Claims struck out for being filed out of time

Summary

The disputants' claims in relation to income tax assessments are struck out for being filed out of time. The disputants have 14 days to decide whether to pursue claims in respect of shortfall penalties.

Impact of decision

The Commissioner of Inland Revenue ("the Commissioner") has no authority to waive the timing requirements for a challenge being filed.

Facts

The disputants are partners in a farming partnership. The disputants claim to have made an election in the 2009 year to cease valuing their herd using the herd scheme valuation method. However, the Commissioner has no record of an election being made in that year.

The Commissioner has assessed the disputants for additional income tax arising from the different valuation method used. The disputants challenged the Commissioner's assessments. This preliminary matter is about whether the disputants' Notices of Claim were filed in time.

On 21 March 2013, the Commissioner assessed the disputants for income tax for the year ended 31 March 2009 ("the income tax assessments").

On 23 March 2013, the Commissioner assessed the disputants for an unacceptable tax position shortfall penalty for the tax shortfall arising from the income tax assessments ("the shortfall penalty assessments").

On 23 May 2014, the disputants each filed a Notice of Claim in the Taxation Review Authority ("the TRA"). The Notices of Claim refer to disputable decisions made by the Commissioner on 23 March 2014, but appear to challenge only the income tax assessments made on 21 March 2014.

No application to commence a challenge out of time (under section 138D of the Tax Administration Act 1994) was made.

The Commissioner decided to bring the issue of timing to the TRA's attention on the basis that the Commissioner did not have the power to waive the statutory requirements in relation to when a challenge could be filed (see Reckitt and Colman (New Zealand) Ltd v Taxation Board of Review [1966] NZLR 696 (SC); [1966] NZLR 1032 (CA)).

Decision

The TRA held that although the income tax and shortfall penalty assessments arose from the same factual context, and the quantum of the shortfall penalty assessment related to the tax shortfall arising from the income tax assessment, the assessments were separate disputable decisions. Time limits applied from the date of issue of each Notice of Assessment (ie, 21 March 2014 for the income tax assessments and 23 March 2014 for the shortfall penalty assessments).

The TRA was satisfied that the challenges to the income tax assessments were filed out of time. In the absence of any applications to extend the time for filing a challenge, the challenges to the income tax assessments were struck out.

Although no particular mention was made of shortfall penalties in the Notices of Claim, there was sufficient mention of matters relating to the shortfall penalty assessments (ie, the 23 March 2014 date and letters dated 18 March 2014 that mention the shortfall penalties) for the Notices of Claim to apply to the shortfall penalty assessments. A challenge in respect of the shortfall penalty assessments was made in time.

The disputants have 14 days to advise the TRA whether they wish to proceed with the challenge to the shortfall penalty assessments only.