Case U188

Members:
PM Roach SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 9 October 1987.

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P.M. Roach (Senior Member)

The issues

1. These references relate to the determination of the quantum of taxable income for the applicant in the years of income ended 30 June 1972 to 1976 inclusive. The respective contentions of the parties are that taxable income should be found to be as follows:

        
                         1972       1973       1974       1975       1976
                           $          $          $          $          $
      Commissioner       7,724      8,297     10,603      8,426      9,600
      Applicant          2,638      2,936      3,106      3,426      4,600
                         -----      -----     ------      -----      -----
      Difference         5,086      5,361      7,497      5,000      5,000
      

Even on the basis of his own figures, the applicant had a liability to lodge returns and to pay tax when assessed.

2. In the years of income ended 30 June 1972 and 1973 the Commissioner increased taxable income by $86 and $361 respectively on the basis "claim for spouse reduced in view of her period of employment". That issue was not pursued at the hearing. In the year ended 30 June 1974 allowance was made for an additional sum of $3 in relation to the dependency of the first child of the applicant. That is not in dispute. As a result the amounts remaining in dispute are $5,000, $5,000, $7,500, $5,000, and $5,000 respectively.

3. In relation to each assessment, additional tax was imposed and the relevant figures in that regard are as follows:

                              1972       1973       1974       1975       1976
                               $          $          $          $          $
200% of tax avoided          4,254      4,298      6,358      4,049      5,640
Additional tax at 10% p.a.     906        700        718        255         73
Additional tax levied          450        300        350        100         25
      

The figures are not challenged and, accordingly, it follows that there is no power in the Tribunal to review the Commissioner's exercise of discretion as to the additional tax to be imposed (cf. sec. 193 - Income Tax Assessment Act 1936 - "the Act").

The investigation

4. The applicant is a man now aged 40. During 1976 his affairs came under the scrutiny of officers of the Commissioner. He had not filed any returns for at least several years - a circumstance which may have contributed in some degree to later difficulties, extending even to the present time. In June of that year he signed a statement of "cost of living and personal expenditure" for the period 1 July 1974 to 30 June 1975 which had been written up by an officer of the Commissioner. It acknowledged (inter alia) "expenditure" of $10 per week on gambling. Nothing was brought to account for any gambling proceeds (if any). The estimate was that "the cost of living and personal expenses of myself and dependants" was $10,287 per annum. At or about the same time a statement of assets and liabilities covering the period from 30 June 1969 to 30 June 1975 was prepared in the hand of an officer of the Commissioner. The form made provision for a signature beneath a certificate stating "I hereby certify that the above is a true and complete statement of the assets and liabilities of myself, wife and children (dependants) as at the above dates". The document was signed by the applicant but only after adding in his own hand the words "too [sic] the best of my knowledge". According to the statement, the "cost" of motor vehicles stood at $2,000, $1,600, $5,000 and $4,000; the cost of furniture at $200, $700 and $1,000 at 30 June 1973 to 1975 inclusive; and liabilities amounted to $3,000, $800, $6,200 and $4,000, all as at 30 June 1972 to 1975 inclusive. Based on the statement of the cost of living and personal expenditure, the Commissioner prepared calculations adjusting the expenditure of $10,287 for 30 June 1975 by a C.P.I. factor and thereby proposed that the funds required to meet the personal expenditure acknowledged by the applicant would have been $4,184, $4,405, $5,207, $6,237 and $6,911 respectively - a total of $26,944 - in excess of the assessable income later returned by the applicant. The total of alleged net gambling wins later acknowledged or claimed by the applicant amounted to $27,500.

5. Then, in October 1976, the applicant signed income tax returns acknowledging an income from "hawking" in sums of $2,950, $3,300, $3,600, $4,050 and $4,600 in the years of income ended 30 June 1972 to 1976 inclusive. The only other entries in the returns were claims for dependants' allowances.

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However, each return was attended by a schedule. It was in a standard form in three parts, but the second part was omitted from the 1976 return. As to the last part, the figure of $5,000 was a constant in all years other than 1974, when a figure of $7,500 was substituted.

6. The form of the schedule was as follows:

"(a) the gross income shown in the taxation return was estimated after deduction of estimated expenses such as telephone, motor vehicle expenses etc., incurred;

(b) no deductions for concessional items have been shown so as to offset any variance of estimated expenses of 25% deducted;

(c) I also estimated I grossed $5,000 from the Government Totalizator Board (T.A.B.) for this financial year which is not taxable and most of which was won in my wife's name."

The assessments

7. By notices of assessment dated 24 January 1977 the Commissioner, after making the adjustments to dependants' allowances previously referred to, issued original assessments in which the acknowledged T.A.B. winnings were treated as assessable income. The adjustment sheet which accompanied the assessments read "income from betting wins included as assessable income". On 10 February 1977 the objection was promptly disallowed and on 27 June 1977 (sic) the applicant requested reference of his objections to a Taxation Board of Review for independent review.

The next decade

8. For reasons which have not been explained, the requests were not transmitted for independent review until they were referred to this Tribunal under cover of a letter of 5 March 1987.

9. The delay is in many respects material. In the intervening years the applicant's common law wife left him, taking with her their two children (born 1973 and 1975). Although the children still maintain contact with the applicant, he said that he does not know the whereabouts of their mother. Further, by the early 1980s or thereabouts he had become a pensioner by reason of an assessment of spinal disability. It was common ground that some time after the request for reference was made, and probably in 1978, there were further discussions between the applicant and officers of the Commissioner. The applicant contends that they "begged him" to abandon his objections, but that he absolutely refused to do so. For the Commissioner, it was suggested that in fact at that time a compromise agreement was reached as to the assessments and that, following the discussion giving rise to that agreement, the Commissioner wrote seeking confirmation in writing of the terms of the agreement and, no reply having been received, wrote several subsequent letters. That was denied by the applicant. His claim was that the only communications he had received from the Commissioner in the years following were in the form of demands for payment and that he had in each instance replied asserting that he would make no payment as a result of those demands until such time as his hearing had taken place. Then at some time unknown he was prosecuted and appeared before a Court of Petty Sessions to represent himself on a charge that he had failed to file income tax returns in relation to later years. The applicant claims that the only income tax returns which have been filed by him since those lodged in October 1976 are those relating to periods since he commenced to receive pension income.

10. The applicant claimed that over the years, commencing with the period of investigation, he dealt with many representatives of the Commissioner. He did so when he, and sometimes his wife, attended at offices of the Commissioner when called on to do so. He claims that on some occasions he was abused and the subject of "stand-over" tactics. I do not accept that. Further, even if the Commissioner's officers were determined in their resolve and so expressed themselves, as in plain and blunt language to do so, I am satisfied that the applicant was in no way intimidated by it or inhibited in his responses.

11. In the course of the hearing no evidence was given by the applicant as to the lifestyle he has followed since 30 June 1976: nor was any suggestion made that there has been any modification to his earlier lifestyle. Further, as the Commissioner has not asserted that the applicant has derived any particular level of taxable income in the years following or even suggested that the applicant has ever acknowledged any liability to pay income tax in

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any of those many years, there is no tax history of the applicant for that period to lend support to the assertions of the Commissioner. If anything, the absence of such a history supports the claims of the applicant, although it is also consistent with the Commissioner's allegations that there had been evasion of tax in the relevant years.

The applicant

12. The claim of the applicant is that he has always been "on the road" and rarely in any form of regular or habitual employment. The principal period of employment he recalled was in the early 1960s when he was with "the Painters and Dockers". He claims that he has earned such assessable income as he did only by hawking whatever he happened to think he could sell, be it watches or vegetables. As to that activity he kept no records of his purchases or of his sales or of his expenses and, having regard to the nature of the activity, it seems quite likely that that would have been so. As to when, where and to whom he sold and from whom he bought so many years ago, his evidence is completely vague. Furthermore, his domestic companion of those years from whom he had long been separated was understandably not called as a witness after such an interval of time.

13. It is at least common ground that throughout the relevant period, and up to the present time, the applicant has resided not too far from the King's Cross district. The applicant acknowledges that at all material times he was a keen punter and that in those days when, according to his evidence, there was "an S.P. bookmaker in every pub", he frequented such places as well as betting on the T.A.B. He acknowledged that at times he worked for different S.P. bookies: sometimes betting with them: winning, on some of those occasions, and on others, losing. Further, he said that sometimes he was paid and paid well, and at other times not paid at all. In his own words, sometimes he lost his wages. His evidence was that at times he was employed to take bets and at other times to act as a "runner" to "lay-off" bets with other S.P. bookmakers near at hand in other hotels but not, at that time, with the T.A.B. because of the then early closing time for placing bets.

14. When this matter came on for hearing the applicant appeared to represent himself. He was an angry man and, if it was only necessary to establish that his anger was genuine, he would succeed upon the application. He was angry at the suggestion that he should have any liability for income tax in these matters. He was angry at the delay in referring his objection for independent determination. He was angry that he was to be denied the opportunity to face his accusers. He was angry at learning that the onus lay on him to prove that the assessments were excessive. He was angry that no witnesses were to be called for the Commissioner at the hearing even though at a preliminary conference the Commissioner's representatives had indicated that it was the Commissioner's intention to call such witnesses.

"The price of justice"

15. I suspect that he would have been more angry still had he known that, had he made his requests for reference on or after 1 March 1987, it would have been required of him that he pay $1,000 by way of fees in order to have the right to an independent adjudication upon his objections; and that, had the requests been made on or after 17 September 1987, the fees required of him would have been $1,200.

16. In other reasons for decision delivered this day I have drawn attention to the way in which the enactment of the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986 greatly improved the just determination of tax disputes. In the months following, this Tribunal demonstrated how, by use of its more efficient procedures, the cost to the community of providing for the resolution of disputes in tax matters could be substantially reduced. Then came the introduction of a new scale of fees: first, at $200 PER APPLICATION; then, at $240 PER APPLICATION.

17. In that other decision, I drew attention to some aspects of that problem in order to indicate how, even in relation to the affairs of a successful professional man, the requirement that such fees should be paid can work harshly; can be a deterrent; and can call upon citizens to pay at rates exceeding perhaps $500 per hour of sitting time to have the benefit of a hearing before a single Member of this Tribunal. For that medical practitioner the problem was one which arose year by year over several years. For this applicant, as for many others, the problem is worse. This applicant would have had but 60 days from disallowance of his

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ATC 1079

objection within which to pay the prescribed fees: currently $1,200. If, within that period, he had been able to raise sufficient to pay only one fee, he would then have needed to make an application to this Tribunal by writing to the Commissioner requesting an extension of time within which to request the reference. To make such an application he would have had to raise a further $240 upon each application. If his application for the extension of time failed, the fees so paid - perhaps $960 for a 30-minute hearing - would have been wholly forfeited. If his applications for extension of time had been successful, whether he would ever succeed in recovering any of the fees so paid would depend upon him having at least some success in relation to the substantive applications.

18. How long it would be before his case could be determined would depend first upon the promptitude of the Commissioner's response to his request for reference and then upon the capacity of the Tribunal to provide for the determination of his dispute. Examination of the Annual Reports of the Commissioner in recent years indicates that the vast backlog of transmissions awaiting reference to the Tribunal has been very substantially reduced but only with the consequence of greatly increasing the number of references with the Tribunal awaiting hearing. Of itself, the transmission of references has had little more effect than to shift a statistic from one column to another: thereby symbolizing a shift in responsibility from the Commissioner to the Tribunal.

19. Nor should it be overlooked that the applicant is not the sort of person who retains the services of barristers, solicitors or accountants. He is not the sort of person whose problems feature prominently in the deliberations and pronouncements of the councils of those professions. Nor is he a person seeking financial assistance from the community purse. Nor is he being provided with support and assistance from community funds as he seeks financial support from the Commonwealth.

20. Fortunately for the applicant, he was not denied a hearing because of inability to pay substantial fees, sufficient to amount to $500 or more per hour of Tribunal sitting time. In that regard, he merely illustrates how at the present time fee-requirements are themselves causing injustice. If the present requirements are maintained, this Tribunal will not have opportunities in the future to point to injustices occasioned by inability to pay the fees because those unable to pay will never come to the attention of the Tribunal. They will have been denied an independent review altogether.

"Justice delayed is justice denied"

21. Unfortunately, as to the second problem, the applicant is far from being alone in suffering the consequences of delay. Recently, in an unreported decision involving an applicant who enjoyed greater social status and greater financial resources than this applicant and in relation to proceedings which extended over six days with both parties represented by counsel, I was confronted with a situation in which the original requests for reference were not complied with by the Commissioner until nearly nine years after the first request. I then said:

"6. The delay was trenchantly criticised by counsel for the applicant. But counsel for the Commissioner contended that the Commissioner had no responsibility before this Tribunal to justify or explain his administration in relation to this applicant, or generally; that the task facing the Tribunal was only to determine whether the assessments before it were excessive; and that in determining that question, delay had no relevance beyond it making it unreasonable for the Tribunal to expect the memory of witnesses to be as clear and precise as to matters long past as in relation to more recent events. In particular counsel made the point that, even if the only year in dispute had been the 1984 year, the factual issues to be determined upon such a reference would have been the same. In general terms I agree with those particular submissions in so far as they relate to the determination of the references.

7. However, I do not accept the view that this Tribunal should be silent in the face of such alarming delays, any more than it should be silent when other deficiencies in the procedural rules or administrative practices involved in tax litigation are seen to occasion injustice. If the Taxation Boards of Review had been more outspoken about the injustices which they so frequently observed as being occasioned by the inflexibility of the `60-day rule' as applied

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ATC 1080

to applicants; by the absence of any comparable rule as applied to the Commissioner; and about the harshness of binding taxpayers strictly to the grounds of their objections as settled within those first 60 days, the reforms effected by the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986 might not have been delayed 50 years. If the Commissioner had done no more than immediately comply with all requests for reference so as to avoid the build-up in his administration of a huge backlog of matters awaiting reference by transferring that backlog to the Taxation Boards of Review, or had drawn attention to the developing problem much more clearly in his Annual Reports to the Minister for tabling before the Parliament, the tax litigation system would now be rendering far better service to the entire community - a service that the community is entitled to expect. But those are matters of the past. The present task for all concerned is to diligently move to reduce any further delay. In that regard I believe that much has been, and continues to be, done.

8. It is said for the Commissioner that the applicant is also responsible for delay in that, despite the aid of solicitors and accountants, he failed to take steps over the nine-year period to force the Commissioner to carry out his duty under the Act. In my view, the argument has no merit. No public officer should say that parties adversely affected by his default in the performance of his duty should be heard to complain unless they have sought to enforce performance of that public duty. Secondly, the Commissioner as a public officer whose responsibility perhaps more than that of any other impinges more directly and substantially and also more regularly and more frequently on more citizens than any other as he enforces tax legislation should be as ready to perform his own duties pursuant to that legislation and to do so as diligently and exactly as he requires citizens to act in performing their own duties under that legislation.

9. It was said for the Commissioner that the delay might have disadvantaged the Commissioner as much as the taxpayer, in that witnesses might have died, or moved, or disappeared; memories would have faded; documents could have been lost. That may well be so but if it is so, it is the community itself which ought to accept the consequences of the delay of its own officials. Furthermore, in my view, the consequences for the community should not be likened to those for the individual. What is at issue for the community in any particular tax matter such as this is trifling relative to the resources of the Commonwealth. For the individual taxpayer it can be a matter of great substance and moment.

10. The delays of which the applicant has complained have been exceptional. Unfortunately serious, but lesser, delays have been all too common, but at least in his case, the consequences are not as serious as they often have been for others. Unlike some, he is still alive. Unlike others who have suffered deterioration in mind or body, he is still in full possession of his physical and mental health, being only in his late 40s."

22. In using the phrase "Justice delayed is justice denied", I recognise it as having two meanings which need to be distinguished. I have used it in the sense that justice is most likely to be done if disputed matters are promptly determined; and that a community benefits when disputes are promptly resolved. There is a second sense to which I will refer later. That is, when the phrase is used to describe situations in which the delay is of such magnitude that in all the circumstances it makes it difficult, and perhaps even impossible, to determine with an appropriate measure of confidence what the correct result should be.

Justice and the community

23. Understandably, in this case, no such arguments were advanced. But in my view there is quite as much reason for concern in these matters as there was in that case, and it is that concern which has caused me to write of these matters. Nor is that a matter of concern only to those directly involved. The quality of the administration of justice in the community is not best measured by assessing how well and effectively the community provides for the fair trial of disputes in which persons of great wealth or social status, or possessed of substantial influence, are involved. Whether or not this applicant contributes to the revenue by

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ATC 1081

way of tax on taxable incomes not greater than $10,603 is not a matter of great moment in itself. However, for the particular applicant, such a liability is very substantial relative to his resources. Injustice to a poor man over $1,000 is a greater burden to him than the loss of $10,000 to many another. Among the many persons who have sought the independent judgment of this Tribunal in recent times I think of the brickie's labourer's offsider - only marginally employable even with financial assistance to his employer from the Commonwealth ($240); of the concentration camp survivor, prematurely forced to retire as a kitchenhand because of those experiences, whose six objections were only referred on after several years and then only several months after his death ($1,440); of the scallop splitter from a local fish factory who was presented with three disallowances at the same time ($720); and of the firewood merchant who was presented with four notices of disallowance at the one time ($960). Then there is the present applicant, whose life pattern falls outside the mainstream of society, with five applications ($1,200); and the unemployed follower of an "alternative lifestyle" presented with the need to challenge six assessments ($1,440). I am much more concerned for them than for the public authority presently part-heard before me with 14 applications ($3,360) under the Bank Account Debits Tax Act 1982.

24. The present standards as to payment of fees go way beyond what is appropriate to ensure that individuals do not put the community to undue expense by making frivolous or vexatious claims. In drawing attention to these matters I hope that the Parliament will act to ensure that a more appropriate and just system is introduced. That such should be done is in the interests of the entire community. If some persons - such as this applicant - are to be denied recourse to the legal justice system, then everyone in the community will be the loser.

The decision

25. Despite the unfortunate circumstances in which this case comes forward for determination, the essential question remains what it always was: has the applicant established - but only on the balance of probabilities - that any of the assessments of taxable income are excessive. As to that, the applicant is entitled to expect that he will receive the benefit of a fair decision from the Tribunal: independently, competently and honestly made. However, he is not entitled to expect that the Tribunal will bow its judgment as to the facts or bend the rules as to the law to accommodate his demands. He is entitled to expect that there will be no presumption against him that any evidence he gives will be untrue. But he is not entitled to expect that there will be some presumption that such evidence as he gives will be accepted as complete and true. Further, he is not entitled to a decision not based on the merits as a means of compensating him for the delay.

26. When I come to address the several questions as to whether any of the assessments are excessive I find that:

• (a) the applicant is a person who throughout most of the period in question supported a wife and two children;
• (b) he acknowledged that he was earning moneys by trade and that he may have underestimated those earnings and overestimated his expenses;
• (c) he acknowledged in evidence before me that he earned additional income, not previously acknowledged to the Commissioner's officers, by working for S.P. bookmakers;
• (d) he never acknowledged prior to the investigation a sufficient level of taxable income such as to make him liable to pay income tax;
• (e) even when he acknowledged a cash-flow of the order of magnitude of the taxable income assessed to him, he contended for non-taxable betting winnings as a major source of funds - larger than his admitted earnings from trade and employment;
• (f) he was willing to conceal his now admitted income in order to avoid payment of income tax.

27. I am satisfied that he put a lot of time, and possibly effort, into his betting activities and that overall he was successful. However, I am not persuaded that the measure of his success was $7,500 in one year and of the order of $5,000 in all other years; or that success was so consistently experienced that punting had always provided a most substantial part of his living expenses. On the other hand, I am not

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ATC 1082

persuaded that he earned $7,500 in the 1974 year and $5,000 in each of the other years from T.A.B. activities in circumstances such as to make those earnings assessable income. Nor am I positively persuaded that such sums constituted assessable income by reason of any other particular form of income-earning activity such as hawking; or S.P. betting; or remuneration from S.P. bookmakers - although it may have been all or any of those things. But that finding does not assist him very much because that is not the question to be resolved. The question in relation to each year is whether his taxable income was less than assessed.

28. Recognising the force of the proposition: "Justice delayed is justice denied", I have considered carefully whether the difficulties I have experienced in deciding these applications are due to the delays or the inherent difficulties of the case. In all the circumstances, I am satisfied that the case would not have been significantly more or less difficult had it been determined in 1977 when it should have been.

29. Having closely considered the matter, I am not persuaded by the evidence of the taxpayer. It might be that his "punting" was as successful as he contends, but that his living expenses were much higher than has been admitted. It might be that his living expenses were no higher than he admitted but his non-taxable betting revenues were less than he claims. Perhaps his betting revenues were of the order of magnitude admitted, but were derived in such circumstances as would constitute them as assessable income. Further, it should be recognised that the circumstance that on some days he may have "lost his wages" by betting with his employer so that he received nothing at the end of the day still leaves the earnings of the day as assessable and the betting losses as "private" and non-deductible expenditure.

30. As I have not been persuaded that the assessments are excessive, I will affirm the determinations of the Commissioner upon the objections under review.