FEDERAL COURT OF AUSTRALIA

Bosanac v Commissioner of Taxation [2018] FCA 946

ORDERS

THE COURT ORDERS THAT:

1.    Each proceeding is dismissed with costs as agreed or as assessed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

STEWARD J:

INTRODUCTION

1    The applicant describes himself as a “self-styled venture capitalist”. He earned money from the sale of shares in Singapore. He also earned money from the provision of consultancy services, either directly, or through companies he owned or controlled. This case concerns the income tax liability of the applicant for the period 1 July 2005 to 30 June 2013 (the “years in dispute”). During those years the applicant paid no income tax at all and filed no tax returns. He now accepts that he earned income of the kind described above, including considerable foreign income, in every year in dispute.

2    In 2014, the respondent (the “Commissioner”) announced an initiative entitled “Project DO IT”. Its object was to provide incentives to induce Australian taxpayers to disclose to the Commissioner foreign earnings upon which no Australian income tax had been paid. The two principal incentives were that:

(1)    the Commissioner would not seek to issue amended assessments beyond the usual period under s 170 of the Income Tax Assessment Act 1936 (Cth) (the “1936 Act”) and would not allege fraud or evasion; and

(2)    the Commissioner would only impose administrative penalties of 10%.

3    In order to be eligible to obtain these incentives, a taxpayer had to apply to participate in Project DO IT and had to satisfy a number of eligibility conditions. Amongst these was the need to make full disclosure of all foreign earnings. There was also a deadline for applying that had to be met, being 19 December 2014. The terms and conditions of Project DO IT were contained on the Commissioner’s website, a printout of which was tendered in evidence.

4    The lawfulness of this initiative was not challenged before me. In my view, it probably operated as a compromise of the Commissioner’s power to recover income tax potentially owed to him: s 8 of the 1936 Act and s 1-7 of the Income Tax Assessment Act 1997 (Cth) (the “1997 Act”); c.f. Grofam Pty Ltd v Federal Commissioner of Taxation (1994) 29 ATR 608 and Inland Revenue Commissioners v National Federation of Self-Employed & Small Businesses Ltd [1982] AC 617 at 636. As such, the Commissioner was free to specify the conditions of eligibility and to withdraw from Project DO IT at any time.

5    The Commissioner commenced an audit of the applicant in March 2014. That audit included an examination of the applicant’s domestic and foreign income. Following the announcement of Project DO IT, the applicant decided to disclose his foreign income to the Commissioner for the first time. He instructed his then accountant, a Mr Thompson, to make disclosure for the purposes of Project DO IT before the deadline of 19 December 2014. Mr Thompson commenced this process, but the Commissioner subsequently decided that the applicant was not eligible to receive the benefits of Project DO IT, for the reasons set out below.

THE AMENDED ASSESSMENTS

6    On 25 February 2015, the applicant for the first time lodged income tax returns for the years in dispute. It is now accepted by the applicant that those returns were inadequate. They disclosed the following taxable income:

7    Original assessments were then issued to the applicant based upon the contents of these returns. Following completion of his audit, the Commissioner then issued amended assessments. The assessments and notices of shortfall penalty assessment were as follows:

8    Further amended assessments were subsequently issued on the making of objection decisions. I do not need to set out the adjustments made by these assessments. In his closing written submissions, the applicant stated that he no longer contested the primary tax assessed for the 2006, 2010 and 2011 years of income.

9    The onus is on the taxpayer to prove on the balance of probabilities the extent to which an impugned assessment is excessive. Where a taxpayer fails to retain records which evidence the course of a business, or fails to create such documents, he or she may well face a great difficulty in demonstrating excessiveness. This was the very problem which the applicant faced here.

10    The applicant also challenged the Commissioner’s decision to exclude the applicant from Project DO IT, and the validity of the resulting amended assessments and assessments of shortfall penalty, pursuant to s 39B of the Judiciary Act 1903 (Cth). Those proceedings were heard at the same time as the tax appeals which were before me.

OVERVIEW OF THE DISCHARGE OF THE ONUS OF PROOF

11    The applicant filed four affidavits he had sworn. The first affidavit addressed primary tax. The second, simply exhibited thousands of pages of Credit Suisse bank account statements without any meaningful explanation. The third was primarily directed to the issue of administrative penalty and to the applicant’s attempt to participate in the Commissioner’s Project DO IT. The fourth, filed on the morning of the first day of the hearing, exhibited an unsigned agreement dated 25 November 2008 between International Formwork & Scaffolding Limited (“IFS”) and the applicant, called a “Loan Agreement”, and a printout containing the document properties of that exhibit. The applicant did not read this affidavit but tendered the unsigned agreement as a business record.

12    The applicant also sought to corroborate his evidence by relying upon a series of short affidavits sworn or affirmed by business associates. He also sought to rely upon an affidavit sworn by his new accountant, a Mr Roos, and three affidavits sworn by Mr Thompson.

13    Little detailed evidence was adduced by the applicant concerning his business of earning income from share transactions or from consultancy. He never explained the structure of his business, save that it would appear that he used up to four companies in Singapore to buy and sell shares using a Credit Suisse bank account in order to bank the proceeds. The owner or owners of these four companies was not disclosed. The books of account of these four companies, if they had any, were not disclosed. The origin, purpose and extent of what the applicant called the “offshore structure” was not disclosed. The manner in which consultancy fees were earned was not disclosed. The precise legal relationship between the applicant and certain companies in Australia (Healthtec Growth Partners Pty Ltd (“Healthtec”) and Greenday Corporate Pty Ltd (“Greenday”)), which he either owned or controlled in part with a Mr Cross, for the purposes of the provision of consultancy services, was not disclosed. Indeed, as will become clear, in the first affidavit he filed, which was directed at the discharge of his onus of proof concerning primary tax, the applicant failed to disclose the fact that he had derived substantial income overseas from the sale of shares. In his third affidavit, a glimpse into his activities was revealed when he deposed as follows:

4.    I refer to paragraphs 5 and 6 of my first affidavit and clarify as follows:

(a)    In the period from 2006 to 2013, my only sources of income were:

i.    Income paid to me for consultancy services provided as part of Greenday’s business, or as part of the business of Healthtec Growth Partners Pty Ltd (“Healthtec”) which was the corporate entity through which my business partner, Evan Cross, and I previously provided such services. Healthtec was deregistered on 26 August 2015 (“consultancy services”); and

ii.    Income received as a result of share transactions (“share transactions”).

(b)    I depose and confirm that the sources referred to in the preceding sub-paragraph were the only methods in which I earnt income throughout the relevant period.

(c)    Income received with respect to consultancy services provided by Greenday (or Healthtec) was primarily paid into one of the following bank accounts:

i.    Account number […], being a Westpac account in the name of Dominion; or

ii.    Account number […], being a Westpac account in the joint names of myself and Ms Bernadette Bosanac.

…

(d)    Funds were paid to me either from Greenday, upon receipt of payment to Dominion from a client for services rendered, or occasionally a payment would be made directly to Mr Cross and I from a particular client. In both cases as deposed to in my first affidavit, the funds were divided equally as 50/50 shares and distributed (or paid direct by the client) to myself and Mr Cross, into our nominated bank accounts.

(e)    Income from share trading in Australia where shares were being converted into cash ultimately made its way into bank accounts held in my name, in Dominion’s name or jointly with Ms Bernadette Bosanac.

(f)    Revenue from share trading conducted overseas through various accounts maintained with Credit Suisse at its Singapore branch was paid into those Credit Suisse accounts and then either used to pay business expenses, repatriated to my Australian accounts (as personal income) or else booked as personal income by my accountants PKF within their updated positions for my tax liabilities following their review of the Credit Suisse data obtained by me earlier this year.

(g)    During the financial periods relevant to this Appeal I have freely and without reservation used my bank accounts to deposit amounts that were income as well as amounts that were not income.

(h)    Neither the consultancy services nor the share trading involved the payment to me of physical cash. I am aware as a regular trader of listed equities that the transfer of funds related to share trading is closely regulated and as such funds arising from share trading can only be transferred by brokers back to the account holder that owned the traded shares.”

14    This disclosure falls very far short of the “wide survey and an exact scrutiny of the taxpayer’s activities” usually required to determine whether receipts are or are not assessable income: Federal Commissioner of Taxation v Stone (2005) 222 CLR 289 at [19]; Federal Commissioner of Taxation v Montgomery (1999) 198 CLR 639 at 663 [69] citing Western Gold Mines NL v Commissioner of Taxation (WA) (1938) 59 CLR 729 at 740.

15    In that respect, in cross-examination, the applicant conceded that he did not himself keep records of his trading in shares (notwithstanding the significant size of his portfolio). He said that when it came to record keeping, he was “very bad at it”. But that is no excuse when it comes to the fulfilment of a citizens’ obligations under the 1936 and 1997 Acts. As already mentioned, a failure to create and retain records can have consequences for a taxpayer seeking to discharge its onus of proof: Spassked Pty Ltd v Federal Commissioner of Taxation (No 5) [2003] FCA 84; 52 ATR 337 at [196] per Lindgren J.

THE APPLICANT’S CASE CONCERNING PRIMARY TAX

16    I return to the applicant’s first affidavit. Its first exhibit was a spreadsheet prepared by Mr Roos which listed each deposit in the applicant’s domestic bank accounts which Ms Roos contended had been included by the Commissioner in his assessable income, together with the size and date of the deposit and, where applicable, reproducing the bank’s description of it. There were about 74 entries listed commencing in 2006 and ending in 2013. Strangely, six of these were not deposits but appeared to be withdrawals. Of the other deposits, about 62% (or 46) of them, were illuminated by the single word “deposit”. The balance, contained additional words of description inserted by the bank, such as “Deposit ETRADE” or “Deposit Greenday Corp” or “Deposit Johnston R S-PAC.” Against each entry in the spreadsheet had been inserted a code starting with “A1” and ending in “P1”.

17    In his affidavit, the applicant sought to interrogate each deposit and explain what he thought each was. A good deal, 14 in total, or in aggregate about $516,686, the applicant could not explain at all. Of the balance, a great part of what the applicant said I ruled as inadmissible, or indicated that I would give the content little weight, and for that purpose gave limited leave in such cases for the applicant to lead further evidence in chief orally to determine whether there might be any basis for what had been asserted. For the most part there was only the applicant’s assertion about the reason for a deposit. No executed written agreements, such as loan contracts, were exhibited. No receipts or invoices were produced into evidence. No personal books of account were proffered that might have assisted the applicant in proving his case. Indeed, it would appear that he kept no books of account at all (save in the case of Healthtec and Greenday and Dominion Investments (WA) Pty Ltd (“Dominion”), a company owned and controlled by the applicant – as to which, see below).

18    Ten entries, in aggregate about $563,560, were said to be internal bank transfers. Save in one case, I refused to admit into evidence those paragraphs of the applicant’s first affidavit in which this assertion was made on the ground that the applicant was speculating or seeking to adduce conclusory inadmissible lay opinion evidence. Paragraph [22(a)] of his affidavit illustrates this vice. It reads:

I refer to Transaction A1, being a deposit of $20,000 into my WBC Investment Property Loan Account on 10 July 2006. Given the timing and the rounded amount of this deposit, I believe that this deposit is an internal bank transfer. Accordingly, I have identified this transaction as a Category 5 deposit.

19    I find, by the expressions used in this paragraph and others like it, that the applicant had no actual knowledge of what this deposit was about, but was instead seeking to draw inferences about its possible provenance from the timing of the deposit and its rounded amount. His resulting opinion was not admissible as lay evidence. The one exception in this category was the transaction known as “A6” being an alleged internal transfer of $243,650.12 made on 3 November 2006. The Commissioner did not object to the admissibility of the paragraph in the applicant’s affidavit concerning this deposit. In that paragraph, the applicant deposed that this was a one-off transfer of “personal funds” into another bank account of his. He exhibited in support of that statement, a letter written to him by Westpac Banking Corporation (“Westpac”) on 3 November 2006. The letter related to the opening of a new account and under the heading “Payments” the letter recorded the following:

As directed, we made the following payments on the day we opened your loan account:

….

Surplus to [a bank account number is identified] $243,650.12.

20    This letter does not support the contention that this was an internal bank transfer and not a derivation of assessable income. It simply is evidence of a transfer of funds. Where those funds came from is unclear to me. In cross-examination it also became clear that the applicant had no real personal recollection of this deposit. Having given evidence that internal transfers were made in or around the third week of each month, he was questioned about the timing of this deposit and gave the following answers:

Now, Mr Bosanac, 3 November 2006 wasn’t anywhere near the third week of the month, was it?---No, but this may not have been a top up of the facility being out of order. This may have been an amount that has been identified by Mr Roos across the actual statements.

Well, Mr Bosanac, your evidence, on oath, is that you have identified documents that you have treated as internal transfers by firstly the – the approximate time that you got your phone call from the bank telling you your accounts were out of order, which you have indicated was about the third week of each month, and you would there and then authorise them to do the transfer?---Yes.

That’s the one basis on which you have assisted your recollection?---Yes.

And plainly 3 November 2006 was not in the third week of any month. Do you accept that?---Yes, I do, but if you read the actual statement, it actually delineates the reason for the – for it coming from one account to the other.

You have also indicated, on oath, in the last sentence in the paragraph that I just took you to of your affidavit, that the internal transfers “....were always rounded amounts”.

Was this a rounded amount?---This is – from what my reading is here, Mr Roos has identified this as the actual opening of the bridging finance.

Well, it’s not what Mr Roos has identified, it’s your evidence - - -?---He would have - - -- how you - - -?--- - - - shown this in the bank statements to me and then we would have, together, put it into the necessary category.

21    When the applicant gave the answer – “[t]his may have been an amount that has been identified by Mr Roos across the actual statements” – it became clear that the applicant was largely relying on the work of Mr Roos to reconstruct his bank account and had no independent recollection of this transfer which “may have” been identified by Mr Roos. I am, therefore, not satisfied that this was not an amount of assessable income.

22    Ten deposits, in aggregate about $749,216, were said to relate to share transactions. The applicant did not dispute that the gains made from the sale of shares were taxable; he did, however, contend that that gains made were on capital account. I refused to admit into evidence five paragraphs directed at five of these deposits. They again constituted inadmissible lay opinion evidence or in some cases were inadmissible hearsay. I rejected as inadmissible hearsay, evidence said to support the existence of another two transactions. I admitted into evidence two further paragraphs said to evidence two deposits, as it appeared from the language used that the applicant might have actual knowledge of what they were about. Three further deposits were the subject of paragraphs against which the Commissioner made no objection. However, in each case, the details of the transaction were very thin. An example is [22(e)] of the first affidavit, which reads:

I refer to Transaction A5, being a deposit of $15,100 into my WBC Investment Property Loan Account on 24 October 2006 described as “Deposit Tolhurst Noall”. I have identified this transaction as funds received from Tolhurst Noall, a stockbroking firm that I used for share transactions during the relevant period (2006 to 2013), as a result of the sale of shares. I have made enquiries with Patersons Securities Limited (Patersons), the stockbroking [sic] that incorporated Tolhurst Noall in or around 2009, and they have informed me that they do not have any records available relating to this share transaction, given the elapse of time. I can say with certainty that the only reason that a deposit would be paid into my personal bank account by Tolhurst Noall would be as a result of share transactions. Accordingly, I have identified this transaction as a Category 4 deposit. Annexed to this affidavit and marked “VB-4” is a copy of an email from myself to Mason King dated 1 November 2016, a stockbroker currently employed by CPS Capital who now, due to a number of brokers consolidating into one firm being CPS Capital, holds my records from Tolhurst Noall. My email requests information regarding the relevant contact at Patersons and shows Mr King’s response of the same date.

23    Notably, nothing is said in this paragraph to demonstrate whether the shares sold were held on capital or revenue account. No further evidence was led in chief to demonstrate the basis for the applicant’s belief set out above. Exhibit “VB-4” to the applicant’s first affidavit was no more than an email, sent well after the year in dispute, which shed no light on the nature of the deposit other than to confirm that the applicant had an account at Tolhurst Noall. Paragraph [24(e)] of the applicant’s affidavit which I also admitted into evidence, was to similar effect.

24    The conclusion I reached from these deposits, is that if they evidenced gains made from the sale of shares, then the applicant had nonetheless not discharged his onus of proof of showing that the shares were held on capital account (and thus eligible for the capital gains tax discount available for individuals). I otherwise infer, by reason of the scale and regularity of the gains made from trading in shares, that the applicant was in a business, of some form, of share trading.

25    In his closing written submissions, the applicant complained that he had only been given notice that he was obliged to prove that gains made from the sale of shares were, as he contended, on capital account, at the trial when I raised this issue with his counsel. He submitted that I had wrongly not given him general leave to lead evidence orally and in chief on this topic (as to which, see below). These complaints are without merit. Leave was not given because the case had proceeded on the basis that evidence in chief was to be given by affidavit, and because the Commissioner would have been exposed to the prejudice of new evidence without the ability to have it properly tested. Moreover, the applicant, represented by counsel, should have known that part of the discharge of his onus in this case included proving that shares were held on capital account. In that respect, the Commissioner’s appeal statement, filed 2 September 2016, made it clear under the heading “Contentions” that the “onus of proof” rested “in all matters” on the applicant. No complaint was ever made about this paragraph. Nor did the applicant suggest in closing that this issue had been conceded by the Commissioner. Further, I had expressly raised this issue with the applicant at a directions hearing on 1 March 2018. No fresh evidence, save for a small bundle (which I will return to) was thereafter adduced in relation to this issue, even though the applicant led new evidence on other issues.

26    It is perhaps appropriate at this point to record that, in opening, and again in his closing written submissions, the applicant pressed a general submission that he should have been given leave to lead evidence on all topics orally, including the capital account issue referred to above. He relied on s 47(6) of the Federal Court of Australia Act 1976 (Cth) for that contention. That provision provides:

Subject to this section and section 47A and without prejudice to any other law that would, if this subsection had not been enacted, expressly permit any testimony to be otherwise given, testimony at the trial of causes shall be given orally in court.

27    Leaving aside the fact that the applicant had himself filed affidavits in 2016 and in 2017, and had been content to allow evidence in chief to be adduced by way of affidavit until the first day of the trial, that submission is misconceived. Section 47(6) commences with the words “[s]ubject to this section”. Section 47(3) provides:

The Court or a Judge may at any time, for sufficient reason and on such conditions (if any) as the Court or Judge thinks necessary in the interests of justice, direct or allow proof by affidavit at the trial of a cause to such extent as the Court or Judge thinks fit.

28    Section 47(6) is thus subordinate to s 47(3). Orders for the filing of affidavits to be relied on at trial in this proceeding were first made by this Court on 22 September 2016. This submission is rejected.

29    The next category of deposit was described by the applicant as “reimbursements of business expenses”. In aggregate, it amounted to about $20,483. An example of these may be found at [22(j)] of the applicant’s first affidavit, which reads:

I refer to Transaction A10, being a deposit of $9,050.96 into my WBC Investment Property Loan Account on 5 January 2007. Given the amount of this deposit, I believe that this deposit is a reimbursement for business expenses personally incurred as a result of Greenday providing consultancy services. Accordingly, I have identified this transaction as a Category 6 deposit.

30    There were nine deposits said to be of this kind and nine paragraphs, expressed in similar terms, addressing each said deposit. In each case, I refused to admit the paragraphs into evidence as they comprised either speculation or inadmissible lay opinion evidence. Even if I had admitted them into evidence, I would have given them no weight.

31    The next category of deposits were said by the applicant to be receipts of monies to buy shares for third parties. I accept, in general terms, the applicant’s contention that, from time to time, he received monies to arrange for share placements on behalf of third parties. Whether these funds were received beneficially or were impressed with some form of trust, was neither the subject of evidence or submission. However, whether the identified deposits constituted the receipt of such monies is another matter. There were 10 paragraphs in the applicant’s first affidavit which addressed 10 such alleged deposits, in aggregate about $445,200, (on one view a further $18,000 should be included in this category). I declined to admit into evidence four of these paragraphs. For example, I rejected [24(l)] of the applicant’s first affidavit, which reads:

I refer to Transaction C12, being a deposit of $15,000 into my WBC Rocket Home Loan Account on 11 January 2008. I have identified this transaction as being a Category 1 deposit. Although I cannot say with certainty the reason that I received the funds because of the elapse of time, given the surrounding transactions in January and February 2008 described above in paragraph 24(k) and below in paragraph 24(p) and 24(q), I am extremely confident that this deposit was also for the placement of shares, likely in SBN Medical Billing.

32    Notwithstanding the confidence with which this was expressed, it nonetheless was inadmissible lay opinion evidence. I rejected [24(m)], [24(n)] and [28] for the same reason. I admitted into evidence the remaining paragraphs addressing this category and again gave the applicant leave to lead evidence in chief orally to establish a basis for the assertions he had made. An example is at [22(r)] which reads:

I refer to Transaction A18, being a deposit of $57,000 into my WBC Classic Plus Account on 13 March 2007 described as “Deposit Leasing Brisbane Regalquest Invest”. I have identified this deposit as being a deposit relation [sic] to a business contact sending money for shares investment, being a Category 1 deposit

No further oral evidence in chief was adduced about this deposit. Another example is at [24(k)] which reads:

I refer to Transaction C11, being a deposit of $5,000 into my WBC Rocket Home Loan Account on 2 January 2008 described as “Deposit Paul Paul SBN Medical”. I have identified this transaction as being a Category 1 deposit. These funds were received from Paul Lambrecht, a business contact of mine, for the placement of shares in SBN Medical Billing.

33    In examination in chief, I disallowed a question from counsel for the applicant which asked why the deposits should not be treated “as income”. The following exchange then took place:

MR FICKLING: Well can you explain to the best of your – from your knowledge what that is?---It’s very clear to me Mr Lambrecht has identified the SBN placement that was being conducted at the time as – and why he sent the money to my account which would have then either been a reimbursement because I put the money up previously for him or it would have then been forwarded onto the company because I would have had my bank details available for him to send it to me along with a – a number of other people that have been identified around the same period that have done this.

HIS HONOUR: Mr Bosanac, when you say “would have”, is that because you don’t actually have a present recollection of this particular matter?---No, I absolutely remember Mr Lambrecht sending funds to me - - -

Yes?--- - - - and that the SBN delineation on that balance – on that actual statement says to me why he’s – he – there’s a few people that have been smart enough to actually put the company’s ticket code from the ASX against why they’ve sent me the money so I can absolutely identify that.

But is that because you’re interpreting the document or because you know it?---I’m interpreting it from the bank statement.

[my emphasis]

34    The foregoing passage illustrates the danger of accepting unsubstantiated and uncorroborated assertion. It reveals that the applicant’s suggested knowledge of this transaction was really his attempt to interpret the spreadsheet and draw an inference from the contents of the description given to the transaction by his bank. A similar observation may be made about the answers given in chief about [24(p)]. That paragraph states:

I refer to Transaction C16, being a deposit of $5,000 into my WBC Rocket Home Loan Account on 1 February 2008. I have identified this transaction as being a Category 1 deposit. These funds were received from Mr Lambrecht for the placement of further shares in SBN Medical Billing (in addition to those purchased upon receipt of funds on 2 January 2008 as described above in paragraph 24(k)).

35    In examination in chief, the following exchange took place:

Okay. And if we continue on to paragraph P. Why do you say that this transaction was also from Mr Lambrecht?---First of all the dates correspond directly to when Ashok also took his position up. And I - I would suggest that this is for SBN at the same time because possibly Ashok or one of Paul’s other clients who would have been taking up part of the position fell short and Paul took up the balance.

36    This answer, if anything, detracts from whatever probative force [24(p)] might have had, if any. The same may be said about the deposit addressed by [24(q)]. In oral examination it became clear that the witness’ knowledge of this deposit rose no higher than a “belief” about what it might have been. Whilst in examination in chief, the applicant professed a stronger memory about the deposit described in his first affidavit at [24(o)]. But what he remembered was “ASHOK investing in SBN”, as distinct from what this deposit was about. Finally, no further evidence in chief was adduced in relation to another deposit described at [33(b)]. But, in cross-examination about that paragraph, the applicant admitted that, following the preparation and swearing of his first affidavit, this sum was identified by him as income. No attempt was made to correct this error in either his second or third affidavit, even though the size of the sum was significant, namely $300,000.

37    It follows that I reject each explanation for the deposits described in this category.

38    The next category concerns the receipt of $13,000 for the disposal of a car in 2007 to the brother of Mr Thompson, the applicant’s former accountant. I am satisfied that this is the correct explanation for this deposit. It is corroborated by an affidavit sworn by Mr Thompson on 2 December 2016.

39    The final category concerned alleged repayments of monies said to have been advanced by the applicant to third parties. There were around 12 such alleged repayments. They varied greatly in size from $2,500 to $982,500. In total, the deposits amounted to about $2,150,316. In almost all cases, the loans were not documented. In a few cases, unexecuted copies of loan agreements were adduced into evidence. No copies of any executed loan contracts were ever produced. I admitted into evidence most of the contents of all the paragraphs of the applicant’s first affidavit that related to these alleged loans. Again, the content of these paragraphs was very thin and without more evidence, would not be sufficient to prove the existence of any debtor/creditor relationship. I gave leave for evidence to be adduced orally in chief to establish a potential basis for the repeated assertions of the applicant that he had “advanced” monies. In most cases the evidence elicited did not go beyond the original bare assertion that a loan had existed. For example, [23(a)] relevantly read:

I refer to Transaction B1, being a deposit of $79,560 into my WBC Investment Property Loan Account on 25 October 2007. I have identified this transaction as repayment of funds loaned to Dominion, being a Category 3 deposit. These funds were transferred from the Dominion transactions account, account number [account number identified] (Dominion Transactions Account), to repay funds that I had personally advanced to Dominion so that Dominion could purchase shares.

40    In oral examination in chief, Mr Fickling, counsel for the applicant, properly observed that the Court was not going to get anything beyond assertion in relation to these so-called loans. That same conclusion applies to what was asserted by the applicant as “advances” in [24(r)], [24(s)] and [24(u)] of this first affidavit. One alleged loan, in the sum of $2,500, was different because it was said to have been advanced to Mr Cross, a former business partner. The applicant, other than identifying it, gave no evidence about this alleged loan, but instead referred to evidence given by Mr Cross on this subject. However, I ruled that part of the affidavit of Mr Cross inadmissible, as it was speculation or lay opinion evidence.

41    No other meaningful evidence was adduced in examination in chief in relation to the deposits said to be loans as described at [23(b)], [23(c)] and [23(d)].

42    Paragraph [27] was in these terms:

I refer to Transaction E1, being a deposit of $103,149.32 into my WBC Investment Property Loan Account on 13 July 2007 described as “Healthtec Growth Quipoz loan Repayment”. I have identified this transaction as repayment of funds advanced to Quizpoz [sic] Limited (Quipoz), being a Category 2 deposit. These funds were received from Quizpoz [sic] for repayment of a loan that I had advanced to the company pending the completion of a capital raising. Annexed to this affidavit and marked “VB-13” is a copy of a bank statement of HealthTec Growth Partners Pty Ltd (subsequently re-named to Greenday Corporate Pty Ltd), account number 566036694, for the period from 7 July 2007 to 13 July 2007, which shows a debit transaction of $103,149.32 on 13 July described as “Quipoz Loan Repay”. I am also aware that Kevin Fell, former Chief Operating Officer of Quipoz, has provided evidence on affidavit concerning the payment.

43    I address Mr Fell’s evidence below. Exhibit “VB-13”, referenced in [27], did not corroborate the assertion that funds had been advanced by the applicant to Quipoz Limited. The exhibit is a Healthtec bank statement. But Healthtec’s role in relation to this alleged loan was never explained. In examination in chief, the applicant said he had been repaid “indirectly.” No such statement was made, however, in the applicant’s affidavit and answers given in the witness box rose no higher than assertion. I am not satisfied, on this evidence, that the alleged loan existed.

44    The deposits described at [29] and [31(d)] were the subject of a narrowly cast concession by the Commissioner, discussed below. No evidence in chief was led orally about these deposits. Paragraph [29] contained another assertion about an alleged advance of funds in 2008, sought to be corroborated by two documents created in 2015 and 2016. Those documents could not evidence that alleged 2008 loan. I make the same finding for similar reasons about the deposit described at [31(d)], which relies on the same documents for corroboration.

45    In relation to the largest alleged loan in the sum of $982,500, more time was spent seeking to adduce evidence in chief from the applicant. This was said to be a repayment, on 28 December 2007, of funds “advanced” by the applicant to Advanced Ocular Systems Ltd (“AOS”) (now known as IFS). Paragraph [25] of the applicant’s first affidavit states:

I refer to Transaction D1, being a deposit of $982,500 into my WBC Rocket Home Loan Account on 28 December 2007. I have identified this transaction as repayment of funds advanced to Advanced Ocular Systems Limited (AOS), in relation to the repayment of funds advanced for the purchase of the Westfield Property Project on behalf of AOS … being a Category 2 deposit. These funds were received from AOS for repayment of a loan that I had advanced to the company pending the completion of a capital raising.

46    Six documents were exhibited to the applicant’s first affidavit in relation to this payment. They undoubtedly show that the applicant had a business relationship of some kind with AOS and possibly that the monies in issue came from that company, but they did not evidence a pre-existing relationship of debtor and creditor. They also did not evidence any advance from the applicant to AOS.

47    Some attempt was made to corroborate this alleged loan. An affidavit of a Mr Cuperus was read. But he had no personal knowledge of the payment made by the applicant to AOS as he only joined that company after the repayment had allegedly taken place. Accordingly, his evidence could not corroborate the alleged loan.

48    The applicant also tendered a bundle of documents, called the “Westfield Bundle of Documents”, in support of the existence of this alleged loan. The applicant claimed that this loan was associated with the funding of a property investment called “Westfield”. These documents might prove that there had been a Westfield project; they did not, however, prove that the deposit of $982,500 was the repayment of a loan.

49    Finally, the applicant tendered an announcement made by AOS to the Australian Stock Exchange dated 17 December 2007. The document does not refer to any loan between the applicant and AOS. Indeed, it does not refer to the applicant at all.

50    I gave the applicant’s counsel leave to lead orally evidence in chief to see whether a satisfactory evidentiary basis for the alleged advance might be discovered. The applicant was asked, without objection being taken, “why it was that you needed to be repaid for this transaction.” The response given in chief mostly comprised a narrative of enquiries that the applicant had made to try to determine what the deposit of $982,500 might have concerned. This included making enquiries of Mr Cuperus, and Mr Cross. Mr Cross, who had sworn two affidavits in this proceeding, gave inadmissible evidence about this alleged loan. Like Mr Cuperus, he joined AOS/IFS after the alleged repayment had been made.

51    An affidavit of Mr Iemma, an entertainer, was also relied upon. That affidavit said nothing about any alleged loan in the sum of $982,500 between the applicant and AOS. Yet, the applicant gave oral evidence in chief that he had asked Mr Iemma on the Friday evening before the commencement of the trial “why would I have got this large a payment from – out of the Westfield transaction with AOS?” Mr Iemma, and his father, had invested in the Westfield transaction. The answer given by the applicant reveals that as late as the week before the trial, he was still trying to understand this deposit. In my view, when his answers in chief are considered in totality, I find that the applicant had no real, actual memory of why he received this sum on 28 December 2007. When pressed by me as to whether he really had a personal recollection of this amount, the applicant said that he did “now”. It follows, however, that he had no such personal recollection when he swore his first affidavit: cf Nicholson v Zizza [2005] FCA 257 at [8]. Moreover, having had the advantage of seeing him and having heard from him, I find that he still does not have any such personal recollection. That is why he was still asking Mr Iemma about it the week before the trial. I am fortified in that conclusion by answers given by the applicant in cross-examination in which he variously stated that he had advanced around $1.5 million and then subsequently “$1.8 million in totality”. The applicant’s lack of recollection is understandable. The deposit took place over 10 years ago and the applicant failed to create and then retain sufficient business records about it.

52    As already mentioned, counsel for the Commissioner made a concession in relation to the two deposits described at [29] and [31(d)]. One was a deposit of $250,000 said to have been a repayment of another loan made to AOS (IFS). The other was a deposit of $350,000, again said to have been a repayment of yet another loan to AOS. The Commissioner conceded that each of these deposits was not assessable income, but did not otherwise admit the underlying factual foundation alleged by the applicant that each was a repayment of a loan (a much smaller concession had also been made, totalling $3,111 for that 2013 year). The applicant nonetheless wanted to rely on these two deposits to support a more general finding that the other loans he had allegedly made were in fact loans, in particular in relation to the large alleged repayment of $982,500. In that respect, the applicant submitted that a pattern of evidence may render the existence of a transaction more probable. He referred to Krew v Federal Commissioner of Taxation (1971) 71 ATC 4213; 2 ATR 230 (“Krew”). In that case, the taxpayer, who was in the metal and hardware business, had been issued with an asset betterment assessment. He contended that cash kept in his safe was the product of successful gambling. Walsh J found that this was so for some of the years in dispute. His Honour reached that conclusion from an examination of the bank accounts of the taxpayer and in some cases drew inferences from the size and timing of deposits and withdrawals. For example in relation to the 1951 year of income, Walsh J described a series of transfers made to a bank account and said at 4222:

It is unlikely, I think, that much of that money came from unrecorded dealings in the metal business. When the details of these deposits are considered… and when regard is had to the pattern of substantial cash withdrawals in the same year and to the oral evidence of the gambling activities of the appellant at this time, I think it is more likely than not that these deposits, or a substantial part of them, came from the proceeds of gambling, either directly or by way of the safe.

[my emphasis]

53    The applicant also relied on what Burchett J had said in Ma v Federal Commissioner of Taxation (1992) 37 FCR 225 (“Ma”) at 233:

Furthermore, the making of estimates upon inexact evidence, which is so much a feature of both judicial and administrative decision-making, cannot be uniquely excluded from appeals against betterment assessments. To refuse to consider the credit, not only of the applicant, but also of his independent and unchallenged witnesses, simply because the effect of the evidence was to support his accountant's generalizations about double-counting rather than to hit upon a precise figure, was to fall into an error of law.

54    In my view, given the paucity of the evidence led concerning each alleged loan, and the narrowness of the Commissioner’s concession, I am not able to make inferences here of the kind made by Walsh J. That is because there is no equivalent in this case of the “great mass of evidence” described by Walsh J (at 4219) and which was apparently before his Honour in Krew. Whilst it is difficult for me to appreciate what that “great mass” included, unlike the case before me here, it would appear that the taxpayer in Krew gave positive evidence about how his gambling led to significant winnings. For example, he gave evidence about the success of his horse “Gay Venture” in 1949.

55    In contrast, here, very little evidence was led about how the applicant earned his income, and what corporate structure he had in place. I do not know how the Singapore companies traded in shares. I do not know why those entities acquired or sold any particular class of shares. I do not know whether the four companies were the only entities comprising the so-called offshore structure. In cross-examination, the applicant appeared to accept that one of the entities through which he traded in shares was called “Devonport Traders Ltd” which had an address based in the British Virgin Islands and a “please reply address” in Lichtenstein. The applicant led no evidence about this entity.

56    Nor is this a case like Ma, where there was “inexact evidence.” This is a case where there is only assertion, or evidence upon which I can give no, or very little, weight.

57    Compounding the problem for the applicant is that, in cross-examination, the size of his considerable wealth was exposed, if only in part. Three loan applications to Westpac dated 8 February 2006, 24 October 2006 and 20 June 2007 respectively, and signed by the applicant on each occasion, were tendered into evidence. In cross-examination, the applicant agreed that the financial details comprised in each application were the product of statements he had made to Westpac. The first application disclosed that he and his former wife owned property assets valued at about $8,475,000, shares valued at about $24,841,100 and motorcars to the value of about $281,000. The applicant further accepted that the shares he had valued included those held by him via his Singapore companies (the value of these shares included certain shares he thought he was to receive, but which he did not). The application also contained statements made by the applicant to his bank that he earned monthly income of $32,047 and that his annual gross income was $772,000. The other two forms contained similar statements. In cross-examination, the applicant did not dispute the accuracy of these figures save for one possible mistake in the third form. The size and nature of these earnings and assets required proper explanation; no such explanation, however, was to be found in the affidavits relied upon by the applicant.

58    For these reasons I am not satisfied that the applicant has discharged his onus of proving that any of the deposits were repayments of loans he had advanced to third parties, in particular, I am not so satisfied in relation to the alleged repayment of $982,500. In reaching this conclusion, I have taken into account the fact that the Commissioner chose not to cross-examine the applicant in relation to this particular loan. But I am nonetheless not prepared, on the scant material before me, and in the absence of clear evidence concerning the sources of the applicant’s wealth, to make a positive finding that the deposits constituted the repayment of loans. The foregoing illustrates the fiscal peril of carrying on a largely undocumented business.

59    In his closing written submissions, counsel for the applicant sought to resist the making of adverse findings about the applicant, because of alleged breaches of the rule in Browne v Dunn (1894) 6 R 67. That submission is, with respect, misconceived. For the most part, the Commissioner did not seek to challenge directly the evidence given by the applicant. He did not need to because it was largely deficient or because the applicant gave answers in cross-examination that were truthful. When he did need to challenge the applicant’s evidence concerning, for example, the preparation of his income tax returns in 2015, counsel for the Commissioner did properly put adverse propositions to the applicant (see below).

60    I should say something about the affidavit material relied upon in an attempt to corroborate the assertions made by the applicant in his first affidavit. First, there were the two affidavits of his business associate, Mr Cross. Mr Cross deposed in his first affidavit that he and the applicant split the consultancy income derived “through” Greenday, on a 50/50 basis. That evidence, which I accept, did not address any particular amount assessed by the Commissioner to be income. The balance of the affidavit I ruled as inadmissible. It was speculation.

61    The second affidavit, which was three paragraphs long, gave highly generalised evidence about an earlier company used to supply consultancy services, called Healthtec. It also exhibited summary spreadsheets setting out the profit and losses of Greenday and Healthtec. Once again, this evidence did not address any particular amount included in the applicant’s assessable income. Nor were the summary spreadsheets of any assistance. Their origin was not identified. I do not know if they were the product of audited accounts, and again they did not shed light as to how the applicant became entitled to consultancy income. Did these companies act as his agent? Did they pay the applicant dividends? One does not know.

62    Secondly, there was the affidavit of Mr Newman. He deposed that he was a co-investor in “opportunities” presented to him by the applicant. I largely ruled his evidence as inadmissible. It was again speculation.

63    Thirdly, there was the affidavit of Mr Lambrecht. He was a “business contact” of the applicant. I ruled the relevant parts of his affidavit to be inadmissible. It was yet again speculation.

64    Fourthly, was the affidavit of Mr Iemma. He was an “entertainer”. I again ruled the relevant part of his affidavit as inadmissible speculation or hearsay.

65    Fifthly, there was the affidavit of Mr Fell. He was the chief operating officer of Quipoz Limited. He swore a very brief affidavit comprising of only three paragraphs in which he deposed in the most general way to an unspecified cash flow shortage that his company was experiencing “in or around 2007”. He then asserted that “in or around 2007” the applicant “provided a loan to Quipoz”. To the best of his recollection the loan was in the amount of “around $100,000 and was subsequently repaid by Quipoz to [the applicant] later the same year”. I admitted these paragraphs into evidence. Mr Fell was then cross-examined. The following exchange then took place:

Thank you. Now, you indicate in your affidavit that this was a loan advanced to Quipoz. Do you recall the date of the loan?---No ..... on the circumstances because of a particular ..... but - as in particular occurrence, but I can’t give you the exact dates, that’s why there was a little bit of looseness around pinpointing the exact date. I can be pretty rough around that, but I can be certain around the circumstances.

All right. And do you recall the month in 2007? If you don’t recall - - -?---All I can do is give you the background and I can answer your question, if you’re wanting me to be specific, I would have to say, no, I can’t recall a date.

All right. Now, I was just wanting to know if you recalled the month. That was all? If you don’t - - -?---Yes, roughly, the date of the request would be sort of January, February 2007, and I would expect the debt was repaid a number of months after that, but that - like I said, the dates are not as certain to me as the circumstances around why the loan was required.

All right. So you say roughly - you’re trying to recollect January or February and it was repaid, you say, some months later?---I would guess so ..... chief operating officer, there was a CEO who was also the CFO, which - who handled all the repayments. I actually made the request for the loan and ..... actually took place, and I know for a fact that it was then paid back ..... who were the accountants at the time, would have records of that.

But you weren’t directly involved in that process, were you?--- ..... process of asking for the loan and - - -

No. I’m sorry, I’m speaking about the repayment of the loan?---No, the CFO would have made the loan.

66    Whilst Mr Fell thought that the loan was repaid “some months later” after January or February 2007, the deposit said to be the product of this alleged repayment in fact took place on 13 July 2007. Moreover, as the exchange set out above reveals, Mr Fell could not give specific evidence about the alleged loan. He did not handle the repayments and his recollection was “pretty rough”. I am not persuaded that Mr Fell had any useful recollection of the alleged loan. He certainly was not able to corroborate that the specific deposit of $103,149.32 made on 13 July 2007 was the repayment of the suggested loan of $100,000. The terms of the alleged loan were never identified. The manner in which funds were allegedly advanced was not identified. All Mr Fell said in conclusory terms was that the applicant “provided a loan to Quipoz”.

67    Sixthly, Mr Cuperus, who was the chief financial officer and company secretary of IFS between April 2008 and October 2009, as already mentioned, swore an affidavit. I rejected his evidence concerning the $982,500 deposit as he had had no personal involvement with this alleged transaction.

68    Seventhly, Mr Evans, who was a registered builder, swore two affidavits. Each concerned work undertaken in relation to a property in West Perth. This evidence appeared to relate to a claim concerning the calculation of the cost base of an asset for the purposes of Pt 3-1 of the 1997 Act. This claim was ultimately not pursued.

69    Eighthly, there were three affidavits filed by Mr Thompson. The first contained evidence corroborating the sale of the car. The second exhibited certain management accounts and a balance sheet of Greenday for some of the years in dispute. This exhibit was not referred to by the applicant in opening or in closing submissions. One paragraph addressed the preparation of the income tax returns in 2015: Mr Thompson said he did not include the consulting fees derived through Greenday in those returns because they had been received by Dominion. The third affidavit is dealt with below.

70    Compounding the problem I had with this third party evidence is that the applicant, who had read their affidavits, had spoken to some of the witnesses about some of the transactions he was endeavouring to prove. In cross-examination of the applicant, the following exchange took place:

Did you speak to Mr Lambrecht before swearing your affidavit about this 40 transaction - - -?---I – I - - - back in 2016?---I believe before I would have spoken to him to say, “Why would I have received this money from you?” and – because I know there is no way he would be sending me money for personal exertion, so I was trying to understand it with that designation. I – and I asked him if it would have been for the SBN transaction at the time, and that – as – as best as he could remember, that’s why that designation was on there, but he wouldn’t have been buying shares from me personally or paying me to have done some sort of job for him.

But it was after you had that conversation that you swore your affidavit in December 2016?---Possibly. I’m – I couldn’t honestly tell you which came – the – the horse or the cart on the conversations with him. As we were trying to identify deposits with Mr Roos, I would have spoken to Mr Iemma, I would have spoken to [Mr Lambrecht]; I didn’t speak to Ashok because once I ascertained on [Mr Lambrecht's] one the right designation, I was sure was Ashok’s were, so - - -

So you spoke to Mr – well, you certainly spoke to Mr Roos before you swore your affidavit?---Yes.

And as part of that process, in addition to looking at documents, you spoke to these various people whose names you’ve just mentioned - - -?---Yes.

- - - to refresh your memory and to assist you in working out what these transactions were about. Is that correct?---Correct.

So you talk about Mr Lambrecht, Mr Iemma, and you say you didn’t speak to Ashok?---No, I didn’t.

So who else did you speak to about these transactions?---I – I remember speaking to [Mr] Evans - - -

Yes?--- - - - at the time because some of the – the funds were [Mr] Evans, and both [Mr Lambrecht] and [Mr Iemma].

71    In my view, there is a risk that because of the conversations the applicant had with Mr Lambrecht, Mr Iemma, Mr Roos and Mr Evans, the evidence those witnesses gave became infected with the applicant’s objectives or hopes. That renders their evidence all the more unreliable: Day v Perisher Blue Pty Ltd (2003) 62 NSWLR 731 at [30].

72    It follows, that the witnesses called to corroborate the applicant’s evidence did not progress the applicant’s claim in any meaningful way.

THE ISSUE OF EXCESSIVENESS

73    I am prepared to accept the explanation for the payment made for the sale of a car. Has the applicant thereby discharged his onus of proof to that extent for the year of income ending 30 June 2007? For the reasons which follow, he has not. Instead, I have concluded that the applicant has failed in relation to each year of income in dispute to demonstrate that any of the amended assessments issued to him were excessive. That is because, in addition to rejecting his evidence concerning the nature of the deposits (other than in relation to the car), the applicant failed to positively adduce evidence as to the quantum and nature of his foreign and domestic earnings in each year in dispute. In my view, the applicant needed to go further than his attack on the basis upon which the Commissioner had issued the amended assessments to him, and positively prove what his taxable income was in each year. He needed to lead evidence constituting a wide survey and exact scrutiny of his business activities. This he never did.

74    Nor can the concessions made by the Commissioner about the sums of $250,000, $350,000 and $3,111 assist the applicant. As Pagone J (with whom Robertson and Bromwich JJ agreed) said in Zappia v Federal Commissioner of Taxation [2017] FCAFC 185 (“Zappia”) at [3]:

The appellant’s submissions cannot be accepted and proceed from an erroneous premise. The question for a court hearing a tax appeal is whether a taxpayer has satisfied the burden cast by s 14ZZO: Federal Commissioner of Taxation v Australia & New Zealand Savings Bank Ltd (1994) 181 CLR 466 at 479. The burden imposed upon the appellant by s 14ZZO to prove that the assessment was excessive required her to establish the amount upon which tax was to be levied: Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 625, 634; Gashi v Commissioner of Taxation [2013] FCAFC 30; 209 FCR 301 at [66]- [67], Rigoli v Commissioner of Taxation [2014] FCAFC 29; 96 ATR 19 at [26]. The statutory amendments relied on by the appellant do not affect this requirement of s 14ZZO. Proof of the amount upon which tax was to be levied is not established by showing error by the Commissioner in the evidentiary, factual or legal basis of assessment: Dalco, Rigoli. Statements made by the Commissioner in an objection decision do not establish the facts upon which tax was to be levied and do not bind the Commissioner, or the operation of the taxing provisions, except (perhaps) where the parties in proceedings have agreed to the facts for the purposes of the proceedings. The recital of facts found in an objection decision are not themselves the facts they purport to recite and their recitation does not bind the Commissioner, or the operation of the taxing statute, where a taxpayer is required to discharge the burden imposed by s 14ZZO to prove that an assessment is excessive. That can be done only by establishing the facts upon which the liability depends.

75    In that respect, I reject the submission which appears to have been made in closing written submissions, that by reason of these concessions, both of which related to deposits made in the 2009 year of income, that it necessarily followed that the taxpayer had demonstrated excessiveness. The amount of tax payable under the first amended assessment for that year was $442,888.61 (subsequently adjusted upwards to $643,048 in the second amended assessment issued for the 2009 year). That reflected undisclosed assessable income, according to the Commissioner Reasons for Decision for issuing the amended assessment, of $1,001,911. The limited concession made by the Commissioner does not discharge the taxpayer’s onus of showing that the undisclosed assessable income of $1,001,911 was not income derived by him in that year.

76    The unsatisfactory nature of the positive case the taxpayer was obliged to prove is highlighted by the following considerations:

(1)    The applicant has historically displayed a cavalier attitude to his obligations as a taxpayer. Until 2015, he had not filed any income tax returns since 2002, whilst successfully pursuing his career as a businessman. With knowledge of his considerable foreign and domestic earnings he filed tax returns in 2015 that were demonstrably wrong. I shall return to that topic when deciding with the issue of administrative penalties. As recently as December 2016 he swore an affidavit that was misleading because it omitted to disclose the significant income derived from share transactions in Singapore.

(3)    Another source of income was disclosed in cross-examination. In his third affidavit, the applicant had identified the “primary” source of his income, being, as already mentioned, income from share transactions and from the provision of consultancy services. The applicant was cross-examined about the choice of the word “primary” as follows:

And you’ve used the word “primary”, which suggests that those are your main sources of income; you accept that?---They’re the main sources. As we know, one of the items of dispute currently is that I was involved in a property transaction also in 2006/2007. So there’s another way I would make a living. But my primary, as it is today, is share trading, and - - -

Well, we’re not asking about today, Mr Bosanac - - -?---But my - my life hasn’t changed.

- - - we’re asking about that period?---I still make a living the same way.

Do you accept that [there] were perhaps other sources too?---Outside of share trading and consulting work?

Yes?---Yes, there was the property side of things that I was doing as well, on occasion.

No evidence was led before me concerning how much income had been earned in the years in dispute from the “property side of things”.

(4)    The applicant’s second affidavit exhibited, without any meaningful explanation, around 3,412 pages of Credit Suisse bank account statements. Other than the affidavit of Mr Roos, which I will come to, no evidence concerning any particular transaction underlying the credits or debits set out in those bank statements of this material was forthcoming. In his closing written submissions, counsel for the applicant said: “[f]irst, the Applicant has given evidence, he has come to Court to say, I want the Court to work out my correct income.” With respect, that observation is mistaken. It was for the applicant to work out and prove his taxable income. This was not achieved by filing a four paragraph affidavit and then exhibiting thousands of pages of bank statements.

(5)    Finally, there is the evidence of the applicant’s wealth as disclosed to his bank, supra. No adequate explanation of the sources of that wealth was ever given to the Court.

77    On the question of the onus of proof, there was debate before me about whether the notices of amended assessment had been issued pursuant to s 166 or s 167 of the 1936 Act. The notices on their face did not specify the source of power for their issue. The sequence of events is that in 2015 the taxpayer filed income tax returns and received assessments in accordance with the contents of those returns. Those original assessments were not issued pursuant to s 167. The Commissioner then completed his audit of the applicant. He issued amended assessments, which, he submits were issued pursuant to s 167 on the basis that the Commissioner was not satisfied with the 2015 returns. Section 167(1)(b) provides:

If:

…

(b)    the Commissioner is not satisfied with the return furnished by any person; or

…

the Commissioner may make an assessment of the amount upon which in his or her judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.

78    The fact that the second round of assessments were amended assessments for the purposes of s 170 of the 1936 Act does not deny the possibility that they were issued pursuant to s 167. This was explained by Latham CJ in Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 when his Honour said at 90:

Full effect can be given to both sec. 36 and sec. 37 by reading them together. The result of reading them together is that the commissioner may act at any time under sec. 36 in the cases mentioned in that section except that where the assessment which he issues under sec. 36 is an assessment which makes alterations in or additions to any existing assessment, he is subject to the time limits imposed by sec. 37 (1A). The result of this construction is that sec. 36 is not limited to first assessments, but that it may also be applied to amended assessments which are duly made under sec. 37, and that, so construed, it does not authorize the commissioner to disregard the time limits provided by sec. 37.

Section 36 in the above passage is now s 167 and s 37 is now s 170 of the 1936 Act.

79    As already mentioned, a further set of amended assessments were then issued at the objection stage.

80    The applicant submitted that I should not be satisfied that the first amended assessments were issued pursuant to s 167; he relied on the fact that the notices of amended assessment did not refer to s 167 on their face. The Commissioner submitted that I should be satisfied that the amended assessments were issued pursuant to s 167 because in his Reasons for Decision for issuing the first set of amended assessments, which was tendered into evidence, a statement to that effect was made by the author of that document. The applicant strongly objected to the tender of that document and said it should have been excluded pursuant to s 69(3) of the Evidence Act 1995 (Cth) (the “Evidence Act”) which creates an exception for the hearsay rule for business records.

81    I should record my view that I found much of this debate perplexing. Generally speaking, the onus imposed on a taxpayer to demonstrate excessiveness is practically the same, if not legally the same, regardless of whether the assessment in dispute was issued pursuant to s 166 or s 167. These two sources of power are very different, but that is so from the perspective of the Commissioner, not the taxpayer: Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 at [52]-[56]. From the taxpayer’s perspective, the task is to prove excessiveness, and this includes proving, or otherwise demonstrating, the correct taxable income. The source of that obligation is not s 167 or s 166, but s 14ZZO of the Taxation Administration Act 1953 (Cth) (the “TAA”). This was explained by Brennan J (as His Honour was then) in Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 (“Dalco”) in the following passage at 623 (the reference to s 190(b) is to the predecessor provision to s 14ZZO):

Counsel for the taxpayer invited the Court to overrule George's Case [(1952) 86 CLR 183] in so far as it requires a taxpayer to prove that the amount of taxable income assessed exceeds the taxpayer's actual taxable income, but that proposition does not rest on George's Case alone. At base, it rests on s. 190(b) but it is acknowledged in McAndrew's Case [(1956) 98 CLR 263], McCormack's Case [(1979) 143 CLR 284] and F.l. Bloemen Pty. Ltd. [(1981) 147 CLR 360] (at pages earlier cited). In this respect, George's Case is not open to doubt. It follows that Wilcox J. was right in holding that “the task for the taxpayer, upon an appeal or a review under Pt V of the Act, is to show that the amount of money for which tax is levied by a particular notice of assessment exceeds the actual substantive liability of the taxpayer” [(1988) 88 ATC, at 4674].

The reference to the judgment of Wilcox J in the foregoing passage is to his Honour’s dissenting judgment in Dalco v Federal Commissioner of Taxation (1988) 88 ATC 4649; 19 ATR 1601 in the Full Federal Court.

82    More recently, Lindgren J observed in W R Carpenter Holdings Pty Ltd v Federal Commissioner of Taxation [2006] FCA 1252; 63 ATR 577 at [118]:

Under ss 166 and 167, however, in order to prove excessiveness, the taxpayer must prove affirmatively the correct amount of taxable income and of tax. If the taxpayer fails to do so, the possibility will always remain that the Commissioner’s assessment is not excessive.

83    During the years in dispute, s 14ZZO of the TAA relevantly provided (it has recently been amended):

In proceedings on an appeal under section 14ZZ to [a court] against an [objection] decision:

(a)    the appellant is, unless the [c]ourt orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and

(b)    the appellant has the burden of proving that:

(i)    if the taxation decision concerned is an assessment (other than a franking assessment) – the assessment is excessive…

84    The word “excessive”, as the High Court observed in McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263, might not have been a “good choice” (at 271), and certainly extends to the existence or non-existence of a condition for the exercise of power in a relevant case. But in the usual case, it directs attention to a number, being the difference between taxable income as assessed, and the taxable income contended for by the taxpayer. That number can only be adequately identified, in my opinion, upon the taxpayer proving – or otherwise demonstrating (see below) – what its taxable income was in any given year of income. As Wilcox J said in Dalco v Federal Commissioner of Taxation (1988) 88 ATC 4649; 19 ATR 1601 at ATC 4674:

The proposition which I have just set out is founded directly upon s.190(b) of the Income Tax Assessment Act. As stated, that paragraph casts upon the taxpayer the burden of proving that “the assessment is excessive”. The word “assessment” is used in the Act to refer to a process, culminating in the service of a notice of assessment; see Batagol v Commissioner of Taxation (1963) 109 CLR 243. But s.190(b) is speaking of excessiveness in amount. This must refer to the amount of tax levied by virtue of the notice of assessment. In McAndrew v Commissioner of Taxation [1956] (1956) 98 CLR 263 at 271 Dixon C.J., McTiernan and Webb J.J., speaking of s.190(b), said that “the word ‘excessive’ relates to the amount of the substantive liability”. Therefore the task for the taxpayer, upon an appeal or a review under Pt.V of the Act, is to show that the amount of money for which tax is levied by a particular notice of assessment exceeds the actual substantive liability of the taxpayer. Most commonly the taxpayer will discharge this burden by demonstrating that his or her true taxable income is less than that adopted by the Commissioner for the purpose of computation of the amount of tax payable by the taxpayer.

The foregoing passage was approved by Brennan J on appeal in the High Court: supra, at 623.

85    Of course, it is open to the Commissioner and the taxpayer to narrow by agreement the issues to be determined by a court in a Pt IVC tax appeal. Excessiveness, for example, may be demonstrated when the necessary facts are agreed leaving only a point of law to be determined. As Brennan J said in Dalco at 624:

If the Commissioner and a taxpayer agree to confine an appeal to a specific point of law or fact on which the amount of the assessment depends, it will suffice for the taxpayer to show that he is entitled to succeed on that point.

86    In more recent times the Federal Court of Australia Act 1976 (Cth) has been amended by the introduction of ss 37M and 37N. Section 37M(1) and (2) provides:

(1)    The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:

(a) according to law; and

(b) as quickly, inexpensively and efficiently as possible.

(2)    Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:

(a)    the just determination of all proceedings before the Court;

(b)    the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c)    the efficient disposal of the Court’s overall caseload;

(d)    the disposal of all proceedings in a timely manner;

(e)    the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

87    Section 37N(1) and (2) provide:

(1)    The parties to a civil proceeding before the Court must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose.

(2)    A party’s lawyer must, in the conduct of a civil proceeding before the Court (including negotiations for settlement) on the party’s behalf:

(a)    take account of the duty imposed on the party by subsection (1); and

(b)    assist the party to comply with the duty.

88    Having regard to ss 37M and 37N, parties are now encouraged to narrow their disputes in tax appeals. Facts that appear obvious should be admitted by both sides. Weak points should not be pursued. The framing of issues to be decided by the Court should be agreed upon by the parties. The early adjudication of separate questions of law (whether within a Pt IVC tax appeal or otherwise; cf Sandini Pty Ltd v Federal Commissioner of Taxation (2017) 251 FCR 543; and on appeal to the Full Federal Court in Ellison v Sandini Pty Ltd [2018] FCAFC 44) should be considered, if to do so would save cost and/or practically determine a dispute. All of this reflects the “culture shift” which has taken place in more recent times: Rozenblit v Vainer [2018] HCA 23 at [76] per Gordon and Edelman JJ.

89    The duty to conduct tax appeals as “quickly, inexpensively and efficiently as possible” falls equally onto the shoulders of both the taxpayer and the Commissioner. Of course, it will not always be possible to narrow a dispute, and the issue of excessiveness of a default assessment issued pursuant to s 167 may make the confinement of issues impossible. In such a case, the Commissioner may well rely upon the presence of the onus and put the taxpayer to proof and rely, for that matter, on “any deficiency in proof” (Dalco at 624), as he has done here. In cases involving default assessments, positive proof of taxable income may also assume a greater prominence, especially when no returns have been filed or the returns filed are manifestly inadequate. Whether the Commissioner is otherwise “entitled” (again to use the language of Dalco) to rely upon deficiencies in proof in every case, may now be doubted having regard to s 37M and s 37N. In any event, by reason of those provisions, the usual tax case should now present itself in as confined a form as is possible and be focused on the real issues for decision.

90    It follows that in my view, it does not matter in this case whether the amended assessments were issued pursuant to s 166 or s 167 of the 1936 Act. If it did matter, I would be inclined to hold that the amended assessments were probably issued pursuant to s 167(b). That is not because of what was said in the Reasons for Decision. Rather, it is because one may infer that the Commissioner would have been dissatisfied with the returns filed by the applicant. The applicant now admits that he had substantial taxable income in each of the years in dispute. He earned significant income from share transactions (his portfolio was said by him in 2006 to have a value of around $24.8 million) and from providing consulting services. Yet the returns filed by him in 2015 for the 2006, 2007, 2009 and 2013 years of income disclosed zero taxable income. For the 2008 year of income, the taxable income was said to be four dollars. Self-evidently, these returns were grossly deficient. For these years, in the circumstances of this case, inferentially it would have been impossible for the Commissioner, acting reasonably, to have been satisfied with these returns.

91    For these reasons, the admission into evidence of the Reasons for Decision probably added little, if anything, to the case. And whilst contrary to his submissions, the Commissioner did rely on that document for the truth of one of its representations, namely that the first amended assessments were made pursuant to s 167(b), in my view s 69(3) of the Evidence Act did not render that representation inadmissible. Section 69(3) provides:

Subsection (2) does not apply if the representation:

(a)    was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding; or

(b)    was made in connection with an investigation relating or leading to a criminal proceeding.

92    The applicant submitted that s 69(3) operated to exclude the Reasons for Decision because it was prepared “in contemplation of or in connection with” certain freezing order Federal Court proceedings. On the day after the Reasons were issued, the Reasons were annexed to an affidavit filed in those proceedings.

93    Section 69(3) applies to a representation or representations, as opposed to the document containing such representation or representations. The rationale for subs (3) is to preclude the admissibility of hearsay material in business records which had been “prepared in an atmosphere or context which may cause it to be self-serving in the sense of possibly being prepared to assist the proof of something known or at least apprehended to be relevant to the outcome of identifiable legal proceedings”: Vitali v Stachnik [2001] NSWSC 303 at [12].

94    The meaning of the phrase “in connection with” in the context of s 69(3) was considered in Thomas v State of New South Wales (2008) 74 NSWLR 34. In that case, the New South Wales Court of Appeal cited (at [21]), among other decisions, the following passage from Health Insurance Commission v Freeman (1998) 88 FCR 544 at 552:

The words “in connection with” have been accepted as capable of describing a spectrum of relationships between things, one of which is bound up with or involved in another: see Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 288. However, as was pointed out by Sackville J in Taciak v Commission of Australian Federal Police (1995) 59 FCR 285 at 295, the question that remains in a particular case is what kind of relationship will suffice to establish the connection contemplated by the statute. That requires a “value judgment about the range of the statute”: see Pozzolanic (at 289).

95    I am not satisfied that s 69(3) applies to the representation in the Reasons for Decision that the first amended assessments were made pursuant to s 167(b) of the 1936 Act. That representation had no bearing on the application for freezing orders. The purpose of preparing the Reasons was to advise the applicant of the decision to issue the amended assessments, not to support an application for freezing orders where the correctness of the assessments could not be challenged. It follows that the connection between the proceedings and the preparation of the statement about the application of s 167(b) is not of a kind that engages s 69(3).

THE EVIDENCE OF MR ROOS

96    The next issue for determination is whether the evidence of Mr Roos is capable of assisting the applicant in discharging his obligation positively to prove (or otherwise demonstrate) his taxable income. Mr Roos, was, as already mentioned, the applicant’s accountant from mid-2015. He is a partner in the accounting firm PKF Mack. In his affidavit, Mr Roos deposed that he had identified the income included by the Commissioner in the applicant’s assessable income, had gone through business records supplied by the applicant to him, including his domestic bank account statements and his Credit Suisse account statements, and from them had sought to ascertain the applicant’s taxable income in each year of dispute. He exhibited a series of spreadsheets and worksheets, including emails, annual reports of certain companies, and more detailed calculations, all of which was said to support his conclusions concerning the applicant’s taxable income. There were about 199 pages of these, a great deal of which was entirely illegible. A legible copy of the working papers was adopted by Mr Roos when he gave his evidence. I did not admit this material into evidence but marked it separately. I treated the spreadsheets and working papers as a submission.

97    In closing, the applicant placed heavy reliance upon Mr Roos’ affidavit as the principal way in which he sought to discharge his onus of proof.

98    Paragraph [9] of that affidavit was in the following form:

… I consider that the adjusted objection amounts for each period are now as follows:

(a)    Financial year ending 2006 - $2,195,693;

(b)    Financial year ending 2007 - $1,159,191;

(c)    Financial year ending 2008 - $747,266;

(d)    Financial year ending 2009 - $754,073;

(e)    Financial year ending 2010 - $707,290;

(f)    Financial year ending 2011 - $1,043,499;

(g)    Financial year ending 2012 - $456,877; and

(h)    Financial year ending 2013 - $383,368.

I did not admit this paragraph into evidence, but treated it as either an admission or as a submission. I rejected it because it went to the ultimate issue in dispute between the parties, notwithstanding s 80 of the Evidence Act which provides:

Evidence of an opinion is not inadmissible only because it is about:

(a)    a fact in issue or an ultimate issue; or

(b)    a matter of common knowledge.

99    In Allstate Life Insurance Co and Ors v Australia and New Zealand Banking Group Limited and Ors (No 6) (1996) 64 FCR 79 Lindgren J did not admit into evidence part of an expert report concerning the content of foreign law because it expressed an opinion about the application of that law to the facts. At 84, Lindgren J said:

Paragraph 80(a) does not dissuade me from concluding that Mr Altman’s application evidence in para 24 of his statement is not admissible for the same reason that content evidence and application evidence in relation to domestic law is not admissible.

There are various ways of expressing support for the conclusion which I have reached. First, the use in para 80(a) of the words “only” and “about” signify that the provision leaves untouched the fundamental common law principle which excludes expert legal opinion evidence as intruding upon the essential judicial function and duty to which I referred earlier. Secondly, the expression “an ultimate issue” does not catch “the ultimate legal issue” for decision by a court. Thirdly, no issue arises under s 80 because s 55 is not satisfied since the evidence tendered is not evidence which could rationally affect the assessment of the probability of the existence of a fact in issue. Fourthly, reference to the legislative background shows that the reference in para 80(a) to the “ultimate issue” was intended to refer to opinion by non-legal expert witnesses or non-expert witnesses on an ultimate issue of fact expressed in language which applies a legal standard.

100    I respectfully adopt what Lindgren J has said above. Paragraph [9] of the affidavit of Mr Roos constituted an inadmissible legal opinion intruding upon the essential judicial function arising in tax appeals under Pt IVC of the TAA. A taxpayer does not discharge the burden of proving his or her taxable income by calling his or her accountant to tell the court what, in that accountant’s opinion, that taxable income should be. That is opinion evidence going to the ultimate issue for the court to decide.

101    Counsel for the taxpayer, when faced with this difficulty, attempted to have the affidavit of Mr Roos, including the paragraph I excluded from evidence, read as either the expert opinion of a forensic accountant or as a summary adduced under s 50 of the Evidence Act. Section 50 provides:

(1)    The court may, on the application of a party, direct that the party may adduce evidence of the contents of 2 or more documents in question in the form of a summary if the court is satisfied that it would not otherwise be possible conveniently to examine the evidence because of the volume or complexity of the documents in question.

(2)    The court may only make such a direction if the party seeking to adduce the evidence in the form of a summary has:

(a)    served on each other party a copy of the summary that discloses the name and address of the person who prepared the summary; and

(b)    given each other party a reasonable opportunity to examine or copy the documents in question.

(3)    The opinion rule does not apply to evidence adduced in accordance with a direction under this section.

102    Counsel for the applicant also contended that Mr Roos could give evidence as to the existence of transactions underlying the credits and debits made to the applicant’s bank accounts even though Mr Roos had never been a party to those transactions, and had only met the applicant for the first time after the last year of income in dispute. There are difficulties in relation to each of these attempts to use the affidavit of Mr Roos.

103    I do not accept that Mr Roos’ affidavit should be received as an expert opinion of a forensic accountant, even if I were to accept him to be so qualified. It is well established that an accountant may be called to give an expert opinion as to the state of the financial records of a business and may summarise their effect: Re Montecatini’s Patent (1973) 47 ALJR 161 at 169; Spassked Pty Ltd v Federal Commissioner of Taxation (No 2) [2002] FCA 489; (2002) 49 ATR 642 per Lindgren J at [13]. Here, of course, there were no accounting records or receipts or invoices of the applicant to inspect (save in the case of Healthtec and then Greenday). Mr Roos instead inspected and analysed other documents, and records exhibited to his affidavit, not for the purpose of summarising their effect, but for the purpose of giving his opinion about the applicant’s taxable income (including which gains made from the sale of shares were on capital account and which were not). Mr Roos did not produce a report as a forensic accountant might have done, tracing payments and expenses from business records, such as receipts and invoices, to bank accounts. He did not comply with this Court’s Practice Note on expert evidence. He was not asked a question designed to extract an opinion from him which might have been admissible under s 79 of the Evidence Act. He was not asked to undertake the task of summarising business records, nor to undertake any tracing exercise independent of his actual task, which was to reach conclusions about taxable income. He was not in any way independent of the applicant. He was his paid accountant, and on this occasion, also his paid advocate. I reject the attempt to admit his affidavit, spreadsheets and work papers as the expert report of a forensic accountant.

104    I also reject the attempt to have his evidence treated as a summary for the purposes of s 50 of the Evidence Act. Mr Roos’ spreadsheets were not summaries of documents. They were not summaries of books of account. In one sense, they were summaries of his working papers used to quantify taxable income in each year in dispute. But they also went beyond a mere summary and recorded Mr Roos’ analysis, for fiscal purposes, of various deposits made into bank accounts owned or controlled by the applicant, whether alone or jointly with his former wife. An example is the large deposit of $982,500. In the spreadsheets this was backed out of assessable income with a note to refer to pp 134 and 203 of the working papers which had been exhibited. Page 134 was a page from the annual report of AOS for the year ended 31 December 2007. Page 203 was an email from an employee of Westpac to the applicant dated 31 March 2016 – a document made for the purposes of this proceeding. Another example is the note in the spreadsheet concerning this same deposit, explaining that it was the redemption of a convertible note – an observation, as it happens, expressly contrary to the applicant’s own evidence. In my view, the affidavit and its exhibits was not a summary for the purposes of s 50 of the Evidence Act.

105    Nor can Mr Roos’ affidavit and worksheets be received by the Court as evidence of any underlying transaction. He was not a party to any transaction alleged to have been undertaken in the years in dispute. Even if the applicant had kept personal books of account, Mr Roos could only have given admissible evidence about what those accounts recorded, as distinct from proving the existence of any underlying transaction which might have given rise to individual entries in those books. As Dixon J (as his Honour then was) said in Potts v Miller (1940) 64 CLR 282 at 303:

Little English authority will be found explaining the grounds upon which the books of account kept according to an established system in organized business are receivable in evidence as proof, not of the occurrence of some particular fact recorded or indicated by a specific entry or narration, but of the financial progress or result of business operations conducted on a large scale.

[my emphasis]

106    A further difficulty with the material contained in the Roos affidavit was that his judgment concerning the course of the applicant’s business was often the product of whatever the applicant had asked him to consider. In cross-examination, Mr Roos confirmed that he relied on the applicant to give him relevant documents, and that when he had queries he deferred to answers given to him by the applicant. An example is that when a deposit into a local bank account was sourced from a Credit Suisse account he assumed that it either had to be the proceeds from the sale of shares or dividends or constituted a non-taxable transfer of funds between bank accounts owned or controlled by the applicant. The possibility that the so-called “offshore structure” might have had other additional sources of income was never considered by him. The following exchange took place between the Court and Mr Roos:

Are you aware as to whether [the applicant] had other foreign companies – controlled or owned other foreign companies?---I have no idea other than the information that has been provided to me, your Honour.

Okay. So if - if you - if I was to tell you to assume that [the applicant] might have had companies in either the British Virgin Islands or Lichtenstein, is it possible that money was transferred into the bank accounts of these nominee companies from those other companies as another source of income?---It is possible, your Honour

107    The foregoing passage is illustrative of potential gaps in the analysis undertaken by Mr Roos. Other problems included:

(1)    treating some deposits as not being income despite the worksheets recording that the applicant was “still seeking evidence”. On those occasions Mr Roos treated the deposits as not being income based only on the applicant’s belief;

(6)    treating some deposits as not being income in his spreadsheets, even though in the applicant’s first affidavit, he was unable to identify what they concerned.

108    In my view, even received as a submission about taxable income, it would be unsafe to rely on Mr Roos’ conclusions given that the applicant has failed to prove his worldwide income in the years in dispute. The accuracy of the spreadsheets rises no higher than the evidence of the applicant himself. At best, his spreadsheets might be receivable as an admission: cf the observations of Goldberg J in Federal Commissioner of Taxation v Star City Pty Ltd (2009) 175 FCR 39 at 63. But in the circumstances of this case, I would not treat such an admission as equivalent to a partial or full discharge of the applicant’s onus of proof.

109    Mr Roos’ spreadsheet was also relied upon as evidence that some of the gains made on the sale of shares were on capital account, and thus eligible for the 50% discount which is available when assets held on capital account are disposed of by an individual. Mr Roos did not explain in his affidavit or spreadsheet why some share dispositions, but not others, should be treated as affairs of capital. From the bar table I was told that he treated shares held for more than 12 months as being on capital account.

110    I reject this use of Mr Roos’ affidavit. His opinion about whether share sales were, or were not, on capital account is inadmissible and of no assistance to the Court in any event. Nor can his spreadsheets be used to prove that shares were held for more than 12 months. He was not a party or a witness to any such sale. Just before closing, the applicant tendered a bundle of corporate documents in an attempt to show that certain shares were acquired on capital account. The bundle included Appendix 9B to the Australian Securities Exchange Listing Rules, and certain prospectuses for companies in which shares had been acquired. In my view, this material fell very far short of being a discharge of the onus of proof that some shares were held by the applicant on capital account. Here, the applicant admitted that a “primary” source of income was “from share transactions”. He admitted that he bought and sold shares. More than this he did not disclose. He did not lead any particular evidence about any particular sale or acquisition of securities. He did not lead any general evidence about any method of selling or acquiring securities. There was before me, nothing like the evidence led in London Australia Investment Co Ltd v Federal Commissioner of Taxation (1977) 138 CLR 106. In such circumstances, he again failed to discharge his onus of proof. In that respect, if it matters, I reject the suggestion that merely because shares were held for more than 12 month, one is permitted to infer that they were held on capital account. Absent evidence addressing the particular purpose for which particular shares were acquired, I would not draw any such inference.

111    For the foregoing reasons, the applicant has not established that any of the amended assessments issued to him in relation to primary tax were excessive. That is because he did not prove on the balance of probabilities, or otherwise demonstrate, what his taxable income was in each year in dispute, and his attempt to do so through Mr Roos failed. It is also because he conceded that the amended assessments for the 2006, 2010 and 2011 years of income were not excessive.

PROJECT DO IT

112    In his third amended appeal statement, the applicant pleaded that the amended assessments for the 2006 to 2009 years of income were wholly excessive because they were issued contrary to the Commissioner’s publicly stated policy under “Project DO IT”. He also submitted that by reason of that Project, the notices of shortfall penalty issued for those years were also excessive. He did not otherwise contend that Project DO IT was in any way applicable to the 2010 to 2013 years of income.

113    The Commissioner submitted that the applicant’s reliance upon the Commissioner’s Project DO IT was not justiciable in Pt IVC tax appeals (at least in respect of primary tax). For that purpose he relied upon cases such as Bellinz Pty Ltd v Federal Commissioner of Taxation (1998) 84 FCR 154 (“Bellinz”) and Macquarie Bank Ltd v Federal Commissioner of Taxation (2013) 215 FCR 403. In Bellinz, the Full Court of this Court said (at 167):

There is little difficulty in accepting that, where a decision-maker, including the Commissioner of Taxation, has a discretion, a principle of fairness will require that that discretion be exercised in a way that does not discriminate against taxpayers: cf Pickering v Federal Commissioner of Taxation (1997) 37 ATR 41; 97 ATC 4893 and, in another context, New South Wales Aboriginal Land Council v Aboriginal and Torres Strait Island Commission (1995) 59 FCR 369 at 387-388. The same principle may be said to permit judicial review in matters of administration or procedure where a decision-maker acts unfairly by discriminating between different categories of persons. But where the question arises as to the inclusion of an amount in assessable income or the allowance of an amount as a deduction, where no question of discretion arises and where the Commissioner is charged to administer the law (compare s 8 of the Act), and one might say bound so to do in accordance with the language used in the statute as passed by Parliament, it is difficult to see how the Commissioner can properly be said to have acted unfairly, even if there is an element of discrimination, where he has acted in accordance with the law itself. Different considerations arise in other circumstances.

114    In my view, the Commissioner’s submission concerning this issue should be accepted, and by the time the applicant came to close his case, he also agreed with the Commissioner’s submission, but only in relation to the matter of primary tax. It is therefore unnecessary for me to say anything further about this issue other than to observe that, in the usual case, statements made by the Commissioner outside the rulings regime, now contained in Pt 5-5 of Sch 1 of the TAA, are of no moment in a tax appeal in this Court; they cannot affect the application of the criteria for liability as set out in the 1936 and 1997 Acts to the facts. That has been the position since at least the decision of the High Court in Federal Commissioner of Taxation v Wade (1951) 84 CLR 105.

115    As already mentioned, the applicant pressed his reliance upon Project DO IT in relation to the issue of penalty, because the Commissioner had declined to remit any penalty. In the applicant’s submission, Project DO IT involved, amongst other things, the making of promises about the exercise of the power to remit. The Commissioner’s power to remit penalty is contained in s 298-20 of Sch 1 of the TAA which provides:

(1)    The Commissioner may remit all or a part of the penalty.

(2)    If the Commissioner decides:

(a)    not to remit the penalty; or

(b)    to remit only part of the penalty;

the Commissioner must give written of the decision and the reasons for the decision to the entity.

116    In Sanctuary Lakes Pty Ltd v Federal Commissioner of Taxation (2013) 212 FCR 483, Griffiths J, with whom Edmonds J agreed, considered that the power to remit was in broad terms. At 534 - 535, his Honour said:

In my opinion, the correct question which arises under s 298-20 should not be expressed in terms of “harshness”. Rather, the question is simply whether the decision-maker is satisfied having regard to the taxpayer’s particular circumstances that it is appropriate to remit penalty in whole or in part. For example, a decision-maker might determine that it is appropriate to remit penalty in whole or in part because otherwise the outcome for a particular taxpayer would be unreasonable or unjust (and therefore inappropriate), as opposed to harsh (see the observations of McHugh and Gummow JJ in Byrne v Australian Airlines Limited (1995) 185 CLR 410 at 465 on the different meanings of the individual words “harsh”, “unjust” and “unreasonable” in a different context concerning unfair dismissal and the collocation of those words in both legislation and an industrial award). In my view, there is no warrant for confining the otherwise broad discretion in s 298-20 to circumstances where the outcome of imposing administrative penalty would otherwise be “harsh”.

117    In a Pt IVC appeal, the Federal Court is limited to judicial review of this broad power, on grounds generally derived from the decision of Dixon J (as his Honour then was) in Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353. It can be difficult to discern an error of law where the power or discretion conferred is very broad. In particular, it may be difficult to identify considerations which must be taken into account in the exercise of that power or discretion. As Hely J once observed in Elias v Federal Commissioner of Taxation (2002) 123 FCR 499 at 511 in the context of review of the Commissioner’s similarly broad power to extend time within which to pay tax:

When a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except insofar as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard: Peko-Wallsend [(1986) 162 CLR 24] at 40. Where the ground of review is that a relevant consideration has not been taken into account, and the discretion is unconfined by the terms of the statute, the Court will not find that the decision-maker is bound to take a particular matter into account unless an implication to that effect is to be found in the subject matter, scope and purpose of the statute: Peko-Wallsend at 40.

Where, as here, a discretion is conferred in very general terms, it is generally a matter for the decision-maker to decide what is relevant and what is not. It is largely for the decision-maker, in the light of the matters placed before him, to determine which matters he regards as relevant and the comparative importance to be accorded to matters which he so regards: Sean Investments Pty Ltd v MacKellar (1981) 38 ALR 363 at 375. As long as the decision-maker considers those things that the legislation requires to be taken into account and ignores any prohibited consideration, the grounds of failing to take into account a relevant consideration, or taking into account an irrelevant consideration, will not be available. Nor are those grounds available where the essence of the complaint is that the decision-maker paid either too little or too much attention to a relevant factor: Aronson and Dyer, Judicial Review of Administrative Action (2nd ed, 2000), p 225.

118    The Commissioner submitted that Project DO IT was not relevant to the exercise of the remission power here, and that, in any event, the taxpayer was correctly excluded from that program because, by the time of his application to participate in it, he was already the subject of an audit which included an examination of his foreign income. The terms of Project DO IT recorded the following “Exclusion Conditions”, the first of which was relied upon by the Commissioner:

Exclusion conditions

You are not eligible for Project DO IT if:

•    we’re already auditing you in relation to the omitted offshore income or capital gains or over-claimed deductions you want to disclose

•    you have received a compulsory information-gathering notice from us requiring you to produce information (or attend and give evidence) relating to the offshore income or capital gains or over-claimed deductions that you are intending to disclose

•    you have been involved in promoting or marketing tax evasion schemes (with some possible exceptions, see Promoters or marketers of schemes that occurred some time ago)

•    you are already under criminal investigation concerning tax-related criminal offences (see also People under covert investigation or audit or have been previously convicted[)]

•    your foreign assets or income were derived from serious criminal offences unrelated to tax

•    you have not complied with specific obligations from a previous offshore voluntary disclosure initiative that you were involved in.

119    The applicant’s evidence is that he first attempted to participate in Project DO IT by an email sent by his then accountant, Mr Thompson, to the Commissioner’s office on 19 December 2014. But by then, the applicant was already being audited. That audit commenced, it would appear, at the end of March 2014 when the applicant was sent a notice of intention to audit by the Commissioner. That notice specified:

Dear Mr Bosanac,

We are writing to inform you that the ATO is conducting an examination of your taxation affairs, for the period 1 July 2005 to 30 June 2013. The examination will cover the following issues:

…

•    Foreign income

120    Project DO IT also, by its terms, required a participating taxpayer to make full disclosure of his or her or its foreign source income. The website contained, for example, the following requirement:

What you need to do

To receive the benefits of Project DO IT, you must make a truthful disclosure to us. You should complete the disclosure statement and lodge it with us by 19 December 2014 (or seek an extension). Until you lodge, our normal compliance activities will continue and if we detect you first you will not be able to participate.

121    The applicant did not dispute, in any serious way, that he was already under audit in relation to his offshore income when he tried to participate in Project DO IT. He also never disclosed his foreign income, as required. He was thus, by the express terms of Project DO IT, properly excluded from its benefits by the Commissioner.

122    At the trial before me, the applicant presented a new contention, not previously pleaded by him in his appeal statement, that he had been improperly excluded from Project DO IT because the Commissioner had allowed a group of other taxpayers to participate in it, even though they should also have been excluded by reason of the “Exclusion Conditions” set out above. He invoked the passage set out above from Bellinz and the need for the Commissioner not to discriminate between taxpayers when exercising discretionary powers. The Commissioner did not object to the raising of this new argument so late. The particular condition identified by the applicant, which he contended had been triggered in relation to this other group, was that they had had foreign assets or income which had been “derived from serious criminal offences unrelated to tax” (the fifth exclusion above). The applicant was asked to identify this group and to demonstrate both that they had committed “serious criminal offences” but had nonetheless been allowed to obtain the benefit of Project DO IT. For that purpose, the applicant tendered a bundle of documents which his counsel said he had planned to use in cross-examining an officer of the Australian Taxation Office, who had sworn an affidavit in the proceedings which ultimately was not read or relied upon by the Commissioner.

123    The allegation then made by the applicant in closing address, which was said to demonstrate unequal treatment between taxpayers, was both baseless and scandalous. As such, I do not propose to repeat it in these reasons for judgment; it is not necessary for the purpose of supplying sufficient reasons for me to do so. A description of the type of material in the bundle tendered will demonstrate sufficiently that the allegation should never have been made. The material included an internal email from an officer of the Commissioner concerning the applicant, 10 newspaper articles, most of which dated back to the 1980s and 1990s, an extract from a journal, an Australian Taxation Office press release, two accounting firm publications (one called a blog), an Australian Broadcasting Commission website news article, a transcript of a panel discussion between certain tax lawyers and a representative of the Commissioner, an extract from an Australian Taxation Office annual report, and 10 pages from a novel.

124    The contents of the last document were especially relied upon. The cover of the novel contained these words: “[i]n this first novel [the author] draws on his own knowledge and experience of the Australian and international business scene to create a story rich in action, excitement and intrigue.” None of this material rose any higher than inadmissible hearsay gossip or conjecture. It did not in any way identify any particular taxpayer or taxpayers that had committed serious criminal offences but had then received benefits under Project DO IT. It follows, that the applicant’s reliance upon Project DO IT is rejected entirely.

125    I also reject the applicant’s submission that his case concerning the administration of Project DO IT was supported by inferences that should be made in accordance with the rule usually extracted from Jones v Dunkel (1959) 101 CLR 298 (“Jones v Dunkel”). In Kordan v Federal Commissioner of Taxation [2000] FCA 1807; 46 ATR 191, Hill, Dowsett and Hely JJ explained that the rule in Jones v Dunkel can only be used to render more probable an inference which otherwise arises from the evidence. At [48] the Court said:

However, what is important to note is that the rule, however expressed, does not permit an inference to be drawn by reason of the failure of the other side to call a witness where that inference is not otherwise open. Put another way, the failure to call evidence does not provide positive evidence, nor does it fill up any gap in evidence.

126    Here, the applicant submitted that inferences should be drawn from the failure by the Commissioner to call two of his officers, who had sworn or affirmed affidavits, but which were ultimately not read or relied upon, together with a failure to call a former officer of the Australian Taxation Office. In my view, to the extent that any inference was sought to be drawn from any, or all, of the documents tendered in closing in relation to Project DO IT, the applicant’s reliance upon Jones v Dunkel is misconceived. That material does not ground any inference that may reliably be drawn by the Court in relation to the administration of Project DO IT by the Commissioner, which might have been more confidently drawn by the failure to call the individuals identified by the applicant.

127    I should add, for completeness, that I had earlier refused to grant leave to the applicant to issue a subpoena to the same former officer of the Australian Taxation Office and I had also set aside certain notices to produce that were directed at an attempt to obtain evidence concerning the administration of Project DO IT by the Commissioner. I did so in each case because I was satisfied that the applicant was fishing for such evidence. Moreover, at the time that the applicant sought leave, the applicant’s third amended appeal statement, as already mentioned, pleaded no allegation that the Commissioner had administered Project DO IT in a manner which did not comply with its terms. That appeal statement was never amended. The evidence sought thus did not exhibit any ostensible relevance to the case pleaded. In addition, I was not satisfied, at that time, that the application of Project DO IT was in any way a justiciable issue in Pt IVC proceedings – a proposition finally conceded by the applicant – at least in relation to primary tax.

PENALTIES

128    The Commissioner imposed two administrative penalties on the applicant. The first was a penalty imposed pursuant to s 284-75(1) of Sch 1 of the TAA for making false and misleading statements in the tax returns filed in 2015. The base penalty amount for the purposes of s 284-90(1) of Sch 1 of the TAA was specified to be 75% because the Commissioner was of the view that there had been “intentional disregard” of the 1936 Act and/or the 1997 Act. Section 284-75(1) provided:

You are liable to an administrative penalty if:

(a)    you make a statement to the Commissioner or to an entity that is exercising powers or performing functions under a taxation law (other than the Excise Acts); and

(b)    the statement is false or misleading in a material particular, whether because of things in it or omitted from it.

129    Item 1 of the table contained within s 284-90(1) provided:

It should be noted that this penalty applies to conduct on the part of both the taxpayer and his or her or its “agent”.

130    In addition, the Commissioner increased this penalty by a further 20% pursuant to s 284-220(1)(a) of Sch 1 of the TAA on the ground that the applicant had taken steps to prevent or obstruct the Commissioner from finding out about a shortfall amount in relation to the 2006 income year, and thereafter pursuant to s 284-220(1)(c) on the basis that item 1 of s 284-90(1) was satisfied. Section 284-220(1) relevantly provided:

The base penalty amount is increased by 20% if:

(a)    you took steps to prevent or obstruct the Commissioner from finding out about a shortfall amount, or the false or misleading nature of a statement, in relation to which the base penalty amount was calculated; or

…

(c)    the base penalty amount was worked out using item 1, 2 or 3 of the table in subsection 284-90(1) and a base penalty amount for you was worked out under one of those items previously; …

131    In each case, the onus was on the applicant to prove that these penalties were excessive. As Hill and Hely JJ said in Hart v Federal Commissioner of Taxation (2003) 131 FCR 203 at 215 at [38]:

The onus is on the appellant to prove that the assessment of additional tax by way of penalty was excessive. The taxpayer could discharge that onus by proof that the factual circumstances which are necessary preconditions to the operation of s 226H, or any other section in Part VII of the Act did not exist: BRK (Bris) Pty Ltd v Commissioner of Taxation (Cth) (1999) 42 ATR 409.

132    That observation, made in relation to the former regime for additional tax, applies equally to penalties imposed by Div 284 of Sch 1 of the TAA. That is because of s 14ZZO of the TAA (supra).

133    The applicant submitted that based on the evidence given by him and his former tax agent, Mr Thompson, the highest penalty that could be justified was 50% for recklessness. He also submitted that the applicant had not only not taken steps to hinder or obstruct the Commissioner, but, rather, had taken positive steps to comply with the law. The applicant’s evidence of this was contained in his third affidavit. I need not describe in any detail its contents. Suffice to say, the applicant said that he had relied upon Mr Thompson, who had failed him. He blamed Mr Thompson for not including the consulting income in the returns. The affidavit also contained a good deal of emotional protest which I either excluded or disregarded as having no probative value. Tellingly, the narrative deposed to commences with what occurred following the receipt of the first amended assessments. Save for the contention that he was “aware that some of the returns did contain income from share trading using the Credit Suisse account”, nothing meaningful was said in this affidavit about the preparation of his income tax returns in 2015, even though it was those returns which contained the false and misleading statements in issue. The carefully crafted statement I have just set out justifies some scrutiny.

134    The applicant was cross-examined about the contents of his 2015 income tax returns which he had endorsed. He freely conceded that he knew at the time these returns were filed that the income he received from his share transactions and from his consulting was taxable in his hands.

135    In relation to his consultancy income the following exchange demonstrates this:

And you personally provided some of those consultancy services for Healthtec and Greenday yourself?---Yes.

And you earned consultancy fees over the period 2006 to 2013 from either of those companies?---Correct.

And those fees were paid for your own benefit to you either into your Dominion bank account or into a Westpac account held in the joint names of you and [Ms Bosanac]?---Yes.

Now, Mr Bosanac, as a sophisticated and experienced businessman, no doubt you knew full well that those fees were subject to tax in Australia?---Say that again.

As a sophisticated and experienced businessman, you knew, did you not, that those fees that you were earning from Healthtec or Greenday were taxable in Australia in your hands?---Yes, of course.

And you knew that certainly in 2014 and in 2015, didn't you?---Yes, I did.

136    In relation to his overseas share trading income. the following exchange demonstrates that the applicant knew that this income was taxable in his hands:

… Now, during 2014, no doubt you're aware that your tax affairs were not in good order?---That's when I found out, yes.

Yes. And you also were aware that you had conducted share trading through your Credit Suisse facilities?---Correct.

You were aware, were you not, that your - your income that you were generating through your overseas share trades was taxable in Australia?---Yes.

And you were aware of that at the time in 2014 already?---Yes, indeed.

137    The following exchange then took place :

I wasn’t asking about the guidance you received from your tax agent. I was asking you what you knew. And I think, if I’m not mistaken, when I asked you yesterday, early on in my cross-examination, you accepted – in fact, you said that you knew that income that you were earning overseas was taxable in your hands?---Correct.

And you also indicated that the consultancy fees which you were earning from Greenday or Healthtec - you knew back as early as 2014 that that was taxable in your hands?---Yes

In my view, having regard to this evidence, I find that the applicant knew before the filing of his returns in 2015 that his earnings from consultancy and from overseas share trading were taxable in Australia.

138    The cross-examiner then, properly, put the following question to the applicant:

So when you signed that you had zero taxable income in those various years, that was false, and you knew it to be false?---No, I did not know it to be false, because again, the advice I was being given on how my taxable amounts were going to be broken up – I actually questioned these returns when they came in with Mr Thompson, because they were so low. And he said we will have to do the other companies separately, which – I didn’t understand how that worked, in all honesty. But he said to me there will – there will be tax to pay in the companies. But – I questioned these when they came through. I was - I was - - -

Well - - -?--- - - - deeply surprised.

139    The applicant had earlier maintained that he believed that his foreign income was to be separately addressed through participation in Project DO IT and therefore did not need to be disclosed in his income tax returns. He also said that Mr Thompson advised him that his income from consultancy would be separately returned through Dominion. The following exchange is illustrative of these claims:

Well, you have to put in your foreign income. You have to declare foreign income in a tax return?---I understand that completely now. But I – what I didn’t understand at the time is that I couldn’t separate them into the separate categories with the company having income that he said was not directly mine, it was the company’s. The Project DO IT is a separate item and then my own personal income. Because I do recall when he did finish my returns, saying to him I thought they were very low. And he said, “No, it’s because the income is in Dominion and it will be in the other – in the Project DO IT.”

140    These claims had not appeared expressly in any affidavit filed by the applicant. Thus, in relation to the consultancy income, the following exchange took place in cross-examination:

Mr Bosanac, do you recall saying anything, in any of your three affidavits filed with this court, about having received advice from Mr Thompson that you did not have to disclose your income from Healthtec or Greenday in your tax returns?---No.

You don’t recall or you didn’t?---I – there isn’t anything where Mr Thompson said not to disclose income from Greenday or Healthtec.

….

Well, you’ve accepted that: that there’s nothing in any of your affidavits about Mr Thompson advising you, in effect, that you didn’t have to disclose in your personal tax returns income that had been received from Dominion, and that because of Project DO IT, you didn’t have to put in any of your income disclosed on the foreign transactions?---Correct.

And that’s not in any of your affidavits?---No, it’s not.

141    Each of the tax returns filed in 2015 also required the taxpayer to disclose whether he owned assets located outside of Australia which had a total value of $50,000 or more. On each occasion the applicant declared that he did not. That answer was false. When asked by counsel for the Commissioner about this false statement when it was first made in the 2006 return, the following exchange took place:

That should be the page. Series of questions asked. This relates to the tax year 2006. Could you have a look at paragraph 19, question 19:

Foreign source income and foreign assets or property. During the year, did you own or have an interest in assets located outside Australia which had a total value of 50,000 Australian dollars or more?

See that question?---Yes, I do.

And there’s an N there, N for no?---Correct.

And on the right-hand side are your initials - - -?---Yes, there is.

- - - pretty much directly opposite the N?---Yes.

So you declared to the tax office there, the ATO, that you had no foreign assets outside Australia which have a total value of at least A$50,000?---That’s according to this correct.

According to what you signed?---Absolutely. I signed it, but again - - -

That - but that was - - -?--- - - - these were all put in front of me and I initialled and handed them back to Mr Thompson.

Right next to the question to which the answer “no” was - - -?---Well, isn’t the primary question did I actually even read that? Because I did not. Mr Thompson lobbed nine years of statements in front of me and asked me to sign them so he could lodge them. We had been prosecuted twice. We were running late. I had already been in severe penalties and trouble with the - with the courts, and I initialled these pages very quickly and relied on Mr Thompson, who had information around these things.

So you’re blaming Mr Thompson again. Mr Bosanac, you - are you now - is your evidence now that you didn’t read – you don’t read documents when you sign them?---This is in the - in the period I trusted Mr Thompson, and I signed these quickly. Had I ever read that particular statement? No, I had not.

But it’s right next to your initial on that page?---It is because I have a habit of quickly initialling the bottom of each page so that a page can’t be substituted, and signing the end of the document where appropriate.

But you knew that that was false?---But I didn’t read that question.

You knew - - -?---If it had have been pointed out to me specifically by Mr Thompson, I may have handled it differently.

So you may have handled it differently, but not necessarily?---Well, you can stretch my words. You - what I’m saying is, if I was aware - - -

Mr - - -?--- - - - if I was made aware of it, I would have asked him why he would have put a “no” there.

Well, it’s your return, Mr Bosanac?---And at the end of the process it’s my fault that I’ve signed something that he hasn’t outlined to me.

You accept that - well, you certainly knew that you owned assets more than $50,000 in 2016, and in fact, in each one of these years .....?---Indeed, yes. I don’t think I’ve ever said otherwise.

You accept that you made a false statement and you knew it to be false?---I accept that Mr Thompson had me sign a document and didn’t point out something that had a false statement in it knowingly.

Turn to the return for 2007?---Page number?

I will give that to you now. Page 8?---Yes.

Turn – and it’s the return for 2007?---Mmm hmm.

Go to question 90 again?---Yes.

Again, directly opposite your initials - - -?---Yes.

- - - same question, same answer: “no”?---Yes, I – I think you will probably find it’s consistent for all the years, to save you going to every page.

So you merrily signed, without reading it, on your version, despite the fact that you were making a very – you had been prosecuted, you had been fined at least once by the time you had signed this. You realised the tax office was being serious, and you signed a document that had serious potential consequences if you made a false statement?---I signed a document that my trusted tax agent said was prepared and ready for – for lodgement.

[my emphasis]

The reference in this extract from the transcript includes a mistaken reference to the 2016 year; it should be the 2006 year.

142    The third affidavit sworn by Mr Thompson was filed and served (without prior notice) at the commencement of the trial. In it, Mr Thompson said that he would not give evidence about his preparation of the 2015 income tax returns without the issue of certificates pursuant to s 128 of the Evidence Act. That provision relevantly provides:

(1)    This section applies if a witness objects to giving particular evidence, or evidence on a particular matter, on the ground that the evidence may tend to prove that the witness:

(a)    has committed an offence against or arising under an Australian law or a law of a foreign country; or

(b)    is liable to a civil penalty.

(2)    The court must determine whether or not there are reasonable grounds for the objection.

(3)    Subject to subsection (4), if the court determines that there are reasonable grounds for the objection, the court is not to require the witness to give the evidence, and is to inform the witness:

(a)    that the witness need not give the evidence unless required by the court to do so under subsection (4); and

(b)    that the court will give a certificate under this section if:

(i)    the witness willingly gives the evidence without being required to do so under subsection (4); or

(ii)    the witness gives the evidence after being required to do so under subsection (4); and

(c)    of the effect of such a certificate.

…

(7)    In any proceeding in an Australian court:

(a)    evidence given by a person in respect of which a certificate under this section has been given; and

(b)    evidence of any information, document or thing obtained as a direct or indirect consequence of the person having given evidence;

cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence.

143    The applicant sought leave to adduce further oral evidence in chief from Mr Thompson concerning the preparation of the returns under the protection of certificates issued under s 128. It was explained to me that Mr Thompson’s concern was that answers given by him on this topic might be used to allege that he had committed breaches of the Tax Agent’s Code of Professional Conduct for the purposes of Pt 3 of the Tax Agents Services Act 2009 (Cth). The Commissioner, quite fairly, did not object to the issue of such certificates, but did object to a grant of leave generally to lead evidence orally. He was concerned about the prejudice arising to him from the production of late evidence. In these circumstances, I gave leave to adduce evidence in chief limited to asking the following three questions:

(1)    what information potentially relevant to the preparation of the applicant’s tax returns did Mr Thompson consider prior to filing the tax returns in 2015;

(7)    when Mr Thompson prepared the applicant’s tax returns in 2015, why did he not disclose in them the foreign income now conceded to have been earned by the applicant; and

(8)    when Mr Thompson prepared the applicant’s tax returns in 2015, why did he not disclose in them the consulting income from Greenday and Healthtec now conceded to have been earned by the applicant?

144    Mr Thompson gave these answers in response to the foregoing questions, in respect of which I issued certificates pursuant to s 128 of the Evidence Act:

(1)    Perhaps if you just answer this question in respect of which I will issue a certificate under section 128. What information or evidence did you consider for the purposes of preparing Mr Bosanac’s tax returns in February 2015?---Understood, sir. Do I – do I answer the question?

…

Can you tell me?---We have various documents, sir, through bank statements. Obviously the Greenday file. Share records. Consultation with Mr Bosanac.

Is that your answer?---Yes, sir.

(2)    So the question was: there has been foreign income now conceded by the applicant, why didn’t you include that foreign income in the returns?---Some of that foreign income wasn’t returned in the returns. It was returned in - under - under part of the returns for share trading. The income that we - the documents we have received, through Credit Suisse and Mr Bosanac, are not in a real usable order. They’re not a straightforward document, they’re not - don’t - they’re not straightforward. And in that - and in that - the document there’s a list of companies that Mr Bosanac said, “I’ve never heard of that company, I’ve never traded with that company, I’ve never had business with that company.” So part of the income - part of the foreign income was returned in his returns, yes, but the full amount of income, I don’t know, sir.

(3)    So in relation to the consultancy income from Greenday and Healthtec, so the question is: why did you not disclose any returns, the consultancy income from Greenday and Healthtec now conceded to have been earned?

…

The Greenday was – excuse me going back through the background, Greenday was a partnership between Mr Bosanac and Mr Evans – Evan Cross. The documents – Mr Bosanac had always insisted that the income flow was to Dominion, which is one of his companies, and that was my understanding before he was a client. That was just the way they had structured their business affairs. We discussed – and he said, “No, that’s Dominion’s income.” I also asked for copies of the tax returns, etcetera, for Greenday, and this is the file that I received, and in the file there’s no copies of the tax returns, there’s copies of BAS returns, but in the file there’s workings and printouts from MYOB files that basically say consultancy fees were paid to Mr Cross’s company and Mr Bosanac’s company, and he said the split is 50/50 ..... some differences at the time, the split was 50/50. That’s how the income was returned by Mr Cross. So we didn’t return the income from Greenday to Mr Bosanac.

145    The Commissioner did not cross-examine Mr Thompson. It will be apparent from the last answer given by him that there is a conflict in the evidence between his and the applicant’s testimony concerning the failure to disclosure the applicant’s consultancy earnings in the returns. Effectively, they each blamed the other for the non-disclosure of this income (although, on one view, the contents of Mr Thompson’s second affidavit are more aligned with the recollection of the applicant). That conflict, which I ultimately do not need to resolve, nonetheless bears upon the applicant’s ability to discharge his onus of proof regarding the imposition of penalty tax. Other than this, the answers given by Mr Thompson did not shed much light on how the returns were prepared.

146    In closing, both orally and in his written submissions, the applicant placed great reliance upon an email dated 11 June 2014, obtained from a freedom of information request, and apparently written by an officer of the Australian Taxation Office, whose name has been redacted, to another person whose name has also been redacted. The email records a statement that the tax agent (Mr Thompson) had “indicated” that the funds “received by Dominion are income to Dominion from Greenday”. It was submitted that this was contemporaneous evidence of Mr Thompson’s understanding of Greenday’s position. That may be so, but that is because, on his evidence, the applicant told him that this was so. Yet the applicant now admits that he knew in 2014 that this income was taxable in his hands.

147    In Russell v Federal Commissioner of Taxation [2009] FCA 1224; 74 ATR 466, Logan J usefully summarised the principles to be applied in determining whether a shortfall amount resulted from intentional disregard of a taxation law. At [180]-[182], his Honour said:

Guidance as to what constitutes “intentional disregard” for the purposes of determining a base penalty amount was offered by Collier J in Price Street Professional Centre Pty Ltd v Commissioner of Taxation (2007) 66 ATR 1 at [43] when considering a materially analogous predecessor provision, s 226J of the ITAA 1936:

[43]    As made clear by the Explanatory Memorandum to the Taxation Laws Amendment (Self Assessment) Bill 1992 which introduced s  26J, s 226J requires knowledge by the taxpayer that, for example, it has claimed a deduction knowing that it is not allowable. Accordingly, “intentional disregard” of the ITAA 1936 or regulations requires, inter alia, an understanding by the taxpayer of the effect of the relevant legislation or regulations, an appreciation by the taxpayer of how that legislation or regulation applies to the circumstances of the taxpayer, and finally, deliberate conduct of the taxpayer so as to flout the ITAA 1936 or regulations. The legislation treats “intentional disregard” differently from, and more seriously than, negligence to comply with the Act (cf s 226G) or recklessness with regard to the correct operation of the Act (cf s 226H).

An appeal from her Honour’s decision in that case, including so much of it as related to penalty, was later dismissed by the Full Court: Price Street Professional Centre Pty Ltd v Commissioner of Taxation (2007) 243 ALR 728.

There is nothing in the judgements delivered in the Full Court which would call into question the correctness of her Honour’s conception of what constitutes “intentional disregard”. I respectfully agree with her Honour’s observations. They serve to confirm what a reading in context of “results from intentional disregard” would otherwise suggest. Within s 290-40 of Schedule 1 to the TAA, Parliament has specified gradations of increasing severity in terms of conduct by a taxpayer or his, her or its agent which has resulted in a tax shortfall. Of these, “intentional disregard” is the most serious in terms of the infliction of a base penalty. It is intended to be qualitatively different to and more severe than “recklessness”. That suggests that wilful blindness of a kind which in other contexts has been regarded as sufficient to supply the mental element in adverbial qualifications such as “knowingly” or “wilfully”, q.v. Iannella v. French (1968) 119 CLR 84 at 95-96 per Barwick CJ and Comptroller-General of Customs v Woodlands Enterprises Pty Ltd [1996] 1 Qd R 589 at 602-603 per Pincus JA, McPherson JA agreeing, is insufficient to supply the mental element in “intentional disregard”. Rather, conduct of that wilfully blind kind would fall under the rubric of “recklessness” for base penalty purposes.

148    I have no hesitation in finding that the applicant was at least wilfully blind in relation to the preparation of his returns. In cross-examination, he said that he had not read the returns and that he had signed them “quickly” after they had been “lobbed” in front of him. On balance, I nonetheless also hold that he had knowledge that the contents of the returns filed for the 2006 to 2013 years contained deliberate false information, notwithstanding the answers given by him in cross-examination. I also hold that he had a sufficient appreciation of his tax obligations to know that, at the very least, he was obliged to declare his foreign and consulting income. Generally speaking, the impression I formed of the applicant is that he often gave his answers honestly. He certainly did not seek to excuse his conduct in not filing returns. But as Walsh J observed in Krew (at 240):

A witness upon whose word one cannot rely may yet give evidence which is true in part.

149    Here, I find the opposite applies, namely that whilst the applicant often gave evidence which was true, on this occasion he did not. In that respect, I have been mindful to treat the answers given by the applicant with caution. As Fullagar J said in Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402 at 404:

Where a person’s purpose or object or other state of mind in relation to a given transaction is in issue, the statements of that person in the witness box provide, in a sense, the “best” evidence, but, for obvious reasons, they must, as Cussen, J observed in Cox v Smail ((1912) VLR 274, at p 283), “be tested most closely, and received with the greatest caution”.

150    I am not persuaded that the applicant has discharged his onus of showing that there was no intentional disregard of the 1936 Act and/or the 1997 Act in relation to the years in question. That is because:

(1)    In relation to all of the years in dispute, the applicant now concedes that he knew that his foreign and consulting earnings comprised income upon which income tax should have been paid by him. He knew this before the filing of his tax returns in 2015. Even if he did not read those returns, I am not persuaded that he did not have knowledge of their contents. His evidence was that he was “deeply surprised” by them. Filing returns with nil income or $4, in those circumstances, was flouting the law.

(2)    I do not accept his excuse that he believed that his foreign income was to be addressed separately from his returns because of his attempt to participate in Project DO IT. No contemporaneous evidence was adduced to support the existence of that belief in 2015. Given the applicant’s knowledge of his earnings, and his sophistication as a successful businessman, I find this excuse to be inherently improbable. Moreover, each return, it will be recalled, contained a positive representation made by the applicant that he did not own foreign assets with a value of $50,000 or more. On each occasion that representation was false, and, I find, was known to be false. The applicant conceded as much in cross-examination. A belief about participation in Project DO IT cannot excuse the making of such egregiously wrong statements.

(3)    Nor, do I accept his other excuse that he was told by Mr Thompson that his consulting income was to be derived by Dominion. Mr Thompson’s evidence was that the applicant insisted it was Dominion’s income (although the evidence in his second affidavit about this issue is less clear). In any event, the applicant agreed in cross-examination that he knew “in 2014 and in 2015” that the consultancy fees were taxable in his hands.

(4)    I do not otherwise accept the applicant’s asserted reliance on a trusted accountant as a sufficient explanation for his endorsement of income tax returns which contained false information. I was unpersuaded by the answers the applicant gave in cross-examination as set out above. Basal tax obligations cannot be wholly delegated to a tax agent. I do not accept that he endorsed or otherwise filled out his returns like some unthinking automaton. The striking juxtaposition of his actual knowledge that his earnings were taxable, and the execution of the tax returns, showing in many cases “nil” income precludes a finding of only wilful blindness.

151    For these reasons, I find that the Commissioner correctly imposed a penalty of 75% on the applicant: as Jessup J said in Gashi v Federal Commissioner of Taxation [2012] FCA 638; 88 ATR 895 at [55] in deciding that there had been, in that case, intentional disregard:

The very modest levels of income returned in these years makes it improbable that the false statements admittedly made were made other than intentionally.

152    I have reached a similar conclusion. The conduct I have described above constituted an intended flouting of the 1936 and 1997 Acts. It is unnecessary for me, in that respect, to make any findings about Mr Thompson.

153    The next issue was whether there was obstruction for the purposes of s 284-220(1)(a) (set out above). This issue only arises in the first year of dispute. The Explanatory Memorandum to A New Tax System (Tax Administration) Act No.2 2000 (Cth), which accompanied the introduction of this provision, describes the operation of s 284-220(1)(a) in these terms:

1.116    This would include, for example, unreasonable delay by the taxpayer in responding to enquiries by taxation officers, or the taxpayer failing to attend an interview at a time previously agreed without a reasonable excuse. It would also include instances where the taxpayer destroyed relevant records, or colluded with other persons (after the relevant statement had been made) to conceal part or all of the shortfall amount.

154    The Commissioner here relies principally upon the onus of proof. He pointed to the Reasons for Decision which stated at [172] that the applicant had not responded to a questionnaire sent to him on 29 March 2014 as part of the Notice of Intention to Audit. That notice said “[t]o help us complete this audit, we ask that you: complete the enclosed questionnaire”. This never occurred. The Commissioner also submitted that the filing of the 2006 return, which failed to disclose the applicant’s substantial foreign income and consultancy fees for that year, and which also answered the question about ownership of foreign assets worth more than $50,000 with the letter “N” meaning “no”, prevented the Commissioner from finding out about those classes of income and thus a shortfall amount.

155    I am not prepared to find that the failure to respond to the questionnaire relevantly obstructed or prevented the Commissioner in the required sense. In my opinion, to take “steps to prevent or obstruct” would usually require a taxpayer to do something, or decline to do something he or she was under a duty to do, whether lawfully imposed or otherwise, which makes it harder or more difficult for the Commissioner to find out about a shortfall amount or the false and misleading nature of a statement: cf Lewis v Cox [1985] QB 509. Here, the invitation to fill out the questionnaire was declined. The Commissioner was, however, at that time free to exercise his powers to obtain information compulsorily. Failure to accept the invitation, without more, did not prevent or obstruct the Commissioner from exercising those powers or otherwise discovering the 2006 shortfall. It did not involve the doing of something, or the failure to do something, which the applicant was under a duty to do; disclosure was voluntary.

156    The return for the 2006 year stands, however, in a different category. It contained a false representation about the non-ownership of foreign assets that prevented the Commissioner from finding out about the income derived from share transactions in Singapore. It follows that s 284-220(1)(a) is satisfied in relation to the 2006 year.

157    For the years that follow (ie the 2007 to 2013 years) the 20% increase applies automatically by reason of the imposition of penalties under item 1 of s 284-90 for each prior year. No submission was made to the Court which suggested otherwise.

158    Finally, I reject the submission made in the closing written submissions of the applicant that the Commissioner was “out to get” the applicant. This was said to be a corruption of the power to issue default assessments. This submission did not appear to be pleaded in the applicant’s third amended appeal statement; it did not express itself in the form of a recognisable error of law in relation to the imposition or remission of administrative penalty; and the material relied upon, which I have reviewed, evidenced the taking of steps by the Commissioner for the issue of amended assessments and the collection of tax in accordance with law. The applicant’s contention is therefore rejected.

REMISSION

159    The applicant submitted that the penalties imposed upon him should have been remitted to 10% pursuant to s 298-20 of Sch 1 and interest should also have been remitted pursuant to s 8AAG of the TAA, although the degree of remission on this occasion was not specified. I have already set out s 298-20.

160    In closing, the applicant confined his case to the proposition that under Project DO IT, for the purposes of remitting penalty, the Commissioner had erred in law in treating one class of taxpayer differently to the applicant. As I have already rejected the factual basis for that allegation, it follows that his case concerning remission of penalty and interest also fails.

TAX APPEALS CONCLUSION

161    For the reasons I have given, I would dismiss each tax appeal for each of the 2006 to 2013 years of income with costs.

SECTION 39B PROCEEDING

162    As already mentioned, the applicant had also separately commenced a proceeding under s 39B of the Judiciary Act 1903 (Cth) seeking, it would appear, to impugn the validity of the amended assessments and assessments of shortfall penalties for the years ended 30 June 2007 to 2009. He did so notwithstanding the rejection by this Court of what appeared to be a similar challenge in earlier proceedings: Federal Commissioner of Taxation v Bosanac [2016] FCA 448; 103 ATR 51. The s 39B proceeding was heard at the same time as the Pt IVC tax appeals. The applicant’s originating motion contended that because the applicant was denied the benefit of Project DO IT, “orders in the nature of certiorari” should issue to quash each decision made to issue each assessment in issue. The applicant also sought the making of certain declarations and mandamus requiring the Commissioner to redo the impugned decisions.

163    As it happens, the attack on each decision to issue an assessment may be of no moment if the assessments themselves are still left standing. However, during the course of argument, I understood that the applicant was intending to impugn, where relevant, the validity of the assessments themselves. In that respect, the applicant faced an immediate problem: he never pleaded that any such assessment was tentative or had been issued in bad faith: Federal Commissioner of Taxation v Futuris Corporation Limited (2008) 237 CLR 146. As such, I would have this summarily dismissed the s 39B proceeding, if such relief had ever been sought by the Commissioner: cf Chhua v Commissioner of Taxation [2018] FCAFC 86.

164    Because the factual basis for the applicant’s Project DO IT claim has been rejected by me, it also follows that the s 39B challenge fails. I would therefore dismiss the applicant’s application for relief under s 39B entirely.

FINAL CONCLUSION

165    Each proceeding is dismissed with costs.