Disputant's application for filing challenge out of time declined
2015 case note - application for filing challenge out of time declined by Taxation Review Authority - exceptional circumstances, challenge of refusal notice, s 89K.
This is a decision of the Taxation Review Authority ("TRA") declining the disputant's application for an extension of time for filing challenge proceedings in relation to default assessments made by the Commissioner of Inland Revenue ("the Commissioner").
This was an application by the disputant for an extension of time for filing challenge proceedings based on exceptional circumstances. The challenge proceedings relate to default assessments issued by the Commissioner for two GST periods ending 30 November 2004 and 30 March 2006.
The disputant attempted to file a Notice of Proposed Adjustment ("NOPA") for these two periods outside of the statutory timeframes. The Commissioner's refusal notice declining to accept the NOPA was issued on 3 September 2014. The disputant filed a Notice of Claim in the TRA on 23 December 2014.
Section 89K(6) of the Tax Administration Act 1994 ("TAA") provides that a disputant is entitled to challenge a refusal notice issued by the Commissioner if proceedings are filed in the TRA "within two months of the notice's issue". Accordingly, the challenge should have been filed by 3 November 2014 to be brought within the requisite time period.
The Commissioner filed a memorandum stating that she will abide by the TRA's decision on the application. Accordingly, she did not file submissions on the matter.
Judge Sinclair found that while the events giving rise to the application were regrettable, the disputant had failed to establish exceptional circumstances and the application to extend time for filing and the challenge proceedings were dismissed.
The disputant contended that exceptional circumstances existed in this situation because the application to the TRA was delayed due to the disputant filing a judicial review proceeding in the High Court in error and it was only on 17 December 2014 that he was notified by the Commissioner that the proceeding should have been filed in the TRA.
Furthermore, the disputant claimed any delay was relatively minimal given that the Commissioner was aware of the case and did not advise the disputant of the error for many weeks after the application was filed in the High Court. The disputant went on to say that the Commissioner would have been under no illusion that the disputant was at all times disputing the assessments.
Judge Sinclair, however, found that the failure to commence the challenge proceedings within time came about because an error was made by the disputant's lawyers for which no explanation was given.
In confirming Commissioner of Inland Revenue v Fuji Xerox NZ Limited (2002) 20 NZTC, she held that the term "exceptional circumstance" has a specific statutory meaning being:
- an event or circumstance beyond the control of a disputant;
- that provides the disputant with a reasonable justification for not commencing a challenge to a disputable decision within the response period.
An act or omission of an agent (which in this case included the disputant's lawyers) of a disputant will not be an exceptional circumstance unless certain conditions are satisfied. These are that:
- the act or omission of the agent was caused by an event or circumstance beyond the control of the agent;
- such event or circumstance could not have been anticipated; and
- the effect of the act or circumstance could not have been avoided by compliance with accepted standards of business organisation and professional conduct.
Judge Sinclair found that the disputant's situation was not an event or circumstance which was beyond the control of the disputant's agent. She further found the situation was not an event or circumstance that could not have been anticipated. The situation could have been avoided by compliance with accepted standards of business organisation and professional conduct. She concluded, at , that the failure to file proceedings within time occurred simply because the requisite disputes procedure under the TAA was not followed.
She went on to state that it did not assist the disputant's position that the Commissioner was aware from the history of the dispute proceedings that it was the disputant's intention to dispute the assessments. Further, it was not relevant that the Commissioner took some weeks before she filed her protest to jurisdiction alerting the disputant to the error. The obligation was on the disputant and his advisors to ensure that the challenge proceedings were properly commenced.
Tax Administration Act 1994