The Federal Court has remitted a matter to be heard and decided again by the AAT after finding the AAT had made an error of law amounting to a constructive failure to exercise its jurisdiction by substantially reproducing the Commissioner’s written submissions verbatim and without attribution.
The substantive issue in the case concerns the taxpayer’s appeal from the decision in AAT Case [2011] AATA 33 where the AAT held that taxpayers had failed to discharge the burden of proof that amended income tax and GST assessments were excessive. In doing so, the Tribunal affirmed the assessments but allowed for certain concessions made by the Commissioner. The taxpayers in the AAT case were 2 associated companies (ST and SM) and their director (P). Following an audit, the Commissioner formed the view that the companies had a shortfall in their BASs and had also incorrectly claimed superannuation deductions in their income tax returns because they did not comply with their super guarantee obligations. Additionally, the Commissioner found that a Div 7A deemed dividend arose because of loans from SM to ST, and P was the sole director and shareholder of both entities at all relevant times.
The taxpayers appealed and re-amended notices of appeal were accepted by the Court. The Federal Court held that the AAT had made “an error of law amounting to a constructive failure to exercise its jurisdiction by substantially reproducing the [Commissioner’s] written submissions verbatim and without attribution in the reasons for decision”, and that therefore the taxpayers’ appeal was allowed.
The Court’s view was that the difficulty “in simply adopting verbatim only one party’s submissions and without attribution” was that even if those submissions were “entirely correct, it may legitimately give rise to a concern that the Tribunal has failed to bring its own mind to bear on the issues before it and thus, that it has constructively failed to exercise its jurisdiction”.
The Court therefore remitted the case back to the AAT to be heard and decided again by the Tribunal in accordance with the Court’s directions that all evidence is to be taken again, and that the evidence that may be adduced by a party is not limited to evidence adduced by either party in the first instance proceedings before the Tribunal.
(Palassis & Ors v FCT (No 2) [2012] FCA 955, Federal Court, McKerracher J, 3 September 2012.)
[LTN 172, 5/9]