Re David Patrick Ousley v Commissioner of Taxation [1992] FCA 419; (1992) 92 Atc 4486 (1992) 23 Atr 593 (31 August 1992)

FEDERAL COURT OF AUSTRALIA

Re: DAVID PATRICK OUSLEY
And: COMMISSIONER OF TAXATION
No. V G130 of 1992
FED No. 635
Income Tax
[1992] FCA 419; (1992) 92 ATC 4486
(1992) 23 ATR 593

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Olney J.(1)

CATCHWORDS

Income Tax - betterment assessments - claim by taxpayer that increments in assets derived from non-taxable gambling - onus of proof on taxpayer - whether taxpayer required to show in appeal to AAT the precise details of his liability to tax - taxpayer's evidence rejected - application of decision in Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614.

Administrative Appeals Tribunal Act 1975, s. 44

Federal Court Rules, O. 53 r. 3(b)

Income Tax Assessment Act 1936, ss. 166, 167, 170, 190, 223

Graham v Green (1925) 2 KB 37

Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614

Ma v Commissioner of Taxation (unreported) Burchett J, 30 July 1992

HEARING

MELBOURNE
31:8:1992

Appeared for the appellant: Mr P. Searle

Instructed by: Patrick McQuillen and Associates

Appeared for the respondent: Mr T. Murphy

Instructed by: Australian Government Solicitor

ORDER

THE COURT ORDERS THAT:

1. The appeal be dismissed;
2. The respondent's costs be taxed and paid by the appellant.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

Introduction
This is an appeal pursuant to section 44 of the Administrative Appeals Tribunal Act 1975. Subsection 44(1) provides that a party to a proceeding before the Administrative Appeals Tribunal (the Tribunal) may appeal to the Federal Court, on a question of law, from a decision of the Tribunal in that proceeding.

2. The proceedings in the Tribunal from which the appeal arises are references by the respondent (the Commissioner) to the Tribunal made at the applicant's request following the disallowance by the Commissioner of the applicant's objections to his 1986, 1987 and 1988 assessments of income tax. In the Tribunal the three references were heard together. The Tribunal affirmed the decisions made by the Commissioner in response to the applicant's objections.

3. The notice of appeal does not specifically identify the questions of law which are said to arise in the appeal, and this notwithstanding Order 53 Rule 3(b) of the Federal Court Rules and prescribed form 55A. In the present case the appellant has indicated that the questions of law raised in the appeal are the subject of the grounds of appeal, and on reference to the grounds of appeal it is impossible to identify any specific question or principle of law which is said to arise. Simply asserting that the Tribunal has erred in law in reaching that finding, or that the Tribunal should have made some finding other than the one made does not make a question of law out of a question of fact.

4. The provisions of the Rules and the prescribed form of notice of appeal are designed to assist both the respondent and the Court to identify the question or questions of law which are said to arise and it is unhelpful, time consuming and costly when those who advise appellants such as the present appellant fail to comply with the Rules.
Background

5. The appellant lodged income tax returns for each of the financial years ending 30 June 1986, 1987 and 1988 in which he disclosed a taxable income of $14,055, $31,561 and $41,421 respectively and the Commissioner duly issued assessments based upon the income as returned. However, the Commissioner subsequently conducted an audit of the appellant's affairs and issued amended assessments increasing the appellant's taxable income for the three years in question to $491,983, $150,806 and $78,624. The increments of $477,928, $119,245 and $37,203 were based upon the Commissioner's calculation of taxable income by the asset betterment method, whereby he compared the value of the appellant's net assets at the end of each financial year with the value at the commencement of the year, and after making allowance for items of personal expenditure and other matters, assessed the difference (i.e. the increase) as taxable income, and in each case imposed additional tax pursuant to section 223 of the Income Tax Assessment Act 1936 (the Assessment Act).

6. The appellant gave notice of objection to each of the amended assessments, and in each case, the real thrust of the objection was the appellant's assertion that the calculation of taxable income was incorrect because it took into account non-assessable gambling winnings.

7. The Commissioner disallowed the appellant's objections and in written reasons given pursuant to paragraph 37(1)(a) of the Administrative Appeals Tribunal Act, the Commissioner said:

The amended assessments were authorised under sub-sections
167(b) and 170(2). The burden of proving that the amended
assessments are excessive is upon the applicant. See F.C.
of T. v Dalco [1990] HCA 3; 90 ATC 4088; Y12 [1991] AATA 374; 91 ATC 186; and Y16 91 ATC
213. The applicant has not discharged that onus. The
applicant has not established, by evidence or other
material, what lesser amounts his taxable incomes should be.

The statutory provisions

8. The provisions of the Assessment Act relevant to the assessment of the appellant's income tax are sections 166, 167 and 170 which provide:

166 From the returns, and from any other information
in his possession, or from any one or more of
these sources, the Commissioner shall make an
assessment of the amount of the taxable income
of any taxpayer, and of the tax payable thereon.
167 If -
(a) any person makes default in furnishing a
return; or
(b) the Commissioner is not satisfied with the
return furnished by any person; or
(c) the Commissioner has reason to believe
that any person who has not furnished a
return has derived taxable income,
the Commissioner may make an assessment of the
amount upon which in his judgment income tax
ought to be levied, and that amount shall be the
taxable income of that person for the purpose of
section 166.
170(1) The Commissioner may, subject to this section,
at any time amend any assessment by making such
alterations therein or additions thereto as he
thinks necessary, notwithstanding that tax may
have been paid in respect of the assessment.
170(2) Subject to this section, where there has been an
avoidance of tax, the Commissioner may:
(a) if the Commissioner is of the opinion that
the avoidance of tax is due to fraud or
evasion - at any time; and
(b) in any other case:
(i) where the taxpayer is a relevant
entity within the meaning of
Division 1B of Part VI and the
assessment is deemed by section 166A
to have been made - within 4 years
from the date upon which the
assessment is so deemed to have been
made; or
(ii) otherwise - within 4 years from the
date upon which the tax became due
and payable under the assessment;
amend the assessment by making such alterations
in it or additions to it as the Commissioner
thinks necessary to correct the assessment.

9. The regime for the making of, and dealing with, objections to an assessment of income tax made by the Commissioner and the reference of same to the Tribunal or to the Court is set out in section 185 and following of the Assessment Act. Section 190 provides:

190 In proceedings under this Part on a review
before the Tribunal or on appeal to a court -
(a) the taxpayer shall, unless the Tribunal or
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.

The letter of 3 August 1989

10. Because it appears to have been a matter which loomed large in the minds of the members of the Tribunal, it is appropriate that mention be made of a letter written by the appellant to the Commissioner on 3 August 1989.

11. The circumstances under which this letter was written are briefly these: In July 1989 the appellant's accountant Mr Marinucci was advised that the appellant's affairs were to be subjected to an audit by the Commissioner, whereupon he (Marinucci) sought legal advice from a solicitor, Mr Kovess. A conference took place between Kovess, Marinucci and the appellant at Kovess's home late in July 1989 and there were other conferences between Marinucci and Kovess, between Kovess and the appellant, and between Marinucci and the appellant. On 3 August 1989, the day on which the Commissioner's officers attended at Marinucci's office to begin the audit, a letter drawn by a member of Kovess's staff, was sent by fax to Marinucci's office, where it was signed by the appellant and handed to the officers from the Taxation Office. The text of the letter, which was accompanied by a separate document which is referred to in paragraph 3, is as follows:

3rd August, 1989
Deputy Commission of Taxation
350 Collins Street
MELBOURNE VIC 3000
Dear Sir,
Re: David Patrick Ousley - Years of Income
1 July, 1984 - 30 June, 1988
I refer to the abovementioned years of income and the income
tax returns lodged in respect thereto.
I now believe that my income for the above years may have
been substantially understated and wish to make a full and
true disclosure of all relevant circumstances of those
years. In doing so I wish to co-operate fully with you in
the correct ascertainment of my taxable income for the
abovementioned years so as to facilitate a correct
assessment for those years.
The circumstances I wish to inform you of are as detailed
below:
1. I am an investor by profession or trade but have
gambled in one form or another since approximately
1976. For approximately six years between 1976 and
1983 I gambled extensively on horse racing and
"two-up".
2. By 1983 I had accumulated approximately $100,000.00 in
savings and decided to extend my activities into
'Starting Price' Bookmaking in about September, 1985.
I ceased 'Starting Price' Bookmaking in about October
1986 and no longer engage in that activity. My tax
agent was not advised of the existence of my earnings
from the above bookmaking activity and was not
instructed to include them in my annual returns as I
believed that as "gambling winnings" and possibly
illegal activities, they were non-assessable. I have
now received advice that these winnings should have
been included in my annual returns for those years.
Although I specifically maintain that they are not
assessable I am disclosing the details of these
earnings in full with a view to co-operating with you
to correctly assess my income over those years.
3. Attached hereto are all the relevant details
concerning my winnings from the years mentioned as far
as I can recall. No written records have been
retained by me for this period except for the
investments made as detailed hereto. Also attached
hereto are copies of the Statement of Assets as at 30
June, 1988 and 27 July, 1989 for myself and my
investment company, Reynold Hall Pty. Ltd.
4. To the best of my knowledge the investments detailed
hereto account for the sum total of my winnings from
'Starting Price' Bookmaking during the years mentioned.
I submit that at no time during the years mentioned did I
intend to make any false or misleading statement to you.
However, in the event that my statements were false and/or
misleading, to the extent that they were false and/or
misleading, such was as a result of an honest mistake on my
part acting alone in misunderstanding my obligations. I
made no attempt to deliberately evade any taxation liability
and was not indifferent to the consequences of my omissions.
From a considered albeit possible erroneous stance I made
the decision not to include in my assessable income for the
years of income 1983-1984 to 1987-1988 those earnings I
received from my activities in 'Starting Price' Bookmaking.
I offer the above information and my co-operation in this
matter freely and submit that no penalty should be imposed.

12. Further reference will be made to this letter hereunder.
Proceedings before the Tribunal

13. The proceedings before the Tribunal were heard on 23-25 March 1992 (inclusive) and the Tribunal's decision, accompanied by written reasons was given on 26 March 1992.

14. Apart from the taxpayer, evidence was given before the Tribunal by Donald William Cox (a former SP bookmaker and friend of the appellant, Marinucci (the appellant's accountant) and Florian Dominic Moran Green (a solicitor employed by Kovess's firm who had drafted the letter of 3 August 1989 and the attached schedule), all of whom were called on behalf of the appellant. The Commissioner did not call any witnesses. Both parties were represented by counsel.

15. In the opening 3 paragraphs of the Tribunal's reasons for decision the scope of the Tribunal's inquiry is described thus:

The main issue in this case turns on the question
whether the taxpayer won by way of gambling amounts
set out below, in the years 1986, 1987 and 1988
respectively, the increase in his assets during the
years in question arrived at by the Commissioner as
the result of an audit. No attack on quantum was
made, the case being fought on an "all or nothing
basis". The assessments under review were prepared on
the asset betterment method which showed an
understatement of income as follows:-
Year ended 30 June 1986 $477,928
Year ended 30 June 1987 $119,245
Year ended 30 June 1988 $37,203
2. Prior to 1976, the taxpayer worked on the dockyards.
Thereafter, it seems, he was not engaged in any form
of remunerative employment, apart from husbanding his
investments; his time and energy being spent,
according to him, in cultivating sources from which he
could derive valuable information denied to other
punters, thus enabling him to make successful bets on
horses and dogs. To obtain this valuable information,
the taxpayer would, for example, take jockeys on
fishing trips in exchange for tips. It is also
alleged that the taxpayer was a successful gambler at
two-up, card games and backing snooker players "for
wages", a quaint term for what, in all the
circumstances, can be said to constitute "small
change" from his other purported betting activities.
3. Since the taxpayer was unable to say whether his
purported betting activities - other than on horses
and dogs - resulted overall in any appreciable gain,
we propose to limit our enquiry to those betting
activities which were alleged to have led to the
substantial gains, the subject of the betterment statement.

16. In paragraphs 4 to 7 of the reasons the Tribunal outlined the appellant's evidence concerning his betting activities and in the last of those paragraphs said:

...the taxpayer's evidence of his betting activity was so
vague that it can barely be said to have qualified as
"evidence". ... In the circumstances, we are confident that
no reliance can be placed on his testimony.

17. The Tribunal fortified its view of the unreliability of the appellant's evidence by reference to the letter of 3 August 1989.

18. Paragraphs 8 to 14 (inclusive) are devoted to a consideration of the evidence given concerning the letter which the Tribunal regarded as containing "damning admissions". Further reference is made to the letter and the "admissions" later.

19. Marinucci's evidence is referred to in paragraph 16, but there is no commentary as to what he said nor are any conclusions expressed other than the observations that the witness was unable to assist the Tribunal as to the source of the increase in the appellant's assets and that it was not surprising due to the passage of time, that the witness was unable to remember minor details concerning the preparation and signing of the letter of 3 August 1989.

20. Paragraph 17 of the reasons deals with Cox's evidence. Cox had recalled a bet the appellant had made on a horse named Always Welcome in 1977 which had returned the appellant about $125,000 but was vague as to other bets alleged to have been made through him. When asked by a member of the Tribunal whether the appellant has won more than he lost, the witness said he thought he won about $200,000 between 1986 and 1988 but conceded that this was no more than "an intelligent guess".

21. Green's evidence is referred to in paragraph 18. The Tribunal was satisfied that he was a truthful witness, and that his role was to prepare the schedule attached to the letter of 3 August 1989, but did not believe that he played any significant role in composing the letter.

22. The Tribunal then returned to the appellant's evidence, of which it said (in paragraph 19):

We found him to be evasive and showing little concern
whether his answers bore any resemblance to the events as
they occurred. ...

23. After giving a particular example of the inaccuracy of the appellant's evidence, and expressing the view that the appellant was "far from being the simple, uneducated person with a poor memory for detail, as claimed for him by his counsel", the Tribunal said further:

In short, we reject the taxpayer's evidence that the various
accretions to his assets were derived from his betting wins
as a punter. The only part of the evidence we are prepared
to accept is that he won some $125,000 on Always Welcome in
1977, i.e. some nine years before the years now under
review.

24. With respect, had the Tribunal stopped at that point and simply concluded that the appellant had failed to discharge the onus cast upon him by section 190(b) of the Assessment Act this appeal may never have been instituted. Be that as it may, the passage last quoted is followed immediately by the following:

19. ... He may well have won some other, albeit smaller
amounts on Cox's horses and dogs and on Strawberry
Road and Manikado. How much we are unable to say.
What became of the proceeds from any of these wins
would be a mere guess on the evidence. In the letter
of 3 August 1989 it is said that the applicant "had
accumulated approximately $100,000". Before us the
taxpayer alleged that this amount was nearer $250,000.
Given the total unreliability of his evidence, we are
unable to say whether - and if so how much - the
applicant had by way of cash in 1985, the first year
the Commissioner investigated. It is, of course,
trite to point out that a taxpayer who alleges that
increases in his assets are attributable to wins at
the races, must identify what those wins were in
circumstances where the totality of his evidence is
disbelieved.
20. Having rejected the taxpayer's evidence of betting
wins as a punter as the source of the amounts set out
in the asset betterment statement, we are left with
the letter of 3 August 1989. That letter, drawn or
settled by the taxpayer's solicitor and handed to him
for signature by his accountant, contains the
following admissions:
(i) "I now believe that my income for the above
years may have been substantially understated;
(ii) By 1983 I had accumulated approximately $100,000
in savings and decided to extend my activities
into 'Starting Price' Bookmaking in about
September 1985. I ceased 'Starting Price'
Bookmaking in about October 1986. ... For a
considered albeit possible erroneous stance I
made the decision not to include in my
assessable income for the years 1983 - 1988
those earnings I received from my activities in
'Starting Price' Bookmaking".
21. The admissions are clear and unambiguous. What
"explanation" for the admissions were advanced have
not persuaded us.
22. The Tribunal is thus presented with two alternative
readings; one the implausible interpretation offered
by the applicant, the other the natural meaning which
the words present. In these circumstances, and in
particular having regard to the source of the document
and the fact that it is the applicant himself who put
it forward, we think that rule contra proferentem,
albeit taken from a different context, should be
applied.
23. The result is that the disputed accretions have as the
most likely source the business of 'Starting Price
Bookmaking'. It was not suggested that such an
activity is not a business and that the proceeds are
not income under ordinary concepts.

25. Paragraph 24 contains an extract from the judgment in Graham v Green (1925) 2 KB 37 dealing with the manner in which a bookmaker operates and is said by the Tribunal to be a statement of law that has stood the test of time, so much so that the Tribunal could see no reason for not applying it to the activities of the appellant in the years under review.

26. In the penultimate paragraph of the reasons (paragraph 25) the Tribunal said:

It follows that, having rejected the evidence of the
taxpayer that the increase in his assets came from betting
on horses and other gambling activities, coupled with the
circumstances of the positive statements made in writing at
the commencement of the relevant audit, this taxpayer has in
no way discharged the onus of proof which he bears. It is
therefore again with no discourtesy to counsel that we
refrain from dealing with the numerous and illuminating
cases he relied on dealing with onus of proof where betting
wins are put forward as the explanation for accretions to assets.

27. The final paragraph of the reasons deals with the question of penalties to which reference will be made later.
The grounds of appeal

28. Ground 1: The appellant says that the Tribunal erred in law when it found in paragraph 1 of its reasons:

No attack on quantum was made, the case being fought on an
"all or nothing basis".

29. In support of this ground reference is made to the appellant's assertion in evidence that in 1985 he had cash in hand of $250,000 not of $100,000 as previously asserted, and that this represented an "attack on quantum".

30. Assuming for present purposes that it is an error of law for a court or tribunal to reach a decision on a misconception of the case being put to it by one of the adversaries, three things can be said of ground 1.

31. First: In the course of the final address of counsel for the appellant the following exchange occurred between the presiding member of the Tribunal and counsel.

THE D. PRESIDENT: And you are saying it is SP or nothing. I
would have thought on one view it is gambling or nothing.
MR SEARLE: Yes. Yes, Mr Deputy President. That is probably a
better way of putting it. It is either gambling or nothing but in
this case in the way it has been run and based upon the evidence
before the tribunal, there are really only two hypotheses that
have even been suggested to Mr Ousley in evidence: there being no
evidence at all the contrary from anyone else. The two hypotheses
are that the - his money is winnings from gambling and the second
one is whether he is carrying on a business or was carrying on a
business of SP bookmaking which would lead to the result that his
net earnings or his winnings constitutes assessable income.
There is no other evidence. This, in my submission, is a
case much like Hines' case and Krew's case. I will take the
tribunal to the cases in a moment but, in my submission,
this is virtually an all or nothing type of case and, in my
submission, it is - I will take the tribunal through each of
the cases in a moment.
(Ts p 145)

and later (at Ts p 161):

THE D. PRESIDENT: Yes, but in this case no attack was made
on the asset betterment as such and, as you say, it is an
all or nothing case, isn't it?
MR SEARLE: That is right, that is right.

32. Second: Whatever may have been asserted by the appellant as to the cash he had on hand in 1985, the Tribunal did not accept his evidence.

33. Third: By virtue of section 190(a) in the proceedings before the Tribunal, the appellant was limited to the grounds stated in his objection. The only relevant ground so stated is that the several asset betterment statements were incorrect because they failed to take into account non-assessable gambling winnings.

34. It cannot be said that the Tribunal misconceived the case being put by the appellant and in the circumstances, no error of law has been demonstrated.

35. Ground 2: The appellant says that the Tribunal erred in law at paragraph 7 of its reasons when it held that the appellant's inability to inform the Tribunal when winning bets were placed and the amounts wagered led to the conclusion that "no reliance can be placed on his evidence". The ground of appeal involves a fundamental misrepresentation as to what was said. Obviously, by prefacing the words quoted in the ground with the words "In the circumstances" the Tribunal was referring to all of the circumstances of the case. The ground raises no question of law.

36. Ground 3: It is said that the Tribunal erred in law at paragraphs 7, 11, 20 and 21 of its reasons when it found that the letter of 3 August 1989 contained "admissions" which are "clear and unambiguous".

37. The text of the letter obviously contains admissions as to the appellant's involvement in 'Starting Price' bookmaking. In my view the letter of 3 August 1989 was quite irrelevant to the issue which the Tribunal had to consider except as something against which to measure the appellant's credit, and even then, the Tribunal had already found that the appellant lacked all credibility before it ever gave any consideration to the letter.
No error of law has been demonstrated.

38. Grounds 4 and 5: The grounds relate to the question of whether Marinucci and the appellant read the letter of 3 August 1989 before it was signed and given to the officers of the Taxation Office. The grounds raise questions of fact and not of law.

39. Grounds 6 and 7: The grounds refer to certain evidence to which the Tribunal referred in paragraph 19 of its reasons as an example of the appellant's evasiveness and lack of concern for the accuracy of his answers. The grounds do not raise any question of law.

40. Ground 8: In my opinion this ground touches upon the question of onus of proof and does involve a question of law. The full text of the ground and the issues which it raises will be dealt with hereunder.

41. Ground 9: The appellant complains that the Tribunal ignored its own findings that the appellant had won $125,000 on a horse in 1977 and that he may have won some other smaller amounts. The ground misrepresents the findings by taking them out of context. No question of law is involved.

42. Grounds 10 to 14: These 5 grounds refer to the finding that the most likely source of the accretions to the appellant's assets was from the business of 'Starting Price' bookmaking, it being said that there was no evidence from which the Tribunal could be satisfied that the appellant had carried on a business and that no relevant findings of fact were made in relation to the activities of the appellant. Alternatively, it is said that if the letter of 3 August 1989 amounts to evidence that the appellant was engaged in a business, the finding could only relate to the period from September 1985 to October 1986. Whether or not there was evidence before the Tribunal to base a finding of fact is a question of law and this aspect of the appeal will be dealt with later.

43. Ground 15: The final ground of appeal relates to the Tribunal's decision on the issue of penalties and I will defer consideration of it until after disposing of the other grounds.
The burden of proof

44. In the proceedings before the Tribunal the appellant carried the burden of proving that the amended assessments were excessive. So much is beyond question. The Assessment Act says so explicitly in paragraph 190(b) and the Tribunal recognised it in paragraph 25 of its reasons.

45. In the Commissioner's reasons reference is made to the High Court decision in Commissioner of Taxation v Dalco [1990] HCA 3; 168 CLR 614 and cases Y12 and Y16 reported respectively at [1991] AATA 374; 91 ATC 186 and 213. The Tribunal did not refer to any judicial authority in its reasons when dealing with the question of burden of proof. Dalco is a relatively recent decision in which all seven justices of the High Court participated and supported the views expressed separately by Brennan J and Toohey J. Although the facts in Dalco were quite different from the present case, the ultimate issue was the same, namely, the application of paragraph 190(b) of the Assessment Act. At p 623 of the report Brennan J dealt in detail with the principle thus:

The ground of objection on which the taxpayer here relies is
error in the formation of a judgment as to the amount on
which tax ought to be levied. But mere error in the
formation of that judgment by the commissioner does not
warrant the setting aside of the amount assessed. Given the
validity of the exercise of the power to make an assessment
under s. 167(b), the ultimate question is whether the amount
of the assessment is excessive. The amount of the
assessment might not be excessive in fact, though the
reasons which led to the assessment were erroneous. In
George's Case (1952) 86 CLR at p 201 the Full Court
said:
"the law has always been taken to be that in an
appeal from an assessment the burden lies upon
the taxpayer of establishing affirmatively that
the amount of taxable income for which he has
been assessed exceeds the actual taxable income
which he has derived during the year of income."
Kitto J., from whose judgment the appeal in George's Case
was brought, said at p 189:
"(Section) 190(b) places the burden of proving
that the assessment is excessive upon the
appellant; and in order to carry that burden he
must necessarily exclude by his proof all
sources of income except those which he admits.
His case must be that he did not derive from any
source taxable income to the amount of the assessment."
Counsel for the taxpayer invited the Court to overrule
George's Case in so far as it requires a taxpayer to prove
that the amount of taxable income assessed exceeds the
taxpayer's actual taxable income, but that proposition does
not rest on George's Case alone. At base, it rests on s.
190(b) but it is acknowledged in McAndrew's Case,
McCormack's Case and F.J. Bloemen Pty. Ltd. In this
respect, George's Case is not open to doubt. It follows
that Wilcox J. was right in holding that "the task for the
taxpayer, upon an appeal or a review under Pt V of the Act,
is to show that the amount of money for which tax is levied
by a particular notice of assessment exceeds the actual
substantive liability of the taxpayer" (1988) 88 ACT at
p 4674.

46. The same theme is repeated on several occasions in His Honour's reasons as well as by Toohey J, who said at p 634:

It was necessary for the taxpayer to make good the
proposition that his income was less; this he failed to do
in respect of any of the assessments.

47. The case referred to by the Commissioner as Y16 is a decision of the Tribunal which was later taken on appeal to the Federal Court (Ma v Commissioner of Taxation (unreported) Burchett J, 30 July 1992). That case also involved a taxpayer who claimed that the "betterment income" was attributable to winnings from his betting activities on horses and dogs. In short ex tempore reasons the Tribunal said:

The case ultimately falls, as I see it, within a very narrow
compass. It is alleged by the applicant that the increment
is attributable to consistent wins year by year from his
betting activities at various forms of horseracing and dogs.
In that kind of situation it is in my view incumbent on an
applicant in cases where it is alleged that the unexplained
difference in the amended assessment was the product of
gambling - he can only discharge the burden of proof cast
upon him by section 190(b) of the Income Tax Assessment Act
if he can prove in relation to each tax year under review
precisely what moneys were earned from gambling and, indeed,
what moneys were lost and what the precise end result was.
Alternatively, to prove the precise amount of the taxable
income of the taxpayer from all sources which would give
rise to taxable income. If that is a correct statement of
the law then the taxpayer must inevitably fail.

48. On appeal Burchett J found that the Tribunal had misconceived the taxpayer's case and its failure to consider the case presented to it amounted to an error of law. The taxpayer also contended that the Tribunal erred in law in the propositions it considered were to be derived from Dalco, a ground which Burchett J considered was also made good. In this context Burchett J said (at p 14):

Dalco insists that a taxpayer in the position of the
applicant must show, according to the civil onus, that the
assessment is excessive. But it does not hobble him in the
ways that the Tribunal's propositions suggest. If, by any
means, he can show the assessment is excessive, he is
entitled to seek relief.

49. I return now to ground 8 of the grounds of appeal. That ground claims:

The Tribunal erred in law at paragraph 19 of its reasons in
holding "a taxpayer who alleges that increases in assets are
attributable to wins at the races must identify what those
wins were in circumstances where the totality of the
taxpayer's evidence is disbelieved.

50. The proposition asserted by the Tribunal is consistent with that expressed by Deputy President Gerber in Ma's Case (Y16) but was found to be erroneous on appeal. However, the difference between this case and Ma is that whereas in Ma the Tribunal did not make any findings as to credibility and thus denied itself the opportunity to make the sort of findings of fact which the case called for, in the present case the Tribunal expressed in unequivocal terms, which it repeated more than once, that the appellant's evidence lacked any credibility. The case the applicant mounted was that he had won money gambling as a punter but the Tribunal did not believe him. That was not necessarily the end of the appellant's case. Obviously, if there was other evidence upon which the necessary finding could be made, then the appellant would have been entitled to succeed. But there was no other evidence probative of the facts asserted. Certainly neither Marinucci nor Green could testify as to any relevant fact, whilst Cox was only able to offer what he conceded was no more than "an intelligent guess" as to the amount of the appellant's winnings between 1986 and 1988. That evidence standing alone could hardly be adequate to satisfy the Tribunal on the balance of probabilities that the amended assessments were excessive. Cox knew nothing, nor did he attempt to say anything, as to what became of the appellant's winnings and there is nothing to suggest that they were necessarily included in the transactions which were taking into account in the asset betterment statement. Whether the facts which called for proof were those contemplated by the Tribunal or whether they were the less specific facts which are referred to in Dalco and in Ma on appeal, the practical position was that the appellant's evidence did not support any positive finding which would lead to the conclusion that the assessments were excessive. Unless support could be found in evidence from the other witnesses, (which proved not to be the case), the appellant's case in the Tribunal was irretrievably lost once the Tribunal found (as expressed in paragraph 19 of its reasons):

...we reject the taxpayer's evidence that the various
accretions to his assets were derived from betting wins as a
punter.

51. That was the basis of the case put in the objection, and that was the case as put to the Tribunal. The appellant failed to establish that any of the accretions were derived from the single source which he had nominated.

52. The letter of 3 August 1989, to which the Tribunal devoted so much attention, was in the final analysis, something of a red herring. It cannot be doubted that it contains an admission that between September 1985 and October 1986 the appellant engaged in what he described as 'Starting Price' bookmaking, but there is no evidence to justify any finding as to what is meant by that admission, particularly when the admission is read in the context of the whole letter, which contains a denial that his winnings were assessable as income.

53. At the end of the day the appellant had not proved anything of relevance before the Tribunal. Clearly, he failed to discharge the burden of proof cast upon him by paragraph 190(b) of the Assessment Act and the Tribunal's ultimate conclusion expressed in paragraph 25 of its reasons that the appellant had in no way discharged the onus of proof was in the circumstances of the case, correct.

54. The Tribunal's finding that the most likely source of the disputed accretions was the business of 'Starting Price' bookmaking was unnecessary in the circumstances of the case. The letter of 3 August 1989 may have provided some slight basis for such a finding but absent any other cogent evidence as to "the activities of (the) taxpayer in the years now under review" I doubt that the finding was open to the Tribunal. However, as I have said, the onus was on the appellant to prove the assessments were excessive. It was not necessary for the Commissioner to prove, nor for the Tribunal to find, that the accretions were from a source that was taxable.
The penalty

55. In paragraph 26 of its reasons the Tribunal said:

On the issue of penalties, the Commissioner has, apart from
the standard interest component, added a further 40%
described as "culpability". Given the fact that the
taxpayer has chosen deliberately to conceal his taxable
activities in his returns and persisted in denying them
before this Tribunal, we can see no good reason for reducing
the penalties imposed year by year. We therefore have no
option but to affirm the decisions on the objections in each
of the three years now under review.

56. The appellant, in his final ground of appeal complains:

The Tribunal erred in law at paragraph 26 of its reasons
when it affirmed the Commissioner's decision on the issue of
penalties concerning a standard interest component and a
further 40% described as a culpability component in that it
failed to take into account the disclosure made by the
taxpayer in the letter dated 3 August 1989, the Tribunal
having decided on the basis of that letter alone that
"admissions" were made therein that the taxpayer was at all
relevant times carrying on a business, the proceeds of which
constituted assessable income.

57. The power to remit the whole or any part of additional tax payable by a taxpayer under a provision of Part VII of the Assessment Act is discretionary. In this case the Commissioner remitted the additional tax to 40% of the assessment. The Tribunal's conclusion that the appellant had chosen deliberately to conceal his taxable activities in his returns does not necessarily follow from the failure of the appellant to prove that the amended assessments were excessive. And there is little doubt that the Tribunal regard his "taxable activities" as the carrying on of the business of a 'Starting Price' bookmaker, a finding which was not really open on the evidence, but be that as it may, the fact is that the appellant did not make any disclosure of his affairs until the eleventh hour before the audit was due to commence and there can be no doubt that but for the intention of the Commissioner to conduct the audit, no disclosure would have been made at all. No error of law has been demonstrated that would justify interfering with the Commissioner's exercise of his statutory discretion under subsection 227(3) of the Assessment Act.
Conclusion

58. The appellant has not been able to demonstrate that the Tribunal's decision was affected by any error of law. In the circumstances the appeal should be dismissed with costs.