McCauley v. Federal Commissioner of Taxation

Judges:
Lockhart J

Court:
Federal Court

Judgment date: Judgment handed down 22 July 1988.

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Lockhart J.

In these seven appeals, being heard together by consent, Bruce McCauley (``the taxpayer'') disputes the correctness of certain assessments which were made by the Commissioner following an investigation of his affairs. The assessments are for each of the years ended 30 June 1970 to 30 June 1976 inclusive and each of the seven years is the subject of a separate appeal. The assessments are based on an assets betterment statement or, as it is sometimes called, an accretion of assets statement. The Commissioner assessed the taxpayer to tax on the basis that during each year of income there was an increase in the taxpayer's assets, the source of which was unexplained by the amounts of income returned by the taxpayer. The Commissioner therefore increased the figures of taxable income in each year as returned to reflect the accretions in assets. I set out below the amounts which are shown in the assets betterment statement as ``Excess Cash Withdrawals'' which represent cash payments by the taxpayer, the source of which he could not explain to the satisfaction of the Commissioner.

                                                               Excess
                                                                cash
    Income year                                             withdrawals
   ended 30 June                                            in dispute
                                                                 $
      1970                                                      1,430
      1971                                                     40,739
      1972                                                     15,852
      1973                                                     33,309
      1974                                                     48,164
      1975                                                     99,702
      1976                                                     86,433
                                                             --------
      Total                                                  $325,629
                                                             --------
    

The taxpayer's case is that the sole source of these payments was betting wins from the activities of a syndicate of which he was a member and from on-course bets placed on his own account. The taxpayer also placed bets on the totalizator and his larger winnings from that source were paid by cheques drawn by the Totalizator Agency Board in his favour. The Commissioner was able to verify certain of these winnings on the totalizator and he accepted that the taxpayer had received $222,172 from that source over the income years 1970-1974. Credit was therefore given to the taxpayer in the assets betterment statement in that sum spread over the seven years of income.

The case is essentially one of fact and turns on the credibility and reliability of witnesses viewed in the light of the surrounding circumstances and probabilities. The taxpayer gave evidence and called James Allan Mason and Leslie Raymond Roberts, all three of whom were members of the betting syndicate. Each of the three witnesses swore affidavits which were supplemented by oral evidence which were supplemented by oral evidence including cross-examination. The taxpayer also called a Mr Rosier, the officer in charge of racing operations with the New South Wales Department of Sport, Recreation and Racing. Mr Rosier gave evidence relating to the submission of betting sheets and other records of bookmakers to the Department of Treasury and Department of Taxation. The Commissioner called one witness, Mr Eric Ellem, a former investigation officer with the Department of Taxation, who was one of the Commissioner's officers engaged in the investigation into the affairs of the taxpayer.

Before making my findings of fact some general observations must be made, as those general observations provide the framework within which the facts are to be determined. The taxpayer lodged no income tax returns between 1965 and 1976. He controlled a company, Logan Investments Pty. Limited (``Logans''), and it too lodged no income tax returns during the same period. The tax returns of the taxpayer and those of Logans for the years ended 30 June 1965 to the year ended 30 June 1976 were all lodged at or about the same time in 1976 by the accountant of the taxpayer. This occurred after the commencement of the investigation into the affairs of the taxpayer by the Department of Taxation of which the taxpayer was aware.

Notices of assessment issued on 2 December 1980, objections were lodged on 29 January 1981 and the Commissioner disallowed those objections on 4 September 1981. On 2 November 1981 the taxpayer requested the Commissioner to treat each of the matters as an appeal and to forward them to the Supreme Court of New South Wales. It was not until 21 March 1986, almost five years later, that the Commissioner referred the requests to the Supreme Court. The matters came to this Court on 1 September 1987 following the transfer of

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ATC 4607

jurisdiction in tax matters from the Supreme Courts to this Court pursuant to the provisions of the Jurisdiction of Courts (Miscellaneous Amendments) Act 1987.

The taxpayer kept very few records at any time relating to his betting activities, and no records are available now. The taxpayer kept betting slips or tickets and made notes on the back of race books for each race meeting. These records were kept only for a short time after race meetings. He kept cheque butts and bank statements but none of these were tendered in evidence. There is some evidence that ledgers and returns of bookmakers may have thrown some light on the matters in issue; but none were tendered and it seems from the rather sparse evidence that exists about the records of bookmakers that they would have been unlikely to have been of any real assistance in this case.

The taxpayer relies on the delay of some four years of the Commissioner in issuing the assessments after the returns were filed and the subsequent delay of almost five years in referring the matters to the Supreme Court of New South Wales as explaining the absence of records on his part. This is not a sound contention as there were hardly any records ever retained by the taxpayer relating to his betting activities. Moreover, the taxpayer must have known from 1976 onwards, after he became aware that his affairs were being investigated, that whatever records he had should be retained safe.

The Commissioner does not assert that the taxpayer carried on the business of betting. Hence, winnings gained by him during the relevant years of income from his betting activities resulted from a pastime or hobby and did not involve receipt of income within the meaning of that concept under the Income Tax Assessment Act 1936 (``the Act''). Although one would not expect the taxpayer to have kept documents evidencing his betting transactions as fully and as systematically as someone who was engaged in the business of betting might have been expected to have kept, it remains that the taxpayer was a member of a betting syndicate which carried on its activities during the relevant years of income on a large scale. Ordinary prudence should have dictated that the taxpayer keep reasonable records of his betting activities. There is some evidence that certain records were kept by members of the syndicate other than the taxpayer, but none were tendered in evidence.

The taxpayer was employed by J.D. Moore Pty. Limited (``Moores'') during the years of income 1970-1976. Moores is a Melbourne based company which carries on business as a publisher of magazines. The taxpayer was employed by Moores until recently. During his employment he performed general administrative functions and he estimated that his duties absorbed about 12 to 18 hours each week.

During the 1970-1976 years of income Logans carried on the business of purchasing and renovating real estate with the intention, according to the evidence of the taxpayer, that properties purchased by Logans should be held by it for some time as investments. Logans purchased a number of properties in various suburbs of Sydney and its environs during the relevant years of income and those purchases were funded by moneys lent by the taxpayer and by loans from other sources. The taxpayer gave evidence that during the seven years he was engaged on the average for about six months each year on a full-time basis supervising the carrying out of renovation work on Logans' properties and was occupied for at least 40 hours each week for about three to four months following the purchase of each property. He received no salary from Logans. He said that Logans did not pay a salary to him because it was highly geared and its interest costs remained fairly high. He said that the only income which he derived by way of salary during the years 1970-1971 was paid to him by Moores.

In addition to his involvement with the real estate transactions of Logans the taxpayer was also engaged in real estate transactions on his own behalf.

From about 1969 to 1973 the taxpayer and Leslie Raymond Roberts had interests in a jewellery importing firm. Both the taxpayer and Mr Roberts gave evidence that this was a company called Santa Prisca Imports Pty. Limited, but that company was not incorporated until 15 May 1973. The evidence is unclear as to whether that business acquired the assets of a firm previously carrying on the business. However, it seems that the two men were engaged in a business which traded under the name of Santa Prisca Imports or some

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ATC 4608

similar name and that Mr Roberts and the taxpayer each held a half share in the business. The taxpayer provided the initial capital and perhaps some capital thereafter. On Mr Roberts' evidence, the taxpayer's involvement was otherwise minimal until Mr Roberts ceased to have any involvement with the affairs of Santa Prisca. Mr Roberts placed the time of that cessation about 1973, at about the time of the incorporation of the company. The evidence as to the company's history was all somewhat curious. The business of the company involved Mr Roberts travelling to Mexico and there purchasing jewellery for Logans which he then brought back to Australia and sold to retailers at wholesale prices. The taxpayer gave evidence that he had a more active involvement in Santa Prisca than Mr Roberts' evidence indicated. In my opinion the taxpayer's evidence as to the nature and extent of his involvement in the affairs of Santa Prisca is unreliable.

The taxpayer's interest in horse racing commenced at an early age. He regularly attended Sydney metropolitan race meetings, usually about twice a week during the relevant income years, on Wednesdays and Saturdays. He was at all material times a member of the Australian Jockey Club and the Sydney Turf Club. The taxpayer, Mr Mason, Mr Roberts and others became members of a betting syndicate which attended Sydney metropolitan race meetings on a regular basis. The evidence spelt out in some detail the way in which the syndicate operated and the role played by its various members. It is not necessary to relate those matters in detail.

The most active period in relation to the syndicate's betting activities was from about 1969 until the end of 1976. Mr Mason had established credit with on-course bookmakers at the Sydney metropolitan race meetings, so bets placed with bookmakers generally were placed in his name. Most of the betting of the syndicate was with on-course bookmakers. Little betting was done on the totalizator. The taxpayer also bet on his own account, both with bookmakers and on the totalizator. During the period from 1970-1976 the proportionate contributions of syndicate members to the total bets of the syndicate consisted of about one-third from Mr Mason, one-third from the taxpayer and one-third jointly by the other syndicate members. The syndicate accepted Mr Mason's suggestions as to which horses should be backed by the syndicate in a particular race and as to the amount which should be bet on the horses, having regard to Mr Mason's previous experience and success. The syndicate often wagered substantial amounts upon individual races, wagering amounts up to a maximum of about $5,000. As betting with the bookmakers was typically on credit in Mr Mason's name the bets were settled at Tattersalls Club or City Tattersalls Club on Mondays. The syndicate sustained some losses over the period 1970-1976; but I find that on the whole the betting was successful and the syndicate's wins substantially exceeded its losses. In early or middle 1976 the syndicate had an extended losing run and it was at that time that the taxpayer ceased betting with the syndicate.

Mr Roberts gave evidence that the syndicate's performance from 1971 to 1975 was ``extremely good''. He estimated that the syndicate would have average profits in the order of $157,000 per annum from 1971 to 1975. He said in his affidavit that he arrived at this estimate by the following method. In the period in question he won between $1,500 and $2,000 a month from syndicate punting which he averaged at $1,750 a month. In a year this would be $21,000 in winnings. On Mr Roberts' evidence, which was slightly different from that of the taxpayer as to the relevant proportions, two other members of the syndicate and Mr Roberts constituted 40% of the syndicate. Their membership would have returned them approximately $63,000 per annum. Mr Mason and the taxpayer each had a 30% share in the syndicate. It follows from Mr Roberts' evidence that the taxpayer's share of the gross syndicate profit of $157,000 per annum would have been about $47,100 (if his share was 30%), or about $52,300 if the taxpayer's share was a third as the taxpayer maintained.

The taxpayer gave evidence that he contributed about one-third of the funds, Mr Mason another third and the other members of the syndicate together about another third. He said that the syndicate normally bet a total of about $3,000 per race of which about $1,000 would normally have been attributable to his share. He said that overall during the years in question the syndicate was extremely successful in its betting activities. Most of the betting transactions were on credit. Bets by the

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ATC 4609

taxpayer on the totalizator were placed by him in cash; but with substantial winnings his practice was to be paid by cheque drawn by the totalizator operator which was placed into his banking account with the ANZ Bank, 273 Pitt Street, Sydney. He made frequent deposits to and withdrawals from that banking account. He also kept a safe at his home where he kept money on a short-term basis, sometimes in substantial sums. The taxpayer estimated that over the six year period 1970-1976 his net winnings were about $450,000 to $500,000 of which some $220,000 represented winnings from betting on the totalizator.

After 1975 the taxpayer acquired interests in racehorses and he sometimes won substantial sums of money on them. Some of the horses in which the taxpayer held an interest included Tattenham Lad, Foxy Lady and Looking Great. After 1976 he acquired an interest in another racehorse called Silent Slipper. He also had interests in about six brood mares.

The taxpayer gave evidence that the only wage or salary income derived by him during the years 1970 to 1976 consisted of the salary paid to him by Moores. He said he was paid small amounts of director's fees by Logans and Santa Prisca and they were disclosed in his income tax returns. The only other amount of income which he recollects deriving during the period was a small amount of interest from moneys on deposit with the Rural Bank in late 1974 or early 1975. He said that all other monetary gains which were made by him during the six years resulted from his betting activities. He said that he kept no written record of those betting activities other than those which were necessary for settlements with bookmakers on Mondays and that those records, brief though they were, were disposed of by him after the settlements. There were, of course, his bank deposit and withdrawal documents with the ANZ Bank. He said that it was impossible for him to make any precise calculation of the betting winnings during the years 1970-1976, but that he was not engaged in carrying on any other business, nor was he engaged in any other activity which might have impacted on his financial affairs or which resulted in his receiving any amount of money, whether of an income nature or otherwise, other than the amounts returned as income by the taxpayer and noted above.

I accept that the taxpayer engaged actively and successfully in betting activities with bookmakers and on the totalizator during the relevant years, that his wins exceeded his losses and that the excess of wins over the losses was substantial.

The taxpayer's evidence of general betting activities, systems of betting was corroborated by Mr Mason and Mr Roberts. The Commissioner accepted that the taxpayer's own winnings on bets placed on the totalizator were approximately $220,000 gross (before deducting about $20,000 stake money) and took that figure into account in issuing the assessments in question.

I accept that betting by persons other than professional punters, even when conducted on a large scale, as were the activities of the taxpayer and the other members of the syndicate with which he was connected, would not necessarily involve the keeping of many or precise records. But not to keep day to day records of wins and losses when engaged in large-scale betting activity is both risky and unwise, particularly where a taxpayer is engaged in other transactions which have the potential to generate assessable income. Anyone with common sense who bet on a large scale, as the taxpayer did, and made substantial gains, must have an eye on the possibility, indeed, the likelihood, that the Department of Taxation will cast an inquisitorial and roving eye over his affairs at some stage. It is, of course, very easy to attribute large monetary gains to successful gambling or betting, the very nature of which tends to involve anonymity of the punter and a lack of documentation.

The taxpayer's own evidence is an estimate based on what he says is his recollection. In fairness to him he maintained before the Department of Taxation in the course of his investigation in the 1970s that he earned about $300,000 from wins with bets placed with bookmakers and about $200,000 (clear of the $20,000 stake) from the totalisator, a total of about $500,000. But there are certain features of the evidence which tell against the reliability of the taxpayer's evidence as to the extent of his winnings and his evidence generally.

There are internal inconsistencies in the taxpayer's own affidavit as to the extent of his winnings and the proportion thereof derived

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ATC 4610

from wins on the totalizator as against wins from bets placed with bookmakers. During the course of his evidence in the witness box the taxpayer, recognising some inconsistency with evidence in his affidavit or documents (including exhibit 3 to which I shall return in a moment), sought to shift his ground to resolve inconsistencies. There is more than one instance of that attitude, but it is not necessary to refer to the particular instances in detail.

Exhibit 3 is a letter dated 17 May 1979 signed by the taxpayer and directed to the Deputy Commissioner of Taxation. The letter states, omitting formal parts:

``Further to recent discussions with an officer of your department I hereby advise that I received approximately $220,000 (gross - before deducting approximately $20,000 stake money) from Totalizator Agency Boards, together with approximately $100,000 (net of stake money) from Racecourse Bookmakers, during the period 1969 to 1977.''

In the course of his cross-examination the taxpayer said that the letter referred only to his personal winnings as distinct from his share of winnings from the syndicate's activities. I do not accept that evidence. Exhibit 3 has some curious features which arise from both the evidence of the taxpayer and the evidence of Mr Ellem, the investigative officer of the Commissioner concerned in the matter. I am satisfied that the letter was signed by the taxpayer after he and his accountant had approximately one week to consider the accuracy of its contents and that it was then returned by the taxpayer or his accountant to the Commissioner together with a statement of his assets and liabilities, to which I shall refer later, being the document on the basis of which the assets betterment statement was prepared.

The taxpayer gave evidence that his winnings from bookmakers was $300,000 approximately, not $100,000 as stated in the letter admitted as Exhibit 3, and that the reason for reducing the figure to $100,000 in the letter was because it represented only his own personal winnings as distinct from those moneys coming to him as a member of the syndicate from the winnings of the syndicate. Mr Ellem's evidence was that the taxpayer's accountant said that if the figure was not reduced from $300,000 to $100,000 the figure would in some way be inconsistent with the statement of assets and liabilities. The telling point is, however, that the taxpayer was prepared to reduce what he asserted was the true winnings from bookmakers of about $300,000 to $100,000. His willingness to do so is confirmatory of the firm view which I have formed that the taxpayer has no clear or real idea of the extent of his winnings during the relevant years of income or any of them.

There are other possible sources of funds which could account at least in part for the unexplained increment in the assets of the taxpayer. His involvement with real estate transactions, both personally and through his company, Logans, is the best example. Indeed, it was the taxpayer's own evidence that he used betting wins to fund transactions of Logans and his own transactions in buying, renovating and selling real estate and also used the funds generated by the sale of properties previously acquired to fund new purchases.

I have already mentioned the conflicting evidence in the case with respect to the involvement of the taxpayer in the affairs of Santa Prisca. Under cross-examination several matters emerged which reflect adversely on the taxpayer's credit. They relate to his conduct in 1972 when obtaining a loan from the St. George Permanent Building Society, and certain false representations made by the taxpayer to his bank during 1970 to 1973. It is not necessary to recite the details of those incidents.

Other matters were elicited in cross-examination which reflect unfavourably on the taxpayer's credit; but I see no useful purpose in relating them.

Generally I was not impressed by the demeanour of the taxpayer. He shifted ground when giving evidence if it suited him to do so.

I have already mentioned that the taxpayer did not file personal income tax returns for the years ended 30 June 1965 to 30 June 1976 until they were all lodged together in 1976 and that the position was the same with respect to the taxation returns of Logans.

As I noted earlier, Mr Mason was the principal member of the syndicate because of his established credit with on-course bookmakers and his acknowledged expertise in picking winners. Although he gave evidence of

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ATC 4611

the taxpayer's involvement with the activities of the syndicate, he said nothing about the extent of the syndicate's winnings in the period in question.

Mr Roberts gave evidence which, if taken at face value would generally support the case of the taxpayer as to the extent of his winnings over the relevant years. I am satisfied that Mr Roberts' evidence about the extent of betting wins was merely an estimate based upon his broad recollection and that he did not have occasion to think about the matter until he swore his affidavit in this case on 9 June 1988, shortly before the commencement of the trial. I do not accept the evidence of Mr Roberts on these matters as providing any reliable guide as to the quantum of the taxpayer's winnings.

I am therefore left in the position where, although I am satisfied that the taxpayer was a successful punter whose wins were substantially greater than his losses during the relevant years of income, I am not persuaded that the quantification of the amount of those wins given in evidence for the applicant is correct.

If I then turn to examine each of the seven relevant years and ask the question whether it has been established that the excess of betting wins over losses during that particular year can account for the otherwise unexplained increment in the assets of the taxpayer, I am unable to conclude whether there was such an excess in any single year, much less the amount thereof.

Section 166 of the Act provides that, from the taxpayer's returns and from any other information in his possession or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon.

Section 167 is the source of the Commissioner's authority to make a default assessment. That section provides, inter alia, that where the Commissioner is not satisfied with the return furnished by any person, the Commissioner may make an assessment of the amount upon which in his view income tax ought to be levied and that amount shall be deemed the taxable income of that person for the purpose of sec. 166.

The combined operation of sec. 166 and 167 was considered by Dixon C.J., McTiernan, Williams. Webb and Fullagar JJ. in
George v. F.C. of T. (1952) 86 C.L.R. 183 at pp. 203 and 204 where their Honours observed:

``Section 166 and 167 do not prescribe distinct duties or functions. They combine to show what the Commissioner may or must do in performing his single duty of arriving at an assessment. Section 166 on its own terms covers cases where the Commissioner depends exclusively on sources other than a return. It says that he is to make an assessment from (1) the returns, (2) from any other information, or (3) from any one or more of these sources. Clearly enough under s. 166 the Commissioner can make an assessment which does not adhere to the income returned and yet to do so must involve some want of satisfaction with the return. Section 167 is epexegetical to s. 166. It is not an independent power. What it does is to mention with particularity three situations which might arise in carrying out the duty imposed by s. 166, and to direct how in those situations the Commissioner shall proceed for the purpose of s. 166. Just as under s. 166 considered alone the Commissioner ascertains the amount of the taxable income and thus assesses it so does he under s. 167, used in aid of s. 166, ascertain the amount upon which, in his judgment, income tax ought to be levied and thus assesses it. By definition `assessment' means the ascertainment of the amount of the taxable income, and of the tax payable thereon. This is the view of s. 166 and 167 adopted by Williams J. in
McEvoy v. Federal Commissioner of Taxation (1950) 9 A.T.D. at p. 211. The fact is that unless the taxpayer discharges the burden laid upon him by s. 190(b) of proving that this ascertainment or judgment is excessive, he cannot succeed and it can be no part of the duty of the Commissioner to establish affirmatively what judgment he formed, much less the grounds of it, and even less still the truth of the facts affording the grounds.''

Section 190 of the Act provides that, upon every appeal to the Court, the burden of proving that the assessment is excessive shall lie upon the taxpayer. As was pointed out in the joint judgment in George's case (supra) to which I have just referred sec. 190 must be read together with subsec. 177(1) which provides

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ATC 4612

that the production of a notice of assessment, or a document purporting to be a copy under the hand of the Commissioner, the second Commissioner or a Deputy Commissioner, shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all particulars of the assessment are correct.

In an appeal from an assessment the burden lies on the taxpayer of establishing affirmatively that the amount of taxable income for which he has been assessed exceeds the actual taxable income which he derived during the year of income:
Stone v. F.C. of T. (1918) 25 C.L.R. 389 at pp. 392 and 393;
Moreau v. F.C. of T. (1926) 39 C.L.R. 65;
F.C. of T. v. Clarke (1927) 40 C.L.R. 246;
Trautwein v. F.C. of T. (1936) 56 C.L.R. 63; George v. F.C. of T. (supra) at p. 201;
Krew v. F.C. of T. 71 ATC 4213; (1971) 45 A.L.J.R. 324.

In F.C. of T. v. Clarke (supra), Isaacs A.C.J. said at p. 251 in relation to the burden of proof lying upon the taxpayer:

``The justice of that burden cannot be disputed. From the nature of the tax, the Commissioner has, as a rule, no means of ascertainment but what is learnt from the taxpayer, and the taxpayer is presumably and generally, in fact, acquainted with his own affairs. The onus may prove to be dischargeable easily or with difficulty according to circumstances.''

This passage was cited with apparent approval in the joint judgment in George's case (supra) at p. 201.

It is for the taxpayer to satisfy the Court that the funds with which his assets were acquired did not come from undisclosed assessable income. For the purposes of these appeals each year must be treated separately. The Court at the request of the parties heard the seven appeals together for convenience. This does not affect the ultimate question to be decided or the burden upon the taxpayer to establish that the assessment was excessive: Trautwein's case (supra) per Dixon, Evatt JJ. at p. 111.

In Krew's case (supra) Walsh J. said at ATC p. 4218; A.L.J.R. p. 328:

``If the evidence of the appellant had been considered to be completely truthful and reliable it would have been sufficient, I think, to look generally at the whole period covered by the assessments and to reach a general conclusion without examining closely any particular year and without troubling about the absence of specific evidence to explain in respect of each year the discrepancy shown in the betterment statement. But unless his evidence be accepted completely (including his general statements that his gambling was always successful and his estimates as to the amounts of his winnings in various fields of gambling, which estimates were rightly regarded by the Board as no better than wild guesses) it is necessary to look at each year and at whatever evidence throws light upon the financial position of the appellant at the beginning and at the end of that year.''

This passage is apposite in the present case. Had I been satisfied that the appellant's evidence was completely or substantially reliable I would have looked generally at the whole period covered by the seven assessments and reached a general conclusion in his favour without examining any particular year closely and without troubling about the absence of specific evidence to explain in respect of each of the years the discrepancy shown in the assets betterment statement. However, as I have not found the evidence of the taxpayer completely or substantially reliable it is necessary to look at each year of income in question. There is a marked variation in the assets of the taxpayer and in the unexplained increment to his assets from year to year. I am not satisfied, however, with respect to any of the seven years of income that the unexplained increment in assets has been satisfactorily explained as having been derived from betting wins. The most that can be said is that in each year some portion of that increment was probably derived from betting wins, but it is impossible on the evidence before the Court to determine the amount thereof. Given my findings as to credit and given that I do not accept the taxpayer's evidence that the entirety of the increment was derived from betting wins, any determination in any of the years in question would merely be a guess. In making this finding I specifically do not accept the evidence of the taxpayer and Mr Roberts as to the extent of the winnings over the relevant period.

I have already made some observations about the effect of the absence of records on the taxpayer's case and it is pertinent to recite the

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ATC 4613

observation on this matter by Latham C.J. in Trautwein's case (supra) at p. 87:

``In the absence of some record in the mind or in the books of the taxpayer, it would often be quite impossible to make a correct assessment. The assessment would necessarily be a guess to some extent, and almost certainly inaccurate in fact. There is every reason to assume that the legislature did not intend to confer upon a potential taxpayer the valuable privilege of disqualifying himself in that capacity by the simple and relatively unskilled method of losing either his memory or his books.''

It was argued by counsel for the taxpayer that during the course of the investigation of the affairs of the taxpayer the Commissioner, if he had wished, could have obtained access to more records than those to which he in fact gained access; in particular, it was said that the Commissioner could have gained access to records of bookmakers with whom bets may have been placed by the taxpayer or the other members of the syndicate. It was also argued that the evidence of Mr Ellem, elicited during cross-examination, established that there may have been some records relating to the taxpayer's affairs, bank statements in particular, in the possession of the Commissioner at least about three years ago when Mr Ellem retired from his employment as an investigation officer and that the Commissioner did not produce such records.

Both these assertions suffer from a similar misconception. It is for the taxpayer to prove that the assessment is excessive and the onus lies upon the taxpayer to prove that funds to acquire the assets in question were not derived from undisclosed income. The source of these funds is peculiarly within the knowledge of the taxpayer. It is true that the Commissioner must conduct his investigations properly and explore avenues of information available to him to fulfil his statutory duties of making assessments; but it is for the taxpayer to establish that the unexplained increment in his wealth is due to betting wins. It was not asserted that the Commissioner deliberately refrained from producing the copies of bank statements which he had obtained from the taxpayer's bank; nor would the material before the Court justify any such assertion. Indeed, the evidence does not support a positive finding that the relevant bank statements were in the Commissioner's file at times material to this case as those documents may have been returned to the taxpayer's accountants.

In conclusion, it should be noted that it was not suggested in this case that the Commissioner proceeded on some wrong basis or wrong principle in making his assessments.

Each of the seven appeals is dismissed with costs.

THE COURT ORDERS THAT:

1. Each of the seven appeals NG2093-NG2099 of 1987 be dismissed.

2. The applicant pay the costs of the respondent of this proceeding including any reserved costs.