FEDERAL COURT OF AUSTRALIA Haritos v Commissioner of Taxation [2014] FCA 96 Citation: Haritos v Commissioner of Taxation [2014] FCA 96 Appeal from: Confidential v Commissioner of Taxation [2013] AATA 112 Parties: GEORGE HARITOS and ALEX KYRITSIS v COMMISSIONER OF TAXATION File number(s): VID 235 of 2013 Judge(s): PAGONE J Date of judgment: 20 February 2014 Corrigendum: 25 February 2014 Catchwords: TAXATION – s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) appeal from the Administrative Appeals Tribunal – income tax assessments under ss 167(b), 167(c) and 170(1) of the Income Tax Assessment Act 1936 (Cth) – extension of time to file notice of objection to competency of appeal – appeal not competent – whether amended notice of appeal raised questions of law – Tribunal's decision based on whether taxpayers discharged burden of proof by proving "actual taxable income" to establish excessiveness of assessment under s 167 – whether Tribunal failed in its duty of providing procedural fairness to the taxpayers. Legislation: Administrative Appeals Tribunal Act 1975 (Cth) ss 39(1), 44(1) Evidence Act 1995 (Cth) s 69(2) Federal Court Rules 2011 (Cth) rr 1.39, 33.12(2)(b), 33.30(1) Income Tax Assessment Act 1936 (Cth) ss 6(1), 44(1), 166, 167(b), 167(c), 170(1), 264 Income Tax Assessment Act 1997 (Cth) s 109C(3) Taxation Administration Act 1953 (Cth) ss 14ZZ, 14ZZK(b)(i), 284-75, 298-30 Cases cited: 3D Scaffolding Pty Ltd v Commissioner of Taxation [2009] FCAFC 75 Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515 Bell v Federal Commissioner of Taxation [2012] FCA 1042 Clements v Independent Indigenous Advisory Committee (2003) 131 FCR 28 Commissioner of Taxation v Rigoli [2013] FCA 784 Comcare v Etheridge (2006) 149 FCR 522 Federal Commissioner of Taxation v Blakely (1981) 82 CLR 388 Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 HBI Health Funds Inc v Minister for Health and Ageing (2006) 149 FCR 291 Hudson v Minister for Immigration and Citizenship (2012) 126 ALD 40 Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 Minister for Immigration and Citizenship v Li (2012) 202 FCR 387 Minister for Immigration and Citizenship v SZMDS (2010) 240 CLR 611 Minister for Immigration and Multicultural Affairs v Al-Miahi (2001) 65 ALD 141 Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 SZOOR v Minister for Immigration and Citizenship (2012) 202 FCR 1 Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation (1963) 113 CLR 475 Mulherin v Commissioner of Taxation [2013] FCAFC 113 Osland v Secretary to the Department of Justice (2010) 241 CLR 320 Rawson Finances v Commissioner of Taxation [2013] FCAFC 26 Tisdall v Webber (2011) 193 FCR 260 TNT Skypack International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 Wilson Finances Pty Ltd v Commissioner of Taxation [2012] FCAFC 26 Date of hearing: 9 and 10 December 2013 Date of last submissions: 10 December 2013 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 30 Counsel for the Appellants: Dr B Orow Solicitor for the Appellants: Stephen Peter Byrne Counsel for the Respondent: Ms M Schilling Solicitor for the Respondent: Maddocks FEDERAL COURT OF AUSTRALIA Haritos v Commissioner of Taxation [2014] FCA 96 CORRIGENDUM 1. In the Reasons for Judgment the second extract in paragraph 17 has been amended by inserting the word "and" in the second sentence and by replacing the word "more" with "no" in the fourth sentence. 2. Other stylistic and formatting amendments have been made. I certify that the preceding two (2) numbered paragraphs are a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Pagone. Associate: Dated: 25 February 2014 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 235 of 2013 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: GEORGE HARITOS First Appellant ALEX KYRITSIS Second Appellant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PAGONE J DATE OF ORDER: 20 February 2014 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The proceeding be dismissed as incompetent. 2. The applicants pay the respondent's costs of the proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 235 of 2013 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: GEORGE HARITOS First Appellant ALEX KYRITSIS Second Appellant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PAGONE J DATE: 20 february 2014 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Messrs George Haritos and Alex Kyritsis seek to appeal from the decision of the Administrative Appeals Tribunal ("the Tribunal") to the extent that it affirmed the Commissioner's objection decisions in respect of assessments to tax and penalties for the years of income ended 30 June 2005 to 30 June 2009. Messrs Haritos and Kyritsis were at all relevant times directors of AES Services Pty Ltd ("AES Services") and AES Property Pty Ltd ("AES Property") until the latter, in 2006, was liquidated until the former was put under the administration of Mr Andrew Yeo of Pitcher Partners between 6 December 2009 and 28 July 2010. The companies operated in the cleaning business. 2 Assessments had initially been issued under s 166 of the Income Tax Assessment Act 1936 (Cth) ("1936 Act") for both Messrs Haritos and Kyritsis on 6 November 2008 (for the 2005 to 2007 income years) and on 29 May 2009 (for the 2008 income year). Subsequently, on 10 June 2009, the Commissioner issued a group of assessments under ss 167(b) and 170(1) of the 1936 Act for both Messrs Haritos and Kyritsis in respect of the 2005 to 2008 income years. The Commissioner also raised assessments for penalties in respect of each of the four income years on Messrs Haritos and Kyritsis on 10 June 2009 under ss 284-75(1) and 298-30 of the Taxation Administration Act 1953 (Cth) ("1953 Act"). That group of assessments had been made following a covert audit into the affairs of AES Services and AES Property. The Tribunal recited the background to the proceedings (referring to most of those concerned by pseudonym) noting at [30]: 30. The Commissioner commenced an audit of [AES Services] taxation affairs in December 2008 and followed it with audits of [Mr Haritos] and [Mr Kyritsis'] taxation affairs beginning in February 2009. The audits were commenced without the taxpayers' knowledge in order to maintain the integrity of an investigation being conducted by the Australian Federal Police (AFP). That investigation focused on whether [AES Services] had declared as part of its assessable income, amounts deposited in a particular bank account. A second group of assessments was issued to Messrs Haritos and Kyritsis in 2010. On 30 September 2010 two assessments were issued to Mr Haritos in respect of the 2008 year of income increasing, respectively, the tax and penalties payable. His assessments for the 2009 year were also increased with a default assessment under s 167(c) of the 1936 Act and an assessment for penalties under ss 284-75(3) and 298-30 of the 1953 Act. On 30 July 2010 and 4 August 2010 similar assessments to those which had been raised against Mr Haritos were issued against Mr Kyritsis in respect of the 2006 to 2009 years of income. The assessments for the 2009 year of income were all made pursuant to s 167(c) of the 1936 Act. The assessments for the remaining years were made pursuant to s 170(1) of the 1936 Act. 3 The Commissioner had identified during the course of the audit, as the Tribunal set out in its reasons, that deposits had been made to Messrs Haritos and Kyritsis from: (a) an account held by AES Services with the Commonwealth Bank of Australia ("CBA"); (b) an account held by Messrs Haritos and Kyritsis trading as AES Services with the Westpac Bank; (c) a Westpac Bank account held by AES Property; and (d) unidentified sources. The Commissioner also raised assessments in respect of dividends declared by AES Services in the 2009 year of income. The Commissioner had taken the view that the deposits to Messrs Haritos and Kyritsis ought to have been returned as their personal income in respect of the five income years in dispute. Messrs Haritos and Kyritsis challenged the assessments and sought a review by the Tribunal of the Commissioner's objection decision. 4 The hearing before the Tribunal proceeded, as explained in the taxpayers' written submissions on appeal, on the basis that the sole issue for determination by the Tribunal was the taxation implications that arose from the use of amounts paid from the AES Services Westpac account to the accounts of the taxpayers. The taxpayers contended that the amounts sourced from the Westpac account were applied in paying AES Services' expenses which the taxpayers maintained had consisted mainly of expenses paid to subcontractors. The taxpayers gave evidence about how the business of AES Services was run and how AES Services' subcontractors were paid. The taxpayers claimed that a proportion of AES Services' invoices had been lost and they gave evidence of the reasons for setting up the AES Services Westpac account. 5 The appeal from the Tribunal's decision was brought to this Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ("AAT Act") and, therefore, is confined to questions of law. Section 44(1) of the AAT Act provides: A party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding. It may be useful to recall that a taxpayer who is dissatisfied with a decision by the Commissioner upon an objection has the option of seeking a review of the decision by the Tribunal or to appeal the decision to this Court: s 14ZZ, 1953 Act. The decision to appeal to this Court carries with it the right of further appeal but the decision to seek to have the Commissioner's decision reviewed by the Tribunal limits any further appeal to this Court to a question of law. The notice of appeal filed for the taxpayers in this appeal initially formulated 12 questions which were said to be questions of law, and the Commissioner did not initially challenge the competence of the appeal. One of the 12 questions was abandoned by the taxpayers shortly before the hearing of the appeal and that circumstance led the Commissioner to challenge the competency of the appeal based upon the then remaining 11 questions. The Commissioner sought, at the commencement of the hearing of the appeal, to object to its competency on the grounds that, question 12 having been abandoned, the 11 questions which remained were not questions of law. 6 The Commissioner, therefore, sought leave under r 1.39 of the Federal Court Rules 2011 (Cth) ("Rules") to extend the time within which to object to the competency of the appeal, since any notice of objection to competency ought to have been filed within 14 days of being served with the notice of appeal as required by r 33.30(1). The basis of the Commissioner's application for leave to extend the time within which to object to competency was the relatively recent abandonment by the taxpayers of the only question of law which the Commissioner considered had properly invoked the Court's statutory jurisdiction under s 44(1) of the AAT Act. The taxpayers had previously been directed by the Court to file an amended version of their written submissions shortly before the hearing of the appeal because they had failed to comply with previous orders which had been made concerning the length of submissions. The replacement submissions, once filed, appeared to abandon question of law numbered 12 which had been put in the following terms: Whether it was open to the Tribunal to review the validity of the assessments and in failing to do so, whether the Tribunal erred in law. It may be doubted whether question of law numbered 12, abandoned by the taxpayers, was (as expressed) sufficient to have engaged the Court's statutory jurisdiction under s 44(1) of the AAT Act, but the Commissioner had taken the view that the presence of the question gave the appeal competence and had not previously sought to challenge the competence of the appeal until the question was abandoned. The question of the competence of the appeal was, in any event, as counsel for the taxpayers correctly conceded, a matter which the taxpayers need to establish irrespective of whether or not the Commissioner sought to challenge the competence of the appeal. The practical effect of granting leave would, essentially, therefore, be to keep in issue the Commissioner's ability to claim costs if the appeal was ultimately found to lack competence. It was, in any event, desirable for the question of the competence of the appeal to be fully engaged with detailed submissions from the Commissioner as the controverter, and the Commissioner's reason for objecting to competency out of time was explained. The grant of leave to object to competency out of time would not necessarily entitle the Commissioner to costs if the appeal were found to be incompetent because the Commissioner's conduct in not raising the question of competence until shortly before the appeal is a matter which may be relevant to the Court's discretion about the awarding of costs. Accordingly, the Commissioner was granted leave to file the notice of objection to competency of the appeal without deciding how costs would be ordered if the appeal were found to be incompetent. 7 During extensive discussion about the competency of the appeal, the taxpayers sought, and were granted, leave to amend their notice of appeal to recast the questions which they had previously formulated. The notice of appeal, before the final amendment, had previously formulated questions in abstract without reference to the particular decision in dispute, or without reference to an aspect of the decision in dispute, which was said to be wrong in law. Thus, by way of example, question 1 was expressed as: Whether [the] Tribunal denied the Applicants procedural fairness. Nothing in the question, as formulated, identified a question of law founded in the decision which was said to be erroneous. Counsel for the taxpayers sought to explain that the reason for adopting this formulation for the questions of law was because the necessary link between the otherwise abstract question and the specific decision from which the appeal was brought was to be found in what appeared under the heading "Grounds relied on". In this case, indeed, in the unamended notice of appeal there was material under the heading "Grounds relied on" which could be seen to link the questions to the decision sought to be appealed from but, as explained in Osland v Secretary to the Department of Justice (2010) 241 CLR 320, the questions of law to engage such a statutory jurisdiction as that confined by s 44 are "not to be distilled from the grounds of appeal": at 333 [21]. In Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515 Ryan J had also explained at 524 that it was not "legitimate to call in aid the grounds supplied" to read down the questions of law which are required by the Rules. In HBI Health Funds Inc v Minister for Health and Ageing (2006) 149 FCR 291 this Court said at 293: As Birdseye and Etheridge also make plain, the grounds required to be specified in the notice of appeal are not grounds of appeal; they are the grounds upon which the appellant will argue that the answers for which it contends to the questions of law entitle it to the relief which it seeks. It is not possible, as the applicant sought to do in this case, to extend the subject matter of the appeal beyond the specified questions of law by itemising, under the heading "Grounds", a series of alleged errors (some being errors of law, some being errors of fact and some being errors of mixed fact and law) in the reasons for decision of the Tribunal. The taxpayers, therefore, during the course of argument, sought, and were given leave, to reformulate their questions so that the basis in the grounds which were said to be errors were linked to the otherwise abstract questions which they contended the alleged errors posed. In doing so it became clear that the true complaints of the taxpayers were not about questions of law but about the Tribunal's findings on the evidence before it and that what the taxpayers were seeking in the appeal was a merits review by the Court of the Tribunal's decision which was not available to them in an appeal under s 44(1) of the AAT Act given the election they had made under s 14ZZ of the 1953 Act. 8 Another example of a related difficulty with the grounds of appeal as first formulated, going to the competency of the appeal, can be seen in question 11 which stated: Whether, on the evidence before the Tribunal, the Tribunal erred in the construction and application of sections 284-75(1), 284-90 and 284-220 of schedule 1 to the Taxation Administration Act 1953. This ground, to the extent that it sought to engage a question concerning the misconstruction of a statutory provision, failed to do so by stating no more than that there was an error in the construction or application of a statutory provision without identifying what the error was said to be. In Comcare v Etheridge (2006) 149 FCR 522 ("Comcare") Branson J said at 528 [19]: A broad enquiry as to the construction and operation of statutory provisions is not a question of law within the meaning of s 44(1) of the AAT Act. Moreover, by inviting the Court to engage in such a broad and hypothetical enquiry the purported question of law extends beyond any controversy between the parties. It is for this reason incapable of constituting a "matter" and thus beyond the competence of the court which has jurisdiction only in respect of matters (ss 75-77 of the Constitution of the Commonwealth). A common difficulty with all of the questions of law as first formulated (except possibly the abandoned question 12) was that the error of construction, or the other asserted generalised error, was dependent upon the evidence which had been before the Tribunal. Generalised questions fail to distinguish between factual disputes and questions of law. The taxpayers, as I have said, were given leave to file an amended notice of appeal. 9 The Commissioner's primary contention was that the notice of appeal, as reformulated, was incompetent because the questions identified in the amended notice of appeal were not questions of law. In TNT Skypack International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 Gummow J explained at 178 that the existence of a question of law was not "merely a qualifying condition to ground the appeal, but also the subject matter of the appeal itself". The question of law to be identified for these purposes is not an abstract question of law but, rather, a question of law "in [the] proceeding". It is necessary, therefore, for questions of law to be identified not as abstract questions indifferent to the facts and circumstances of any particular case but, rather, for the questions to arise from the particular facts and circumstances in which the question is grounded. The clear formulation of questions of law arising from the particular circumstances of a case must constantly be borne in mind in light of the "limited role of a court reviewing the exercise of an administrative discretion": Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 ("Peko-Wallsend") at 40. The role of the Court is to "set limits on the exercise of that discretion, and a decision made within those boundaries cannot be impugned": Peko-Wallsend at 40-41. The need for "precision" is emphasised by r 33.12(2)(b) of the Rules which requires that the notice of appeal state "the precise question or questions of law to be raised on appeal": see Hudson v Minister for Immigration and Citizenship (2012) 126 ALD 40. 10 The first question of law as re-formulated for the taxpayers contended that the Tribunal had failed in its duty of providing procedural fairness to the taxpayers. Some 11 matters were relied upon as the basis of the claim of denial of procedural fairness. The ground as re-formulated was: Whether in each one or more of these instances: a. In admitting into evidence and/or giving weight to the statements of persons who were not available for cross-examination [550], name of the statement of Mr Smith and the statements contained in documents attached to the statement of Mr Smith; b. In receiving into evidence the opinion evidence of Mr Meredith [484] who did not possess relevant expertise in matters before the Tribunal; c. In denying the applicants the opportunity to cross-examine Mr Meredith on the basis upon which his evidence was received; d. In refusing to require the Commissioner to produce a s 264 notice issued to the Australian Federal Police [573] that contained a list of relevant documents in possession of the Commissioner but were not disclosed to the Tribunal; e. In denying the applicants the opportunity to subpoena the auditors of the reports that informed the basis of the assessments the subject of review and in so doing denied the applicants the opportunity to cross-examine those witnesses on matters relevant to the discharge by the applicants of the burden of proof that the assessments were excessive; f. In receiving evidence which had no rationally probative basis, which evidence included hearsay statements and documents, in circumstances where the applicants could not cross-examine the maker of those statements or test the content of those documents; g. In giving written reasons for decisions and rulings on preliminary questions and issues that differed from oral reasons given during the trial [160, 193, 212]; h. In applying the rules of evidence inconsistently; i. In allowing into evidence T documents in their entirety after the conclusion of the evidence and in failing to identify the weight to be accorded to each document [381, 599] and so denied the applicant the opportunity to properly review and test that material; j. Denying the applicants the opportunity to ask Andrew Yeo questions in relation to the negotiations of the Deed of Company Arrangement between the applicants as directors of AES Services Pty Ltd, the Commissioner, and the Administrator; and k. In refusing to receive into evidence T documents identified by the documents as relevant and upon which they relied to discharge the onus of proof that the assessments were excessive [the] Tribunal breached its statutory duty in s 39 of the Administrative Appeals Tribunal Act 1975 and [the] common law duty to afford the applicants procedural fairness. A properly formulated question of breach of procedural fairness has been held to raise a question of law. In Clements v Independent Indigenous Advisory Committee (2003) 131 FCR 28 Gray ACJ and North J said at 32 [8]: Given the state of the authorities, this court should accept the principle that a denial of procedural fairness is an error of law and that, therefore, an appeal from a decision of the Tribunal on the ground of such a denial raises a question of law. For this purpose, it is undesirable to attempt to distinguish between a denial of procedural fairness resulting from a course of action chosen by the Tribunal in conducting the case before it and a denial that is unintended and results from an error of fact made by the Tribunal. In the circumstances, the proceeding has been commenced properly and amendment is unnecessary. It goes without saying that, if an amendment were necessary, leave to make it should have been given, for the purpose of enabling the applicant to put his case. However, it is difficult to see how any of the instances relied upon in this first question engages a relevant failure to accord procedural fairness in the hearing before the Tribunal. The question is an attempt to re-agitate on appeal, under the guise of a complaint of a denial of procedural fairness, the dispute on its merits which the Tribunal had decided against the taxpayers after having afforded procedural fairness to the taxpayers. 11 The issue before the Tribunal was whether the assessments were excessive and, in that task, the taxpayers' burden of proof was to establish their actual taxable income rather than error on the part of the Commissioner. In Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 the High Court held that a taxpayer seeking to discharge the burden of proof that an assessment [under s 167(b)] was excessive needs to prove the actual amount of taxable income upon which the assessment ought to have been based. In Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 the Full Court said at 315 [63]: A taxpayer who seeks to establish that a s 167 assessment based on the asset betterment method of calculation is excessive must positively prove his or her "actual taxable income" and, in doing so, must show that the amount of money for which tax is levied by the assessment exceeds the actual substantive liability of the taxpayer: Dalco at 623-5 and Trautwein at 88. The taxpayer must show that the unexplained accumulated wealth was from the non-income sources. The manner in which a taxpayer discharges that burden is not defined or specified – it varies with circumstances: Dalco at 624. The reason for this conclusion was explained by the Court at 312-313 [53]-[55]: The s 167 power is necessarily different to that in s 166. Under s 166, the power is to "make an assessment of the amount of the taxable income". The phrase "taxable income" is defined to mean "assessable income" minus "deductions": s 4-15 of the 1997 Act and s 6(1) of the 1936 Act. Under s 167, that process of calculating taxable income as assessable income minus deductions is not possible (in whole or in part) because of one of the preconditions to the exercise of the power in sub ss (a) - (c) of s 167 – a failure by a person to lodge a tax return, the tax return is deficient or the Commissioner has reason to believe that a person who has not lodged a return has derived taxable income. It is for those reasons that the balance of s 167 empowers the Commissioner to make an assessment of the amount upon which income tax ought to be levied and for that amount to be deemed to be the taxpayer's taxable income for the purposes of s 166. The third part of the section – the deeming provision – would be futile if it was necessary for the Commissioner to undertake a process of the kind referred to in s 166. As the Commissioner submitted, the assessment of the "amount" in s 167 is not constrained by a process of subtracting "deductions" from "assessable income". Instead, in making his judgment of the "amount" that becomes taxable, the Commissioner may use what is known as the "asset betterment" method: Trautwein at 87, 99-100 and 105. The asset betterment method, and the resulting assessment, is necessarily a guess to some extent and "almost certainly inaccurate in fact": Trautwein at 87. It is therefore "no part of the duty of the commissioner to establish affirmatively what judgment he formed [under s 167 of the 1936 Act], much less the grounds of it, and even less still the truth of the facts affording the grounds": George v Federal Commissioner of Taxation at 204. In my view the same conclusions follow where assessments are made under s 167(c): Commissioner of Taxation v Rigoli [2013] FCA 784. 12 The issue for the Tribunal was, therefore, whether the taxpayers had discharged the burden of proving their actual amount for the years of dispute in question. The Tribunal decided against the taxpayers because it was not satisfied that they had discharged their burden of proof by the evidence upon which they relied. The hearing before the Tribunal had taken some 15 days on various dates between 16 April 2012 and 18 June 2012. The Tribunal's reasons occupy 400 pages with 942 paragraphs. The evidence given by the taxpayers, and by those called to give evidence on their behalf, was carefully considered, but the Tribunal was critical of the credibility and reliability of the testimony given by the taxpayers. The expert evidence of a Mr Steven Adrian, who was called by the taxpayers, was considered by the Tribunal but, in critical respects, the Tribunal was not satisfied that his evidence alleviated the concerns which the Tribunal had about the AES Services Westpac account. His evidence, along with all of the other evidence relied upon by the taxpayers, was carefully considered by the Tribunal and detailed reasons were given for the conclusions which the Tribunal reached. The evidence before the Tribunal also included reports of Pitcher Partners (the administrator of AES Services), Mr Adrian and Mr Greg Meredith (an expert called by the Commissioner) which were considered by the Tribunal in detail. At [681] the Tribunal said: 681. Taking these reports at face value and making allowance in the 2006 year for the fact that none of them can be more than an approximation, I am satisfied that, on the balance of probabilities, there were profits in the 2005, 2006, 2008 and 2009 income years in the form which the accounts could have been paid to [Mr Haritos] and [Mr Kyritsis]. It is clear from the judgment of Fisher J in MacFarlane at [612(6)(c)] above that amounts do not have to be paid from post taxed money. It would be prudent to do so but prudence does not determine whether they have in fact been paid. As for the 2007 income year, I am not satisfied that [Mr Haritos] and [Mr Kyritsis] have discharged their burden of proof to establish that there were not profits from which the amounts assessed could not have been paid. This stems from their inability to prove the expenses on which the reports have been based and I will return to them. Messrs Haritos and Kyritsis had claimed that the amounts paid to them from the Westpac account had been loans to them or had been paid to them to hold on trust for the preservation of company assets. In each case the Tribunal was not satisfied that Messrs Haritos and Kyritsis had discharged the burden of proving the matters which had been asserted. However, the Tribunal did find, and the taxpayers did not dispute, that amounts had been paid to them from the AES Services Westpac account. The Tribunal said at [678]: 678. Putting aside their characterisation, [Mr Haritos] and [Mr Kyritsis] do not dispute that payments have been made to them from the [AES Services] Westpac account. They do not dispute that they are shareholders of [AES Services] or that they are residents of Australia. They do dispute that the payments, or any of them, have been made to them. In the paragraph which followed the Tribunal looked at the analysis which had been undertaken by Pitcher Partners of the transactions shown in the AES Services Westpac and CBA accounts and from which they had concluded that AES Services had made a profit in each of the income years in question. Mr Adrian had reached the same conclusion as Pitcher Partners (although what Mr Adrian described as "operating profits" differed substantially from that assessed by Pitcher Partners in large part because Mr Adrian had made allowance for the taxation liability of AES Services). The Tribunal also considered the evidence of Mr Meredith. The Tribunal prepared a table setting out the evidence of the net profit of AES Services for the years 2005 to 2009 on the basis of the combined material at [679]: Year 2005 2006 2007 2008 2009 Mr Haritos' amended taxable income $768,798 $2,115,910 $3,307,920 $2,150,449 $2,752,004 Mr Kyritsis' amended taxable income $107,445 $1,697,015 $344,070 $1,533,580 $1,922,423 Total of [Mr Haritos'] and [Mr Kyritsis'] taxable income $876,243 $3,812,925 $3,651,990 $3,684,029 $4,674,427 Profit assessed by Pitcher Partners $1,522,665 $3,134,869 $1,836,912 $4,845,016 $7,738,420 Net profit before tax assessed by Mr Adrian $1,718,217 $3,642,590 $2,612,881 $3,643,989 Operating profit after tax: $1,064,731 $855,008 $195,902 $597,481 Net profit before tax assessed by Mr Meredith $1,718,217 $653,486 $3,642,591 $2,689,173 $98,409 $2,221,077 $3,788,763 Income tax: $1,064,731 $855,088 $1,991,461 $425,518 $425,518 $2,449,027 $742,253 GIC: $597,481 Net post tax profit: There was, therefore, evidence upon which the Tribunal could affirm the assessments made. The critical conclusion, however, was that the taxpayers had failed to prove the assessments to be excessive because the Tribunal was not satisfied that the evidence relied upon by the taxpayers was sufficient to establish their claim. Its lack of satisfaction was not because it failed to accord procedural fairness but because, having accorded procedural fairness, it had decided against the taxpayers. The specific instances listed in the taxpayers' first question are all matters which the Tribunal considered and decided against the taxpayers. 13 The first instance set out in the first question formulated by the taxpayers which is said to be a failure by the Tribunal to accord to them procedural fairness is a complaint that a statement of Mr Douglas Smith, and the documents attached to his statement, were admitted into evidence and given weight in circumstances when Mr Smith and the makers of the statements were not available to give evidence. The admission of evidence is not a breach of procedural fairness and the duty to accord procedural fairness does not necessarily require the Tribunal to exclude evidence, or to give no weight to evidence, based upon statements which have not been the subject of cross-examination. It has long been held that the Tribunal, and the Board of Review before it, is an administrative body with a discretion as to its procedure and the evidence that it will receive: see Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation (1963) 113 CLR 475 ("Mobil Oil"); Mulherin v Commissioner of Taxation [2013] FCAFC 113 at [53]. The Tribunal is obliged to ensure that every party to a proceeding is given a reasonable opportunity to present his or her case and, in particular, to inspect any document, and to have an opportunity to make submissions on any document, to which the Tribunal proposes to have regard in reaching a decision: s 39(1), AAT Act. The relevant question in each case is whether the Tribunal's process was unfair in the circumstances: Wilson Finances Pty Ltd v Commissioner of Taxation [2012] FCAFC 26 at [73] and [137]. 14 The evidence of Mr Smith was received by the Tribunal on its conclusion, after argument, that the evidence fell within s 69(2) of the Evidence Act 1995 (Cth). Section 69(2) provides an exception to the rule against hearsay for business records which contain representations made by a person who had or might reasonably be supposed to have had personal knowledge of the asserted facts. The sub-section provides: The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made: (a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact; or (b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact. The evidence of Mr Smith, about which the taxpayers complain, was of statements which the Tribunal concluded on the facts fell within this statutory exception and the taxpayers in this appeal did not contend any error of principle in this regard. The Tribunal also considered that the taxpayers had not explained the nature of any prejudice to the taxpayers of an inability to cross-examine the authors of documents which were annexed to Mr Smith's statements. At [550] of the Tribunal's reasons, to which the taxpayers' amended notice of appeal directed attention, the Tribunal stated: 550. In this case, I accept that Dr Orow is not able to cross examine the authors of the documents annexed to Mr Smith's statement but he has not explained the nature of any prejudice this will visit upon his clients. At the time of the tender, those annexures were simply documents extracted from the ATO's records. They are records of communications between officers of the ATO and representatives of [Mr Haritos] and [Mr Kyritsis] or persons or bodies associated with them. The records have long been available to [Mr Haritos] and [Mr Kyritsis] and they have had the opportunity to produce evidence contradicting the statements made in the records and attributed to those representing [Mr Haritos] and [Mr Kyritsis] or persons or bodies associated with them. They have also had the opportunity to respond to assertions made in those records of facts as perceived by officers of the ATO. The records contain some statements that may be regarded as prejudicial to the interests of certain persons or bodies but, the ATO's records of what has transpired and in view of the opportunity given to [Mr Haritos] and [Mr Kyritsis] to respond to them, are not unfairly prejudicial to them in the sense used in s 1359(a) or otherwise. For these reasons I admitted Mr Smith's statement. Its weight and the weight I give to its annexures is a matter I will consider in addressing the evidence below. It is clear, therefore, from the very paragraph relied upon by the taxpayers in this appeal, that the facts do not establish a failure to accord procedural fairness to Messrs Haritos and Kyritsis from an inability by them to cross-examine Mr Smith or those who had made statements in annexures to his material. Indeed, no specific prejudice was referred to or relied upon in the appeal beyond the generalised statement that an ability to cross-examine was a breach of the Tribunal's duty of procedural fairness to the taxpayers. There is no foundation in law for an obligation to permit cross-examination in all circumstances of the kind which arose in the proceeding before the Tribunal and there were no specific facts relied upon in the appeal or before the Tribunal which established a specific breach in respect of these taxpayers in this case before the Tribunal. The Tribunal, rather, did provide the taxpayers with an opportunity to identify any substantive prejudice occasioned by the absence of an opportunity to cross-examine Mr Smith. The Tribunal specifically said at [522]: 522. The second perspective relates to the scope of any likely cross-examination. Apart from his stating that his clients have been denied the opportunity to cross examine Mr Smith, Dr Orow has not put forward any substantive disadvantage that his clients would suffer from being denied the opportunity. He has not made me aware of any matters in the documents with which [Mr Haritos] and [Mr Kyritsis] take issue and would not want to explore but, even if he had, I come back to the first perspective I have mentioned. Section 69(2) provides for an exception to the hearsay rule in the case of business documents. They are admissible. If Dr Orow wanted to test the representations made in the documents, he could have taken steps to do so. It is not enough simply to claim that his clients have been denied procedural fairness. In my view, they have not been denied that fairness. In addition, and fundamentally, the appeal to this Court failed to show how the Tribunal's decision was infected by any such failure to permit Mr Smith's evidence to be the subject of cross-examination. The Tribunal's decision was that the taxpayers had failed to discharge their burden of proving their actual taxable income. The taxpayers did not identify anything in the Tribunal's reasons for its decision to warrant a conclusion that a failure to cross-examine Mr Smith's evidence was operative in the Tribunal's determination of the substantive issues, let alone that any impermissible failure to permit cross-examination had resulted in the conclusion that the taxpayers had failed to discharge their burden of proof. It might have been otherwise if, for example, the taxpayers had themselves called Mr Smith to give evidence and had been prevented from testing the evidence which had previously been relied upon by the Commissioner. 15 The second instance relied upon for the taxpayers in relation to the first question which was said to be a question of law was the receipt into evidence of the opinion evidence of Mr Meredith who, it was contended, did not possess relevant expertise in relation to the matters before the Tribunal. The paragraph of the Tribunal's reasons to which the taxpayers' amended notice of appeal referred was [484] in which the Tribunal said: 484. Dr Orow objected to Mr Greg Meredith's giving evidence on the basis that he should not be regarded as an expert witness. He accepted that he is a highly qualified forensic accountant and did not challenge his expertise in that regard. Where Mr Meredith was not an expert, Dr Orow submitted, is in the relevant service industry in which [AES Services] was engaged. That is expertise, Dr Orow submitted, that Mr Meredith needed to possess if he was to answer questions relating to benchmark analysis in that industry. Mr Meredith would, for example, need to know the labour costs in that industry. I consider that Dr Orow's objection to Mr Meredith's expertise was made on too narrow a basis. I find that Mr Meredith had expertise in service industries of types other than the relevant service industry in which [AES Services] was engaged. That expertise, together with his expertise as a forensic accountant qualified him as an expert witness in this case and he did not need to have experience in or a detailed knowledge of the relevant service industry required by Dr Orow. It is plain from a reading of the paragraph relied upon by the taxpayers in their claim of a denial of procedural fairness that the receipt into evidence of the opinion of Mr Meredith was based upon a finding of fact which was not challenged and, in any event, appeared plainly to have been open to the Tribunal to find. The Tribunal gave careful consideration to the admissibility of the evidence tendered on behalf of the Commissioner, including the evidence of Mr Meredith. The taxpayers have not identified any error in the Tribunal's approach to the receipt of expert evidence except the assertion, without challenge of the contrary finding by the Tribunal of the fact, that Mr Meredith did possess the relevant expertise in respect of which his opinion had been expressed. In any event, the evidence of Mr Meredith was not the basis upon which the Tribunal concluded that the taxpayers had failed to discharge their burden of proof by having failed to establish their actual taxable income. 16 The third instance relied upon by the taxpayers for the contention that the Tribunal had failed to accord procedural fairness was said to lie in the Tribunal having denied them the opportunity "to cross examine Mr Meredith on the basis upon which his evidence was received". That assertion, however, is not supported by the facts. Mr Meredith was called to give evidence and he was cross-examined by counsel for the taxpayers. It is inaccurate to say that the taxpayers were denied the opportunity to cross-examine Mr Meredith on the basis upon which his evidence was received when the fact was that he was present at the hearing before the Tribunal and was in fact cross-examined by counsel for the taxpayers who appeared both before the Tribunal and in this Court on appeal. The transcript of that cross-examination does not reveal any impediment of any kind on the cross-examination. 17 The fourth instance said to reveal that the Tribunal had denied the taxpayers procedural fairness was said to be in the Tribunal's refusal to require the Commissioner to produce a s 264 notice issued to the Australian Federal Police that contained a list of relevant documents in possession of the Commissioner but which were not disclosed to the Tribunal. In advancing this submission the taxpayers did not refer to the facts or the decision in Mobil Oil. In any event, nothing was shown by the taxpayers to warrant the conclusion that the failure to require the production of the notices in any way affected adversely the operative decision by the Tribunal bearing in mind the taxpayers' burden of proof. The amended notice of appeal made specific reference in this context to [573] in the Tribunal's reasons which stated: 573. Dr Orow submitted that the Commissioner should produce the notices he had issued under s 264 of the ITAA 36 to the Australian Federal Police (AFP) on 27 January 2008 and to the Commonwealth Bank of Australia (CBA) on 28 May 2009. He argued that they would assist him in showing the documents that [Mr Haritos] and [Mr Kyritsis] had in their possession when the Commissioner was making his assessments. As I understand him, he wanted the notices themselves to show the documents that were in the possession of the Commissioner and not in that of his clients at particular times. Ms Schilling opposed his submission. If they were, it would support his submission that the Commissioner had acted in bad faith and the assessments are invalid. He also referred to the amendments that the Commissioner had made from time to time as support for his proposition that he had acted in bad faith. It is plain from the paragraph upon which the taxpayers rely that the failure to require production of the notices issued under s 264 of the 1936 Act did not bear upon the matter which the Tribunal was called to determine bearing in mind that the burden of proof fell upon the taxpayers to prove the actual taxable income and not that the Commissioner was in error. However, if there were any doubt about the matter, it is instructive to read the two paragraphs in the Tribunal's reasons which followed, where the Tribunal said: 574. I do not understand how the documents, or categories of documents, that the Commissioner sought under s 264 notices can assist me in resolving this case. What is important are documents relevant to the review of the decision and that may be sought. For the reasons I have given above, the validity of the assessments is not a matter I can consider. Therefore, issues relating to bad faith that might lead to a declaration of invalidity in a court, can have no relevance to my review of the taxation objection decisions. 575. If I look at the matter from the point of view of reviewing the taxation objection decisions relating to the imposition of penalties, the s 264 notices have no relevance either. What may be relevant is not what was sought but what was available to the taxpayers and what steps they took to make the Commissioner aware of any difficulties they had in obtaining their records. An indication of that might be able to be obtained from three sources. The first is found in the FST Documents where the Commissioner has lodged those in his possession or control and that he considers relevant to the review. The second is in the property seizure record recording the items seized during the search of [AES Services'] premises on 10 June 2009. It lists 90 items and one of [AES Services'] secretarial staff , whom I recall "Samantha", signed a certification to the effect that the items had been correctly described. Also relevant is Samantha's acknowledgement of receipt of [AES Services'] documents returned to it by the AFP on 21 February 2012. That document, exhibit U, contains a description of the documents returned. The source is in any correspondence or communication they or their advisers had with the ATO. Some records are to be found in the T documents. It is, therefore, clear that the complaint of the refusal to require the Commissioner to produce the s 264 notice issued to the Australian Federal Police was correctly analysed by the Tribunal as irrelevant to the statutory task of reviewing the objection decision. Nothing said by the taxpayers in the appeal warrants any contrary conclusion. There is no basis upon which the taxpayers established that the refusal bore upon the statutory task undertaken by the Tribunal. 18 The fifth instance said to enliven the first question of law as a breach of a duty to accord procedural fairness was in denying the taxpayers the opportunity to subpoena the auditors of the reports that formed the basis of the assessments which were the subject of review and, it is said, that in doing so the Tribunal denied the taxpayers the opportunity to cross-examine those witnesses on matters relevant to the discharge by them of the burden of proof that the assessments were excessive. It may be accepted that the Tribunal did not issue subpoenas to the auditors of the reports as asserted. However, what is not shown is how that decision was not open to the Tribunal as a matter of law or upon the facts. The validity of the assessments was not what the Tribunal had to determine. Its task was to determine whether the assessments were excessive by the taxpayers proving the actual amount of income upon which tax ought to have been levied. 19 The sixth instance relied upon by the taxpayers in its contention of having been denied procedural fairness was said to be that the Tribunal received evidence "which had no rationally probative basis, which evidence included hearsay statements and documents, in circumstances where the [taxpayers] could not cross examine the maker of those statements or test the content of those documents". This complaint, in large part, is a repetition of complaints considered above. In this instance it was generalised in a number of ways including the bald assertion that the evidence had "no rationally probative basis". It is, in its formulation, not clear which evidence received by the Tribunal is to be regarded as having had no rationally probative basis although it seems that the evidence complained about may have been affidavits which had been filed in other proceedings from the taxpayers' respective spouses, Mr Stephen Kyritsis (the son of Mr Kyritsis), and Mr Lionel Wirth (the former legal representative of Messrs Haritos and Kyritsis). This evidence was dealt with by the Tribunal at [714] to [718] where the Tribunal said: 714. In his first witness statement, [Mr Haritos] has stated that the: "The properties were purchased in the names of entities external to ... [AES Services] to minimise risk and ensure capital preservation. Rental incomes were deposited into the bank accounts of the respective owners." 715. If the properties were purchased with asset preservation in mind, it would be expected that there would be records that reflected that and that ensured that the registered proprietors did not misunderstand that their legal interest was subject to [AES Services'] continuing to hold the beneficial interest. There are no such records. The conduct of the registered owners is not consistent with any understanding that they hold the beneficial interest on trust for [AES Services]. 716. I will begin with the affidavits lodged in the Supreme Court in support of applications to lift the freezing orders on Houses 1 to 7. [Mr Haritos'] affidavit dealt with House 1 and Houses 2 and 3. In relation to Houses 2 and 3, he referred to their being funded by cheques drawn on his and [Effie Haritos'] Westpac loan account. No mention is made of the transfers from the [AES Services] Westpac account to that account previously. [Mr Haritos] adopted [Mr Kyritsis'] affidavit in relation to House 1. [Mr Kyritsis] referred to a deposit on the purchase of $392,000 having been made by way of his personal cheque drawn on the Nemo Bank as was the balance of $1,561.477.43 remaining after a loan from Challenger was taken into account. [Mr Haritos], [Mr Kyritsis] believed, had contributed a further sum of $461,477.43 drawn on his and [Effie Haritos'] joint loan facility. That would have been the [Mr Haritos] and [Effie Haritos] Westpac loan account. No reference is made by either [Mr Haritos] or [Mr Kyritsis] to the source of the funds. Instead, they have presented themselves as having funded the properties from their personal funds. When referring to House 6, [Betty Kyritsis] has given the same impression referred to the particular accounts from which funds were drawn but made no reference to the source of at least some of those funds. 717. The other affidavits lodged in support of the lifting of the freezing order do not give any indication that the funds had their origin with [AES Services] or that [AES Services] had any interest in them. [Stephen Kyritsis], for example, refers to a discussion with his parents, [Mr Kyritsis] and [Betty Kyritsis], regarding their desire to help him financially. At the time he swore the affidavit, the property was leased but he intends it to become his home in due course. [Stella Mellas], the daughter of [Mr Haritos] and [Effie Haritos], refers to House 4 as her matrimonial home. Let alone regarding herself as holding the property on some form of trust for [AES Services] or herself in some sort of role protecting the interests of [AES Services], she transferred a half interest in House 4 to her husband, [Mr Terry Christos Mellas]. [Mr Terry Christos Mellas] has spent his time and labour in renovating it. 718. In view of this material, I am not satisfied that [Mr Haritos] and [Mr Kyritsis] have met their burden of proof on this matter. The affidavits were accurate in identifying the accounts from which the funds were drawn but, by choosing not to reveal the origin of the funds in the [AES Services] Westpac account to the Supreme Court, their conduct is consistent only with those of persons who saw the beneficial interest as their own. In nominating their children as the purchasers, their conduct reinforces the perception of them as persons who have the beneficial interest for that is a privilege of beneficial ownership. It is not a privilege of a person who holds funds on trust or who is, in some way, preserving the assets of [AES Services]. It is clear from these passages that the Tribunal accepted evidence which had a rationally probative basis contrary to the assertion in the complaint as formulated in sub-paragraph (f) of question 1. The Commissioner also submitted (and it was not suggested otherwise) that the taxpayers had not raised before the Tribunal that they could not have called any of the deponents in relation to the content of their affidavits if they had sought to controvert the material in any way. 20 The seventh and eighth instances said to form part of those constituting a breach by the Tribunal of a duty to afford procedural fairness to the taxpayers were the generalised, and un-particularised, claims that the Tribunal gave written reasons for decision and rulings on preliminary questions and issues that differed from the oral reasons given during the trial, and that the Tribunal had applied the rules of evidence inconsistently. The written submissions filed for the taxpayers in this appeal did not shed much light on this complaint. Paragraph 34 of the written submissions for the taxpayers stated: The Tribunal applied the rules of evidence inconsistently but consistently in favour of the Commissioner. That raised questions as to the impartiality of the Tribunal and to that extent the Tribunal failed to act judicially. Instances of such inconsistent applications of the rules of evidence include those at transcript 338, 335, 375, 483, 526, 727 and 1013. The Tribunal refused to receive into evidence T documents identified by the [taxpayers] as relevant and upon which they relied to discharge the onus of proof that the assessments were excessive. Further, the Tribunal received into evidence the T documents in their entirety after the conclusion of the evidence without identifying the evidentiary basis upon which they were received [381, 355]. In doing so the Tribunal denied the applicants the opportunity to test that material and to take objection to inadmissible documents and to make submissions on the relevance and weight to be accorded such documents. A careful consideration of the Tribunal's reasons, and an examination of the transcript, give a different impression from that created by the complaint as formulated. The implication in the complaint of inconsistency by the Tribunal in the application of the rules of evidence, which was elevated to an assertion of apprehended bias in the taxpayers' written submissions, needs to be considered in light of the paragraph in the Tribunal's reasons which dealt with the decisions which had been made during the course of the hearing on preliminary issues. The Tribunal recorded in [159] of its written reasons that decisions and rulings had been made on a number of matters in the course of the hearing and that in making them the Tribunal "gave brief oral reasons on the basis that [the Tribunal] would give more comprehensive written reasons at a later time as requested by Dr Orow". It was, therefore, always contemplated by the Tribunal, and clearly known by the taxpayers, that the reasons which were given at the hearing were summary and were to be more comprehensively provided subsequently in writing as had specifically been requested by counsel for the taxpayers. Those matters were dealt with at [159] to [215] of the Tribunal's reasons which occupy 26 pages in the Tribunal's reasons for decision. Nothing has been identified in any of those reasons which depart from the substance of the oral reasons, or which occasioned prejudice to the taxpayers or which were erroneous in legal principle. 21 The ninth instance relied upon by the taxpayers is said to be that in allowing into evidence the T documents in their entirety after the conclusion of the evidence, and in failing to identify the weight to be accorded to each document, the taxpayers were denied the opportunity properly to review and test that material. The instance, as formulated, is again contrary to the evidence. The taxpayers had objected to admission of the T documents in their entirety at the outset of the hearing and the Tribunal both considered and determined that objection. There was, therefore, no denial of an opportunity to test the material but, rather, a decision on the facts which the taxpayers have not shown not to have been open to the Tribunal. Furthermore, the Tribunal gave comprehensive and detailed reasons for admitting the T documents in their entirety. It did so in its reasons at [330] to [384] which occupy 19 pages in the Tribunal's reasons. The taxpayers neither contend nor show any error on the part of the Tribunal in applying the relevant legal principles in respect of the admission of the T documents into evidence. 22 The tenth instance relied upon is substantially the same as those previously considered. It is that the taxpayers were denied the opportunity to ask Mr Yeo questions in relation to the negotiations of the Deed of Company Arrangement ("DOCA") between the taxpayers as directors of AES Services, the Commissioner and the administrator. However, there was no foundation for any denial of an opportunity to ask Mr Yeo questions bearing upon the matter the Tribunal was called upon to decide. Nor was anything shown in the appeal to justify what was otherwise a generalised statement without particularisation. Furthermore, the Tribunal gave detailed consideration to the DOCA which had been entered into by AES Services and the Tribunal found that the arrangements established by the DOCA in respect of the liabilities of AES Services did not bear upon the characterisation of the payments which the taxpayers received. At [324] to [326] of the Tribunal's reasons the Tribunal said: 324. In light of these principles, it is clear that the Commissioner must fulfil his statutory duty under the taxation law in relation to [Mr Haritos] and [Mr Kyritsis]. He cannot be estopped in performing that duty by any representation he might have made. 325. Even if I am incorrect in this conclusion, I find that the Commissioner has not made any representation that would form the basis of an estoppel. In assessing [AES Services'] taxation liability, the Commissioner has not made any reference to amounts that might have been lent by [AES Services] to the directors. There was no reason why he should when working out what was assessable income. As part of that process, he has deducted from the deposits in the [AES Services] CBA account and the [AES Services] Westpac account those moneys that have been paid from the personal bank accounts of the directors to those of Freanert, reversed transactions and intra account transfers between the [AES Services] CBA account and the [AES Services] Westpac account in order to prevent double counting. 326. The reference to moneys being loans from [AES Services] to the directors comes from the letter written by [Mr Haritos] and [Mr Kyritsis'] solicitors to Mr Yeo. The Commissioner was not party to that correspondence. Although he was a Participating Creditor and the DOCA did not come into effect until he gave his consent, he was not a party to the DOCA. None of the findings made by the Tribunal were challenged on appeal and they all appear to be open for the Tribunal to have made on the evidence. No questions were identified on appeal which needed to have been put at the Tribunal hearing and which were not able to be put, nor was any evidence identified which was prevented from being led which might in any way have required a different conclusion from that reached by the Tribunal. 23 The last of the instances relied upon for what was said to be a question of law of a breach by the Tribunal of a duty to afford procedural fairness to the taxpayers, was a claim of the Tribunal refusing to receive into evidence T documents identified by the taxpayers as relevant and upon which they relied to discharge the onus of proof. As with the previous instances referred to for the taxpayers no error was identified or shown to have been committed by the Tribunal in the law it identified in considering the receipt into evidence of the T documents nor in its application of those principles to the facts. 24 The other questions of law which were set out in the amended notice of appeal are similarly complaints about the Tribunal's decision on the evidence which was available to the Tribunal and are not questions of law. Many take the form of asserting a misunderstanding by the Tribunal of the terms of a statutory provision, but the taxpayers do not identify a misconstruction in some way except to contend that the Tribunal should have decided the case in their favour. Thus, for example, question 2 was, in essence, whether the Tribunal had misunderstood or misapplied s 14ZZK(b)(i) of the 1953 Act in light of the evidence before the Tribunal. The question was purportedly expressed in the form of a question of law but it was no more than a complaint that the Tribunal ought to have reached a different conclusion on the evidence in the exercise of its statutory jurisdiction. The reformulation of question 2 made clear the taxpayers' desire to challenge the Tribunal's decision on the facts rather than raising a question of law. Questions 3, 4 and 5 are in the same position. 25 The full text of questions 2, 3, 4 and 5 are: 2. Whether, on the evidence before the Tribunal namely: a. The evidence given by the Applicants that funds deposited in the Westpac account were used for the purposes of AES Services Pty Ltd (non-private purposes); b. The evidence given by Glenys Murray in relation to the preparation of MYOB records of sub-contractor payments and director loans; c. The evidence that all deposits into and withdrawals from the Westpac account were accounted for in full and that the sole issue the verification of the final destination of the withdrawals. d. The evidence of the Applicants and that of Glenys Murray: i. was accepted by the administrator of AES Services Pty Ltd in carrying out his duties as the administrator and in settling the dispute with the Commissioner; ii. was consistent with the costs incurred during the administration of AES Services Pty Ltd by the administrator; iii. was consistent with the costs incurred by AES Services Pty Ltd after the administration period; e. The evidence given by Andrew Yeo about the cost structure of AES Services Pty Ltd and that the cost incurred by the Applicants were consistent with his experience in carrying on the business of AES Services Pty Ltd during its administration by him; f. The evidence given by: i. Stephen Adrian that the costs were reasonable and consistent with industry benchmarks; ii. Ivan Dalla Costa that the costs were reasonable and consistent with industry benchmarks and practice; iii. Jonathan Karlovsky that the costs were reasonable and consistent with industry benchmarks and practice; iv. Greg Meredith (called by the Commissioner) that the costs were reasonable and consistent with industry benchmarks; g. The acceptance by the Commissioner of those costs in negotiating his claim against AES Services Pty Ltd; and the findings of fact made by the Tribunal [76-158], the Tribunal misunderstood and/or misapplied the test in section 14ZZK(b)(i) of the Taxation Administration Act 1953 [4] and concluding that the Applicants failed to discharge the burden cast upon them by that section 14ZZK(b)(i). 3. Whether the Tribunal (i) failed to make findings of material fact that it was required to make (ii) failed to make inferences of fact it ought to have made or which were not permissible (iii) made findings of fact that were not supported by admissible, relevant or probative evidence or were contrary to the evidence (iv) made findings of fact that were manifestly unreasonable. 4. Whether, given the matters in questions 2(a)-(g), the Tribunal's reasoning process was illogical, irrational or lacking a basis in findings or inferences of fact supported on logical grounds and made a decision it was not authorised to make. 5. Whether, given the matters particularised in ground 5 (a)-(f), the Tribunal decision was so unreasonable that no reasonable decision maker could have made and in so doing failed to act judicially. The facts which are incorporated by reference into question 5 are the lengthy facts particularised in grounds 5(a)-(f). I set them out for completeness: The Tribunal adopted a process of reasoning that was so illogical, irrational or lacking a basis in findings or inferences of fact supported on logical grounds that its reasoning was affected by errors of law and has made a decision that was so unreasonable that no reasonable decision maker would have made, in that: a. The Tribunal was not satisfied [613-658] that any sub-contractor payments were made from the Westpac account despite evidence that: i. The business of AES Services Pty Ltd was labour intensive and required the engagement of sub-contractors; ii. AES Services Pty Ltd engaged subcontractors to perform cleaning services in the ordinary course of its business; iii. The sub-contractors were actually paid from the Westpac account; iv. Invoices were obtained from sub-contractors. Some of the invoices were lost and some of the invoices were confiscated by the Australian Federal Police. v. MYOB records of the payments to sub-contractors, which records were based on Westpac bank statements and hand-written notes of the directors, were prepared; vi. The Applicants engaged and paid sub-contractors in respect of services provided to AES Services Pty Ltd from the Westpac account; vii. The amount paid by the directors to sub-contractors was accepted by the administrator of AES Services Pty Ltd; viii. The amount paid by the directors to sub-contractors was accepted by the Commissioner in negotiating a deed of company arrangement in respect of his claim against AES Services Pty Ltd; ix. The amount paid by the directors to sub-contractors was less than the costs incurred by the administrators during the period of administration; x. The amount paid by the directors to sub-contractors was consistent with costs incurred after the period of administration; xi. The amount paid by the directors to sub-contractors was accepted as reasonable and consistent with benchmarks by three experts called by the Applicants, namely Stephen Adrian, Jonathan Karlovsky and Ivan Dalla Costa; and xii. The amount paid by the directors to sub-contractors was accepted as reasonable and consistent with benchmarks by Greg Meredith – a witness called by the Commissioner. b. The Tribunal found that the MYOB records [640-675] in relation to subcontractor payments were not reliable despite evidence: i. The records were based on hand-written notes prepared by the directors and reconciled with Westpac bank statements; ii. There was one version of those accounts; iii. If there was more than one version, the evidence of Stephen Adrian and Greg Meredith that the difference between the two version was not material; and iv. That the records were consistent with the evidence as particularised in 5(a). c. The Tribunal was not satisfied [700-710] that AES Services Pty Ltd made loans to the Applicants [as contended at 468] to the extent of the drawings from the Westpac account applied by the Applicants for private purposes despite: i. Evidence given by the Applicants that they considered the drawings to be loans; ii. The drawings were recorded in MYOB accounts of AES Service Pty Ltd as loans; iii. The drawings were accepted by the administrator of AES Service Pty Ltd as loans; iv. The drawings were accepted by the Commissioner as loans when negotiating the deed of company arrangement; v. Documents exchanged between the Commissioner, the Applicants as directors of AES Service Pty Ltd and the administrator of AES Service Pty Ltd treat those drawings as loans; vi. The deed of company arrangement treated those drawings as loans; vii. Payments by the Applicants to AES Service Pty Ltd pursuant to the deed of company arrangement were made upon the premise that the drawings were loans; and viii. With respect to the 2009 year of income, the drawings were treated as loans by the Commissioner in a letter upon which the Applicants and AES Service Pty Ltd relied to negotiate the deed of company arrangement. d. The Tribunal was not satisfied [711-713] that Alex Kyritsis made a loan to George Haritos in the 2009 income year despite: i. Evidence given by both Applicants that the relevant amount was a loan; ii. Documents exchanged between the Commissioner, the Applicants as directors of AES Service Pty Ltd and the administrator of AES Service Pty Ltd treat those drawings as loans; and iii. The deed of company arrangement treated that amount as a loan. e. The Tribunal was not satisfied that the Applicants discharged the burden of proof in respect of the transactions listed at [722-762] despite: i. Evidence given by the Applicants of those transactions; ii. Evidence given by Stephen Adrian, Ivan Dalla Costa, Jonathan Karlovsky and Greg Meredith that the profitability of AES Services Pty Ltd was consistent with relevant industry profitability and benchmarks; iii. The report of the administrator; and iv. The evidence of Andrew Yeo. f. The Tribunal was satisfied [818-828] that the distributable surplus of AES Services Pty Ltd was sufficient to support the deeming of a dividend under Division 7A of the Income Tax Assessment Act 1936 despite: i. Evidence that, in calculating the distributable surplus, the Commissioner did not take into account liabilities of AES Services Pty Ltd including taxation liabilities, penalties and interest payable under the Taxation Administration Act 1953; ii. Evidence that the Commissioner did not exercise his discretion under section 109Y(2) of the Income Tax Assessment Act 1936 to substitute an alternative value for the assets of AES Services Pty Ltd or alternatively, it was open for the Commissioner to exercise that discretion on the evidence before him; and iii. Evidence as to the distributable surplus of AES Services Pty Ltd given by Stephen Adrian. The formulation of the questions in this way reveals how each question fails to identify a question of law but seek, rather, merits review. The questions do not identify any error of principle in the Tribunal's reasoning beyond the complaint that the Tribunal ought to have reached a different conclusion. 26 A further difficulty with questions 2, 3, 4 and 5, and the grounds upon which they are based, is that the facts do not support what is asserted as the factual foundation upon which the questions are based, and, at times, the factual assertions contained in the questions mis-state the facts as revealed by the Tribunal's reasons. Question 2(a), for example, is predicated in part upon the description of the evidence before the Tribunal as being that: The evidence given by the [taxpayers] that funds deposited in the Westpac account were used for the purposes of AES Services Pty Ltd (non-private purposes). However, the evidence recited by the Tribunal is significantly different. At [102] of the Tribunal's reasons the Tribunal recorded that Mr Haritos did not dispute that the funds identified in the Pitcher Partners report had been withdrawn for the taxpayer's own use. The relevant paragraph stated: 102. [Mr Haritos] said in cross examination that he agreed with the outcome of Pitcher Partners' forensic accounting that in excess of $46,149,772 had been deposited in the [AES Services] Westpac account in the period from March 2005 to December 2009. The majority had been deposited by Clients A and Z with significant amounts by two other clients and multiple "Other" clients depositing $2,753,871. He did not dispute Pitcher Partners' assessment that $46,074,248 had been withdrawn from that account. He did not dispute their finding that $11,961,373 had been withdrawn for their own use. It is conceivable that what appeared at [102] of the Tribunal's reasons does not fully address the asserted evidence upon which question 2(a) in part depends, but the passage in the Tribunal's reasons undermines the foundation upon which the question is based and shows, again, that the taxpayers seek to challenge conclusions which were open to the Tribunal upon the evidence rather than that they identify a question of law said to have been erroneously answered by the Tribunal. 27 The Commissioner prepared a table for the appeal in which he identified inconsistencies, mis-statements or errors between, on the one hand, the statements of facts or findings in the Tribunal's reasons and, on the other hand, the statements of the facts or findings as described in the taxpayers' amended notice of appeal forming part of the questions or the grounds relied upon in support of the questions. The relevant part of the table relating to questions 2-5 (including ground 5 which was incorporated into question 5) is as follows: Question (Q) or Ground (G) in the amended notice of appeal Contrary or Inconsistent Findings by Tribunal in its Reasons Q 2(a) Inconsistent with [102] G 2(a) Q 2(c) Inconsistent with [470] G 2(c) Q 2(d),(e) The Administrator had no regard to the "evidence of Glenys Murray": Inconsistent with [110]-[111] G 2(d), (e) Q 2(f)(i) Inconsistent with [686]-[688], [691] G 2(f)(i) Q 2(f)(ii) and (iii) Inconsistent with [694] G 2 (f)(ii) and (iii) Q 2 (f)(iv) Inconsistent with [696] (final sentence) G 2(f)(iv) Q 2(g) No finding to the effect alleged G 2(g) G 5(a) Inconsistent with [614], [616] G 5(a)(iv) Inconsistent with [114]-[116], as to the availability of invoices see [575] G 5(a)(v) Inconsistent with [470] and [639]-[641] G 5(a)(vii) Mis-states evidence at [112] ("likely payments"), see further the caveats expressed by Mr Yeo at Transcript 932 lines 8-24 and 954 lines 8-10 (Part C document 247) G 5(a)(viii) No finding to the effect alleged G 5(a)(x) Inconsistent with [111] G 5(a)(xi) Inconsistent with [688], [691], [695] G 5(a)(xii) Inconsistent with [696] (final sentence) G 5(c)(i)-(iii) Inconsistent with [613], [638] G 5(c)(iv)-(vii) Inconsistent with [325]-[328] G 5(d)(i) Inconsistent with [712] G 5(d)(ii)-(iii) Inconsistent with [325]-[328] G 5(e)(ii) Inconsistent with [694], [696] G 5(f)(i) Inconsistent with [818] G 5(f)(ii) Inconsistent with [820]-[823] A comparison between (a) the facts and findings of the Tribunal as described by the taxpayers and (b) those facts and findings as stated in the Tribunal's reasons for decision reveals that the former do not accurately reflect the latter. I will not repeat the taxpayers' questions and grounds nor set out the lengthy material in the Tribunal's reasons or in the transcript which were referred to, but adopt the summary provided by the Commissioner as a convenient, and accurate, summary of the extent to which the taxpayers' proposed grounds depend upon their mis-description of the facts and findings of the Tribunal. The extent of material differences between the fact asserted in the amended notice of appeal (either directly in the question or by incorporation in the question from the grounds) and the fact as set out in the Tribunal's reasons or as found in the transcript tells against the taxpayers' contentions that the questions posed were ones of law where the Tribunal can be shown to have committed some error in legal principle. The taxpayers' case was, at best, that there must have been an error of law because they ought to have succeeded on the evidence. In no instance have the taxpayers contended, or established, that the findings made by the Tribunal were not open to the Tribunal in the sense of there being no evidence to support the finding: Minister for Immigration and Multicultural Affairs v Al-Miahi (2001) 65 ALD 141 at 149 [34]-[35]; Tisdall v Webber (2011) 193 FCR 260 at 270-271 [31]-[32], 295-298 [124]-[131]. The taxpayer may be unhappy about the weight given to the evidence before the Tribunal, but the weight which may be given to evidence is a matter within the Tribunal's domain: Rawson Finances v Commissioner of Taxation [2013] FCAFC 26 at [119]. 28 Question 5, in addition, raises issues similar to those raised for consideration in the context of question 6 to which I have not yet referred. Question 6 was formulated in the following terms: Whether the Tribunal failed to take into account relevant considerations particularised in grounds 6(a)-(k) and/or took into account irrelevant matters particularised in grounds 6(m)-(g) and in so doing failed to act judicially. Question 6 incorporated the facts set out in grounds 6 in the amended notice of appeal which I need not set out. Essentially the facts set out in ground 6 are facts which the taxpayers contended made the Tribunal's decision wrong because it was said that they were either not taken into account by the Tribunal (where they ought to have been taken into account) or, conversely, had been taken into account by the Tribunal (where they ought not to have been taken into account). In no instance did the taxpayers establish, or contend, any error by the Tribunal of any legal principle. Each of the Tribunal's findings were based upon a detailed examination and consideration of the evidence, all of which appears to have been open on the facts, and which were not irrational in the sense of irrational which is necessary to establish jurisdictional error. In Minister for Immigration and Citizenship v SZMDS (2010) 240 CLR 611 Crennan and Bell JJ said at 648 [131]: What was involved here was an issue of jurisdictional fact upon which different minds might reach different conclusions. The complaint of illogicality or irrationality was said to lie in the process of reasoning. But, the test for illogicality or irrationality must be to ask whether logical or rational or reasonable minds might adopt different reasoning or might differ in any decision or finding to be made on evidence upon which the decision is based. If probative evidence can give rise to different processes of reasoning and if logical or rational or reasonable minds might differ in respect of the conclusions to be drawn from that evidence, a decision cannot be said by a reviewing court to be illogical or irrational or unreasonable, simply because one conclusion has been preferred to another possible conclusion. None of the evidence complained about by the taxpayers can be said to be "irrational" in that sense. The complaint of unreasonableness as posed by the taxpayers in the questions is also misplaced to the extent that it seeks to apply the doctrine to findings which the Tribunal made within its jurisdiction in contrast to the exercise of a discretion: SZOOR v Minister for Immigration and Citizenship (2012) 202 FCR 1 at 22 [83]; Minister for Immigration and Citizenship v Li (2012) 202 FCR 387 at 396 [33]. The same may be said for the complaint about the Tribunal having taken into account "relevant and irrelevant considerations" to the extent that the challenge is sought to be to findings of fact by the Tribunal upon evidence which was available to it as distinct from an exercise of a discretion: Bell v Federal Commissioner of Taxation [2012] FCA 1042 at [89]-[91]. An error of these principles is not shown where the Tribunal was engaged in the process of identifying and weighing evidence relevant to the application of taxing provisions where the Tribunal is plainly referring to material actually available to it: Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 348-349 [73]-[74]. 29 The remaining questions in the amended notice of appeal are also not questions of law and also seek to engage in merits review: 7. Whether, on the evidence before the Tribunal, namely: a. The withdrawals from the Westpac account for private purposes were equal to $11,961 between the years of income 2005-2009 (as particularised in exhibit XZ) b. The balance of the withdrawals from the Westpac account was used to pay expenses on behalf and for the benefit of AES Services Pty Ltd; c. The withdrawals from the Westpac account were made to confer a benefit upon the associated of the Applicants and not the Applicants personally; d. The amounts withdrawn were in the nature of loans from AES Service Pty Ltd to them as shareholders and at all material times, the Applicants intended to prepay the amounts withdrawn; e. That the drawings from the Westpac account were not proportionate to the respective shareholding of the Applicants; f. There was no formal or informal resolution authorising the distribution or crediting of the profits referable to the withdrawals for the years 2005-2008, if any, of AES Services Pty Ltd to the Applicants was passed; g. There was no valid resolution authorising the distribution of the profits, if any, of AES Services Pty Ltd to the Applicants for the year of income ended 2009; h. In the years 2005-2008 AES did not have a distributable surplus or profits to sustain a distribution of dividend; the Tribunal erred in the proper construction and application of section 44(1) of the Income Tax Assessment Act 1936 and in deciding [4, 602-786] that the withdrawals from the Westpac account were assessable to the Applicants as dividend under that section 44(1). 8. Whether, on the evidence before the Tribunal, namely: a. The withdrawals from the Westpac account for private purposes were equal to $11,961 between the years of income 2005-2009 (as particularised in exhibit XZ) b. The balance of the withdrawals from the Westpac account was used to pay expenses on behalf and for the benefit of AES Services Pty Ltd; c. The withdrawals from the Westpac account were made to confer a benefit upon the associated of the Applicants and not the Applicants personally; d. The amounts withdrawn were in the nature of loans from AES Service Pty Ltd to them as shareholders; e. There was no valid resolution authorising the distribution of the profits, if any, of AES Services Pty Ltd to the Applicants for the year of income ended 2009; f. In the years 2005-2008 AES did not have a distributable surplus or profits to sustain a distribution of dividend; the Tribunal erred in the proper construction and application of Division 7A of the Income Tax Assessment Act 1936 and In deciding, on alternative basis, [4, 787-828] that the withdrawals from the Westpac account were assessable to the Applicants as deemed dividend under that Division. 9. Whether, on the evidence before the Tribunal, namely: a. The withdrawals from the Westpac account for private purposes were equal to $11,961 between the years of income 2005-2009 (as particularised in exhibit XZ) b. The balance of the withdrawals from the Westpac account was used to pay expenses on behalf and for the benefit of AES Services Pty Ltd; c. The withdrawals from the Westpac account were made to confer a benefit upon the associated of the Applicants and not the Applicants personally; d. The amounts withdrawn were in the nature of loans from AES Service Pty Ltd to them as shareholders; e. At all material times, the Applicants intended to prepay the amounts withdrawn; the Tribunal erred in the proper construction and application of section 6-5 of the Income Tax Assessment Act 1997 and in deciding, on a further alternative basis, [829-838] that the withdrawals from the Westpac account were assessable to the Applicants as income on ordinary concepts within that section 6-5. 10. Whether, on the evidence before the Tribunal, the Tribunal erred in the construction and application of section 23L of the Income Tax Assessment Act 1936. 11. Whether, on the evidence before the Tribunal, the Tribunal erred in the construction and application of sections 284-75(1), 284-90 and 284-220 of schedule 1 to the Taxation Administration Act 1953. In each case the question is expressed as a question concerning the proper construction of a statutory provision, but in none of the questions is there identified what construction the Tribunal gave to the provisions which might said to be erroneous. At most, in relation to questions 7, 8 and 9, there was identified specific facts said to be the foundation of an erroneous construction but none of the questions reveal a legal error in contrast with an attempt to engage in merits review. Questions 10 and 11 are not confined even to that extent. Questions 10 and 11 are, at best, expressed as a broad inquiry about the construction of provisions which for that reason fail to identify questions of law to enliven the jurisdiction conferred by s 44 of the AAT Act: Comcare at 528 [19]; at worst they seek to engage in merits review under the guise of an unfocused inquiry by a generalised contention that the facts could not have led to the decision which was reached. 30 Furthermore, if it were necessary to consider the matter, it appears that many of the asserted facts in the questions, or in the grounds upon which they are supported, are either wrong in fact or depend upon erroneous view of the law. It is not desirable to deal further with erroneous statements of the facts, or of erroneous statements of law where the appeal is not otherwise competent and where the mis-statements are not material to that conclusion, other than to give an example. Thus, question 7(g) appears to assert that the operation of s 44(1) of the 1936 Act required there to be a "formal or informal resolution authorising a distribution". However, the law does not require what the fact asserted implies: see ss 6(1) and 44(1) of the 1936 Act; Federal Commissioner of Taxation v Blakely (1981) 82 CLR 388 at 400 and 406, s 109C(3) of the Income Tax Assessment Act 1997 (Cth), 3D Scaffolding Pty Ltd v Commissioner of Taxation [2009] FCAFC 75 at [53]. For present purposes it is sufficient to conclude that the appeal is incompetent. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone. Associate: Dated: 20 February 2014