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03 May 2006
Appeal Status
Not appealed

Taxpayer successfully opposes Commissioner's application to adduce new evidence

2006 case note – CIR unsuccessful in attempt to adduce new evidence - evidence exclusion rule.

TRA003/003 Decision Number 7/2006


The Commissioner was unsuccessful in his attempt, under section 138G(2) TAA, to adduce new evidence which section 138G(1) excluded.


This ruling is about the admission of evidence.

The Commissioner had assessed the Disputant for the income previously accounted for in partnership returns for the period 1996 to 2005. At the time of the dispute and making the resultant assessments, the partner companies of the partnership were thought to have not filed tax returns of their own.

The partner companies filed tax returns after the issue of the Commissioner's Statement of Position to the Disputant. It also was discovered that for the tax years 1998 and 1999 one of the partner companies had filed returns prior to the issue of the Commissioner's Statement of Position.

The Commissioner applied to raise new evidence in challenge proceedings pursuant to sestion 138G(2) of the Tax Administration Act 1994 (the Act).

The grounds on which the Commissioner pleaded in the application were:

  • At the time of delivery of the Commissioner's Statement of Position and Disclosure Notice dated 6 July 2001, the Commissioner could not have, with due diligence, discovered that evidence.
  • Apart from the tax returns, which were lodged with the Inland Revenue Department on 27 March 2001, all returns were filed well after 6 July 2001.
  • Such evidence was relevant to the issues in the challenge proceedings and having regard to the provisions of section 89A of the Act and the conduct of the parties, the admission of this evidence is necessary to avoid injustice to the defendant and the disputant.

A Notice of Opposition was filed by the Disputant on the grounds that:

  • The returns for the 1998 and 1999 years were filed prior to the date of the Commissioner's Statement of Position and so are not new facts and evidence, the Commissioner had these documents and could have discovered them by simply referring to the file;
  • Any details required from the tax returns could be confirmed in the Statement of Agreed Facts;
  • Tax returns of the entities were not relevant to the disputant's assessments;
  • The quantum of the partnership's income could be amended if the Commissioner chose to change his claim because it was different to those returns for those years;
  • There is no nexus between the partnership's returns and the returns and assessments in the challenge proceedings; and
  • The additional years requested do not meet the statutory criteria and are not relevant.


Judge Barber accepted there were three essential matters to consider when faced with an application under section 138G(2):

  1. The evidence to be introduced must be evidence of a type described in the Commissioner's Statement of Position;
  2. That the evidence could not have been, with due diligence discovered prior to the issue of the Statement of Position; and
  3. Having regard to section 89A and the parties, that admission is necessary to avoid a manifest injustice.

The Judge agreed with the disputant that for the partner company which filed its 1998 and 1999 returns before the issue of the Commissioner's Statement of Position those returns could not be regarded as new facts and evidence [para 62].

The Judge also agreed (though reserved the right to change his mind when the substantive case had commenced) that the material sought to be admitted is so relevant that its exclusion would result in a manifest injustice, though it is possibly seen as helpful and has some relevance for the substantive case [para 63 to 64].

The judge noted his wide powers to ensure the assessments are correct [par 66]. Another factor that was important was the Disputant's opposition to the adducing of the evidence (even though it benefited the Disputant), suggesting it was not manifestly unjust not to exclude it [para 64].

In this instance it was not considered appropriate to admit the evidence under section 138G(2).

Judge Barber went on to discuss the case in general terms and against the background of certain template litigation raising his concerns with both parties' position [para 71 to 76]. He expressed dissatisfaction with the current proceedings saying “this matter cries out for a negotiated settlement of a unique problem” [at para 77] and inviting the parties to consider a Judicial Settlement Conference prior to the matter proceeding any further [para 78 to 80].

Tax Administration Act 1994