Case: FJ Bloemen Pty Ltd v Commissioner of Taxation [1981] HCA 27 ; (1981) 147 CLR 360
Outcome: discussed
FJ Bloemen Pty Ltd v Commissioner of Taxation [1981] HCA 27 ; (1981) 147 CLR 360 (" FJ Bloemen ") comprised two appeals, heard together, from decisions of the New South Wales Court of Appeal: FJ Bloemen Pty Ltd v Commissioner of Taxation (unreported) and Dorney v Commissioner of Taxation and Simons v Commissioner of Taxation [1980] 1 NSWLR 404 (" Dorney and Simons "). The appeal against the Commissioner's objection decision in the FJ Bloemen proceeding was heard by Rath J: (1978) 36 FLR 191. However, by reason of the judgments which that Court had in meanwhile delivered in the Dorney and Simons appeals, the Court of Appeal dismissed the FJ Bloemen appeal. Thus, the reasons of the Court of Appeal are to be found in the Dorney and Simons appeals. 95 The question raised on the appeal to the High Court in FJ Bloemen was stated by Mason and Wilson JJ in their Honours' joint judgment to be whether the Supreme Court of New South Wales, in a statutory appeal under the ITAA or in a proceeding for declaratory relief, has jurisdiction to determine that an assessment of the taxpayer to income tax under s 166 of the ITAA is invalid, notwithstanding that a notice of assessment is produced by the Commissioner, and that the notice has the force of conclusive evidence (except in proceedings on appeal against the assessment) under s 177. Their Honours noted (at 365) that the case presented by the taxpayers had been that the Commissioner did not in truth make final assessments, but purported to make assessments which, if made at all, were only tentative or provisional, in neither case being authorised by the ITAA. In the FJ Bloemen case, the taxpayer also contended that the Commissioner had not made his assessments from the return or from any other information in his possession, in accordance with s 166, and that his real purpose was not to assess the amount of taxable income or of the tax payable thereon, but to cause a debt for tax to come into existence so that he could exercise his powers under s 218 of the ITAA (at 365-366). 96 In the High Court, the taxpayers argued that s 177(1) was enlivened only where something amounting to an "assessment" had been made, and that production of a notice of assessment did not preclude inquiry into whether that condition was satisfied. However, the Court unanimously rejected the submission. Mason and Wilson JJ, with whom Stephen J agreed, said that upon production of a notice of assessment that was final and definitive on its face, as distinct from provisional or tentative, the notice was conclusive evidence that an assessment was actually made, not merely conclusive evidence that an assessment, if made, was duly made (at 378). 97 The High Court judgments in FJ Bloemen do not assist greatly in the present appeals. 98 Part IVA was introduced into the ITAA by Act No 110 of 1981, replacing s 260 as the ITAA's general anti-avoidance rule. Div 13's more specific anti-avoidance provision was introduced the following year as complementary to Pt IVA (see [13] above). Part IVA and Div 13 are similarly structured. Unlike the former s 260, they both provide for the making of determinations by the Commissioner as conditions of liability to tax. None of the cases considered above were of such a Commissioner's determination class of case. 128 Mason CJ observed (at 178) that the making of a determination under s 177F "forms part of the process of assessment and goes to the ascertainment of the substantive liability of the taxpayer to tax " (emphasis in original). His Honour referred to the distinction recognised in George , McAndrew , FJ Bloemen and Dalco , between the procedural mechanism by which taxable income is ascertained on the one hand, and the taxpayer's substantive liability on the other, the former (alone) involving the "due making" of the assessment (at 182-184). After referring to certain illustrations of the distinction, the Chief Justice observed (at 184): "... the making of a determination by the Commissioner under s 177F of the [ITAA] is a determination going to substantive liability and, in conformity with the interpretation of s 177(1) adopted in George , McAndrew , FJ Bloemen and Dalco , is put in issue by an appeal which challenges the assessment on the ground that it is excessive." Later, Mason CJ referred specifically to the susceptibility of a determination under s 177F to attack in an appeal to this Court against an objection decision. His Honour stated (at 187-8): "In such an appeal, it is for the taxpayer to show that the assessment is excessive. In that context, the existence of an inadmissible purpose on the part of the Commissioner plays no part. The central element of the legislative r&eacute;gime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax. In such an appeal, the taxpayer is at liberty to challenge the exercise of any relevant discretion by the Commissioner. Thus, on appeal, the court will set aside the assessment if any relevant exercise of discretion by the Commissioner is affected by error of law, if he has taken an extraneous factor into account or if he has failed to consider a material factor [citing Avon Downs at 360]" (emphasis added). 152 I am concerned with an appeal under Pt IVC of the TAA, that is to say, a proceeding in which production of the Commissioner's notice of assessment is not conclusive evidence as to the amount or particulars of the assessment, yet is conclusive as to the due making of the assessment in other respects. Cases such as FJ Bloemen and Richard Walter are distinguishable on their facts as not being in the nature of appeals.