Ngo and Commissioner of Taxation [2003] AATA 58; (2003) 51 ATR 1244; 2003 ATC 2013 (22 January 2003)

Last Updated: 29 September 2009

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [2003] AATA 58

ADMINISTRATIVE APPEALS TRIBUNAL Nº VT2002/8—9

TAXATION APPEALS DIVISION

Re: DIEP MY NGO

Applicant

And: COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal: Mr W.G. McLean, Member

Date: 22 January 2003

Place: Melbourne

Decision: The decision under review is affirmed.

(sgd) W.G. McLean
Member

TAXATION — tax assessed for income derived by clothing industry outworker – whether tax assessed is excessive – whether tax liability should be altered additional tax penalties and interest – decision affirmed

Income Tax Assessment Act 1936 ss.223, 227

Taxation Administration Act 1953 s14ZZK

Commissioner of Taxation and Dalco [1990] HCA 3; (1989) 168 CLR 614

REASONS FOR DECISION

22 January 2003 Mr W.G. McLean, Member

1. The Tribunal considered an application from Ms Diep My Ngo for the review of a decision by the Commissioner of Taxation (“the respondent”) concerning Notices of Assessment issued for the years ended 30 June 1992 and 30 June 1993. The respondent increased the taxable income of the applicant for 1992 by $34,801 from $7873 to $42,674 and for 1993 by $66,211 from $8,024 to $74,235. The respondent also imposed interest and additional tax penalties in respect of these adjustments.
2. Mr M. Flynn of Counsel appeared for the applicant. Sworn oral evidence was given by Ms Diep My Ngo and also by Ms Kim Hanh Huynh, Mr Tuan Minh Huynh and Mr Cuoi Van Huynh for the applicant. Mr T. Murphy of Counsel appeared for the respondent. Mr Michael Fedyshyn and Mr Louis Gauci gave sworn oral evidence for the respondent.
3. The Tribunal received into evidence the documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975.. Documentary exhibits numbered A1 to A5 and R1 to R3 were tendered during the hearing by the applicant and respondent respectively.
4. The assessments, which are the subject of this review, arouse out of the audit by the respondent for Mr Louis Gauci. At the time of the audit the respondent was focussing its attention on taxpayers in the clothing and textile industry. From 1988 until late 1993 Mr Gauci operated a business in the clothing industry trading under the name Parmex Trading. The business involved the outsourcing of the making up of clothing garments for clothing factories. Mr Gauci would negotiate a price for the work to be outsourced and a completion date with the clothing manufacturers and would then distribute the work to several clothing outworker sewing machinists who made up the garments in their homes. Mr Gauci would collect incomplete garments from the clothing manufacturers and deliver them to the homes of his respective outworkers with a sample completed garments to be copied that was also provided by the manufacturers. Mr Gauci would collect the finished garments from the outworker and return them to the clothing manufacturers. The respondent contends that the applicant was one of Mr Gauci’s outworker sewing machinists and that the applicant was paid by Mr Gauci the amounts of $34,801 for the year ended 30 June 1992 and $66,211 for the year ended 30 June 1993 for finished garments.
5. Mr Gauci attended the hearing and gave sworn oral evidence in support of his following written statement dated 19 June 2002 (Exhibit R2).

Statement of Louis Gauci
On the 19th day of June 2002 I, Louis Gauci state as follows:

1. From about 1988 to late 1993 I ran a business in the clothing industry, trading under the name Parmex Trading.
2. The business involved outsourcing the making up of clothing garments from clothing factories to outworkers. Clothing factories would outsource some parts of the making up of clothing garments. I would negotiate a price for this work, depending on how hard the work was and the number of garments and they would tell me when they wanted the work back. I would then farm the work out to clothing outworkers who worked from their homes.
3. I started the business in 1989. At the start I had only a couple of outworkers who could do work for me and but over time this increased to about twenty. For each job that I got from a factory, I would go and visit the outworkers and negotiate a price for the job.
4. For each job I would pick up the garments from the factory and deliver them to the homes of the outworkers who had agreed to do that job. I would also deliver to each outworker a sample garment that was provided by the factory. The outworker would then make up a sample that I would take back to the factory for their approval. I would then return to the outworker’s house to let them know what the factory said about their sample. This was to make sure the work was done how the factory wanted it done.
5. In most cases the husband and wife shared the work. The wife would do the sewing, which was the more skilled work, and the husband would do the overlocking, which was a lot quicker and required less skill.
6. I ran my business from home and did all of my bookwork at home. All I had was my van that I used to pick up and deliver the clothing.
7. All of the outworkers I used insisted that I pay them by cheque made out to cash, otherwise they would not do the work. I would tell them that I was not going to hide who I had paid, and I believe that they would have known that I kept records of who I had made payments to.
8. If an outworker had given me a false name I would never have known. I never asked that they prove the name they gave me was their legal name.
9. At the end of each job I would write out the cheques to outworkers who had done the work on that job. I would write the name of the outworker, the amount of the cheque and the date of writing the cheque on the chequebutt. I would make the cheque out to cash. At the same time as preparing the cheques I would write the date, name and amount of each cheque in my cash book.

Annexed to this statement are true copies of my:
(i) Cheque Butts marked with the letter “A”
(ii) Cheques marked with the letter “B”
(iii) Cash Book marked with the letter “C”

10. I kept records of all the payments I made because they were my business records that I used for preparing my tax returns.
11. From referring to my cash book I say that I paid the outworker I knew as Dip Huynh;

(a) $34,801 for the year ended 30 June 1992
(b) $66,211 for the year ended 30 June 1993

12. I generally personally delivered the cheques to the outworkers by hand.
13. I had a list of all of the outworkers that I used that was taken from me by Michael Fedyshyn, an auditor from the Australian Taxation Office. One of the outworkers was a woman who I knew as Dip Huynh (“the applicant”). She was Vietnamese, from referring to my list I say that she lived at 27 Castlemaine Street, Yarraville.

Now produced and shown to me and marked “D” is a true copy of the list, with the names and street names of other outworkers obscured.

14. Although it has been about ten years since I conducted the business there are a number of things I remember about the applicant. I remember;

(a) she lived in a brick house in Yarraville.
(b) the house was a corner block, near the heart of Yarraville and that it was not very far from a main road.
(c) the applicant’s husband lived in the garage.
(d) she had a daughter aged 12 and a son aged about 9.
(e) she was a very good worker. She was able to do the more complicated work for which was paid more, but which took longer to do. A lot of the other workers would try and do the work as quickly as possible because they were paid per garment. This meant that they would not do the more complicated work to a high enough standard.
(f) The applicant took a lot of work as compared to some of the other outworkers. She took so much work that I don’t think it was possible for her to have personally done all the work.

15. I estimate that I would have been to the applicant’s house 100 times over the time that she worked for me.
16. I cannot remember the exact time when the applicant started to do work for me, but I do remember that she was doing work for me up until the business ended, which was when the Taxation Officer took my records in October 1993.
6. Mr Gauci said that he met the applicant’s husband Mr Cuoi Van Huynh in the late 1980s or early 1990s at a friend's house. Mr Gauci identified the applicant at the hearing as the outworker he knew as Dip Huynh, with whom he had the dealings referred to in his statement. Mr Gauci was shown an extract page taken from the applicant’s address book which reads “Name: Louis Gauci”. “Telephone [phone]”. Mr Gauci said that he recognised the telephone number. He said “Yes, that is my brother’s phone number when I used to live with him.”.
7. Mr Gauci confirmed that he had visited the applicant’s house at least one hundred times. He said that he had also been in the garage at the rear of the house with the applicant and her husband and that the garage contained sewing machines and a bed. Mr Gauci said that he had actually seen the applicant sewing in the garage. If a garment was not completed satisfactorily and needed alteration, Mr Gauci would return it to either Mr Huynh or the applicant for alteration. Mr Huynh also worked with the applicant in the garage. Mr Gauci said:

All that I can tell you is that in 99.9 per cent of cases, the lady of the house do what they call the plain machining and the husband usually does the overlocking in 9.9 out of 10 cases.

Mr Gauci confirmed that he had actually handed cheques to the applicant, representing payment for completed work, and that the cheques which were made payable to cash were later cashed at his bank. Mr Gauci recalled that the applicant had been ill. He did not know how she could have completed all of the work that she had received payment for, given her poor state of health during the relevant period.

8. In respect of Mr Gauci disclosing the personal details of his outworkers to the Tax Auditors; Mr Murphy asked by Mr Gauci – “So there are some outworkers who you feared might hurt you if you gave evidence about them” and Mr Gauci replied “Not – only because – only because they might think, you know, I am turning against them, something like that basically. No other reasons though.”. Mr Flynn asked Mr Gauci – “But you previously indicated to them (sic Tax Auditors) that you weren’t going to tell them because you were concerned about the consequences for you if you did tell them.”. Mr Gauci replied “They had my books, when they came in they had – the books were in front of me on the desk, they had all the names and addresses. I didn’t have to tell them anything.”.
9. Mr Michael Fedyshyn a field officer with the Australian Tax Department in Moonee Ponds provided the Tribunal with the following written statement dated 20 June 2002:

Statement of Michael Fedyshyn
On the 20th day of June 2002 I, Michael Fedyshyn state as follows:

1. In have been an auditor with the Australian Taxation Office since 1984.
2. In late 1993 I, conducted an investigation into the affairs of Mr Louis Gauci (Gauci), trading as Parmex Trading.
3. On the 15th November 1993, Greigory Noonan also of the Australian Taxation Office, and I attended 27 Castlemaine Street Yarraville and met with Diep My Ngo (the applicant). At the meeting the applicant denied knowing Louis Gauci. During the interview the applicant’s address book was located and in it was found Louis Gauci’s name and phone number. The applicant was asked who this person was, and she replied that he was just a friend.

Now produced and shown to me and marked with the letter is “A” is a true copy of the pages of the address book of the applicant showing the name Louis Gauci.

10. During the visit by the tax field officers (Messrs Fedyshyn and Noonan) to the applicants home at 27 Castlemaine Street, Yarraville in November 1993, a man called at the house with a sample garment. Mr Fedyshyn said:

...I recall the situation, Sir, in view of the fact that there was another – an Anglo-Saxon person came into the house with a sample of – two samples of ladies blouses. Upon knocking on the door, I entered – I entered the front door and he asked, me whether I was Louis or whether I was – he mentioned an Asian name, and I said no. All I said to him was that the lady of the house is present, I then opened the door. He came in and the person in question straightway stated to the Anglo Saxon person, “You don’t know me, you don’t know me” and then she said to that person “These two men are from the Australian Tax Office”. “He in turn said to us that a while ago, person by the name of Louis and another Asian name, which I do apologise to the hearing I can’t recall, rang him to say if he had any work to be done they can bring it to this house. He then straightaway left the house immediately.

11. The tax field officers request to look in the garage at the rear of the applicant’s Yarraville house was refused by the applicant on the basis that her husband, from whom she is separated, resided in the garage.
12. The audit of Parmex in 1993 confirms that Mr Louis Gauci had arranged the outsourcing of services on behalf of clothing manufacturers to a number of outworkers and that these services involved the making up of garments. Mr Gauci recorded payments made to the various outworkers and/or subcontractors in a cash book. Payments were made by cheques payable to cash and Mr Gauci recorded the name of the recipient of each payment made on the cheque butt. The recipient’s name written on the cheque butt corresponded with the names of the outworker recorded in Mr Gauci’s cash book. The recordings in these documents of payments made to the applicant refers to the applicant’s married name Diep Huynh.
13. Mr Fedyshyn inspected a number of cheques drawn by Mr Gauci on the Parmex bank account at the bank branch maintaining the Parmex account, to ascertain whether the back of any cheque that had been cashed by an outworker had been initialled or signed; and they had not. The bank manager assured him that it was not the policy of the bank to cash such a cheque and it was recalled by Mr Fedyshyn that he said, “However, in this case in view of the fact that the account was in credit, the tellers automatically paid the cash out".
14. Mr Fedyshyn gave evidence that Income Tax Assessments had also been raised by the respondent for other outworkers who were found during the audit of Parmex to have received cash cheques for work completed for Mr Gauci. Mr Fedyshyn acknowledged that the correctness of certain amounts assessed by the respondent had been queried by other outworkers however, with the exception of the applicant, he knew of no other appeals against those assessments.
15. The applicant provided the Tribunal with the following written statement dated 2 July 2002 (Exhibit A3) and also appeared as a witness at the hearing and gave sworn oral evidence. The applicant was assisted at the hearing by an interpreter of the Vietnamese language, Mr Than Huu Nguyen.

Witness Statement
I, MY DIEP NGO of 27 Castlemaine Street, Yarraville in the State of Victoria, state as follows:

1. My son Tuan Minh Huynh, perused the Respondent’s Statement of Findings on Material Questions of Fact, Evidence, Reasons for Decision and Relevant Documents dated 26 February 2002 (“T Documents”) and explained to me in Vietnamese the contents thereof. I make this statement from my own knowledge and from my understanding of the T Documents.

2. I migrated to Australia on 10 May 1982.

3. Prior to 1990 I worked with my ex-husband Mr Cuoi Van Huynh (“Cuoi Van”) as a machinist for a number of different clothing manufacturers. I do not have an independent recollection of the names of those clothing manufacturers.

4. I separated from Cuoi Van in 1990 and we divorced in 1992.
5. I have not been employed at all on any basis since September 1990.

6. The reason I have not worked since September 1990 is that I have been suffering from a number of debilitating health complaints. I have been diagnosed as suffering from chronic fatigue syndrome, non-insulin dependent diabetes, memory loss, urinary frequency and paranoid schizophrenia. During this period I have been eligible for and have received a sole parent pension and since about November 2000 a disability pension.
7. I deny having worked for Mr Louis Gauci or Paramex Trading Pty Ltd (“the Principal”) at any time after September 1990.
8. Until 15 November 1993, I had no knowledge of the Respondent’s allegations that I had derived assessable income from the Principal during the years ended 30 June 1992 and 1993.
9. On 15 November 1993, 2 officers from the Australian Taxation Office (“ATO”) arrived unannounced at my residence at 27 Castlemaine Street, Yarraville and asked me a series of questions (“the Interview”).
10. During the Interview, an interpreter was not present and due to my very poor understanding of English I had great difficulty understanding the questions put to me. I did, however, deny that:

(a) I knew Mr Louis Gauci;
(b) I received work from Mr Louis Gauci trading as Paramex Trading Pty Ltd; and
(c) I received any payments from Mr Louis Gauci in the form of cash cheques or at all.

11. During the conduct of the Interview, a man called at my house. The officers from the ATO answered the door and queried whether I recognised the man. I replied that I did not. I was not privy to further discussions between the officers and the visitor, however I note from the Respondent’s T documents that he did not recognise me and asked to speak to “Louis” or “Van”.
12. At the time of the Interview Coui Van occupied the garage at my residence at 27 Castlemaine Street, Yarraville.
13. During the Interview I was questioned about my employment history and responded that I had worked as a machinist and packer in 1985 on a full time basis and that I had been in receipt of a pension since 1990.
14. The Principal’s cashbook referred to in paragraph 1 of the T Documents particularise payments made to “Diep Huynh”.. I deny knowledge of these alleged payments and I further state that I have always been known by my maiden name “My Diep Ngo”.
15. In my taxation returns for the years ended 30 June 1992 and 1993 I returned as assessable income an amount equal to my single parent pension for those years being amounts of $7,873 and $8,024 respectively. I subsequently received amended assessments dated 7 June 1995 which included in my assessable income the amounts of $34,801 and $66,211 for the years ended 30 June 1992 and 30 June 1993 respectively.
16. By notice dated 27 June 1995, I objected against the amended assessments issued on 7 June 1995.
17. On 27 November 2001 the ATO issued a Notice of Decision disallowing the objections in full.
18. As at the date of this Witness Statement the only assets held by me are a 1984 Toyota Corona and a bank statement with the Commonwealth Bank of Australia with a balance of $16.42.
19. This statement was read by and translated into Vietnamese by my son, Tuan Minh Huynh, and I fully understand the contents thereof.

DATED: 2 day of July 2002
(sgd Diep)
...
MY DIEP NGO

16. The applicant also provided the Tribunal with a written medical opinion from Dr Stella S.Y. Kwong dated 27 June 2002 (Exhibit A1) and from Dr Y.W.E. Wong dated 26 June 2002 (Exhibit A2). Dr Kwong, a consultant psychiatrist, saw the applicant in December 1999 at the request of her family physician Dr Ivor Green. Dr Kwong considered the medical history given to her by the applicant in December 1999 and reached a view that the applicant started to be ill in 1990. She opined:

Her illness was so severe that it affected her interpersonal relationship leading to her husband leaving her and she became an invalid pensioner in 1991.
In the period of time between 1st July 1991 and 30th June 1993, Mrs. Ngo’s children were aged twelve, ten and seven. It is quite unlikely that a single mother with Mrs. Ngo’s mental condition could cope with housework and some gainful employment.

The Tribunal notes that the applicant received a sole parent pension from 1 July 1991 until 30 June 1993 and not an invalid pension, which is apparently the history given by the applicant to Dr Kwong. Dr Kwong did not appear as a witness for the applicant at the hearing, and accordingly, this and other aspects of the history given to Dr Kwong in 1999 by the applicant could not be discussed with her.

17. Dr Wong’s medical report dated 26 June 2002 is set out hereunder. Dr Wong did not appear as a witness at the hearing.

Medical Report on Mrs. My Diep NGO of 27 Castlemaine St. Yarraville 3013
I am a registered medical practitioner having obtain my Bachelor of Medicine and Bachelor of Surgery Degree from University of Adelaide. I have practised family medicine since 1981.
Mrs My Diep Ngo has been my patient since 24th September 1990. On 4th April, 1991, she was diagnosed non-insulin dependent diabetes mellita. Since her separation from her husband in 1989, she had developed anxiety and depression with insomnia, heavy feeling in stomach and difficulty in passing urine.
On 15th May, 1991, she presented with more abdominal pain and severe anxiety requiring medications.
On 20th June, 1991, she saw me with history of on-going dizziness and belching despite a normal barm meal.
On 2th July, 1991, she had more abdominal symptoms of constipation, dizziness, low blood pressure and weight 42kg. She was then very nervous and required more medication. Abnormal cortisol found in a blood test in 3th July 1991 prompted an urgent referral to endocrinologist, Dr Murray Gertsman of 78 Harp St, Kew.
On 24th July 1991, patient presented with 1 month history of urinary frequency and 2 weeks of diarrhoea. She has a long history of recurrent urinary tract infection.
On 24th February, 1992, patient returned to me with 3 months history of lethargy, severe tiredness, insomnia, memory loss and under stress. She was then referred to Western Sector Psychiatric Services at Saltwater Community Mental Health Services. They saw her on 12th March 1992 onwards.
On 13th March 1992, patient presented again with constipation, and urinary frequency with lower back pain. She had 3 children. She was referred to Footscray Hospital for cystoscopy.
On 8th April, 1992, she had another episode of urinary tract infection.
Patient did not return to consult me until 7th April 1993 afterwards.
In summary, from April 1991 to 8th April 1992, Mrs Ngo suffered from anxiety, depression, chronic fatigue syndrome, lots of abdominal symptoms and lower back pain and urinary tract problems. She was seen by endocrinologists, psychiatrist, and doctors in Hospital Footscray.
She was then not a well person; in particular, not well enough to work a full-time job.

18. The applicant confirmed that prior to her separation from her husband in 1990, she and her husband Mr Cuoi Van Huynh worked together as machinists sewing garments for various clothing manufacturers. Mr Huynh would collect the work from the manufacturer and received payment for the completed work. The applicant said that at the time she separated from her husband she was sick with a very serious illness. Before the separation they would often argue and she said that she would “collapse unconscious so I did not know”.. She did not know when her husband moved out of the house and into the garage however, she said that “during the time when we processed the divorce, my husband would like to have the garage and the solicitor said that I could not touch the garage, that is all I know”. She said that she has never used the garage.
19. The applicant has 3 children. Her daughter Kim Hanh Huynh was born on 6 September 1977, her son Tuan Minh Huynh was born on 11 July 1979 and the third child was born in 1984. Therefore in 1992 the children’s ages would have been 15, 13, and 8 years respectively. The Social Security Department records that the applicant received a sole parents pension of $13,574.50 gross of which $7873.10 was taxable for the year ended 30 June 1992 and $11,792.90 of which $8024.60 was taxable for the year ended 30 June 1993. The applicant also received a social security family allowance payment of $62.10 per fortnight until December 1992. Both the sole parents pension and family allowance fortnightly payments from social security were paid directly into a Commonwealth Bank account, Richmond branch in the name of Mrs My Diep (Ngo) Huynh trustee for Mr Tuan Minh Huynh. At 30 July 1993 the bank account had a balance of $31.29 which supports the applicant’s evidence that she used the social security payments deposited directly into her son's bank account to support her family during 1992 and 1993. The applicant said that her ex-husband did not provide her with financial support during 1992 and 1993 and occasionally gave his children small amounts of money of approximately $10 or $20. She said that her blood relatives sometimes gave her a few hundred dollars when she saw them every 5 to 10 years. The applicant provided the financial support for her family during 1992 and 1993 including the cost of food, services, rates and education at private school for her 2 eldest children.
20. The applicant was shown a photocopy of a page extracted from her address book, that Mr Fedyshyn of the Tax Office found during his visit to the applicant’s home in November 1993. The name and telephone contact number is recorded at the top of the page. The applicant confirmed that she wrote Mr Gauci’s name and telephone number in her address book, but she could not satisfactorily explain why she wrote in the book the name and telephone number of Mr Gauci whom, she contends, is a person that she did not know and did not have any dealings with.
21. The applicant’s ex-husband Mr Cuoi Van Huynh gave sworn oral evidence in support of the applicant. He said that in the period from July 1991 to June 1993 he lived in Footscray following his separation from the applicant. He returned to live in the garage at the rear of 27 Castlemaine Street, Yarraville in late 1993 because he could not pay the rent where he was living. Mr Huynh was unemployed and received a government pension from the time of his separation from the applicant in 1989 until he obtained employment in 1994. He said that 27 Castlemaine Street, Yarraville is jointly owned in his name and the name of the applicant. He contends that when he and the applicant separated he stored his possessions in the garage. He locked the garage at that time and since then, he says, the applicant did not have access to the garage.
22. Mr Huynh confirmed that he did not provide the applicant with any financial support following their separation. He said that he would occasionally buy secondhand school clothes for his children for $5 or $3 per item and would occasionally give his children $10 or $15. He also confirmed that the applicant was very ill from 1990 to 1993.
23. Mr Huynh said that he met Mr Gauci at the home of a friend at 8 Elizabeth Street, Yarraville some time in 1990, before he separated from the applicant. He said that he took Mr Gauci two or three times to his home at 27 Castlemaine Street. Mr Huynh said that Mr Gauci had met the applicant during his visits to Castlemaine Street. He also said that he had never worked for Mr Gauci or Parmex.
24. The applicant’s daughter Kim Hanh Huynh (“Kim”) appeared as a witness and gave sworn oral evidence. Kim lives with her family at 27 Castlemaine Street, Yarraville and is employed as a customer service representative and is studying for a masters degree – information technology. As her date of birth is 6 September 1977 she was 14 years of age in 1991 and was attending school at the Yarraville Catholic Girls College at that time. Kim estimated that her college fees would have amounted to $2,000 per annum excluding the costs of books, uniforms, stationery, etc. Kim said that in 1991 she had to help her mother with the housework and cooking because her mother was very ill. She said that her mother did not have a mental problem and described her illness as “like, you get wind inside yourself”.. She said that her mother took Chinese herbal medicine to treat her illness.
25. Kim said that her mother received cheques from her uncles on more than one occasion of $400 to $500. Kim recalled “because they sent it in the mail and I used to open up the mail and they just – and then she (the applicant) just deposit it in the bank account”.. Kim could not recall the dates or how often the money was received. Kim occasionally saw her father after her parents' separation in 1990 and although she had a telephone contact number she did not know his address. She said that her father owned the garage at the rear of her home but was not living in the garage between 1990 to 1993. Kim never entered the garage and did not know what her mother did during the day while she was at school.
26. The applicant’s son, Tuan Minh Huynh (“Tuan”) appeared as a witness and gave sworn oral evidence. Tuan also lives with his family, is a student and works part time. He is studying a software engineering course at Melbourne University. As his date of birth is 11 July 1979 he was 12 years of age in 1991 and at that time he attended St Augustine’s Primary School from 9 am until 4 pm daily. In 1992 Tuan attended St John’s College in Braybrook.
27. Tuan recalled that his mother was ill during 1991 to 1993 and was not able to do much of the housework and accordingly, Kim and Tuan used to help their mother. Tuan was unsure where his father lived during 1992-1993 although he had contact with him during that period. Tuan said that he had not seen his mother or father enter the garage at the rear of his home nor has he ever entered the garage.
28. The applicant and the respondent are in agreement that this case is essentially a contest of facts. The applicant’s case is that she did not receive any payments from Parmex or Mr Gauci. It is clear that the applicant case is not that she received cash cheques from Mr Gauci in respect of garment sewing work that was completed by a person or persons other than herself. She simply contends that she does not know Mr Gauci and that she never received cash cheques from Mr Gauci during the tax years ended 30 June 1992 and 30 June 1993. Mr Flynn stated in his opening address, that this case does not involve any esoteric points of law. The Tribunal must therefore determine whether it prefers the evidence presented by the applicant as opposed to the evidence presented by the respondent in this matter. Later Mr Flynn said:

...
If the Tribunal decides that it can't – it shouldn't believe Mr Gauci's version of what happened and that Mrs Ngo's version is to be preferred then we say that is the end of the matter. The objections should be allowed and Mrs Ngo should be reassessed on that basis. If the Tribunal decided – is against me on that it decided that it prefers Mr Gauci's version of what happened, then there is still the question of whether she was acting as an agent for others because Mr Gauci's own evidence is that he thinks that may have been what was occurring.

29. The applicant’s evidence is that she was ill during the relevant period and that she was incapable of doing any sewing work.. Her children Kim and Tuan gave evidence that she required assistance to complete her housework but they were not in a position to provide any evidence about her capability to do sewing work during the day while they attended school. Dr Kwong's, consultant psychiatrist, opinion of 27 June 2002, which was based upon a history provided to her by the applicant in December 1999, is that between July 1991 and June 1993 it is quite unlikely that a single mother with the applicant’s condition could cope with housework and some gainful employment. Dr Kwong did not consider the fact that the applicant received a very considerable amount of assistance from her children in respect of her housework during 1991 to 1993 nor does she explain what is meant by her reference to “some gainful employment”. Dr Wong’s opinion in his letter dated 26 June 2002 is that “She (the applicant) was then not a well person; in particular, not well enough to work a full time job.”.
30. As a witness, the applicant appeared evasive and unwilling to sincerely endeavour to fully inform the Tribunal of the facts. She says that she has never met Mr Gauci whereas her ex-husband recalls that the applicant met Mr Gauci on more than one occasion when Mr Gauci visited their Yarraville home, prior to their separation in 1990. She did not satisfactorily explain why she wrote Mr Gauci’s name and telephone contact number in her address book. Also, she has made no reasonable endeavour to properly explain how she was able to pay all of her family living and significant educational costs out of the family allowance and sole parent pension that she received from social security. Her evidence is that her relatives visited her once in five years or once in ten years and gave her a few hundred dollars and that she received no financial support from her ex-husband during the relevant 1992-1993 periods. The applicant’s daughter, Kim, gave evidence that her mother received cheques in the mail from her uncles of $400 to $500 which her mother banked. However, no evidence was given by the applicant that she received cheques in the mail from relatives or that she had banked cheques received from relatives. When responding to the contention expressed by the respondent that the liquid resources provided to the applicant from her social security receipts were not adequate to cover her total family living expenses and educational costs during the relevant period. Mr Flynn said:

...and what we say is that it would be quite dangerous to do that sort of analysis without the benefit of detailed evidence. And really, the taxpayer did not come along expecting to give evidence on those issues and so the evidence about how much income she was getting was incomplete and piecemeal.

The difficulty that the Tribunal has with Mr Flynn's submission is that no endeavour was made by the applicant, during the adjournment of this matter from 9 September 2002 to 16 December 2002, to produce detailed evidence reconciling her total cash received from all sources against her family living expenses and educational costs for the years ended 30 June 1992 and 30 June 1993, in order to rebut the respondent's contentions.

31. The Tribunal found the evidence by the respondent to be more convincing. It is clear that the Australian Tax Office (“ATO”) conducted an investigation into the affairs of Mr Louis Gauci trading as Parmex Trading in late 1993 and at that time ascertained from Mr Gauci’s cheque butts and cash book records that cash cheques had been given by Mr Gauci to the applicant in payment for sewing work associated with the completion of garments. It is also clear that Mr Gauci operated the business of arranging on behalf of clothing manufacturers for sewing work completion of garments with several outworkers and, on every occasion, Mr Gauci paid the outworkers by cash cheque for their work. It is Mr Fedyshyn’s evidence that the Income Tax Assessments issued to other outworkers, arising from the ATO audit of Mr Gauci, may have been queried in certain instances but have not to date been appealed by any other recipient outworker. Mr Fedyshyn gave evidence that when he visited the home of the applicant in November 1993, the applicant denied knowing Mr Gauci however, during the visit the applicant’s address book was located. Mr Fedyshyn found in the address book Mr Gauci’s name and contact telephone number, which had been written in the book by the applicant. Also, at the time of the visit to the applicant’s home, Mr Fedyshyn met another person who told him that a person by the name of Louis and another person with an Asian name had telephoned him to say that if he had any work to be done to bring it to the applicant’s house. The person in question came to the house with two samples of ladies blouses.
32. Mr Louis Gauci’s written statement and salient oral evidence is set out in these reasons for decision and is equally convincing. The Tribunal accepts the veracity of the evidence presented by both Mr Fedyshyn and Mr Gauci. The Tribunal finds that the applicant received cash cheques from Mr Gauci amounting to $34,801 for the year ended 30 June 1992 and $66,211 for the year ended 30 June 1993, as determined by the respondent as a result of an ATO audit investigation in 1993 into the affairs of Mr Louis Gauci trading as Parmex Trading.
33. The Tribunal acknowledges the evidence concerning the ill health suffered by the applicant during the financial years ended 30 June 1992 and 30 June 1993. Evidence concerning the severity of her illness is referred to in these reasons for decision and includes the oral evidence given by the applicant, her two eldest children, her ex-husband and Mr Gauci. Dr Kwong, psychiatrist, is of the opinion that during the relevant period it is unlikely that the applicant could cope with “some gainful employment” and it is Dr Wong’s opinion that the applicant was not well enough to work a full time job. The Tribunal also has reservations about the applicant’s capability to complete the volume of work required to receive payment amounting to $34,801 for 1992 and $66,211 for 1993 and can only reasonably assume that the applicant must have received assistance from some other person or persons. The difficulty that the Tribunal faces in this matter is the evidence strongly put by the applicant is that she does not know Mr Gauci and did not receive cash cheques from Mr Gauci. The Tribunal rejects the veracity of this aspect of the applicant’s evidence. The applicant is not saying that she was assisted by other outworkers in completing the garment sewing work provided to her by Mr Gauci. Accordingly, the Tribunal must assume that the entire amounts paid by Mr Gauci to the applicant totalling $34,801 for 1992 and $66,211 for 1993 are assessable income derived by the applicant.
34. Section 14ZZK of the Taxation Administration Act 1953 provides that on an application for review of a reviewable objection the applicant has the burden of proving that the assessment is excessive if the decision concerned is an assessment.
35. The respondent referred the Tribunal to a decision of the High Court in the matter of the Commissioner of Taxation and Dalco [1990] HCA 3; (1989) 168 CLR 614 in which

their Honours considered the questions of whether or not an income tax assessment was excessive and also a taxpayer's burden of proof. The following relevant extract is taken from the reasons for judgment, delivered by Brennan J:

...It would be inappropriate for a court determining an appeal to make an order altering the tax liability assessed (s. 199) unless the court were satisfied that the amount to which it proposed to alter the assessment represented the true tax liability of the taxpayer. Although the grounds of objection limit the grounds of appeal, the ultimate question for the court hearing the appeal is not whether the grounds have been made out but whether the amount assessed as taxable income is wrong. The burden which rests on a taxpayer is to prove that the assessment is excessive and that burden is not necessarily discharged by showing an error by the Commissioner in forming a judgment as to the amount of the assessment.

36. Based upon the evidence, the Tribunal finds that the applicant in this matter has not satisfied the burden of proving that the assessments issued to her by the respondent for the years ended 30 June 1992 and 30 June 1993, are excessive. There is no evidence from the applicant that assessable income found to have been derived by her from Mr Gauci during the years ended 30 June 1992 and 1993 should be reduced or shared with others, and, accordingly, the Tribunal finds that it would be inappropriate to consider altering the applicant’s tax liability.
37. The respondent has imposed an additional tax under s.223(1) of the Income Tax Assessment Act 1936 (the ITAA) on the applicant for making a false declaration in relation to her income tax affairs. The Tribunal finds that discretion to remit the whole or part of this additional penalty tax, pursuant to s.227(3) of the ITAA, should not be exercised in this case. The Tribunal also finds that there is no reasonable basis for the respondent to exercise discretion to remit the whole or any part of the interest payable by the applicant in respect of this matter, as contended in paragraphs 15 and 16 of the applicant’s statement of facts and contention.
38. The decision under review is affirmed.

I certify that the thirty-eight [38] preceding paragraphs are a true copy of the reasons for the decision herein of

Mr W.G. McLean, Member

(sgd) Catherine Thomas

Clerk

Date of Hearing: 9 September 2002

16 December 2002

Date of Decision: 22 January 2003

Solicitor for the applicant: Herbert Geer & Rundle

Counsel for the applicant: Mr M. Flynn

Solicitor for the respondent: Advocacy Section, Australian Taxation Office

Counsel for the respondent: Mr T. Murphy