Diab and Commissioner of Taxation [2011] AATA 289 (3 May 2011)

Last Updated: 19 May 2011

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 289

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2009/4831-4834

TAXATION APPEALS DIVISION		)
	Re		JOHN DIAB

Applicant

And

COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal

Senior Member S E Frost

Date 3 May 2011

Place Sydney

Decision

The objection decision is varied as set out in paragraph 12 of the reasons for decision.

....................[sgd]..........................
S E Frost
Senior Member

CATCHWORDS

TAXATION – amended assessments - administrative penalties imposed - recklessness– whether Applicant discharged burden of proving assessments and penalties excessive – No evidence given by Applicant at hearing – objection decision varied.

Taxation Administration Act 1953: s 14ZZK , 284-90(1) Schedule 1

REASONS FOR DECISION

3 May 2011

Senior Member S E Frost

INTRODUCTION

1. The Applicant is a director of a company carrying on business in suburban Sydney. He derives income in the form of salary or wages from the company, rent from an investment property, and some dividends and interest.
2. In 2008 the Applicant was notified that the Commissioner of Taxation would be conducting an audit of his tax affairs. As a result of the audit, the Commissioner made amended assessments of the Applicant's taxable income for the 2005, 2006, 2007 and 2008 tax years. In each case the Commissioner considered that the Applicant's taxable income was more than had been originally declared. The claimed increase came from deposits into the Applicant's bank account that could not be attributed to transfers of funds from one of his other bank accounts, or to some other satisfactory explanation.
3. A significant tax shortfall resulted. The Commissioner considered that the shortfall resulted from recklessness, and accordingly he assessed administrative penalties equal to 50% of the tax shortfall for each year.
4. The Applicant objected against the amended assessments of taxable income and against the assessment of administrative penalties. All objections (with one exception) were disallowed. The exception was the objection in relation to the 2006 financial year, which the Commissioner allowed in part after accepting that some of the deposits did not represent receipts of income.
5. The Applicant has now applied to the Tribunal for review of those objection decisions.

THE ISSUES

6. In relation to the amended assessments of taxable income, the only issue arising is whether the Applicant has discharged his burden of proving that the assessments are excessive (s 14ZZK of the Taxation Administration Act 1953 (TAA)).
7. In relation to the administrative penalties, the issue is whether the taxpayer has discharged his burden of proving:
   • that the assessment of administrative penalties is excessive on the basis that the circumstances do not amount to “recklessness” as to the operation of a taxation law (item 3 in the table in s 284-90(1) in Schedule 1 to the TAA); and
   • that the decision not to remit any administrative penalties should not have been made or should have been made differently.
8. Since lodging his application to the Tribunal, the Applicant has provided further information to the Commissioner which has led the Commissioner to accept that the Applicant’s taxable income for 2007 should be reduced by $5,797. Aside from that minor adjustment, the Commissioner says that the objection decision should be affirmed.

CONSIDERATION

9. A hearing in this matter was conducted on 8 April 2011. The Applicant, who did not attend in person, was represented by his accountant. It is not clear how the Applicant expected to be able to discharge his burden of proof in circumstances where:
   • he did not attend the hearing to give oral evidence about his circumstances in relation to the relevant income years; and
   • he did not make a written statement, prior to the hearing, to explain those circumstances.
10. Ultimately his case consisted of a number of assertions put by his accountant, but in respect of which there was no evidence presented by the one person who is aware of the factual background on which, presumably, those assertions are based. That person, of course, is the Applicant himself.
11. As long ago as April 2010 the Commissioner’s representatives had requested further information in relation to the various unexplained cash deposits into the Applicant’s account, and on which the amended assessments had been based. No information was provided at that time, and none has been provided since.
12. In those circumstances the Tribunal decides, in the absence of any evidence on behalf of the Applicant in support of his contentions, and in accordance with the Commissioner’s written outline of submissions:
    1. The objection decision is varied as follows:
       • (a) The Applicant’s taxable income for the 2007 income year is $171,043.
       • (b) In calculating administrative penalties pursuant to s 284-75 in Schedule 1 to the TAA, the shortfall amount for the purposes of item 3 in the table in s 284-90(1) in Schedule 1 to the TAA for the 2007 income year is $51,520.45.
    2. The objection decision is otherwise affirmed.
       

I certify that the 12 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member S E Frost

Signed: .............[sgd]...................................................................

Associate

Date of Hearing 8 April 2011

Date of Decision 3 May 2011

Advocate for the Applicant Ms Marisa Wong, AMS Advisory Group

Solicitor for the Respondent Ms Rimma Miller, Australian Taxation Office