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06 Jun 1111 Bank account deposits unexplained; assessments upheld - Chen

The AAT has held that evidence concerning a large number of bank deposits and credit card transactions was so unsatisfactory that the taxpayer, who is currently serving a long prison sentence for money laundering offences, had failed to discharge his onus of proving that the Commissioner’s assessments were excessive.

The taxpayer had lodged returns for the 1999 to 2003 income years inclusive, disclosing total taxable income of $45,404. The Commissioner undertook an audit of the taxpayer’s tax affairs, and ultimately assessed him to a total taxable income for those years of almost $3 million plus just over $1 million in penalties. The taxpayer challenged all of the assessments and contended that his returns were correct.

The taxpayer’s objections were disallowed in 2005, and the hearing of the applications to the AAT took place only after a very long delay. The delay was caused, in the first instance, because the applications were held in abeyance at the taxpayer’s request and with the Commissioner’s consent while criminal proceedings involving the taxpayer, including an appeal, took place. As a result of the criminal proceedings the taxpayer is currently serving a lengthy sentence of imprisonment, having been convicted of money laundering on an extensive scale.

Considerable evidence about many deposits made to the taxpayer’s account, and credit card transactions by him, was given by the taxpayer and other persons connected with him. The AAT found, however, that, excepting only the taxpayer’s wife (who had met and married him some time after the years in question), none of the persons who gave evidence before the AAT could be described as truthful. The evidence considered as a whole was contradictory, and in many respects incoherent but above all untruthful. The evidence was such that it was not possible to determine whether the money which came into the taxpayer’s possession was legally or illegally derived. It was not necessary for the Tribunal to make a finding as to the origin of the money because the taxpayer bore the onus. The only possible result was that the taxpayer had entirely and singularly failed to discharge the onus. Accordingly, the objection decision under review was affirmed.

Re Chen and FCT [2011] AATA 381 (J Block DP, 3 June 2011).