Challenge to jurisdiction of Taxation Review Authority fails
2009 case note - Assessment, validity of assessment, notice of assessment, jurisdiction of the Taxation Review Authority, procedural requirements of Revenue Acts.
The appellants' challenge to the jurisdiction of the Taxation Review Authority was unsuccessful. The appellants' argued that the notices of assessment issued by the Commissioner were invalid, as they did not quantify the amount of tax owing. The appellants contended that the Taxation Review Authority did not have jurisdiction to determine a challenge when the notices of assessment issued were invalid.
The Court of Appeal confirmed that the jurisdiction of the Taxation Review Authority to determine tax challenges arises from section 138B of the Tax Administration Act 1994 ("TAA"). A notice of assessment commences the statutory time periods to initiate a challenge to an assessment, but is a separate and ancillary step to the assessment itself.
Impact of decision
This judgment confirms the existing case law regarding the distinction between assessments and notices of assessment. It reiterates that in accordance with section 114 of the TAA, the Commissioner's failure to comply with procedural requirements of the Revenue Acts will not invalidate an assessment.
The appellants' partnership had business interests in farming and an electrical equipment company. Following an investigation into the partnership's tax affairs, the Commissioner issued manual notices of assessment for the 1992-1995 income tax years on 17 September 1996. The notices of assessment set out the adjustments to be made to the assessable income returned by the appellants, but did not quantify the amount of tax payable. On 15 October 1996, the Commissioner issued statements of account.
Further discussions regarding the assessments were held with the appellants and subsequent notices of assessment were issued on 20 February 1997. These notices were also manually prepared and specified the adjusted assessable income of the appellants and did not quantify the amount of tax to be paid. On 26 February 1997 statements of account were issued to reflect the re-assessments made.
Following a disagreement over the validity of the Commissioner's assessments and the appellants' dispute of the assessments, the appellants commenced Judicial Review proceedings against the Commissioner. The Judicial Review proceedings were settled by way of Deed. The Settlement Deed stated that the Commissioner agreed to accept the appellants' notices of proposed adjustment outside the statutory response period.
The appellants' challenge to the correctness and the validity of the assessments were unsuccessful before the Taxation Review Authority and the High Court. The appellants then appealed to the Court of Appeal, challenging the jurisdiction of the Taxation Review Authority to hear the challenge proceedings.
The appeal was dismissed.
The Court of Appeal reiterated at paragraph , that it is settled law that an assessment is a decision by the Commissioner quantifying the amount of tax payable by the taxpayer; it must be definitive as to the taxpayer's liability and is subject to challenge only through the statutory disputes process.
The Court noted that the legislation contemplates that a taxpayer is to be given notice of an assessment as soon as convenient (section 111 of the TAA), but that failure to give such notice does not affect the validity of the assessment itself (section 111(6) of the TAA).
A taxpayer's liability to pay tax arises when an assessment is made, the notices of assessment gives rise to the procedural process of the disputes resolution and challenge process contained in Part IVA and VIIIA of the TAA (paragraph  of the Judgment).
The Court of Appeal stated at paragraph  of the judgment that the jurisdiction of the Taxation Review Authority arises from section 138B of the TAA, not from the notice of assessment. The notice of assessment determines the commencement of the statutory time period for the challenge proceedings to be commenced.
Income Tax Act 1976, Tax Administration Act 1994