Naboulsi v Commissioner of Taxation [2000] FCA 813

FEDERAL COURT OF AUSTRALIA

Naboulsi v Commissioner of Taxation [2000] FCA 813 OMAR NABOULSI v COMMISSIONER OF TAXATION N 736 OF 1999

OMAR NABOULSI v COMMISSIONER OF TAXATION N 737 OF 1999 LEHANE J 16 JUNE 2000 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 736 OF 1999

N 737 OF 1999

BETWEEN: OMAR NABOULSI

APPLICANT

AND: COMMISSIONER OF TAXATION

RESPONDENT

JUDGE: LEHANE J

DATE OF ORDER: 16 JUNE 2000

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The applications be dismissed.

2. The applicant pay the respondent's costs of the applications.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 736 OF 1999

N 737 OF 1999

BETWEEN: OMAR NABOULSI

APPLICANT

AND: COMMISSIONER OF TAXATION

RESPONDENT

JUDGE: LEHANE J

DATE: 16 JUNE 2000

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The applicant, Mr Naboulsi, appeals under s 14ZZ(c) of the Taxation Administration Act 1953 (Cth) (the "Administration Act") against two appealable objection decisions of the respondent Commissioner. By each of those objection decisions, the Commissioner disallowed a taxation objection lodged with the Commissioner against an amended assessment made by the Commissioner under s 167 of the Income Tax Assessment Act 1936 (Cth) (the "Assessment Act"). One of those assessments relates to the year which ended on 30 June 1996, the other to the year which ended on 30 June 1997.

Background facts 2 Mr Naboulsi is, and has been for many years, a taxi owner and driver. During the two income years in question he owned, successively, two taxi cabs. He drove them himself during the day on most weekdays and also, commonly, on Friday evenings. The cabs were driven by other drivers at other times, principally during the evening on weekdays other than Fridays, and on Saturdays. Those drivers made payments to Mr Naboulsi following their shifts. Thus, in broad terms, Mr Naboulsi derived income by way of takings which he received when he drove the cabs himself and by way of payments from other drivers. He incurred expenses in relation to the operation of the cabs. 3 Mr Naboulsi employed a firm of tax agents known as Alect Taxation Services to prepare his income tax returns for both the 1996 and the 1997 year. The principal of that firm was Mr Ali Oygur; the actual task of preparing the returns was, apparently, delegated to an employee of that firm, Mr Trevor Ward. Mr Naboulsi's tax return for each of the years in question disclosed, as his only assessable income, income derived from the taxi business and no allowable deductions other than expenses incurred in that business. The 1996 return disclosed a total business income of $29,825.00. It disclosed total expenses of $17,342.00, made up of interest expenses of $2,013.00, depreciation expenses of $284.00, motor vehicle expenses of $9,231.00 and other expenses of $5,814.00. On that footing, the taxable income was the difference between income and expenditure, namely $12,483.00. The 1997 return disclosed total business income of $31,255.00 and expenses amounting to $17,254.00. The expenses claimed were interest of $746.00, depreciation of $629.00, motor vehicle expenses amounting to $9,371.00 and other expenses of $6,508.00. The resulting net, or taxable, income was $14,001.00. The Commissioner issued an assessment for each year in which he assessed Mr Naboulsi to tax in accordance with the returns. 4 On 10 December 1997, an officer of the Australian Taxation Office wrote to Mr Naboulsi informing him that the Office was conducting a "National Project on the Taxi Industry". He was asked to provide information, in relation to the 1996 and 1997 years of income, by completing what was described as a "taxi operator questionnaire" and by providing profit and loss statements for the two years. The questionnaire was completed (apparently by the tax agents), Mr Naboulsi signed it and it was sent to the Australian Taxation Office. Profit and loss statements were also sent, apparently in the form of Schedule B to the form of income tax return. Those showed, for each year, gross receipts and total expenses (and therefore net income) of the same amounts as had been returned. Nothing turns on the detail of the profit and loss statements. 5 Mr Naboulsi was interviewed by officers of the Australian Taxation Office, in company with Mr Ward, on 1 June 1998 and again on 22 October 1998. On 10 March 1999 the Commissioner issued, under s 167(b) of the Assessment Act, two notices of amended assessment. The amended assessment for 1996 was based on an amended taxable income of $56,123.00. In addition to the tax and Medicare levy assessed on that taxable income, the Commissioner imposed "Understatement Penalty and Interest" of $7,462.83. The amended assessment for 1997 was based on an amended taxable income of $59,186.00. The assessment included a penalty and interest amounting to $5,443.18. Mr Naboulsi lodged an objection to each amended assessment; the objection decisions disallowing those objections are the subject of the present appeals.