0.13880 /45 1 E Day, Gor. Print, Melb. IN THE HIGH COURT OF AUSTRALIA REASONS FOR JUDGMENT "SHEARER. JUDGMENT. RICH Je This is a taxation prosecution by action pursuant to sec. 233(1) of the Income Tax Assessment Act 1936-1947. The allegations in the statement of claim made by the plaintiff Commissioner of Taxation relate to offences against certain sections of the Act as applied to the Social ServicesContribution Assessment Act 1945-1947. The sections concerned are sec. 227(1), sec. 230(1) and sec. 231(1) + All the allegations in the statement of claim were admitted. Paragraph 2 of the statement of defence was with- drawn at the hearing. On these admissions Mr. Brown, counsel for the plaintiff Commissioner,moved for judgment in respect only of the offence against sec. 231(1) » I directed counsel to produce the returns made by the defendant and the assessment to tax by the Commissioner. It was then stated that the assessment had not yet been made butthe returns were produced and made an exhibit. The first return dated 31st August 1947 which pursuant to sec. 161 the defendant furnished to the plaintiff Commissioner contained the declaration that his total income from personal exertion for the year of tax wasé516. This was admittedly an understatement as his income amounted to not less tnan £7,068. The plaintiff refused to accept this return and on 18th May 1948 the defendant made an amended return. This was the result of enquiries and investigations by the Commissioner's officers and the return dec- lared his total net income from personalexertion to be Loss. This compares well with the Commissioner's estimate ond 1068. As this was done only after an investigation of the defendant's true income had been made by the officers of the Commissioner it might be rash to treat it as necessarily indicative of a repentant spirit on the part of the defendant. I must, however, consider the shortcomings of the first return and the admissions in the pleadings which evidence the offence against the relevant section - sec.231(1). The particulars are that the defendant dids- 2. "( a) make furnish and deliver to the Plaintiff the said return in which said return the Defendant stated and declared that for the year ist July 1946 to 30th e 1947 his total income from personal exertion wags' 516 whereas in fact his total income from personal exer- tion f the said year was far in excess of the said um of £516 and amounted to a sum of not less than ET ,068 (bv) fail to keep proper books of account in accordance with the requirement of the said Acts and in accordance with usual commercial practice; (c) enter into an arrangement with Charles Coward and/or Hillman Tobacco Company Pty. Ltd. whereby the said Charles Coward and/or Hillman Tobacco Company Pty. Ltd. was to sell to the Defendant and the Defendant was to purchase tobacco from the said Charles Coward and/or Hillman Tobacco Company Pty. Ltd. on the basis that cash would be paid by the Defendant on delivery of the said tobacco to the Defendant and that no receipt or invoice was to be given or issued by the said Charles Coward and/or Hillman Tobacco Company Pty. Ltd. to the defendant in respect of any such sale or delivery}; (a) carry into effect the arrangement made by him referred to in (c) hereof 3 (e) conduct the business of buying and selling tobacco under the name of 'R. Sinclair' and operate banking accounts under the name of 'R. Sinclair' with the object of concealing his business activities and with the object of concealing purchases and sales of tobacco made by the Defendant and the income derived by him from such purchases and sales; (f) when questioned in the course of their official duties by officers duly authorised under the said Acts to investigate the correctness of the said return and the income of the Defendant on behalf of the Plaintiff concerning transactions made in the name of 'R. Sinclair' pretend that he had no concern or interest in the business affairs and dealings of 'R. Sinclair'." These admitted facts entitle the plaintiff to a declaration that the defendant has been guilty of an offence against sec. 231( 1) of the Acte It now remains to consider the penalty provided by this section. It is not less than twenty-five pounds, or more than five hundred pounds and, in addition, the Court may order payment to the Commissioner of a sum not exceeding double the amount of tax that has been avoided or attempted to be avoided. In a previous case, son, unreported, I held that "penalty" included any sum which / 3. a defendant may "in addition" be ordered to pay. Payment of a penalty under the Act does not relieve the offender from liability to assessment and payment of any tax for which he would otherwise be liable. Assessment will no doubt be made and independent means taken to exact payment. The methods of obtaining payment of a penalty are set out in sec. 247. The facts of this case do not, I consider, call for an order committing the defendant to gaol except as a means of inswing payment of the penalties. It is one of the means provided. for obtaining payment of the pecuniary penalty which is the real punishment for the offence.I therefore adjourned the hearing of the motion for judgment until today in order to give the defendant an opportunity of arranging for payment of the penalties I shall proceed to impose. I regard the case as disclosing very reprehensible conduct on the part of the taxpayer and the penalty I propose to inflict is intended to mark the character of the offence. It is in effect a fine of&1000. It will of course be diviied into two amounts as is required by sec. 231(41) » that is one amount representing a penalty of not less than 25 or more t] 500 and an additional amount ordered to be paid not exceeding double the amount of the tax that it has been ttempted to avoid. The amount it was attempted to avoid was Line. Theoretically, therefore I might impose a total penalty of f 500 plus/'8,832. That would be a crushing imposition however: one which I would not be inclined to impose unless a defendant had over a succession of ears been guilty of systematic fraud. What I shall do is to fix-250 as the first part of what for convenience I call the penalty and Piso as the second part. What is in effect a fine of Prove I consider a just penalty, though I am conscious that it errs, if at all, on the side of leniency . The defendant will when assessed be under/liability for the tax he attempted to evade. That is, however, not the subject of these proceedings. I/ & 4. I shall make an order declaring that the defendant has been guilty of an offence against sec. 231( 4) of the Income Tax Assessment Act and of that section as applied to-the Social Services Contribution Act. The judgment will order that the plaintiff recover in respect of the offence a penalty of 250 and it will order that the defendant do pay to the plaintiff a further sum of J 750. There will also be an order for the costs of the action against the defendant. doserdtart. As the defendant by his counsel has undertaken to pay the sums abovementioned and the costs I make the following declaration and order. Declare that the defendant has been guilty of an offence against sec. 231(1) of the Act. Order that plaintiff do recover in respect of this offence a penalty wc Peo and order that the defendant do pay to the plaintiff an additional sum seb rs0. By consent of counsel costs assessed at one hundred guineas, which I order defendant to pay to plaintiff or his solicitors.