Case P4

Judges:
HP Stevens Ch
JR Harrowell M
BR Pape M

Court:
No. 1 Board of Review

Judgment date: 9 February 1982.

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H.P. Stevens (Chairman); J.R. Harrowell and B.R. Pape (Members)

During the course of the hearing of these references (1976, 1977, 1979, 1980) the issues were much discussed and, at its conclusion, the taxpayer was aware of the result of the hearing. In the circumstances we propose to deal with some general matters (para. 2-6) and only one specific matter (the Board's ``jurisdiction'') (para. 6-10).

2. A Board of Review has the character of an administrative tribunal and its purpose is ``to provide a less formal method of investigating facts at a hearing'' (per Dixon C.J. in
Mobil Oil Australia Pty. Ltd. v. F.C. of T. (1963) 113 C.L.R. 475 at p. 488). However this does not imply that a taxpayer can attend and, rather than place evidence before the Board himself, request the Board to question him. The Board, except to the extent of what is revealed in the papers transmitted when the taxpayer's request for reference is referred to the Board by the Commissioner, knows nothing of the taxpayer's affairs whereas the taxpayer may be presumed to be aware of everything that he considers relevant to the claims before the Board. Naturally a Board will ask questions to clarify points of evidence placed before it and even suggest evidence on a particular aspect would be relevant but it cannot be expected to act ab initio as an advocate for the taxpayer would in leading evidence from him.

3. Further a Board cannot decide matters favourably to a taxpayer when he does not provide factual material but seeks to rely on a ``notional'' basis. This can be illustrated by the taxpayer's claim for a deduction for interest in respect of ``funds used to purchase shares''. In December 1977 an amount of $2,300 was borrowed and in the period May 1978 to January 1979 share purchases of $2,848.65 were made. It was the taxpayer's view that it was completely unnecessary to produce any evidence re the disposition of the $2,300 because, if he hadn't borrowed that amount, then his overall funds would have been that much less. Eventually it was established that the amount of $2,300 was deposited in a Building Society account on 28 December 1977 resulting in a balance in that account on 31 December 1977 of $4,512.97. On 31 January 1978 $3,500 was withdrawn and went into his solicitor's trust account in respect of a home unit purchase. A further $1,000 was withdrawn on 21 February 1978 (leaving a balance of $12.97) but the destination thereof remains unknown. On the details established it is clearly impossible to find that any part of the $2,300 borrowed was in fact used for an income producing purpose.

4. Additionally a Board is not a forum for the propounding of moral or philosophical themes. The Board is bound by the terms of the Act (the taxpayer implicitly accepts this for he claimed a deduction for the cost of an Act) and, as the Full High Court said in
Sutton v. F.C. of T. (1958-59) 100 C.L.R. 518, is obliged to decide cases by ``applying the law'' to the ascertained facts. Now it may be true that, in times of inflation, the real value of fixed interest deposits declines but that is not a matter allowed for by the Act, nor does the Act allow for the assessment of an amount where the increased value of something, e.g. real estate, outstrips the inflation rate. The taxpayer agreed that his concept would require assessability as well as deductibility and, since he now was interested in real estate, said he would

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discontinue this claim. Similarly it may be said to be unfair that, if a person is on a visit overseas and uncovered by a registered body, he should still be (in the year concerned) the subject of the Health Levy. However the then Act required otherwise and the taxpayer recognises this.

5. Again the Board, with the exception referred to in para. 2, knows nothing of what has occurred between the taxpayer and the Commissioner's officers. In general no conduct on the part of the Commissioner can ``operate as an estoppel against the operation of the Act'' (per Kitto J. in
F.C. of T. v. Wade (1951) 84 C.L.R. 105 at p. 117) and usually any occurrences are irrelevant to the issues before the Board. Where they are relevant the appropriate evidence can be introduced. However it is entirely inappropriate to seek to cross-examine (i.e. treat as a hostile witness) the representative of the Commissioner in relation to occurrences between the taxpayer and other named officers.

6. The Board is also unaware of what complaints a taxpayer may have made to the Ombudsman concerning the Commissioner. This is mentioned only because there was a dispute as to whether there had been a valid request for reference in respect of one particular year. The papers for that year were forwarded to the Board but with the rider that ``it is not conceded that the taxpayer has made a valid objection to the assessment for that year in terms of section 185''. When the taxpayer became aware of this (raised as a preliminary issue) he produced a voluminous letter addressed to him from the Ombudsman. This letter which did not become an exhibit said on the page read from, that the Commissioner had decided to refer the matter to the Board and the taxpayer claimed that he had been told later by the Ombudsman that the Board would decide the case on its merits. It was his view therefore that the Board must accept the reference as valid.

7. In relation to the issue of whether a Board has power to decide whether a reference is properly before it there is unfortunately a diversity of opinion. This Board as previously constituted has taken the view that it has such power but Board of Review No. 3 takes the opposite view - see Case K62,
78 ATC 611 and Case L5,
79 ATC 20 per Mr. Fairleigh Q.C. at pp. 23-27.

8. We take the view that it is our responsibility to ensure that matters are properly before the Board. To that end the papers are examined to ascertain the date of issue of the assessment, the date the objection bears, the date of the notice of disallowance and the date of the letter requesting reference to a Board of Review. In the present case such examination discloses the following dates for the 1976 year:

      Assessment       15 February 1977
      Objection            2 April 1978
      Disallowance         11 July 1978
      Request          3 September 1978
          

Clearly on these dates the objection does not comply with the provisions of sec. 185.

9. The taxpayer's argument was that he was abroad when the assessment issued, that he had advised the Commissioner he was proceeding abroad by letter of 25 November 1976 and that, although he did receive the assessment when he returned to Australia in late 1977 and met with an officer of the Commissioner in December 1977, the letter of 2 April 1978 should be accepted as valid. Regulation 59 refers to notices being served by posting to ``his address for service'' whilst reg. 29 states such address shall be the ``address for service last given to the Commissioner''. In his return dated 22 August 1976 the taxpayer gave as his address for service the address to which the assessment was sent. Although the letter of 25 November 1976 stated he would be abroad it did not, as required by reg. 28, give ``his new address in Australia for service'' (or any address) and it is difficult to see how the assessment was not correctly addressed. Of course, if it were that the assessment could be said to be invalid, this would not assist for there would be nothing against which there could be a valid objection, etc.

10. Accordingly as ruled at the hearing on this preliminary point there is no valid 1976 request for reference before the Board.

11. To the extent that the issues in the 1976 year were the same as those in later years the taxpayer has been given a decision on their ``merits''. In respect of another issue - the application of sec. 26AAA to shares held for less than 12 months sold following a

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takeover offer - the taxpayer referred to a section of the Campbell Report which was said to recommend an amendment to negate the section's present effect. He appreciates the need for such amendment before his claim could succeed. Overall it can be fairly said that, despite the ruling given on the preliminary point, the taxpayer has had the benefit of a hearing on the merits of the 1976 claims.

12. For the above reasons we would uphold the Commissioner's decisions on the 1977, 1979 and 1980 objections and confirm the assessments for those years.

Claim disallowed