COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY
GENERAL DIVISION
Jenkinson J.(1)

CWDS
  Income Tax - Objections and appeals - Reference to Administrative Appeals
Tribunal of decision on objection against assessment - Extension by
Commissioner of time for furnishing return after return furnished not subject
to review by Tribunal.
  Income Tax Assessment Act 1936
  Balnaves v. Commissioner of Taxation (1985) 8 FCR 589

HRNG
MELBOURNE
#DATE 4:5:1990
  Counsel for the Applicant    :  Mr. A.G. Uren QC and Mr. G.T.
                                  Pagone
  Solicitor for the Applicant  :  Australian Government Solicitor

JUDGE1
  Application for an order of review in respect of a decision of the
Administrative Appeals Tribunal made in the course of a review by the Tribunal
of a decision under s.186 of the Income Tax Assessment Act 1936 by the
applicant Commissioner on an objection by the second-named respondent against
an income tax assessment by the applicant.
2.  The assessment was of additional tax for failure to furnish when required
to do so a return relating to the year of income ended 30 June 1985.  The
Tribunal found that the return was furnished on 15 February 1986 and that
shortly thereafter "an officer of the Commissioner endorsed the return as
having an extended date for lodgment to 31 December 1985".  In the Tribunal's
reasons for decision that finding was followed by the following passage:
          "......It was said by the Commissioner's
          representative that that was a long
          standing practice of the Commissioner.
                Whether or not such a practice
          amounts to an allowance by the
          Commissioner of extended time, it was at
          least clear that in calculating
          penalties, the Commissioner did take the
          view that, in measuring the penalty to be
          imposed as 20% per annum of the relevant
          tax for the period during which lodgment
          was delayed, regard should be had to 31
          December as a final lodgment date.  In
          addition, as an act of grace, the
          Commissioner allowed a further 7 days."
These observations have reference to sub-sections 161(1) and 222(1) of the
Income Tax Assessment Act 1936 and to s.227 thereof, which read thus:
          "161(1)  Every person shall, if required
          by the Commissioner by notice published
          in the Gazette, furnish to the
          Commissioner in the prescribed manner,
          within the time specified in the notice,
          or such extended time as the Commissioner
          may allow, a return signed by him setting
          forth a full and complete statement of
          the total income (other than income upon
          which withholding tax is payable), and
          profits or gains of a capital nature,
          derived by him during the year of income,
          and of any deductions or losses, being
          losses of a capital nature, claimed by
          him, and also setting forth such
          information (if any), being information
          that it is necessary for the Commissioner
          to obtain for the purposes of the
          administration or operation of a State
          income tax law, as is prescribed:
                Provided that the Commissioner may,
          in the notice, exempt from liability to
          furnish returns such classes of persons
          not liable to pay income tax as he thinks
          fit, and any person so exempted need not
          furnish a return unless he is required by
          the Commissioner to do so.
          ........................
          222(1)  Where a taxpayer refuses or fails
          to furnish, when and as required under or
          pursuant to this Act or the regulations
          to do so, a return, or any information,
          relating to a year of income, being a
          return relating to or information
          relating to, or to the affairs of, the
          taxpayer, the taxpayer is liable to pay,
          by way of penalty, additional tax equal
          to double the amount of tax payable by
          the taxpayer in respect of the year of
          income.
          ..........................
          227(1)  The Commissioner shall make an
          assessment of the additional tax payable
          by a person under a provision of this
          Part.
          (2)   Nothing in this Act shall be taken
          to preclude notice of an assessment made
          in respect of a person under sub-section
          (1) from being incorporated in notice of
          any other assessment made in respect of
          the person under this Act.
          (3)   The Commissioner may, in the
          Commissioner's discretion, remit the
          whole or any part of the additional tax
          payable by a person under a provision of
          this Part, but, for the purposes of the
          application of sub-section 33(1) of the
          Acts Interpretation Act 1901 to the power
          of remission conferred by this
          sub-section, nothing in this Act shall be
          taken to preclude the exercise of the
          power at a time before an assessment is
          made under sub-section (1) of the
          additional tax.
Both s.222 and s.227 fall within Part VII of the Act.  Although the liability
to additional tax payable for failure to furnish when required to do so a
return relating to a year of income is directed by sub-section 222(1) to be
measured by reference to the amount of tax payable in respect of that year of
income and without regard to any temporal extent of the default in furnishing
the return, paragraph 193(2)(a) of the Act provides:
          "(2) Notwithstanding section 25 of the
          Administrative Appeals Tribunal Act 1975,
          the Tribunal does not have power to
          review decisions of the Commissioner
          relating to the remission of additional
          tax payable by a taxpayer except
          decisions relating to the remission of
          additional tax under Part VII where the
          additional tax payable, after the making
          by the Commissioner of the decision,
          exceeds -
          (a)  in the case of additional tax
               payable under section 222 by reason
               of the refusal or failure to furnish
               a return, or any information,
               relating to a year of income-the
               amount calculated, in respect of the
               period commencing on the last day
               allowed for furnishing the return or
               information and ending on the day on
               which the return or information is
               furnished or the day on which the
               assessment of the additional tax is
               made, whichever first happens, at
               the rate of 20% per annum of the tax
               properly payable by the taxpayer in
               respect of the year of income;"
Double the amount of tax payable by the second-named respondent in respect of
the year of income ended 30 June 1985 was $1,684,234.96.  If "the last day
allowed for furnishing the return", within the meaning of that phrase in
s.193(2)(a), be 7 January 1986, the period described in that paragraph may be,
and was in fact conceived by the applicant to be, 38 days.  He exercised his
discretionary power to remit the whole or part of the additional tax payable
by the second-named respondent by remitting, on 27 May 1986 when the
additional tax payable was assessed, all but $17,534.00.  The "tax properly
payable by the taxpayer in respect of the year of income", to which
s.193(2)(a) refers, was $842,117.48.  The calculation $842117.48 x 38 x 20
                                                       365  100
gives $17534.50, and it was that calculation by which the Commissioner
selected the amount of additional tax which would be payable after the making
by him of his decision relating to the remission of additional tax.
3.  In order to determine whether a liability imposed by s.222 to pay
additional tax has been incurred by a taxpayer in respect of a year of income,
so that the existence of an obligation to make an assessment of such
additional tax may be recognised and the obligation discharged, it is
necessary that the applicant ascertain whether a return in respect of that
year of income has been required of the taxpayer and, if it has, the date when
the return relating to the year of income was required to be furnished, and
whether such a return has been furnished and, if it has, when it was
furnished.  It was common ground, and the Tribunal found, that the
Commissioner had by notice published in the Gazette on 2 July 1985 required
the second-named respondent, in exercise of the power conferred on him by
sub-section 161(1), to furnish a return in respect of the year ended 30 June
1985 on or before 31 August 1985.  But the parties seem to have conducted the
review before the Tribunal, as the applicant Commissioner conducted the
proceeding in this Court, on the assumption that the applicant's assessment of
additional tax on 27 May 1986 had been preceded, either on the endorsement of
"an extended date for lodgment" on the return, or on 27 May 1986, by an
exercise of power, conceived to be conferred by the words "or such extended
time as the Commissioner may allow" in sub-section 161(1), to substitute for
the date specified in the Gazette notice, 31 August 1985, a later date, that
is 7 January 1986 (or, as the Tribunal considered, 31 December 1985), as the
end of the period within which the respondent was required to furnish that
return. Underlying such an assumption is a construction of sub-section 161(1)
which treats the power of the Commissioner to allow an extended time as
exercisable after as well as before the expiration of "the time specified in
the notice", and after as well as before the return to which the extension
relates has been furnished.  I will assume, but without expressing an opinion
upon, the correctness of that construction.
4.  On the hearing of the review by the Tribunal the applicant denied that his
decision that 7 January 1986 should be allowed by him to be the end of the
extended time within which the second-named respondent's return ought to have
been furnished was part of the process of making the assessment to which the
respondent had objected; and he denied that on the Tribunal's review of his
decision on the objection the Tribunal was authorised to exercise the
discretionary power of extending that time if and as the Tribunal thought fit.
The applicant did not suggest that, if a decision concerning extension of the
time were part of the process of assessment, the Tribunal would lack the
authority itself to substitute for the applicant's decision the decision which
the Tribunal thought right : the applicant's only submission was that a
decision for which sub-section 161(1) provided authority was not a part of the
process of assessment. In thus framing his submission the applicant was in my
opinion correct.  Section 43 of the Administrative Appeals Tribunal Act 1975
confers on the Tribunal all the powers and discretions that are conferred by
any relevant enactment on the person who made the decision, exercisable for
the purpose of reviewing the decision. If the power conferred by sub-section
161(1) is a power exercisable as part of the assessment process, it is
exercisable by the applicant also upon consideration of an objection against
the assessment and therefore exercisable also by the Tribunal for the purpose
of reviewing the applicant's decision on the objection.
5.  The Tribunal's conclusion was "that, in the circumstances of the present
case, the decision whereby the Commissioner elected to treat as 'late' that
which he might have accepted as being within time was an integral part of the
assessment process", and that the decision so characterised was subject to
review by the Tribunal.  The Tribunal's reason for characterising the
Commissioner's exercise of the power conferred by sub-section 161(1) in the
terms I have just quoted may be gathered from the following passage from the
Tribunal's written reasons:
          "...  I am well satisfied that there are
          many circumstances in which decisions by
          the Commissioner as to the due date for
          lodgment of returns are purely
          administrative decisions which form no
          part of any process of assessment.  I
          instance decisions such as the decision
          to select 31st August as the due date for
          lodgment to be gazetted; decisions as to
          Standard Lodgment Programmes for agents;
          and decisions as to Alternative Lodgment
          Programmes.  It would be open to persons
          dissatisfied with such decision to seek
          judicial review pursuant to the ADJR Act
          if they were so advised.  Further, those
          decisions would not be open to challenge
          before this Tribunal by the procedures of
          objection and review provided for by Part
          V of the Act.
          36.   But the decision now sought to be
          reviewed was an integral part of the
          process of raising the assessment.  If
          the return was 'late' in the relevant
          sense the statute made automatic
          provision for additional tax:  additional
          tax which in the circumstances in the
          case amounted to $1,684,234.96.  That
          statutory provision was of course subject
          to the power of the Commissioner to grant
          remissions.  But for all that it was a
          liability to which the taxpayer was
          exposed if the return was 'late' and
          whether the return was late by one day,
          one year or a decade; and whether the
          lateness occasioned substantial loss to
          the revenue or, as here, none.  In order
          to determine whether the return was
          'late' in the relevant sense, it was
          necessary that the Commissioner should
          apply his mind to the question as to what
          would be a sufficient or acceptable date
          for lodgment of the return.  He did so.
          He determined on 31st December 1985 as
          the appropriate date.  Having so
          determined and having found the return to
          have been lodged thereafter, there
          immediately arose, subject to remissions,
          a liability in the taxpayer to
          $1,684,234.96.  Had he determined that
          the date of actual lodgment was an
          acceptable date for lodgment, there would
          have been no liability at all to
          additional tax for late return."
(Balnaves v. Commissioner of Taxation (1985) 8 FCR 589 provides an exposition
of "Standard Lodgment Programmes" and " Alternative Lodgment Programmes".)
6.  The originating application for an order of review described the decision
in respect of which the order was sought as "the decision of the
Administrative Appeals Tribunal ..... that it had power or jurisdiction to
review the decision by the Commissioner ..... as to the date allowable for
lodgment of the relevant income tax return of a taxpayer in the course of a
review under Part V of the Income Tax Assessment Act 1936."
7.  The opinion which the Tribunal formed of the power to review that decision
of the Commissioner was given effect by the making of a decision to exercise
the power and, to that end, by the giving of a direction that the parties to
the proceeding in relation to which the opinion was formed were to be afforded
an opportunity to adduce evidence and to address argument to the Tribunal on
the matter thus laid open to review.  The decision to exercise that power was
in my opinion a decision to which the Administrative Decisions (Judicial
Review) Act 1977 applies.  (Cf. Lamb v. Moss (1983) 76 FLR 296.)
8.  In Balnaves v. Commissioner of Taxation (1985) 8 FCR 589 at 593 a Full
Court of this court held that "a decision to grant or withhold an extension of
time for the lodgment of a return is made by the Commissioner in the course of
discharging his administrative functions, and is remote from the process of
assessment of tax."  But the decision of the Commissioner in question in that
case was made before the return had been furnished and the reasoning of the
Full Court in support of its conclusion, which it formed in rejecting a
submission by the respondent Commissioner that his decision was one "forming
part of the process of making, or leading up to the making of" an assessment
of tax, within the meaning of those words in paragraph (e) of Schedule I to
the Administrative Decisions (Judicial Review) Act 1977, reflected the court's
consciousness of that circumstance.  Thus the Full Court noted that in Clarke
and Kahn v. Deputy Commissioner of Taxation (Qld) (1983) 52 ALR 603 at 607
"the court also observed that a decision is not a decision leading up to the
making of an assessment unless the making of an assessment has followed or
will follow from the decision.  The making of a decision to grant or withhold
an extension of time for the lodgment of a taxation return will not
necessarily be followed by the making of an assessment.  In many, perhaps
most, cases such a decision will be followed by an assessment but in other
cases it will not.  In some cases an assessment may issue although no return
has been lodged: see s 166 of the Act.
9.  In our opinion the decision sought to be reviewed in the present case,
whilst being a decision which will normally precede the making of assessments,
is not properly characterised as a decision forming part of the process of
making assessment or leading up to the making of assessments.  In Minister for
Industry and Commerce v. Tooheys Ltd (1982) 60 FLR 325 at 337-338 a Full Court
of this Court approved a statement by Ellicott J, at first instance in that
case, that
          "the words 'leading up to the making' are
          intended to point to decisions which have to
          be made or in the circumstances it is
          appropriate to make before the actual process
          of assessment or calculation can begin."
That is not this case.  The lodgment of a return and, a fortiori, the grant of
an extension of time for its lodgment is so remote from the Commissioner's
assessment activities as not to form part of or lead up to those activities.
Accordingly, it is not a decision of a class referred to in par (e) of the
First Schedule to the Judicial Review Act." But in a case such as this, where
the decision concerning extension of time is made after the return has been
furnished, it may be fairly said that the only purpose served by the making of
the decision is to enable the question to be answered whether a liability
under s.222 is to arise.  A decision whether to extend the time for furnishing
a return which has at the time of the making of the decision been furnished
cannot easily be described as "remote from the Commissioner's assessment
activities."
10.  However,  to decide in exercise of a power conferred by sub-section
161(1) what the date shall be on or before which the obligation to furnish a
return must be discharged is in my opinion to make a decision about a matter
affecting liability to additional tax under sub-section 222(1), whether the
decision be made before or after the return is furnished, and is not a
decision dealing with the calculation - or, in the language of the definition
of "assessment" in s.6 of the Act, "the ascertainment" - of the amount of
additional tax payable. To fix upon that date is to prescribe by
administrative decision one of the circumstances upon which the liability to
additional tax will depend:  it is not to ascertain the existence of a
circumstance on which such a liability depends in the course, and for the
purpose, of assessment.  (Cf. Tooheys Ltd. v. Minister for Business and
Consumer Affairs (1981) 54 FLR 421, espec. at 436.)  In my opinion the
decision of the applicant fixing that date formed no part of the assessment
which he made of the second-named respondent's liability to additional tax,
and was accordingly not a subject of re-consideration by him in making his
decision on the second-named respondent's objection against the assessment,
nor a subject of consideration by the Administrative Appeals Tribunal in its
review of the latter decision.
11.  There will be a declaration that a decision of the Commissioner of
Taxation allowing A.C. Goode and Co. Ltd. an extended time for furnishing a
return of income derived by it during the year of income ended 30 June 1985 is
not subject to review or alteration by the Administrative Appeals Tribunal in
the proceeding No. VT 87/801.