TRA strikes out taxpayer's late claim
2016 case note – CIR's application to strike out proceedings granted by Taxation Review Authority – late claim, exceptional circumstances.
The Commissioner of Inland Revenue ("the Commissioner") applied to strike out the disputant's belatedly filed notice of claim. The disputant filed a response which the Taxation Review Authority ("the TRA") accepted as an application to allow proceedings to be commenced out of time. The TRA determined (on the papers) that there were no exceptional circumstances, consequently dismissing the disputant's application, and granted the Commissioner's application to strike out the proceedings.
The decision reinforces the importance of complying with the strict procedures for the commencement of challenge proceedings in the TRA as outlined in the Tax Administration Act 1994 ("TAA").
The disputant owns a residential property and claimed rental losses in relation to the property in the 2006, 2007 and 2009 to 2012 income years.
The Commissioner made reassessments for the 2009 to 2012 income years after two separate audits of the disputant's income tax returns.
The disputant served a Notice of Proposed Adjustment ("NOPA") on the Commissioner on or about 12 November 2014 seeking an adjustment of $18,087. The NOPA was rejected by the Commissioner and the Disputes Review Unit subsequently decided that the adjustment proposed by the disputant should not be made.
The Notice of Final Decision dated 30 June 2015 and a copy of the adjudication report were sent to the disputant including information regarding the specific procedure to be followed if the disputant wished to challenge the assessment.
The investigator responsible for the audits of the disputant's tax returns (‘Ms A') spoke with the disputant on several occasions in August 2015 regarding bringing challenge proceedings and the procedure to do so.
Ms A received a handwritten document on 27 August 2015 from the disputant titled "Notice of Claim" which had been sent to the Commissioner's office in Wellington. Ms A subsequently followed up with the disputant reminding her of the procedure to bring a challenge and the dates by which to do so.
On 8 September 2015, Ms A received a second document purporting to be the disputant's notice of claim. Ms A then contacted the Litigation Management Unit ("LMU") which confirmed the document had not been filed in the TRA as required.
Mr X, a solicitor with LMU, contacted the disputant by phone and email on 9 September 2015 regarding the procedure and timeline for commencing a challenge in the TRA. He spoke to the disputant again on 18 September 2015 and recommended that she file a notice of claim as soon as possible.
On 24 September 2015, the disputant filed a notice of claim with the TRA.
The Commissioner applied to strike-out the disputant's challenge proceedings on the grounds that the proceedings were filed out of time and no application had been made for an extension of time.
The disputant filed a response which the TRA accepted as an application to allow proceedings to be commenced out of time under s 138D of the TAA. Additionally, the disputant was given further opportunity to file affidavit evidence in response to the Commissioner's application, as well as being urged by the TRA to seek legal advice.
The TRA was satisfied that the disputant's failure to file her challenge within the required time period in accordance with s 138B(3)(c) of the TAA came about because the disputant did not follow the procedure for bringing a challenge and not because of any event or circumstance which was beyond her control.
Therefore the TRA concluded that no exceptional circumstances existed and accordingly dismissed the disputant's application to allow the challenge proceedings to be commenced out of time.
Having decided that the disputant had failed to comply with s 138B of the TAA, the TRA applied the decision in Allen v Commissioner of Inland Revenue ( 3 NZLR 1, (2005) 22 NZTC 19,473 (CA) at ) and concluded that it did not have jurisdiction to hear the claim and that it must strike out the challenge proceedings under s 138H of the TAA.
Rule 15 District Court Rules 2014 and Part 8A Tax Administration Act 1994