In a decision handed down on Tue 29.10.2013, the Federal Court has granted judgment to the Commissioner concerning outstanding tax debts of a taxpayer.
The taxpayer controlled several transport companies. He alleged he sold 2 of the companies to an individual, which explained a number of payments to those companies and to the taxpayer. The Court said the ATO found the evidence did not support the existence of such a transaction or, in fact, the existence of the individual concerned. The ATO found the taxpayer had not accounted for all income received during the period from 1 July 2002 to 30 June 2006. The ATO issued s167 default assessments amending the taxpayer’s taxable income to over $3.7m for the 2003 to 2006 income years inclusive, plus shortfall penalties of id=”mce_marker”.27m. The taxpayer objected to the assessments and the ATO allowed the objections in part, which resulted in substantial reductions in the assessment of taxable income and tax.
The Deputy Commissioner had sought summary judgment against the taxpayer under s31A(2) of the Federal Court of Australia Act 1976. At the same time, the taxpayer sought relief under s39B of the Judiciary Act 1903 that the amended assessments be quashed, and a declaration that the amended assessments were invalid pursuant to s21 of the Federal Court of Australia Act.
The taxpayer argued that on the facts, the Deputy Commissioner’s application for summary judgment should be refused because the taxpayer had raised an arguable case that the assessments met the description of tentative or provisional or of being the product of conscious maladministration or both. He also argued that reckless maladministration was a sufficient basis upon which to set aside an assessment. The taxpayer contended that the ATO was guilty of maladministration and that it had not acted bona fide in exercising its powers against the taxpayer because, among other things: (i) the ATO accused the taxpayer of fraud with no evidence; (ii) the ATO had assessed a tax liability in the taxpayer’s name that was a liability in relation to Diesel Fuel Rebates, which were not claimed in the taxpayer’s name, but in the names of his associated companies.
The Court considered the taxpayer did not have an arguable case of conscious maladministration, nor an arguable case that the 2008 assessments were tentative or provisional. It found the Deputy Commissioner had made out a case for summary judgment, which the Court granted.
(Roberts v DCT [2013] FCA 1108, Federal Court, Besanko J, 29 October 2013.)
[LTN 209, 29/10/13]
s21 of the Federal Court of Australia Act – Declarations of right
(1) The Court may, in civil proceedings in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed.
(2) A suit is not open to objection on the ground that a declaratory order only is sought.
s31A(2) of the Federal Court of Australia Act 1976 – Summary judgment
(1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is prosecuting the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.
(2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
(4) This section does not limit any powers that the Court has apart from this section.
(5) This section does not apply to criminal proceedings.