Commissioner's decision reviewed
2005 case note – No judicial review for CIR's decision to not accept the plaintiff's NOPA filed outside the statutory response period - exceptional circumstances.
No ground of judicial review existed in relation to the Commissioner's decision to not accept the plaintiff's NOPA which was filed outside the statutory response period.
This was a Judicial Review of the decision of the Commissioner to refuse to accept the late filing of a Notice of Proposed Adjustment ("NOPA") under section 89K of the Tax Administration Act 1994 ("the TAA").
Prior to 2004 the plaintiff had been in dispute with the Accident Compensation Corporation ("ACC") over entitlement to compensation. During the 2004 income tax year the dispute was resolved and the plaintiff was granted employment-related compensation from ACC.
While the payment was made in two lump sums they effectively related to an earlier period of years. After discussions between the plaintiff and the Commissioner, the Commissioner agreed to allow the ACC payments to be allocated back into the years in which they effectively related, rather than in the year they were received.
Following this decision the plaintiff's Tax advisors, Coffey Davidson Limited, filed income tax returns reflecting this agreement for the income tax years ended 31 March 2000 through 2004 inclusive.
Following the filing of these income tax returns the Commissioner issued notices of assessment with respect to the income tax years ended 31 March 2000, 2001 and 2002 and income statements for the 2003 and 2004 income tax years.
These notices of assessment and income statements were issued by the Commissioner to the plaintiff's tax agents. The plaintiff's tax agents however, failed to pass these on to the plaintiff until around two months after they were originally issued by the Commissioner.
Having finally received the relevant information from her tax agents, the plaintiff prepared a NOPA for the 2000 through 2004 income tax years inclusive, which was then issued to the Commissioner along with a covering note requesting that the NOPA be accepted despite being issued outside the statutory response period required by the TAA.
For all save the 2004 income tax year, the NOPA was issued outside the two month statutory response period. Because of the operation of Part III of the TAA no assessment for the 2004 year has yet been made and as such the plaintiff will have two months to challenge that assessment by NOPA once such an assessment is made.
For the 2000 through 2003 income tax years a number of grounds were raised by the plaintiff in support for having her late NOPA accepted. These included:
- The fact that the plaintiff was awaiting a Court of Appeal decision and other reviews and appeals relating to her entitlement to a benefit and ACC, which might affect her tax position and assist her.
- Her tax agents, her accountants, did not pass on the relevant notice of assessment and income statements until the two month response period had expired or practically expired.
- There was a dispute between herself and the Commissioner as to the correctness of the income tax returns.
- The Commissioner should allow the underlying merits of the plaintiff's case to be heard and resolved.
- Judge Barber (of the Taxation Review Authority) had previously made comments about the need for a liberal approach to be given to the interpretation of exceptional circumstances.
The Commissioner, through a duly delegated officer, concluded that none of these reasons constituted exceptional circumstances.
His Honour found for the Commissioner after working through the following submissions made by the plaintiff.
The plaintiff's first submission revolved around the difficulty of potentially different decisions on her tax liability for the 2004 income tax year, compared to her 2000 through 2003 income tax years. This arose as all parties agreed the plaintiff still had the right to NOPA the 2004 income tax year after the Commissioner makes a formal assessment for that year.
The plaintiff made the point that if she is successful in disputing her 2004 income tax assessment there will be conflicting tax liabilities for the 2000 through 2003 income tax years as all the years relate to exactly the same issues. Basically, the plaintiff submitted this was an exceptional circumstance.
His Honour noted that the plaintiff had never put this point to the Commissioner in support of her argument for exceptional circumstances. In any event His Honour noted that as counsel for the Commissioner had pointed out, if the plaintiff was successful in her dispute over her 2004 income tax year she would be able to apply to the Commissioner under section 113 of the TAA to have her earlier income tax years amended accordingly. Therefore, this was not a ground of review for the plaintiff.
His Honour then dealt with a number of submissions made by the plaintiff relating to the circumstances by which she was late in filing her NOPA.
His Honour concluded it was clear that the plaintiff did not formally know about the notices of assessment and income statements until her accountants had finally passed them on to her.
His Honour noted that once the plaintiff had received the notices, she called Inland Revenue and spoke to an employee who told her, that despite being out of time or almost out of time, there may have been grounds to justify exceptional circumstances.
His Honour again noted that the plaintiff had never put this point to the Commissioner in support of her argument for exceptional circumstances. Furthermore, the plaintiff did not claim to have been misled by this information nor did she claim that it had delayed her in issuing her NOPA.
His Honour concluded that although it is unwise for Inland Revenue employees to give such advice, on the facts of this case it did not provide a ground of review.
His Honour also concluded that although the plaintiff had not raised any substantive grounds of review she did nevertheless have an effective remedy in this case. That was to proceed through with the dispute in relation to the 2004 income tax year and if she was successful with this, she could apply to the Commissioner under section 113 of the TAA to have her 2000 through 2003 income tax years amended accordingly.
Tax Administration Act 1994