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26 Jun 2009
Appeal Status

Taxpayer should proceed to challenge proceedings when disputing the validity of a Notice of Response

2009 case note - once there is a valid assessment by the CIR, the next step for taxpayer is to proceed to challenge proceedings - Notice of response, assessments.

Commissioner of Inland Revenue v Alam and Begum


Where an assessment has been issued after the Commissioner has declined to accept a taxpayer's NOR as valid, the taxpayer should proceed to challenge proceedings to dispute the validity of the Notice of Response.

Impact of decision

The Court of Appeal's decision is that once there is a valid assessment by the Commissioner, the next step for the taxpayer is to proceed to challenge proceedings. The issue of whether there is a valid Notice of Response ("NOR") should be considered at the challenge proceedings rather than at Judicial Review proceedings.


On 4 July 2001 the Commissioner issued a Notice of Proposed Assessment ("NOPA") under section 89F of the Tax Administration Act 1994 ("TAA") to the taxpayers, disallowing a GST claim for payment made to one Rafi Achmed ("Rafi"). The NOPA alleged there was no evidence that payment had been made to Rafi.

The taxpayers' NOR of 3 July 2001 was "sparse" in so much as it contained the bare assertion that they did pay Rafi.

On 4 July 2001, the Commissioner rejected their NOR on the ground that it did not provide sufficient detail to constitute a valid NOR and subsequently issued assessments.

On 22 March 2007, the taxpayers applied for a judicial review of the Commissioner's decision to reject their NOR.

At the hearing in the High Court, Woodhouse J, held that the NOR was valid and the Commissioner had no power under the disputes process to reject it.

In the Court of Appeal ("the Court"), the Commissioner put his case on the basis that a valid assessment had been made [paragraphs 16 and 17] regardless of the taxpayers' contention about the rejection of their NOR.

The Court considered the following issues:

  1. What course should a taxpayer take when he or she considers that the Commissioner has wrongly rejected his/her NOR and applied the deemed acceptance provision in section 89H (1) of the Tax Administration Act 1994 ("TAA")?
  2. Was the High Court wrong to exercise its discretion to grant relief?


On the first issue the Court answered that the taxpayers should proceed by challenge proceedings under the TAA for the following reasons:

  • The Commissioner had no power to reject the NOR and therefore the deemed provision under section 89H (1) did not apply.
  • The taxpayers should therefore proceed to challenge the assessments under section138B of the TAA.
  • The issue of the validity of the NOR could be raised at that point and could be raised in an application for a strike out by the Commissioner under section138H of the TAA.

On the second issue, the Court held that the judicial review application had no or little value to the taxpayers as the assessments remained valid and could be disputed through the disputes process. The High Court should not have granted the relief.

The Commissioner's appeal was allowed and the declaratory order of the High Court quashed.

Tax Administration Act 1994