Uysal v Deputy Commissioner of Taxation [2003] FCA 1156

FEDERAL COURT OF AUSTRALIA

Uysal v Deputy Commissioner of Taxation [2003] FCA 1156 TAXATION – application for interlocutory injunction to stay Supreme Court summary judgment application for recovery of taxation assessment liabilities – whether Commissioner acted unlawfully in refusing to extend due date of payments for taxation assessments

Taxation Administration Act 1953 (Cth) ss 255-10, 298-30, 59, 61, 14ZZE, 14ZZR Income Tax Assessment Act 1936 (Cth) s 177 Hells Angels Ltd v Deputy Commissioner of Taxation (1984) 3 FCR 83 distinguished NECMI UYSAL v DEPUTY COMMISON OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA V958 of 2003 HEEREY J 15 OCTOBER 2003 MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V958 OF 2003

BETWEEN: NECMI UYSAL

APPLICANT

AND: DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

RESPONDENT

JUDGE: HEEREY J

DATE OF ORDER: 15 OCTOBER 2003

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: 1. The application for an injunction is dismissed. 2. The applicant pay the respondent's costs Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V958 OF 2003

BETWEEN: NECMI UYSAL

APPLICANT

AND: DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

RESPONDENT

JUDGE: HEEREY J

DATE: 15 OCTOBER 2003

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 The applicant seeks an interlocutory injunction restraining the respondent from taking any further steps in Supreme Court of Victoria proceeding no. 6617 of 2003, other than to consent to an adjournment or stay of those proceedings, until further order. 2 The applicant carried on business as a motor car dealer without being registered under the relevant Victorian legislation. When this was discovered by the Victorian authorities the matter was reported to the Australian Taxation Office and, as a result, default assessments were issued against the applicant in August of this year for income tax, penalties and GST totalling $1,220,736.10. As well as carrying on his unregistered motor car business, the applicant had not lodged any tax returns. He has now done so, and on 13 October lodged objections to the assessments. 3 The Commissioner has commenced the Supreme Court proceeding already mentioned and has obtained a Mareva injunction restraining disposal of the respondent's assets and also an order prohibiting him from leaving the jurisdiction. A summons for final judgment has been issued and is returnable this day. The effect of the injunction sought would be to prevent the Master of the Supreme Court hearing and determining that application. 4 The central issue in the present application is whether the Commissioner acted unlawfully in refusing to extend the due date for payment of those assessments under s 255-10 of the Taxation Administration Act 1953 (Cth) (the Act). 5 The applicant relies on correspondence sent by his solicitors on 30 September and 13 October to the Australian Government Solicitor (AGS) acting for the Commissioner. In essence, that correspondence raises allegations that the assessment is grossly excessive and has, for example, simply treated all credits in the applicant's bank account as income, has treated the sale of a house as income and has not allowed deductions for obvious trading expenses. AGS replied on 1 October and stated, amongst other things, that the Commissioner did not propose to enter into correspondence with the applicant about the quantum of the assessments of income tax and GST. AGS pointed out that the procedures for challenging assessments are set out in Part IVC of the Act. A further letter on 14 October advised that the request for an extension of time under s 255-10 was refused. The letter stated: "Our client does not consider that the time at which the tax liabilities are due and payable should be extended, having regard to the circumstances of your client's case." 6 As counsel for the Commissioner pointed out, various provisions of the taxation legislation make tax assessments conclusive; in the case of income tax, s 177 of the Income Tax Assessment Act 1936 (Cth); in the case of penalties, s 298-30 of sch 1 of the Act; and in the case of GST, ss 59 and 61 of the Act. Further, ss 14ZZE and 14ZZR of the Act provide, in effect, that taxation assessments may be enforced even though there are challenges to the validity of the assessments in the Administrative Appeals Tribunal or a court. 7 The substantive application of the applicant seeks review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 39B of the Judiciary Act 1903 (Cth), of 1. The respondent's refusal to consider amending the applicant's assessment of the income tax and penalty tax for the 2001 and 2002 tax years, and the assessments of GST for the period 1 July 2000 to 31 March 2003; 2. The conduct in which the respondent proposes to engage, by which the respondent will obtain summary judgment in the Supreme Court proceeding for the debts attributable to the assessments and will take steps to enforce any such judgment; and 3. The refusal by the respondent to grant an extension of time to pay the debts arising out of the assessment. 8 As counsel for the Commissioner pointed out, there is no direct challenge to the assessments themselves. It should be mentioned that taxation decisions of the kind amended are excluded from review under the Administrative Decisions (Judicial Review) Act (see par (e) of sch 1). However, review would be available against the Commissioner as an officer of the Commonwealth under s 39B of the Judiciary Act. 9 The question is whether there is an arguable case for the relief sought in the order to review. Although there was mention in passing of bad faith, the application itself does not mention bad faith. The question of bad faith tended to drift out of the argument, so to speak. I think it is proper that I do not consider this issue any further, given that bad faith is a serious allegation analogous to fraud, and, if it is to be raised, should be raised clearly and unequivocally. 10 Counsel for the applicant said that the Commissioner had not taken into account a number of matters. These were said to be: 1. that the applicant's objections were on foot; 2. that tax returns have now been lodged; 3. the specific errors of the nature already mentioned; 4. that the alleged debt exceeded the applicant's assets, which amounted to some $500,000; and 5. that there was the protection of the Mareva injunction and the prohibition order available. 11 I do not think that, singly or collectively, these matters support the case alleged. The fact that objections are on foot and that tax returns have been lodged clearly cannot prevent the Commissioner proceeding in a court for recovery of amounts for which assessments have been issued. The legislative scheme is clear. Assessments are binding and can be enforced notwithstanding that the taxpayer is following a right to challenge the assessments under Pt IVC of the Act. 12 The specific errors alleged simply go to the merits of the assessments. They may well turn out to be valid complaints. But the taxation system necessarily assumes that the Commissioner may make errors of fact or law in assessments and that these errors will be corrected either in the AAT or in the court, but that does not gainsay the legislative scheme that in the meantime the assessments are binding and may be enforced. Of course, if that enforcement results in a judgment and recovery under the judgment, and there is a subsequent setting aside or varying of the assessments, the assessments to that extent would be no longer binding and the Commissioner would have to repay with interest any moneys recovered. 13 I have not overlooked Hells Angels Ltd v Deputy Commissioner of Taxation (1984) 3 FCR 83 which was strongly relied on by counsel for the applicant. That decision turned rather on its own facts. In particular there was an allegation that the taxpayer allegedly was simply a bare trustee. In the present case, what is at issue is a typical taxation dispute as to what income was earned and as to what deductions a taxpayer is entitled. There is no material on which on I could find, for the purposes of an interlocutory application, that there is a triable issue that the Commissioner did not take them into account, still less that he acted in bad faith. The interlocutory injunction will be dismissed with costs. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.