Diab and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2009/4831-4834)
Judgment date: 3 May 2011
Date published: 22 July 2011

Summary of decision:
Whether the taxpayer was reckless in lodging incorrect income tax returns and whether the taxpayer discharged the burden of proving that the amended assessments and penalties imposed due to his recklessness were excessive.

Overview of facts:
The Applicant is a director of a company which carried on a business. He derived income in the form of salary from the company, rent from an investment property and some dividends and interest. In 2008, an audit conducted by the Commissioner resulted in amendments being made to the Applicant's assessable income for the 2005, 2006, 2007 and 2008 income tax years on the basis that the Applicant's income was significantly higher than declared originally. As a result of this, a significant shortfall penalty was issued for penalties equal to 50% for each income year in dispute. | The Applicant lodged objections against the amended assessments and the assessment of administrative penalties. All objections were disallowed, except the objection concerning the 2006 financial year which was allowed by the Commissioner in part. The Applicant then applied to the Tribunal for review of all the objection decisions. | Issues decided by the tribunal | It was held that the Applicant did not discharge his burden of proving that the assessments are excessive as per section 14ZZK of the Taxation Administration Act 1953 (TAA)) The Applicant did not attend the hearing to give oral evidence about the circumstances of the case, nor did he make a written statement to this effect. | In relation to the administrative penalties, it was held that the taxpayer had failed to discharge his burden of proving that the administrative penalties are excessive in that his circumstances did not amount to being reckless (item 3 in the table in s 284-90(1) in Schedule 1 to the TAA). The finding of recklessness was maintained because, while a number of assertions were made by the Applicant's representative, they were not substantiated by the Applicant's evidence. Further, the Applicant did not comply with the Commissioner's request for further information in relation to various unexplained cash deposits into the Applicant's account. These cash receipts were the basis upon which the amended assessments were issued and no information was provided by the Applicant as to why these deposits were not income receipts.

Issues decided:
It was held that the Applicant did not discharge his burden of proving that the assessments are excessive as per section 14ZZK of the Taxation Administration Act 1953 (TAA)) The Applicant did not attend the hearing to give oral evidence about the circumstances of the case, nor did he make a written statement to this effect. In relation to the administrative penalties, it was held that the taxpayer had failed to discharge his burden of proving that the administrative penalties are excessive in that his circumstances did not amount to being reckless (item 3 in the table in s 284-90(1) in Schedule 1 to the TAA). The finding of recklessness was maintained because, while a number of assertions were made by the Applicant's representative, they were not substantiated by the Applicant's evidence. Further, the Applicant did not comply with the Commissioner's request for further information in relation to various unexplained cash deposits into the Applicant's account. These cash receipts were the basis upon which the amended assessments were issued and no information was provided by the Applicant as to why these deposits were not income receipts.

ATO view of decision:
The decision will not result in any change to current ATO practices. The only changes made to the 2007 objection decision are those requested to be made by the Commissioner upon the receipt of further evidence to substantiate amendment by the Tribunal.

Administrative treatment:
Implications on current Public Rulings & Determinations | None

Legislative references: Taxation Administration Act 1953 14ZZK 284-90(1) Schedule 1
Subject references: Income tax amended assessments administrative penalties recklessness burden of proof