FEDERAL COURT OF AUSTRALIA

Nguyen v Commissioner of Taxation [2018] FCA 1420

ORDERS

THE COURT ORDERS THAT:

1.    Leave to further amend the applicant's amended notice of appeal filed under r 33.12 of the Federal Court Rules 2011 (Cth) be refused.

2.    Leave to amend the applicant's application under s 39B of the Judiciary Act 1903 (Cth) be refused.

3.    The application under s 39B of the Judiciary Act 1903 (Cth) be dismissed.

4.    The application by way of appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) be dismissed.

5.    The applicant pay the first respondent's costs of the proceeding, to be taxed in default of agreement.

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

REASONS FOR JUDGMENT

KENNY J:

1    The applicant, Ms Hue Thi Nguyen, appeals to this Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) from a decision made on 19 December 2016 by the Administrative Appeals Tribunal. This decision was to affirm the reviewable objection decision made by the Commissioner of Taxation on 20 February 2015, in so far as it disallowed the applicant's objections to amended income tax assessments and penalties for the years ended 30 June 2008, 30 June 2010, 30 June 2011 and 30 June 2012. The Tribunal's decision has the citation Nguyen and Commissioner of Taxation (Taxation) [2016] AATA 1041 (Tribunal reasons).

2    The applicant also proceeds on an application under s 39B of the Judiciary Act 1903 (Cth). This application was heard at the same time as the appeal under s 44 of the AAT Act, and raised the question whether s 14ZZA of the Taxation Administration Act 1953 (Cth) was invalid because, with ss 25 and 43 of the AAT Act, it operated, contrary to the Constitution, to confer the judicial power of the Commonwealth on the Tribunal, which was not a Chapter III court. The applicant also sought to raise this and other issues in the s 44 appeal proceeding, as described below.

3    The applicant gave notice (and later substituted notice) of a constitutional matter under s 78B of the Judiciary Act in both proceedings.

4    For the following reasons, both applications should be dismissed.

Background

5    It seems that in 2012, the Commissioner audited the applicant's taxation affairs for the years ended 30 June 2008 to 30 June 2012. In his reasons for the reviewable objection decision, the Commissioner stated:

The Commissioner reviewed your bank statements and accompanying narratives, mortgage documents, and your casino gambling data. The Commissioner ... determined that there was no obvious explanation for certain deposits in your bank accounts ("unexplained deposits") and certain monetary amounts that you used to buy chips to gamble at casinos ("unexplained cash presented at casinos"). The Commissioner considered these amounts to be assessable. He then compared these amounts to the amounts you reported in your income tax returns and found that you had understated your income by almost $2.5 million over the relevant years. As a result of the audit, the Commissioner adjusted your assessable income. Your taxable income was amended accordingly.

Due to the tax shortfall, the Commissioner imposed administrative penalties for intentional disregard of a taxation law at the rate of 75% for the financial year ended 30 June 2008 and 90% for the financial years ended 30 June 2009 to 30 June 2012.

6    The Commissioner made default assessments for income tax pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) (1936 Act) and issued amended income tax assessments for the 2008 to 2012 income years, to include in the applicant's taxable income amounts representing unexplained deposits into bank accounts controlled by her and unexplained cash presented by her at casinos totalling $2,471,789.

7    The amended assessments for the 2008 to 2010 income tax years were issued to the applicant on 20 March 2014. The Commissioner also imposed administrative penalties.

8    By 20 March 2014, any potentially relevant periods of time specified in s 170(1) of the 1936 Act permitting the Commissioner to amend an assessment had expired. In issuing the amended assessments in this case, the Commissioner relied on the power conferred by item 5 of the table in s 170(1) of the 1936 Act, pursuant to which the Commissioner may amend an assessment at any time if he or she is of the opinion that there has been fraud or evasion. The Commissioner's opinion in the applicant's case that there had been fraud or evasion in relation to the relevant assessments was, therefore, a precondition to the exercise of the Commissioner's power to amend those assessments.

9    The applicant lodged a notice of objection to the amended assessments and penalties, stating, amongst other things, that:

Ms Nguyen does not have any undisclosed source of income, and confirms that she has appropriately declared all of her assessable income as evidenced in the tax returns she lodged for the relevant years. Ms Nguyen is completely innocent of any wrongdoing and strongly rejects the unfounded accusation made against her in the Position Paper. Her position is supported by the fact that there is no evidence whatsoever that she could have possessed any identifiable source of undisclosed income. Ms Nguyen considers she has been mistreated, discriminated and falsely accused by the Responsible Officers.

...

In summary, the Assessments are excessive and the reasoning outlined in the Position Paper [is] incorrect for the following reasons:

(a)    The 'adjustments' made by the Commissioner ... cannot be included as assessable income of Ms Nguyen under section 6-5 of the Income Tax Assessment Act 1997 ... because none of these adjustments relate to ordinary income or statutory income of Ms Nguyen;

(b)    The Commissioner was prohibited from raising any amended assessment against Ms Nguyen for the years ended 30 June 2008, 30 June 2009 and 30 June 2010 under section 170 of the Income Tax Assessment Act 1936 ... because there is no avoidance of tax due to fraud or evasion;

(c)    The Assessments were invalidly issued and were motivated by improper considerations in contravention of Practice Statement PSLA 2007/24; and

(d)    No penalties can be imposed against Ms Nguyen as there is no tax shortfall for any income year, but even if there were any shortfalls ... Ms Nguyen has taken reasonable care in lodging her tax returns and would otherwise be protected by the safe harbour provisions in section 284-75(6) of Schedule 1 to the Taxation Administration Act 1953 ...

10    The applicant's objection was allowed in full for the 2009 income tax year and in part for the 2010 and 2012 income tax years. The objection was disallowed in full for the 2008 and 2011 income tax years.

11    In making his reviewable objection decision, the Commissioner did not consider that the applicant had provided "explanations and evidence that would result in a materially different factual position to that reached ... at audit". Further, in making that decision, the Commissioner stated that he had formed the opinion that there had been fraud and evasion within item 5 of the table in s 170(1), in the income tax years ended 30 June 2008, 30 June 2010, 30 June 2011 and 30 June 2012. The Commissioner said, in summary:

You and/or your tax agent's failure to include the above amounts in your assessable income demonstrates fraudulent and evasive behaviour. We consider that you intentionally omitted the income ... from your tax returns to avoid paying the tax due.

12    The Commissioner concluded that "the omission of income from your income tax returns for the years ended 30 June 2008, 30 June 2010, 30 June 2011, and 30 June 2012 resulted from intentional disregard of a taxation law by you or your agent as to the operation of a taxation law", and that there should be no change in the administrative penalties imposed. The Commissioner imposed a penalty under item 1 in s 284-90(1) of Schedule 1 to the Administration Act at the rate of 75% for intentional disregard of a taxation law for the 2008 income year, and a further penalty at the increased rate of 90% under s 284-220(1)(c) of Schedule 1 to the Administration Act for each of the 2010 to 2012 income years.

13    The applicant applied to the Tribunal for review of the Commissioner's reviewable objection decision in relation to the amended assessments for the 2008 and 2010 to 2012 income tax years, pursuant to s 14ZZ of the Administration Act and ss 25 and 29 of the AAT Act.

The decision of the tribunal

14    The issues as stated (at [7]) by the Tribunal were:

(a)    whether the applicant demonstrated that the post-objection decision amended income tax assessments for the 2008 and 2010 to 2012 income years were excessive by showing the provenance of the deposits and amounts presented to casinos;

(b)    whether the applicant demonstrated that the Commissioner was wrong in forming an opinion that there was fraud and evasion in respect of the 2008 and 2010 income years;

(c)    whether the Tribunal had jurisdiction to determine whether the amended assessments were invalidly issued; and

(d)    whether the penalties were correctly imposed.

15    The Tribunal specifically stated (at [8]) that the applicant had "not agitated remission of penalties".

16    The Tribunal found (at [10]) that the applicant was born in Vietnam and, as at 19 December 2016, had been living in Australia for nine years. As at that date, she was living in Queensland. The Tribunal also found that the applicant had limited education and limited command of the English language and either worked as an employee nail technician in a nail salon or operated her own nail salon and beauty services business in the Brisbane CBD. She frequently gambled at Crown Casino in Queensland, less frequently at the Melbourne Casino, and occasionally at the Perth Casino. She made very short visits to both Melbourne and, while less frequently, Perth.

17    At the hearing before the Tribunal, the applicant sought to establish three sources for the unexplained deposits into her bank accounts and the cash presented at casinos (apart from her earnings as an employee nail technician or sole trader). These sources were: (1) a series of loans from a Mr George Morris totalling $2.555 million; (2) occasional winnings from betting at various casinos; and (3) significant gifts from family members. The applicant relied on the loans from Mr Morris to explain the majority of the funds deposited by her into her bank accounts or presented by her at the casinos: see Tribunal reasons at [13], [5]. The applicant also relied on evidence given by a friend, Ms Hang Nguyen, who loaned her sums of money, but (so the Tribunal found) not sufficient to explain the amounts identified by the Commissioner: see Tribunal reasons at [9].

18    The Tribunal noted (at [12]) that the "facts of the deposits to the [a]pplicant's bank accounts, and the cash presented to the Casinos are not disputed". The Tribunal held that:

(1)    none of the content of the statutory declaration made by Mr Morris (and received into evidence) could be accepted as proven or true, and that the applicant was left with an "uncorroborated assertion of an improbable source of funds to explain the majority of the bank deposits and amounts produced at casinos" (at [16]-[17]);

(2)    accepting that not all of the applicant's gambling activities were transacted through the casinos' personal gambling record facilities, there was no evidence that corroborated the provenance of all of the amounts presented to casinos that the Commissioner had relied on in making the amended assessments (at [18]);

(3)    the Department of Immigration's records did not support the applicant's contentions concerning the unverified gifts from family members (at [19]); and

(4)    there was evidence of amounts loaned to the applicant by Ms Hang Nguyen but not in the amounts required to account for the unexplained money (at [20]).

19    The Tribunal therefore held (at [21], [28]) that the applicant had failed to demonstrate the character of the sources of money available to her; and that the applicant had failed to discharge her burden under s 14ZZK(b)(i) of the Administration Act of showing that the amended assessments were excessive. In reaching this conclusion, the Tribunal stated:

[27]    In cases where the burden of proving an assessment is in issue, two things are possible: first it may be the case that the amount of the assessment made by the Commissioner may not be the true taxable income and tax payable determined by applying the Assessment Acts to the taxpayer's circumstances if adequate proofs were available, and, second, a taxpayer may well be giving an honest account in his, her or its evidence, but the evidence does not demonstrate that the assessment is excessive in the requisite sense.

20    In relation to the Commissioner's reliance on item 5 of the table in s 170(1) of the 1936 Act, the Tribunal did not accept the applicant's submission (noted at [29(m)] of the Tribunal reasons) that "a failure to discharge the burden under s 14ZZK of proving an assessment is excessive does not equate with a failure to discharge the burden of proving there was no fraud or evasion or, in relation to penalties, that there was no intentional disregard of a taxation law".

21    With respect to the issue of fraud or evasion, the Tribunal relied on the decision of the Full Court of this Court in Binetter v Commissioner of Taxation [2016] FCAFC 163; 249 FCR 534, on the basis of which the Tribunal concluded:

[34]    Provided the Commissioner has formed the requisite opinion, in an income case, the effect of the Binneter decision, and those on which it is based, may well be to make a fraud or evasion finding unchallengeable independently of the challenge to the assessability of the relevant amount. If that is so that is not a matter that the Tribunal can alter. Thus the Applicant's contention at paragraph [29(m)] above, in the present circumstances, and notwithstanding the possibility noted at paragraph [27] above, cannot be accepted.

[35]    Where the character of an amount remains unestablished, the taxpayer has not proven the amount is not assessable, [and] it is difficult, if not impossible to:

(a)    form any view as to the level of shortcoming, if there be one;

(b)    form a view as to whether there has been an innocent mistake or a blameworthy act; and

(c)    say that the taxpayer has demonstrated that there was not fraud or evasion.

22    With respect to penalty, the Tribunal held (at [38]) that "[t]he considerations concerning the approach to challenging the fraud or evasion opinion apply to the penalty imposition". The Tribunal stated that:

[38]    … The failure to demonstrate that the amounts were not assessable as income means the level of seriousness of any shortcoming has not been established and whether there was reasonable care or otherwise, or more serious shortcomings have not been established or disproven as the case may be. Similarly, whether the safe harbor rules apply has not been established.

[39]    Again, in an income case this may make the penalty unchallengeable independently of the substantive assessment challenge. Again, if that is so, it is not something the Tribunal can alter.

23    Accordingly, the Tribunal affirmed the decision under review.

The proposed further amended section 44 notice of appeal

24    The applicant filed an amended notice of appeal under s 44 of the AAT Act on 26 July 2017, with leave, pursuant to orders made on 13 and 21 July 2017. The applicant also sought leave to file a further amended notice of appeal dated 14 July 2017.

25    The further amended notice of appeal sets out the following questions of law raised, or sought to be raised, on the statutory appeal:

Years ended 30 June 2008 and 2010

1.    Was the Tribunal required to re-form, or alternatively adopt as its own, the purported fraud or evasion opinion that the Commissioner purportedly formed under s 170 (1) Item 5 of the Income Tax Assessment Act 1936 (Cth) ("ITAA36") ("the Purported Fraud or Evasion Opinion") prior to affirming the amended assessments for the years ended 30 June 2008 and 2010?

2.    Was the Commissioner Respondent required to duly assist the Tribunal by tendering before the Tribunal a copy of the Purported Fraud or Evasion Opinion pursuant to s 33(1AA) and/or s 37 of the Administrative Appeals Tribunal Act 1975 (Cth) ("AATA") and Wei v Minister for Immigration and Border Protection [2015] HCA 51 which included evidence or reasoning as to why the Respondent considered bank deposits not reported as income amounted to in his opinion to income that had been omitted in circumstances that amounted to dishonesty as to fraud or evasion, which was necessary so that the purported opinion met the statutory criterion in s. 170(1) Item 5.

3.    Further and in the alternative to Questions 1 & 2, did the Tribunal fail to exercise jurisdiction, and or fail to provide procedural fairness to the Applicant, or fall into jurisdictional error, in relation to:

a.    Failing to determine whether the Tribunal should either reform or alternatively adopt as its own, the Purported Fraud or Evasion Opinion?

b.    Failing to determine whether the Tribunal should reform or refuse to reform the Purported Fraud or Evasion Opinion having regard to the changed circumstances that occurred as a result of matters being allowed at objection by the Commissioner since the original Purported Fraud or Evasion Opinion had been formed?

c.    If Binetter be correctly decided (which is denied), failing to identify the constituent legal elements of fraud and of evasion, including mens rea, and making findings as to each of those elements, determine whether the Applicant had "disproved fraud or evasion" having regard to the evidence adduced by the Applicant, the lack of evidence adduced by the Respondent, and detailed submissions of the Applicant, before concluding that the Applicant had failed to disprove fraud or evasion?

cc.    If Binetter be correctly decided (which is denied), pursuant to the requirement of Binetter at [81] and [93], failing to review and decide the Applicant's ground of objection that the Commissioner had amended the assessments without forming an opinion in lawful compliance with s. 170(1) Item 5 ITAA36?

d.    Further to the parallel s. 39B Judiciary Act 1903 (Cth) application, if Binetter be correctly decided (which is denied), is the Decision infected with jurisdictional error or void at law because the Tribunal in following Binetter at [93] did not re-exercise its discretion to form the fraud or evasion opinion as a further administrative decision maker in the Chapter II Executive hierarchy but instead was impermissibly exercising Chapter III judicial power contrary to ss 71 and 72 of the Constitution because:

i.    As distinct from re-exercising an administrative function of re-determining the Purported Fraud or Evasion Opinion, Binetter commanded the Tribunal that it "must affirm the amended assessments" unless the Applicant proved that there was no requisite opinion or, if there was, "disproved fraud or evasion", and thereby sit in judgment on the Respondent's own findings rather than making its own; and

ii.    Morphed what was a subjective Purported Fraud or Evasion Opinion pursuant to s. 170(1) Item 5 ITAA36 in the hands of the Respondent into a purported finding of objective fact (i.e. whether or not the Applicant had disproved fraud and evasion) such that the Chapter III Court on a s. 44 AATA "appeal" ceased to be able to examine the subjective Purported Fraud or Evasion Opinion that was the constitutive element of increased liability.

e.    Do the jurisdictional errors as to the Decision being procedurally unfair, amounting to failure to exercise jurisdiction, or amounting to jurisdictional error set out above extend more generally to the Tribunal's failure to make factual findings of its own on other issues.

3A.    [Arising as an [sic] necessary consideration of questions and grounds 1 and 3] Did the Purported Fraud or Evasion Opinion answer the statutory requirement of s. 170(1) Item 5 ITAA36?

Years ended 30 June 2011 and 2012

4.    Did the Tribunal fail to weigh up all the evidence supporting the contentions of the Applicant as required by the decision of Haritos v Commissioner of Taxation [2015] FCAFC 92 ("Haritos")?

5.    Further and in addition to Question 4, Did the Tribunal fail to exercise jurisdiction, and or fail to provide procedural fairness to the Applicant by:

a.    failing to give due weight to the evidence of the Applicant, Ms Hue Thi Nguyen and written material tendered on the Applicant's behalf?

b.    Failing to make a credit assessment as to the Applicant and or Ms Hue Thi Nguyen prior to discounting their evidence?

6.    Was the Commissioner required to duly assist the Tribunal by tendering before the Tribunal further relevant probative evidence and documents documenting knowledge in his position as to the inherent unreliability of casino records, particularly pertaining to casino deposits and or the redeposit of winnings, pursuant to s 33(1AA) of the Administrative Appeals Tribunal Act 1975 ("Cth") (AATA") and Wei v Minister for Immigration and Border Protection [2015] HCA 51?

7.    Did the Tribunal fail to exercise jurisdiction, or commit jurisdictional error by failing to re-exercise the Commissioner's discretion to remit penalties pursuant to s. 298-20 Schedule 1 Taxation Administration Act 1953 (Cth)?

26    The grounds of the appeal, including the proposed grounds, reflected these questions. Having regard to the applicant's written and oral submissions, it would also appear that, in ground 5(b) above, the applicant intended to refer not only to herself but also to Ms Hang Nguyen. The inclusion of 'Ms Hue Thi Nguyen' (the applicant's name) rather than 'Ms Hang Nguyen' was in error.

27    The underlined paragraphs identify proposed new questions of law raised by the applicant for which leave is still required. The Commissioner opposed those amendments, as discussed hereafter. The struck-through paragraphs are the questions of law that the applicant abandoned. Any remaining questions of leave and merit were argued at the hearing, on the basis that they would be addressed by the Court in these reasons for judgment.

The proposed amended section 39B application

28    The applicant's s 39B application originally sought orders in the nature of writs of certiorari, prohibition, and mandamus, on the basis that, if Binetter were correctly decided, then s 14ZZA of the Administration Act invalidly conferred the judicial power of the Commonwealth on the Tribunal, contrary to ss 71 and 72 of the Constitution.

29    By amendments proposed by a document filed on 18 July 2017, the applicant sought leave to amend her s 39B application so as to raise new grounds. The proposed paragraphs 4 to 6, in respect of which the applicant sought leave, were in the following terms:

4.    An order that the Purported Fraud or Evasion Opinion tendered to the Tribunal as described in the Statement of Claim be declared to be void and of no effect and an order in the nature of a writ of prohibition directed to the First Respondent prohibiting it from acting in purported reliance of the Purported Fraud or Evasion Opinion and forming any further Purported Fraud or Evasion Opinion for the years ended 30 June 2008 and 30 June 2010 without the leave of the Honourable Court.

5.    An order that the purported amended assessments for the years ended 30 June 2008 and 30 June 2010 issued in purported reliance of the power contained in s 170(1) Item 5 Income Tax Assessment Act 1936 ("ITAA36") as described in the Statement of Claim be declared to be excessive as that term is understood in ss 14ZZK and 14ZZO of the Taxation Administration Act 1953 (Cth) and a writ in the nature of prohibition issue against the First Respondent from acting in purported reliance upon the purported amended assessments for the years ended 30 June 2008 and 30 June 2010.

6.    Alternative to 5, an order that the purported amended assessments for the years ended 30 June 2008 and 30 June 2010 issued in purported reliance of the power contained in s 170(1) Item 5 ITAA36 as described in the Statement of Claim be declared to be without power and void and of no effect and must be declared as such and a writ in the nature of prohibition issue against the First Respondent from acting in purported reliance upon the purported amended assessments for the years ended 30 June 2008 and 30 June 2010.

The Commissioner opposed the grant of leave to amend on the basis that the proposed amendments were doomed to fail.

30    The questions of leave and of merit were argued at the hearing, on the basis that they would be addressed by the Court subsequently.

Legislation

31    In order to understand the parties' submissions, it is necessary to keep in mind the terms of the legislative provisions on which the parties principally relied.

32    Section 175A(1) of the 1936 Act provided that:

A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.

33    Section 14ZL, in Part IVC of the Administration Act, provided that:

(1)    This Part applies if a provision of an Act or of regulations (including the provision as applied by another Act) provides that a person who is dissatisfied with an assessment, determination, notice or decision, or with a failure to make a private ruling, may object against it in the manner set out in this Part.

(2)    Such an objection is in this Part called a taxation objection.

34    Section 14ZY(1) relevantly stated that, if the taxation objection has been lodged with the Commissioner within the required period, the Commissioner must decide whether to allow it, wholly or in part, or disallow it. This gave rise to an objection decision: see s 14ZY(2).

35    Section 14ZZ(1) of the Administration Act relevantly provided that, if dissatisfied with the Commissioner's objection decision, the taxpayer may:

(a)    if the decision is a reviewable objection decision – either:

(i)    apply to the Tribunal for review of the decision; or

(ii)    appeal to the Federal Court against the decision; or

(b)    otherwise – appeal to the Federal Court against the decision.

36    Pursuant to s 14ZZA, the AAT Act applied in relation to, relevantly, the review of reviewable objection decisions, subject to the modifications set out in Division 4 of Part IVC of the Administration Act. That Division contained numerous provisions modifying the AAT Act.

37    Within Division 4 of Part IVC, s 14ZZK relevantly provided that:

On an application for review of a reviewable objection decision:

(a)    the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and

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

(i)    if the taxation decision concerned is an assessment …—that the assessment is excessive; or

(ii)    …

(iii)    in any other case—the taxation decision concerned should not have been made or should have been made differently.

38    Section 14ZZL of the Administration Act further provided:

(1)    When the decision of the Tribunal on the review of a reviewable objection decision or an extension of time refusal decision becomes final, the Commissioner must, within 60 days, take such action, including amending any assessment or determination concerned, as is necessary to give effect to the decision.

(2)    For the purposes of subsection (1), if no appeal is lodged against the Tribunal's decision within the period for lodging an appeal, the decision becomes final at the end of the period.

39    Section 25(1) of the AAT Act provided that:

An enactment may provide that applications may be made to the Tribunal:

(a)    for review of decisions made in the exercise of powers conferred by that enactment; or

(b)    for the review of decisions made in the exercise of powers conferred, or that may be conferred, by another enactment having effect under that enactment.

40    Section 43 of the AAT Act further provided:

(1)    For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:

(a)    affirming the decision under review; or

(b)    varying the decision under review; or

(c)    setting aside the decision under review and:

(i)    making a decision in substitution for the decision so set aside; or

(ii)    remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal.

…

(6)    A decision of a person as varied by the Tribunal, or a decision made by the Tribunal in substitution for the decision of a person, shall, for all purposes (other than the purposes of applications to the Tribunal for a review or of appeals in accordance with section 44), be deemed to be a decision of that person and, upon the coming into operation of the decision of the Tribunal, unless the Tribunal otherwise orders, has effect, or shall be deemed to have had effect, on and from the day on which the decision under review has or had effect.

Applicant's submissions

41    The applicant filed a number of versions of its principal written submissions in support of its appeal under s 44 of the AAT Act, the final version being the "Applicant's Amended Substituted Submissions". In the s 39B proceeding, the applicant relied on a document entitled amended statement of claim, which was treated as the applicant's submissions in support of the amended s 39B application.

42    The applicant also filed "Reply Submissions to Respondent at hearing", which were the same in both the s 44 appeal and the s 39B proceeding. These submissions were filed after the hearing.

43    At an earlier date, the applicant filed submissions in the s 44 appeal and in the s 39B proceeding on "(i) application to amend s 44 AAT Act grounds of appeal and (ii) section 39B Judiciary Act application". These submissions were largely overtaken by the applicant's subsequent amended submissions and submissions in reply.

44    Senior counsel for the applicant made further detailed submissions at the hearing, directed to the questions raised or sought to be raised by the applicant in the proceedings. The principal parts of the applicant's submissions are summarised below, by reference to the questions in the amended notice of appeal in the proceeding brought under s 44 of the AAT Act: see [25] above. Matters sought to be raised by amendment are touched upon from time to time, but are mostly separately discussed from [193] and following.

45    The applicant's submissions were lengthy and detailed and, in consequence, the summary is longer than it should be and yet it is necessarily incomplete.

Question 1 – years ended 30 June 2008 and 30 June 2010

46    With respect to question 1 of the further amended notice of appeal, whether or not the Tribunal was "required to re-form, or alternatively adopt as its own, the purported fraud or evasion opinion", the applicant contended that the Tribunal's function was to "make its own discretionary judgments to create the constitutive elements of liability, not to judge the Commissioner's discretionary judgments". Citing British Imperial Oil Co Ltd v Federal Commissioner of Taxation [1925] HCA 4; 35 CLR 422, Barripp v Commissioner of Taxation (1940) 41 SR (NSW) 16 at 25, Rowdell Pty Limited v Federal Commissioner of Taxation [1963] HCA 61; 111 CLR 106, Mobil Oil Australia Pty Ltd v Commissioner of Taxation [1963] HCA 41; 113 CLR 475, and Shi v Migration Agents Registration Authority [2008] HCA 31; 235 CLR 286, the applicant submitted that the Tribunal had erroneously concluded that it ought not make its own appraisal about fraud or evasion.

47    In reply submissions, the applicant contended that before Binetter, the Tribunal was required to do what the Board of Review (the predecessor to the AAT) had been required to do. The applicant acknowledged that Binetter stood as authority against her.

48    Senior counsel for the applicant submitted that Binetter erroneously held that the Tribunal was not required to form its own opinion on the issue of fraud or evasion. It was said that Binetter created a situation in which "a subjective opinion ... of the Commissioner morphs into an objective fact … such that the Tribunal is impermissibly exercising judicial power by being the final determining authority on the validity of the subjective fraud and evasion opinion". Citing Moreau v Federal Commissioner of Taxation [1926] HCA 28; 39 CLR 65, Jolly v Federal Commissioner of Taxation [1935] HCA 21; 53 CLR 206, McAndrew v Federal Commissioner of Taxation [1956] HCA 62; 98 CLR 263, and Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21; 197 CLR 611, it was submitted that Binetter at [92]-[93] was "manifestly, i.e. on its face, wrong".

49    Further, so it was submitted, Binetter was contrary to Krew v Federal Commissioner of Taxation (1971) 2 ATR 230; 45 ALJR 324, which had been accepted as correct by Gibbs J in McCormack v Federal Commissioner of Taxation [1979] HCA 18; 143 CLR 284 and applied by the Full Court of this Court in Copperart Pty Ltd v Commissioner of Taxation [1994] FCA 216; 50 FCR 345 at 352 (applied in Revlon Manufacturing Ltd v Commissioner of Taxation (1995) 63 FCR 535) and in Saffron v Commissioner of Taxation (1994) 27 ATR 59; 94 ATC 4049. The applicant noted that neither Copperart nor Saffron was mentioned by the Full Court in Binetter. Nor, for that matter, was Revlon. As a consequence, so the applicant argued, Binetter "inadvertently sub-silentio overrode Krew and its application in Copperart and Saffron".

50    The applicant also contended that Binetter "sub-silentio overrode a very long list of authorities of the High Court stating that it was the role of the Review Board to exercise only the powers of the Commissioner and determine for itself whether it could reform the opinion as to fraud or evasion". The applicant cited various authorities including Moreau, Barripp, Mobil Oil, British Imperial Oil at 438-439 (Isaacs J), Shell Company of Australia Limited v Federal Commissioner of Taxation [1930] UKPCHCA 1; 44 CLR 530 at 543, 545, and Denver Chemical Manufacturing Co v Commissioner of Taxation (NSW) [1949] HCA 25; 79 CLR 296 at 310-311 (Dixon J), 316-317 (Williams J).

51    The applicant contended that s 14ZZK did not, as Binetter at [89]-[95] suggested, "mark a fundamental change or modification to the duties of" the Tribunal. In this regard, senior counsel for the applicant referred to s 39 of the Income Tax Assessment Act 1922 (Cth) (1922 Act), s 190 of the 1936 Act, and McAndrew, Danmark Pty Ltd v Federal Commissioner of Taxation (1944) 2 AITR 517; 7 ATD 333 and George v Federal Commissioner of Taxation [1952] HCA 21; 86 CLR 183.

52    Further, the applicant contended that Binetter at [92]-[93] made the Commissioner's subjective opinion "unchallengeable", because Binetter placed the "contestation of a s 170(1) Item 5 ITAA36 opinion outside the ratio" in Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32; 237 CLR 146 (Futuris) at [9]-[10]. In her reply submissions, the applicant submitted that "[i]t is illogical to suggest, as the Commissioner does, that a taxpayer could succeed before the [Tribunal] by proving that no opinion in fact exists, yet fail after showing the [Tribunal] that an existing opinion was unlawful. The [Tribunal] would be in error to have regard to a legal nullity".

53    Senior counsel for the applicant submitted that if Binetter was wrong, then the Tribunal would be obliged to make its own factual findings and exercise its own discretionary judgment in substitution for that of the Commissioner; and no constitutional issue (as outlined below) would arise.

54    In the alternative, the applicant submitted that if Binetter was correct, then "this altered function of the Tribunal violates ss 71 and 72 of the Constitution". The applicant continued:

The further consequence is that an appeal under s 44 AAT Act is bad and this Court's only jurisdiction is to declare it to be bad: British Imperial Oil. This leaves the Tribunal's duty to review unexercised.

The appropriate relief, given that there was no factual basis for the Commissioner's opinion, is to restore the applicant's original assessments: Minister of National Revenue v. Wrights' Canadian Ropes Ltd. (1947) AC 109, particularly at 122 ff.

(It may be noted that the issue as to whether Binetter entailed the Tribunal invalidly exercising the judicial power of the Commonwealth was directly raised by question 3(d) of the further amended notice of appeal and the s 39B application, but it is convenient to refer to the applicant's submissions at this point.)

55    In reply submissions, the applicant said:

[6]    The [Tribunal], following Binetter, deliberately did not exercise the s 170 ITAA36 discretionary power or find facts. It decided that the applicant had not disproved either the fact of evasion or that receipts asserted to be ordinary income were not ordinary income. It was required to, and did, affirm a pre-existing liability to be accurate.

[7]    This (new) adjudicative process violates ss 71 and 72 of the Constitution.

[8]    The Court consequently has no jurisdiction under s 44 AAT Act to hear any question of law. The [Tribunal] must reconsider the application without the s 14ZZK ... modification.

[9]    Further and in addition thereto, the matter must be remitted to the [Tribunal] to make findings of fact and of credit, and to consider the remission discretion in s 298-20 in schedule 1 [to the Administration Act].

...

[43]    The fundamental point relevant to judicial power is that a jurisdictional fact is one laid down by the statute, not one asserted by the Commissioner. No constitutional difficulty arises where the [Tribunal] makes finding[s] [of] pure facts and determines if they displace the statute; it is creating liability by addressing that question. It then reaches the conclusion whether the assessment made by the Commissioner is excessive.

[44]    But it is Constitutionally impermissible for the [Tribunal] to sit in judgment on the Commissioner's determination of pure fact, being required to adjudicate whether that fact has been disproved. If that is what Millar [v Commissioner of Taxation [2015] FCA 1104] now requires, then there is a violation of ss 71 and 72 of the Constitution.

56    At the hearing, the applicant's senior counsel contended that the Tribunal was exercising judicial power, first, because the Tribunal was "sitting in judgment on the existing tax liability determined by the Commissioner". This was the result, he said, of the modifications to ss 25 and 43 of the AAT Act made by s 14ZZA of the Administration Act, as interpreted by the Court in Binetter. He developed this contention by reference to Isaacs J's analyses in British Imperial Oil at 435-436, 439-440 and Federal Commissioner of Taxation v Munro [1926] HCA 58; 38 CLR 153 at 172, 175, 181-183 and Kitto J's statements in Mobil Oil at 502-503. Secondly, so senior counsel submitted, the Tribunal in this case was not making its own findings of fact and substituting its own discretionary judgments as the "statutory constitutive elements of liability". Thirdly, referring to Shi and to the discussion of judicial power in Brandy v Human Rights and Equal Opportunity Commission [1995] HCA 10; 183 CLR 245 at 267-269, senior counsel contended that, in contrast to the Commissioner's objection decision, the Tribunal's decision "is final as between the parties, subject only to an appeal [under s 44 of the AAT Act], and also final and conclusive as to the facts on any appeal" and "enforceable against the Commissioner or against the taxpayer". Senior counsel contended that:

[O]nce the Tribunal has decided that the taxpayer has disproved fraud or decided that the taxpayer has not disproved fraud, there is a final binding and conclusive decision confirming or denying the asserted right, the right that the Commissioner asserts on behalf of the Commonwealth to tax; and that money award is enforceable because the Commissioner must, under s 14ZZL, issue an amended assessment to give effect to that judgment. And by force of s 177, and now s 350–10, a Supreme Court must accept that as conclusive evidence of the taxpayer's liability to the Commonwealth or entitlement to money.

57    The result was, according to senior counsel, that the "combination of factors is representative of an exercise of judicial power". He concluded that:

[I]t's constitutionally necessary, if Ms Nguyen is to have an increased liability imposed upon her, for the Tribunal itself to impose that liability, for the Tribunal itself to form its own opinion but the structure of Part IVC and ss 25 and 43 of the AAT Act now limit the function or alter the function to a judgment of whether the existing liability imposed by the Commissioner – by his opinion – is accurate or inaccurate and to limit the Tribunal's function in this way, to treat the taxpayer as having to either show that the opinion was intrinsically wrong or legally wrong is to cause it to exercise judicial power.

Since, on his argument, the Tribunal's decision was no decision at all, then, so senior counsel said, the jurisdiction of this Court under s 44 of the AAT Act was not "itself enlivened".

58    Notwithstanding that the applicant argued in detail that Binetter was wrongly decided and relevantly led to constitutional invalidity, the applicant ultimately accepted that a single judge exercising the Court's original jurisdiction was required to "follow Binetter and Millar [v Commissioner of Taxation [2015] FCA 1104; 67 AAR 490] as to the modifying effect that s 14ZZK [of the Administration Act] ha[d] on ss 25 and 43 [of the] AAT Act". The applicant added in her reply submissions:

Only a Full Court can resolve any conflict with how Copperart and Revlon decided the same issue. This Court cannot decide that the Full Court's decision is per incuriam and not follow it. The applicant does not ask it to do so. It may properly provide obiter dicta.

Conversely, this Court must also follow Copperart and Revlon to decide that the s 14ZZK modification places the [Tribunal] in materially the same position as the Court, rather than the Commissioner, and so violates ss 71 and 72 of the Constitution.

The applicant submitted, however, that it was "appropriate now that this Court by way of obiter for the benefit of the Full Court give full consideration to the Applicant's submission that the decision in Binetter is manifestly and in principle incorrect".

59    Further, with respect to question 1, citing McDonald v Commissioner of Business Franchises [1992] HCA 59; 175 CLR 472, the applicant contended that "[t]he absence of a Fraud and Evasion opinion which contained particulars as to the purported fraud or evasion so as to meet the statutory requirements of s 170(1) Item 5 ITAA36 in the hands of the Tribunal ... means such an amended assessment is without power and therefore excessive". The applicant relied on the statement at [30] of the Tribunal reasons that "[t]his is not a case where the Commissioner has pointed to a particular behaviour and asserted that that constitutes fraud or evasion". The applicant submitted that the Tribunal wrongly failed to "reform the purported Fraud or Evasion Opinion taking into account the changed circumstances and additional evidence placed before it ... (including, but not limited to, the Commissioner's abandonment of the factual particulars for the year ended 30 June 2009)".

60    The applicant submitted that, following Binetter, the Court must review the Commissioner's original particularised opinion "for validity if that were a ground of objection". It was further submitted that the Court should find that the Commissioner's opinion was invalid in law such that the s 170 power to amend did not exist, and that the power was not enlivened by any substituted opinion of the Tribunal. Citing Denver Chemical and Avon Downs Pty Ltd v Federal Commissioner of Taxation [1949] HCA 26; 78 CLR 353, the Commissioner's opinion was to be reviewed, so the applicant said, by reference to the reasons given for the opinion and the evidence said to support it. It was contended that the opinion was not in conformity with s 170 of the 1936 Act because the Commissioner did not address himself to the statutory question posed by that provision. It was further submitted that the reasons given by the Commissioner disclosed an incorrect understanding of the meaning of fraud and of evasion as set out in Denver Chemical and the applicant's grounds of objection. The applicant submitted, citing Minister of National Revenue v Wrights' Canadian Ropes Ltd [1947] AC 109, that the failure to refer to any evidence to support the opinion carried "the necessary implication" that there was none. The result was, so the applicant said, that the applicant had proved that her amended assessments were excessive.

61    Finally, the applicant contended that, even if Binetter was correct, the question before the Tribunal was whether the applicant had "disproved fraud or evasion"; and there were detailed submissions before it on this issue. The applicant submitted that the Tribunal's failure to make any findings of fact that would have allowed it to reach any conclusion as to whether the applicant had shown that she was not guilty of fraud or evasion was a failure to exercise jurisdiction.

Question 2 – years ended 30 June 2008 and 30 June 2010

62    As will be seen at [25] above, the applicant abandoned this question and its corresponding ground.

Question 3 – years ended 30 June 2008 and 30 June 2010

63    Leaving aside the proposed amendment in paragraph (cc), whether or not the Tribunal failed to exercise its jurisdiction, failed to provide procedural fairness, or fell into jurisdictional error in terms of question 3 substantially involved the same arguments as those advanced by the applicant in relation to question 1.

Questions 4 and 5 – years ended 30 June 2011 and 30 June 2012

64    The applicant addressed both questions 4 and 5 together: see [25] above. These were the questions whether the Tribunal had failed to weigh up all of the applicant's evidence as it was required to do; and whether it failed to exercise its jurisdiction and/or failed to provide the applicant with procedural fairness by failing to give "due weight" to the evidence of the applicant, Ms Hue Thi Nguyen, and failing to make "a credit assessment" of the applicant and Ms Hang Nguyen before "discounting" their evidence.

65    In written submissions, regarding the 2011 and 2012 income years, the applicant contended that:

[T]here appears to be cross-pollination in the [Tribunal's] decision of the application of Binetter into the reasons at [17]-[21]. If any of Grounds 1 to 3 are allowed, then due to this risk, which is submitted there is a serious risk of, then the years ended 30 June 2011 and 30 June 2012 must be remitted to the Tribunal for redetermination.

66    The applicant further contended that, so far as the 2011 and 2012 income years were concerned, her contentions in support of her objections (as set out in the Tribunal reasons at [5](a) and (b)) were relevant, namely:

(a)    the adjustments made by the Commissioner were not amounts of the Applicant's assessable income because they were not ordinary or statutory income;

(b)    the deposits to the Applicant's bank accounts and any cash held were attributable to:

(i)    significant gifts from family members;

(ii)    significant loans from her friend, George Morris;

(iii)    occasional wins from betting at various casinos; and

(iv)    income from working as a beauty therapist as an employee, and a sole trader.

67    The applicant contended that "contrary or in addition to what the Tribunal did at Tribunal reasons [17]-[21], the Tribunal was required to weigh up the evidence of the Applicant and Ms Hang Nguyen", in accordance with Haritos v Commissioner of Taxation [2015] FCAFC 92; 233 FCR 315 at [233]-[234] and Tisdall v Webber [2011] FCAFC 76; 193 FCR 260 at [30], [83], [132]. The applicant submitted that the Tribunal did not discharge this obligation because:

a.    The Tribunal did not weigh up the evidence of the Applicant and Ms Hang Nguyen as a whole ...

b.    The Tribunal did not make an assessment as to the credibility of the Applicant and Ms Hang Nguyen, as it was required to do, before rejecting the explanation provided [by] the Applicant ...

c.    As a result, the Tribunal did not weigh up in the s 14ZZK ... review whether on the balance of probabilities … the Applicant had established that the amount[s] she contended were not income, were indeed … not income, such that if established she would have met the burden of s 14ZZK ...

68    The applicant further submitted that these errors were "a manifestation of the judicial power that the Tribunal has exercised as a result of s 14ZZK['s] ... modifying effect on its duties and powers under ss 25 and 43 [of the] AAT Act".

69    Also in her reply submissions, the applicant argued that:

The [Tribunal] wrongly addressed the question of whether Ms Nguyen had disproved what the Commissioner asserted was her ordinary income.

Although cash was found to have been received, it would be an error of law to treat that cash as income per se.

But if the Tribunal (i) finds an accumulation of wealth and (ii) only a partial explanation, then it is open to it to make findings that the cash was derived [from] an income source, unless (iii) it makes findings that the taxpayer is honest, has disclosed all income sources, and genuinely is mistaken as to her explanation. But it must make those findings. It did not.

70    In support of the latter argument, the applicant contended that the present case was different to McCormack because, in that case, s 26(a) of the 1936 Act directly brought into a taxpayer's "assessable income" a gain made from the sale of an asset if acquired for the dominant purpose of sale and, in that context, the relevant jurisdictional fact was merely the taxpayer's purpose. Hence, so the applicant said, "the taxpayer was not required to disprove the Commissioner's assertion of purpose, but to prove that his purpose was outside the section. He had to adduce evidence of his purpose so that finding could be made."

71    Further, at the hearing, senior counsel for the applicant submitted:

Krew's case requires the Tribunal to find the facts, despite not being fully satisfied with everything the taxpayer has said and the Tribunal didn't do that ... [W]e say the Tribunal should never have been drawn in to a starting point that everything the Commissioner asserted was income was in fact income. The Commissioner never – there was never any evidence that any amounts were income. The Tribunal's function was to work out whether the taxpayer had shown what her actual taxable income was, not to start with an assertion of the Commissioner that all these receipts are income and are evaded income.

Question 6 – years ended 30 June 2011 and 30 June 2012

72    As will be seen at [25] above, the applicant abandoned this question and its corresponding ground.

Question 7 – years ended 30 June 2011 and 30 June 2012

73    The applicant contended that the Tribunal failed to exercise jurisdiction, or committed jurisdictional error, by failing to re-exercise the Commissioner's discretion to remit penalties pursuant to s 298-20 of Schedule 1 to the Administration Act.

74    The applicant contended that the Tribunal's role did not end with ascertaining the proper base penalty. Rather, the Tribunal had the power to determine whether, in the Tribunal's unfettered discretion, the penalty should be remitted in whole or in part. Citing Jolly at 213-215 (Rich and Dixon JJ) and Rowdell, the applicant submitted that the Tribunal erred in not exercising this power, having regard to the applicant's notice of objection at [167] and closing submissions at [72].

75    At the hearing, senior counsel for the applicant stated:

[I]f all the arguments that we make are determined to be wrong and the taxpayer is left in a situation where the Commissioner has not suggested any positive culpability on her part, but she can't prove that she is innocent, then we say that is a powerful ground for a ... favourable remission discretion because the Tribunal, despite the Commissioner and all his resources, has not been able to itself make any actual findings of culpability and her liability to penalties only arises by operation of [s] 14ZZK.

Senior counsel further submitted that the Tribunal was in error when it said that the applicant had not "agitated the remission of penalties", because the applicant had in fact submitted to the Tribunal (at [107] of her closing submissions) that the penalty imposed as a result of the apparent tax shortfall lacked any substantial or reasonable basis and should be remitted in full. An oral submission was also made at the hearing that "the penalty component ... should be remitted". If the Court accepted that the Tribunal wrongly failed to consider the question of remission, then senior counsel submitted that the matter ought to be remitted to the Tribunal for its consideration.

76    In her reply submissions, the applicant contended:

The respondent's submissions incorrectly treat the issue of remission under s 298‐20 as narrow and separate from the broad matters which inform substantive liability under Division 284. That submission was rejected by the Full Court in Sanctuary Lakes [Pty Ltd v Commissioner of Taxation [2013] FCAFC 50; 212 FCR 483], a case to which the applicant directed the [Tribunal's] attention in her objection.

Moreover, as the respondent points out, he drew the applicant's attention by way of footnote in his SFIC to the fact that her SFIC did not repeat her ground of objection.

The applicant corrected that omission in her subsequent written and oral submissions. Thus the issue of remission under s 298-20 in accordance with the law as set out in Sanctuary Lakes was squarely before the [Tribunal].

The Commissioner's submissions

77    The Commissioner filed an outline of written submissions dated 30 June 2017. These submissions were necessarily confined to the issues raised by the applicant as at that date. The Commissioner also filed an outline of written submissions dated 19 July 2017, directed to the applicant's contention that, by applying Binetter, the Tribunal invalidly exercised the judicial power of the Commonwealth. These submissions were augmented by counsel for the Commissioner at the hearing.

Question 1 – years ended 30 June 2008 and 30 June 2010; Question 3 – years ended 30 June 2008 and 30 June 2010

78    In relation to the Commissioner's fraud and evasion opinion, the Commissioner submitted that there were three issues:

    Issue 1: whether the Tribunal was required to re-form or adopt the opinion formed by the Commissioner as to fraud and evasion, including whether the Tribunal erred by failing to determine if it was required to adopt or re-form the Commissioner's opinion;

    Issue 2: whether, by applying Binetter, the Tribunal was exercising the judicial power of the Commonwealth; and

    Issue 3: assuming Binetter is correct, whether the Tribunal erred in its approach when concluding that the applicant failed to disprove fraud or evasion.

79    The Commissioner identified a fourth potential issue, as raised by the applicant's leave to amend application:

    Issue 4: whether the Tribunal failed to review and decide the applicant's objection that the Commissioner had amended assessments without forming an opinion in lawful compliance with item 5 of the table in s 170(1) of the 1936 Act.

Issue 1: whether the Tribunal was required to re-form or adopt the opinion formed by the Commissioner as to fraud and evasion, including whether the Tribunal erred by failing to determine if it was required to adopt or re-form the Commissioner's opinion

80    As counsel for the Commissioner observed, a difficulty with the applicant's first question and the corresponding ground is that it is unclear what is intended by an asserted obligation "to re-form, or alternatively adopt as its own, the purported fraud or evasion opinion". Counsel for the Commissioner submitted:

If, by re-form, the applicant means that the Tribunal has to consider the question whether there was fraud or evasion afresh based on the material before it, then we would agree with that. If, by adopt, the applicant means that after considering the material before it, the Tribunal may express agreement with the Commissioner's reasoning and factual findings as set out in a written fraud and evasion opinion, then we would say that that's a course that's open to it but not one that it's required to follow.

If the applicant's argument is – and this is how I apprehend the argument to run – that by affirming the objection decisions under review the precondition to the issuing of the assessments under section 170(1) of the 1936 Act was no longer satisfied because the original opinion ceased to exist, then we disagree with that, and the reason I apprehend that to be the argument is because that's how it is put in the grounds in support of the question.

81    The Commissioner submitted that the contention that the applicant sought to raise under her first question and first ground was rejected in Binetter at [95].

82    After referring the Court to the provisions set out earlier at [31]-[40] above, the Commissioner submitted that the function of the Tribunal in Part IVC proceedings was to review the Commissioner's objection decision, and not the process of assessment. There was no question, so the Commissioner said, that the Tribunal may on review exercise all the powers and discretions that the Commissioner could have exercised in determining the objection decision, citing Re Roche Products Pty Ltd and Commissioner of Taxation [2008] AATA 639; 70 ATR 703 at [202] and Fletcher v Commissioner of Taxation [1988] FCA 580; 19 FCR 442. The Commissioner emphasised, however, that "[w]hat the Tribunal has to do over again is decide the objection [decision], not the process of assessment itself".

83    The Commissioner accepted that where a criterion of liability was the formation of an opinion by the Commissioner, the Tribunal must re-examine the matter for itself, having regard to the evidence before it. The Commissioner submitted, however, that the Tribunal, as constituted by existing legislation, cannot create liability. This was in contrast to previous taxation review bodies, which under their constituent legislation could have so done. The Commissioner referred to Denver Chemical and the terms of ss 238 and 248 of the Income Tax Management Act 1941 (NSW) considered by the High Court in that case. Counsel for the Commissioner submitted that:

[T]he way the old provisions operated is that when the Tribunal – if you objected to a particular formation of an opinion and it went to the Tribunal, the Tribunal would consider that, but its determination of that review – or that appeal, as it's called in the section – shall be deemed to be made by the Commissioner. And that is a different regime to what we're dealing with here.

84    The Commissioner submitted that, in the tax context, the main difference between the decision-making of the Tribunal and that of the Commissioner arose from the statutory onus in s 14ZZK of the Administration Act. This was because on a review of an objection decision before the Tribunal, a taxpayer must show that the assessment was excessive. The Commissioner acknowledged that, if an amendment to an assessment had been made on the basis of a fraud or evasion opinion, one way of doing this would be for the taxpayer to demonstrate that the Commissioner should not have formed that opinion, but that the onus in s 14ZZK would apply. With respect to the Tribunal judging the matter for itself, the Commissioner submitted that:

[I]t would be an odd result, if for the purposes of that task only, the onus in section 14ZZK was turned off and it fell upon the Commissioner to convince the Tribunal that there was fraud or evasion. There's nothing in the words of the provisions that would indicate that it should operate in that way. And given that this whole process is a creature of statute, this really is a question of statutory construction. And we go further and say it would be antithetical to the underlying rationale of the onus provision, which has been explained by the High Court on multiple occasions.

85    In support of this submission, the Commissioner referred to statements in the authorities about s 14ZZK and its predecessor provisions, referring to Trautwein v Commissioner of Taxation [1936] HCA 77; 56 CLR 63 and George concerning the rationale for imposing the onus of proof on the taxpayer. The Commissioner also referred to Gibbs J's discussion in McCormack at 302-303 about the operation of the onus of proof provision, noting the change in the High Court's statement of its operation subsequent to Gauci v Federal Commissioner of Taxation [1975] HCA 54; 135 CLR 81 at 87 and the fact that "the idea that where there's an absence of evidence either way means that the taxpayer can win is no longer the law". The Commissioner submitted that s 14ZZK "modifies the AAT Act in respect of all decision-making by the Tribunal, including a review of an objection decision where the underlying assessment is premised on the Commissioner reaching a state of satisfaction or forming an opinion about a matter", citing Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26; 296 ALR 307, Commissioner of Taxation v Hornibrook [2006] FCAFC 170; 156 FCR 313, Millar, and Binetter.

Issue 2: whether by applying the decision in Binetter the Tribunal was exercising the judicial power of the Commonwealth

86    After noting that this issue was raised by question 3(d) of the further amended notice of appeal and the s 39B application, the Commissioner submitted that the Court should reject the applicant's contention that the scheme of the legislation, as interpreted in Binetter, produced the same result as in British Imperial Oil. The reason that the Board of Appeal was held by the Court in British Imperial Oil to be exercising judicial power was, so the Commissioner submitted, because the Board of Appeal "was placed in precisely the same position as the court". The Commissioner relied on Shell for the proposition that the Tribunal was in a relevantly different position to the Board of Appeal in British Imperial Oil. The Commissioner argued that the applicant's submission about the finality of the Tribunal's decision should be rejected. The Commissioner submitted that the finality in s 14ZZL "is really just a label", that "[t]hese are, really, administrative machinery provisions", and that "to the extent there is some level of finality that arises from that provision … it really is just a level of finality that is no different to most other administrative decisions".

87    In response to the applicant's argument that the effect of s 14ZZK of the Administration Act as interpreted in Binetter was that the Tribunal was purporting to exercise judicial power, the Commissioner submitted that that argument had to fail as the Court in Binetter had made it clear that the Tribunal was not exercising judicial power.

Issue 3: assuming Binetter is correct, whether the Tribunal erred in its approach when concluding that the applicant failed to disprove fraud or evasion

Issue 4: whether the Tribunal failed to review and decide the applicant's objection that the Commissioner had amended assessments without forming an opinion in lawful compliance with item 5 of the table in s 170(1) of the 1936 Act.

88    The Commissioner submitted that the Tribunal in this case correctly applied the relevant legislative provisions, including s 14ZZK, in accordance with the established legal principles. On the Commissioner's analysis, issue 4 did not arise as a separate issue.

Question 2 – years ended 30 June 2008 and 30 June 2010

89    As noted above, the applicant abandoned this question and its corresponding ground.

Question 3 – years ended 30 June 2008 and 30 June 2010 – see [78] and following above

Questions 4 and 5 – years ended 30 June 2011 and 30 June 2012

90    The Commissioner identified the following issues arising under questions 4 and 5:

    Issue 5: whether the Tribunal erred in law by failing to weigh up the evidence or give due weight to the evidence relied upon by the applicant; and

    Issue 6: whether the Tribunal erred in law by failing to make a credit assessment of the applicant and Ms Hang Nguyen (see [25] above) prior to discounting their evidence.

91    The Commissioner also identified a related issue (although arising under question 3(e)). This was:

    Issue 7: "do the jurisdictional errors as to the decision being procedurally unfair, amounting to failure to exercise jurisdiction, or amounting to jurisdictional error … extend more generally to the Tribunal's failure to make factual findings of its own on other issues"?

Issue 5: whether the Tribunal erred in law by failing to weigh up the evidence or give due weight to the evidence relied upon by the applicant

Issue 6: whether the Tribunal erred in law by failing to make a credit assessment of the applicant and Ms Hang Nguyen prior to discounting their evidence

92    Citing Haritos at [92], the Commissioner submitted that questions 4 and 5 did not disclose a question of law for the purposes of s 44(1) of the AAT Act. The Commissioner contended that a failure to "weigh up" or "give due weight" to evidence was not an error of law in a case where that evidence was taken into account; and that inviting the Court "to re-examine the weight to be given to certain evidence is to invite it to usurp the fact-finding function of the Tribunal".

93    The Commissioner also contended that the Tribunal was not required to make an explicit "credit assessment" of each witness in order to determine whether an applicant had discharged the onus of proof under s 14ZZK(b)(i). The Commissioner submitted that it was implicit in the Tribunal's findings that the uncorroborated evidence of the applicant regarding the purported loans from Mr Morris was rejected. The Commissioner noted that the Tribunal also held that the evidence of Ms Hang Nguyen regarding the amounts she loaned to the applicant, even if accepted, was inadequate to explain the source of the funds. The Commissioner also submitted that Tisdall v Webber (upon which the applicant relied) had "little or no bearing on the matter".

Issue 7: do the jurisdictional errors as to the decision being procedurally unfair, amounting to failure to exercise jurisdiction, or amounting to jurisdictional error extend more generally to the Tribunal's failure to make factual findings of its own on other issues?

94    At the hearing, counsel for the Commissioner submitted that it was difficult to identify precisely the issue sought to be raised by this question, although he noted that the applicant had submitted that the Tribunal should never have adopted, as a starting point, the proposition that everything the Commissioner had asserted was income was in fact income. If this was brought into contest by this question, then, so the Commissioner submitted, the applicant's submission was contrary to authority, in particular George and Rigoli v Commissioner of Taxation [2014] FCAFC 29; 96 ATR 19; 141 ALD 529 at [26]. Reference was also made to Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243 at 259 (Hill J).

Question 6 – years ended 30 June 2011 and 30 June 2012

95    As already noted, the applicant abandoned this question and its corresponding ground.

Question 7 – years ended 30 June 2011 and 30 June 2012

96    The issue identified by the Commissioner under question 7 was whether the Tribunal erred by failing to re-exercise the Commissioner's discretion to remit penalties.

Issue 8: whether the Tribunal erred by failing to re-exercise the Commissioner's discretion to remit penalties

97    The Commissioner submitted that the applicant did not agitate the remission of penalties before the Tribunal, and that the Tribunal correctly noted this at [8] of the Tribunal reasons.

98    The Commissioner submitted that while the objection and objection decision did refer to the remission of penalties, neither the applicant's statement of issues, facts and contentions nor the applicant's written submissions in the Tribunal raised the remission of penalties as an issue. The Commissioner referred to the only reference to remission in the transcript of Tribunal proceedings and submitted that this reference was in the context of having established that the penalty was improperly imposed in the first place.

Consideration

99    Binetter is key to resolving most of the issues in this case. It is, therefore, crucial to understand what was decided in that case.

The decision in Binetter

100    There were four proceedings before the Full Court in Binetter. There were three appeals from a decision of the Tribunal, which was adverse to certain members of the Binetter family. The fourth appeal was from orders of a judge of the Court, who upheld an appeal by Mrs Bai against a decision of the Tribunal. Although the issues in the appeals were not precisely the same, they all raised the issue whether a taxpayer bears the onus in Part IVC proceedings in the Tribunal of proving the absence of fraud or evasion where the Commissioner has previously issued an amended assessment out of time on that basis.

101    The Commissioner issued amended assessments to three members of the Binetter family, beyond the time for which s 170(1) of the 1936 Act specifically provided. The Commissioner did so on the basis that he was of the opinion that there had been fraud or evasion on the part of the relevant Binetter family members and that, in this circumstance, he could amend the relevant assessments at any time. The Binetter family unsuccessfully objected to the amended assessments and then sought review of the Commissioner's objection decisions in the Tribunal.

102    The Commissioner's position before the Tribunal was that the effect of s 14ZZK(b)(i) of the Administration Act was to cast on the taxpayer the onus of satisfying the Tribunal that the taxpayer had not engaged in fraud or evasion in each of the relevant years. As the joint judgment of Perram and Davies JJ explained (at [81]):

The reasoning underpinning this was that s 14ZZK(b)(i) required the taxpayer to prove that the relevant assessment was excessive. In a case where the issue of an amended notice of assessment which would otherwise be out of time was authorised only if the Commissioner had formed the requisite opinion that there had been fraud or evasion, the burden was on the taxpayer to prove that the condition for the exercise of the amendment power was not met, either by proving that the Commissioner had amended the assessments without forming such an opinion or by proving that there had been no fraud or evasion.

103    The taxpayer's position before the Tribunal was to the contrary. As their Honours said (at [81]):

For her part, [the taxpayer] submitted both to the Tribunal and in this Court that s 14ZZK(b)(i) did not apply to the formation of opinions which had the effect of creating, or perhaps imposing, tax liabilities. On this view, there was a distinction to be drawn between provisions of the [1936 Act] (or, where relevant, the Income Tax Assessment Act 1997 (Cth) ("the ITAA 1997")) by which the Commissioner engaged in the process of assessing the liabilities imposed by those statutes, and situations where the formation by the Commissioner of a particular opinion was itself the factum which generated the taxpayer's liability to tax or was an essential step along the way to the imposition of such a liability. [The taxpayer] pointed to a series of cases concerned with the former Taxation Board of Review that contained statements which suggested, in what were said to be largely equivalent circumstances, that the Board had always had to form its own opinion where there had been the antecedent formation of such an opinion by the Commissioner.

104    Perram and Davies JJ observed (at [82]) that the evidence before the Tribunal was "to say the least, sparse". Their Honours noted (at [84]) that prior to the Tribunal hearing the taxpayer had sought to have the Commissioner provide particulars of the fraud and evasion on which he relied. The Commissioner had declined to provide such particulars on the basis that the provision of particulars would be inconsistent with the function being performed by the Tribunal. Their Honours stated (at [84]):

In effect, this was an expression of the Commissioner's view that s 14ZZK(b)(i) required [the taxpayer] to disprove fraud or evasion, and that it was not for him to prove it. On that view, since the Commissioner did not have to prove anything, the provision of particulars indicating how he would go about doing something he was not bound to do was to be seen as a redundant exercise.

105    The Tribunal held that because of s 14ZZK(b)(i) it was for the taxpayer to disprove fraud or evasion and, as the taxpayer had not done so, it affirmed the Commissioner's objection decision. Perram and Davies JJ (Siopis J agreeing) concluded that the Tribunal was correct to hold that the taxpayer bore the onus of proving that the conditions for the exercise of the power to amend an assessment did not exist. Their Honours rejected the taxpayer's contention that the Tribunal erred by affirming the amended assessments without itself forming the opinion that there was fraud or evasion. The Court dismissed the Binetter family's three appeals.

106    As Perram and Davies JJ explained, the taxpayer's contention relied on two further propositions:

[88]    The first proposition was that as the relevant jurisdictional fact under s 170 of the [1936 Act] to enliven the amendment power was the formation by the Commissioner of the opinion that there was fraud or evasion, the onus imposed on [the taxpayer] by s 14ZZK of the [Administration Act] required [the taxpayer] only to prove that the Commissioner had not formed the requisite opinion.

[89]    The second proposition was that the s 14ZZK onus to prove the absence of the fact of an opinion formed by the Commissioner "has nothing to do with a full merits review of the opinion of the existence of the fact" … . [The taxpayer] argued that the Tribunal, on review, "standing in the shoes of the Commissioner", must itself form the opinion there was fraud or evasion to enliven the amendment power and that that opinion becomes, by operation of s 43(6) of the AAT Act and s 169A(3) of the [1936 Act], the authority under s 170 of the [1936 Act] for making the amended assessment. If the Tribunal did not form an opinion (or if on appeal the Court holds that the Tribunal did not properly form its opinion), the argument went, then the jurisdictional fact necessary to authorise the amendment of the assessment under s 170 "has disappeared and not been replaced" and the amended assessment "must be set aside as excessive under s 14ZZK" … . As in this case the Tribunal did not form its own opinion that there was fraud or evasion and the Tribunal's own opinion was required as a precondition to the authority to amend, the Tribunal could not lawfully affirm the amended assessments.

107    Perram and Davies JJ stated (at [90]) that the taxpayer's argument faced a "fundamental difficulty" in that it disregarded the effect of s 14ZZK of the Administration Act which, by s 14ZZA, modified the powers of the Tribunal in relation to an application for review of a taxation decision. Their Honours explained:

[91]    It is well established that the term "excessive" in ss 14ZZK and 14ZZO relates to the taxpayer's substantive liability for the amount of tax assessed, and that to discharge that onus the taxpayer must prove that the assessed amount is greater than the liability of the taxpayer under the relevant tax Act: Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614. It is also well established that satisfaction of the requirements of s 170(2) of the [1936 Act] (and its cognate provisions) is a matter going to substantive liability, so that a taxpayer challenging the authority of the Commissioner to make an amended assessment bears the onus of proving that the statutory requirements for the authority to amend the assessment were not satisfied: McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263; Dalco at 622; WR Carpenter Holdings Pty Ltd v Federal Commissioner of Taxation (2008) 237 CLR 198 at [6].

[92]    The seminal decision is McAndrew. In McAndrew it was held that s 190(b) (the predecessor provision to ss 14ZZK and 14ZZO) imposed the burden on the taxpayer to show that there had not been an avoidance of tax due to fraud or evasion. McAndrew was followed by the High Court in Dalco. Brennan J at 622 stated that:

McAndrew's Case … establishes that s.170(2) creates a condition precedent governing the power to make an amended assessment and that the satisfaction of the requirements of s. 170(2) is not merely part of the due making of the assessment which does not affect substantive liability. It was held that s.170(2) creates a condition precedent, the satisfaction of which was not protected from challenge in appeal proceedings by s.177(1). As the amount of the amended assessment would be shown to be excessive if the requirements of s.170(2) were not satisfied, s.190(b) imposed on the taxpayer the burden of showing that the requirements had not been satisfied.

In Dalco the High Court affirmed the dissenting remarks of Mason J in Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89, that there was no onus on the Commissioner to show that the assessments were correctly made, and that unless the taxpayer discharged the onus imposed by s 190(b) the assessment stood. As stated by Brennan J (as his Honour then was) at 624, the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed.

[93]    In cases where the amendment power depends on the formation of an opinion by the Commissioner of fraud or evasion, the difference between merits review by the Tribunal and an appeal to the Court is that the Tribunal re-considers whether, on the evidence before it, there was an avoidance of tax due to fraud or evasion, whereas the Court will only interfere with the Commissioner's exercise of the amendment power if the Commissioner did not form the requisite opinion or the Commissioner's opinion that there was fraud or evasion is vitiated by some error of law: s 43 of the AAT Act; Shell Company of Australia Ltd v Federal Commissioner of Taxation (1930) 44 CLR 530 at 544-545; Jolly v Federal Commissioner of Taxation (1935) 53 CLR 206 at 212-214; Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 360. Although the Tribunal re-examines whether, on the evidence before it, there was an avoidance of tax due to fraud or evasion, and is able to substitute its opinion for that of the Commissioner, the issue for the Tribunal is whether the taxpayer has discharged the onus of showing that the opinion that there was fraud or evasion should not have been formed, and therefore, that the statutory condition for the power to amend is not satisfied. Unless the taxpayer discharges that onus, the assessments are not shown to be excessive and the effect of s 14ZZK is that the Tribunal must affirm the amended assessments, such assessments having been made by the Commissioner in compliance with the statutory requirements: McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284 at 303; Millar v Federal Commissioner of Taxation (2015) 101 ATR 827. In Millar Griffiths J correctly held that on a merits review before the Tribunal, the onus of proof imposed by s 14ZZK places on the taxpayer the burden of disproving fraud or evasion.

[94]    [The taxpayer's] reliance upon earlier decisions such as Denver Chemical Manufacturing Company v Commissioner of Taxation (NSW) (1949) 79 CLR 296 and Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation (1963) 113 CLR 475, dealing with the powers of the former Taxation Board of Review (which were cited in support of [the taxpayer's] argument), do not direct a different answer. Those cases do illustrate that the powers of the former Taxation Board of Review were not materially different from the powers now conferred on the Tribunal and so much may be accepted: see also Fletcher v Federal Commissioner of Taxation (1988) 19 FCR 442 at 454. However, nothing was said in Denver (or in other cases on the power of the Board) to support the proposition that the Tribunal must form a view that there has been fraud or evasion to support the amendment power, and independently exercise any discretion conferred on the Commissioner on which a taxpayer's liability to tax depends, failing which the "jurisdictional fact" for the imposition of the tax liability does not exist.

[95]    The Tribunal was correct to hold that [the taxpayer] bore the onus of proving that the conditions for the exercise of the amendment power did not exist. [The taxpayer's] contention that the Tribunal must itself on review form the opinion that there was fraud and evasion "before there is power to amend the assessments" fails to take account of, or give due regard to, the effect of s 14ZZK of the [Administration Act].

108    It is unnecessary to discuss here how the Full Court resolved the other issues that arose in the three Binetter family appeals.

109    In the case of Mrs Bai, the Commissioner had issued amended assessments out of time after conducting a tax audit, but on the basis that he had formed the opinion that there had been fraud or evasion. On appeal from a decision of the Tribunal, which had reviewed the Commissioner's earlier objection decisions, a judge of the Court accepted that the taxpayer bore the civil onus of proving, on the balance of probabilities, that there was no fraud or evasion if she were to prove that the challenged amended assessment was excessive in law. At the same time, however, his Honour accepted the taxpayer's submission that the Tribunal had applied the wrong onus of proof by effectively requiring her to "exclude the possibility" of fraud or evasion, and accordingly allowed the appeal. The Commissioner appealed to the Full Court.

110    As the Full Court observed (at [196]), "his Honour's criticism was that to require Mrs Bai to exclude any possibility that the receipts were income was to impose a much higher standard of proof than was required". The Full Court accepted (at [199]) the Commissioner's submission that the primary judge's finding was not a reasonable interpretation of what the Tribunal had actually done, particularly when regard was had to the well-known principle that the reasons of an administrative decision-maker should not be examined minutely with an eye keenly attuned to the perception of error. Accordingly, the Court allowed the Commissioner's appeal in Mrs Bai's case.

111    The Court did not determine the Commissioner's alternative submission (at [197]) that, even if the Tribunal had applied the criminal standard, this was an immaterial error, because once the Tribunal had rejected the taxpayer's particular account as to the origin of the deposits, the only result then open to the Tribunal was that she had not discharged her onus under s 14ZZK(b)(i).

112    It seems to me that the Commissioner correctly identified the issues that fall, or potentially fall, for determination; and the following consideration is arranged having regard to these issues.

Question 1 – years ended 30 June 2008 and 30 June 2010; Question 3 – years ended 30 June 2008 and 30 June 2010 (see [63] above)

Issue 1: whether the Tribunal was required to re-form or adopt the opinion formed by the Commissioner as to fraud and evasion, including whether the Tribunal erred by failing to determine if it was required to adopt or re-form the Commissioner's opinion

113    Bearing in mind the statement of the first ground as set out in the applicant's further amended notice of appeal, it seems to me that the first question and first ground are to be understood as identifying the applicant's contention that, if the Tribunal failed to form its own opinion (which was to become the opinion in item 5 of the table in s 170(1) of the 1936 Act) then there was no opinion, as the Commissioner's original opinion had ceased to exist. As counsel for the Commissioner observed, this reading of the first question was consistent with the statement of the first ground, particularly in paragraphs (b) and (c).

114    The first question and ground depended on a proposition that was in substance the same as that advanced by the taxpayer in Binetter: see Binetter at [89] (set out at [106] above). This proposition was clearly rejected by the Court in Binetter at [95], when it held that the Tribunal was correct to conclude that the taxpayer bore the onus of proving that the conditions for the exercise of the amendment power did not exist; and that the taxpayer's contention failed to take account of the effect of s 14ZZK of the Administration Act.

115    The applicant relied on numerous authorities, many of which concerned the former Taxation Board of Review, in support of her submission that the Court should reach a contrary conclusion. As the applicant's senior counsel ultimately acknowledged, however, as a single judge exercising original jurisdiction, I am not at liberty to depart from the considered decision of the Full Court in Binetter on the very point at issue. Binetter was a decision made on particular facts that stated a rule about the effect of s 14ZZK of the Administration Act in a review of an objection decision where the Commissioner has issued an amended assessment after forming the opinion that there had been fraud or evasion, for the purposes of item 5 of the table in s 170(1) of the 1936 Act. According to the doctrine of stare decisis, the Court in this case is bound to follow the decision in Binetter. In any event, to the extent that it matters, the decision in Binetter is, in my opinion, plainly correct; and since the issue was fully argued, I set out below some considerations that in my opinion support the conclusion in Binetter, including that, as Perram and Davies JJ said in that case at [94], a comparison of the powers of the former Taxation Board of Review and the Tribunal does not direct a different outcome.

116    It is well-established that the task of the Tribunal on review, including on review of the Commissioner's objection decisions, is to make the correct or preferable decision on the material before the Tribunal: Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 589 (Bowen CJ and Deane J). In reviewing an objection decision, the Tribunal may exercise the same powers and discretions as were exercisable by the Commissioner in making the objection decision: see AAT Act, s 43(1). In this respect at least, the position of the present Tribunal is not materially different from the former Board of Review: compare Binetter at [94].

117    There are, nonetheless, relevant differences between the present statutory regime and former regimes. In the present case, the Tribunal was engaged only in reviewing the objection decision, and not in reviewing the process of assessment. Further, the Tribunal's decision could not of itself create a taxation liability, this being the function of the issue of a notice of assessment. As already noted, the applicant relied on such cases as Denver Chemicals and Shell, but the position of the State Board of Appeal under the Income Tax Management Act 1941 (NSW), considered in Denver Chemicals, was relevantly different. The State Act specifically provided, in s 238, that the taxpayer might object against an opinion (such as the Commissioner's opinion that there had been avoidance of tax by evasion) and, in s 248, that "assessments, determinations and decisions of the Board and its decisions upon appeals" were deemed to be "assessments, determinations or decisions of the Commissioner": see Denver Chemical at 296-297. The Commonwealth legislation applicable to the former Taxation Board of Review, which was discussed in Shell, was to the same effect: see Shell at 537.

118    In the case of the Tribunal, as Hayne and Heydon JJ noted in Shi at [100], "not all of the powers that the Tribunal may exercise draw upon the grant of powers and discretions to the primary decision-maker"; and the statement that the Tribunal's task is "to do over again" what the original decision-maker did is "subject to that qualification". In this context, their Honours referred with approval to Brennan J's observations in Re Brian Lawlor Automotive Pty Ltd and Collector of Customs (NSW) (1978) 1 ALD 167 at 175-176 that:

A decision by the Tribunal pursuant to s 43(1)(a) to affirm the original decision leaves the original decision intact, and that is the only decision which takes effect under the enactment: the original powers are not drawn upon by the Tribunal's order. Equally, a decision to set aside the decision under review and remit the matter for reconsideration pursuant to s 43(1)(c)(ii) requires the original repository of the powers and discretions to exercise them afresh: they are not exercised by the Tribunal. Section 43(1) grants the original powers and discretions to the Tribunal, but it does not require the Tribunal to exercise them unless the Tribunal is making a fresh order the effectiveness of which depends upon their exercise.

119    In the taxation context, s 14ZZL of the Administration Act is another aspect of the primary point made by his Honour at the commencement of this passage.

120    It is therefore not correct to assimilate the Tribunal's position entirely to that of the Commissioner: each has a different part to play in the administration of the taxation legislation. Relevantly, in the case of the Commissioner, in providing the taxpayer with an opportunity to object to an assessment and, in the case of the Tribunal, in providing an opportunity for review of the Commissioner's decision on that objection.

121    Probably the most significant difference between the decision-making processes of the Commissioner and of the Tribunal arises from s 14ZZK(b)(i) of the Administration Act. That provision does not apply to the Commissioner's decision-making process. Rather, it applies in the Tribunal "[o]n an application for review of a reviewable objection decision" to impose on the taxpayer the burden of proving that an assessment is excessive: see s 14ZZK(b)(i).

122    This difference is crucial to the Tribunal's decision-making. The Commissioner did not dispute, and it may be accepted, that when the Commissioner has issued an amended assessment after forming the opinion that there has been fraud or evasion for the purposes of item 5 of the table in s 170(1) of the 1936 Act, then on a review of an objection decision in which the taxpayer challenges that opinion, the Tribunal must reconsider the matter for itself. However, whether there has been fraud or evasion to support the amendment is part of proving that the assessment under review is excessive. It is, therefore, a matter governed by s 14ZZK(b)(i) of the Administration Act. This is clear as a matter of statutory construction and on the authorities.

123    In George, the High Court stated (at 201) that "the law has always been taken to be that in an appeal from an assessment the burden lies upon the taxpayer of establishing affirmatively that the amount of taxable income for which he has been assessed exceeds the actual taxable income which he has derived during the year of income". The Court continued with a quotation from Isaacs ACJ in Federal Commissioner of Taxation v Clarke [1927] HCA 49; 40 CLR 246 at 251:

"The justice of that burden cannot be disputed. From the nature of the tax, the commissioner has, as a rule, no means of ascertainment but what is learnt from the taxpayer, and the taxpayer is presumably and generally, in fact, acquainted with his own affairs. The onus may prove to be dischargeable easily or with difficulty according to circumstances", per Isaacs A.C.J., Federal Commissioner of Taxation v. Clarke [(1927) 40 CLR 246 at p 251].

In the present case it might be expected that the source of the large increase year by year in the appellant's assets would be a matter peculiarly within his own knowledge. If it is a form of gain outside the very wide ambit of what is assessable income, proof of its character will be enough to support the material grounds of his appeals. It is a fact outside any knowledge the commissioner can have except from inquiry into the affairs of the appellant and it is not unreasonable that the onus of proof should be placed by law upon the latter.

See also Trautwein at 87 per Latham CJ.

124    It is no longer the law that a taxpayer will succeed in discharging the statutory onus of proof in the absence of evidence about a matter on which liability depends. As the Commissioner submitted, Gibbs J's discussion in McCormack at 302-303 sets out the current position. Gibbs J there stated:

In Gauci v. Federal Commissioner of Taxation, Barwick C.J. said [(1975) 135 CLR at p 87]:

"There is no presumption that property is acquired for resale at a profit. No doubt s. 190 of the Act requires the appellant to show that the assessment is excessive. But the relevant facts being known, if there is no material upon which it may properly be concluded that the property was acquired with the relevant purpose, the assessment is thereby shown to be excessive. As I have said, there is no presumption of purpose to aid the assessment. In particular, s. 190 does not raise any such presumption."

With the greatest respect I cannot agree with this statement, which seems to me inconsistent with earlier decisions of the Court such as George v. Federal Commissioner of Taxation [(1952) 86 CLR 183] and McAndrew v. Federal Commissioner of Taxation [(1956) 98 CLR 263]. The taxpayer bears the burden of proving that the assessment was excessive. To discharge that burden in a case such as the present he must prove affirmatively, on the balance of probabilities, that the property was not acquired for the purpose of profit-making by sale. The burden may be discharged by drawing inferences from the evidence. In some cases in which all the relevant facts are known, and there is no material upon which it might properly be concluded that the property was acquired for the relevant purpose, the inference may properly be drawn that the property was not acquired for the relevant purpose. But it is not enough, even when all the facts are known, that there is no material upon which it may be concluded that the property was acquired for the purpose mentioned in s. 26(a). If a taxpayer can succeed, simply because there is no evidence from which it can be concluded that the relevant purpose existed, that must mean that the burden of proving the existence of that purpose lies on the Commissioner. That in my respectful opinion would be to invert the onus of proof. The taxpayer will succeed if the proper inference from the evidence is that the property was not acquired for the relevant purpose, but if there is no evidence as to the purpose for which the taxpayer acquired the property the appeal must fail.

(Emphasis added)

125    Further, it may be accepted, as Brennan J said in Federal Commissioner of Taxation v Dalco [1990] HCA 3; 168 CLR 614 at 624, that:

The manner in which a taxpayer can discharge [the taxpayer's] burden varies with the circumstances. 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. Absent such a confining of the issues for determination, the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment, though the taxpayer is limited to the grounds of his objection.

126    It may also be accepted that s 14ZZK of the Administration Act applies to the whole of the Tribunal's review of the Commissioner's objection decision, including in the review of an assessment premised on the Commissioner's satisfaction as to, or opinion about, a particular matter. This means that s 14ZZK modifies the position that might otherwise exist under the AAT Act, as made clear in Rawson Finances.

127    In that case, Jagot J (Nicholas J agreeing) discussed the way in which s 14ZZK affected the review undertaken by the Tribunal. Her Honour observed (at [90]) that:

Section 14ZZK is a modification of the AAT Act because, but for that provision, an applicant would not have the "burden of proving that … the assessment is excessive". There are no equivalent provisions in the AAT Act and it is well established that as the Tribunal may "exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision" (s 43(1) of the AAT Act), an applicant for review is not subject to any burden of proof, the Tribunal's obligation being whether the decision under review is the correct or preferable decision on the basis of the available material (Bushell v Repatriation Commission (1992) 175 CLR 408 at 424-5; 109 ALR 30 at 43; 29 ALD 1 at 4-5).

128    Jagot J held that the Tribunal's reasons in that case indicated error. Her Honour explained (at [115]-[116]) that:

… The Tribunal … said:

But the practical reality in most cases is more likely to be that proper consideration of all of the material will lead the tribunal to a state of comfortable satisfaction that a particular outcome is either 'correct or preferable' in all the circumstances. Comfortable satisfaction that a different result is 'preferable' will justify the tribunal in regarding an applicant for review as having discharged the burden imposed by s 14ZZK(b) of the Taxation Administration Act — of showing that the taxation decision 'should not have been made or should have been made differently'.

These observations seem to me to confuse the Tribunal's general obligation as a merits decision-maker which may by s 43(1) of the AAT Act "exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision" (a power which has been held to oblige the Tribunal to make the correct or preferable decision on the available material) with the Tribunal's duty to apply s 43(1) subject to the modification imposed by, relevantly in this case, s 14ZZK(b)(i) of the [Administration Act]. In a case where s 14ZZK(b)(i) of the [Administration Act] applies the correct or preferable decision is to set aside the decision under review if the applicant has discharged the burden of proving that the assessment is excessive and to dismiss the review application if the applicant has not discharged that burden. The fact that the Tribunal cannot be satisfied that the Commissioner's assessments represent the correct or preferable decision does not mean that the applicant must succeed and the Commissioner fail. This would involve not only the casting of an onus of proof on the Commissioner but would also relieve the applicant of the applicant's burden of proof. Both would be impermissible.

(Emphasis added)

129    Consistently with this, Gyles J said in Hornibrook at [28], albeit in relation to different provisions of the Administration Act, that:

It may generally be correct to say that the Tribunal stands in the shoes of the decision-maker, but that is subject to particular provisions which relate to the conduct of an appeal. The Tribunal exercises the powers granted by the Administration Act pursuant to the provisions of the AAT Act. The two statutes must be read together so far as possible. In that situation, a general power in the AAT Act cannot be used to circumvent the express limitations in the Administration Act.

130    In keeping with the authorities and applying the applicable statutory provisions, the Court in Binetter at [93] recognised that s 14ZZK affected the nature of the Tribunal's task on review, including where the Commissioner's amendment power depends on the formation of an opinion by the Commissioner of fraud or evasion. As the Court there said, in such a case, "the Tribunal re-considers whether, on the evidence before it, there was an avoidance of tax due to fraud or evasion." It may substitute its opinion for that of the Commissioner. Before doing so, however, the Tribunal must determine whether the taxpayer has discharged the onus of showing that the opinion that there was fraud or evasion should not have been formed: see also Millar at [146]-[147] (Griffiths J); appeal dismissed: Millar v Commissioner of Taxation [2016] FCAFC 94; 243 FCR 302. If it determines that the taxpayer has not discharged the taxpayer's onus, then the taxpayer will not succeed since the taxpayer will not have shown that the assessment is excessive.

131    It may be noted furthermore that the High Court refused an application for special leave to appeal the decision in Binetter (see Margaret Binetter for the Estate of Erwin Binetter v Commissioner of Taxation; Binetter v Commissioner of Taxation; Bai v Commissioner of Taxation [2017] HCATrans 126) and the decision was recently cited with approval by the Full Court (differently constituted) in Chhua v Commissioner of Taxation [2018] FCAFC 86 at [29] and [38].

132    I would reject the applicant's submission that Binetter was decided per incuriam. If it matters, I would accept the Commissioner's submission that Krew – upon which the applicant also relied to support her submission – was not in any event contrary to Binetter but rather tended to support the process of reasoning adopted by the Full Court in Binetter and followed by the Tribunal: see Krew at 237-238 (Walsh J). In the present case, the Tribunal correctly identified and discharged its statutory task, as discussed below under issues 3 and 4.

Issue 2: whether by applying Binetter the Tribunal was exercising the judicial power of the Commonwealth

133    This issue was raised by question 3(d) of the amended notice of appeal and the s 39B application.

134    As will be seen, the applicant relied on British Imperial Oil in support of her contention that, in a case such as hers, the interpretation given in Binetter to s 14ZZK of the Administration Act meant that the Tribunal was required to exercise the judicial power of the Commonwealth, contrary to the Constitution. Put another way, the applicant's submission was that the effect of s 14ZZK, as construed in Binetter, was to confer federal judicial power on a body other than a court created under and in accordance with Chapter III of the Constitution.

135    The applicant's reliance on British Imperial Oil was misplaced. It is correct to say, as the applicant does, that the High Court held in that case that the powers conferred on the Board of Appeal by the 1922 Act were part of the judicial powers of the Commonwealth and, as such, those powers could not be conferred on the Board of Appeal, because the Board was not a court created by the Parliament under Chapter III of the Constitution. The powers conferred on the Board of Appeal were, however, materially different from the powers now conferred on the Tribunal.

136    The 1922 Act created a Board of Appeal to hear and decide cases as prescribed or referred to it by the Commissioner under that Act. In British Imperial Oil, Isaacs J described (at 436) the powers conferred on the Board of Appeal in the following terms:

Then sec. 44, which is extremely important in this connection, says:—"(1) A Board of Appeal shall have power to hear such cases as are prescribed, or are referred to it by the Commissioner under this Act. (2) The provisions of section fifty-one, fifty-two, and fifty-three of this Act shall apply, so far as applicable, to references by the Commissioner to the Board as if those references were appeals." "References" are thus placed, as far as they can be, in precisely the same position as "appeals" so far as the Board's duty and powers are concerned; and this compels us to examine the provisions as to appeals. Turning then to sec. 50, dealing with "appeals," it provides by sub-sec. 4 that a taxpayer dissatisfied with the decision of the Commissioner may, by the method stated, require the Commissioner to forward his case, where the objection does not raise questions of law only, to (1) the High Court or (2) a Supreme Court or (3) a Board of Appeal. Pausing there for a moment, it is quite evident that judicial power is thereby conferred on the Board, because the power invested in the High Court is necessarily judicial (In re Judiciary and Navigation Acts [(1921) 29 C.L.R. 257, at p. 264.]) and it is the identical power given by sec. 50 to the Supreme Court and the Board. The power thus given is one of ascertaining and determining whether and how far the rights and duties independently enacted have been accurately declared by the Commissioner, and not for the purpose of superseding his discretionary judgment to create a constitutive element of liability.

137    As this passage shows, the 1922 Act was held to confer federal judicial power on the Board of Appeal contrary to s 71 of the Constitution because the Board of Appeal's duty and powers with respect to references to it were identical to the duty and powers of a State Supreme Court and the High Court with respect to taxation appeals. Since the 1922 Act drew no distinction between the duty and powers of the High Court, a State Supreme Court and the Board of Appeal, and the High Court and a Supreme Court necessarily had the duty and powers to ascertain and determine whether and how far statutory rights and duties had been "accurately declared by the Commissioner", then the 1922 Act was construed to confer the same duty and powers on the Board. The latter conferral of power was contrary to s 71 of the Constitution, since the Board of Appeal was not a court constituted under Chapter III of the Constitution, and capable of having federal judicial power vested in it.

138    Following British Imperial Oil, the legislature amended the 1922 Act to constitute a Board of Review with different duties and powers to the former Board of Appeal. The High Court and subsequently the Judicial Committee of the Privy Council heard another constitutional challenge, this time with respect to the provisions constituting the Board of Review. The High Court held that these new provisions did not purport to confer federal judicial power on the Board of Review: see Munro. In that case, Isaacs J stated (at 172):

In September 1925 the Commonwealth Parliament drastically altered the [1922] Act so as to conform to the law as explained in [British Imperial Oil], and created a new Board—a Board of Review—on a totally different basis.

139    Isaacs J went on to say (at 175):

The difference in point of status and nature of function between the new Board of Review and the original Board of Appeal is the difference between daylight and dark. ... In the former legislation the Board of Appeal was linked up in character with the High Court and the Supreme Court of the State, and an appeal on law points was given to this Court in its appellate jurisdiction. That was an unmistakable and an inseparable indication that the Board of Appeal was intended by Parliament to exercise "judicial power". ... But there are many functions which ... are consistent with either strict judicial or executive action. ... If consistent with either strictly judicial or executive action, the matter must be examined further.

140    Isaacs J examined the relevant provisions, observing (at 181-183) that:

It appears to me impossible to construe the word "appeal" in secs. 12, 18 and 19 of the amending Act otherwise than as giving merely the right of applying to this Court to exercise ordinary judicial power in original jurisdiction. ...

There is some language in amended sec. 51 which perhaps calls for some attention. I refer to sub.-sec. 6, which says: "The Commissioner or a taxpayer may appeal to the High Court from any decision of the Board under this section, which, in the opinion of the High Court, involves a question of law". ...

Once we conclude that the word "appeal" in sub-sec. 6 of sec. 51 ... has reference to original jurisdiction, it follows necessarily that the Board was not intended by Parliament to exercise judicial power at all in the constitutional sense. In this vital respect the present legislation differs toto caelo from the prior enactment under which the British Imperial Oil Co.'s Case was decided ...

[T]he general intention is apparent to transform the old Board of Appeal, declared by the Court to have a judicial character de facto, into a Board of Review having a true administrative character and affording ... a practical means of reconsidering business matters without the intricacies, delay and expense of legal proceedings. The Courts were reserved for matters involving legal questions.

...

Instead of the Board being given the powers and functions of the Court, it is given "the powers and functions of the Commissioner in making assessments, determinations and decisions under this Act." …

141    The Privy Council agreed: see Shell at 541-545. The Privy Council observed (at 544-545):

Their Lordships are of [the] opinion that it is not impossible under the Australian Constitution for Parliament to provide that the fixing of assessments shall rest with an administrative officer, subject to review, if the taxpayer prefers, either by another administrative body, or by a Court strictly so called, or, to put it more briefly, to say to the taxpayer "If you want to have the assessment reviewed judicially, go to the Court; if you want to have it reviewed by business men, go to the Board of Review."

...

The Board of Review appears to be in the nature of administrative machinery to which the taxpayer can resort at his option in order to have his contentions reconsidered. An administrative tribunal may act judicially, but still remain an administrative tribunal as distinguished from a Court, strictly so-called. Mere externals do not make a direction to an administrative officer by an ad hoc tribunal an exercise by a Court of judicial power. Their Lordships find themselves in agreement with Isaacs J., where he says [(1926) 38 CLR, at p.175]:—"There are many functions which are either inconsistent with strict judicial action ... or are consistent with either strict judicial or executive action. ... If consistent with either strictly judicial or executive action, the matter must be examined further" [(1926) 38 CLR, at p.178]. "The decisions of the Board of Review may very appropriately be designated ... 'administrative awards', but they are by no means of the character of decisions of the Judicature of the Commonwealth."

142    It is well-established today that there are functions, which, when performed by a court, constitute the exercise of judicial power but, when performed by some other body, do not, as Deane, Dawson, Gaudron and McHugh JJ observed in Brandy at 267, with reference to Precision Data Holdings Ltd v Wills [1991] HCA 58; 173 CLR 167. In Precision Data, the High Court said, at 189:

… although the finding of facts and the making of value judgments, even the formation of an opinion as to the legal rights and obligations of parties, are common ingredients in the exercise of judicial power, they may also be elements in the exercise of administrative and legislative power. Again, functions which are ordinary ingredients in the exercise of administrative or legislative power can, in some circumstances, be elements in the exercise of what is truly judicial power.

It follows that functions may be classified as either judicial or administrative according to the way in which they are to be exercised. So, if the ultimate decision may be determined not merely by the application of legal principles to ascertained facts but by considerations of policy also, then the determination does not proceed from an exercise of judicial power. That is not to suggest that considerations of policy do not play a role, sometimes a decisive role, in the shaping of legal principles.

(Footnotes omitted)

143    Under the amending legislation introduced after British Imperial Oil, the newly created Board of Review was held to exercise administrative power, and not judicial power, bearing in mind that:

(a)    it was named a Board of Review, and not a Board of Appeal

(b)    the powers of the new Board of Review were assimilated to those of the Commissioner, and not those of the courts;

(c)    the decisions of the Board of Review were mostly deemed to be those of the Commissioner;

(d)    the Commissioner and the taxpayer were able to appeal to a court on a question of law;

(e)    appeals from the Board of Review lay to a court in its original, rather than its appellate, jurisdiction; and

(f)    the evident legislative intention was to create an administrative body to give practical reconsideration to taxation matters without the complexity, expense and delay of legal proceedings.

See Munro at 181-183; and Shell at 541-545.

144    The position of the Tribunal is not identical to the Board of Review; indeed some differences have already been noted: see [117] above. There are, however, a number of considerations that, in my opinion, lead to the clear conclusion that the Tribunal exercises administrative, and not judicial, power. These considerations include that:

(a)    the Tribunal is named the Administrative Appeals Tribunal and specifically described as an administrative tribunal;

(b)    the Tribunal may exercise all the powers and discretions conferred on the Commissioner (AAT Act, s 43(1));

(c)    if a matter involves the exercise of a discretion (for example, where remission of a penalty is sought) the Tribunal has the power to substitute its own decision if it considers the Commissioner's decision is not the preferable one (AAT Act, s 43(1));

(d)    a decision made by the Tribunal in substitution for a decision of the Commissioner shall be deemed to be a decision of the Commissioner (AAT Act, s 43(6));

(e)    the Commissioner or the taxpayer (or other party to the Tribunal proceeding) may appeal to the Federal Court from the decision of the Tribunal on a question of law (AAT Act, s 44(1));

(f)    the hearing and determination of any such appeal from the Tribunal is an exercise of the original jurisdiction of the Federal Court, rather than its appellate jurisdiction (AAT Act, s 44(3)-(10); Federal Court of Australia Act 1976 (Cth), s 19); and

(g)    the clear legislative intention is to confer power on an administrative body to review     certain decisions of the Commissioner efficiently and without the complexity and expense of legal proceedings: see AAT Act, s 2A; Administration Act, s 14ZZK.

This list of considerations is not exhaustive.

145    Furthermore, the modifications to the AAT Act brought about by Division 4 of Part IVC of the Administration Act, in proceedings for the review of objection decisions and extension of time refusal decisions, do not militate against this conclusion. I accept that, as the Commissioner submitted, the reference in s 14ZZL(1) of the Administration Act to the decision of the Tribunal becoming "final" is to be construed by reference to s 14ZZL(2), which indicates that the "finality" in question is referable to the expiry of the appeal period and serves the interests of good administration by providing an end point for the administrative disputation and thus certainty about the administrative position. The same rationale informs provisions limiting the time in which administrative (or judicial) review can be sought. The decisions of the Tribunal remain at all times subject to review in the High Court under s 75(v) of the Constitution. As this case demonstrates, they are also subject to judicial review pursuant to s 39B of the Judiciary Act and appeal under s 44 of the AAT Act.

146    Not every binding and authoritative determination of a dispute constitutes the exercise of judicial power: see Brandy at 268. An administrative decision may also answer that description; and the "finality" for which s 14ZZL provides does not give rise to the problem identified in Brandy. In that case, the relevant legislation provided that a determination of the Human Rights and Equal Opportunity Commission was not binding and conclusive, although it could be enforced as if it was an order of the Federal Court on its registration and the expiry of the applicable period for filing a review application in the Court. The finality involved in that legislation was the enforceability of an administrative determination as an order of the Court. This enforceability was critical to the High Court's decision that there was an exercise of judicial power: Brandy at 268-270; see also 263-264. No similar problem exists in the present case.

147    I would reject the applicant's argument that, if the effect of s 14ZZK of the Administration Act is as interpreted in Binetter, then the Tribunal is exercising federal judicial power. If s 14ZZK is interpreted as the Court in Binetter says it should be, it does not follow that the Tribunal is exercising federal judicial power when reviewing an objection decision arising from an assessment amended in reliance on item 5 of the table in s 170(1) of the 1936 Act. The Full Court in Binetter emphasised that there was a difference between the powers exercisable by the Tribunal on such a review and the powers exercisable by the Court on judicial review or an appeal under s 44 of the AAT Act. In particular, the Court explained in Binetter at [93] that:

In cases where the amendment power depends on the formation of an opinion by the Commissioner of fraud or evasion, the difference between merits review by the Tribunal and an appeal to the Court is that the Tribunal re-considers whether, on the evidence before it, there was an avoidance of tax due to fraud or evasion, whereas the Court will only interfere with the Commissioner's exercise of the amendment power if the Commissioner did not form the requisite opinion or the Commissioner's opinion that there was fraud or evasion is vitiated by some error of law ...

The entirety of this passage is set out at [107] above.

148    The Tribunal did not, following Binetter, "s[it] in judgment on the validity and correctness" of the Commissioner's fraud and evasion opinion, as the applicant claimed. Rather, the Tribunal was required to re-examine the matter for itself, having regard to the evidence before it at the time it came to make its decision. In this respect, the Tribunal's task in the present case was no different from the task of the Tribunal in most other kinds of review: see Shi at [37]-[38] (Kirby J), [99] (Hayne and Heydon JJ), [143] (Kiefel J) (with whom Crennan J agreed on this point at [117]). If the taxpayer shows that there was no fraud or evasion, the taxpayer will succeed in showing that the amended assessment is excessive for the purposes of s 14ZZK(b)(i). This follows from the High Court's decision in McAndrew: see 271 (Dixon CJ, McTiernan and Webb JJ), 274 (Kitto J) and 282 (Taylor J). If the taxpayer does not show that there was no fraud or evasion (and there is no other relevant ground to contest the objection decision), then the taxpayer will not succeed in showing that the amended assessment is excessive. If raised by the taxpayer (cf: s 14ZZK(a)), the question whether there was fraud or evasion is reviewed by the Tribunal in the same way as any other constituent element of the taxpayer's liability challenged by the taxpayer on the review. Any opinion formed or decision made in substitution for that of the Commissioner will operate as if made by the Commissioner. The applicant's claim that the interpretation given to s 14ZZK in Binetter involves the Tribunal exercising the judicial power of the Commonwealth must fail.

Issue 3: assuming Binetter is correct, whether the Tribunal erred in its approach when concluding that the applicant failed to disprove fraud or evasion

Issue 4: whether the Tribunal failed to review and decide the applicant's objection that the Commissioner had amended assessments without forming an opinion in lawful compliance with item 5 of the table in s 170(1) of the 1936 Act.

149    These two matters can be dealt with together. The Tribunal's reasons for decision do not disclose any error in the Tribunal's application of the relevant legislative provisions, including s 14ZZK. Rather, the Tribunal's analysis conforms to the established legal principles.

150    At [31], the Tribunal noted that the Commissioner's submission was that the applicant bore the onus of showing that, on the balance of probabilities, there was no fraud and evasion. Further, it set out the Commissioner's submissions to it that:

… In circumstances where the applicant is unable to discharge her burden of showing that the amended assessments are excessive and the source of the funds deposited in to her bank accounts and presented at the casinos remains unexplained, the applicant will have failed to discharge that burden.

It follows that, the question of whether there was fraud or evasion will depend upon whether the applicant's evidence as to the source of the funds is otherwise accepted.

151    The Tribunal then set out its reasons, relevantly at [32]-[35]. At [32], following reference to Binetter, the Tribunal summarised its understanding of the effect of the joint judgment in that case, stating:

Perram and Davies JJ begin to the effect that a taxpayer carries the onus of showing that there was no fraud or evasion or that the Commissioner had not formed the requisite opinion, and explain that there is no onus on the Commissioner to show that the assessment was correctly made, and that while this Tribunal can re-examine whether, on the evidence before it, there was fraud or evasion, and can substitute its opinion for the Commissioner's, the issue for this Tribunal is whether the taxpayer has discharged the onus of showing that the fraud or evasion opinion should not have been formed. If a taxpayer does not do that, the amended assessments stand.

(Footnotes omitted and emphasis added)

It is clear from this passage that the Tribunal did not mistake the relevant effect of Binetter.

152    The Tribunal went on to explore how a taxpayer might discharge the onus. At [33], the Tribunal stated:

The manner in which a taxpayer would achieve such a goal in an income case depends on the particular circumstances. A taxpayer could demonstrate there was no omission of income and therefore no avoidance of tax. Alternatively a taxpayer could demonstrate that the amounts, while assessable, were not included in assessable income returned for a reason that shows that while there was a shortcoming, it was a shortcoming that fell short of a blameworthy act in the Denver Chemical [At (1949) 79 CLR 313 Dixon J] sense.

There is no error disclosed in this passage.

153    At [34]-[35], the Tribunal stated:

[34]    Provided the Commissioner has formed the requisite opinion, in an income case, the effect of the Binneter decision, and those on which it is based, may well be to make a fraud or evasion finding unchallengeable independently of the challenge to the assessability of the relevant amount. If that is so that is not a matter that the Tribunal can alter. Thus the Applicant's contention at paragraph [29(m)] above, in the present circumstances, and notwithstanding the possibility noted at paragraph [27] above, cannot be accepted.

[35]    Where the character of an amount remains unestablished, the taxpayer has not proven the amount is not assessable, it is difficult, if not impossible to:

(a)    form any view as to the level of shortcoming, if there be one;

(b)    form a view as to whether there has been an innocent mistake or a blameworthy act; and

(c)    say that the taxpayer has demonstrated that there was not fraud or evasion.

154    As the Commissioner acknowledged, on a superficial reading, the Tribunal's statement in [34] that "the effect of the Binneter decision ... may well be to make a fraud or evasion finding unchallengeable independently of the challenge to the assessability of the relevant amount" might appear to contradict its statement in the last sentence of [33]. It does not appear to me, however, that the Tribunal intended to assert, as a general proposition, that a fraud or evasion finding was always unchallengeable independently of the challenge to the assessability of the relevant amount. This would have been wrong. Reading the Tribunal's statement in that way, would, however, introduce a clear and unexplained contradiction between this statement at [34] and the Tribunal's statement at the end of [33]. The Tribunal's previous reference to the Commissioner's submissions indicates, moreover, that those submissions are the source of the comment in [34]. Those submissions make it clear that, in this particular case, to discharge the onus of proof regarding fraud and evasion the taxpayer would need to provide evidence as to the source of the unexplained funds, being evidence that was accepted by the Tribunal. In other words, the Tribunal's comment at [34] is to be understood as limited to a case such as the one before it.

155    As the Commissioner submitted, this was indeed the way the case was run before the Tribunal. In this regard, the Commissioner referred to the Commissioner's 8 March 2016 submissions to the Tribunal, at [14] and [15], which included the statement that:

In the present case, the applicant has adduced evidence directed at showing the source of substantial sums that were deposited into her bank accounts and presented at casinos. If her evidence falls short of establishing that she did not derive income in the amount assessed, then it must also fall short of showing that there was no fraud or evasion or intentional disregard of a taxation law. That is because, given the way the case was run, there would be no satisfactory evidence explaining the disparity between the applicant's presumed income and her reported income.

156    In any event, the Tribunal's comment at [34] was not critical to its decision. The Tribunal's observations at [32] and [35] reflect both a correct understanding of Binetter and a correct application of the principles set out in that case.

157    Aside from question 3(e) (see below at [170]-[172]), none of the other issues potentially raised by question 3 of the amended notice of appeal were developed by the applicant and, having considered the parties' submissions and the other material before the Court, I can discern no reasonable basis on which they might succeed.

Questions 4 and 5 – years ended 30 June 2011 and 30 June 2012

Issue 5: whether the Tribunal erred in law by failing to weigh up the evidence or give due weight to the evidence relied upon by the applicant

158    In Haritos the Full Court re-affirmed (at [62]) that the subject matter of the Court's jurisdiction under s 44 of the AAT Act is confined to a question or questions of law; and that the Court has jurisdiction to decide whether or not an appeal from the Tribunal is on a question of law. In questions 4 and 5 of the further amended notice of appeal, the applicant did not, in my opinion, identify a question of law. What follows is concerned with question 4 and part of question 5. The balance of question 5 is addressed hereafter.

159    Disagreement between the parties to an appeal instituted in reliance on s 44 of the AAT Act about whether a question is a question of law is not uncommon, in part because there is "no satisfactory test of universal application" to mark out a question of law from a question of fact: Haritos at [111]; and Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; 186 CLR 389 at 394. One must accept, however, that whether or not there is a question of law that can be entertained by this Court on an appeal under s 44 must be considered as a matter of substance rather than form: see Haritos at [62]. As the Court said in Haritos at [192], s 44 should not be read as excluding a mixed question of fact and law from the appeal for which it provides. The point is that "the right of appeal does not extend to mere questions of fact": see Haritos at [192]. The Full Court in Haritos at [192] went on to say, in this context, that:

As French CJ, Gummow and Bell JJ emphasised in Osland [v Secretary to the Department of Justice (No 2) [2010] HCA 24; 241 CLR 320], at [19], the Court "should not usurp the fact-finding function of the AAT", citing Repatriation Commission v O'Brien (1985) 155 CLR 422 at 430 per Gibbs CJ, Wilson and Dawson JJ. … As Brennan J said in Waterford v Commonwealth (1987) 163 CLR 54 at 77:

A finding by the A.A.T. on a matter of fact cannot be reviewed on appeal unless the finding is vitiated by an error of law. Section 44 of the A.A.T. Act confers on a party to a proceeding before the A.A.T. a right of appeal to the Federal Court of Australia "from any decision of the Tribunal in that proceeding" but only "on a question of law". The error of law which an appellant must rely on to succeed must arise on the facts as the A.A.T. has found them to be or it must vitiate the findings made or it must have led the A.A.T. to omit to make a finding it was legally required to make. There is no error of law simply in making a wrong finding of fact. …

It follows that legally erroneous fact finding may found an appeal on a question of law within s 44. Further, we do not read Brennan J in Waterford as addressing jurisdictional facts or such facts as it may be necessary for the Court to find when considering a claim of denial of procedural fairness ...

160    The Court added, at [194]:

As the High Court said in [Repatriation Commission v Owens (1996) 70 ALJR 904; noted 187 CLR 704], the purpose of limiting an appeal to a question of law is to ensure that the merits of the case are dealt with not by the Federal Court but by the Tribunal. This distribution of function is critical to the correct operation of the administrative review process. See also O'Brien at 430 where Gibbs CJ, Wilson and Dawson JJ said that on an appeal under s 44 the appellate body should not usurp the fact-finding function of the Tribunal. But such fact-finding is an entirely different exercise from the evaluation of the fact-finding process of the Tribunal (as fact-finder) to decide upon its legality.

161    Considered as a matter of substance, it is difficult to discern a question of law in the applicant's question 4 and the relevant part of question 5, in so far as they raise whether the Tribunal failed to weigh up the evidence or give due weight to the evidence relied upon by the applicant. The corresponding ground does not illuminate the question further: as stated, ground 4 was that "the Tribunal failed to weigh up all the evidence supporting the contentions of the Applicant as required by" Haritos: see also question 4 and the incorporation of paragraphs 4(a)-4(e) in ground 5.

162    Further consideration of the context in which the questions are raised fails to indicate a question, or questions, of law. There is no suggestion in this case that the Tribunal did not consider the evidence presented by the applicant. That is not the applicant's claim. Indeed, such a claim would have no foundation, since it is clear from the Tribunal's reasons that the Tribunal had regard to the applicant's evidence and that of Ms Hang Nguyen. It also had regard to the statutory declaration of Mr Morris, but, for the reasons the Tribunal stated, it did not accept the content of that statutory declaration as proven or true. The applicant's argument did not identify or otherwise suggest a lurking "administrative law ground" of the kind discussed in the cases mentioned in Haritos at [123]-[130] that might have turned question 4 (or question 5) into a question of law. In this circumstance, I accept that, as the Commissioner submitted, there was in truth no question of law raised in question 4, or by the part of question 5 with which I am presently concerned.

163    On analysis, it seemed to me that by question 4 and the relevant part of question 5, the applicant was inviting the Court to usurp the fact-finding function of the Tribunal, rather than appraise the legality of the Tribunal's fact-finding process. As indicated already, this is not the kind of invitation the Court can accept: see, for example Repatriation Commission v Owens (1996) 70 ALJR 904; noted 187 CLR 704; Repatriation Commission v O'Brien (1985) 155 CLR 422 at 430; and Osland v Secretary to the Department of Justice (No 2) [2010] HCA 24; 241 CLR 320 at [19]. In substance, by question 4 and the relevant part of question 5, the applicant was inviting the Court to consider the merits of the case, which cannot be done in a s 44 appeal. This consideration confirms that there is no question of law here for the Court to determine.

164    In the applicant's amended substituted submissions (at [18]) the applicant contended that the Tribunal should have weighed up the applicant's evidence and that of Ms Hang Nguyen in accordance with [233]-[234] of Haritos. In these paragraphs, the Full Court said:

[233]    The second way in which the appellants put their argument that the Tribunal had misconstrued or misapplied the burden of proof section was to contend that the section did not, contrary to the Tribunal's view, require exact proof of the amount by which the assessment was excessive. The appellants referred to Ma v Federal Commissioner of Taxation (1992) 37 FCR 225 where Burchett J, after referring at length to the decision of the High Court in Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614, said, 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 generalisations about double-counting rather than to hit upon a precise figure, was to fall into an error of law.

[234]    The proposition which the appellants sought to derive from this passage was that in performing its review function, the Tribunal may be required to make an estimate upon inexact evidence, and it cannot avoid its responsibility to make findings by relying on the burden of proof section. This proposition may be accepted for present purposes. The difficulty for the appellants is that, subject to the third argument dealt with below, they are unable to identify the estimate they contend the Tribunal should have made and the evidence by reference to which the estimate should have been made. It is true that the Tribunal appears to have thought it likely that there were subcontractor expenses of a reasonably substantial amount, but the appellants have not identified any findings of the Tribunal, or evidence referred to by it, that could form the basis of even an estimate upon inexact evidence. At one point the appellants foreshadowed a challenge to the Tribunal's decision on the basis that it had not provided adequate reasons, but that line of attack was not pursued. The appellants did not suggest that the Tribunal erred in not selecting a figure advanced by one of the witnesses who gave evidence which potentially corroborated Mr Haritos' evidence and, of course, a rational basis for the selection would need to be identified.

165    Senior counsel for the applicant also alluded at the hearing to the next two paragraphs, in which the Full Court added:

[235]    The third way in which the appellants put their argument that the Tribunal had misused the burden of proof section is related to the second. The appellants submitted that even if Mr Haritos' evidence was correctly rejected, they had nevertheless established subcontractor expenses of at least a certain amount. The Tribunal was not entitled to adopt what the appellants described as an "all or nothing" approach. If an "at least" figure was established on the evidence, then the Tribunal should have made a finding in accordance with that evidence.

[236]    We think that proposition is correct. If a taxpayer claims his or her expenses were $10.00, but fails to prove that fact because their evidence is rejected, this does not prevent the Tribunal from finding that the expenses were $5.00 where there is other satisfactory evidence establishing expenses of at least that amount. In our opinion, the burden of proof section does not dictate a different conclusion.

166    Having regard to the references to Haritos in the applicant's submissions, it would appear that the reference in ground 4(c) of the further amended notice of appeal should be to Haritos at [233]-[234] or [233]-[236], rather than to [233]-[244] as there appears.

167    The relevance of these particular paragraphs of Haritos to this case is difficult to follow, but, having regard to the submissions made on the applicant's behalf, the applicant's contention would appear to be that the Tribunal ought to have, and did not, decide whether she had established that the disputed amounts were not income, such that she discharged the onus under s 14ZZK of the Administration Act, because the Tribunal did not weigh up the evidence or assess her own and Ms Hang Nguyen's credit before rejecting her explanation, bearing in mind the Full Court's acceptance in Haritos that the Tribunal cannot avoid its responsibility to make findings by relying on the burden of proof section. In some cases, a contention of this kind might well raise a question of law. In this case, however, the further amended notice of appeal contained no (or at any event insufficient) foundation for some such question of law. Any reference by senior counsel at the hearing to such a question of law was at best passing and indirect. In any event, there is no basis in the Tribunal's reasons or elsewhere in the material to support the propositions that the Tribunal failed to assess the evidence before it in accordance with the Full Court's decision in Binetter or, insofar as relevant, Haritos, and failed correctly to apply s 14ZZK(b)(i) of the Administration Act in considering the applicant's evidence.

Issue 6: whether the Tribunal erred in law by failing to make a credit assessment of the applicant and Ms Hang Nguyen prior to discounting their evidence

168    This issue also arose under questions 4 and 5 of the applicant's further amended notice of appeal. As to this issue, I accept that, as the Commissioner submitted, the Tribunal was not required to make an explicit "credit assessment" of each witness in order to determine whether the applicant had discharged the onus of proof under s 14ZZK(b)(i). It was clear from the Tribunal's reasons that it rejected the uncorroborated evidence of the applicant regarding the purported loans from Mr Morris: see Tribunal reasons at [17]-[21]. The Tribunal held, moreover, that the evidence of Ms Hang Nguyen regarding amounts she loaned to the applicant, even if accepted, was inadequate to explain the source of the funds in question, or, as the Tribunal put it, "to account for the unexplained money": see Tribunal reasons at [20]. As the Tribunal concluded (at [21]), "[t]he necessary conclusion is that the Applicant ha[d] failed to demonstrate the character of the sources of money available to her".