FEDERAL COURT OF AUSTRALIA Rigoli v Commissioner of Taxation [2015] FCA 803 Citation: Rigoli v Commissioner of Taxation [2015] FCA 803 Appeal from: Re Rigoli and Commissioner of Taxation [2015] AATA 169 Parties: LITTLE JOE RIGOLI v COMMISSIONER OF TAXATION File number: VID 212 of 2015 Judge: PAGONE J Date of judgment: 7 August 2015 Catchwords: ADMINISTRATIVE LAW – appeal from decision of Administrative Appeals Tribunal – whether appeal incompetent – whether appeal raised question of law – evidence to be considered by Tribunal – Tribunal not required to go beyond material produced by parties and conduct own investigation INCOME TAX – default assessment – where taxpayer failed to lodge tax returns – expert report prepared for Commissioner to determine financial affairs of partnership of which taxpayer was partner – whether taxpayer able to rely on expert report to establish that assessment excessive – burden of proof on taxpayer – whether Tribunal erred in not finding that taxpayer could rely on expert report to establish taxable income – probative value of expert report Legislation: Administrative Appeals Tribunal Act 1975 (Cth) s 44 Income Tax Assessment Act 1936 (Cth) ss 92, 167 Taxation Administration Act 1953 (Cth) s 14ZZK(b) Cases cited: Commissioner of Taxation v Glennan (1999) 90 FCR 538 Commissioner of Taxation v Rigoli [2013] FCA 784 Gashi v Commissioner of Taxation (2015) 209 FCR 301 Haritos v Commissioner of Taxation [2015] FCAFC 92 Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 Re Rigoli and Commissioner of Taxation [2012] AATA 757 Re Rigoli and Commissioner of Taxation [2015] AATA 169 Rigoli v Commissioner of Taxation [2014] FCAFC 29 Rawson Finances Pty Ltd v Commissioner of Taxation (2013) 296 ALR 307 Date of hearing: 24 July 2015 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 16 Counsel for the Applicant: Mr P Hanks QC with Mr D Clough Solicitor for the Applicant: Lennon Mazzeo Counsel for the Respondent: Ms D Harding QC with Ms A Lee Solicitor for the Respondent: Australian Government Solicitor IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 212 of 2015 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: LITTLE JOE RIGOLI Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: PAGONE J DATE: 7 AUGUST 2015 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Mr Little Joe Rigoli appeals under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act") from a decision of the Administrative Appeals Tribunal. The Commissioner has objected to the competency of the appeal contending that Mr Rigoli's notice of appeal does not raise a question of law. The Commissioner has also filed a notice of contention seeking to have the Tribunal's decision affirmed on grounds other than those relied upon by the Tribunal. The appeal and the objection to competency were heard together. 2 Mr Rigoli contended that the Tribunal fell into legal error, and failed to discharge the review function of the Tribunal, when the Tribunal found that Mr Rigoli could not discharge his burden of proof by relying upon an expert report by Mr Kompos ("the Kompos report") which had been prepared for the Commissioner for a different purpose. The Commissioner's assessments had been raised under s 167 of the Income Tax Assessment Act 1936 (Cth) ("the 1936 Act") for the 1994 to 2001 years of income on the basis that Mr Rigoli had defaulted in furnishing returns. The Commissioner had obtained, and had relied upon, the Kompos report in making the assessments which Mr Rigoli sought to challenge. Section 14ZZK(b)(i) of the Taxation Administration Act 1953 (Cth) ("the Administration Act") imposed upon Mr Rigoli the legal burden of proving that the Commissioner's assessments were excessive if Mr Rigoli wanted to challenge the assessments. In earlier proceedings Mr Rigoli had contended that he was able to discharge the legal burden upon him of proving the assessments to be excessive by "conceding" the Commissioner's estimates of income based upon the Kompos report which had been made under s 167 of the 1936 Act but to claim deductions from that conceded amount which the Commissioner had not allowed. 3 Mr Rigoli was unsuccessful in seeking to discharge the burden upon him by "conceding" parts of the Commissioner's estimates of Mr Rigoli's taxable income: Re Rigoli and Commissioner of Taxation [2012] AATA 757; Commissioner of Taxation v Rigoli [2013] FCA 784; Rigoli v Commissioner of Taxation [2014] FCAFC 29. On 18 March 2014 the Full Court dismissed Mr Rigoli's appeal in the earlier proceedings and remitted Mr Rigoli's applications to the Tribunal to review the Commissioner's objection decision. The Full Court ordered that the remitted proceeding be heard and determined on the evidence which had been before the Tribunal, but subject to any order of the Tribunal for proper cause: Rigoli v Commissioner of Taxation [2014] FCAFC 29. The remitted proceeding was heard on 12 November 2014. On 24 March 2015 the Tribunal affirmed the Commissioner's decisions. 4 The basis upon which counsel for Mr Rigoli sought to discharge the legal burden of proof in the remitted proceeding differed from the approach which had been taken in the earlier proceedings. In the earlier proceedings, Mr Rigoli had "conceded" the Commissioner's estimates based upon the Kompos report but claimed deductions which the Commissioner had not allowed. In the remitted proceedings Mr Rigoli purported to rely upon the Kompos report as expert "evidence" of his taxable income. The Tribunal decided that Mr Rigoli could not discharge the burden of proof in that manner. 5 The questions of law in the notice of appeal were stated as follows: 1. Was the Applicant required, in order to discharge the burden imposed on him by s 14ZZK(b) of the Taxation Administration Act 1953 (the TAA) and prove that the assessments made by the Respondent for the 1994 – 2001 income years were excessive: 1.1 to prove that he did not derive from any source taxable income to the amount of the assessment; and 1.2 in so doing, to prove that there was no other possible source, other than the sources identified in the assessments or otherwise asserted by the Respondent, from which he could have derived taxable income? 2. Was it open to the Applicant, in discharging the burden imposed on him by s 14ZZK(b) of the TAA so as to prove that the assessments made by the Respondent for the 1994 – 2001 income years were excessive, to rely on: 2.1 an expert report relating to the Applicant's partnership income, prepared for the Respondent and tendered to the Tribunal; 2.2 the Applicant's evidence regarding depreciation claimed for various items of plant and equipment, as found by the Tribunal in its earlier decision, Re Rigoli and Commissioner of Taxation [2012] AATA 757; and 2.3 the other evidence before the Tribunal; so as to establish, or provide a proper basis for drawing inferences as to, the Applicant's taxable income for those income years? The grounds relied upon by Mr Rigoli are, in essence, that he was entitled to rely upon the Kompos report to discharge the burden imposed on him by s 14ZZK(b) of the Administration Act and that the Tribunal erred in not finding that he could do so. The grounds in the notice of appeal were set out as follows: 1. The Tribunal erred in finding that the Applicant was required, before he could be said to have discharged the burden imposed on him by s 14ZZK(b) of the TAA: 1.1 to prove that he did not derive from any source taxable income to the amount of each of the assessments; and 1.2 in so doing, to prove that there was no other possible source, other than the sources identified in the assessments or otherwise asserted by the Respondent, from which he could have derived taxable income. 2. The Tribunal erred in not finding that the Applicant could rely on: 2.1 the expert report prepared for the Respondent and provided to the Tribunal by the Respondent; 2.2 the Applicant's evidence regarding depreciation claimed for various items of plant and equipment, as found by the Tribunal in its earlier decision, Re Rigoli and Commissioner of Taxation [2012] AATA 757; and 2.3 the other evidence before the Tribunal; as sufficient to: 2.4 establish, or provide a proper basis for drawing inferences as to, the Applicant's taxable income for the 1994 – 2001 income years; and 2.5 prove that the assessments made by the Respondent for the 1994 – 2001 income years were excessive. The fundamental issue raised by this appeal concerns what Mr Rigoli is required to prove to discharge the burden of proof and whether in the remitted proceeding he could do so by relying upon the Kompos report. 6 The Commissioner contended that Mr Rigoli's appeal was incompetent as it did not raise a question of law as required by s 44(1) of the AAT Act. In Haritos v Commissioner of Taxation [2015] FCAFC 92 the Full Court summarised their conclusions at [62] by saying: (1) The subject-matter of the Court's jurisdiction under s 44 of the AAT Act is confined to a question or questions of law. The ambit of the appeal is confined to a question or questions of law. (2) The statement of the question of law with sufficient precision is a matter of great importance to the efficient and effective hearing and determination of appeals from the Tribunal. (3) The Court has jurisdiction to decide whether or not an appeal from the Tribunal is on a question of law. It also has power to grant a party leave to amend a notice of appeal from the Tribunal under s 44. (4) Any requirements of drafting precision concerning the form of the question of law do not go to the existence of the jurisdiction conferred on the Court by s 44(3) to hear and determine appeals instituted in the Court in accordance with s 44(1), but to the exercise of that jurisdiction. (5) In certain circumstances it may be preferable, as a matter of practice and procedure, to determine whether or not the appeal is on a question of law as part of the hearing of the appeal. (6) Whether or not the appeal is on a question of law is to be approached as a matter of substance rather than form. (7) A question of law within s 44 is not confined to jurisdictional error but extends to a non-jurisdictional question of law. (8) The expression "may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal" in s 44 should not be read as if the words "pure" or "only" qualified "question of law". Not all so-called "mixed questions of fact and law" stand outside an appeal on a question of law. (9) In certain circumstances, a new question of law may be raised on appeal to a Full Court. The exercise of the Court's discretion will be affected not only by Coulton v Holcombe [1986] HCA 33; 162 CLR 1 considerations, but also by considerations specific to the limited nature of the appeal from the Tribunal on a question of law, for example the consideration referred to by Gummow J in Federal Commissioner of Taxation v Raptis [1989] FCA 557; 89 ATC 4994 that there is difficulty in finding an "error of law" in the failure in the Tribunal to make a finding first urged in this Court. (10) Earlier decisions of this Court to the extent to which they hold contrary to these conclusions, especially to conclusions (3), (4), (6) and (8), should not be followed to that extent and are overruled. Those cases include Birdseye v Australian Securities and Investments Commission [2003] FCA 232; 76 ALD 321, Australian Securities and Investments Commission v Saxby Bridge Financial Planning Pty Ltd [2003] FCAFC 244, 133 FCR 290, Etheridge, HBF Health Funds and Hussain v Minister for Foreign Affairs [2008] FCAFC 128; 169 FCR 241. The Commissioner's contentions in the present case were that neither of the questions posed by Mr Rigoli were questions of law. The first was said to be based upon a misconception of what the Tribunal had found and the second was said to seek an impermissible review on the merits raising what was said to be at best mixed questions of fact and law. 7 Whether or not Mr Rigoli's appeal is on a question of law is, as the Full Court said in Haritos at [62(6)], "to be approached as a matter of substance rather than form". The questions posed for Mr Rigoli in this case are, in substance, questions of law. Mr Rigoli's complaint is in substance that by not finding that Mr Rigoli had discharged his burden by reliance, as evidence, upon the Kompos report the Tribunal had failed to exercise its review function by "identifying a wrong issue, asking a wrong question, [or] ignoring relevant material" (see Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323, 351 [82]), or that it had left incomplete its review function because it had not addressed an aspect relevant to determine the excessiveness of the assessments (see Haritos [218]-[219]). It may be that Mr Rigoli's submissions on the questions raised will not succeed for the reasons which the Commissioner advanced, but the possibility of, or the fact of, failure does not deprive the questions of the character as questions of law. 8 Mr Rigoli had the legal burden under s 14ZZK(b) of proving at the Tribunal in the remitted proceedings that the Commissioner's assessments were "excessive or otherwise incorrect and what the assessment[s] should have been". Section 14ZZK(b) relevantly provides: On an application for review of a reviewable objection decision: […] (b) the applicant has the burden of proving: (i) if the taxation decision concerned is an assessment—that the assessment is excessive or otherwise incorrect and what the assessment should have been; […] It is well-established that a taxpayer seeking to prove that an assessment is excessive is required to establish the actual taxable income that ought to have been assessed. Mr Rigoli was not able to undertake that task from his own sources but contended that he could do so by relying in part upon what the Commissioner had relied upon for the purpose of raising the assessments in the years in question. The Commissioner's objection to that approach was that it did not do what s 14ZZK(b) required Mr Rigoli to do. In Rigoli v Commissioner of Taxation [2014] FCAFC 29 the Full Court said at [14]: It is only in circumstances where the Commissioner has agreed to a process such as that adopted by Mr Rigoli that this would be permissible. As Brennan J noted in Dalco (at 624-626), absent an agreement confining the issues for the determination the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed. The taxpayer must establish not that the Commissioner's assessment was wrong but, rather, what the actual amount should be. Although the means of doing so will vary from case to case, it cannot be done, the primary judge said, by the AAT proceeding by way of a concession as to a critical part of the Commissioner's assessment. The primary judge also noted the observation in Ma v Federal Commissioner of Taxation (1992) 37 FCR 225 that the task for the taxpayer on objection is not to prove that the Commissioner erred but to prove, on the balance of probabilities, the correct amount upon which tax should be levied. These observations were consistent with those in Gashi v Commissioner of Taxation (2015) 209 FCR 301, at [53]-[55] and [63] which were referred to by the Full Court in Rigoli at [11]. The fundamental task for a taxpayer in Mr Rigoli's position is to do that which ought to have been done when furnishing a return of income. Mr Rigoli's obligations, such as, to keep records and to furnish a return of income preceded the obligation under s 14ZZK(b) when before the Tribunal. It was Mr Rigoli's failure to lodge income tax returns that had led the Commissioner to rely upon s 167 of the 1936 Act to issue assessments, but those assessments, or the basis upon which they were made, are not a substitute for Mr Rigoli's obligations. The raising of assessments under s 167 did not displace Mr Rigoli's obligations to establish what the assessments should have been and, absent agreement to the contrary, the Commissioner is entitled "to rely upon any deficiency in proof": Rigoli at [14]. Mr Rigoli was given the right to object to the Commissioner's assessments and to establish what the assessments should have been notwithstanding his failure to have lodged returns. But that is a right to establish what the assessments should have been if he is able to do so. 9 Mr Rigoli did not seek to prove his actual taxable income at the remitted proceedings from any sources other than the Kompos report, the Commissioner's reasons for objection decision and the findings which the Tribunal had made in the first hearing on depreciation. Indeed, counsel for Mr Rigoli candidly conceded at the remitted proceeding that it was "highly likely" that Mr Rigoli did not "know his actual taxable income". Counsel for Mr Rigoli accepted that a consequence of the earlier proceedings was that Mr Rigoli could not discharge the burden of proving that the assessments were excessive by "conceding" the Commissioner's calculations but at the remitted proceedings purported to adopt part of those calculations as evidence. His counsel said at the hearing of the remitted proceedings: Our approach is formally and plainly today an evidentiary approach. We accept that we can't merely point to error. We accept that we are not amending in any way by agreement with the Commissioner or otherwise the grounds for objection, that we must prove, on the balance of probabilities, putting aside the issue of the 167 discretion, but on the balance of probabilities, Mr Rigoli's actual taxable income for the relevant income years. And we formally rely on the evidence which has been placed before the tribunal by the Commissioner. We formally rely on the Commissioner's analysis underlying the assessments and we formally rely on, and we continue to rely on the tribunal's findings on depreciation. So of course, the question is as a matter of evidence, is that a sufficient probative basis for the tribunal to find that the taxpayer's actual taxable income was something other than, and indeed less than that which was assessed. The written submissions which had been filed with the Tribunal for Mr Rigoli had stated that he relied "on the evidence of the Commissioner's expert […] subject to the Tribunal's existing findings concerning depreciation". Counsel for Mr Rigoli did not take the Tribunal to the facts upon which the Kompos report was based but referred to the fact that the report had been based upon substantial material providing a body of probative evidence upon which the Tribunal could draw the same inferences that Mr Rigoli was seeking the Tribunal to draw from the Kompos report. Mr Rigoli's case was not simply to accept the Commissioner's assessments but sought to adopt those parts of the assessments which were based upon the Kompos report subject to the Tribunal's earlier findings concerning depreciation and to be "correct" further by materials in the Kompos report concerning diesel fuel rebates which were received by the partnership, by claims concerning capital gains which were made by the partnership on the sale of two machines, and by the material in documents before the Tribunal under s 37 of the AAT Act of the Centrelink payments received by Mr Rigoli in 1994, 1995 and 1996. The Tribunal concluded at [89] that Mr Rigoli did not discharge his onus of proof "by simply relying on the report prepared by Mr Kompos". That conclusion was based upon an evaluation of the Kompos report by the Tribunal and a finding that the Kompos report did not establish Mr Rigoli's taxable income and that the calculation of Mr Kompos could not be substituted for the actual taxable income of Mr Rigoli from all sources. 10 The claim for Mr Rigoli on appeal to this Court was that the Tribunal wrongly concluded that the Kompos report could not be relied upon as evidence in the discharge of Mr Rigoli's burden of proof. It may be that some parts of the Tribunal's reasons appear to be expressed as stating that Mr Rigoli was not permitted to rely upon evidence produced to the Tribunal by the Commissioner for another purpose, but the Tribunal's reasons need to be read and understood in the context of the issues before the Tribunal and the way in which the parties had presented their respective cases. The fundamental issue before the Tribunal in the remitted proceeding became whether Mr Rigoli could discharge his burden of proof by reliance upon the opinion of an expert whose task had been to undertake a different, albeit potentially overlapping, exercise than the one required for Mr Rigoli to undertake to discharge his burden of establishing that the assessments were excessive. Mr Rigoli had not furnished returns and the Commissioner had retained Mr Kompos to undertake the task of providing an opinion on the income, expenses and change in net assets of a partnership of which Mr Rigoli was a partner. The process undertaken in producing the Kompos report had similarity with a taxpayer's return of income but it was not in form or in substance evidence of Mr Rigoli's taxable income. Mr Kompos had not been asked to prepare, nor did he purport to prepare, a report which assessed Mr Rigoli's taxable income, although Mr Kompos used material which bore upon that topic and expressed opinions upon which Mr Rigoli could have relied in support of his case. The Tribunal should not be understood as deciding that a taxpayer may not rely upon probative material solely because it was not led in evidence by the taxpayer or because it had been placed before the Tribunal by the Commissioner for some other purpose. The Tribunal's reasons for rejecting Mr Rigoli's reliance upon the Kompos report was, rather, that it did not establish Mr Rigoli's taxable income. The Tribunal said at [73] of its reasons: To discharge the onus of proving that the assessment was excessive, the taxpayer must prove, on the balance of probabilities, that he or she did not derive from any source taxable income to the amount of the assessment (George, at 189). While it is true to say that a taxpayer can discharge the burden of proof in a manner which may depend on the circumstances, Mr Rigoli did not adduce any evidence of the amount or source of his income for any [of] the income years in issue. He simply sought to rely on the report prepared by Mr Kompos. That report was prepared for the purpose of enabling the Commissioner to make an assessment of the amount upon which, in his judgment, income tax ought to have been levied. It was not intended to and did not establish, even on the basis of an estimate, the actual taxable income of Mr Rigoli from all sources for the income years in question. The Tribunal's description of the Commissioner's purpose in obtaining the Kompos report in part explained why it did not establish Mr Rigoli's taxable income. The report provided the Commissioner with a reasonable basis for raising assessments in the absence of what Mr Rigoli ought to have furnished but it was not the preparation by Mr Kompos of Mr Rigoli's returns of income for the years in question. The Tribunal found as a fact that the Kompos report did not establish Mr Rigoli's taxable income. The Tribunal had earlier in its reasons analysed the Kompos report saying at [17]-[21]: 17. […] In this case, the Commissioner obtained an expert report from Mr Kompos, then an Executive Director of the accountancy firm Ferrier Hodgson. In his report, Mr Kompos set out the methodology adopted in order to determine the financial affairs of the partnership of which Mr Rigoli was one of three partners. In the introduction to this report, Mr Kompos said: I was initially requested to provide an analysis of the gross income derived, expenses incurred and the change in net assets of the "Bonanza Pack", later the "Principality of Ponderosa", partnership for each of the years of income ended 30 June 1994 to 30 June 1997 inclusive. 18. Effectively, what Mr Kompos did was produce a complex and detailed report based on numerous primary financial documents including bank statements and passbooks, invoices, receipts, cheques, deposit and withdrawal slips, correspondence from suppliers and all creditors, diesel fuel rebate statements and witness statements from suppliers and/or creditors. He also conducted an analysis from the available information identifying amounts which were of a capital nature; of a private nature; or cash transactions. From those available documents, he also identified asset purchases of the partnership setting out in tabulated form the amounts of expenditure and a depreciation table. He calculated the gross income derived and expenses incurred by the partnership for each year of income and allowed an amount for depreciation. Mr Kompos also calculated a change in the net assets of the partnership for each year of income. He made allowances for personal living expenses based on figures published by the Melbourne Institute of Applied Economic and Social Research. He used seasonally adjusted household disposable income figures for each year of income for a single adult and a couple. 19. Despite doing the best he could with the information available to him, Mr Kompos frankly admitted that he used a mixture of cash accounting and accruals accounting in making his assessment. Because of the way the partnership conducted its affairs, including a large number of cash transactions, he found he could not rely solely on information which appeared on bank statements and other documents. Furthermore, he could not adopt an accruals accounting method because many source documents for income and expenses were not available. 20. Clearly, Mr Kompos' analysis is not a precise account of the financial transactions for the years in question. It is his best estimate of the true financial position of the partnership in those years. Nevertheless, the important point to note is that the analysis conducted by Mr Kompos is in fact a reasonable reconstruction of the financial statements which should have been prepared by the partnership in the relevant years. It is not merely a guess. Furthermore, relying on Mr Kompos' report, the Commissioner, in arriving at each of the assessments, has done so by taking into account estimates of gross income and expenses including depreciation of assets likely to have been used in the production of assessable income. He has also taken into account later income tax returns lodged on Mr Rigoli's behalf by William Buck which resulted in the allowance of some of his objections. 21. The Commissioner has not simply drawn inferences from figures which bear no direct relationship to income or expenses. In fact, it should be said that the Commissioner has thoroughly and properly applied his mind to arriving at the best possible estimate of the partnership's true financial position in each of the years in question. The Tribunal found, as it was entitled to find on the material before it, that the Kompos report, and its methodology, was incomplete and did not establish Mr Rigoli's taxable income. The Tribunal's finding was not a rejection of the Kompos report as evidence nor a conclusion that Mr Rigoli could not rely upon evidence which had been produced by the Commissioner for another purpose, but a finding that the report did not establish that which Mr Rigoli needed to establish. 11 The Tribunal's observations at [86] and [87], in the context of considering Rawson Finances Pty Ltd v Commissioner of Taxation (2013) 296 ALR 307, that the evidence must be produced by Mr Rigoli, must also be understood in the context of the Tribunal's finding that the Kompos report was insufficient to establish Mr Rigoli's taxable income. The reasons for decision of an administrative decision-maker are "not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed": Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259, 272. It was the Tribunal's rejection of the Kompos report as probative evidence of Mr Rigoli's taxable income which was the Tribunal's reason for observing that there was no other probative material from Mr Rigoli which would have permitted the inferences to be drawn from the report. 12 The limitations of the Kompos report had also been the subject of observation in the judgment of the Full Court where, on the appeal, Mr Rigoli had sought to rely upon the Kompos report in the earlier proceedings. The Full Court had said in its reasons in the earlier proceeding at [2014] FCAFC 29, [23]-[25]: 23 That is sufficient to dispose of the appeal, but it is also clear that the evidence which was adduced for the Commissioner – which Mr Rigoli ultimately sought to embrace – did not purport to provide, and did not provide, the AAT with a probative foundation upon which factual conclusions could be reached. This is for the simple reason that it was expressly acknowledged that the methodology adopted by the expert engaged for the Commissioner was necessarily incomplete. It was inherently inaccurate because the partnership did not keep basic business records. As a typical example of this, in the expert's affidavit (at [58]) payments totalling over $2.5 million were identified as cash payments, but with no better description of the nature of the payments or to whom the cash payments were made. Notwithstanding this, the expert included the cash payments as "Payments" in his estimates of the partnership expenses. Mr Rigoli threw no light on the bare description of "cash payments" and did not attempt to give the AAT a probative foundation upon which factual conclusions could be based. 24 The reality is that it was, and remains, impossible for Mr Rigoli to do so. His own accountant whose report was found by the AAT to be unhelpful (A[107]) acknowledged the complete inadequacy of records in this evidentiary exchange extracted by the AAT (at A[105]): To your knowledge, for any of the years covered in this report, did Mr Rigoli or any of the other persons involved in the business maintain a cash receipts book?... For those periods, no. To your knowledge, did they maintain a cash payments book?... No. A complete set of invoices?... No. A complete set of receipts?... No. A complete set of bank statements?... No. A listing of assets acquired and disposed of from time to time?... I was not given any of that information. A listing of capital works undertaken from time to time?... For that period, no. To your knowledge for any of those years, did Mr Rigoli or any other person involved with the business prepare balance sheets?... No. Profit and loss statements?... No. Depreciation schedules?... No. And to your knowledge, for any of those years, did the partnership lodge – did Mr Rigoli or any other persons involved with the business lodge income tax returns in respect of the business?... For that period, no. So would you agree with me that the state of the business records do not reflect what normally happens in a business environment?... Yes, I agree. There was in fact, would you say, a complete lack of information?... It was a mess, yes. What would you say was missing?... Just basic business records. 25 The task Mr Rigoli sought to carry out was to simply identify some errors in the Commissioner's approach so that the matter might be remitted on the basis of those errors for reconsideration by the Commissioner. This is the very picking and choosing which the authorities make clear is impermissible. The taxpayer's choice is to pay tax according to the Commissioner's assessment under s 167 or to establish, as a matter of evidence, what was "the amount upon which…income tax ought to be levied". An intermediate course, which involves elements of the Commissioner's calculations and facts which the taxpayer chooses to lead in evidence, is not an available option. It was submitted for Mr Rigoli that these observations were obiter and that they had been made in circumstances where the probative weight of the Kompos report was not relevant to the proceeding in the Full Court and had not been the subject of argument. The Commissioner challenged these submissions but, even if it be accepted for present purposes that the Full Court had not been taken to all of the material upon which the Kompos report was based and, therefore, that (as was contended for Mr Rigoli) the observation of the Full Court (that what had been adduced for the Commissioner "did not purport to provide, and did not provide, the [Tribunal] with a probative foundation upon which factual conclusions could be reached") was obiter, and not binding as between Mr Rigoli and the Commissioner, the Tribunal reached the same conclusion independently in the subsequent remitted proceedings. The observations by the Full Court, in other words, are to the same effect as the Tribunal found in the remitted proceedings, namely, that the Kompos report was not, and did not purport to be, that which Mr Rigoli needed to establish his taxable income. The observation by the Full Court of the deficiencies in the Kompos report are in part an explanation of why the report did not establish his taxable income (or, more precisely, his taxable income to the extent that it was made up of his share of the partnership). The candid remark by Mr Rigoli's counsel to the Tribunal in the remitted proceeding that Mr Rigoli was unlikely to be aware of his taxable income is in part a further explanation why Mr Rigoli's reliance upon the Kompos report does not establish Mr Rigoli's taxable income. Neither explanation amounts to saying that a taxpayer is not able to rely upon evidence tendered by or for the Commissioner in discharging the taxpayer's burden of proof, but may explain why the Kompos report did not do so in this case. 13 The Tribunal's finding that the Kompos report did not establish, even on the basis of an estimate, the actual taxable income of Mr Rigoli from all sources for the income years in question, needs to be borne in mind when considering other parts of the Tribunal's reasons. Counsel for Mr Rigoli referred to some parts of the passages at [72] to [76] to submit that the Tribunal had wrongly rejected the Kompos report on the basis that an expert report produced by the Commissioner could not be relied upon by a taxpayer as probative evidence to discharge the statutory burden of proof. However, the Tribunal's observations must be understood in the light of its finding that the particular report relied upon did not satisfy the Tribunal that it provided probative evidence of that which Mr Rigoli needed to prove. At [72]-[76] (with, for convenience, the repetition of [73] quoted above) the Tribunal said: 72. Given the above authorities, in the absence of the Commissioner's consent to confine the issues for determination to the assessment of partnership income as set out in Mr Kompos's report, Mr Rigoli's claim to rely on Mr Kompos's report cannot be sustained. The Commissioner has not agreed to confine the issues for determination to the partnership income as assessed by the Commissioner's expert, Mr Kompos, and in fact, to the contrary, has insisted that Mr Rigoli discharge the onus of proving that the assessment was excessive by establishing his actual income from all sources, not solely the partnership. Even if the Commissioner had agreed to confine the issues in this case to Mr Rigoli's assessable income, Mr Rigoli would not discharge his onus of proof by simply referring to the Kompos report. 73. To discharge the onus of proving that the assessment was excessive, the taxpayer must prove, on the balance of probabilities, that he or she did not derive from any source taxable income to the amount of the assessment (George, at 189). While it is true to say that a taxpayer can discharge the burden of proof in a manner which may depend on the circumstances, Mr Rigoli did not adduce any evidence of the amount or source of his income for any the income years in issue. He simply sought to rely on the report prepared by Mr Kompos. That report was prepared for the purpose of enabling the Commissioner to make an assessment of the amount upon which, in his judgment, income tax ought to have been levied. It was not intended to and did not establish, even on the basis of an estimate, the actual taxable income of Mr Rigoli from all sources for the income years in question. 74. I have not overlooked the fact that I had in evidence a report prepared by Mr Anthony Xerri, an accountant, and the report prepared by BMT & Associates, quantity surveyors. 75. The problem for Mr Rigoli is that neither Mr Xerri's report nor the BMT & Associates report goes to establishing his actual taxable income for the years in question. As Mr Xerri said in a witness statement made on 9 June 2010: I attach to this document my expert report which, amongst other things, reviews and determines the methodology and accuracy of the income and expenses assigned by the Respondent [the Commissioner] to the Rigoli family members for the income years 1994-2001. 76. The methodology adopted by Mr Xerri was directed specifically to identifying errors made by the Commissioner in arriving at his assessment. That does not assist Mr Rigoli with establishing his actual taxable income in this case. At [84]-[87] the Tribunal went on to say: 84. The three cases I have referred to above are all cases in which the taxpayer was able to establish, on the balance of probabilities, circumstances which deprived receipts treated as income by the Commissioner of that character, or was able, by evidence, to disclose expenditure in the earning of income liable to tax even though precise amounts could not be established. They do not assist Mr Rigoli in this matter because his evidence did not establish his actual taxable income. Although Mr Kompos provided a thorough but inexact assessment of what he considered Mr Rigoli's partnership income might have been in the years in question, that does not assist Mr Rigoli. Mr Rigoli was unable to discharge the onus of proving that the assessment was excessive because he did not lead evidence of his actual income from all sources. 85. Mr Clough also directed my attention to the Full Court of the Federal Court of Australia (Jessup, Jagot and Nicholas JJ) in Rawson Finances Pty Ltd v Commissioner of Taxation (2013) 296 ALR 307. The main issue before the Court in that case was whether the primary judge erred in concluding that the Tribunal's ultimate finding of the existence of loans was not open on the evidence, or not supported by any evidence. There was no direct evidence of the existence of a loan agreement between the taxpayer and the bank involved. The Tribunal, on review of the Commissioner's decision, based its conclusion by drawing an inference from the evidence before it. Jessup J, while stating that the circumstances of the case might make one sceptical about the taxpayer's case that a loan existed, the material which the taxpayer put before the Tribunal clearly indicated the existence of a loan. His Honour did not accept that the decision was based on speculation or conjecture. He said, at 330: Any submission that the tribunal resolved the factual issues that were before it on the basis that the evidence was so evenly balanced that the ultimate finding turned, in effect, on the toss of a coin, or upon speculation or conjecture, would be quite inconsistent with the detailed and careful – and, it must be said, wholly conventional – inferential reasoning which supported its decision in the case. In light of the material to which I have referred earlier in these reasons, it was reasonably open to the tribunal to infer that the funds transferred by the bank to the appellant in 1997 were in the way of loans. 86. The point to note for present purposes from the above decision by Jessup J is that the decision of the Tribunal, although made by inferences drawn from indirect evidence, nevertheless resulted from the evidence produced by the taxpayer. Once again, this is clearly essential because it is the taxpayer who has the onus of proving that the assessment made by the Commissioner was excessive. 87. What Mr Clough submitted was that it was open to the Tribunal to draw inferences from the entirety of the evidence before it notwithstanding that Mr Rigoli did not have complete documentation of his assessable income and expenditure. In light of the cases I have referred to above, I must reject that submission. The observations that the Kompos report had been produced by the Commissioner were made in the context of the Tribunal regarding the Kompos report as inadequate to prove that which Mr Rigoli sought to establish by it. It was the Tribunal's rejection of the report as probative evidence that informed the Tribunal's observations that it had not been evidence produced by Mr Rigoli to establish the taxable income which his counsel had candidly accepted that Mr Rigoli was unlikely to know. 14 For the foregoing reasons I would dismiss the appeal. It is, therefore, unnecessary to deal with the Commissioner's notice of contention that Mr Rigoli did not provide the Tribunal with a probative foundation upon which factual conclusions could be based about either the amount included in his taxable income or allowable as a deduction under s 92 of the 1936 Act or of his actual taxable income for any of the years in question. It may, however, be desirable to make the following observations about the notice of contention. 15 The case conducted for Mr Rigoli in the Tribunal in the remitted proceedings depended upon whether the Kompos report was itself sufficient to provide a probative foundation for the inferences which Mr Rigoli sought the Tribunal to have drawn in his favour. Counsel for Mr Rigoli informed the Tribunal that "there really ought to be no need to go behind Mr Kompos' expert opinion to look at the primary documents he relied on" and that "the evidence that can be looked at can be held in the palm of one's hand", namely, the Kompos report, the Commissioner's reasons for decision and the Tribunal's prior findings on depreciation so that there was "no need to delve into the multitude of T document folders". The Tribunal was not taken to the underlying material in an attempt to provide, or to explain, the evidentiary foundation for the inferences which Mr Rigoli sought to have drawn in his favour. The Tribunal was not obliged in those circumstances to go beyond the material as put by the parties and was not required to undertake for itself an investigation into whether the materials in the documents before the Tribunal provided some independent basis for the inferences which Mr Rigoli sought to have made in his favour. In Commissioner of Taxation v Glennan (1999) 90 FCR 538 the Full Court said at [82]: As a matter of general administrative law, it has long been accepted that it is no part of the duty of the decision-maker to make out a case for the applicant: Prasad v Minister for Immigration and Ethnic Affairs (1985) 6 FCR 155 at 170, per Wilcox J. In a statutory context in which a taxpayer seeking to challenge an assessment is required to specify the grounds of his objection, and bears the burden of proving that it is excessive, as a general rule it cannot be said that the AAT is bound to make findings of fact and rulings on issues not relied upon by the taxpayer in the proceedings before it. It follows that, as a general rule, there is no error of law if the AAT fails to address issues of fact and law not the subject of argument by the taxpayer. The case for Mr Rigoli before the Tribunal was not conducted upon the basis that the Tribunal should independently have undertaken a review of all of the material which was before the Tribunal in search of a probative foundation to base conclusions concerning the amount included in Mr Rigoli's assessable income or allowable as a deduction as a partner under s 92 of the 1936 Act or of the amount of his actual taxable income. The Tribunal recorded at [88] of its reasons that the report by Mr Kompos "dealt only with his best estimate of partnership income" and provided no foundation to draw inferences about Mr Rigoli's actual taxable income from any material which the Commissioner used in arriving at his assessment. 16 Accordingly, the proceeding will be dismissed and I will hear the parties in relation to the form of orders and any question of costs. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone. Associate: Dated: 7 August 2015