FEDERAL COURT OF AUSTRALIA Marijancevic v Deputy Commissioner of Taxation [2004] FCA 1084 TAXATION – respondent's application for summary judgment – application alleging tax assessments void – whether a "substantial possibility" that the amounts were assessable income – whether assessments tentative or provisional Income Tax Assessment Act 1936 Federal Court Rules O 20 r 2 McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 249 at 281-282 applied F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 375-376 applied R V Hickman; ex parte Fox & Clinton (1945) 70 CLR 598 at 615 applied Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 applied Walton v Gardiner (1993) 177 CLR 378 at 393 applied General Steel Industries Inc v Commissioner for Railways (NSW) 164, 112 CLR, 125 at 128-130 applied Madden v Madden (1996) 32 ATR 223 at 258 applied Briglia v Federal Commissioner of Taxation (2000) 44 ATR 166 at [8-9] applied R v Commissioner of Taxation (WA); ex parte Briggs (1986) 12 FCR 301 referred to Stokes v Commissioner of Taxation (1996) 72 FCR 160 cited WILLIAM MARIJANCEVIC v NEIL MANN, A DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA V 713 OF 2004 HEEREY J 25 AUGUST 2004 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V713 OF 2004 BETWEEN: WILLIAM MARIJANCEVIC APPLICANT AND: NEIL MANN, A DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA RESPONDENT JUDGE: HEEREY J DATE OF ORDER: 25 AUGUST 2004 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. There be judgment for the respondent. 2. The applicant pay the respondent's costs of the motion for summary judgment and the proceeding. 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 V713 OF 2004 BETWEEN: WILLIAM MARIJANCEVIC APPLICANT AND: NEIL MANN, A DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA RESPONDENT JUDGE: HEEREY J DATE: 25 AUGUST 2004 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Under s 167 of the Income Tax Assessment Act 1936 (Cth) (the Assessment Act) the respondent issued default assessments to the applicant for the 1998, 2000, 2001 and 2002 tax years. In the present proceeding the applicant seeks orders that the assessments were void, an injunction restraining the respondent from giving effect to them and alternatively writs of prohibition and certiorari. 2 The respondent applies for an order under O 20 r 2 of the Federal Court Rules that the application be dismissed as the proceeding discloses no reasonable cause of action, is frivolous or vexatious or is an abuse of process of the Court. Assessments and objections 3 Section 167 of the Assessment Act provides that if any person makes default in furnishing a return the Commissioner may make an assessment of the amount upon which in his judgment income tax ought to be levied. 4 The applicant has not filed any tax returns since obtaining a tax file number in 1995. On 11 February 2003 default assessments were issued to the applicant for the years already mentioned. There was nothing unusual about the assessments; they were in a standard form, claiming tax, interest and penalties totalling $1,846,442.49. 5 On 6 March 2003 the applicant lodged objections to the assessments. Supreme Court proceedings 6 On 25 July 2003 the respondent issued a writ in the Supreme Court of Victoria claiming $1,008,564.05. 7 On 13 February 2004 the respondent issued a summary judgment application. This was adjourned by consent a number of times. 8 On 4 March 2004 the applicant's objections were allowed in part. On 14 April 2004 credit assessments were issued to the applicant, the effect of which was that the amount of the assessments as at 6 July 2004 stood at $526,645.49. 9 On 29 April 2004 the applicant filed an application under Part IVC of the Taxation Administration Act 1953 (the Administration Act) in the Administrative Appeals Tribunal for review of the objection decisions. On 9 June 2004, the same day as the present proceeding was commenced, the applicant filed an application in the Supreme Court seeking orders that the Supreme Court recovery proceeding be cross-vested to the Federal Court. On 17 June 2004 the cross-vesting application and the respondent's application for summary judgment were adjourned by Byrne J pending determination of the present strikeout application. Statement of claim 10 In par 4 of his statement of claim the applicant alleges that the respondent in making the assessments made no assessment of a kind authorised by s 167. Particulars are given alleging that in making the assessments for the 1998, 2000 and 2001 tax years the respondent: "(a) did no more than add up amounts of money recorded in bank statements as having been deposited into bank accounts operated for the applicant; (b) made no, or no genuine, attempt to ascertain whether those amounts of money were derived by the applicant as income; and (c) purported to assess the total of those moneys deposited as an amount upon which income tax ought to be levied on the applicant: (i) when the respondent knew or ought to have known that that amount could not possibly be a correct or accurate estimate of the taxable income of the applicant; (ii) when the respondent did not have any, or any reasonable, ground for believing that the deposits represented income of the applicant; (iii) when the respondent did not have any, or any reasonable, ground for assessing the money as an amount upon which income tax ought to be levied on the applicant; and (iv) with the object of creating a device (namely, an income tax assessment) which could be used, in conjunction with a notice under s 260-5 of Schedule 1 of the Administration Act, to prevent the sum of approximately $592,000 from being returned to the applicant by officers of the Queensland Police, by whom it had been seized (hereinafter referred to as 'the Queensland Cash')." 11 The particulars further allege essentially the same matters in relation to the assessment for the 2002 tax year with the addition of an allegation that the Queensland cash itself had been included in the assessment for that year. In par 5 it is alleged that the respondent did not attempt bona fide and in good faith to make an assessment of the kind authorised by s 167. In par 6 it is alleged that the respondent did not make any assessment other than a tentative or provisional assessment. In par 7 it is alleged that each of the assessments was not authorised by s 167, was not the result of a bona fide attempt to exercise the power conferred by that section and was a purported exercise of the powers for an improper and collateral purpose. Garnishee notices 12 The notice under s 260-5 of the Administration Act referred to in the Statement of Claim was issued on 5 February 2003. On the same day similar notices were issued to Bendigo Bank Limited and on the following day to the Commonwealth Bank of Australia. In the course of argument on the present application counsel for the respondent accepted that these notices were invalid since they were issued before the assessments. Hence there was as at the date of the garnishee notices, no tax debt due and payable. The conclusiveness of an assessment 13 Section 177 of the Assessment Act provides that the mere production of a copy of a notice of assessment is conclusive evidence of the due making of the assessment and, except in proceedings on a review or appeal, that the amount and all the particulars of the assessment are correct. The High Court said that the purpose of s 177(1) is to make it impossible for a taxpayer in proceedings other than an appeal against it to challenge an assessment on any grounds: McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 249 at 281-282, F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 375-376. However s 177(1) does not deprive the Federal Court of the jurisdiction conferred on it by s 39B(1) of the Judiciary Act 1903 (Cth) to grant prohibition or an injunction against an officer of the Commonwealth pursuant to s 75(v) of the Constitution. But an assessment under s 177 will be valid as long as it satisfies the basic Hickman requirements, that is to say it is a bona fide attempt to exercise the power that it relates to the subject matter of the legislation and is reasonably capable of reference to the power given: R v Hickman; ex parte Fox & Clinton (1945) 70 CLR 598 at 615; Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168. Summary judgment 14 A proceeding will be an abuse of process if it can be clearly seen to be doomed to failure: Walton v Gardiner (1993) 177 CLR 378 at 393. Australian law and practice set a high threshold for a party seeking summary judgment. The leading case is General Steel Industries Inc v Commissioner for Railways (NSW) 164, 112 CLR, 125 at 128-130 which erects a palisade of adjectives. For example, the claim must be "manifestly groundless" or "so obviously untenable that it cannot possibly succeed". The present case 15 The statement of claim discloses essentially three grounds. · the Commissioner did no more than treat receipts, either in the form of bank deposits or cash seized by the Queensland police, as assessable income; · the assessments were merely a device to obtain the cash seized by the Queensland police; · the assessments were tentative or provisional. The calculation ground 16 The whole point of s 167 is that the Commissioner, deprived of the usual source of information which is contained in a taxpayer's return, has to do the best he or she can on whatever information is available. Such information as is available to the Commissioner will be infinitely variable. In the present case, the Commissioner had become aware that the applicant had received certain cash. It is difficult to see how the Commissioner could have done anything else other than issue the assessments, given the failure of the taxpayer to lodge returns. It is a truism that not all cash receipts constitute assessable income. Likewise there may be deductions available to the taxpayer. But these are matters which it is open to the taxpayer to raise in objection proceedings, the onus being on him: Administration Act, s 14ZZK(b). There is at the very least "a substantial possibility" that the amounts for which the assessment was issued were assessable income: Richard Walter at 200-201. The device ground 17 Plainly there is no obligation on the Commissioner to identify any particular source of income. 18 If an assessment is validly made under s 167, it is none the less valid because the timing of the issue is affected by the Commissioner's desire to avail himself of a window of opportunity with respect to assets of the taxpayer. There is no obligation on the Commissioner to issue an assessment at any particular time (particularly when the taxpayer has not provided returns): Madden v Madden (1996) 32 ATR 223 at 258. Since this ground was merely another way of saying that the Commissioner was not acting bona fide, I adopt what was said by Kenny J in Briglia v Federal Commissioner of Taxation (2000) 44 ATR 166 at [8] – [9]. Tentative or provisional assessment 19 There is nothing on the face of the assessments to suggest they were tentative or provisional, in contrast to cases like R v Commissioner of Taxation (WA); ex parte Briggs (1986) 12 FCR 301 where the Commissioner admitted that he had "never intended to embark and did not in fact embark on the process of ascertaining the taxpayers income" or Commissioner of Taxation v Stokes (1996) 72 FCR 160 where the Commissioner purported to make three assessments against the same taxpayer for the one income year. Discovery 20 At the end of the particulars under par 4 of the statement of claim the applicant "reserve(d) the right to deliver further and better particulars following discovery". However, if no arguable case has been demonstrated it would not be appropriate to allow the case to go ahead on the purely speculative basis that on discovery might turn something up: see Madden at 258. Conclusion 21 There will be orders that there be judgment for the respondent and that the applicant pay the respondent's costs of the motion and of the proceeding. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 24 August 2004 Counsel for the Applicant: A Richards QC and A Young Solicitor for the Applicant: Ferraro Pruscino & Co Counsel for the Respondent: H Riley Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 10 August 2004 Date of Judgment: 25 August 2004