Case: Haritopoulos Pty Ltd v Deputy Commissioner of Taxation [2007] FCA 394
Outcome: applied
On 30 March 2006, Haritopoulos Pty Ltd also issued proceedings under s 39B of the Judiciary Act in this Court (matter SAD 54 of 2006) against the respondent for orders that certain notices of assessment of income tax against it were invalid as not having been made in good faith and having been made for an improper purpose. In particular, Haritopoulos challenged the validity of an assessment issued on 8 November 2005 in respect of the financial year ended 30 June 2002 by which Haritopoulos was assessed for income tax liability at $2,813,000 (plus certain other amounts to which I do not need to refer), and the validity of an assessment issued on 24 November 2005 imposing a penalty assessment of $2,109,750. On 25 May 2006, the respondent applied to summarily dismiss that application. The motion was heard on 29 August 2006. Judgment was given on 23 March 2007. Justice Besanko found that, on the material before the Court, Haritopoulos had no arguable case that the assessment challenged was made in bad faith and entered summary judgment dismissing the proceeding in its entirety: Haritopoulos Pty Ltd v Deputy Commissioner of Taxation [2007] FCA 394. 13 In each of the proceedings heard by Finn J and Besanko J, the nature of the allegations is very similar to those now asserted in the statement of claim filed on behalf of the applicant in this matter. 14 Counsel for the applicant acknowledged that, unless the applicant is given leave to amend its statement of claim to add what is called a new issue, and to rely on an affidavit of Pantelis Charitopoulos sworn on 29 May 2007 in opposition to the motion, the Court would on the motion make an order dismissing the application because the issues raised on the present statement of claim are in essence the same as those already addressed. 19 Taking facts alleged in the present statement of claim at their highest, the issues which might point to invalidity of the assessment and of the penalty assessment are the same as those which Besanko J addressed in Haritopoulos [2007] FCA 394. They are a failure to provide particulars of the assessment and of the penalty assessment; secondly, the issue of the assessment on 15 September 2005 when, a few weeks earlier, an officer of the respondent had anticipated that it would take six to eight weeks for a default assessment to issue; thirdly, the fact that the penalty assessment was issued so close in time to the assessment; and finally, the failure to consider the package of information provided on 3 November 2005 before making the assessment (although it is clear that there was no undertaking given to consider that material before making the assessment, and in fact it was made plain on 20 October 2005 and in the letter of 8 November 2005 that a default assessment would issue notwithstanding the provision of that further information). 20 I agree with Besanko J, for the reasons his Honour gave, that on those allegations no arguable case of bad faith on the part of the respondent in making the assessment or the penalty assessment could be made out. As so much has been acknowledged by counsel for the applicant, I do not need to repeat those reasons. Furthermore, although it has not been expressly stated in this application, I note that Besanko J also rejected the further contention that arguably there had been a breach of s 166 of the 1936 Act and in any event his Honour found it beyond argument that s 175 meant that any such breach would not affect the validity of the assessment. His Honour also noted (as appears also to be the case here) that the claim based upon a want of procedural fairness had not been pursued before him, and in any event it was unarguable as ss 175 and 177 would operate so as not to affect the validity of the assessment even if there had been a want of procedural fairness to which the applicant was entitled. In the light of those provisions, Besanko J concluded, and I agree, that the applicant was bound to confine its challenge (as distinct from any challenge to the amount of the assessment under Pt IVC of the Taxation Administration Act 1953 (Cth)) to the "Hickman grounds" ( R v Hickman; Ex parte Fox and Clinton [1945] HCA 53 ; (1945) 70 CLR 598 per Dixon J at 615), relevantly that the assessment was not made in good faith.