High Court upholds TRA decision regarding Income Tax, GST and PAYE assessments and TAA ss 108 and 108A time bar.
This is an appeal from a decision of the TRA regarding Mr Dowden’s challenge to the Commissioner of Inland Revenue’s PAYE, GST and INC assessments for tax periods between January 2004 and May 2012.
Income Tax Act 1994
Income Tax Act 2004
Income Tax Act 2007
Student Loan Scheme 1992
Tax Administration Act 1994, ss 108 and 108A
This is an appeal from a decision of the Taxation Review Authority (“TRA”) regarding Mr Dowden’s challenge to the Commissioner of Inland Revenue’s (“Commissioner”) PAYE, GST and INC assessments for tax periods between January 2004 and May 2012.
These assessments concerned several businesses run by Mr Dowden, including Safeguard Security (“Safeguard”). Mr Dowden claimed to have transferred his interest in Safeguard to his former partner, Ms Jackson, in December 2003. Mr Dowden’s case was that Ms Jackson was liable for tax relating to Safeguard between January 2004 and December 2011.
The TRA upheld the Commissioner’s assessments. The TRA held that Mr Dowden had not ceased to trade as Safeguard from January 2004 to December 2011 and also that the Commissioner was not bound by the limitation periods in ss 108 and 108A of the TAA.
The decision reaffirms the TRA’s entitlement to determine the weight to place on evidence where the witness was not available for cross-examination and that it is not required to disregard entirely, the conflicting statements of a witness. The decision also reaffirms the TRA’s entitlement to take into account all information relevant to the assessment made by the Commissioner.
The decision reaffirms case law surrounding TAA ss 108 and 108A and provides a useful summary of judicial definitions of the terms used in these sections.
The issues for determination were: whether the TRA erred in finding that Mr Dowden had carried on business as Safeguard during the relevant period; and whether the TRA’s determinations regarding ss 108 and 108A were in error.
Mr Dowden argued that the TRA did not accord enough weight to statements made by Ms Jackson during an interview with Inland Revenue staff, which, according to Mr Dowden, were admissions that she and/or a company she controlled had taken over Safeguard. He also argued that various documents, which the TRA considered showed that Mr Dowden was owner/operator of Safeguard, evidenced no more than an inattention to detail on Mr Dowden’s part and did not show that Mr Dowden was trading as Safeguard.
The High Court did not accept Mr Dowden’s submissions, stating that the conclusion that Mr Dowden was operating Safeguard was plainly open on the evidence and that the contemporaneous documents, including Mr Dowden’s representations, led to this conclusion.
The High Court also stated that, in deciding what weight to give Ms Jackson’s statements, the TRA was entitled to take into account that she had not given evidence and was not available for cross-examination.
Mr Dowden’s argument regarding ss 108 and 108A was that the Commissioner was statute-barred from amending assessments relating to Mr Dowden’s 2004 Income Tax return and various GST returns throughout 2003, 2004, 2005, 2008 and 2009.
Section 108(2) permits the Commissioner to amend assessments for income tax outside a 4-year statute bar where the Commissioner is of the opinion that the relevant return was fraudulent or wilfully misleading or does not mention income (i.e. “omitted all mention of a gain subsequently found to be assessable income”).
Section 108A(3) permits the Commissioner to amend GST assessments outside a 4-year statute bar where the Commissioner considers that the person assessed has knowingly or fraudulently failed to disclose to the Commissioner all of the material facts necessary for determining the amount of GST payable.
The Court held that the TRA made no error regarding the application of ss 108 and 108A, in light of its factual findings that the relevant income tax return “did not reflect [Mr Dowden’s] true tax position, […] was misleading” and omitted income, and also that Mr Dowden, knowingly or fraudulently, failed to disclose all material facts in the relevant GST returns.
The consequence of these findings was that the Commissioner was not bound by ss 108 and 108A and was entitled to increase the amounts assessed as she had done.