Case: Bailey v Commissioner of Taxation [1977] HCA 11 ; (1977) 136 CLR 214
Outcome: considered
Bailey v Commissioner of Taxation [1977] HCA 11 ; (1977) 136 CLR 214 , commencing at 216, Barwick CJ observed that the assessment of income tax is the process of applying the Act to a state of fact. His Honour continued that: [T]he process of assessment requires the application of the Act to the facts as known to and accepted by the Commissioner. He must of necessity, as part of that process, adopt a view of the relevant facts. And then, a little later: Quite clearly, the taxpayer is entitled to know the basis on which the assessment has been made. An adjustment sheet supplied with the notice of assessment can be expected to state and should state that basis. The taxpayer should be told the taxable facts. In a separate judgment in that case, Mason J stated, at pages 220 to 221: There is therefore no foundation for the notion that the Commissioner stands apart from ordinary litigants in some special position in relation to the giving of particulars ... To conclude otherwise would result not merely in injustice to the taxpayer, who will remain in doubt as to the Commissioner's case until it is presented at the hearing, but also in unnecessary preparations and in a hearing of unnecessary length as the taxpayer endeavours to deal with matters on which, as it may subsequently transpire, the Commissioner is placing no reliance whatsoever ... Although, speaking generally, the taxpayer knows or should know the facts relevant to a correct assessment of his income, there are other facts which will be relevant on the hearing of an appeal. Under s 190 [the then equivalent of s 14ZZO] the taxpayer bears the onus of showing that the Commissioner's assessment is excessive. Consequently the relevant facts in the appeal include the view of the facts on which the Commissioner has based his assessment, the manner in which he has arrived at his assessment. These facts are not within the knowledge of the taxpayer; they are within the knowledge of the Commissioner. Indeed, there is very much to be said for the view that fairness to the taxpayer demands that the Commissioner should be compelled to give particulars of his assessment when it issues so that the taxpayer is adequately informed as to the manner in which the assessment has been arrived at and may then determine whether he will object to the assessment and subsequently appeal. It is not difficult to see that sentiments in relation to fairness to a taxpayer informed the making of O 52B and, in particular, r 5, in its provision for an appeal statement; nor is it difficult to see that those same sentiments of fairness attend the provision found in the Tax List Directions at para 5.4 that, at the scheduling conference, the parties will be expected to address the following: (a) Narrowing of issues. In clear outline, the issues and facts that appear to be in dispute. None of this is to suggest that in any way an appeal statement rule, or for that matter, a practice direction can be a substitute for the statutory obligation which falls on an appellant to prove an assessment to be excessive. That is not to say, though, that when a taxpayer, by filing an appeal, engages judicial power, the respondent Commissioner is in some special privileged position in relation to the affording of procedural fairness to a taxpayer. The statement that was given in response to what was a very deliberate question at the scheduling conference was a statement made on instructions. It is true to say there had been some earlier informal correspondence between counsel acting respectively for the Commissioner and the taxpayer. Whatever might be the tenor of that correspondence, it was not known to the Court, nor for that matter, did it have the formality of a statement made in open court by counsel on behalf of, in this case, the Commissioner. The affidavits which have come to be filed on behalf of the applicant, Pacific Exchange, were cast, unsurprisingly, with the benefit of, not only the Commissioner's appeal statement, but also the statement made in open court.