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08 Aug 13 Commissioner's appeal on burden of proof upheld

The Federal Court (Pagone J) has upheld the Commissioner's appeal from the decision of the AAT in Rigoli and FCT [2012] AATA 757. It held that the taxpayer had not discharged the onus of proof that an assessment raised by the Commissioner under s 167 ITAA 1936 was excessive.

It explained the taxpayer's approach thus:

"Mr Rigoli did not seek to prove that the amount which had been assessed against him as his taxable income 'in fact' exceeded his actual taxable income but, rather, sought to show that the amount judged by the Commissioner to be that upon which he was to be assessed was wrong by attempting to establish that the Commissioner had failed to make appropriate allowance for depreciation within the assessment."

The Court rejected this approach on the basis of the High Court decision in FCT v Dalco [1990] HCA 3, stating:

"The High Court in Dalco dealt with a similar challenge by saying that a taxpayer will fail to discharge the burden of proof where the taxpayer does not show that the amount assessed under s 167 'in fact exceeds his taxable income' but merely challenges the basis upon which the Commissioner’s judgment was based."

The Court also said:

"Section 167 does not in terms require the Commissioner to make an assessment of a taxpayer’s 'taxable income' but, in contrast to s 166, has the effect of deeming as the taxpayer’s 'taxable income' the amount which upon his judgment income tax ought to be levied..."

The Court held that it followed that the taxpayer had failed to discharge the burden of proof that the assessment was excessive, and therefore that the decision of the AAT should be set aside, the Commissioner’s appeal should be allowed and the proceedings be remitted to the Tribunal.

FCT v Rigoli [2013] FCA 784 (Federal Court, Pagone J, 7 August 2013).


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