RAFFAELE v DFC of T

Judges:
Davies J

Court:
Federal Court

Judgment date: Judgment handed down 25 October 1994

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Davies J

This is an appeal from a decision of the Deputy Commissioner of Taxation on an objection lodged by the applicant, Tina Raffaele, to an amended assessment of income tax in respect of the year ended 30 June 1990.

At the hearing, Mrs Raffaele appeared for herself. She was assisted by her husband. Mr DV McGovern of counsel appeared for the Commissioner of Taxation. During most of the interlocutory stages of these proceedings Mrs Raffaele had been represented by a solicitor, first, Mr DM Carbone of Clapin & Carbone and, later, Mr R Bartalesi of Nescis Solicitors. The affidavit sworn by Mrs Raffaele in support of her case was filed by Mr Bartalesi as also was Mrs Raffaele's statement of facts, issues and contentions.

In the year of income, deposits totalling $25,400 were paid into a bank account maintained in the name of Mrs Raffaele at the National Royal Mutual Bank at Five Dock. Eight deposits totalling $25,400 were paid in during May and June 1990. These sums were included by the Deputy Commissioner of Taxation in Mrs Raffaele's assessable income. Mrs Raffaele objected that the sums were not assessable income. Her objection read, inter alia:-

``The $25,400 was moneys accumulated by myself from salaries, gifts from my family for birthdays, Christmas, etc., over a number of years. I decided to bank the money as my home was robbed early that year (1990) and felt that it was no longer safe to keep the money in the house. This money is not income and as such I do not feel that I should be assessed on this amount.''

The substance of Mrs Raffaele's case as stated in her affidavit was as follows:-

``3. In or about 1970, I began to put aside small sums of money from my wages. These monies I hid in my house so that my husband would not gain access to them and in order that I might have something to live on should my marriage fail.

4. Between 1970 and 1990 I estimate that I would have put aside between $30.00 per week from my wages.

5. I was employed as a machine operator with Nestle Australia Limited for approximately twelve (12) years ending in 1980.

6. Since 1981, I have been employed by Grace Bros. Pty. Limited as a cafeteria assistant/general.

7. In early 1990, my house was broken into and my television, video and other personal effects were stolen. The thieves, however,

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did not discover the place where I had hidden my savings.

8. As a result of the burglary, I no longer considered my house sufficiently secure to keep my savings and in May, 1990, I began to remove my savings from my house and deposit them into account number 081 107 202 held in my name with National Royal Mutual Bank at Five Dock as follows:

          2-5-1990                  $3,900.00
          10-5-1990                  1,700.00
          15-5-1990                  3,800.00
          23-5-1990                  3,700.00
          29-5-1990                  2,300.00
          5-6-1990                   5,000.00
          9-6-1990                   2,900.00
          15-6-1990                  2,100.00
                                   ----------
                                   $25,400.00
          

9. During my employment with Nestle Australia Limited and Grace Bros. Pty. Limited, I was a `pay as you earn' tax payer and derived no income from any other source.''

Mrs Raffaele's statement of facts, issues and contentions was to the same effect. The substance was as stated thus:-

``1. The Applicant over a number of years put moneys aside from her wages for safekeeping in the family home.

2. In early 1990 the Applicant's home was burgled and as a result of the burglary the Applicant removed the cash savings she had stored in her home and deposited them in her account at the National Royal Mutual Bank Account No. 081 107 202...''

In accordance with s. 14ZZO(b) of the Taxation Administration Act 1953 (Cth) (previously s. 190(b) of the Income Tax Assessment Act 1936 (Cth), Mrs Raffaele has the burden of proving that the amended assessment was excessive. In
FC of T v. Dalco 90 ATC 4088 at 4093; (1990) 168 CLR 614 at 624-625, Brennan J. explained the operation of the burden in these terms:-

``The manner in which a taxpayer can discharge that burden varies with the circumstances. If the Commissioner and a taxpayer agree to confine an appeal to a specific point of law or fact on which the amount of the assessment depends, it will suffice for the taxpayer to show that he is entitled to succeed on that point. Absent such a confining of the issues for determination, the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment, though the taxpayer is limited to the grounds of his objection. In
Gauci v. F.C. of T. 75 ATC 4257; (1975) 135 C.L.R. 81, Mason J. said (at ATC p. 4261; C.L.R. p. 89):

`The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with sec. 190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail.'

That view, expressed in a dissenting judgment, now prevails:
Macmine Pty. Ltd. v. F.C. of T. 79 ATC 4133 at pp. 4139, 4146, 4159; (1979) 53 A.L.J.R. 362 at pp. 366, 371, 381; McCormack's Case ATC pp. 4121, 4123, 4132; C.L.R. pp. 303, 306, 323.''

At the hearing, Mr McGovern did not adduce evidence from which it could be inferred that Mrs Raffaele in fact derived the income as assessed. However, the burden lies upon Mrs Raffaele to show that the assessment was excessive. Mrs Raffaele undertook the burden of proving that the amended assessment was excessive by propounding the story as set out in her affidavit.

There are a number of factors which together make it difficult to accept Mrs Raffaele's evidence. They are:-

1. Mrs Raffaele did not speak with confidence when giving her evidence.

2. Early in her cross-examination, Mrs Raffaele withdrew the estimate of $30 per week which was expressed in para. 4 of her affidavit. For example, Mrs Raffaele gave this evidence in cross-examination:-

"Have you any approximate idea? Well, can you remember in 1970 actually taking $30 out of your pay on a weekly basis or approximately $30 and putting it aside? - Probably not because then the wages was smaller but as I said before, this was the solicitor's idea because he

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said, have to put roughly how much a week from then to there to make up the figure but I pointed to this to my solicitor but he said, we have to put roughly one figure. I'm not solicitor so I - I believe I have to - I mean, to say yes, whatever he-

Is that paragraph of your affidavit wrong then or would you like to change it in some way? - Well, it's not wrong and I - it's no need really to change. This is just to say roughly, you know, how much I can provide from the savings until - where was it - see, it's been long time. I mean, I can't remember exactly what the wages was and how much put that here and here after but I only say that was savings and not income,., I will say that all the time because that's what it is." (the emphasis is mine)

3. Mrs Raffaele gave evidence that she had received a substantial sum of money on her retirement from Nestle Australia Ltd. Documents which she tendered included letters from Nestle Australia Ltd of 22 December 1981 and 4 January 1982 which showed severance payments totalling a little over $12,000. Mrs Raffaele also received the sum of $5,469.53 superannuation on her retirement from Nestle Australia Ltd. In her oral evidence, Mrs Raffaele suggested that these sums may have formed part of the $25,400.

In my opinion, it is probable that the severance and superannuation payments were paid by cheque, as indeed the letter of 4 January 1982 shows, and that, if Mrs Raffaele had cashed the cheques or withdrawn the amount of the severance and superannuation payments from the bank at about that time, she would have recalled doing so and would have referred to this in her notice of objection and in her affidavit.

4. Mrs Raffaele did not give cogent evidence as to where she hid the moneys. Mrs Raffaele wrote the hiding places down on a piece of paper but only some of her writing was decipherable and that which was decipherable seems inconsequential. Mrs Raffaele's evidence did not clearly distinguish between the hiding places in the each of the houses in which she resided and did not make it clear whether she had one or several hiding places in each house.

5. Mrs Raffaele did not call any corroborative evidence from her husband or her children, one of whom is employed in a bank.

6. Mrs Raffaele's income from her employment was at all times quite modest, being approximately $11,000 in 1980 and approximately $16,000 in the subject year of income. As, according to Mrs Raffaele's evidence, her husband was not employed during much of the 1980s and as, during the 1980s, there was a mortgage to be paid off to which Mrs Raffaele contributed, it would appear that she would have had little opportunity for saving.

7. The moneys paid into the Bank in May and June 1990 were principally in $100 notes with a lesser amount in $50 notes and a small amount in $20 notes. $100 notes were not issued in Australia until 1983.

8. Mr and Mrs Raffaele seem to have had a keen interest in deriving a good rate of interest. Records of an application for a housing loan sought in September 1980 show that Mr and Mrs Raffaele then had two accounts with a bank, six accounts at building societies and a deposit account. In the 1988, 1989 and 1990 years of income, at a time when a house had been sold and the proceeds were invested, Mrs Raffaele had a number of accounts with more than one institution and switched accounts from time to time to derive a better rate of interest. It seems inconsistent with this pattern for Mrs Raffaele to have maintained at her home over a long period a large sum of money which did not draw interest.

9. In her returns of income for the 1988, 1989 and 1990 years of income, Mrs Raffaele disclosed minimal amounts of interest. In fact, substantial interest was credited on the accounts held in her name during those three years:-

            Declared        Omitted

  1988        $ 21          $ 6690
  1989        $ 45          $19010
  1990        $182          $14861
      

In her affidavit, Mrs Raffaele deposed that the failure to disclose the interest was due to inadvertence. In her oral evidence, Mrs Raffaele at first said that this was because her husband prepared or helped to prepare the returns and because he was unaware of

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the interest. She subsequently gave evidence, however, that the returns were prepared by Ross Maniaci & Co., accountants, and that she went alone to see Mr Maniaci and gave him instructions for the preparation of the returns. In these circumstances, the conclusion is inevitable that there was deliberate non-disclosure of the interest derived on the bank accounts held in Mrs Raffaele's name and on which she operated.

A part of Mrs Raffaele's case was that she had marriage difficulties and that it was for that reason that she hid the money. I accept that Mr & Mrs Raffaele had matrimonial problems. There is corroborative evidence that, at least during 1985 and 1986, Mr & Mrs Raffaele sought and received counselling. But that fact does not of itself make it probable that Mrs Raffaele regularly saved and hid cash from her weekly wages. It is perhaps worth noting that, when the subject moneys were paid into a bank account, they were not paid into a special account of which Mr Raffaele would have been unaware. They were paid into an account of which Mr Raffaele was aware and in which he may have had an interest. The account appears to have developed from moneys received on the sale of a house which Mr and Mrs Raffaele had owned.

In my opinion, the facts concerning the sums totalling $25,400 have not been disclosed to the Court. It may be that, if disclosed, those facts would show that the moneys were not income of Mrs Raffaele. It may be that the moneys were in whole or in part undisclosed income of Mr Raffaele. But it is not for the Court to speculate. Mrs Raffaele has put forward her version of the facts. If the Court is not satisfied on the balance of probabilities with this version, then Mrs Raffaele fails to satisfy the Court as to the issues which she has raised for the Court's determination and fails to satisfy the burden of proving that the amended assessment was excessive.

The application will be dismissed with costs.