Federal Commissioner of Taxation v Finn [1960] HCA 69; (1960) 103 CLR 165 (13 September 1960)

HIGH COURT OF AUSTRALIA

COMMISSIONER OF TAXATION v. FINN [1960] HCA 69; (1960) 103 CLR 165

Income Tax (Cth)

High Court of Australia
Fullagar J.(1)

CATCHWORDS

Income Tax (Cth) - Appeal to High Court by Commissioner of Taxation from decision of board of review allowing objection - No appearance for respondent taxpayer on hearing - Whether Commissioner entitled without more to have appeal allowed - Income Tax and Social Services Contribution Assessment Act 1936-1957 (No. 27 of 1936 - No. 65 of 1957), s. 196 (1).

HEARING

Perth, 1960, September 6, 13. 13:9:1960
APPEAL from the Board of Review.

DECISION

September 13.
FULLAGAR J. delivered the following written judgment: -
This is an appeal by the Commissioner of Taxation under s. 196 (1) of the decision of a board of review. The taxpayer, Gordon William Finn, in his return of income derived by him in the year ended 30th June 1957, claimed as an allowable deduction under the head of "travelling expenses" a sum of 352 pounds. The Commissioner by his assessment disallowed this deduction, and later disallowed an objection by the taxpayer to the assessment. The taxpayer under s. 187 of the Act requested the Commissioner to refer his decision to a board of review for review, and the Commissioner referred his decision accordingly. The Board by a majority, allowed the objection and reduced the assessment by the amount of 352 pounds. The Commissioner now appeals to this Court. (at p166)

2. When the appeal was called on for hearing before me, Mr. Downing Q.C. and Mr. Gleedman appeared for the Commissioner. There was no appearance for the taxpayer. Mr. Downing then submitted that the Commissioner was entitled, without entering on the merits of the case, to have his appeal allowed. He said that the so-called appeal given by s. 196 (1) was an appeal by way of rehearing - in other words, that the right of appeal was neither more nor less than a right to have a rehearing. The right is given either to the Commissioner or the taxpayer, though it is given only against decisions of the Board which involve a question of law. But, whether the appellant is the Commissioner or the taxpayer, the position, counsel said, is the same. In either case the burden of proving that the assessment is excessive lies upon the taxpayer. In either case it is for the taxpayer to begin, and for the taxpayer to place before the Court the material on which he relies. If he fails to appear and do this, there is no material upon which he can challenge the assessment. There is a presumption that the original assessment is correct, and that presumption must prevail. It follows that, if the taxpayer is the appellant, the taxpayer's appeal fails, and, if the Commissioner is the appellant, the Commissioner's appeal succeeds. (at p167)

3. The distinction between an appeal in the strict sense and an appeal by way of rehearing is explained in the judgment of Dixon J. in Victorian Stevedoring and General Contracting Co. Pty. Ltd. and Meakes v. Dignan [1931] HCA 34; (1931) 46 CLR 73, at pp 106-110 . Appeals to this Court under s. 73 of the Constitution are sometimes described as appeals by way of rehearing, because on such appeals questions of fact, as well as questions of law, are open. But such appeals are really appeals in the strict sense: they must be decided on the materials which were before the court from which the appeal comes, and no fresh evidence can be admitted. On the other hand, the so-called appeal from a board of review to this Court is clearly an appeal by way of rehearing. The jurisdiction exercised is in truth original jurisdiction, and not appellate jurisdiction. The general position with regard to such "appeals" may be fully explained by quoting passages from two judgments. In Federal Commissioner of Taxation v. Lewis Berger & Sons (Australia) Ltd. (1927) 39 CLR 468 , Starke J. said: "The appeal may be brought from any decision of the Board which, in the opinion of this Court, involves a question of law. The Board, in its proceedings, did not exercise the judicial power of the Commonwealth, but an administrative function, namely, that of reviewing the Commissioner's assessments for the purpose of ascertaining the taxable income upon which tax should be levied. The appeal to this Court submits the ascertainment of the taxpayer's liability to judicial review and ascertainment, but the so-called appeal is a proceeding in the original, and not within the appellate, jurisdiction of the Court. It follows, I think, that the parties on this appeal are not limited to the material that was before the Board of Review, but are entitled to adduce before this Court such evidence in support of, or in answer to, the appeal as is relevant to the matter. The material before the Board and its decision and reasons should be brought before this Court, and the parties may use this material if they so desire, but further or additional evidence may be adduced, or the appeal may be conducted as an original cause brought in this Court." (1927) 39 CLR, at p 469 In Federal Commissioner of Taxation v. Sagar [1946] HCA 6; (1946) 71 CLR 421 , Williams J. said: "It is only competent for the Court to entertain an appeal under s. 25 (7) if the decision of the Board involves a question of law. Unless the statute provides that some portion of the Board's decision is to be unappealable, the whole decision and not merely the question of law is then open to review and the Court must rehear the whole case although it rejects the point of law. . . . The appeal is a proceeding in the original jurisdiction of the Court so that, unless the parties agree that the evidence given before the Board shall be used on the appeal, the evidence must be tendered again, and, as the appeal is a rehearing, further evidence can be called." (1946) 71 CLR, at pp 423, 424 (at p168)

4. But the general nature of the so-called "appeal" does not go very far towards supporting the contention that, where the Commissioner is the appellant, his appeal must be allowed unless the taxpayer appears and maintains his case. Appeals to Quarter Sessions in England and to General Sessions in Victoria are by way of rehearing, and (unless the appeal is based on some defect of form or substance in the order appealed against) the party who began in the Court below begins again, proving his case de novo, and, if he calls no evidence, the order below must be quashed. But this has been regarded as a matter of practice and procedure, and, as such, within the control - up to a point, within the discretion - of the appellate court, and the reasons for the practice adopted in Quarter Sessions and General Sessions have, in general, no application to "appeals" by the Commissioner from a board of review to this Court. The practice was challenged in a rating case in R. v. Inhabitants of Newbury [1791] EngR 1497; (1791) 4 TR 475 (100 ER 1127) . Lord Kenyon was inclined to think at first that the Court of King's Bench ought not to make any pronouncement "to control the practice of the Court of Quarter Sessions". But finally, supported by Ashurst J. and Buller J., he approved the practice as "required by law, justice and convenience". Reg. v. Justices of Surrey (1892) 2 QB 719 was a case of an appeal against a conviction for an offence, and the practice was again approved. The two main reasons given as justifying it were that to require the appellant to begin would generally be to require him to prove a negative, and that the evidence before the Court below is not before the appellate court until someone adduces it. To require the Commissioner to begin on an appeal from a board would not, in general, be to require him to prove a negative. And O. 65, r. 14, of the Rules of this Court requires the transmission to this Court of all the material which was before the Board. If oral evidence has been taken before the Board, that material will include a transcript of that evidence. Since the institution of the Boards of Review in 1925 the Commissioner has been the appellant in a large number of appeals from decisions of a board, and it has, I think, been the invariable practice in such cases for the Commissioner to begin. If an exceptional case arises in which law, justice or convenience (to use Lord Kenyon's words) requires that the taxpayer should begin, the matter will be within the control of the Court. (at p169)

5. I have thought it desirable to make these general observations, but Mr. Downing's submission does not rest on any consideration of practice or procedure. His argument prevails if, but only if, on an appeal by the Commissioner from a board of review to this Court, the burden rests on the taxpayer of establishing that the Commissioner's original assessment was excessive. No such burden rests, in my opinion, on the taxpayer. On the contrary, the Commissioner must, in my opinion, fail unless he establishes that the decision of the Board is erroneous. In other words, there is, on such an appeal, no presumption that the Commissioner's original assessment was correct. That original assessment, which ex hypothesi has been reduced by the Board, has ceased to exist. The effect of s. 193 (1) is that the original assessment has been replaced by the Board's reduced assessment, which is the only existent assessment, and which must stand unless and until it is set aside on "appeal" to this Court. The Commissioner, by his "appeal" seeks to have the existent assessment, the reduced assessment, set aside, and the original assessment restored. He may succeed, but he begins without any presumption to help him. (at p169)

6. There are two provisions in the Assessment Act which create presumptions in favour of assessments, but neither, in my opinion, has any application to the present case. The first is s. 177 (1), which (so far as material) provides "the production of a notice of assessment . . . shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct." On one view of this provision it may be said that an appeal by the Commissioner under s. 196 (1) is not a proceeding on appeal against an assessment, but a proceeding on appeal against a decision of a board, and that the exception in the parenthesis therefore does not apply. If, then, the Commissioner puts in a copy of his original notice of assessment, he is entitled, in the absence of further material, to suceed on his appeal. But it is impossible to suppose that this is the intended effect of s. 177 (1). The answer is that, as has been pointed out above, when the Board has given a decision in favour of a taxpayer, the original assessment has no longer any effect, and, if there is any assessment to which the sub-section applies, it is the original assessment as altered by the Board. The other provision is s. 190 (b), which provides that "upon every such reference or appeal the burden of proving that the assessment is excessive shall lie upon the taxpayer." But this again, as Mr. Downing really conceded, has no application to such a case as the present. For the word "such" embraces only references and appeals which have been previously mentioned - that is to say, references of a taxpayer's objection to a board and appeals from the Commissioner direct to this Court or the Supreme Court of a State. Appeals from a board to this Court are not mentioned until later in Pt. V of the Act. (at p170)

ORDER

For these reasons I must reject Mr. Downing's preliminary submission.