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02 Feb 15 Taxpayer's appeal on administrative matters dismissed - Kocharyan

The Federal Court (Jessup J) has dismissed the taxpayer's appeal from the decision of the AAT in Confidential v FCT [2014] AATA 32.

The taxpayer's grounds of appeal were as follows:

(1) The Tribunal erred in holding that the applicant’s 2007 tax return was valid.
(2) The Tribunal erred in holding that the amended assessments had been served upon him.
(3) The Tribunal erred in holding that the amended assessments had been served within time.

In relation to the first ground, the taxpayer argued that the electronic return lodged on his behalf by his tax agent was not in the "approved form", was not therefore "duly made" and could not therefore be valid. It was not in the approved form because he had not authorised it. The Court rejected the argument that to be in the "approved form", the electronic return must contain a declaration that the agent is authorised by the taxpayer to give the return to the Commissioner. The first ground was dismissed.

In relation to the second ground, the taxpayer argued that the Commissioner had served the assessments to a post office box rather than his "preferred" address as communicated to the Commissioner. The Court said, at para 14:

"My attention was drawn to no statutory provision, however, which would require the Commissioner to use only the latter. Undoubtedly the Commissioner was required to serve the amended assessments on the applicant, but this could be done “by post or otherwise”: 1936 Act, s 174. The legally relevant question was, therefore, not whether the amended assessments had been sent to the applicant’s preferred address, but whether they were served on him by post or otherwise."

The Court held that the taxpayer had clearly received the assessments. This ground was also dismissed.

In relation to the third and final ground, the taxpayer argued that the amended assessments were out of time, not having been served within 2 years of the date of service of the original assessments. However, the Commissioner relied on the fact that the taxpayer had entered into a scheme for the sole or dominant purpose of obtaining a scheme benefit. This was found to be the case by the AAT, who found that a claim for a deduction was a scheme carried out by the taxpayer's tax agent. The taxpayer argued that a claim for an erroneous deduction could never be a scheme to which there was a tax benefit, because it would be denied under s 8-1 of ITAA 1997.

The Court said, at para 22:

"The applicant’s submission cannot be accepted. It involves reading into the relevant provisions words which were not there, and impressing upon them a perspective which is informed by the context of Pt IVA of the 1936 Act. Under item 1(e) in the table in s 170(1) of the 1936 Act, the only questions which arose were those which yielded the conclusions referred to in para 20 above. Unlike Pt IVA, s 170 did not invest the Commissioner with a power to render deductions non-allowable. Instead, it gave the Commissioner a longer period within which to amend. The provision in question was particularly apposite to a situation in which an assessment – including a self-assessment – claimed apparently uncontroversial deductions, but where the truth of the matter, once it emerged, was that deductions were not allowable at all; that is to say, a situation such as the applicant’s in 2006 and 2007."

The third ground of appeal was also dismissed.

Kocharyan v FCT [2015] FCA 13 (Federal Court, Jessup J, 27 January 2015).

 


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