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02 Mar 2007
Appeal Status
Not appealed

Application for leave to commence proceedings after expiry of response period dismissed

2007 case note - applicant sought to commence proceedings out of time - expiry of response period, exceptional circumstances.

Decision Number 5/2007

Tax Administration Act 1994; section 138D.


The applicant sought leave from the Authority to commence proceedings out of time, on the grounds exceptional circumstances applied. The Authority decided that no exceptional circumstances existed and dismissed the application.


In about 2000, a dispute developed between the parties over tax payable in the 1994 and 1995 years. There were dealings between the applicant's solicitors and the investigator based in Nelson, IRD Wellington and the Crown Law Office. The in-house accountant received copies of all communications between the parties but generally such communications took place between the applicant's solicitor and the Department.

The Department sent a letter to the applicant's solicitor on 20 April 2006 to advise notices of assessment would be issued shortly. The letter also noted that the assessments would be sent directly to the applicant. A copy of the letter was sent to the in-house accountant, and the external accountant. The assessments issued on 27 April 2006. The applicant failed to commence proceedings before the response period expired on 26 June 2006, but did so on 10 August 2006.

The in-house accountant received the assessments on either 28 April or 1 May 2006, but took no action until 8 May 2006. That appeared to be due to the investigator having telephoned the external accountant in relation to the assessments, and the external accountant telephoning the in-house accountant who said he had received them and would contact the external accountant to discuss them.

In mid June 2006, the external accountant reminded the in-house accountant he had not forwarded on the assessments. The in-house accountant undertook to do so, but did not attend to that until 26 June 2006, the last day of the response period.


  1. The applicant relied on four factors which it said amounted to exceptional circumstances beyond its control and provided it with reasonable justification for its failure to commence proceedings in time:
    1. That there were very long delays between a process being agreed to between the parties and the IRD issuing the assessments.
    2. The communications from the IRD suggested it would take a next step without any next step then following.
    3. That the IRD were in the practice of forwarding copies of documents to, and primarily dealing with the applicant's solicitors, but did not do so with regard to the assessments.
    4. That printing on the back of the notices of assessment recorded that the applicant had a four month period in which to challenge the assessments.

The submission for the Department was that there was no causal link between any of these factors, and the applicant's default, which arose from repeated failures of its agents.

The Authority accepted the IRD submission that any delays by it prior to issuing the assessments cannot be said to be the cause of the in-house accountants failure to properly consider correspondence copied to him, or to re-familiarise himself with the agreed process and to follow the matter up within two months.

The Authority noted the letter of 20 April 2006 from IRD made it clear the Commissioner would be issuing the assessments shortly. Thus any delays by the IRD prior to 20 April 2006 were irrelevant to the present situation.

The Authority also accepted an IRD submission that the facts did not show that the investigator indicated he would do something and then fail to do it.

On the facts, the Authority placed no weight on the fact the notices of assessment were sent directly to the inhouse accountant. There was no lack of control of the situation by the applicant. He also noted that this event or circumstance did not reasonably justify the default, as the letter of 20 April 2006 could not be clearer as to where the notices of assessment would be posted.

The Authority also found that the reference to a four month period on the back of the notices of assessment applied only to the issue of a NOPA and not to disputing the assessment by filing a challenge. He also noted those procedures do not apply where a tax audit has occurred, and the notices of assessment stated repeatedly "amended as per investigation."