R v Cain; Ex parte Evatt [1975] HCA 57; (1975) 133 CLR 37 (10 December 1975)

HIGH COURT OF AUSTRALIA

THE QUEEN v. CAIN; Ex parte EVATT [1975] HCA 57; (1975) 133 CLR 37

Income Tax (Cth)

High Court of Australia
Barwick C.J.(1), McTiernan(2), Gibbs(3), Stephen(4) and Mason(5) JJ.

CATCHWORDS

Income Tax (Cth) - Objection by taxpayer to assessment - Disallowance by Commissioner - Reference to Board of Review - Statement containing Commissioner's reasons for disallowing taxpayer's claim sent to Board by Commissioner - Sufficiency of statement - Income Tax Regulations, reg. 35*.

* Regulation 35 (1) of the Income Tax Regulations (Cth) provides: "The Commissioner, in referring to a decision to a Board of Review in accordance with sub-section (1) of s. 188 of the Act or s. 189 of the Act, shall furnish to the Board with a printed or typewritten statement, in quadruplicate, containing-(a) . . . (b) . . . (c) the Commissioner's reasons for disallowing the taxpayer's claims."

HEARING

Sydney, 1975, November 18, December 10. 10:12:1975
MANDAMUS.

DECISION

December 10.
The following written judgments were delivered:-
BARWICK C.J. I have the advantage in this application of reading the reasons be discharged for the reason that the respondent Commissioner had not failed to comply with the provisions of reg. 35 of the Income Tax Regulations. I also agree that in principle the application cannot be distinguished from the case of Sutton v. Federal Commissioner of Taxation [1959] HCA 3; (1959) 100 CLR 518 . In my opinion, that case was correctly decided and governs the present application. I think that it is rightly said in the reasons for judgment in that case that the provisions of reg. 35 are included for the benefit of the Board of Review. In my opinion, the requirement of reg. 35 (2) is merely to inform the objecting taxpayer of the material which has been sent to the Board. I do not think that the presence of that sub-regulation alters the intention of the provisions of the regulation as a whole. (at p40)

2. As I have indicated elsewhere, the duty of the Commissioner is fully to inform the taxpayer of the basis upon which the assessment is raised. In this case, in my opinion, he did so. It is my opinion that it would be preferable if, having from the taxpayer material in amplification of the formal grounds of objection, the Commissioner presented that material or an accurate abstract or summary of it to the Board to facilitate the work of the Board. But the Commissioner is not required by the regulations to inform the Board of his views as to that material. (at p40)

3. In my opinion the rule nisi should be discharged. (at p40)

McTIERNAN J. I agree that the rule nisi should be discharged. (at p40)

2. In my opinion Sutton v. Federal Commissioner of Taxation is an appropriate precedent on which to base the decision in the matter. (at p40)

GIBBS J. This is an application for a writ of mandamus directed to the Commissioner of Taxation. The prosecutor - the taxpayer - lodged objections to amended assessments to income tax made by the Commissioner for each of the years of income ended 30th June 1968, 30th June 1970 and 30th June 1971. The objections were disallowed and the taxpayer requested the Commissioner to refer the decision to a Board of Review. The Commissioner thereupon forwarded to the Board a statement made in intended compliance with reg. 35 (1) of the Income Tax Regulations. The material parts of the statement read as follows:

"(b) FULL DETAILS OF TAXPAYER'S CLAIM AS MADE TO THE
COMMISSIONER
As per notices of objection dated 13th April 1973 copies
of which are attached.

(c) THE COMMISSIONER'S REASONS FOR DISALLOWING THE
TAXPAYER'S CLAIM
(i) The taxable incomes derived by the taxpayer during
the undermentioned years of income, determined
pursuant to s. 167 (b) of the abovenamed Acts were
not less than:-
Year ended 30th June Taxable Income
$
1968 23,254
1970 4,219
1971 105,266
(ii) The taxpayer omitted from his returns of income for
the years ended 30th June 1968, 1970 and 1971
assessable income and became liable under s.
226 (2) of the abovenamed Acts to pay as additional
tax amounts equal to double the difference between
the tax properly payable and the tax payable upon
the basis of the returns furnished.
(iii) Of such additional tax, the Commissioner remitted,
in terms of s. 226 (3) of the said Acts,
three-quarters and the circumstances do not warrant any
further remission in respect of the years of income
ended 30th June 1968, 1970 and 1971."

Copies of the notices of objection were forwarded with the statement. (at p41)

2. Regulation 35 is in the following terms:

"Reg. 35. Particulars to be supplied by Commissioner.
(1.) The Commissioner, in referring a decision to a Board
of Review in accordance with sub-section (1.) of section 188 of
the Act or section 189 of the Act, shall furnish the Board with
a printed or typewritten statement, in quadruplicate,
containing -
(a) the name and address of the taxpayer;
(b) full details of the taxpayer's claim as made to the
Commissioner; and
(c) the Commissioner's reasons for disallowing the
taxpayer's claim.
(2.) The Commissioner shall at the same time furnish the
taxpayer with a copy of the statements referred to in
sub-paragraphs (b) and (c) of the last preceding sub-regulation."
(at p41)

3. The taxpayer complained that the brief and general statement made by the Commissioner did not satisfy the requirements of reg. 35 (1) (c). The assessments were default assessments and were made on a "betterment" basis, that is the Commissioner calculated the taxpayer's income by having regard to the apparent increase in his assets. Details of the Commissioner's calculations were furnished to the Board and to the taxpayer. In the course of the correspondence with the Commissioner, and in conversations with his officers, the taxpayer elaborated in some detail his contentions that the assessments were erroneous. The Commissioner did not furnish copies of that correspondence, or information concerning those conversations, to the Board. It was submitted that "full details of the taxpayer's claim as made to the Commissioner" could only be discovered by considering all the communications, oral and written, made by the taxpayer to the Commissioner. If this were correct it would seem to follow that there had been a failure to comply with reg. 35 (1) (b), but counsel for the taxpayer did not seek to rely on any such failure. The argument put forward on behalf of the taxpayer was that whether the "full details of the taxpayer's claim" are to be found in the objection alone, or in that together with additional material, the Commissioner, to discharge his duty under reg. 35 (1) (c), must deal with all the substantial questions of law and fact raised by the taxpayer in his "claim", and give his reasons for rejecting the taxpayer's objections and assertions. (at p42)

4. If the matter were free from authority I might have doubted whether a statement of the Commissioner's ultimate conclusions, which did not reveal the steps in the reasoning by which those conclusions were reached, would satisfy reg. 35 (1) (c). But it has been decided by this Court that such a statement is sufficient: Sutton v. Federal Commissioner of Taxation [1959] HCA 3; (1959) 100 CLR 518 . Counsel for the taxpayer conceded that unless we distinguish or overrule that decision his application must fail. In that case the Commissioner had furnished to the Board a statement of his reasons which, as appears from the report in the Australia and New Zealand Income Tax Reports (1959) 7 ANZITR 386, at pp 391-392 was very similar in form to that in the present case. It was no more informative than the present statement. Counsel asked the Board to rule that the statement did not comply with reg. 35 (1) (c) and to require the Commissioner to furnish particulars (1959) 100 CLR, at p 520 . A case stated by the Board to this Court asked three questions one of which was as follows:

"Whether par. (c) of (the statement furnished to the board
by the commission) constitutes a compliance by the
commissioner with reg. 35 (1) (c) of the Income Tax and Social
Services Contribution Regulations" (1959) 100 CLR, at p 521 .

The Court answered that question in the affirmative. In the course of their judgment the members of the Court said (1959) 100 CLR, at p 524 :

"The reasons which the Commissioner in this case
forwarded in his statement have the merit of brevity, and the
taxpayer complains that they are so concise that they amount to
nothing. What they do is to give ultimate conclusions and
figures justifying the assessments, and not the steps in
reasoning by which they were reached. It is not possible to say that
this amounts to nothing, even if it provides less than the
author of reg. 35 (1) (c) might have hoped. But again the board
has no authority to impose on the Commissioner a legal
obligation to give more reasons. It is to be observed that reg.
35 (1) (c) is directed not to ensuring that the taxpayer is
informed of the Commissioner's reasons but to supplying the
board with them. It is not the board that appears to be
dissatisfied with the Commissioner's statement of reasons."

I can see no ground on which that decision can be distinguished from the present case. It is true that there the powers of the Board were discussed, but the Court was called upon to decide, and did decide, whether a statement indistinguishable from that furnished in the present case was sufficient compliance with reg. 35 (1) (c). (at p43)

5. This Court has power to overrule its own decisions, but will do so only "with great caution and in clear cases": Perpetual Executors and Trustees Association of Australia Ltd. v. Federal Commissioner of Taxation (Thomas' Case) [1949] HCA 4; (1949) 77 CLR 493 . It is not enough to overrule an earlier decision that an opposite conclusion is preferred: Attorney-General (N.S.W.) v. Perpetual Trustee Co. Ltd. [1952] HCA 2; (1952) 85 CLR 237, at p 244 . The decision in Sutton v. Federal Commissioner of Taxation [1959] HCA 3; (1959) 100 CLR 518 was unanimously given by five members of the Court. It is impossible to say that it is manifestly wrong. It was submitted that the remark that reg. 35 (1) (c) is directed not to informing the taxpayer of the Commissioner's reasons but to supplying the Board with them suggests that possibly the Court did not advert to reg. 35 (2). It may be that, having considered the latter regulation, the Court considered that the purpose of the statement was to inform the Board, and that reg. 35 (2) was designed to ensure that the taxpayer was, in fairness, apprised of the contents of any statement furnished to the Board. However even if the Court did overlook the provisions of reg. 35 (2), that would not appear to affect in any way the reasoning by which it reached its conclusion as to the meaning of reg. 35 (1) (c). Furthermore, the decision is one as to the meaning of a regulation dealing with a matter of procedure, and if it is thought desirable that the Commissioner should supply the Board and the taxpayer with a statement that reveals what view he has formed on the various matters raised by the taxpayer in support of his objection - and without in any way reflecting on what has been done in the present case I would think that it would be desirable that more useful and illuminating statements should be required - that result can readily be achieved by amending the Regulations. In my opinion the decision in Sutton v. Federal Commissioner of Taxation [1959] HCA 3; (1959) 100 CLR 518 should be treated as a binding authority and it governs the decision in the present case. (at p44)

6. The order nisi should be discharged. (at p44)

STEPHEN J. I agree that this order nisi should be discharged for the reasons stated in the judgment of Gibbs J., which I have had the opportunity of reading. (at p44)

MASON J. I have had the advantage of reading the reasons for judgment prepared by my brother Gibbs and am in agreement with them. (at p44)

ORDER

Order nisi discharged.

Prosecutor to pay respondent's costs.