MARTIN v FC of T

Judges:
Davies J

Court:
Federal Court

Judgment date: Judgment handed down 16 December 1993

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Davies J

These appeals are brought under Division 1 of Part V of the Income Tax Assessment Act 1936 (Cth) (``the Act'') from decisions of the Commissioner of Taxation (``the Commissioner'') on objections lodged by the taxpayer, John Bronco Martin, to

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ATC 5201

assessments of income tax for the years ended 30 June 1984 to 30 June 1989 inclusive.

On the hearing of the appeals, Mr B. Glennon of counsel appeared for Mr Martin. Mr D.B. McGovern and Mr A.J. O'Brien of counsel appeared for the Commissioner.

Mr Martin did not lodge a return of income for any of the years, save a return for the 1989 year which was lodged after a written query had been received from an officer of the Taxation Office. Both the answer to the query and the 1989 return were exceedingly misleading. The assessments issued after an investigation was conducted into Mr Martin's business as a dealer in scrap metal. Having collected information as to sums which had been paid to Mr Martin by purchasers of scrap metal and having no information from Mr Martin as to his expenses in incurring that income, or at least no information which the Taxation Office considered reliable, assessments issued assessing Mr Martin for each of the years on the amounts of income which it was considered that Mr Martin had received. Accordingly, the effect of the assessments was to assess Mr Martin on what was understood to be his gross income without allowing deductions therefrom.

I need not discuss in detail the objections lodged. They alleged inter alia that the sums of income assessed had not been derived by Mr Martin and that, if they had been derived, the gross profit from the trading activities was no more than 10% or 15%. In the proceedings in this Court, both parties were required to file a statement of the facts, issues and contentions arising in the appeals. The statement lodged on behalf of the Commissioner contended in substance that the assessments had issued and that the onus was on Mr Martin under s. 190(b) of the Act to establish that they were excessive. The statement lodged on behalf of Mr Martin was brief and threw little, if any, light upon the extent to which the assessments were excessive. Paragraphs 4 and 6 of the statement said:-

``4. The Applicant does not dispute that he received gross income during the relevant years upon which the Assessments are based.

...

6. The Respondent based the relevant Assessments upon gross income only and did not allow the Applicant any amounts as business deductions.''

The statement then proceeded:-

``ISSUES

1. Whether the Assessments are bad at law.

2. Whether the Assessments are excessive.

3. Whether the Respondent erred in law in the manner in which the discretion conferred on him under s. 227(3) of the Income Tax Assessment Act was applied.

4. Whether the Respondent acted reasonably in issuing the relevant Assessments.

CONTENTIONS

1. The issuance of the Assessments are ultra vires at law, given that the Income Tax Assessment Act requires the Respondent to take into account deductions when making an assessment of a taxpayer's income.

2. In the alternative, should the Assessment be found to have been intra vires, then the Assessments should be set aside as being excessive, because the Assessments were based solely upon gross income, allowing no amounts as deductions to the Applicant.

3. The Respondent acted capriciously and unreasonably in not refraining from issuing the Assessments before the Applicant had the opportunity to substantiate deductions.''

As can be seen, the statement of facts, issues and contentions lodged on Mr Martin's behalf approached the matter on the footing that the assessments should be set aside as bad at law, unreasonable or ultra vires in that what was assessed as taxable income was gross income only without the allowance of deductible outgoings.

This approach was misconceived. In
F.J. Bloemen Pty Ltd v. FC of T; Simons v. FC of T 81 ATC 4280; (1981) 147 C.L.R. 360, it was held that, once a document satisfying s. 177(1) of the Act, that is to say a notice of assessment, is produced to a court, the court is compelled to treat it as conclusive evidence that the Commissioner had made an assessment and that, in making the assessment, he has complied with the statutory formalities. At ATC 4288; C.L.R. 375, Mason and Wilson JJ., with whom Aickin J. expressed his concurrence, said:-

``This interpretation gives expression to the policy which underlies, and is manifest in, the statutory provisions. The effect of this policy is that, once the Commissioner takes

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ATC 5202

advantage of sec. 177(1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt. V.

Although sec. 190(b) places the onus on a taxpayer upon a reference or appeal of proving that the assessment is excessive, it enables him to contest his substantive liability to tax. It is then for the board upon a reference or the Court on an appeal, within the framework of the taxpayer's objection, to ascertain whether he is liable to tax and, if so, in what amount. The Pt. V procedures accordingly protect the taxpayer and enable him to have his liability to tax determined.''

More recently, in
FC of T v. Dalco 90 ATC 4088; (1990) 168 C.L.R. 614, Brennan J., with whom Mason C.J., Gaudron and McHugh JJ. expressed agreement, said at ATC 4090-4091; C.L.R. 619-621:-

``Where one or other of the situations described in para. (a), (b) and (c) of sec. 167 exists, the Commissioner or his delegate is empowered to make an assessment of an amount which, in the Commissioner's judgment, is the amount on which tax ought to be levied: George's case at p. 204. It is that amount which, for the purpose of sec. 166, becomes the taxpayer's taxable income. That amount may not be in truth the taxpayer's taxable income for a particular income year and it may not be so regarded by the Commissioner (as in Trautwein v. F.C. of T. (1936) 56 C.L.R. 63) but, for the purpose of sec. 166, that amount is the taxpayer's taxable income for the income year to which the assessment relates unless it is shown on appeal from, or on review of, the assessment that the amount of the assessment is wrong:
Henderson v. F.C. of T. 70 ATC 4016 at p. 4018; (1968-1970) 119 C.L.R. 612 at p. 648. In a case arising under sec. 167(b) there are two functions for the Commissioner or his delegate to perform: first, he must decide whether he is satisfied with the return furnished, and, if he is not, he must form a judgment of the amount on which tax ought to be levied. In George's case it was held (at pp. 206-207) that the former function was a procedural step and was thus part of the making of the assessment, the due making of which is conclusively proved by the production of a notice of assessment: sec. 177(1). By contrast, in proceedings on appeal against an assessment the function of forming a judgment of the amount on which tax ought to be levied is not conclusively proved by the production of a notice of assessment. That is because sec. 177 distinguishes `between the procedure or mechanism by which the taxable income and tax is ascertained or assessed on the one hand and on the other hand the substantive liability of the taxpayer. The former involves the due making of the assessment': George's case, at pp. 206-207;
McAndrew v. F.C. of T. (1956) 98 C.L.R. 263 at p. 271; and see F.J. Bloemen Pty. Ltd. v. F.C. of T. 81 ATC 4280 at p. 4286; (1980-1981) 147 C.L.R. 360 at p. 373.

In relation to the proceedings on appeal against the assessments before Yeldham J., sec. 190 provides:

`(a) the taxpayer shall, unless the... court otherwise orders, be limited to the grounds stated in his objection; and

(b) the burden of proving that the assessment is excessive shall lie upon the taxpayer.'

...

It would be inappropriate for a court determining an appeal to make an order altering the tax liability assessed (sec. 199) unless the court were satisfied that the amount to which it proposed to alter the assessment represented the true tax liability of the taxpayer. Although the grounds of objection limit the grounds of appeal, the ultimate question for the court hearing the appeal is not whether the grounds have been made out but whether the amount assessed as taxable income is wrong. The burden which rests on a taxpayer is to prove that the assessment is excessive and that burden is not necessarily discharged by showing an error by the Commissioner in forming a judgment as to the amount of the assessment.''

See also
Briggs v. DFC of T (W.A.) & Ors 87 ATC 4278; (1987) 72 A.L.R. 365;
Eldridge v. FC of T 90 ATC 4907.

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ATC 5203

It follows that the task of the Court on an appeal from a decision on an objection is to determine whether the taxpayer has satisfied the burden of proof of showing that the amount of taxable income assessed is excessive, a burden which the taxpayer cannot dispel merely by showing that there was an error in the assessment. The taxpayer must go on to establish what is the amount which should be substituted therefor.

A court may set aside an assessment and remit the matter for reconsideration by the Commissioner where the court is satisfied that there was an error of law in the Commissioner's approach which led to an excessive assessment and that the taxable income should be recalculated by the Commissioner on a particular basis. But that is not to say that it is sufficient for a taxpayer merely to show that there was some error in the Commissioner's assessment. The taxpayer must demonstrate what is the amount which should be substituted for the taxable income assessed by the Commissioner or the basis upon which a calculation of that taxable income should be undertaken. The ultimate burden of the taxpayer is to show not merely that the assessment was in theory excessive, but that the amount assessed was excessive. Ordinarily, such a burden can be discharged only by proving what was the amount of the taxpayer's true taxable income and by comparing that sum with the taxable income assessed.

It is on this footing that I turn to consider the facts of the case. I need refer only to the principal facts and I need state them only in broad terms.

The taxable incomes as assessed were as follows:-

    1984      $50,905
    1985      $43,479
    1986      $43,712
    1987      $67,198
    1988      $163,372
    1989      $170,363
      

Those sums were calculated from invoices and like records obtained from persons who had purchased goods from Mr Martin.

Further documents were obtained on subpoena during the course of these proceedings. The following additional sums of gross income were identified from these documents:-

    1985      $746.70
    1986      $287.50
    1989      $9756.50
      

Moreover, a witness, Mr J.A.L. Mayson, produced his records and these disclose sums which he paid to Mr Martin. I am content to accept that the gross incomes assessed should be increased by these figures.

Mr McGovern also relied on evidence from Mr M.G. Minett that Mr Martin undertook some trading in goods outside the ambit of his scrap metal business. However, the evidence is not sufficiently definite to allow any specific conclusion to be drawn on this matter. I therefore do not take it into account.

Although Mr Martin's evidence did not go to deal with any specific receipts, his evidence did mention occasions when he sold goods on commission with the result that, although invoices may have been in his name, the proceeds paid by him were handed over to others subject to the deduction by Mr Martin of an agreed commission. I consider that, in giving this evidence, Mr Martin was in substance speaking the truth, although not in relation to specifics. I think it probable that Mr Martin did undertake some commission deals. I shall therefore take the payment made to the principals into account as costs of earning the income assessed, though I recognise that this is not the theoretically correct way of dealing with the matter.

As Mr Martin's statement of facts, issues and contentions did not raise any specific point of fact or issue with respect to the amounts of income assessed, I did not permit Mr Glennon to adduce evidence at the trial that these amounts were not received by way of gross income.

During the currency of the interlocutory proceedings, further documents were obtained on subpoena from persons who dealt in the scrap metal industry. From these documents and from the documents which officers of the Taxation Office already held, a schedule was prepared by officers of the Taxation Office setting out expenditure under s. 51(1) or (2) of the Act which they accepted that Mr Martin had incurred in gaining or producing his assessable income. Those sums are:-

    1984      $11612.66
    1985      $12979.90
    1986


         $3635

    1987      $4686.35
    1988      $2696.15
    1989      $9339.80
      

However, the case as put on behalf of Mr Martin is that dealing in scrap metal was a very competitive business and that the gross profit would not have been more than 12% overall.

The consideration of this matter is difficult for Mr Martin has no pattern of income tax returns, he has no records and his evidence was generally unreliable. Mr McGovern thought that these factors were sufficient to justify dismissal of the appeals. Mr McGovern relied upon the remarks of Latham C.J. in
Trautwein v. FC of T (No 1) (1936) 4 ATD 48 at 62-63; (1936) 56 C.L.R. 63 at 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.''

However, the fact that a taxpayer is untruthful and a tax evader is no reason not to arrive at an assessment of income tax as contemplated by the Act, if such an assessment can be made. As Walsh J. said in
Krew v. FC of T 71 ATC 4213 at 4219, in relation to a taxpayer who also was a dealer in metals and a gambler:-

``A witness upon whose word one cannot rely may yet give evidence which is true in part.''

Although in that case the evidence of the taxpayer was unreliable and neither consistent nor convincing, Walsh J. held that, in some of the years in question, there was acceptable evidence of a net gain from the taxpayer's betting, and his Honour set aside the amended assessment for those years. In this area of jurisprudence, Krew is a significant guide.

In the present case, the point that stands out is that the sums which make up the assessments are agreed to be gross income. No sum has been allowed as a deduction for the cost of trading stock or otherwise as the cost of gaining or producing the assessable income. If a proper basis can be arrived at for the allowance of deductions, that basis should be given effect.

Mr Martin arrived in Australia many years ago. He has rarely put in a return of income. For many years, he worked as an employee in the printing trade, holding down two jobs for day- time and night-time work. Mr Martin was able to support a wife and 10 children and, in 1979, he purchased a home in Pittwater Road, Collaroy for approx. $145,000. That was a substantial price to pay for a home in 1979. Mr Martin and his wife still live in that home though many of their children have now grown up and moved out.

Mr Martin gave up employment in the early 1980s and, in about 1983, he commenced dealing in scrap metal or in goods, such as photographic paper, from which metal could be recovered.

I can say at once that I would not adopt Mr Martin's figure of 12% as his overall profit margin. Although there is little evidence that Mr Martin is a person of wealth, I cannot picture him as a man who would have been satisfied with an income of $5,000-$6,000 in the 1984, 1985 and 1986 years. Mr Martin had managed to raise a large family and to acquire a substantial home in a desirable suburb. I cannot picture him as being involved in an income- earning activity unless the income was greater than that.

On the other hand, the Commissioner has not approached this matter on the basis of a betterment statement. The only evidence of income which would not be adequately explained by the gross receipts I have mentioned is that of the purchase of a Mercedes Benz sedan on 15 March 1988 for $132,000 and substantial deposits and withdrawals from an investment account at the Royal Bank at about that time.

The records available of the dealings with the Royal Bank, in which was incorporated the United Permanent Building Society Ltd, commence in January 1987. Until November 1987, the deposits are consistent with the payment in of business cheques and also with the occasional deposit of sums of cash in amounts of $1,000, $2,000 and $3,000 or thereabouts. However, commencing from 11 November 1987, there are some very substantial deposits of cash such as $5,000, $10,000, $15,000, $30,000, and even one deposit on 19 February 1988 of $80,000.

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ATC 5205

Mr Martin explained these deposits on the footing that he had always been a betting man and that, during the period of November 1987 to March 1988, he had the great fortune to have received successful tips from an acquaintance, Hollywood George. Mr Martin said that over this period he bet substantial sums on the following horses:-

                                Billy Asset
                                Star Watch
                             Grosvenor Square
                                 Rubiton
                                Snippets
      

Mr Martin said that he purchased the Mercedes from the proceeds of his winnings and that, after that period had concluded, he suffered betting losses.

Mr Martin's evidence was not supported by any documentary evidence such as betting sheets, and his evidence of betting on horses at particular times was not such as to attract confidence. On the other hand, there was some genuineness in his evidence that during this period of four months he had large winnings through his race bets, though not on every occasion, and that thereafter he lost more than he won. Mr Martin's evidence was supported by that of his son, John, who said that at that time he attended the races with his father.

I agree with Mr McGovern that the son seemed to put forward points which he thought would assist his father's case and that his recollection of particular races and bets was no more reliable than that of Mr Martin. But having said that, I did not form that opinion when listening to Mr Martin and to his son that there was no substance to their evidence that Mr Martin had had an unusual winning streak over this period.

On this issue I am most influenced by the records of the Royal Bank. The fact of the creation of a deposit account with the United Permanent Building Society and subsequently the Royal Bank is consistent with a general improvement in Mr Martin's business, which is confirmed both by the invoices on which the Commissioner has relied for the assessment and also the evidence of Mr Martin and others that, during the calendar years 1987, 1988 and 1989, a good price for aluminium made trading in that metal profitable, notwithstanding that competition remained keen. The Commissioner's assessments show that there was noticeable improvement in the 1987 year of income and that, in the two subsequent years of income, gross returns were much higher than in earlier years.

Thus, the opening of the deposit account is consistent with an improvement in the business and it appears to me, although Mr Martin has denied the fact, that he commenced to put business cheques into that account. There were also occasional deposits of lump sums, presumably of cash, and withdrawals of cash. There were withdrawals in 1987 on 19 June of $1,000 3 July of $5,000, on 18 July of $1,000 and of 7 August of $5,000. The deposits and withdrawals seem to me to be consistent with betting. A number of the withdrawals were made on a Thursday or Friday and a number of deposits on a Monday or Tuesday, consistent with betting on a Saturday. Mr McGovern has not attempted to relate them, or the larger deposits of $20,000, $30,000 and $80,000 during the 4 months period, with any dealings of which the Commissioner has the documentation. If the deposits and withdrawals relate to betting, they correlate the increased level of betting with the increasing prosperity of the scrap metal dealing. There is nothing improbable in this.

The records of the Royal Bank show that, in 1988, there was a withdrawal of $30,000 on 12 August, a withdrawal of $6,000 on 18 August, a withdrawal of $15,000 on 19 August, a deposit of $20,000 on 22 August, a withdrawal of $8,000 on 9 September, a further withdrawal of $7,000 on 9 September, a withdrawal of $5,000 on 13 September, a withdrawal of $5,000 on 14 September, a withdrawal of $5,000 on 27 September, a withdrawal of $3,000 on 30 September and a withdrawal of $2,500 on 7 October. By this time, the account was exhausted.

These withdrawals are entirely consistent with a run of betting losses and, indeed, that there is no other probable explanation. Mr McGovern was unable to explain what the moneys were expended on if they were not laid out on the unsuccessful endeavours of race horses.

It follows that I accept Mr Martin's evidence that the large sums appearing in the records of the Royal Bank are related to his betting activities and that the Mercedes Benz was acquired from the proceeds of a temporary run of success in betting. I therefore attribute the

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ATC 5206

larger deposits to the Royal Bank and the purchase of the Mercedes Benz to gambling and not to the conduct of the business.

The fact that Mr Martin was prepared to bet the sums he did is some indication that his business was prospering. The gross income as ascertained by the Commissioner shows that this was so. And I take the purchase of the Mercedes Benz to reflect the point I earlier made that Mr Martin was not such a man as would have been prepared to accept net profits of $5,000-$6,000 from his business in the '84, '85 and '86 years.

Notwithstanding that, I did not gain the impression that Mr Martin was a prosperous man. Neither he nor his witnesses gave that appearance in the witness box, and the evidence of the witnesses was supportive of Mr Martin's evidence that the margins available in scrap metal deals were relatively low.

It is impossible to ascertain the exact extent of Mr Martin's earnings in the period for, save as to the deposits with the Royal Bank, he retained his moneys in cash. However, the fact that cheques were deposited with the Royal Bank is an indication that the business was prospering sufficiently to enable some business receipts to be put into an interest earning deposit. The fact that the cheques were so deposited does not however infer taxable income in the vicinity of that assessed by the Commissioner.

It should be further noted that the business seems to have been a relatively small one. Mr Martin said that he maintained some books in the early years, but that these were held in a satchel which was stolen from his car. He did not bother thereafter to keep books. This evidence may be true or false but it does suggest that, if books were ever kept, they were modest in bulk. Mr Martin had no office other than his home. Notwithstanding Mr Martin's evidence that he employed his wife, I am satisfied that he did not employ her in his business and that, although his wife would no doubt have answered the phone from time to time, Mr Martin did not pay her remuneration. His only employees appear to have been his sons Ian and John who, at different times were employed part-time by their father. The son Ian gave evidence that he worked part-time for his father at various times between 1983 and 1986. He deposed that he was paid a share of the profits at the end of each week, mostly receiving less than $120 in any particular week and receiving no payment when business was quiet. The son John said that, during the period from about January 1987 to June 1988, he worked two to three days per week with his father and on average was paid $100 per week in cash. In cross-examination, the son John gave this evidence:-

``And how much were you paid per week? - There were some weeks I was paid nothing because we did nothing, there were other weeks where I was paid $100, other weeks I was paid $80, $60.

...

Yes, so are you telling us that it was not a very great sum of money that you received over all that period of time? - No it wasn't.''

Mr Martin's other children do not appear to have worked in the business or, if ever they assisted Mr Martin, they were not remunerated. The vehicle used in the business appears to have been a not very expensive second-hand vehicle. Evidence was given that the vehicle used in the later years was a former police paddy-wagon.

I assume from the evidence that the business came to an end in about the middle of 1989 when Mr Martin's eyesight deteriorated as the result of a diabetic problem. It does not appear that any of the children went into or continued the business or that the business was sold.

Evidence called on behalf of the Commissioner established that some of Mr Martin's dealings were less than honourable. Mr McGovern submitted that the inference should be drawn that Mr Martin's costs may have been less than those of an honest dealer. Evidence was given by members of two different firms that goods sold by Mr Martin had, on inspection, been found to include mainly paper or a less valuable material than that sold, the material purportedly purchased being merely packed on the top of and around worthless or less valuable contents. However, I would not draw from that evidence the conclusion that the majority of Mr Martin's dealings were of that type. I would rather draw the conclusion that, if the deceit was his, he must have been fairly desperate for funds to adopt tactics of that type. Obviously, tactics of that type would be liable to discovery if undertaken regularly, except perhaps if some

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ATC 5207

persons in the employ of the firms were paid not to disclose the fraud.

Evidence was also given that Mr Martin paid one or more employees of a firm to write down false and exaggerated weights for metals which Mr Martin sold.

This evidence shows that Mr Martin probably would not have incurred the costs which strictly honest dealers in the same field would have incurred. Nevertheless, the evidence does not suggest that, over all the years from 1984 to 1989, the majority of Mr Martin's business was conducted on that basis.

It was not suggested to Mr Martin in cross- examination that his business, or the majority of it, involved stolen goods. The material before the Court would not support that conclusion.

Having found that the deposits with the Royal Bank were principally connected with betting activities, I am left with the point that the assessments were drawn up by taking into account not assets and living expenses but simply items considered to be gross income. No deductions were allowed, though it is obvious that a dealer in scrap metal would have substantial costs, even if the material was acquired by theft. All the material of the type that Mr Martin dealt in was material that had value. The evidence has satisfied me that the persons who supplied this material to Mr Martin would probably have known its value and that there were many dealers competing for the business.

It was for this reason that Mr Martin put forward the overall profit margin of 12%. In particular, Mr J.A.L. Mayson gave evidence that he dealt in like goods and both sold material to Mr Martin and bought goods from him. I see no reason to reject Mr Mayson's evidence, and indeed, his books disclose dealings with Mr Martin. Mr Mayson dealt to some extent with goods such as the photographic paper, in which Mr Martin developed a considerable trade, and also with aluminium when its price rose in the second half of the 1980s. There is no reason to doubt Mr Mayson's evidence that there was considerable competition for goods of the type in which Mr Martin traded. Mr Mayson also deposed, inter alia:

``9. During the period 1987 and 1988 I recall that I sold scrap metal to the total value of approximately $10,000 per annum and that the net proceeds, after deducting all business expenses, was about $4,000.''

In all the circumstances, although Mr Martin's evidence as to his costs is unreliable, I have formed the view, as a matter of probability, that Mr Martin did have substantial costs, particularly expenditure in the purchase of stock. To put a figure on that cost is, of course, a matter of guesswork. But if a taxpayer has no records and his evidence is thought not to be reliable, then it is impossible to determine the facts of each dealing. Indeed, even the invoices and the other records from which the Commissioner based his assessments are not before the Court. Yet, as Burchett J. said in
Ma v. FC of T 92 ATC 4373 at 4379:-

``... the making of estimates upon inexact evidence, which is so much a feature of both judicial and administrative decision-making, cannot be uniquely excluded from appeals against betterment assessments.''

Having regard to the evidence as to the nature of Mr Martin's business and to such evidence as to his lifestyle as is available, I think it would be reasonable to conclude on the balance of probabilities that Mr Martin's taxable income would not have been more than 50% of his identified gross income. In my opinion, there is a sufficiency of evidence to draw that conclusion. In drawing this conclusion, I have taken into account such matters as Mr Martin's evidence that some dealings were done on a commission basis and the evidence on which Mr McGovern has relied.

I regard it as unsatisfactory that the Taxation Office has not sought to come to a conclusion about Mr Martin's costs of earning his income save to say that expenditure not proven would not be allowed. An unwilling taxpayer, even though he is a tax evader whose evidence is not reliable, should not be assessed to tax on gross income. The Act requires that a judgment be made as to allowable deductions. I have sought to undertake this task, doing the best I can on the inadequate information available, and keeping in mind that the burden of proof lies on the taxpayer, Mr Martin.

In the circumstances, I would set aside the Commissioner's assessments and remit them for the purpose of recalculation with the direction that the assessable incomes as set out in the assessments should be increased by the further amounts to which I have referred which

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ATC 5208

were identified during the course of the proceedings. Allowable deductions equal to one-half of the assessable income for each year should be allowed. This result seems to me to accord with Mr Martin's business and with his lifestyle as it has been described.

Counsel should bring in within 7 days minutes of the orders which they propose dealing with the adjustment to taxable incomes, penalty tax and costs. I should perhaps mention that, as presently advised, I would order that each party pay his own costs of the proceedings. Mr Martin has succeeded, but I do not in general accept his evidence. The case which was put on his behalf, that the net margin should be accepted as 12%, I reject.

THE COURT ORDERS THAT:

That within 7 days the parties bring in minutes of the orders which they propose.