The Federal Court has ordered that the Commissioner extend the time for a taxpayer to comply with a s 264 notice.
The assessments in question related to the Commissioner’s treatment as income of deposits in the taxpayer’s bank account. Assessments were issued and the taxpayer objected. The taxpayer argued that the deposits were partly of interest and mostly of repayments of the principal of one or more loans.
On 13 January 2012, the Commissioner wrote to the taxpayer enclosing a notice under s 264 of the ITAA 1936 formally requiring her to furnish information and produce documents. The taxpayer’s solicitors sought reasons from the Commissioner under s 13 of the AD(JR) Act for the issue of this notice. On 20 February 2012, the Commissioner wrote withdrawing the first notice but indicating that a new one would issue shortly. That occurred on 24 February 2012. The taxpayer sought interim relief in respect of the 24 February 2012 notice, which required the taxpayer to provide detailed information by 23 March 2012.
One of the categories of information sought by the Commissioner in the notice (the 4th category) was for the taxpayer to advise whether at any time during the relevant period, 2 trustee companies were unable to meet their obligations under the purported loan arrangement and failed to make repayments or were unable to make repayments to the taxpayer in full.
The Federal Court said that, “accepting that the Commissioner is entitled to conduct a roving inquiry or to fish for information”, it considered there was a sufficient prima facie case raised by the taxpayer “as to the precision with which the 4th category in the notice was framed”. The Court said that 4th category lacked “sufficient clarity to be a valid exercise of the power to require the addressee to furnish information under s 264(1)(a)”. In the Court’s view, it was sufficiently arguable that at a final hearing, the Court would find that the taxpayer “may have been left in a state where the information sought has not been sufficiently or intelligibly identified for her to be required to answer the fourth category”. The Court said the taxpayer may suffer significant prejudice if the notice were allowed to expire and that requirement were later found to be bad. The Court also noted the Commissioner did not identify any particular prejudice to him from a short delay in the matter being allowed to go to final hearing.
The Court said it was satisfied that it had power to order the Commissioner to amend a notice issued under s 264 by extending the time for compliance with that notice “to any time the Court considers appropriate”. It therefore ordered that the Commissioner extend the times for compliance with the notice subject to further order, up to and including the 14th day after the making of final orders in these proceedings.
(Binetter v DCT [2012] FCA 377, Federal Court, Rares J, 20 March 2012.)
[LTN 71, 16/4]