Decision date: 10 October 2013
Case: Faloon v Commissioner of Inland Revenue
Act(s): Tax Administration Act 1994
Keywords: Statement of Position, disputes resolution process, taxpayer-initiated dispute
The taxpayer applied to the High Court for leave to bring an Originating Application, for more time to reply to the Commissioner of Inland Revenue's ("the Commissioner") Statement of Position ("SOP") under section 89M(11) of the Tax Administration Act 1994 ("TAA"). The High Court declined the application. Ronald Young J agreed with the Commissioner's position that there was no right of reply to the Commissioner's SOP in a taxpayer-initiated dispute.
This judgment confirms that section 89M(11) of the TAA does not allow a taxpayer a right of reply to the Commissioner's SOP in a taxpayer-initiated dispute.
Mr Faloon ("the taxpayer") filed two interlocutory applications. The first was an application for leave to bring an Originating Application (Rule 19.5 High Court Rules ) pursuant to section 89M (11) of the TAA, for more time to reply to the Commissioner's SOP. The second was to set aside the Commissioner's Notice of Opposition and a supporting affidavit.
The taxpayer had filed income tax returns returning income that he believes he is entitled to. The taxpayer is of the view that he is due compensation for land that was compulsorily acquired from a company that his (now-deceased) father was shareholder and director of. The Commissioner reassessed the taxpayer without issuing a Notice of Proposed Adjustment ("NOPA") under 89C(f) of the TAA. The taxpayer then issued a NOPA and commenced the disputes resolution process. The Commissioner responded to the NOPA with a Notice of Response. The taxpayer then issued an SOP, which was followed by the Commissioner's SOP. The taxpayer then applied to the High Court for more time to reply to the Commissioner's SOP.
The taxpayer also applied to have the Commissioner's Notice of Opposition set aside on the basis that it did not comply with rule 5.44 of the High Court Rules (in that it did not include a memorandum setting out the name of the solicitor acting and address for service), and for the affidavit filed in support of the Commissioner's Notice of Opposition to be set aside on the basis that it contained statements that were inadmissible under the Evidence Act 2006.
Ronald Young J dismissed the taxpayer's applications. His Honour held that ordinarily, the Originating Application procedure would be suited to a section 89M(11) application. However, section 89M(11) of the TAA did not apply where a taxpayer had initiated the dispute process.
His Honour agreed with the Commissioner's position that there was no right of reply to the Commissioner's SOP in a taxpayer-initiated dispute. His Honour stated it would be "a nonsense" to allow an application under section 89M(11) of the TAA when there was no right of reply to the Commissioner's SOP.
The Court also found that the technical failure of the Commissioner's Notice of Opposition was of no prejudice to the taxpayer and the non-compliance with the High Court Rules was of no lasting concern, therefore the Notice of Opposition should not be set aside. The Court further held that the statements in the Commissioner's supporting affidavit were not inadmissible as hearsay evidence (contrary to the Evidence Act 2006) because they were made in the context of the investigator providing her background knowledge into the taxpayer's affairs rather than being adduced to prove the truth of the statements.