Taxpayer fails in abuse of process claim
2007 case note – claim of incorrect advice given by IR officer not proven - judicial review, abuse of process, due process.
The taxpayer claimed that the Commissioner has assessed her as being liable for shortfall penalties for tax evasion due to the fact that an Inland Revenue officer had given her incorrect advice as to how to complete ten GST returns and a business cessation form. The Court found that no such advice was given and the claim of abuse of process had not been made out. Furthermore, the allegation that the Commissioner failed to follow due process in investigating his own role in relation to the completion of the GST forms and business cessation form had not been proved.
The plaintiff taxpayer was the sole director and shareholder of a company that was registered for GST purposes. The company owned two residential properties. Following communications between an Inland Revenue Department ("IRD") employee, the taxpayer and the taxpayer's tax agent regarding outstanding GST returns for the company, the taxpayer met with an IRD employee.
At that meeting the ten outstanding GST returns were completed as "nil" returns and a Business cessation (IR315) form were completed and handed to the IRD employee. The date for cessation of the business entered onto the IR315 was some eighteen months prior to the meeting and the two properties owned by the business were not listed as assets.The Company subsequently sold both properties and did not return the GST on the sales.
The Company was audited and the taxpayer was asked why the properties had not been included on the IR315 and why GST from the sale of the properties had not been included in the GST returns. The taxpayer said she had been told to backdate the company's trading cessation date by the IRD employee and could only "plead ignorance".
The Commissioner issued a Notice of Proposed Adjustment ("NOPA") to the taxpayer, including a shortfall penalty for tax evasion in respect of incorrectly completing the GST returns as nil returns and for incorrect completion of the business cessation form. The NOPA was sent to both the taxpayer and her tax agent. A Notice of Response ("NOR") was received out of the statutory response period.
The Court dismissed the application for Judicial Review.
The Court made findings of fact in favour of the Commissioner to the effect that the IRD employee had not told the taxpayer how to complete the IR315 and that the taxpayer was the only person who had knowledge of the status of the (sale of) the properties. He also noted other evidence to the effect that the taxpayer had been aware of the obligation to return the GST from the sales of the properties.
The Court held that there was nothing said or done by the IRD employee that could be characterised as an abuse of process or unfairness.
The Court held further that the NOPA detailed the investigation undertaken by the Commissioner and noted that the allegation that the Commissioner had failedto follow due process in investigating his own role in relation to the completion of the GST form and the IR315 was not made out on the facts.
The Court held in the alternative, if it was incorrect in its conclusions and there was some apparent basis for intervention, that the circumstances of the case did not involve "exceptional circumstances" as required for judicial review in tax cases.
Judicature Amendment Act 1972 and Tax Administration Act 1994