George v Federal Commissioner of Taxation [1952] HCA 21; (1952) 86 CLR 183 (3 November 1952)

HIGH COURT OF AUSTRALIA

GEORGE v. FEDERAL COMMISSIONER OF TAXATION [1952] HCA 21; (1952) 86 CLR 183

Taxation

High Court of Australia
Kitto J.(1)
Dixon C.J.(2), McTiernan(2), Williams(2), Webb(2) and Fullagar(2) JJ.

CATCHWORDS

Taxation - Income tax - Assessment - Increase in assets - Stated income not reconcilable - Income "derived" by taxpayer - Commissioner "not satisfied" - Arbitrary assessment - Objections by taxpayer disallowed - Appeals - Application by taxpayer for order for particulars - Source from &which taxpayer alleged to have derived additional amount - Power of deputy commissioner - Dismissal of applications - Income Tax Assessment Act 1936-1947 (No. 27 of 1936 - No. 63 of 1947), ss. 6 (1), 8-12, 166, 167, 177 (1), 190 (b).

HEARING

Sydney, 1952, April 17, 30. 30:4:1952
Sydney, 1952, August 15, 18.
Melbourne, 1952, November 3. 3:11:1952
APPEAL from Kitto J.

DECISION

April 30.
The following written judgment was delivered in respect of the matters relating to the income year ended 30th June 1947. (at p188)

2. KITTO J. This is a summons in an appeal which comes to the Court in consequence of a request by the taxpayer that his objection to an assessment of income tax and social services contribution, having been disallowed by the commissioner, should be treated as an appeal and forwarded to this Court. The assessment in question is an assessment of tax based on the income derived by the appellant during the year ended 30th June 1947. The notice of assessment was issued by the Deputy Commissioner of Taxation in Sydney, and was accompanied by an adjustment sheet which stated: "As your return is considered to be unsatisfactory, your assessment has been raised in terms of Section 167 of the Income Tax Assessment Act, 1936-47, upon the amount upon which in the opinion of the Commissioner of Taxation, tax should be levied against you." (at p188)

3. I was informed that the appellant had given to the commissioner certain information as to the annual improvement in his assets position between 1940 and 1947, and that the assessment under appeal was based upon the increase in value which admittedly occurred in the year ended 30th June 1947. (at p188)

4. The appellant by his notice of objection asserts that his taxable income in that year was less than the amount assessed; and he also contends that there was no exercise of personal judgment under s. 167 by the commissioner or a second commissioner, or even (if it matters) by the deputy commissioner, and that, that being so, the assessment was not authorized by that section. (at p188)

5. The summons asks in the first place that the commissioner be ordered to furnish to the appellant particulars as to the source from which the commissioner alleges that the appellant derived the amount by which the taxable income as assessed exceeds the taxable income disclosed in the appellant's return of income. If at the hearing the onus would be upon the commissioner to establish that the appellant did in fact derive more income in the relevant year than he had disclosed, there would be much to be said for ordering him to give particulars for the purpose of defining the precise issues for trial and preventing surprise. But s. 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. That will involve him, of course, in accounting for the increase in his assets, and it may well be that the commissioner will direct his efforts mainly or even wholly to endeavouring to meet the evidence the appellant adduces on this point. But the source of the increase in the assets is not the actual issue in the case; even if it were proved, for example, that that source consisted of winning bets on the racecourse, the issue would still be whether or not from any source the appellant derived as much taxable income as the assessment treats him as having derived. (at p189)

6. The object of the present application is really to have the commissioner say whether he is prepared to assign a source or sources for the moneys included in taxable income in the assessment over and above those disclosed as taxable income in the return, and to admit that if they did not come from that source, or from one or more of those sources, those moneys were not liable to be included in the appellant's taxable income. The commissioner may, if he chooses, voluntarily narrow the possible range of evidence in that way, but there could be no justification for ordering him to do so, under the guise of ordering particulars. If he attempts to prove derivation from a particular source and fails, he is none the less entitled under the Act to point to another source, or, without troubling about source at all, to stand upon his assessment and submit that the presumption in its favour has not been displaced. Even if the commissioner at present has in mind to seek to prove that income not disclosed in the return was derived from a particular source, he cannot be pinned to that source, nor would it be proper to order him to reveal his present plan of campaign. He is entitled to say, "I do not allege anything about source at all; I may have ideas on the subject, but if I have I shall develop or modify or abandon or replace them as occasion may require, until the evidence on the hearing is complete, and then I shall make my submissions to the Court". (at p190)

7. I was not referred to any authority on the point, and so far as I know there is none. But an anology may be found in the cases in which the courts in England have considered applications by plaintiffs upon whom lies the onus of proving a negative, for particulars from defendants who have put in issue the plaintiff's negative allegation. The principle laid down is that if it is clear to the court, either from the nature of the case or from the admission of counsel or otherwise, that the defendant intends under his denial of the negative, to set up an affirmative case, particulars of the defendant's case may be ordered; but not otherwise (Pinson v. Lloyds and National Provincial Foreign Bank Ltd. (1941) 2 KB 72, at p 80 ; Duke's Court Estates, Ltd. v. Associated British Engineering Ltd. (1948) Ch 458 ; cf. Weinberger v. Inglis (1918) 1 Ch 133 ). So, if in this matter the commissioner were to admit that he intended to set up a case that the additional income upon which he has assessed tax was derived from a particular source, I should think that he ought to give particulars to enable the appellant to meet that case. But the commissioner has made no admission and there is nothing which could entitle me to infer that he has such an intention. All that appears is, as I have said, that the appellant is put to the proof of his negative case. In my opinion it would not be consistent with the authorities I have cited, or with the commonsense of the situation, to order particulars. If the commissioner's case at the hearing of the appeal develops upon lines which the appellant cannot fairly be expected to be ready to meet, the presiding Judge will be in a position to ensure that no injustice results. (at p190)

8. The summons next asks that the commissioner be ordered to furnish to the appellant particulars as to the person or officer who formed or made a judgment under s. 167 upon which the assessment was based. This part of the application is misconceived. It is no part of the case which the commissioner will be making at the hearing of the appeal to prove who was the person or officer referred to in the summons. The relevance of the question to the appeal is only that the appellant desires to argue that the assessment is invalid because the Act, on the true construction of ss. 167, 10, 11 and 12, provides as a condition of the validity of an assessment under s. 167 that the commissioner himself, or the second commissioner, or possibly a deputy commissioner, must decide that he is not satisfied with the return and must form a judgment as to the amount upon which income tax ought to be levied. Accordingly the appellant desires, if he can, to extract from the commissioner an admission that it was someone other than the commissioner or the second commissioner, and perhaps that it was someone lower than the deputy commissioner, who was not satisfied with the return and formed the judgment to which the section refers. No argument was addressed to me on behalf of the appellant to show that I have any power to compel the commissioner, by answering interrogatories or otherwise, to make such an admission; but even if I have some such power, I am of opinion that, having regard to ss. 175 and 177 (1) of the Income Tax Assessment Act, I ought not to exercise the power. (at p191)

9. For these reasons I dismiss the summons with costs. Certify for counsel. (at p191)

10. In a written judgment in respect of the amended assessment relating to the income year ended 30th June 1946, his Honour said that the summons asked only for one order, which was similar to the first of the orders sought in the summons dealt with above, and for the reasons he had stated in dismissing that summons he dismissed this summons with costs and certified for counsel. (at p191)

11. From those decisions the appellant appealed to the Full Court of the High Court. (at p191)

12. G. E. Barwick Q.C. (with him J. D. O'Meally), for the appellant. A specific issue arises as to whether the assessment could, in the circumstances, be made under s. 167 of the Income Tax Assessment Act 1936-1947. The assessment was signed by a deputy commissioner. It will be for the commissioner, in this proceeding, to establish that he was not satisfied with the return and that he formed a judgment as to the amount of the taxable income. Those two matters are conditions precedent in the power to make the assessment. The production of a notice of assessment would not prove those facts. The due making of the assessment does not include, for the purposes of s. 177 of the Act, those prerequisites to the power to assess. Therefore the commissioner has a positive case; he has got to prove something, and the appellant should be entitled to particulars in order to prepare to meet that case. The power conferred in s. 167 (b) is not susceptible of delegation. Also, as shown by ss. 8-12 of the Act, only the commissioner or the second commissioner can exercise power under s. 167 (b). Assuming the commissioner to have shown that he formed the judgment and that the prerequisites to the power to assess are present, that the onus has passed to the appellant to show that the amount is excessive, the amount of the assessment which will then include both taxable income and the tax is excessive, the commissioner, in those circumstances, must have some positive case of which the appellant is entitled to particulars. This view is very much concerned with the nature of s. 167 itself. The commissioner's position to the taxpayer is much more than a mere traverse of the taxpayer's assertion that the assessment was excessive. When the commissioner says "In my judgment this is the amount" he has determined an amount and he has formed a judgment about it. It is then for the taxpayer to show that that amount is excessive. Unless he has some positive case the commissioner has no warrant for his assessment. Of necessity it must be an affirmative case because the statute provides that the commissioner cannot make an assessment until he has formed a judgment. This is a matter in the original jurisdiction of the Court. From that there emerges: (i) that powers which come under the general rules of the Court are available for use in the matter; (ii) that the matter is a matter within s. 32 of the Judiciary Act 1903-1950, from which stems the Court's powers, very akin to inherent powers, to give all remedies and do all things that are necessary to effect and carry out the rights of the parties; and (iii) that one of the inherent powers of the Court is the power to order particulars and to ensure that the issue is narrowed and surprise is avoided. It is not disputed that the assessment was made under s. 167 (b). Neither the dissatisfaction with the return nor the formation of a judgment as to the amount of the taxable income is a formality of the making of the assessment. They are not mere formalities of the making of the assessment; they are rather conditions precedent to the power. The production of a notice of assessment will not prove the existence of those conditions. In s. 177 the distinction is drawn between due making and the amount of the assessment. The words "evidence of the due making" must be given some restricted meaning. That meaning is "conclusive evidence of compliance with formalities". The dissatisfaction and the exercise of judgment by the commissioner under s. 167 are not mere formalities, they are conditions precedent to the power, and the mere production of the notice of assessment will not prove that he was dissatisfied or that he did exercise his judgment. The Court is aware of the fact that even when s. 39 was in the Income Tax Assessment Act 1922, as amended, as distinct from the present s. 177, an issue could arise as to the forming of those opinions, which issue was not precluded by production of a notice of assessment (Moreau v. Federal Commissioner of Taxation (1926) 39 CLR 65 ; Danmark Pty. Ltd. v. Federal Commissioner of Taxation (1944) 7 ATD 333 ; Australasian Scale Co. Ltd. v. Commissioner of Taxes (Q.) [1935] HCA 23; (1935) 53 CLR 534 ; Trautwein v. Federal Commissioner of Taxation [1936] HCA 77; (1936) 56 CLR 63, at p 88 ). The commissioner has to prove conditions precedent in any case. To test it by what would happen upon an action does not touch or cut down these submissions. Unlike s. 39 of the 1922 Act and Trautwein's Case [1936] HCA 77; (1936) 56 CLR 63 , on analysis it depends on the prima-facie validity of the assessment on appeal. The intention to have the assessment without any evidentiary value except as to due making on appeal was quite distinct; it is to have no evidentiary value except as to due making on appeal. Trautwein's Case [1936] HCA 77; (1936) 56 CLR 63 in its last analysis depends entirely upon the evidentiary value of the assessment for all its particulars. Even in a suit the due making and conclusiveness and correctness of the amount will not establish performance of the conditions precedent. The other view is that the conclusiveness and the correctness of the amount supplies the gap when one comes into suit. It does not follow that because one can succeed in an action for the amount of the tax the presumption that the amount was correct involves necessarily the presumption that all the steps necessary to the making of it correct had been taken. It must be granted that s. 177, even read in conjunction with s. 190, is not the same as s. 39 of the 1922 Act; it does not make the notice of assessment prima-facie evidence on the appeal (McEvoy v. Federal Commissioner of Taxation (1950) 9 ATD 206 ). The prerequisites under s. 167 are not established by production of the assessment. "Due making" was considered in Kellow-Falkiner Pty. Ltd. v. Federal Commissioner of Taxation (1928) 34 ALR 276, at p 279 . In this case the commissioner must prove two things, namely, dissatisfaction with the return and formation of a judgment. Kitto J. would have been disposed to grant particulars if he had accepted this view. The particulars sought are those of the person whose subjective state was the relevant point. The alternative view of ss. 8-12 supports the proposition that the formation of the views as to dissatisfaction and the judgment as to the taxable income, are matters which are not susceptible of delegation and can only be made by the commissioner or the second commissioner. The words "subject to this section" in sub-s. (1) of s. 10 must be a reference to sub-s. (3). There is nothing in sub-s. (2) which would be appropriate to be brought in under those words. It is rather sub-s. (3) which puts the limitation. The words "powers and functions" in sub-s. (1) would have to be read as insufficient in definition - or denotation - to include the making or formation of an opinion or state of mind, whether relevant to the exercise of a power or function. The power of delegation - delegating the ability or the faculty - of forming the opinion or state of mind does not extend to that. A limited meaning must be given to the words "powers and functions" or, perhaps, the precise meaning of those words in s. 10 (1), because of the presence of s. 10 (2). The words in s. 11 should be equally limited. Upon a critical analysis of those sections it appears that s. 10 (2) is such that the forming of the view and the state of mind are antecedent to the performance of the powers and functions. It involves some ability before the power and function came into it. It is not then a power or function and, therefore, under ss. 11 and 12 cannot be delegated to a deputy commissioner. The scheme of the Act is that it should be reserved to the commissioner and the second commissioner to entertain opinions and exercise judgments. Then, after that the deputy commissioners may exercise the more mechanical functions. That makes the precise particulars sought by the appellant particularly relevant. The appellant is entitled to know who, in this case, exercised judgment as to the taxable income. That information is peculiarly within the knowledge of the commissioner. Any delegation to the deputy commissioner can only be without any power of sub-delegation. A delegation under s. 12 (1) must be done directly from the commissioner and not by sub-delegation from the deputy commissioner. If it be right to say that under s. 167 the commissioner on appeal must establish, inter alia, that a judgment was formed as to the amount of taxable income then it necessarily follows that the commissioner must have some view. The taxpayer is entitled to know what the suggested source is, so that the issue may be confined. There is not any presumption that the commissioner has a sense of responsibility in exercising the arbitrary powers. It is nothing to the point to say that a taxpayer knows all about his own affairs, if he does not know what is alleged against him. The taxpayer is entitled to have the area narrowed. (at p194)

13. (DIXON C.J. referred to Mullin v. Mullin (1901) 1 SR (NSW) 60; 18 WN 249 .) (at p194)

14. The commissioner has a positive case, unquestionably in the case of an amended assessment. The foregoing observations are a fortiori in the case of an amended assessment to what they are in the case of an original assessment. (at p195)

15. F. G. Myers Q.C. (with him A. B. Kerrigan), for the respondent. There are not two conditions precedent to the exercise of the power under s. 167 of the Income Tax Assessment Act 1936-1947. If there be a condition precedent, there is one and one only. The dissatisfaction with the return furnished could be a condition precedent, but the judgment which the commissioner forms is not something that precedes the assessment, it is the actual assessment or part of the assessment itself. What he assesses does not follow from a judgment that he has formed; it follows from what he judges to be the correct amount. It is the amount on which the tax should be levied. Forming that opinion is exactly similar to the arithmetical calculation that he would make if he accepted all the figures in the return. In either case he forms his opinion as to what the correct figure of assessable income should be. In one case he forms it by reference to something outside the return and something as to which he forms a judgment. Section 167 (a), (b) or (c) is the only prerequisite. The appellant cannot get any particulars other than the fact that the commissioner is dissatisfied. The reasons why he is dissatisfied, or the grounds of his dissatisfaction cannot, except as part of his evidence, form any part of the commissioner's case. Assuming there was an onus on the commissioner to prove compliance with (b), all he would have to do would be to allege that he was not satisfied. The grounds or reasons for it would not be anything that the commissioner would have to allege if there were pleadings in the matter. It is not so much particulars but evidence that the appellant seeks. The question of whether the commissioner has to offer evidence to show that he is not satisfied upon appeal proceedings taken against the assessment cannot arise because of the operation of ss. 175 and 177. Section 167 (b) is the type of provision of the Act which is referred to in s. 175. Sub-section (b) of s. 167 is in a different position from sub-s. (a). Under sub-s. (a) the commissioner would have to prove the fact that default was made. Sub-section (b) is a provision of the Act which must be complied with, and the commissioner is not required to prove it because s. 175 makes the assessment valid whether it is complied with or not. Under sub-s. (b) there is not any duty on the commissioner not to be satisfied. Sub-section (c) is of a hybrid nature. Section 175 means that the validity of an assessment shall not be affected by reason of any of the conditions of the Act not being complied with by the commissioner. Under s. 177 the production of a notice of assessment is conclusive evidence in any case that the assessment has been duly made. "Conclusive evidence of the due making" must mean conclusive evidence that the commissioner has done everything required by the Act in order to render the assessment duly made. Such an assessment is an assessment made by the commissioner after having complied with the relevant provisions of the Act. The commissioner has the benefit of either s. 175 or s. 177, which makes it unnecessary for him to prove that he was not satisfied with the return. Once he has issued his notice of assessment that is a condition which is conclusively proved in his favour. The subject assessment is signed by the deputy commissioner, but it does not contain any statement that the deputy commissioner was dissatisfied, or that it was made under s. 167. On the question as to whether the commissioner or the second commissioner alone have power to express dissatisfaction, it is not correct to draw from s. 10 (2), which relates to the second commissioner, the inference, or to use it as a dictionary which requires the same construction to be given to "powers and functions" in ss. 11 and 12. That could not have been the intention of the Parliament, because it would make the Act unworkable. The large number of sections concerned show that the Act would not work as a practical matter if an opinion or a state of mind must be formed or had personally by the commissioner or by the second commissioner: see, inter alia, ss. 36 (8), 65 (1), 205, 210 and 213. There are so many opinions, beliefs and states of mind the commissioner is required to form that it would be a physical impossibility for the commissioner or the second commissioner to do so. Sub-section (2) of s. 10 is redundant. The commissioner's judgment under s. 167 of the amount on which tax ought to be levied is not a condition precedent, but is a fact - the actual making or part of the making of the assessment itself. This, however, is not of any moment because s. 190 places the onus of displacing the commissioner's view upon the appellant. Unless some evidence be given by the taxpayer, the effect of s. 190 is that it proves the amount of income and the amount of tax are correctly stated in the notice of assessment, and it is upon the taxpayer to prove that they are excessive, or for him to prove on the merits in some other way that the assessment is invalid. It is not open to him to challenge any step that the commissioner has taken in making the assessment. "Due making" in s. 177 covers everything that the commissioner is required to do in the making of an assessment. Section 167 (b) is something that the commissioner himself is required to do. It is part of the making of the assessment by him. The due making of the assessment under s. 167 (b) means the consideration of the return, the dissatisfaction with the return and the judgment of the amount of income. Once the commissioner has formed the opinion that the source of the moneys out of which capital assets were purchased was taxable or assessable income, and that it is either personal exertion or property, he has fulfilled his function, and there is not any further step that he need take. The commissioner is not obliged to form any judgment as to the source at all. Even if s. 167 did make the opinion of the commissioner as to the amount of income a condition precedent which the commissioner has to establish, there is still not any obligation on the commissioner to give particulars. (at p197)

16. G. E. Barwick Q.C., in reply. The Act does not provide in substance that every increase in assets is, prima facie, derived from income. Section 167 lays upon the commissioner a very heavy duty to form a judgment. He must have materials, and it must be a judgment, a rational judgment, that a sum of money is, in the circumstances, taxable income. This being an assessment by the deputy commissioner, there were two conditions precedent to the making of the assessment. Firstly, there was s. 167 (b), and secondly, there must have been an amount determined as the taxable income under s. 167 itself. If the deputy commissioner did not have an amount determined as the taxable income under s. 167, he would be limited to the returns or any other information that he had which was related to them. So there were two conditions precedent where an assessment was made with the aid of s. 167, namely, the dissatisfaction with the return, and the determination of a taxable income to which the Act applied to enable the tax payable to be determined. Section 167 (b) is just as much a fact to be found or determined as s. 167 (a). It is nothing to the point that the Act requires a person on the one hand to furnish a return, and, on the other hand, allows the commissioner to be dissatisfied. There is not any difference, from this point of view, between s. 167 (a) and (b), or, indeed, s. 170 (2) (a). They are all facts and so is the determination of the taxable income in the circumstances. The scheme of the Act, so far as is relevant, is that the taxpayer must show that the amount of taxable income which the commissioner, in his judgment, has thought to be the amount, is excessive. That is the issue (Danmark Pty. Ltd. v. Federal Commissioner of Taxation (1944) 7 ATD 333 ). The appellant is entitled to challenge the existence of the fact that there was a judgment and the due making. As shown by s. 175, the expression "due making" is clearly used in some narrow sense. The assessment under s. 166, where it calls in aid s. 167, is no more than the working out of the tax payable. When an assessment is made under s. 166 with the aid of s. 167 the only function of the assessor is to work out the tax on an amount of taxable income, unexaminably so far as he is concerned, furnished to him. His power to make the assessment must have been upon having what is in fact a taxable amount determined in the judgment of the commissioner. The assessment referred to in s. 177 is the notice of assessment, that is, the documentary assertion of the amount of tax payable. Under the original 1922 Act it was not conceived that anybody but the commissioner could form those opinions. With respect to s. 10 (2) the natural meaning of "power and function" does not include the ability to form states of mind and form opinions where the existence of some power or function is dependent upon the existence of the state of mind. It was necessary to insert s. 10 (2) because naturally the delegation of the power or function would not be sufficient to enable the delegate relevantly to form the state of mind. The mere presence of the power of delegation of powers and functions will not warrant the substitution in the various sections where the commissioner's opinion is relevant, of the words "or of any delegate of his" wherever the word "commissioner" occurs. In this case there are matters which are not concluded by the production of the notice of assessment. Those matters include the matter of fact as to whether or not the commissioner or the second commissioner or some other person did form the necessary judgment. The formation of the judgment, of necessity, in most cases, and probably in this case involves the formation of a view as to the source from which the assets were increased because the judgment was as to taxable income.
Cur. adv. vult. (at
p198)

November 3.
The COURT delivered the following written judgment: -
appeal. The orders, which were made by Kitto J., dismissed applications by the taxpayer for orders directing the Commissioner of Taxation to furnish him with particulars. The attempt by a taxpayer who appeals from an assessment of the commissioner to obtain an order against him for particulars is a novel experiment, but doubtless the reason for it must be looked for in the circumstances of the case, which at present by no means fully appear. (at p199)

2. The appellant is by occupation a dentist. For the year of income ended 30th June 1946 he returned his income from personal exertion at the sum of 1,546 pounds and from property at the sum of 128 pounds. For the following year of income he returned his income from personal exertion at the sum of 1,536 pounds, or 10 pounds less than the previous year, and his income from property at 203 pounds. For the first of these two years of income an assessment of the appellant's taxable income was made in which the figures in his return were accepted. But before the assessment for the second of the two years was made it was ascertained by or on behalf of the commissioner that the amount of the net assets of the appellant had increased very substantially year by year during a period of four or five years. We were told by the appellant's counsel that the appellant supplied the figures. In the year ended 30th June 1946 the increase was 5,788 pounds and in the year ended 30th June 1947, 7,537 pounds. (at p199)

3. The commissioner, using that expression to include his officers, took these figures and to the first of them he added an amount of 754 pounds to represent what it must have cost the appellant to subsist. To the second he added 806 pounds for subsistence and a further amount of 572 pounds as the cost of maintaining a race horse or race horses. On the other side the commissioner made small allowances for depreciation. He thus obtained for the first of the two income years in question a sum of 6,494 pounds, and for the second, a sum of 8,869 pounds and he treated both the amounts as representing taxable income. The commissioner regarded the amounts which the taxpayer had returned as income from property, viz., 128 pounds for the first year and 203 pounds for the second year, as included within these respective sums and he taxed as income from property so much of them as represented the figures so returned. The result was that he treated the taxpayer as having derived income from personal exertion in the sums of 6,366 pounds and 8,666 pounds respectively for the two years. For the year of income ended 30th June 1946 he amended his assessment to increase the amount of income from personal exertion to 6,366 pounds. For the year ended 30th June 1947 the commissioner made an original assessment which stated the income from personal exertion at 8,666 pounds. (at p199)

4. To the amended assessment and the assessment the appellant lodged objections which the commissioner disallowed and the appellant requested him to treat the objections as appeals and forward them to this Court. In both appeals the appellant requested the commissioner to furnish him with certain particulars, which the commissioner declined to do except that he answered no to the question whether it was alleged that any sums derived by the appellant from betting wins on horse races during the years in question were derived by him as a professional gambler and to the further question whether it was alleged that any moneys won by the appellant during those years from betting upon horse races constituted assessable income in his hands. The appellant then applied by summons to Kitto J. in chambers for orders in the respective appeals directing the respondent commissioner to furnish particulars. In each appeal the summons sought "particulars as to the source from which the respondent alleges that the appellant derived the additional amount (stating it) upon which the respondent has arbitrarily assessed the appellant for the year of income" (identifying the year). In the appeal relating to the year ended 30th June 1947 the summons also sought "particulars as to the person or officer who formed or made a judgment under s. 167 of the Income Tax Assessment Act 1936-1947". The grounds of objection must be noticed in so far as they raise the issues to which the particulars sought are relevant. In substance the grounds in point with respect to the particulars sought in both appeals are that the assessment was excessive, that the appellant did not derive taxable income from personal exertion in the figures stated but in less sums and that the commissioner should have assessed the appellant on the basis of his returns. (at p200)

5. Accompanying the notice of assessment in respect of the year ended 30th June 1947 was a notification that as the appellant's return was considered unsatisfactory, his assessment had been based in terms of s. 167 of the Act upon the amount upon which, in the opinion of the commissioner, tax should be levied against him. In consequence the appellant included in his objections for that year grounds to the effect that the opinion and judgment contemplated by s. 167 had not been formed by the right person and that in any case it had been formed on no material. This explains the additional particulars sought in the appeal concerned with the year of income ended 30th June 1947. The considerations that govern the question whether these additional particulars should be ordered are not the same as those that affect the question whether the commissioner should be ordered to give particulars as to the source from which he allleges that the appellant derived the additional amounts upon which he has assessed the appellant. It is convenient to deal first with the latter question. (at p200)

6. Section 190 provides that upon every appeal to the Court the burden of proving that the assessment is excessive shall lie upon the taxpayer. With this provision must be read s. 177 (1), which provides that the production of a notice of assessment, or a document purporting to be a copy under the hand of the commissioner the second commissioner or a deputy commissioner, 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 particulars of the assessment are correct. The word "assessment" is defined by s. 6 (1) to mean the ascertainment of the amount of taxable income and of the tax payable thereon. In conformity with this definition s. 166 directs the commissioner to make an assessment of the amount of the taxable income of any taxpayer and of the tax payable thereon. From these provisions both in their present form and in their slightly different earlier form, 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: Stone v. Federal Commissioner of Taxation (1918) 25 CLR 389, at pp 392, 393 ; Moreau v. Federal Commissioner of Taxation [1926] HCA 28; (1926) 39 CLR 65 ; Federal Commissioner of Taxation v. Clarke [1927] HCA 49; (1927) 40 CLR 246 ; Trautwein v. Federal Commissioner of Taxation [1936] HCA 77; (1936) 56 CLR 63 . "The justice of that burden cannot be disputed. From the nature of the tax, the commissioner has, as a rule, no means of ascertainment but what is learnt from the taxpayer, and the taxpayer is presumably and generally, in fact, acquainted with his own affairs. The onus may prove to be dischargeable easily or with difficulty according to circumstances", per Isaacs A.C.J., Federal Commissioner of Taxation v. Clarke (1927) 40 CLR, at p 251 . (at p201)

7. In the present case it might be expected that the source of the large increase year by year in the appellant's assets would be a matter peculiarly within his own knowledge. If it is a form of gain outside the very wide ambit of what is assessable income, proof of its character will be enough to support the material grounds of his appeals. It is a fact outside any knowledge the commissioner can have except from inquiry into the affairs of the appellant and it is not unreasonable that the onus of proof should be placed by law upon the latter. (at p201)

8. These are considerations which, it might be thought, are enough to make it quite wrong to require the commissioner to give particulars of what he alleges the source to be of the appellant's gains, which he has treated as assessable income. But it is contended for the appellant that because the commissioner relied for what he did upon s. 167, a different result ensues. (at p202)

9. As has been stated, in his communication accompanying the assessment for the year of income ended 30th June 1947, the commissioner referred to the application of s. 167 and, no doubt, it may be assumed that, once the power to amend the assessment for the previous year arose, s. 167 became applicable in making the amendment. Cf. per Williams J., McEvoy v. Federal Commissioner of Taxation (1950) 9 ATD 206, at pp 210, 211 . Why the appellant says that a different result ensues once s. 167 is invoked can only be understood from the text of s. 167 and, as its operation is by means of s. 166, it is best to set out both provisions. They are as follows: -

"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 the last preceding section." (at p202)

10. The contention is that, before the commissioner may fix the taxable income under s. 167 (b) two conditions must be fulfilled and that, in an appeal, the burden is upon him to prove their fulfilment. The first condition is that he must fail to be satisfied with the return furnished. The next is that he must form a judgment of the amount upon which income tax ought to be levied. When, but only when, this has been done, so it is argued, does the amount become, pursuant to the last words of s. 167, the taxable income for the purposes of the process of assessment under s. 166. Almost every step involved in this argument is open to question, but for the moment let it be supposed that it represents the effect of the provisions. Why should it follow that the commissioner ought to be required to give particulars of the source from which he alleges that the appellant derived the additional amount of taxable income? Upon this question the need that the commissioner should not be satisfied with the return may be put on one side. That is agreed. His want of satisfaction is a subjective question and even on the footing that he must prove it, that does not show that he must allege or prove the source of the taxable income he imputes to the taxpayer. What is relied upon is the necessity that he shall form a judgment of what the amount is upon which tax should be levied. But the judgment the commissioner has formed is made abundantly clear by the assessments themselves. They each depend upon the amount which he has fixed and they state it. No particulars of the fact that he has formed a judgment of the amount or what that amount is could possibly be required. It is said, however, that he could not form that judgment without materials or without reaching some opinion of the sources whence the increases in the appellant's assets came so as to make the gains income. (at p203)

11. But, even were it true that the commissioner must, upon the hearing of the appeal, affirmatively prove by evidence that he formed a judgment of the amount of the income upon which the appellant ought to be taxed, it could not be part of his case to establish the facts upon which he acted in forming the judgment or the grounds on which he proceeded, the materials before him, or the reasoning actuating him. The need supposed of showing that he formed such a judgment could be no ground for requiring particulars of the sources of the taxable income ascribed by the assessment to the appellant. The assumption made, however, has no foundation. The formation of the judgment as to what is the amount of the income that ought to be taxed is no condition precedent to the power to assess. It is part of the very process of assessment itself. Section 166 and s. 167 do not prescribe distinct duties or functions. They combine to show what the commissioner may or must do in performing his single duty of arriving at an assessment. Section 166 on its own terms covers cases where the commissioner depends exclusively on sources other than a return. It says that he is to make his assessment from (1) the returns, (2) from any other information, or (3) from any one or more of these sources. Clearly enough under s. 166 the commissioner can make an assessment which does not adhere to the income returned and yet to do so must involve some want of satisfaction with the return. Section 167 is epexegetical to s. 166. It is not an independent power. What it does is to mention with particularity three situations which might arise in carrying out the duty imposed by s. 166, and to direct how in those situations the commissioner shall proceed for the purpose of s. 166. Just as under s. 166 considered alone the commissioner ascertains the amount of the taxable income and thus assesses it so does he under s. 167, used in aid of s. 166, ascertain the amount upon which, in his judgment, income tax ought to be levied and thus assesses it. By definition "assessment" means the ascertainment of the amount of the taxable income, and of the tax payable thereon. This is the view of ss. 166 and 167 adopted by Williams J. in McEvoy v. Federal Commissioner of Taxation (1950) 9 ATD, at p 211 . The fact is that unless the taxpayer discharges the burden laid upon him by s. 190 (b) of proving that this ascertainment or judgment is excessive, he cannot succeed and it can be no part of the duty of the commissioner to establish affirmatively what judgment he formed, much less the grounds of it, and even less still the truth of the facts affording the grounds. Yet that is what is involved when the demand for particulars of the sources alleged of the appellant's income is justified by reference to s. 167. It is an error to treat the formation by the commissioner of a judgment as to the amount of the taxable income as if it were not the ascertainment of the taxable income which constitutes assessment or a necessary part of that process and as if it were but the fulfilment of a condition precedent to the power or authority to assess. If, however, it were a condition precedent the question would at once arise whether the fulfilment of the condition was not part of "the due making of the assessment" of which s. 177 (1) makes the production of a notice of assessment conclusive evidence. But of this it is unnecessary to speak specifically. It is unnecessary to do so not only because the reasons already given are enough to dispose of the request for particulars of the sources of the appellant's additional taxable income, but also because a similar question must now be dealt with in relation to the additional particulars which the appellant seeks in reference to the year of income ended 30th June 1947, that is to say, particulars as to the person or officer who formed or made a judgment under s. 167. The demand for these particulars arises from the view for which the appellant contends that under s. 167 (b) it is essential that the want of satisfaction with the return should exist in the commissioner or second commissioner and not a deputy commissioner. If, however, it may exist in a deputy commissioner, at all events, so he contends, it cannot be enough that it exists in some lesser officer to whose opinion the deputy commissioner gives effect by authenticating the assessment. Presumably in the same way the judgment as to the amount of income to be taxed must be formed either by the same higher officer or one of like status. Accordingly the appellant by his summons seeks particulars of the person or officer who formed or made a judgment under s. 167. This, doubtless, was meant to cover the failure to be satisfied under par. (b), as well as the formation of a judgment as to the amount of income on which tax ought to be levied. (at p205)

12. The contention that it is not competent for a deputy commissioner to invoke s. 167 (b) rests upon an interpretation placed by counsel for the appellant upon s. 12 (1). By that provision the commissioner may delegate to a deputy commissioner or other person all or any of his powers or functions under the Act (except the power of delegation) so that the delegated powers or functions may be exercised by the deputy commissioner or person with respect to the matters or class of matters or the State or part of the Commonwealth specified in the instrument of delegation. (at p205)

13. The interpretation which it is sought to place upon this provision limits the application of the expression "powers or functions" so that it does not include the formation of any opinion, belief or state of mind upon the existence of which in the commissioner the operation of any provision of the Act is dependent. The reason advanced for so limiting the expression "powers or functions" is that in s. 10, which deals with the second commissioner, there is an express provision making his opinion, belief or state of mind equivalent to that of the commissioner for such purposes. Section 9 (1) says that for the purposes of the Act there shall be a second commissioner. Sub-sections (1) and (2) of s. 10 are as follows: - 10. (1) Subject to this section, the Second Commissioner shall have and may exercise all the powers and functions of the Commissioner under this Act. (2) Where in this Act the exercise of any power or function by the Commissioner or the operation of any provision of this Act is dependent upon the opinion, belief or state of mind of the Commissioner in relation to any matter, that power or function may be exercised by the Second Commissioner or that provision may operate (as the case may be) upon the opinion, belief or state of mind of the Second Commissioner in relation to that matter. (at p205)

14. It is evident that sub-s. (2) was intended to put beyond doubt the equivalence (subject to sub-s. (3) which does not concern this case) of the second commissioner and the first commissioner for purposes of the statute. To infer from the presence of s. 10 (2) in the statute that the wide words of s. 12 (1) are to be read as excluding a power or function if according to the express terms of a provision of the statute it requires, or depends upon an exercise of discretion or judgment would be to defeat the administration of the Act. There may be matters depending upon the opinion, belief or state of mind of the commissioner and second commissioner which because of their character do not fairly fall within the description "power or function" in s. 12 (1). But it seems obvious that these words were intended to bear their wide natural meaning unrestricted by any inference from s. 10 (2) of the kind suggested by the rule of interpretation, expressio unius est exclusio alterius. Of this rule Wills J. in a judgment upheld in the House of Lords (Colquhoun v. Brooks (1887) 19 QBD 400, at p 406; 14 App Cas 493 ) said: - "I may observe that the method of construction summarised in the maxim 'Expressio unius exclusio alterius' is one that certainly requires to be watched. Perhaps few so-called rules of interpretation have been more frequently misapplied and stretched beyond their due limits. The failure to make the 'expressio' complete very often arises from accident, very often from the fact that it never struck the draftsman that the thing supposed to be excluded needed specific mention of any kind; and the application of this and every other technical rule of construction varies so much under differing circumstances, and is open to so many qualifications and exceptions, that it is rarely that such rules help one to arrive at what is meant." (at p206)

15. In the present case we are concerned with the function of assessing taxpayers. It has already been pointed out that s. 166 and s. 167 are not independent, but together give the directions which the assessing officer must pursue. The discretion or judgment involved in s. 167 forms a practically inseparable part of that function. It seems to be clearly within the contemplation of s. 12 (1) that such a discretion or judgment should be included in the delegation of the duty of assessing taxpayers. Any other view would make it impossible to carry on the work of the Department of Taxation. But in any case the question whether the right officer has applied his mind to the question whether the taxpayer's returns are satisfactory within s. 167 (b) is not a question left open by s. 177. As already has been said, ss. 166 and 167 are together concerned with the process of ascertaining the taxpayer's taxable income and the consequent tax. The clear policy of s. 177 is to distinguish between the procedure or mechanism by which the taxable income and tax is ascertained or assessed on the one hand and on the other hand the substantive liability of the taxpayer. The former involves the due making of the assessment. The production of the notice of assessment is conclusive evidence of the due making of the assessment. It would, for example, be absurd to suppose that in an action brought by the commissioner under s. 209 to recover unpaid tax due upon such an assessment as those now under appeal, evidence must be given for the plaintiff that the right officer was not satisfied under s. 167 (b) and formed a judgment as to the amount of the income to be taxed. Yet that is the consequence of the argument. To avoid this consequence, amounting as it does to a reductio ad absurdum of the argument, it was suggested that under s. 177 (1) the amount of the assessment was conclusive, although fulfilment of what the argument treated as conditions precedent to the power given by s. 167 to make the assessment were not covered by the words "due making". But this would mean that ex hypothesi the power to assess the tax was not well exercised. Accordingly the assessment would be bad and there would be nothing to be treated as good. Since tax is only due after it is "assessed" (see, for example, s. 204) a bad assessment would not do, however conclusive as to the amount of the tax a notice of assessment might be. Obviously the "due making of the assessment" was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal. (at p207)

16. The decision of Kitto J. refusing an order for particulars and dismissing the summonses was right. (at p207)

17. The appeals should be dismissed with costs. (at p207)

FULLAGAR J. I am a party to the judgment which has just been delivered. I wish, however, to add for myself that, in my opinion, apart altogether from any question of burden of proof, the application for "particulars" was rightly rejected by Kitto J. It was not really an application for particulars at all. The subject matter of the demand for information was rather subject matter for interrogatories, and I can see no warrant for ordering interrogatories to be answered in a case of this type, even if I am to assume that the Court has power to make such an order, which I doubt. It is common practice, in the Court lists and in the Law Reports to entitle a taxation appeal as if it were a proceeding between a named taxpayer and the Commissioner of Taxation. But the Commissioner is only nominally a "party" to the proceedings. The proceedings are really proceedings between Crown and subject. A similar position exists under the Patents Act 1952 and the Trade Marks Act 1905-1948. The substance of the position in taxation cases is not affected by the fact that the Commissioner is given eo nomine a right of appeal from decisions of the Board of Review. The Commissioner is an officer who, in the performance of his statutory functions, does acts which prima facie create an obligation as between the Crown and a particular subject, and the statute provides means whereby the subject may test before a court or a board the question whether the Commissioner has acted according to law. In proceedings before court or board the Commissioner's acts are called in question, but he is in no real sense a party. This does not mean that he is not, in many respects, subject to orders of the court, but it does mean that certain orders which are quite appropriate as between parties to an action are quite inappropriate as between an appellant taxpayer and the Commissioner. (at p208)

ORDER

Appeals dismissed with costs.