative methodologies of establishing a basis for imputing income to a taxpayer, whether by way of ``asset betterment'' calculations or ``source and application of funds'' calculations, had not
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been availed of. What the Commissioner did in those circumstances was to make an assumption. Having established a basis for contending that there had been a taxable profit, he then made the assumptions that three persons, and only three persons (being Tom, Dick and Harry) had participated in the distribution of that profit, and had done so in equal shares. But there is no basis for those assumptions to be considered prima facie true in either fact or in law in proceedings before this Tribunal. When proceedings commence before this Tribunal, there is no presumption that the assessment made by the Commissioner is correct. The determination of the Tribunal must be founded only in the evidence presented before it. If, upon a consideration of that evidence, the Tribunal is satisfied that Dick derived no part of that taxable profit, to that extent the assessment will be set aside. If the Tribunal determines upon the evidence before it that Dick derived something less than has been attributed to him, to that extent the assessment will be set aside. If the evidence persuades the Tribunal that the assessment is sound, then the determination of the Commissioner upon the objection will be upheld. In all of those cases, the standard of satisfaction required is for the Tribunal to be persuaded ``on the balance of probabilities''. Given that the Tribunal is so satisfied, it is unnecessary for the Tribunal to bring into play sec. 190 of the Act which provides that:``Upon every... reference...
- (a)...; and
- (b) the burden of proving that the assessment is excessive shall lie upon the taxpayer.''
As a result, it is only when, upon the close of the evidence, the Tribunal is not persuaded one way or the other, that the statutory direction as to the burden of proof comes into play with the result that, where neither party has persuaded the Tribunal that its contentions are more probably correct, then the applicant fails.
13. Having been so assessed, Dick acted promptly - as it was necessary that he should - and he objected to the assessments made. That was on 16 April 1980 by which date a request for information as to the basis of the assessments had been refused. The objections so made on 16 April 1980 were disallowed within the month: on 15 May 1980. In response, Dick acted promptly - as it was again necessary that he should - and on 5 June 1980 requested that the Commissioner's decisions to disallow the objections made on his behalf should be referred for independent review.
The references
14. To that point the Commissioner had acted promptly in carrying out investigations into these most serious matters. However, having received the requests that the matters be submitted for independent review, the Commissioner, for reasons not explained, failed to carry out his statutory duty to refer the objections for review. The requests were not complied with until 28 August 1986 - more than six years later. By that date this Tribunal had been appointed to succeed to the responsibilities previously carried by the Taxation Board of Review.
15. Furthermore, despite the Commissioner's assertion that the gross misconduct of one of his officers had produced a situation in which the Commissioner was entitled, in the interests of the community, to recover $32,897.35 in tax and additional tax from the applicant by 31 March 1980, no action had been taken to date of hearing to enforce that obligation. In the interim, interest has accrued from that date at the rate of 10% per annum to 13 February 1983 and at 20% per annum thereafter. As a result, the amount now due and payable by the applicant as a debt due to the Crown in respect of income tax stands at a sum well in excess of $80,000.
16. When the Commissioner did refer matters to the Tribunal in accordance with requests made by Dick, on the same day he also referred the papers relating to requests made by Tom and Harry for review. When the matters came forward in the list of the Tribunal for attention, by the consent of all they were considered together in preliminary proceedings. In those proceedings Tom was represented by his solicitor; and Dick and Harry were represented by a member of the Bar. (Despite that circumstance, when the hearing commenced Dick appeared to conduct his own case. The Commissioner was represented by senior and junior counsel.) On behalf of Dick and Harry, counsel requested separate hearings from each other and from Tom. The Commissioner by his representative opposed
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those applications on the basis that such a procedure would be grossly wasteful of community resources - but the application could not be acceded to by the Tribunal. Not only is the Income Tax Assessment Act 1936 (``the Act'') based upon a concept of assessment being made against individuals to the exclusion of all others; and on a fiscal year basis separate from all other years, but so too the same principle has been carried through into the procedural rules for the conduct of tax litigation. That is unfortunate.Separate hearings
17. The consequence vividly illustrated by the elections made in these proceedings is not new. It arises whenever, for example, the question in issue relates to the adjustment of a partnership or trust return. Because such an adjustment flows through in its effect into the returns of individuals, each individual has to raise his own objection. As a result, the conduct of litigation over a single issue requires the production of as many objections; determinations of objections; requests for reference; compilation of formal documents; and transmissions for review as there are objecting partners or beneficiaries. Further, having received the matters for review, the Tribunal must then, under existing procedures, take each application for review as if it were to be dealt with as a matter completely separate from all other matters. It is only when parties in common interest, even parties in such common interest as husband and wife, consent that there can be some elimination of wasteful duplication. The problem I have described was at its worst as a result of the tax explosion of the 1970s with the implementation of common form tax plans in which large numbers, sometimes vast numbers, of taxpayers were involved and whereby, in order to preserve their rights, objections in common form - sometimes documents of exceptional length - were generated and transmitted to the Tribunal even though in all groups in common interest it was only rarely necessary that any more than one matter would ever need to proceed to hearing, if an appropriate matter could only have been identified. The worst of that problem has no doubt now passed but the problem still remains on a sufficient scale such that the elimination of wasteful duplication of effort and reproduction of formal documents ought still to be a matter of priority for those who are concerned to achieve forest conservation and efficiency in the fair and just resolution of disputes by litigation.
18. But with a problem such as that of correctly determining the taxable incomes for Tom, Dick and Harry, special and different problems arise. That is so because they, unlike most of the persons of whom I have been speaking, are far from being in common interest. They might have a common interest in asserting that the total income generated by the scheme and allegedly shared by them was less than that calculated by the Commissioner's investigators, but their common interest probably ends there. It certainly does for Dick. His respect for the capacity and honesty of the Commissioner's investigators is such that he substantially accepts their assessment of group profit. He plainly accepted without question the accuracy of their analyses. His contention is rather that he received far less than the one-third attributed to him; and that what he did receive did not constitute assessable income. The corollary to that is that either one or both of the others have been under-assessed; or that others, not yet assessed at all, have derived some portion of the relevant income; or that the scheme profit was less than alleged.
19. So long as such issues are to be resolved by separate litigation, there can be no assurance that the decisions handed down after hearings will be consistent. That is not a criticism of the process of judgment. It is an observation about the conditions under which the process of judgment is carried out. Such inconsistencies may arise because of differences as to:
- the witnesses to give evidence;
- the evidence given by those witnesses;
- the effectiveness of the advocacy;
- the different membership of the Tribunal; and
- the different perceptions of the persons sitting in judgment.
20. In any other form of civil litigation which comes to mind, issues such as this would be resolved in a single hearing arising, if necessary, by the joinder of all related proceedings. Assuming that each of the alleged conspirators would challenge the Commissioner's claims, a decision would only be given upon a hearing of a case presented for each applicant. Ordinarily, that would mean
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that no decision would be given in favour of A with logical implications for B or C until such time as the case to be put on behalf of B and C had been heard. Ordinarily, that would result in mutually consistent findings. Furthermore, given sufficient power to do so, all of the findings and orders necessary to finally conclude all issues could be made at the one time, even to the point of increasing some assessments while reducing others, assuming that power to do so was conferred in appropriate terms.21. I recommend that consideration be given to improving these aspects of procedure with a view to not only effecting economy in administration for taxpayers and for the community as represented by the courts and the Tribunal on the one hand, and the Commissioner on the other but, more importantly, improving the prospects for just, accurate and consistent determinations in tax litigation.
22. I mention these matters for a number of reasons. First, I am called on to determine whether the applicant's share of the scheme profit was one-third, as alleged by the Commissioner, and to do so without having the claims of Tom and Harry before me for determination in the present proceedings. Secondly, although either party could have called Tom and Harry as witnesses, neither did so, thereby denying the Tribunal of the benefit of evidence from the alleged fellow conspirators. That the Tribunal should be called on to make such a determination without the benefit of their evidence should not be to the detriment of the present applicant. He did not influence the development of the procedural rules. Further, just as he is bound by the law, he is also entitled to be protected by it. No inference should be drawn against him because of any omission on his part to call as witnesses either Tom or Harry. There is no reason founded in the evidence before me for supposing that either would be disposed to give evidence helpful to the applicant (
Jones v. Dunkel (1959) 101 C.L.R. 298). If anything, it is the Commissioner who might have been expected to call Tom and Harry as persons who might have contended that Dick's share was as alleged by the Commissioner or, possibly, that his share was greater than alleged by the Commissioner and theirs less.
23. I am also of the view that no factor occasioned by delay should operate to the detriment of Dick. He sought an independent determination over eight years ago. The fact that such a determination has not occurred is not due to any default on his part. In large measure it is attributable to the failure of the Commissioner to comply with his statutory duty and, in so far as the delay has been occasioned since his request was referred to the Tribunal, it has been because of the massive workload assumed by the Tribunal in consequence of a delayed transmission for review of thousands of matters on the part of the Commissioner. The fact of such delays is not due to any fault on the part of the applicant. It is true that, in so far as the Commissioner delayed, the applicant might have had recourse to the provisions of sec. 189 of the Act and called on the Commissioner to effect the reference, but in my view ordinarily no citizen should be disadvantaged by the application of any such argument. The Commissioner is the public enforcer of the obligations of citizens in tax matters. He should not need to be reminded of his duty by those citizens. Against that background I proceed to make the following additional findings as to the scheme.
The scheme
24. I am satisfied that some or all of the conspirators (Tom, Dick and Harry), and possibly one or more others, derived assessable income from the scheme. I am not persuaded that the total so derived was less than $107,007: the moneys so derived being the moneys subscribed by customers.
25. I am well satisfied that, although all the formalities necessary to bring into existence the registered companies had been complied with so as to result in incorporation, and although for that reason it cannot be denied but that the companies existed, I am well satisfied that they had no place in the operation of the scheme other than a veil to conceal the identity of the conspirators. Their role differed little from the use of false names of individuals to conceal from some or all the true identity of the persons operating bank and building society accounts. The circumstance that, as a matter of legal fiction, the companies for many purposes were considered to have a legal personality independent of that of the persons directing them, does not alter my view that they were but a sham: a facade to conceal reality.
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The profit
26. I am satisfied that the investigating officers brought to account such expenses as were substantiated and that they excluded from their profit calculations the sum of the Wal-Co refund cheque $10,620. That was on the basis, it seems, that that sum was recouped to the revenue, with half of the sum repaid coming from Dick. I am not persuaded that the profit generated under the scheme was less than that calculated by the investigation officers. Even if there were expenses not taken into account, that is consistent with those expenses having been met from assessable income not brought to account. In any event, Dick has not offered any evidence to support any finding that any such further expenses were incurred, regardless as to how they might have been met. His only argument was to point to a claim made in an objection by Wal-Co that it had incurred some expenses not brought to account in the assessment of its taxable income; and to the fact of the refund made by the Commissioner - said to be attributed to the allowance in whole or in part of expenses so claimed. Such contentions are capable of many explanations and are not persuasive.
The apportionment
27. The Commissioner's allegation is that there was a profit from the scheme such as I have found to be the case. But the critically important allegations are that that profit was derived by only three persons; and that those three persons shared equally in that profit. That resulted in the assessments issuing against Dick which attributed one-third of that profit to him. Whether so much was correctly attributed to him is the principal matter to be determined in these proceedings. To the extent to which Dick has disputed the first proposition, I have found against him. But his substantive challenge is to the other propositions. In essence he says that the only moneys he received were:
- (a) sums reimbursed to him for expenses which he incurred, which sums as reimbursed did not constitute assessable income; and
- (b) an amount by way of the refund cheque as to which only one-half was received beneficially - and then in circumstances such as not to constitute it as assessable income; and as to the balance - paid on to others.
28. In support of those arguments, Dick gave evidence of a very limited role in the conspiracy; and of association with other persons (Suter and another) as principals - persons playing a more significant part than he himself. In that regard, his evidence was neither detailed nor extensive. If his account is in substance true, that is not surprising. Accordingly, I now proceed to consider and evaluate the evidence placed before me and, in particular, Dick's account of matters, before reaching the finding of fact which must be made in order to determine the issues before me.
The witnesses
29. Those to give testimony on oath or affirmation were Dick and Ann for the applicant; and for the Commissioner, a document examiner as an expert witness, a senior officer of the Commissioner (who spoke of Departmental practices), and Holmes - one of the investigation officers who carried out the investigation. Numerous exhibits were tendered. Among them were extracts from the committal proceedings conducted in October 1978. The applicant sought to place reliance on the testimony there recorded as that of Caxton, it being contended by the Commissioner (and accepted by the applicant) that Caxton is now deceased. Neither side called as witnesses, or indicated that they had unsuccessfully tried to call as witnesses, Tom, Harry, Suter or any of the detectives who had interviewed Dick.
Dick: his lifestyle
30. I accept the evidence of Ann and Dick in so far as it establishes the circumstances of Dick's private life to have been in the context of a family life described in the opening paragraphs. I accept that, prior to March 1978, he was a trusted investigation officer of the Commissioner and a person of considerable experience working in the service of the Commissioner in investigating the affairs of suspect taxpayers - some only of whom were in default of their tax obligations or dishonest. I accept that he had been on terms of personal friendship with Tom and Harry; that his friendship with Tom has long since ceased, but that his association with Harry continues to this day. (He is now employed by Harry in a tax agent's practice.) I accept that all three men had been officers of the Commissioner, but that Harry had retired for reasons unrelated to these
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matters. I find that, following termination of his service with the Commissioner, the task of providing for the day-to-day needs of the family fell largely on the shoulders of Ann who returned to the workforce promptly, despite the relatively recent birth and despite still suffering temporarily facial disfigurement following surgery. I accept that Dick also returned to the workforce, taking such casual positions as he could and, probably from some point in 1980, securing permanent employment, but not such as would ever allow him to again enjoy the financial position he had known as a salaried officer of the Commissioner. I accept that together Ann and Dick have provided for their family and have maintained the home they purchased in 1977. I find that nearly four years ago, following satisfaction of their mortgage obligations, the interest of Dick in the freehold was transferred to Ann. I find that, as an investigation officer with the Commissioner, Dick had worked in accordance with a regular pattern of commuting employees travelling to and from work each day - collecting his pay in cash each payday - saving when he could - and not indulging in any extravagant lifestyle. Such were his domestic commitments. I recognise that, in the course of his duties as an investigating officer he must have observed with a measure of envy many situations in which persons with greater means and lesser responsibilities seriously failed in the discharge of their obligations to the community through the taxation system. In that regard, he did not differ from many other taxation officers of comparable status.The Wal-Co investigation
31. I find that Tom was conducting an investigation into the affairs of Wal-Co. The evidence did not indicate just what was the purpose of that investigation, or when it commenced. Documents relied on by Dick - the objection of Wal-Co and evidence in the committal proceedings of Caxton - indicate that, on 2 September 1974, Wal-Co had been assessed as having derived a taxable income for the year of income ended 30 June 1974 of $150,000. Objection was taken to the assessment. It was claimed that, by reason of expenses not allowed for by the Commissioner, taxable income should not have exceeded $51,803. According to Caxton, the last material he had printed was printed in about August 1974: a date roughly corresponding with adverse media publicity. According to Caxton, Wal-Co was controlled by a New Zealand resident (Suter) who visited Sydney from time to time. Suter was described by the Commissioner's investigating officers as ``an international confidence man''. Caxton was retained as his printer as required. In addition, Suter used the services of the lady who ran a business of providing secretarial services and who was related to Caxton, to prepare and despatch mail; and to pay accounts, using cheques left with her which had been pre-signed by Suter. Another lady collected incoming mail and bank cheques. Caxton's evidence had been that the account of Wal-Co was operated on until it was ``frozen'' - something which I find occurred promptly following the assessment of 2 September 1974. He thought the last he had seen of Suter in relation to these matters had been about September 1975.
32. The first date on which anything occurred which identified any of the conspirators with the scheme, was 29 August 1975 when a cheque was drawn on an account of Wal-Co in the sum of $490 made payable in favour of Harry. I accept that the cheque was signed by Suter. If it was signed at the time it was drawn, it would lend support to Dick's assertion that Suter was aware of what was being undertaken. On the other hand, if the cheques, along with the key to the G.P.O. box, had been handed by Caxton to Tom as an investigator of the Commissioner, as had been Caxton's evidence, that circumstances is quite consistent with Suter knowing nothing of these matters. I am satisfied, upon considering the evidence of the document examiner that the handwriting on the cheque nominating Harry as the payee and the amount to be paid was in the handwriting of Dick.
33. Certainly Dick was involved by 16 December 1975 for, on the 16th and 17th days of that month, Dick opened on one day a building society account in a fictitious name and, the next day, a savings bank account in the fictitious name of a voluntary association. By 9 February 1976, Dick was involved in the incorporation of Walbank.
The role of Dick
34. I accept the evidence of Dick that Tom was responsible for an investigation into the affairs of Wal-Co and that, initially, Dick had
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no part in that exercise. Dick claims that, in the course of that investigation, Tom sought his assistance in carrying out the Wal-Co investigation. He claims that thereafter in all that he did he was acting in the service of the Commissioner. I completely reject that. I do not accept that what happened thereafter, or any part of what happened thereafter, had the approval of the Commissioner competent to give approval to what was undertaken. I reject his evidence that what he later did at Tom's request was part of ``undercover operations''. I accept that, by reason of his position as the officer responsible for the investigation into Wal-Co, Tom was the dominant figure as between Tom and Dick. Caxton's evidence at committal supports that conclusion. However, that is far from suggesting that Dick was not a free agent in what he did. I find that he was his own master in what he did in the way of opening accounts in fictitious names and in the selection of the names to be used. I find that he was a free agent in the preparation of the incorporation documents in relation to each company. I further find that, by advancing all of the disbursements necessary to effect the incorporation of the companies, he had no belief that, in doing so, he was serving in any way the interests of the Commissioner or the community.35. I find that, from the commencement of his association with the scheme, he (as he readily admitted) frequently deposited moneys received from customers to the credit of the accounts of all companies; and to the credit of accounts he had opened and operated in fictitious names. I also find that Tom similarly deposited cheques to the credit of the companies and to accounts in fictitious names maintained by him. I make no such finding in relation to Harry.
The refund cheque $10,620.99
36. On 10 May 1977 the Commissioner posted a refund cheque to Wal-Co, care of the post office box previously mentioned. The cheque was made payable in favour of Wal-Co. It was crossed and marked ``not negotiable account payee only''. I make no finding as to what connection, if any, there was between the issue of the refund cheque and the involvement of Tom in the investigation of Wal-Co. I find that the cheque was delivered to the post office box; that it found its way into the possession of Dick; that it was endorsed by Dick, signing in a fictitious name; that the endorsement purported to be an endorsement of Wal-Co made by Suter authorising payment to the order of Walbank; and that the cheque was deposited to the credit of Walbank by Dick on 12 May 1977.
Bank accounts
37. I find that Dick commonly transferred moneys between accounts maintained by him in fictitious names, and also between accounts operated by him in the names of Walbank and Grant-Co. One common feature of such transfers was that sums of $500 and $1,000 would be withdrawn from building society accounts by cheque; that the cheques so drawn would be deposited to the credit of savings accounts; and that the funds would then be drawn in cash; all on the same day. Commonly the application of the cash could not be identified. If Dick is to be believed, his role was to collect moneys from the city office while en route to work and to deposit them; to withdraw moneys as instructed; to transfer moneys between accounts as instructed; to return moneys withdrawn to the office to be left there; and that, subject to the exceptions which have been mentioned, he received none for his own purposes. I have rejected his contention that he thought that all of his actions in doing so were actions undertaken in the interests of the Commissioner and the community. But it does not automatically follow that he derived as assessable income the sums attributed to him by the Commissioner.
Missed opportunities
38. The applicant was much pressed in cross-examination about his failure to have earlier put forward his explanation for the entire affair as presented in his evidence before the Tribunal. The significance of the alleged failure was put strongly in argument on behalf of the Commissioner. The opportunities referred to were:
- (a) that arising on the occasion of the police interrogation;
- (b) the omission to put his explanation through cross-examination of prosecution witnesses during committal proceedings;
- (c) the fact of pleading guilty to the offences charged when, according to the explanation given in evidence, he was not guilty of any criminal offence;
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- (d) the failure to put the entirety of his account to the Commissioner's investigator on interview, in November 1979; and
- (e) as to two matters only (the proceeds of the sale of a car in mid-1977 and of a stamp collection in mid-1977), that they were not mentioned when first responding to questions from the Tribunal about the sources of moneys deposited to the separate accounts maintained by Dick for his own and family purposes.
39. At first impression it does seem remarkable that some 10½ years should have passed before the applicant was heard to present the explanation given to the Tribunal in his evidence-in-chief. However, when one considers the circumstances of each of the alleged ``opportunities'' that seems to be not only less surprising but quite unremarkable. The proceedings before the Tribunal constituted the first opportunity to deal with the entire affair and to do so without any fear of having been already judged and found wanting.
(A) police interview
40. As to the police interview, I find that, although he was attended by police officers from 6.45 a.m. on 17 March 1978 until late in the evening - sufficiently late to only return home in the early hours of the next day (his wife was satisfied he had returned directly), the only evidence about that day presented on behalf of the Commissioner relates to a signed, written record of interview which purports to embrace only the time period from ``3.00 p.m.'' to ``8.00 p.m.'' - within which there were three breaks for a total of 40 minutes. That interview, by its terms, disclosed a very limited purpose: an interrogation conducted by police officers with a view to obtaining written confirmation from the applicant that he had forged and uttered the refunded cheque for $10,620. There was no suggestion that he was at any time asked to respond to more general assertions as to his participation in the scheme. Nor is there anything which suggests that in any relevant sense he had the opportunity to explain himself generally. In particular, there is nothing in the circumstances giving rise to that interview to suggest that he was then aware of any contention being put forward such as was put forward when the Commissioner issued the assessments in dispute; or, indeed, aware of any contention touching any matter other than the refund cheque.
(B) committal proceedings
41. The committal proceedings were also limited to concern over the criminal charges in relation to the cheque. I am not persuaded to the view argued for on behalf of the Commissioner. It was that the fact that no cross-examination then took place on particular matters which, if true, might have established, or contributed to the establishment of, a defence was significant. I find nothing strange in the thought that able counsel conducted committal proceedings on the basis of using the opportunity establish the extent of the Crown case; rather than to conduct a ``trial-run'' of any defence which might later be placed before a jury. Furthermore, I do not find it strange that competent counsel would have thought it a proper discharge of his professional responsibility to not meekly submit himself to conducting committal proceedings in accordance with the instructions of a client inexperienced in such matters. Nor, having said that, does it follow that anything at all improper occurs when counsel exercises the power of his personality and the authority of his position - as Dick says his counsel did - to prevail upon a client to accept his advice as to conduct of proceedings, be they criminal or civil.
(C) the plea of guilty
42. Again the exercise was on a very narrow front. The applicant, in his record of interview, had provided a written admission of guilt. I accept that he was much pressed to do so, but not that he was under ``duress'' in any such way as would vitiate the voluntariness of the confession such that, upon his trial in a court of criminal jurisdiction, evidence of the ``confession'' would have been excluded. Against that background, it is not surprising that there was a plea of guilty.
Once the decision was taken that there would be such a plea, quite obviously the concern of senior counsel who then represented the applicant would have been to deal only with such aspects of the matter of the offence as would hopefully lead to the least severe punishment for his client that could be hoped for. As with the question of the conduct of the committal proceedings, I make no findings as to the extent of the disclosure made to counsel, nor do I draw any inference from the failure to make such a finding. Nor do I attach significance to the non-attendance of Dick's
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counsel as a witness. Any attempt on the part of the Commissioner to procure evidence from counsel as to what had been communicated to them would have been excluded on the basis that such communications were wholly privileged. On the other hand, such evidence as the applicant might have given, and did give, about those communications was, of course, self-serving. To have had his counsel testify to the same effect, would only have served to rebut any suggestion made on behalf of the Commissioner as to recent invention.(D) the Commissioner's interview
43. I have heard the evidence of the Commissioner's investigator (Holmes) and I have seen the report he made immediately following it. I have also seen the fuller report subsequently prepared which dealt (inter alia) with that interview. The latter report (cf. p. 6) recounts some matters not referred to at all in the earlier record. However, in general terms, I accept that evidence and I prefer it as an accurate indication of what passed upon that interview in so far as it is inconsistent with the evidence of the applicant. But that is not to say I find the matter of no assistance to the applicant. By the time that interview took place, Dick had been dealt with for his criminal offences. There is nothing before me to suggest that, prior to that interview, he knew of the results to that date of the investigation. I find that, in particular, he had no knowledge prior to that interview indicating the extent of the alleged profit (``believed to be of six figures'') or how it had been made up. On the other hand, I find that Holmes approached the problem on the basis that he had already determined that, with a person such as the applicant, and with the skills he would possess in hiding assets, it would be pointless to do an ``asset betterment'' calculation. I understand by that that what he meant was that the carrying of an ``asset betterment'' calculation would not be likely to lend any assistance to the cause of the Commissioner. I am not persuaded that Holmes had allowed in his thinking for the possibility that such a calculation might have assisted Dick.
44. I find that three matters dominated that interview. The first objective of Holmes was to try to establish a basis for attributing a particular portion of the scheme profit to the applicant and to Tom and Harry. In that regard, the applicant was unhelpful even to the point that he would not expressly acknowledge to the investigator the names of Tom and Harry. On the other hand, I have no doubt that Dick believed, and correctly believed, that others known to Holmes to have been involved in the scheme had been Tom and Harry. The second matter was reference to a bank cheque for $18,000. The investigator had had the suggestion made to him that the applicant had ``purchased (a bank cheque) for $18,000 cash''. He was suspicious about it, but not so suspicious as to automatically reject the explanation offered by the applicant. The applicant, on the other hand, was indignant at what he considered to be a completely false suggestion. There had been an advance of $18,000 and, in his view, properly so. It was a transaction which related to the financing of his home by a bridging loan. I find that he resented the suggestion that it was anything else. However, the third matter was significant by omission in relation to the interview. There is no suggestion in the evidence placed before me that it was ever proposed to the applicant that his share of the scheme ``profit'' - as distinct from turnover - had been as much as one-third of $107,007. In other words, I find that there is nothing in the evidence for the Commissioner suggesting that it was ever put to Dick, or that Dick was in any way challenged with, a proposition indicating that it was the Commissioner's contention that in a period of some 30 months he had derived untaxed income in excess of $35,000: more than three years take-home pay. Had that been suggested it might well be that he would have made a point which it seems the investigator had overlooked: that an ``assets betterment'' calculation would have brought to light much to be explained; and that such questions having been raised, explanations in large measure could have been immediately provided and, upon investigation, proved to be accurate. I will defer further consideration of that matter until later.
45. For the moment it suffices to say that, despite the fact that the powers of the Commissioner to interrogate and to require that questions should be answered were far greater than those available to the police officers, Holmes failed to obtain any acknowledgment or admission which lent support to the case to be later put for the Commissioner.
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46. I also observe that from at least June 1978 the investigators had taken the view that there was insufficient information available to enable such a calculation to be prepared (para. 45 - 9 June 1978) even though by 16 June 1978 the chief investigation officer in charge of the matter was recorded as holding the view:
``7. The general feeling at this stage is that the investigations of the individuals conducted on an asset betterment basis will fail to account for all income from the venture. In (Dick's) case, amounts totalling, as I understand it, in the vicinity of $40,000 can be traced into his current assets.
...
10. For reasons stated earlier, investigation action must necessarily come to a halt which, unfortunately, will probably be for a considerable period of time. There is little that can be done in the meantime other than to consider the alternatives we face. These are, as I see it, to -
- (a) assess each individual on one-third of the total withdrawn each year from the companies less an appropriate amount for expenses. This course of action may hopefully cause one or more of the trio to reveal the true position if he feels he is being unfairly treated; or
- (b) rely on the investigations carried on either the specific or assets betterment basis to produce more fruitful results than seem possible at the moment.''
The contention that [approximately] $40,000 could be traced to Dick was later abandoned. However, it is against that background that the interview was conducted. Holmes commenced his memorandum, prepared as a record of that interview, with the words:
``After introductions I advised (Dick) that I was interested in the distribution of income between the parties involved in the operation of (Walbank) and (Grant-Co).''
Had an ``asset betterment'' exercise been undertaken, using figures readily discoverable, it would have seemed appropriate to have required the applicant to explain the following dealings:
$ $ $
New residence
Purchase price 75,000
LESS mortgage 10,000
LESS equity
Previous residence 18,000 28,000 47,000
------
New cottage 25,000
New car 5,000
Gift to father-in-law 5,000
Loan to brother 4,000
-------
$86,000
-------
Such dealings could not have been explained only by reason of reference to the applicant's admitted sources of income as known to the Commissioner at the date of interview. It might have been expected by the investigators that they could not be explained without attributing to the applicant the disputed moneys as income. According to the investigator's record of that interview he did question the applicant as to the sources of funds for the purchase of the new home but only to record:
$7,500 - deposit (furnished by
wife)
$20,000 - furnished by wife
$18,000 - bridging finance
$5,000 - personal loan (Rural
Bank)
$3,000/$4,000 - credit union
$8,000 - savings and building
society accounts
$10,000 - mortgage
------------------
$71,500/$72,500
47. What was significant about that was not what was recorded but rather what was not considered: the cost of the assets other than the new home, which seemed to total $39,000; the capacity of the wife to contribute $27,500; and reference to her lottery win in February 1977.
48. However, had the questions been put, some explanations would have emerged. I find that the only cost incurred in relation to the cottage and the gift to the father-in-law was the gift to the father-in-law. The fact that the transfer of the cottage title was presented as a transfer upon sale for $25,000 was effected in order to avoid stamp duty at ``gift duty'' rates. That, no doubt, constituted an offence against the provision of the Stamp Duties Act but, at least, it was not as reprehensible as many such transactions. In this instance, there was no understatement of the value of the property for it seems that the applicant had taken a
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precaution that few do. He had obtained a valuation from a registered valuer for a fee which had established the value of the property to be $24,500.49. As to the car and the loan to the brother-in-law, they were to be explained in large measure by a lottery win of $30,000 by Ann. That lottery win also went a significant way to explain the acquisition of the new home, although it fell far short of a complete explanation. But had the question been raised, it would have brought to light more fully the borrowings, otherwise than by mortgage: the bridging loan of $18,000 necessary when the purchase of the new home had to precede completion of the sale of the old; the borrowings from a building society and from the bank and a credit union on personal loan; and the surrender of, or borrowing against, life policies.
50. Had such an exercise been undertaken at that time it might well have been that the questions so broadly raised might have elicited responses as comprehensive as the evidence-in-chief presented before me and the answers to my other questions. That it was not done seems to be attributable to a presumption that such an exercise should only be undertaken when it is predicated that the result will support the provisional judgments of the Commissioner's investigators and that the scope of the investigation will be such as to make it feasible to do such a calculation accurately and completely with a result supportive of liability in the taxpayer.
51. So it was that all such enquiries as had been made of the applicant were complete by November 1979 and none of those enquiries had required or invited him to give an explanation for his conduct as comprehensive as that presented before me.
The allegations
52. When in February 1980 Dick became aware of the extent of the Commissioner's allegations against him, he only became aware of them by reference to a short statement in the adjustment sheet which attended the notices of assessment. It merely said:
``Your income tax return for each of the years ended 30 June 1976 1977 and 1978 is not satisfactory and the judgment has been made that the amount set out for each year is the amount on which income tax ought to be levied.''
When, following receipt of those assessments, he sought particulars as to how the calculations were made up, he was told - as I find was the case - that the information would not be provided. It is not surprising that he did not thereafter volunteer to present a complete explanation to the Commissioner.
53. Had the Commissioner acted promptly in complying with the request for reference for independent review when it was made, it might well have been that the matter would have come to a hearing during 1981. It would then have been reasonable to expect Dick to have been more precise about these matters but, for no fault of his, he had no opportunity to present his explanation to anybody who had not already pre-judged him until August 1988. In all the circumstances, I find no merit in the criticisms of non-explanation levelled on behalf of the Commissioner.
54. However, there is yet a further dimension to matters. In November 1979, given the assumption that Dick was a tax-evader, there was considerable reason for the investigation officers to suspect that a betterment investigation might not bring to light all of the assets and dealings which should be brought to account in a calculation of taxable income by the betterment method. There was such a sufficient number of accounts in false names that it would only be reasonable to assume that there might have been other accounts in false names. But the hearing was in 1988 and, in my view, such assumptions and suspicions were no longer well-founded.
Sources and application of funds
55. Persons who acquire wealth, whether it is constituted by income or not, may expend the moneys gained in the ordinary costs of daily living, or on gifts to others, or in acquiring assets, or they may dissipate it. If it is dissipated, whether wasted on addictions such as gambling, or indulgences such as an extravagant lifestyle, the signs of spending will usually be there to be observed by the familiars of the individual. If assets are acquired, they will usually be known to and applied to the benefit of the individual and his family. In this instance, particularly having heard the evidence of Ann, I am satisfied that there were no assets not known to the Commissioner; that there was
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no source of moneys unknown to her which came to the aid of the family post-March 1978 in meeting the ``ordinary'' costs of living; that there were no relevantly significant gifts to others; and that no expensive habits were engaged in by her husband.56. I attribute particular significance to the unchallenged evidence of Ann, especially relating to the financial situation of the family following the arrest of her husband. I accept that the arrest of her husband came as a complete shock to her. I find nothing surprising in the circumstance that Dick had not discussed with her any of his activities, whether in the course of serving the Commissioner or in relation to his association with the enterprise. Further, I find nothing surprising in the circumstance that he did not discuss with her his ``good fortune'' in receiving by way of gift half of the proceeds of the refund cheque. Nor do I find anything surprising in the circumstance that she was not conscious of the fact that that ``good fortune'' pro tanto eased the difficulties of financing the purchase of the new home and the expenses attending that purchase.
57. However, I do find particular significance in two things. The first is the factual situation reflected in her evidence when I asked:
- Q. ``Is there anything that you want to tell me that you think your husband or Mr Rofe have missed?''
- A. ``... Well, one of my bankbooks there, from 1978 onwards shows a decline; that it went down rapidly. There were no amounts going in other than family allowance and that was what we lived on. We had no money at that stage. I had not gone back to work. And I found it very traumatic to go back to work, when I had to go back because I had a newborn baby, or four months old baby. I had to face very big surgery on my face following an operation, and for me to have to go out and face people with the scars that I had on my face was, you know, very traumatic. But it was a case of necessity. I went back casually all over the place, wherever I could get - a day here and a day there - until 1979 when the (Totalizator Agency) Board gave me my own agency to run.''
Later, she said in answer to a question about her husband's earnings following his arrest:
- Q. ``When did he start bringing further money into the household?''
- A. ``... Well, he was unemployed, on Social Security, for a little while... it might have only been five or six weeks or something like that. But he found it very hard. We reversed situations. He stayed home and minded the babies and I went to work.''
- Q. ``When did he get back into the workforce?''
- A. ``... He started - I am just trying to think - it would have been in the eighties, around about eighties, like, starting to get permanent work.''
- Q. ``Where did he get that permanent work?''
- A. ``He was doing an odd day with a few different people here and there, but I think full-time employment came when he started working for (a firm of Tax Agents).''
I accept that evidence, and I accept that nothing came to the notice of Ann in the decade following to change her mind about those matters. That being so, I find that there is not now and there has not been any hidden asset such as could have been resorted to in order to ease the difficulties experienced by the family throughout the decade, particularly in the early months and years of the period. Further, I am satisfied that in 1978 there did not exist any such resource to which resort could be had. I accept that, for a period, substantial relief from financial pressures was had when Ann's brother repaid $2,000, being the balance of the moneys he had borrowed in 1977. That repayment was effected after March 1978 when, to quote Ann, ``We were in `dire straits'''. Being satisfied that there were no hidden assets such as would have rendered ineffective any asset betterment calculation, it follows that such moneys as the applicant had received had been spent by March 1978. That being so, the moneys had either been so expended as to create an asset, e.g. by being used and applied in the acquisition of the home and of the personalty acquired with it; or it had been otherwise expended. In so far as known assets were acquired - and there were no significant unknown assets - I am satisfied that, upon
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taking into account the half-interest in the proceeds of the refund cheque, the source of funds to acquire all assets has been explained and accounted for.58. In so far as the moneys in question might have been spent, they might have been expended on the ``ordinary'' costs of living, as expenditure on matters of which both spouses would be aware, or dissipated. As to the ``ordinary'' costs of the household, it needs to be borne in mind that the Commissioner's allegation would have it that, in the space of some 24 months, the inflow of money to the household which was ordinarily limited to take-home pay was massively increased: so that, for example, in the year of income ended 30 June 1977, instead of the in-flow being limited to take-home pay ($10,200), it was increased by $14,835 and a further $5,000 from the refund cheque: an increase of over 90%. I am satisfied that the wife knew of no such increase in available moneys applied to the use of the family. That being so, I am satisfied that no such sums were so applied to the use of the family. There remains the possibility of dissipation of the funds by some form of self-indulgent extravagance on the part of Dick, such as could not only account for the loss of the moneys but also to have arisen in a way which would not be known to Ann. The possibility of ``wine, women and wagers'' comes to mind but I am satisfied that such indulgences, and the possibility of them is not to be invoked to sustain the assessments.
59. It follows that, if there were such moneys as the Commissioner contends for, they were represented by assets. Those assets might have been known, such as the new home, the new car and the new holiday cottage, but I am satisfied that they have been accounted for without reference to any scheme moneys other than the refund cheque moneys. Alternatively, in 1978-1980, as was suspected as quite likely by the investigation officer, they may have been hidden. But whatever the probabilities as to the latter might have been in 1979, I am satisfied that it would be quite unreasonable to conclude that, in 1988, such concealed assets still existed, especially as a decade has passed in which the entire family lived under straitened conditions, and such available resources were not resorted to.
Conclusions
60. At the conclusion of the evidence presented in this case, I am well satisfied that Dick participated in a scheme which involved him in criminal misconduct so far as the refund cheque was concerned and grossly improper conduct as an officer of the Australian Taxation Office. The question to be determined is whether he has discharged the burden he bears of persuading the Tribunal that, on the balance of probabilities, the action of the Commissioner of attributing to him assessable income derived from a profit-making scheme is excessive. As to that, the Commissioner has advanced no direct evidence that Dick participated in or benefited from the scheme except in so far as he received portion of the refund cheque: a sum not suggested to constitute assessable income in his hands. That in itself is not surprising. The Commissioner commonly has to rely on inferences from other established facts to indicate the existence of untaxed income. I have heard evidence from Dick denying that he participated in the scheme in such a way as to derive assessable income from it and I have heard evidence from both Dick and Ann which persuades me that, on the balance of probabilities, there was no in-flow of moneys into their home at the relevant time which cannot be explained from what has been admitted. Had the investigators examined more closely into the affairs of Dick they might have produced some evidence in support of the assessments. Had the interrogation of Dick been something other than the very limited enquiry which it was, the result might have been different. Had the Commissioner called to the stand Tom or Harry, or both of them, the result might have been different. But it is not for me to speculate about those matters. As the evidence stands, Dick has persuaded me that it is more probably true than not that the financial benefits derived by him from his association with the scheme were limited to his share of the refund cheque: and that that amount did not constitute assessable income - something not disputed by the Commissioner and, therefore, not a matter in issue before me.
61. The applicant lent his assistance to a grossly improper scheme. For his crime he has been punished. For his gross misconduct as an officer of the Commissioner he has suffered the loss of the privileges of his office. However, he has persuaded me, on the balance of
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probabilities, that, despite his involvement in that extraordinary and reprehensible affair, he did not derive any moneys from it by way of assessable income such as has been attributed to him in the assessments before me. Accordingly, except in relation to matters of omitted interest, the applicant will succeed. The amounts of interest omitted were relatively small ($34; $328; or $319). But the fact of omission by a senior investigation officer of the Commissioner makes the omissions especially culpable. A ``culpability factor'' - a term which as now used was added to tax vocabulary only in 1983 - of the order of 50% is in order.62. Before concluding, it is appropriate to place two further matters on record. At the conclusion of the hearing counsel for the Commissioner raised a question as to whether the Tribunal would direct that its reasons for decision be not released for publication. Such an application, if granted, would have denied the public any information as to the assessment of Dick; of the evidence presented; and of the Tribunal's assessment of the issues placed before it.
63. In response to the application, I raised the question whether it was better in the public interest that the community should be kept in ignorance as to misconduct among the Commissioner's officers, or better that the community should be made aware of such occurrences and informed as to the consequences arising from them. In the event, it became unnecessary to consider either that question or the application generally because the application was withdrawn. That being so the usual practice of not prohibiting publication but of not identifying the applicant will be followed.
64. However, for reasons not directly related to that application, a decision has been taken as to the timing of the handing down of these reasons for decision. The proceedings in which the Tribunal was called upon to review the Commissioner's determination against objections by Tom came before me and was determined without any need to deliver published reasons. The evidence given in those proceedings forms no part of the evidence upon the review relating to the affairs of Dick. However, immediately following the hearing of the proceedings relating to Dick, another Member of the Tribunal. Senior Member Gibson, embarked upon the hearing of proceedings relating to Harry. Care has been taken to ensure that neither Member has become aware of any oral evidence presented before the other Member in those other proceedings. In that way, care has been taken to ensure that each case will be determined on the evidence presented in those proceedings. If that results in disparity of judgment, so be it. However, with a view to ensuring that, so far as may be justice is not only done but is seen to be done, arrangements have been made that the decisions in both cases will be handed down contemporaneously without either Member being aware of the determination of the other until such knowledge comes through access to the published reasons for decision.
65. The Orders of the Tribunal will be that the determinations of the Commissioner upon the objections under review shall be varied and that the amended assessments for the years of income ended 30 June 1976 and 1977 and the assessment of taxable income for the year of income ended 30 June 1978 shall be reduced from $22,198 to $13,651; from $29,163 to $14,656; and from $25,812 to $13,197 respectively; and that additional tax for incorrect returns shall be reduced to $15, $110 and $95 respectively.
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