Time limit for tax payer to issue NOPA begins on filing return
2004 case note – TRA found no exceptional circumstances existed to excuse the filing of a NOPA out of time – strike out.
The tax payer filed a return intending to follow it up with a NOPA requiring that an item returned as income be deleted. It acted in the mistaken belief that the response period commenced on receipt of the notice of assessment, which is no longer issued as a matter of course under the self-assessment regime.
Due to an error, the return acknowledgment was issued to the wrong address and the NOPA was not filed with Inland Revenue until after the response period had expired. The proceedings sought to challenge the Commissioner's decision under section 89K that no exceptional circumstances existed to excuse the filing of a NOPA out of time. The Authority found it had no jurisdiction to hear the challenge.
The department applied for an order striking out the notice of claim. In essence the grounds for the application were that the notice of claim disclosed no right of challenge under Part VIIIA of the Tax Administration Act 1994. The background to the application was as follows:
The tax payer filed its 2003 return on 2 July 2003 which disclosed the receipt of the sum of $167,000 paid to the disputant by a former lessee as consideration for cancellation of a lease. The accountant who filed the return considered the receipt to be a capital sum, and made arrangements for a tax consultant to attend to the filing of a NOPA upon receipt of a notice of assessment. The department was sent a letter advising that the address of the tax payer had changed from its accountant to the tax consultant engaged to prepare the NOPA.
On 29 July 2003 the department issued a return acknowledgment form to the wrong address. This resembled a notice of assessment form, but was merely advice of the self assessment figures. The tax consultant expected this communication would be sent to him so he could prepare the NOPA, but he did not learn of it until the former accountant returned from his overseas trip. That led to the disputant filing a NOPA on 31 October 2003, which the TRA accepted was as soon as reasonably possible after discovery by its advisers that the return acknowledgment form had been sent to the wrong address. However, that NOPA was out of time, in that it needed to have been filed by 1 September 2003, unless the department allowed an extension of that period on the basis of there being exceptional circumstances.
The TRA found that with the introduction of self-assessment, section 92 of the TAA now provides for each tax payer, not the Commissioner to make an assessment of their taxable income and income tax liability. This meant that the time for filing a NOPA commenced on the date the income tax return was filed, and not on the date the return acknowledgment form was issued by the department.
The TRA accepted that the decision under section 89K that there were no exceptional circumstances to excuse the late filing of the NOPA was not a disputable decision pursuant to section 138E(1)(e)(iv). All other decisions which the disputant alleged the Commissioner had made were merely ancillary to the decision that there were no exceptional circumstances. Alternatively, even if all other decisions were independent decisions which satisfied the decision of "disputable decision" the disputant still had no right of challenge because its NOPA did not satisfy the statutory time limits.
The TRA also found there was no right of challenge under section 138B of the TAA. It was not necessary for the department to issue a response notice as the NOPA was out of time.
Judge Barber also noted the circumstances of the disputant's failure to file the NOPA in time could arguably (but with difficulty) amount to an exceptional circumstance. He earlier observed that the question is not as clear cut against the tax payer as the department thinks it is. However he accepted that this was a matter for the Commissioner and the Authority had no jurisdiction to hear the matter and there was no option but to grant the application.
Tax Administration Act 1994, sections 138H, 89K, 92, 138B, 138C, 138E(1)(e)(iv); Taxation Review Authorities Act 1994, section 13A; Taxation Review Authorities Regulations 1998, regulation 12