Dalton v Deputy Commissioner of Taxation [1986] HCA 15

High Court of Australia Gibbs C.J. Mason, Wilson, Brennan and Dawson JJ. Dalton v Deputy Commissioner of Taxation [1986] HCA 15

ORDER Appeal dismissed with costs.

The Court delivered the following judgment:—

April 11 Gibbs C.J.,Mason, Wilson, Brennan and Dawson JJ.

This appeal raises for decision the short but important question whether the Commissioner of Taxation, in referring a decision to a Board of Review in accordance with s. 188(1) of the Income Tax Assessment Act 1936 Cth, as amended, is required to include in the statement which he furnishes to the Board, and a copy of which he furnishes to the taxpayer, a statement of his findings on material questions of fact and a reference to the evidence or other material on which those findings are based. The Full Court of the Federal Court by a majority (Lockhart and Wilcox JJ., Smithers J. dissenting) [1] affirmed the decision of Franki J. [2] who answered this question in the negative.

1. (1985) 60 A.L.R. 783; 16 A.T.R. 736; 85 A.T.C. 4476. 2. (1985) 16 A.T.R. 292; 85 A.T.C. 4144.

By s. 185 of the Income Tax Assessment Act a taxpayer dissatisfied with any assessment under that Act may, within the time mentioned in the section, post to or lodge with the Commissioner an objection in writing against the assessment. Section 186 requires the Commissioner to consider the objection and provides that he may disallow it or allow it either wholly or in part and requires the Commissioner to serve the taxpayer with written notice of the decision. Clearly, the Commissioner is not obliged to give reasons for that decision either at the time when he makes it or at the time when he serves the taxpayer with written notice of it. The contrary was not suggested.

Under s. 187 of the Income Tax Assessment Act a taxpayer dissatisfied with the decision on the objection may request the Commissioner either to refer the decision to a Board of Review for review or to treat his objection as an appeal and forward it to a Supreme Court. Section 188(1) provides that if the request is accompanied by the requisite fee the Commissioner shall refer the decision or forward the objection to a Board or court in accordance with the request. Upon the reference to the Board, the taxpayer is limited to the grounds taken in the objection and has the onus of proving the assessment to be excessive: s. 190. The Board has power to review the decision of the Commissioner referred to it and for that purpose has, subject to s. 193, all the powers and functions of the Commissioner: ss. 192, 193. On the reference, the Board gives a decision in writing (s. 195(1)) and, on the request of the Commissioner or the taxpayer, when giving its decision shall state in writing its findings of fact and its reasons in law for the decision: s. 195(2).

The Act itself does not require the Commissioner to furnish the Board with reasons for a decision to which objection has been made, but reg. 35 of the Income Tax Regulations does impose that requirement. That regulation provides as follows:

(1) The Commissioner, in referring a decision to a Board of Review in accordance with sub-section (1) of section 188 of the Act or section 189 of the Act, shall furnish the Board with a printed or typewritten statement, in quadruplicate, containing—

(a) the name and address of the taxpayer;

(b) full details of the taxpayer's claim as made to the Commissioner; and

(c) the Commissioner's reasons for disallowing the taxpayer's claim.

(2) The Commissioner shall at the same time furnish the taxpayer with a copy of the statements referred to in sub-paragraphs (b) and (c) of the last preceding sub-regulation.

It was held in Sutton v Federal Commissioner of Taxation [3] , which was followed in Reg v Cain; Ex parte Evatt [4] , that a statement by the Commissioner of his ultimate conclusions will satisfy the requirements of that regulation and that the Commissioner is not bound to reveal the steps in reasoning by which the conclusion was reached.

1. (1959) 100 C.L.R. 518. 2. (1975) 133 C.L.R. 37.

The question which now arises is raised by the provisions of s. 25D of the Acts Interpretation Act 1901 Cth, as amended, which was inserted in that statute by amendment in 1984. Section 25D provides as follows:

Where an Act requires a tribunal, body or person making a decision to give written reasons for the decision, whether the expression "reasons", "grounds" or any other expression is used, the instrument giving the reasons shall also set out the findings on material questions of fact and refer to the evidence or other material on which those findings were based. It was accepted in argument that s. 25D applies to the case where a regulation requires a person making a decision to give reasons for his decision: see s. 46(a) of the Acts Interpretation Act.

The main submission, put clearly by Mr. Bloom on behalf of the appellant, was that if s. 25D is given its ordinary meaning it will apply to reg. 35(1)(c) and that there is no justification for departing from that meaning. However, s. 25D applies to the case where the Act (or regulation) requires a person making a decision to give written reasons for his decision. As has been said, under the Income Tax Assessment Act the Commissioner is not required to give reasons for his decision to disallow an objection at the time when he makes that decision or gives notice of it to the taxpayer. An obligation to give reasons under reg. 35 arises only if the taxpayer has requested the Commissioner to refer the decision to a Board of Review and it arises only when the decision is referred to the Board and by reason of the fact that the decision is so referred, rather than by reason of the fact that the decision was made. The use of the present participle in the phrase "making a decision" suggests a continuing relationship; in other words, that the duty under s. 25D is imposed on a person by reason of, and as an incident to, the fact that he is making a decision. The ordinary and grammatical meaning of the words is not the same as "a person who has made a decision". Although the section is of a remedial character its apparent purpose does not warrant a departure from the ordinary meaning of its words. The purpose of s. 25D appears to be to enable a person affected by a decision for which reasons must be given to be supplied with findings and a reference to the evidence or other material on which they were based so that he may shape the course of his future conduct accordingly. That purpose will not be effectuated when the information is to be given to him only after he has chosen and embarked upon a particular course.

Of course, what has been said does not mean that s. 25D applies only when the person making the decision is obliged to give his reasons immediately the decision is given. However, the section requires that the obligation to give reasons should arise from the fact that the decision was given and as an adjunct to it and not by reason of the happening of, or as an adjunct to, some subsequent circumstance. It should be observed that the construction suggested by Mr. Bloom would have only a limited value for a taxpayer because any reasons given by the Commissioner under reg. 35 are not made binding upon him and in the absence of express statutory provision the Commissioner's actions cannot estop the Board from giving effect to the provisions of the Income Tax Assessment Act.

We will dismiss the appeal.