White Industries Australia Ltd v Commissioner of Taxation [2003] FCA 599 (13 June 2003)

Last Updated: 17 June 2003

FEDERAL COURT OF AUSTRALIA

White Industries Australia Ltd v Commissioner of Taxation [2003] FCA 599

TAXATION - notices of amended assessment - where notices issued in November 2001 - where further `notices' issued in December 2001 - effect of further `notices' - whether further `notices' supersede or replace notices of amended assessment

Evidence Act 1995 (Cth) ss 60, 69

Income Tax Assessment Act 1936 (Cth) ss 161, 166A, 170, 173, 174, 175A, 177, 204, Pt IVA, Pt VI, Div IB

Taxation Administration Act 1953 (Cth) Pt IVC

Commissioner of Taxation (Cth) v Prestige Motors Pty Ltd [1994] HCA 39; (1994) 181 CLR 1 cited

Federal Commissioner of Taxation v S Hoffnung & Co Ltd [1928] HCA 46; (1928) 42 CLR 39 cited

WHITE INDUSTRIES AUSTRALIA LIMITED (ACN 003 409 345) AND GB & AB WHITE HOLDINGS PTY LTD (ACN 000 574 309) v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

N452 OF 2003

EMMETT J

13 JUNE 2003

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N452 OF 2003

BETWEEN:	WHITE INDUSTRIES AUSTRALIA LIMITED (ACN 003 409 345) FIRST APPLICANT GB & AB WHITE HOLDINGS PTY LTD (ACN 000 574 309) SECOND APPLICANT
AND:	COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA RESPONDENT
JUDGE:	EMMETT J
DATE OF ORDER:	13 JUNE 2003
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. the proceeding be stood over for directions and orders on 20 June 2003 at 9.30 am.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N452 OF 2003

BETWEEN:	WHITE INDUSTRIES AUSTRALIA LIMITED (ACN 003 409 345) FIRST APPLICANT GB & AB WHITE HOLDINGS PTY LTD (ACN 000 574 309) SECOND APPLICANT
AND:	COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA RESPONDENT

JUDGE:	EMMETT J
DATE:	13 JUNE 2003
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 The applicants, White Industries Australia Limited (`White Industries') and GB & AB White Holdings Pty Limited (`White Holdings') (together `the Taxpayers'), claim that documents issued in December 2001 by the respondent, the Commissioner of Taxation (`the Commissioner'), are notices of assessment for the purposes of the Income Tax Assessment Act 1936 (Cth) (`the Act') that supersede and displace notices of amended assessment issued under the Act by the Commissioner to the Taxpayers on 30 November 2001.

2 Section 161(1) of the Act relevantly provides that every person must give to the Commissioner a return for each year of income. Section 166 requires the Commissioner to make, from the return of a taxpayer, and from any other information in his possession, an assessment of the amount of the taxable income of that taxpayer and of the tax payable thereon. Section 166A(1) provides that, where a taxpayer that is a `relevant entity' within the meaning of Div 1B of Pt VI furnishes a return in respect of income of a year of income:

(a) the Commissioner is taken to have made, on the day on which the return is furnished, an assessment of the relevant taxable income and of the tax payable on that taxable income, as specified in the return; and

(b) on and after the day on which the Commissioner is deemed to have made the assessment, the return is deemed to be a notice of the deemed assessment; and

(c) such notice is deemed to have been served on the entity on the day on which the Commissioner is deemed to have made the assessment.

3 Section 174(1) provides that, as soon as conveniently may be after any assessment is made, the Commissioner must serve notice thereof in writing upon the person liable to pay the tax. Section 204(1) provided at the relevant time that any income tax assessed was to be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the thirtieth day after the service of the notice.

4 Section 175A provides that a taxpayer who is dissatisfied with an assessment made in relation to that taxpayer may object against it in the manner set out in Pt IVC of the Taxation Administration Act 1953 (Cth) (`the Administration Act'). Under the Administration Act, the time for lodging an objection is gauged by reference to the date of service of notice of assessment pursuant to s 174(1) of the Act.

5 Section 177(1) provides that the production of a notice of assessment is to be conclusive evidence of the due making of the assessment and, except in proceedings under Pt IVC of the Administration Act on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct.

6 Each of the Taxpayers was, in 1997, a relevant entity within the meaning of Div 1B of Pt VI of the Act. On 1 December 1997, each of them furnished a return to the Commissioner in respect of the year of income ended 30 June 1997.

7 The return lodged on behalf of White Industries disclosed the following:

`Taxable Income - $44,748,564.00

Gross Tax - $16,109,483.04

Other Credits - $ 1,589,173.92

Balance - $14,520,309.12'.

8 The return lodged on behalf of White Holdings disclosed the following:

`Taxable Income - $124,013,976.00

Gross Tax - $ 44,645,031.36

Other Credits - $ 44,645,031.36

Balance - $ Nil '.

9 The effect of s 166A(1) of the Act was that:

* the Commissioner is taken to have made on 1 December 1997 an assessment of the taxable income of the Taxpayers and of the tax payable on that taxable income;

* on and after 1 December 1997, the return lodged on behalf of each of the Taxpayers is deemed to be a notice of such deemed assessment; and

* such notice is deemed to have been served on the relevant Taxpayer on 1 December 1997.

10 Section 170(2)(b) of the Act provides that, where there has been an avoidance of tax, if the relevant taxpayer is a relevant entity and an assessment is taken by s 166A to have been made, the Commissioner may, within four years after the day on which the assessment is so taken to have been made, amend the assessment by making such alterations in it or additions to it as the Commissioner thinks necessary to correct the assessment. Under s 173, every amended assessment is to be an assessment for all the purposes of the Act.

11 Section 170(4) of the Act provides that, where the Commissioner has begun an examination of the affairs of a taxpayer and the examination was not completed within the period within which the Commissioner may amend an assessment to which the examination relates, the Commissioner may request the taxpayer to consent to the extension of the period. Under s 170(4B), if a request is made to a taxpayer, that taxpayer may consent to the extension of the period within which the Commissioner may amend the assessment.

12 On 25 October 2001, the Commissioner wrote to PricewaterhouseCoopers, the tax advisers of the Taxpayers, requesting them to consent to an extension of six months to the period within which the Commissioner may amend the deemed assessments of the Taxpayers for the year ended 30 June 1997. The request for extension would effectively have extended the time limited by s 170(2)(b) for amended assessments for the year ended 30 June 1997. That time would otherwise have expired on 1 December 2001, such that no amended assessment could be made after that date, except pursuant to Pt IVA of the Act, which deals with `Schemes to reduce income tax'. By letter dated 29 November 2001, sent to the Commissioner on 30 November 2001, PricewaterhouseCoopers replied to the Commissioner's letter of 25 October 2001, saying that the Taxpayers were not prepared to consent to the extension of time requested by the Commissioner.

13 On 30 November 2001, the Commissioner sent to each of White Industries and White Holdings a letter enclosing a notice of amended assessment. Each notice of amended assessment was dated 30 November 2001. The notice of assessment addressed to White Industries contained the following particulars:

` $ c

TAXABLE INCOME $101,558,133

GROSS TAX 36560927.88DR

ADDITIONAL TAX FOR UNDERSTATEMENT

- PENALTY 10225722.42DR

- INTEREST 10918756.74DR

OTHER CREDITS 1589173.92CR

BALANCE OF THIS ASSESSMENT 56116231.12DR

BALANCE OF YOUR PREVIOUS 1997 ASSESSMENT 14520309.12DR

DIFFERENCE BETWEEN THIS AND PREVIOUS ASSESSMENT 41595922.00DR

*****$41595922.00 IS DUE AND PAYABLE ON 10 JAN 2002****

THE AMOUNT OF INTEREST ON UNDERSTATEMENT IS ALLOWABLE

AS AN INCOME TAX DEDUCTION.'

14 The notice of amended assessment addressed to White Holdings contained the following:

` $ c

TAXABLE INCOME $124,013,976

GROSS TAX 44645031.36DR

ADDITIONAL TAX FOR UNDERSTATEMENT

- PENALTY 10403177.94DR

- INTEREST 11108237.02DR

OTHER CREDITS 23838675.48CR

BALANCE OF THIS ASSESSMENT 423177770.84DR

BALANCE OF YOUR PREVIOUS 1997 ASSESSMENT 0.00DR

DIFFERENCE BETWEEN THIS AND PREVIOUS ASSESSMENT 42317770.84DR

*****$42317770.84 IS DUE AND PAYABLE ON 10 JAN 2002****

THE AMOUNT OF INTEREST ON UNDERSTATEMENT IS ALLOWABLE

AS AN INCOME TAX DEDUCTION.'

Both letters, together with enclosures, were received by the relevant Taxpayer on or shortly after 30 November 2001.

15 However, the Commissioner subsequently sent a further document to each of the Taxpayers. The document addressed to White Industries was dated 13 December 2001 and was described as `NOTICE OF AMENDED ASSESSMENT'. It contained the same particulars as the document of 30 November 2001, except that the amount payable was said to be due on 17 January 2002.

16 The document addressed to White Holdings was dated 19 December 2001 and was described as `NOTICE OF ASSESSMENT'. The particulars were the same except for the amount claimed and the due date for payment. The latter was 23 January 2002. The amount claimed was $42,317,770.80 and the particulars differed by showing:

`Amount Payable Rounded Down by 0.04CR'.

That is to say, there was a difference of 4c by reason of rounding down the amount to the nearest 10c.

17 On 20 December 2001, PricewaterhouseCoopers wrote to the Commissioner on behalf of White Industries, referring to the document of 14 December 2001 and asserting:

`It appears both assessments issued to [White Industries] are void'.

The Commissioner responded to the letter of 20 December 2001 by letter apparently dated 21 December 2001. The Commissioner's letter was headed by reference to both White Holdings and White Industries and said as follows:

`I refer to your letter dated 20 December 2001. The notices that were sent from our automated mail centre on 13 December 2001 and 19 December 2001 are not assessments.

The valid assessment notices that were served on the 30 November 2001 were manually prepared and were not produced by our automated systems. This was necessary in order to provide the taxpayers with the maximum opportunity to reply to our request for an extension of time to amend the relevant original assessments. We did not receive a reply from you until 30 November 2001. As you will recall, the circumstances in which the request for the extension was made, and your rely was received, are detailed in my letter of 19 December 2001.

In accordance with normal procedures our data processing people input transactions in order to update our accounting system to reflect the effect of the manually issued assessments. These transactions were intended for internal purposes only and the production of `dummy' notices should have been suppressed by the system. However due to an oversight by our data processing people the `dummy' notices issued from our automated mail centre. All persons involved in the administration of this matter did not intend, and were completely unaware of, the notices dated 13 December 2001 and 19 December 2001. Only one decision was made to issue assessments and those assessments were served on 30 November 2001.

Please disregard the notices dated 13 December 2001 and 19 December 2001. Any inconvenience that has been caused is sincerely regretted.'

18 Correspondence thereafter ensued between the Commissioner, on the one hand, and PricewaterhouseCoopers, on the other, concerning the validity of the notices of amended assessment of 30 November 2001 (`the November Notices') and the subsequent notices dated 13 December 2001 and 19 December 2001 respectively (`the December Notices').

19 A copy of the letter from the Commissioner of 21 December 2001 was annexed to an affidavit read in the proceeding on behalf of the Taxpayers. Arguments were advanced on behalf of the Taxpayers to the effect that the letter should not be treated as evidence of the truth of the statements made in it. However, to the extent that those facts are relevant, I consider that the letter proves those facts by the operation of either s 60 or s 69 of the Evidence Act 1995 (Cth).

20 The Taxpayers contend that the December Notices are notices of assessment for the purposes of the Act that supersede and replace the November Notices. Apparently, there are consequences of substance that would flow from such a determination.

21 For example, the adjustment sheet attached to the notice of amended assessment of 30 November 2001 addressed to White Industries referred to alternative bases of assessment as follows:

`As a result of an examination of the income tax affairs of the company, an adjustment has been made to the company's taxable income in the year ended 30 June 1997.

	$
Taxable Income as previously assessed	44,748,564
Add
Net capital gain previously omitted from assessable income.
Alternatively, a determination has been made by the Commissioner pursuant to s.177F of the Income Tax Assessment Act 1936 ("ITAA 1936") that a net capital gain is included in assessable income.	56,809,569
Amended Taxable Income	101,558,133'.

While the time for an amended assessment based on s 177F of the Act, which is in Pt IVA, had not expired, the time for making an amended assessment in respect of a capital gain had expired by the time of issuing the notice of 13 December 2001.

22 The adjustment sheet attached to the notice of amended assessment of 30 November 2001 addressed to White Holdings referred to the following:

`As a result of an examination of the income tax affairs of the company, an adjustment has been made to the company's taxable income in the year ended 30 June 1997.

	$
Gross Tax on Taxable Income of $124,013,976	44,645,031.36
Less Rebates as originally assessed	44,645,031.36
Original Net Tax Payable	Nil
Less Rebates disallowed	42,317,770.84
Amended Net Taxable Income	42,317,770.84'.

No reliance was placed on s 177F in relation to White Holdings and, accordingly, there was no power for the Commissioner to make an amended assessment at the date of the notice of 19 December 2001.

23 The December Notices are not duplicates of the November Notices. They bear on their face different dates of issue and different due dates. The December Notice addressed to White Holdings also shows a variation, albeit infinitesimal in the context, in the amount payable. The Taxpayers contend, therefore, that the December Notices are notices of assessment for the purposes of the Act and, must, therefore, be taken to have superseded or replaced the November Notices.

24 The Commissioner, on the other hand, contends that the assessment process undertaken in relation to amended assessment of each of the Taxpayers was complete upon the delivery to that Taxpayer of the relevant November Notice. He says that the December Notices were no more than pieces of paper, the delivery of which had no juridical consequences under the Act.

25 The scheme of the Act and the Administration Act draws a distinction between the process of assessment, on the one hand, and the giving of notice of assessment on the other. However, the process of assessment is only completed when the Commissioner, having inserted in a notice of assessment the amount of the taxable income and the amount of tax payable thereon, serves the notice on a taxpayer. Service of the notice of assessment on a taxpayer fixes the ascertainment of the amount of the taxable income and the amount of the tax payable by that taxpayer. That service brings to an end the process of assessment. If the Commissioner, having gone through the process of calculation, serves on a taxpayer a notice that he has assessed the taxable income and the tax at specified amounts, the tax becomes, by force of the Act, due and payable on the date specified in the notice: Commissioner of Taxation (Cth) v Prestige Motors Pty Ltd [1994] HCA 39; (1994) 181 CLR 1 at 14.

26 While it is not essential to the validity of a notice of assessment that it state the name of the taxpayer liable to pay the tax, it is necessary that the notice should bring to the attention of the person on whom it is served that the assessment to which it relates is an assessment of that person's tax. That is because the principal purpose of a notice of assessment is to bring to the attention of the person on whom it is served that such person is liable to pay, on the due date, the amount of tax assessed in the notice on the income stated in the notice: Commissioner of Taxation (Cth) v Prestige Motors Pty Ltd (at 14).

27 Thus, while the giving of notice of assessment brings about the completion of the process of assessment, the function of the notice is to bring to the attention of the taxpayer the fact of the liability that arises upon the giving of the notice. There is no liability until the notice is given but, once given, there is nothing further to be done in order to complete the process of assessment that gives rise to a liability to pay tax on the part of the relevant taxpayer.

28 There has been no suggestion on behalf of the Taxpayers that the November Notices are not valid notices of assessment within the meaning of s 174(1) of the Act. Further, the Taxpayers expressly eschewed any suggestion that the December Notices relate to any amended assessment different from those of which notice was given by the November Notices. It follows, therefore, that there was no reason for the Commissioner to have issued the December Notices. The only possible explanation for them is that they were the consequence of a mistake such as that referred to in the Commissioner's letter of 21 December 2001.

29 The Taxpayers contend in effect that the December Notices are amended notices of the amended assessments. It may be that, where a clerical error resulted in a notice of assessment that was inconsistent with an assessment actually made by the Commissioner, the Commissioner could give an amended notice of that assessment. It might also be that such an amended notice of assessment could only be given within the time within which the original notice of assessment could have been given. However, neither of those questions arises in the present case.

30 When an alteration or addition is made to a standing assessment, the assessment thenceforth exists as altered or added to and not as previously existing, plus independent alteration or addition: Federal Commissioner of Taxation v S Hoffnung & Co Ltd [1928] HCA 46; (1928) 42 CLR 39 at 54. However, the question in issue in the present proceeding is not concerned with amended assessments and the relationship between an original assessment and the amendment. As I have said, the Taxpayers do not suggest that the December Notices refer to any amended assessment different from those referred to in the November Notices. The only question is whether the December Notices are notices of assessment within s 174(1) that supersede and displace the November Notices.

31 I do not consider that the December Notices had any such effect. The assessment process was complete in relation to each of the Taxpayers upon receipt by them of the respective November Notices directed to them. Each of the November Notices was valid. Where a perfectly valid and complete notice of assessment has already been given to a taxpayer, the giving of another notice of the same amended assessment will not supersede or displace that earlier valid notice.

32 Whether or not the Commissioner could have made further amended assessments after 1 December 2001, he has not purported to do so and the Taxpayers do not suggest that he has done so or purported to do so. The only question is whether the December Notices can be characterised as notices of assessment pursuant to s 174(1). In my view they cannot, because there was simply no work under the Act for them to do. The Act confers no authority on the Commissioner to give a notice of an assessment or an amended assessment that has any juridical consequences where he has already given valid notice of that assessment or amended assessment.

33 The position might, of course, have been different if the November Notices had never been received by White Industries or White Holdings as the case may be. In such a case, the December Notices would have had effect as notices pursuant to s 174. To that extent, they might have been characterised as notices of assessment pursuant to s 174(1) and would have had work to do under the Act. The fact that they were out of time, of course, might be a different matter. However, once notice of an assessment (or an amended assessment) has been given in accordance with s 174, that is an end of the matter.

34 The application should be dismissed with costs.

I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated: 16 June 2003

Counsel for the Applicants:	R F Edmonds SC with E A Collins
Solicitor for the Applicants:	PricewaterhouseCoopers Legal
Counsel for the Respondent:	G T Pagone QC with J H Momsen
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	11 June 2003
Date of Judgment:	13 June 2003