Case: Madden v Madden (1996) 65 FCR 354
Outcome: followed
A principal contention of the applicant was that, taking into account the chronology of events and surrounding circumstances, the sole or driving purpose of the making of the assessment was to allow the respondent to issue the Garnishee Notices, and that this was an improper purpose. The applicant relied upon a passage of Einfeld J in Madden v Madden (1996) 65 FCR 354 at 370: As tax collection is not part of tax assessment, the Hickman principle that the assessment must have been made in a bona fide attempt to exercise the powers conferred by the Tax Act, that is, the powers of assessment, seems to me to lead to the conclusion that a motive of collection from a known fund rather than by a genuine assessment of tax due is a breach of the principle. It is one thing to raise an assessment having regard to tax collection, even to enhance the ability to collect the tax -- the Tax Act provides as much: see for example ss 167 and 205. However, it is entirely another matter to raise the assessment with speed, imprecision and inadequacy of examination, investigation and inquiry in order to take advantage of a window of opportunity for its simple collection. In other words, raising an assessment in order to collect tax, rather than to determine the tax due, is not a bona fide attempt to exercise the powers of assessment conferred by the Tax Act. The consequence of an improper exercise of power is to take advantage of the taxpayer in a way which cannot be redressed within the internal appeal and review procedures of the Tax Act itself. Once the notice of assessment has been served, the taxpayer is liable to tax and s 218 may be activated. In this case the result has been bankruptcy. If the Commissioner was motivated to raise this assessment in order to serve a s 218 notice on the police, the assessment would in my opinion not have been made for a proper purpose and would accordingly be invalid 28 Even if there was a perceived urgency to issue the Garnishee Notices, I am not satisfied that the applicant has demonstrated that the assessment was raised in order to collect tax. I do not find any "speed", "imprecision", or "inadequacy of examination, investigation and inquiry" in the making of the assessment, or for the purpose of taking advantage of any "window of opportunity" to collect tax. The investigation into the applicant had been ongoing for some time before the assessment was made, and there is no other evidence of any inadequacy of examination, investigation or inquiry. Assuming the approach of Einfied J is correct, I am not satisfied that the assessment was made other than in circumstances of determining the tax due. 29 Even if the assessment was issued in conjunction with the issue of the Garnishee Notices, this does not lead to the conclusion that the assessment is invalid. To my mind there is a similarity to the position confronting the court in Madden 65 FCR 354 where at 395, Foster J (with whom Shepherd J agreed) dismissed an application based on a similar argument in relation to the issue of a s 218 notice, an equivalent to a notice under s 260-5: As I see it, the appellant's contention amounts really to this. He alleges that the assessment was invalid because it was issued by the Commissioner in abuse of his power to assess..., in that it was not a bona fide attempt to assess the amount upon which tax should be levied but was a mere device to enable the issue of the s 218 notice... In the first place, I am unable to attribute any significance to the fact that the assessment was issued in conjunction with and motivated by a desire to take advantage of s 218. There is sufficient indication of urgency in the situation to warrant the steps that were taken. In my opinion, the s 218 connection is a purely neutral fact in the determination of whether the assessment itself was invalid.