KRASNIQI v COMMISSIONER OF INLAND REVENUE [2018] NZHC 2075

KRASNIQI v COMMISSIONER OF INLAND REVENUE [2018] NZHC 2075 [14 August 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-000019[2018] NZHC 2075UNDER THE Income Tax Acts 1994, 2004 and 2007 andthe Tax Administration Act 1994IN THE MATTER OF an appeal against the decision of theTaxation Review AuthorityBETWEEN ETHNIK KRASNIQIAppellantAND COMMISSIONER OF INLANDREVENUERespondentHearing: 7 and 8 June 2018; further submissions and schedules filed 28June 2018Appearances: A A H Low and T M Kelly for the AppellantR L Roff and L K Worthing for the RespondentJudgment: 14 August 2018JUDGMENT OF WYLIE JThis judgment was delivered by Justice WylieOn 14 August 2018 at 4.00pmPursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/counsel:Alexandra Low & Associates, AucklandCrown Law, WellingtonCONTENTSIntroduction 1Factual background 3Alterations in position 22The Authority's decision 23Issues on appeal 32The appeals 35Analysis 38Section 138G(2) 38Relevant provisions 38Submissions 41Analysis 44(a) Process issues 44(b) A higher standard of disclosure in attribution cases? 54Income under ordinary concepts 62The Authority's findings 62Submissions 67The onus 69Mr Krasniqi's appeal 72(a) Deposits paid into the Krasniqi Discretionary Trust 72(b) Payment by Whangaruru Farm Trust to Roverland 86(c) Payment to Flamur Krasniqi 95(d) Amounts paid into Mr Krasniqi's New Zealand bank account inDecember 2009 and March 2011 99The Commissioner's cross-appeal 110(e) Payment by Sun Marine Services into Mr Krasniqi's Australianbank account 110(f) Sums paid by Sun Marine Services to the KrasniqiDiscretionary Trust 116(g) International money transfers to Yacht Solutions 121Conclusion - Summary 126Costs 128Introduction[1] The appellant, Ethnik Krasniqi, appeals aspects of a decision given by JudgeAA Sinclair, sitting as the Taxation Review Authority (the Authority), on 30 November2017.1 The respondent, the Commissioner of Inland Revenue (the Commissioner),cross-appeals aspects of the decision.[2] Broadly, the appeals concern the correctness of default income tax assessmentsissued by the Commissioner to Mr Krasniqi for the 2005 to 2011 income years (thedisputed period).Factual background[3] Mr Krasniqi was born in New Zealand. His business endeavours in thiscountry have been met with mixed success. He was adjudicated bankrupt in 1993following the failure of his family's manufacturing business. He then becameinvolved in property trading and land development. He relocated to Australia with hisfamily in 2001, but he continued to spend a considerable amount of time thereafter inthis country. During the disputed period, Mr Krasniqi worked as a consultant,notwithstanding that he was adjudicated bankrupt again in 2003. His work includedadvising on, as well as facilitating and negotiating, property deals and landdevelopment projects undertaken in New Zealand, principally by two of his childhoodfriends – Roy Brown and Murray Smith. He also looked after various businessinterests of his father, Mazhar Krasniqi.[4] Many of the projects undertaken by Messrs Brown, Smith and Mazhar Krasniqiwere conducted through trusts set up by them.[5] During the disputed period, substantial deposits were made into Mr Krasniqi'spersonal bank accounts, both in Australia and New Zealand, from the various trustsset up respectively by Messrs Brown, Smith and Mazhar Krasniqi. Substantialdeposits were also made by the trusts into the bank accounts of various ofMr Krasniqi's family members and the bank accounts of a further trust – the KrasniqiDiscretionary Trust, which the Commissioner asserts Mr Krasniqi was involved in.There were also various eftpos card transactions, ATM withdrawals, foreign currency1 Krasniqi v Commissioner of Inland Revenue [2017] NZTRA 8.purchases and international money transfers by the trusts, which the Commissionersays resulted in monies being received directly or indirectly by Mr Krasniqi. Therewere other deposits into Mr Krasniqi's personal bank accounts and the bank accountsheld by the Krasniqi Discretionary Trust from unknown sources.[6] The Commissioner started reviewing Mr Krasniqi's tax affairs in October2009, as a result of an investigation into the tax affairs of some of Mr Brown's trusts.The Commissioner continued to gather and analyse information in relation toMr Krasniqi's tax affairs for almost four years before issuing default assessmentsagainst Mr Krasniqi in August 2013. Mr Krasniqi was then provided with acomprehensive schedule – referred to as "Schedule A" – setting out theCommissioner's assessments for each tax year in the disputed period.2 The totalincome attributed to Mr Krasniqi over the disputed period was $7,806,780.67 and thetotal tax to pay was assessed at $2,930,367.55.[7] Initially, Mr Krasniqi denied that he was a New Zealand tax resident liable topay New Zealand income tax over the disputed period. In December 2013, he issueda notice of proposed adjustment and filed nil tax returns for each relevant tax year. Healso stated that he wished to discharge the onus of proof resting on him, and herequested all of the Commissioner's source documentation and a breakdown of thecalculations set out in Schedule A.[8] The Commissioner's notice of response was issued on 14 February 2014. Sherejected Mr Krasniqi's notice of proposed adjustment and his assertion that he was nota New Zealand tax resident, liable to pay New Zealand income tax. She maintainedthe position she had taken in the default assessments.[9] On 18 March 2014, the Commissioner responded to Mr Krasniqi's request fora breakdown of the calculations set out in Schedule A. She compiled detailedspreadsheets itemising each transaction that made up the summary figures included inSchedule A. The breakdown and spreadsheets were made available to Mr Krasniqi.He was told in a covering letter that the amounts recorded in the spreadsheets weresourced directly from bank statements. The Commissioner recorded her assumption2 The Income Tax Act 1994 applied to the 2005 tax year, the Income Tax Act 2004 to the 2006-2008tax years, and the Income Tax Act 2007 to the 2007-2011 tax years.that Mr Krasniqi would have access to his own bank account statements and records,and that he would be able to request copies of his family members' bank accountstatements direct from them.[10] Mr Krasniqi did not respond to this letter.[11] After a series of aborted attempts to do so, a facilitated conference wasarranged between the Commissioner's officers and Mr Krasniqi's advisors. Theconference took place in late July 2014. Mr Krasniqi did not attend. In the course ofthe conference, the Commissioner agreed to provide Mr Krasniqi with copies of thebank statements she held for Mr Brown's trusts which were said to have paid moneyto or for Mr Krasniqi, and the source documents relating to Mr Krasniqi's passengermovements in and out of New Zealand (Mr Krasniqi was at this point denying that hewas a tax resident in this country). Mr Krasniqi for his part, through his advisors,agreed to provide the Commissioner with documentation in relation to the allegedrepayment of loans he said had been made by Mr Brown to members of his family. Itwas the expectation of both parties that this material would be exchanged by 10October 2014.[12] The Commissioner provided Mr Krasniqi with the documents she had agreedto provide between September and December 2014. Mr Krasniqi, however, failed toprovide the documents he had promised in return. The Commissioner initiallyextended time to Mr Krasniqi to enable him to provide the promised material. He stillfailed to do so and the Commissioner ultimately issued him with formal noticerequesting the promised information under s 17 of the Tax Administration Act 1994(the Act). However, no documentation was provided by Mr Krasniqi in response tothis formal notice.[13] On 1 December 2014, a disclosure notice was issued by the Commissioner.This triggered the start of the strict timeframes set out in the disputes process detailedin the Act.3[14] Mr Krasniqi sent his statement of position by email to the Commissioner on 30January 2015. In it, Mr Krasniqi said as follows:3 Tax Administration Act 1994, s 89H.The Taxpayer reiterates that he wishes to discharge the onus of proof, and isreviewing the Commissioner's source documents and breakdown ofcalculations. The Taxpayer had hoped to have all evidence to theCommissioner before today but will provide further evidence as it comes tohand and as quickly as possible. The Taxpayer is reviewing his records andmaking enquiries to obtain information in support of his position Mr Krasniqi went on to indicate that the documentary evidence to be provided wouldinclude bank statements for various relevant entities, bank statements and loandocumentation for various individuals, and oral evidence. Relevantly, Mr Krasniqidid not assert that he had been disadvantaged in preparing his statement of positionbecause he did not have access to all of the material available to the Commissioner.[15] On 3 February 2015, the Commissioner confirmed receipt of Mr Krasniqi'sstatement of position. She rejected the assertions made in it on 9 February 2015 and,on 30 March 2015, issued her own statement of position. It included a full list of allthe documentary evidence she relied on. The documentary evidence – running to 182items – was cross-referenced to various assertions made in her statement of position.[16] No request was then made by Mr Krasniqi for copies of any of the documentslisted.[17] On 11 June 2015, the dispute was referred to adjudication by the DisputesReview Unit. The referral letter also included a further list of all documentaryevidence the Commissioner held. The same list was provided to Mr Krasniqi on 28May 2015.[18] Again, no request was made by Mr Krasniqi for any of the documents listed.[19] On 17 July 2015, the Disputes Review Unit issued its adjudication report. Itwas in favour of the Commissioner and shortly thereafter statements were issued toMr Krasniqi for the tax owing in accordance with the default assessments.[20] On 16 September 2015, Mr Krasniqi filed a challenge with the Authority.[21] Full discovery occurred in March 2016. Mr Krasniqi then received all of theCommissioner's documentation.Alterations in position[22] As I have noted, Mr Krasniqi initially denied that he was a New Zealand taxresident and instead asserted that he was residing in Australia throughout the disputedperiod. He did not, however, return any income in that country over the disputedperiod either. When the dispute came before the Authority, Mr Krasniqi accepted thathe was a New Zealand tax resident at all relevant times. He also accepted that he hadreceived some fees for his consultancy work for some of the tax years falling withinthe disputed period, but he did not say how much he had received.The Authority's decision[23] There were two primary issues for determination before the Authority:4(a) Whether Mr Krasniqi should be permitted, under s 138G(2) of the Act,to raise what were referred to as "process issues" not raised in hisstatement of position; and(b) Whether the amounts attributed by the Commissioner to Mr Krasniqiwere assessable to him as income under "ordinary concepts".[24] Judge Sinclair noted that process issues were first raised in the openingsubmissions made for Mr Krasniqi.5[25] The argument was in two parts – first, an assertion that there was an alternativebasis of assessment which, it was said, should have been used by the Commissioner,and secondly, that the Commissioner was required in this case, involving attribution,to take additional steps to assist the taxpayer to obtain information he could notreasonably have been expected to have obtained himself.[26] The Judge first discussed the alternative basis of assessment whichMr Krasniqi belatedly said should have been used by the Commissioner. Thisargument had not been advanced by Mr Krasniqi in his statement of position. MrKrasniqi was contending either that the approach taken by the Commissioner wasunclear or that the Commissioner had changed her initial basis of assessment – i.e. that4 Krasniqi v Commissioner of Inland Revenue, above n 1, at [8].5 At [9].the amounts attributed to Mr Krasniqi were income under ordinary concepts. TheJudge did not accept these arguments. She reached the following conclusion:[21] In my view, it would have been apparent from an early stage, as tothe way in which the Commissioner was approaching her assessment of [MrKrasniqi's] taxable income or with due diligence, it could have beendetermined. I consider that any issues which [Mr Krasniqi] wished to raiserelating to the Commissioner's basis of assessment could therefore have beenincluded in his [statement of position].The Judge went on to say that even if it was accepted that the basis of assessment issuedid not arise until after the adjudication report was issued by the Disputes ReviewUnit, she did not consider that Mr Krasniqi could meet the requirements ofs 138G(2)(b).6 She noted that the hearing before the Authority was a de novo hearing,and that any issue as to the basis for the Commissioner's assessments could have beenaddressed at the hearing before her.7 As a result, she did not consider that Mr Krasniqihad suffered any manifest injustice.8 She concluded that the requirements ofs 138G(2)(b) were not met, and she declined to allow Mr Krasniqi leave to raise thealternative basis of assessment issue.9[27] Judge Sinclair then went on to deal with the second part of the submission,namely that, in cases involving attribution, the Commissioner must take additionalsteps to assist the taxpayer to obtain information the taxpayer cannot reasonably beexpected to obtain, and which might assist the taxpayer to discharge the onus of proofresting on him or her. The Judge noted that Mr Krasniqi had Schedule A from theoutset and the bank statements for Mr Brown's trusts, which he received sometimelater.10 She noted that Mr Krasniqi had these materials before he issued his statementof position. The Judge found that Mr Krasniqi knew that the Commissioner had copiesof his personal bank statements and those of his family members.11 She concludedthat it was reasonable for the Commissioner to have expected that Mr Krasniqi couldsource these bank statements for himself, as well as the bank statements for theKrasniqi Discretionary Trust.12 She considered that there was no evidence that6 At [22].7 At [22].8 At [22].9 At [23].10 At [36].11 At [36].12 At [36].Mr Krasniqi had suffered any prejudice, notwithstanding that there had been somedelay by the Commissioner in providing some of the documents sought.13 Nor did sheconsider that there would be any manifest injustice to Mr Krasniqi if this issue was notable to be raised.14 She concluded that the requirements of s 138G(2) were not metand she dismissed Mr Krasniqi's application under that subsection.15[28] Judge Sinclair then turned to consider the income attributed to Mr Krasniqi.She noted that the onus was on him to establish, on the balance of probabilities, thatthe assessments were wrong, why they were wrong and by how much they werewrong.16 She discussed relevant tax law, including what is meant by income under"ordinary concepts". She then went through the Commissioner's assessments, takinginto account evidence provided by Mr Krasniqi about the consultancy services whichhe had provided, primarily to Mr Brown's trusts. She noted that Mr Krasniqi told herthat, in return for the services he provided, Mr Brown's entities paid his expenses, andthat he also received fees in respect of some projects.17 She also noted thatMr Krasniqi did not dispute that a number of the deposits/international moneytransfers had been credited to him, that he accepted that he could not discharge theonus of proof in regard to these credits, and that he accordingly conceded that theseamounts were properly assessed as income to him, and taxable accordingly.18[29] The Judge went through each of the various payments in dispute, includingsums received by Mr Krasniqi which he asserted were the repayment of loans madeby his father to Mr Brown's family trust, loans Mr Krasniqi said had been made to himby his father, and loans which Mr Krasniqi said had been made to him by Mr Brown.The Judge considered various bank account deposits into accounts, both in Australiaand New Zealand, operated by Mr Krasniqi's family members and the KrasniqiDiscretionary Trust. The Judge considered payments made into the New Zealand bankaccount of Mr Krasniqi's stepmother, international money transfers paid fromMr Brown's trusts, overseas spending and ATM withdrawals from an entity known asAB Asset Management Limited, New Zealand ATM withdrawals, New Zealand13 At [37].14 At [38].15 At [41].16 At [42].17 At [55].18 At [56].private spending, including a motor vehicle purchase, personal expenditure and cashwithdrawals at a casino.[30] Judge Sinclair was not satisfied that Mr Krasniqi had discharged the onus ofproof which rested on him in relation to any of these transactions. She recorded thatgenerally she did not find Mr Krasniqi to be a credible witness.19 She found hisdescription of the various business activities in which he was involved to be vague andunconvincing. She noted that Mr Krasniqi held himself out as an experienced propertyconsultant, who had also worked for other entities, providing services on substantialprojects involving large sums of money.20 She acknowledged that any documentswould have been held by others, but she had difficulty in accepting that Mr Krasniqihad retained no business records at all.21[31] The Judge reduced Mr Krasniqi's attributed income by excluding AUD$519,351.45 deposited into Mr Krasniqi's Australian bank account, AUD $66,300deposited into the Krasniqi Discretionary Trust's bank account, and NZ $10,020 andNZ $12,020, transferred to Phuket in December 2006 and July 2008.22 In all otherrespects, the Commissioner's default assessments for the tax years within the disputedperiod were confirmed.23Issues on appeal[32] Judge Sinclair's overall approach to the matter, including her findings as towhat, as a matter of law, comprises income under ordinary concepts, was notchallenged. Nor were many of her factual findings in relation to specific paymentsattributed as income to Mr Krasniqi.[33] Mr Krasniqi raised two issues:(a) whether the Authority erred in dismissing the application made by himunder s 138G(2) of the Act to raise additional arguments not taken inhis statement of position; and19 At [72].20 At [72].21 At [72].22 At [139].23 At [140].(b) whether the Authority erred in finding that:(i) NZ $1,309,185.0424 paid into the Krasniqi Discretionary Trust'sbank accounts between 11 October 2005 and 25 June 2009;(ii) NZ $105,000 paid by Whangaruru Farm Trust to Roverland forthe purchase of a Range Rover on 16 September 2004;(iii) NZ $100,025 (AUD $84,620) transferred from one ofMr Brown's trusts to Mr Krasniqi's brother, Flamur Krasniqi,on or about 3 October 2007;25 and(iv) a total sum of NZ $253,479.45 deposited into Mr Krasniqi'sNew Zealand bank account on 4 and 15 December 2010 and on2 March 2011;were correctly assessed by the Commissioner as income attributable toMr Krasniqi under ordinary concepts.[34] In her cross-appeal, the Commissioner argued that the Authority was wrong toamend her default assessments, and to reduce the same by taking out:(a) AUD $519,351.45 deposited by Sun Marine Services intoMr Krasniqi's Australian bank account on 20 December 2006;(b) AUD $39,000 and AUD $27,300 (total AUD $66,300) deposited bySun Marine Services into the Krasniqi Discretionary Trust's bankaccount on 14 August 2007 and 19 December 2007; and(c) the sums of NZ $10,020 and NZ $12,020 (total NZ $22,040) transferredby international money transfer to Yacht Solutions at Boat Lagoon,Phuket on 7 December 2006 and 9 July 2008.24 The net amount allowing for the deductions of AUD $39,000 and AUD $27,300 ordered by theTaxation Review Authority.25 Mr Krasniqi said that the payment was made on 28 September 2007. The correct date, ascertainedfrom information made available by the Australian Tax Office, appears to be 3 October 2007.The appeals[35] The appeals are brought pursuant to s 26A of the Taxation Review AuthoritiesAct 1994. They proceed by way of rehearing pursuant to r 20.18 of the High CourtRules. Counsel were agreed that the principles discussed by the Supreme Court inAustin, Nichols & Co Inc v Stichting Lodestar apply.26 Those principles have beensummarised in the tax context as follows:27(a) the appellant bears the onus of satisfying the appeal court that it shoulddiffer from the decision under appeal;(b) it is only if an appellate court considers that the appealed decision iswrong that it is justified in interfering with it;(c) the appellate court has the responsibility of arriving at its ownassessment on the merits of the case;(d) no defence is required beyond the customary caution appropriatewhere the first instance fact finder had a particular advantage such astechnical expertise or an opportunity to assist the credibility of thewitnesses;(e) the appellate Judge is entitled to use the reasons of the first instancedecision-maker to assist him or her in reaching his or her ownconclusions, but the weight the Judge places on them is a matter forthe Court.[36] I did raise with counsel whether or not the Austin, Nichols approach isappropriate when considering an appeal against a decision of the Authority decliningto exercise the discretion conferred by s 138G(2) of the Act. Both counsel took theview that, in this case, the Authority did not get to the stage of exercising the residualdiscretion conferred by s 138G(2). Rather, it evaluated the evidence and concludedthat the requirements set out in s 138G(2)(a) and (b) were not met. They submittedthat the Austin, Nichols approach applies to an appeal against that thresholddetermination.[37] I agree. Mr Krasniqi's appeal in regard to this issue requires me to decidewhether or not the Authority was correct when it found that the s 138G(2) threshold26 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].27 Russell v Commissioner of Inland Revenue (2010) 24 NZTC 24,463 (HC) at [69]; affirmed onappeal in Russell v Commissioner of Inland Revenue [2012] NZCA 128; leave to appeal declinedin Russell v Commissioner of Inland Revenue [2012] NZSC 73.criteria were not met. I accept counsels' submissions that the principles in Austin,Nichols apply to this issue.AnalysisSection 138G(2)Relevant provisions[38] In any hearing before the Authority, both the Commissioner and the disputanttaxpayer are confined to the issues and propositions of law that they have disclosed intheir respective statements of position.28 The Act encourages both parties to put "allcards on the table",29 and seeks to prevent "trial by ambush".30 There is a proviso – s138G(2) allows a party in dispute with the Commissioner to apply to the Authority forleave to raise new issues not disclosed in that party's statement of position. Thesubsection provides as follows:138G Effect of disclosure notice(2) A hearing authority may, on application by a party to a challenge to adisputable decision, allow the applicant to raise in the challenge newpropositions of law, and new issues, if satisfied that—(a) the applicant could not, at the time of delivery of theapplicant's statement of position, have, with due diligence,discerned those propositions of law or issues; and(b) having regard to the provisions of section 89A and the conductof the parties, the hearing authority considers that the raisingof those propositions of law or issues is necessary to avoidmanifest injustice to the Commissioner or the disputant.28 Tax Administration Act, s 138G(1).29 Inland Revenue Department Resolving tax disputes: a legislative review (Policy Advice Division,Inland Revenue Department, Wellington, July 2003) at [1.3].30 Inland Revenue Department Disputes: a review (Policy Advice Division, Inland Revenue and theTreasury, Wellington, July 2010) at [1.6].[39] The s 138G(2) criteria are strict.31 Unless they are made out, leave must bedeclined. If they are made out, the Authority has a discretion to allow the applicant toraise new issues.[40] Section 89A, referred to in s 138G(2)(b), provides as follows:89A Purpose of this Part(1) The purpose of this Part is to establish procedures that will—(a) improve the accuracy of disputable decisions made by theCommissioner under certain of the Inland Revenue Acts; and(b) reduce the likelihood of disputes arising between theCommissioner and taxpayers by encouraging open and fullcommunication—(i) to the Commissioner, of all information necessary formaking accurate disputable decisions; and(ii) to the taxpayers, of the basis for disputable decisionsto be made by the Commissioner; and(c) promote the early identification of the basis for any disputeconcerning a disputable decision; and(d) promote the prompt and efficient resolution of any disputeconcerning a disputable decision by requiring the issues andevidence to be considered by the Commissioner and adisputant before the disputant commences proceedings.(2) This Part does not apply with respect to any tax returns or notices ofassessments that are, or become, subject to objection proceedingsunder Part 8.(3) Despite section 1(2), this Part applies to disputable decisions made bythe Commissioner for tax years before the 1994–95 tax year.Submissions[41] Before the Authority, Mr Krasniqi submitted that he needed to be able to raisenew grounds, in order to prevent a manifest injustice to him. The same argument wasadvanced before me. I asked Ms Low, appearing for Mr Krasniqi, what additionalissues Mr Krasniqi belatedly seeks to raise. She advised that Mr Krasniqi wishes toassert that he was denied the opportunity to discharge the onus of proving the31 Trustpower Ltd v Commissioner of Inland Revenue [2016] NZSC 91, [2017] 1 NZLR 155 at [15].Commissioner's assessments wrong, and further, that he was denied the opportunityto challenge "the arbitrariness" of the Commissioner's assessments.[42] Ms Low argued that Mr Krasniqi was denied these opportunities because thematerials provided to him did not sufficiently inform him of the Commissioner's basisfor assessment, and because it was not clear to Mr Krasniqi until discovery wasprovided – some 12 months after his statement of position had been issued – that theCommissioner had documents that might have assisted him during the disputesprocess. She argued that in attribution cases, the Commissioner should be held to ahigher standard and required to assist the disputing taxpayer to obtain all relevantinformation to avoid any unfairness.[43] Ms Roff, for the Commissioner, did not accept that Mr Krasniqi could not haveraised the issues he says he wanted to raise in his statement of position. Ms Roffargued that the Commissioner engaged with Mr Krasniqi throughout, that she providedhim with all relevant documentation and that he was kept fully informed. It wassubmitted that Mr Krasniqi had everything he needed to challenge the Commissioner'sassessments from as early as March 2014, but that he only raised the so-called processissues in his opening submissions immediately prior to the hearing before theAuthority. She asserted that Mr Krasniqi cannot show that the Authority was wrongwhen it found that the s 138G(2) threshold criteria were not made out.Analysis(a) Process issues[44] I have set out the relevant factual background above at [3] to [22]. As I therenoted, the Commissioner issued her default assessments in August 2013. She thenprovided Mr Krasniqi with Schedule A setting out her default assessments. Theschedule was a two-page, high level overview. While it was a high level overview, itdid, however, make it clear that the Commissioner was attributing monies sheconsidered had been received either directly or indirectly by Mr Krasniqi, or by hisfamily members, or by the Krasniqi Discretionary Trust, as income to Mr Krasniqi,and asserting that it was taxable in his hands. It set out in summary how much creditedto each account in each year was attributed to Mr Krasniqi. It summarisedinternational money transfers from Mr Brown's entities to various named third partiesand said to be for Mr Krasniqi's benefit. It recorded overseas spending and ATMwithdrawals, foreign currency purchases, New Zealand ATM withdrawals, and NewZealand private spending, again all on a year by year basis, and all said to be forMr Krasniqi's benefit. It totalled these sums and then assessed the tax on a year byyear basis for each tax year falling within the disputed period.[45] The Commissioner was requested to provide the source documentation and abreakdown of the summary calculations set out in Schedule A. She collated theinformation sought and compiled detailed spreadsheets itemising each transaction thatmade up the summary set out in Schedule A. This was done on an account by accountbasis. Full detail of each transaction was given where it was available. Thisbreakdown was sent to Mr Krasniqi on 18 March 2014. The information provided toMr Krasniqi contained all of the information available from the source documents. Itwas patently clear that the Commissioner had access to various bank accountstatements. This was also explained to Mr Krasniqi in a covering letter. TheCommissioner made clear her expectation that Mr Krasniqi could obtain the bankstatements himself.[46] A taxpayer is entitled to know the ground or grounds on which he or she hasbeen assessed,32 but in my judgment, it was clear from the materials provided by theCommissioner from the outset what amounts the Commissioner was attributing asincome to Mr Krasniqi and the basis for the resulting assessment. Much of the moneyassessed had been received by Mr Krasniqi into his personal bank accounts – both inAustralia and New Zealand. Clearly, Mr Krasniqi was in a position to obtain copiesof his own bank accounts. The Commissioner was also seeking to attribute toMr Krasniqi monies paid into the accounts of various members of Mr Krasniqi'sfamily, and into the accounts of the Krasniqi Discretionary Trust. Each family memberwas named. So was the trust. The account details were provided. The Commissionerwas entitled to assume that Mr Krasniqi could obtain access to the relevant bankstatements. The Commissioner expressly made her expectations in this regard knownto Mr Krasniqi. There was nothing unreasonable in the Commissioner's expectation.Mr Krasniqi did not protest or suggest that he could not source the relevant bank32 Commissioner of Inland Revenue v Walker [1963] NZLR 339 (SC) at 359.statements for himself. It was a situation where many of the relevant documents wereor should have been within Mr Krasniqi's control.33[47] The Commissioner was at all relevant times prepared to attend a facilitatedconference. There were difficulties organising a conference. When it was ultimatelyheld in August 2014 – well before Mr Krasniqi filed his statement of position – hefailed to attend in person and rather sent his legal advisor. One would have thoughtthat had Mr Krasniqi had concerns about the basis on which the default assessmentswere issued against him, he would have attended the conference, taken the opportunityto make sure he understood the Commissioner's position and responded where hedisagreed with it.[48] As agreed at the facilitated conference, between September and December2014, the Commissioner provided Mr Krasniqi with all bank statements forMr Brown's trusts relevant to the default assessments, as well as the passengermovement source documents. Mr Krasniqi did not then complain, suggest that hecould not understand the default assessments, or assert that he needed moreinformation. Rather, he failed to provide the documents he had agreed to provide.[49] The disclosure notice – triggering the statutory timeframes – was not issueduntil 1 December 2014. Mr Krasniqi issued his statement of position on 30 January2015. There was nothing in the statement of position suggesting that Mr Krasniqi washindered in its preparation because he did not have all relevant documents. Indeed,the contrary applies – Mr Krasniqi said that he was reviewing the documentationprovided by the Commissioner.[50] When the Commissioner issued her statement of position, she included a fulllist of the documents she relied upon. Mr Krasniqi did not then request copies of anyof the documents listed, or suggest that any of them took him by surprise or that hewas prejudiced by their earlier non-disclosure.[51] Similarly, on 11 June 2015, when the dispute was referred to the DisputesReview Unit, the referral letter included a list of all of the documentary evidence theCommissioner held. The referral letter and list had been provided to Mr Krasniqi on33 See Duncan v Commissioner of Inland Revenue (2004) 21 NZTC 18,735 (HC) at [181].28 May 2015. Again, he did not request any of the documents listed or protest theirearlier non-disclosure.[52] I agree with the Authority that the Commissioner made her position clear at anearly stage, and well before Mr Krasniqi was required to file his statement of position.Further, in my judgment, Mr Krasniqi had everything he needed, or was in a positionto obtain everything he needed, to challenge the Commissioner's assessment, fromDecember 2014 at the latest. Mr Krasniqi should have been readily able to discern thepropositions of law, and/or the issues he belatedly seeks to raise, at the time he filedhis statement of position. The matters he says he has been denied the opportunity toraise were or should have been obvious from the outset. It is noteworthy that even atthis late stage, I was not referred to any particular document Mr Krasniqi receivedafter he filed his statement of position which could have altered the stance he thentook. Nor did counsel explain how Mr Krasniqi's ability to present the proposedarguments noted above at [41] was affected by what it is belatedly said were theCommissioner's failings.[53] I am not persuaded that the Authority was wrong when it found that the criteriadetailed in s 138G(2) were not made out. The Authority was right to conclude that itwas not necessary to allow Mr Krasniqi the opportunity to raise matters not raised inhis statement of position, to avoid manifest injustice to him. This aspect of the appealis dismissed.(b) A higher standard of disclosure in attribution cases?[54] Nor do I consider that the Commissioner should be held to a "higher standard"and required to assist disputants in attribution cases to obtain information to dischargethe onus of proof resting on them.[55] The Commissioner properly accepts that she has an obligation to conduct anhonest appraisal of a taxpayer's tax affairs, and to genuinely exercise her judgementwhen issuing default assessments. She also fairly acknowledged that, in doing so, sheis not entitled to act arbitrarily, or to disregard the law or facts known to her.34 It is34 Commissioner of Inland Revenue v Canterbury Frozen Meat Co Ltd [1994] 2 NZLR 681 (CA) at692-693.not, however, unusual for the Commissioner to have to rely on limited informationwhen attempting to reconstruct a taxpayer's affairs, and even if the information heldis incomplete, the Commissioner can still assess so long as she can make a genuineassessment.35 She must do the best she can based on the information in her possession.[56] There is nothing to suggest that the Commissioner has breached any of theseobligations. She based her default assessments on the information she had – that isinformation that was in her possession at the time the assessments were made. TheCommissioner does not have to seek information not in her possession, but perhapsavailable had she sought it.36 The legislation requires the Commissioner to exercisejudgement, but it does not set a high threshold as to the material on which anyjudgement is required to be based.37 The taxpayer is best placed to know how he orshe has conducted his or her business affairs, and the more unreasonable the positionof the taxpayer in not maintaining or providing records, the greater the entitlement ofthe Commissioner to make assessments in broad terms.38[57] Once the Commissioner issued her default assessments, the onus passed underthe Act to Mr Krasniqi to establish on the balance of probabilities that the assessmentswere wrong, why they were wrong and by how much they were wrong.39[58] There is no authority that I am aware of, or which counsel could refer me to,which suggests that, in attribution cases, the Commissioner is required to assistdisputants to obtain information to discharge the onus of proof which the Act placeson them. Any assertion that such duty exists ignores two things – first, the taxpayer isbeing assessed in respect of payments he or she has received and which it is reasonableto assume he or she must be aware of, and secondly, the statutory onus of proof.[59] In any event, in this case, the Commissioner did provide copies of relevantdocuments to Mr Krasniqi. He failed to provide anything in return to assist her inmaking the default assessments. The Commissioner had no alternative but to proceed35 Commissioner of Inland Revenue v New Zealand Wool Board (1999) 19 NZTC 15,476 (CA) at[49].36 At [51].37 At [49].38 Duncan v Commissioner of Inland Revenue, above n 33, at [41]; Trautwein v FederalCommissioner of Taxation (1936) 56 CLR 63 at 87-88.39 Tax Administration Act, s 149A.on the basis of the information she had in her possession at the time. It has not beenestablished that the information was incomplete; even if it was, that cannot taint orinvalidate the assessments made. It was not for the Commissioner to prove thecorrectness of the assessments honestly and properly made or to make additionalenquiries to assist Mr Krasniqi to discharge the onus which passed to him. Rather, itwas for Mr Krasniqi to present any evidence he wished to rely on to the Authority tosupport his assertions and to show what the correct assessments should be. The realityis that he failed to do so.40[60] For the sake of completeness, I also record that I agree with the Authority thatthe focus of the hearing before it was to determine whether or not the Commissioner'sassessments were correct. The Authority is a commission of inquiry which gives itbroad evidential powers.41 It was a de novo hearing, which necessarily cured anyearlier breaches of natural justice, unfairness or procedural defects, even assuming thatthere were such breaches of defects (and that has not been established).42[61] Again, this ground of appeal must fail. Mr Krasniqi has failed to persuade methat the Authority erred in its approach to this issue. I agree with the Authority'sconclusion that Mr Krasniqi had not met the s 138G(2) threshold criteria.Income under ordinary conceptsThe Authority's findings[62] As the Authority noted,43 the Commissioner was contending that theunexplained deposits and funds paid or applied to Mr Krasniqi's behalf were incometo him under ordinary concepts.[63] Relevantly, s CA 1(2) of the Income Tax Act 2007 provides as follows:40 When asked why he had not called his wife as a witness, Mr Krasniqi answered "I'm not sure whyI need to". He went on to say "I think all my family could add value, but as I said yesterday, I'mnot going to drag them into this". With respect to his brother, Flamur Krasniqi, he said "I don'tthink – if I called him, I don't think he would come. I wouldn't call him anyway, he'd have to besubpoenaed".41 Taxation Review Authorities Act 1994, s 15.42 Musuku v Commissioner of Inland Revenue [2016] NZHC 934 at [79]; citing DandelionInvestments Ltd v Commissioner of Inland Revenue [1997] 2 NZLR 96 (HC) at 102.43 Krasniqi v Commissioner of Inland Revenue, above n 1, at [47].(2) An amount is also income of a person if it is their income underordinary concepts.[64] As the Authority acknowledged, income under ordinary concepts is not definedin the Income Tax Act.44 The Authority nevertheless set out various principles whichare well established and which are derived from the relevant case law. It summed upthose principles as follows:45 A long history of case law has considered the terms and thefollowing are well established principles:47.1 Income is something which 'comes in' (as opposed to a savingin expenditure).4647.2 Income must be either payment in money or money's worth.4747.3 Whether a payment is income is to be determined withreference to the quality of the payment in the hands of thepayee (as opposed to the payer).4847.4 Major factors in determining whether payments are incomeunder ordinary concepts include:47.4.1 Whether the payments are recurring, regular and/orperiodic;49 and47.4.2 Whether the recipient relies on the payments to meetliving expenses.50Income under ordinary concepts is a flow of money or money's wortharising from the ownership of property or capital, or from labour, orfrom a combination of those things. In A Taxpayer v Commissionerof Inland Revenue51 Richardson J described income as:Thus income is perceived as a gain derived from propertywhich leaves the property intact – a fruit of the tree as distinctfrom the tree itself, a crop as distinct from the land. Again,44 At [49].45 At [49]-[51].46 Tennant v Smith [1892] AC 150 (HL); Commissioner of Inland Revenue v Parson (No 2) [1968]NZLR 574 (CA); Federal Commissioner of Taxation v Cooke and Sherden (1980) 29 ALR 202(FCA).47 Commissioner of Inland Revenue v Parson (No 2), above n 46.48 Reid v Commissioner of Inland Revenue [1986] 1 NZLR 129, (1985) 7 NZTC 5,176 (CA). Seealso Scott v Federal Commissioner of Taxation (1966) 117 CLR 514 (HCA) and G v Commissionerof Inland Revenue [1961] NZLR 994 (SC).49 Reid v Commissioner of Inland Revenue, above n 48; A Taxpayer v Commissioner of InlandRevenue (1997) 18 NZTC 13,350 (CA); Neame v Commissioner of Inland Revenue (1988) 10NZTC 5,288 (HC); Federal Commissioner of Taxation v Dixon (1952) 86 CLR 540 (HCA).50 G v Commissioner of Inland Revenue, above n 48; Reid v Commissioner of Inland Revenue, aboven 48, at 5,183.51 A Taxpayer v Commissioner of Inland Revenue, above n 49.income is a flow of money or money's worth, a series ofperiodic receipts arising from the ownership of property orcapital, or from labour, or a combination, eg rent, interest anddividends, salary and other personal exertion receipts,annuities and business receipts Therefore, income, under ordinary concepts, includes payments frombusiness and other profit making activities, and also from performingservices as a self-employed person.52 It also includes periodicpayments. In Reid v Commissioner of Inland Revenue,53 RichardsonJ said:54 The major determinant in many cases is the periodic natureof a payment (FC of T v Dixon (1952) 86 CLR 540; and Asherv London Film Productions [1944] 1 ALL ER 77). If it hasthat quality of regularity or recurrence then the paymentsbecome part of the receipts upon which the recipient maydepend for his living expenses, just as in the case of a salary orwage earner, annuitant or welfare beneficiary. But that in itselfis not enough and consideration must be given to therelationship between payer and payee and to the purpose of thepayment, in order to determine the quality of the payment inthe hands of the payee.55[65] The Authority went on to deal with income credited into accounts held bymembers of Mr Krasniqi's family or paid to third parties. It said as follows:[52] As previously mentioned, some of the disputed amounts werenot received directly by the disputant but were paid into bank accountsheld in the names of members of the disputant's family, paid to thirdparties, or used to pay expenses. It is not in dispute that amounts canbe income derived by a person in spite of him or her not being theimmediate recipient of the money or money's worth, if the income hasbeen dealt with on the person's behalf or in his or her interest. Therelevant subsection of s BD 3 of the [Income Tax Act] 200756provides:BD 3 Allocation of income to particular income yearsIncome credited in account(4) Despite subsection (3), income that has notpreviously been derived by a person is treated asbeing derived when it is credited in their account or,in some other way, dealt with in their interest or ontheir behalf.52 See Wattie v Commissioner of Inland Revenue (1997) 18 NZTC 13,297 (CA) and Commissionerof Inland Revenue v Buis (2005) 22 NZTC 19,278 (HC).53 Reid v Commissioner of Inland Revenue, above n 48.54 At 5,183.55 Reid v Commissioner of Inland Revenue, above n 48, was followed in Neame v Commissioner ofInland Revenue, above n 49.56 Section EB 9(1) of the Income Tax Act 1994 and s BD 3 of the Income Tax Act 2004.[53] In Dunn v Commissioner of Inland Revenue57 the thenSupreme Court said of an earlier equivalent to s BD 3(4): [the section] is concerned with when a person is deemedto derive income. What the section is aimed at, I think, is thekind of situation where income which in the ordinary coursewould reach the taxpayer's hands is in some way diverted toother uses of benefit to him. The section postulates thatincome has not actually been paid to or received by him, noralready become due or receivable. Hence he could say thathe has not derived it. So a rule is laid down that he shall bedeemed to have derived it when it has been dealt with in hisinterest or on his behalf in any of various ways, some whichare specified. All the ways specified involve diversion ofincome which would otherwise have flowed to the taxpayer.Another helpful statement is that of Fergusson J. in Perrott vCommissioner of Taxation (1922) 23 S.R. (N.S.W.) 118,124 –"What that clause contemplates is that the case where thetaxpayer, though he has not received the money itself, hashad the benefit of it, or of something which is substantiallyequivalent to it. If he is given credit for the amount, forexample, in his bank account, he is in the same position as ifhe had actually been paid the cash and had deposited it in thebank. So with a re-investment, or accumulation, or any ofthe other dealings mentioned in the section. A contract topay money in the future stands on a very difficult footing.He does not receive it now; he has no right to receive it now:and he may never receive it at all."Those passages support the view that, broadly speaking, sec92 is intended to deal with persons whose activities or assetsyield income but who do not receive and perhaps do not evencontrol that income, although it is applied for their benefit.In Commissioner of Inland Revenue v Farmers Trading Co Ltd58Richardson J said in relation to a predecessor of the section that thesection: does not in its terms provide a test for determining whena profit accrues on trading. It is directed to the form in whichincome is derived. It deems income to be derived by ataxpayer where, even if it does not reach him, it is dealt within his interest or on his behalf.[66] Neither party took issue with these paragraphs from the Authority's decision,and I gratefully adopt them.57 Dunn v Commissioner of Inland Revenue [1975] 1 NZLR 465, (1974) 1 NZTC 61,245 (SC) at469.58 Commissioner of Inland Revenue v Farmers' Trading Co Ltd [1982] 1 NZLR 449 (CA) at 457.That case considered s 92 of the Land and Income Tax Act 1954, which was replaced by s EB 1(1)of the Income Tax Act 1994 (the wording of the two is almost identical).Submissions[67] Ms Low argued that the Commissioner was essentially relying on unexplaineddeposits and asserting that they were not out of the ordinary for Mr Krasniqi. Themajority of deposits relied on by the Commissioner were either paid to Mr Krasniqi,to his wife or to an entity owned or controlled by him. It was argued that the Authorityhad to consider the character of each deposit and undertake a factual enquiry,balancing the evidence given by the Commissioner and the evidence given byMr Krasniqi. It was argued that the Authority did not properly do so in relation tosome of the deposits the subject of the default assessments, and it was suggested thatthe Commissioner's assessment of some of the deposits was arbitrary.[68] The Commissioner, for her part, did not dispute that a factual enquiry wasnecessary. She, however, pointed to the statutory onus and argued that there was morethan sufficient evidence to show that the deposits the subject of Mr Krasniqi's appealshould be attributed to him as income under ordinary concepts. She noted that:(a) The amounts came in directly to Mr Krasniqi via his personal bankaccount, via bank accounts which he controlled, or via payments tothird parties at his direction and for his benefit.(b) The deposits were either in the form of money or monies worth.(c) Mr Krasniqi received the amounts as remuneration for his services inrespect of the various consultancy services he was providing toMr Brown's trusts and others.(d) The deposits were recurrent and regular.(e) Mr Krasniqi relied on the deposits to meet his day to day livingexpenses. He did not declare any income in Australia. His wife did notwork and she had no income.(f) Mr Krasniqi was unable to give satisfactory answers as to what money(if not the amounts in dispute) he was using to meet his and his family'sliving expenses.The Commissioner emphasised Judge Sinclair's findings as to Mr Krasniqi'scredibility, summarised at [30] above.The onus[69] As I have already noted, when the Commissioner issued her defaultassessments, the onus passed to Mr Krasniqi to establish on the balance of probabilitiesthat the assessments were wrong, why they were wrong and by how much they werewrong.[70] The reason why the onus passes to the disputant in tax challenges is clear. Itwas succinctly put by the Court of Appeal in Buckley & Young Ltd v Commissioner ofInland Revenue:59 The Commissioner could not sensibly be expected to bear the onus of proofof matters which originate with the taxpayer and which usually are peculiarlywithin his knowledge and power. Thus, there are sound if not compellingpractical reasons why the legislation requires him to provide satisfactoryevidence to support his calculation of his assessable income. If he fails or isunable to provide sufficient evidence to discharge that onus, his objection tothe Commissioner's assessment will fail.For a tax challenge to succeed, the disputant has to demonstrate with "reasonableclarity" what the correct assessments should be.60 As the Authority noted, the facts inany particular case will determine what evidence will be required to discharge thedisputant's onus of proof.61 In most cases, it will be necessary for the disputanttaxpayer to produce corroborative evidence, such as contemporaneous documents,statements, records and the like, in support of the disputant's necessarily ex post factoexplanations.6259 Buckley & Young Ltd v Commissioner of Inland Revenue [1978] 2 NZLR 485 (CA) at 498. Seealso Russell v Commissioner of Inland Revenue [2012] NZCA 128 at [70].60 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2NZLR 289 at [171].61 Krasniqi v Commissioner of Inland Revenue, above n 1, at [46].62 Case J23 v Commissioner of Inland Revenue [1986] NZTRA 13, (1987) 9 NZTC 1,129; Case E69v Commissioner of Inland Revenue (1982) 5 NZTC 59,378 (TRA); Case L40 v Commissioner ofInland Revenue (1989) 11 NZTC 1,249 (TRA); Case L25 v Commissioner of Inland Revenue[71] Against this background, I turn to look at the various payments challenged byMr Krasniqi and by the Commissioner.Mr Krasniqi's appeal(a) Deposits paid into the Krasniqi Discretionary Trust[72] The Commissioner assessed various deposits totalling NZ $1,309,185.04 intothe Krasniqi Discretionary Trust's bank accounts as income to Mr Krasniqi, whetherthe deposits came directly from one of the trusts operated by Mr Brown or others, orwhether they were from other sources, unknown or otherwise. The Commissionertook this stance because she considered, on the basis of the information available toher, that Mr Krasniqi was a primary beneficiary of the trust and that he frequentlyresorted to the trust fund for his personal expenditure.[73] The Authority did allow two deductions – one of AUD $39,000 and the otherof AUD $27,300 – both deposited by Sun Marine Services into the KrasniqiDiscretionary Trust's bank account on 4 August 2007 and 19 December 2007respectively. These deductions are challenged by the Commissioner in her cross-appeal and I deal with them below.[74] The Commissioner obtained information about the Krasniqi DiscretionaryTrust from the Australian Tax Office. The trust was initially settled by Mr Krasniqi'sfather, Mazhar Krasniqi, and Mr Krasniqi's brother, Flamur Krasniqi, was initially atrustee. In this capacity, he bought and sold a properly on behalf of the trust. FlamurKrasniqi was adjudicated bankrupt in Australia and he did not disclose the trusteeshipin his statement of affairs. When he was questioned about this, he said that he was nolonger a trustee of the trust and, in a report prepared by his controlling trustees in hisbankruptcy, it was noted that Flamur Krasniqi resigned as a trustee of the KrasniqiDiscretionary Trust in June 2007. The controlling trustee also reported that the trustdeed named Mr Krasniqi as the primary beneficiary of the trust and that his siblingswere secondary beneficiaries.[1989] NZTRA 10, (1989) NZTC 1,163; Case Q32 v Commissioner of Inland Revenue (1993) 15NZTC 5,150 (TRA).[75] Mr Krasniqi initially maintained in his brief of evidence that he did not haveany direct personal involvement in the trust. He said that he was not a beneficiary ofthe trust and that he had no access to its bank accounts. In the course of hisexamination-in-chief, he admitted that he had been a beneficiary but said that that wasno longer the case. He was, however, unable to say when he was removed as abeneficiary. He denied knowing who the then trustee(s) of the trust was (or were). Headmitted arranging for payments to be made into the trust from another trust – the DIFTrust – of which he was a trustee. He endeavoured to explain why these deposits weremade, but he produced no documentary evidence or independent witnesses tocorroborate his contentions.[76] Information obtained from the Australian Tax Office showed that at least twobank accounts in the name of the Krasniqi Discretionary Trust were in operationduring the disputed period. One was opened in 2005 and the other in 2007.Mr Krasniqi had a level of authority over at least one of the bank accounts. He wasdescribed in the material from the Australian Tax Office as being an "orderingcustomer". When pressed on this issue at the hearing, Mr Krasniqi admitted that hestill held signing authority over a bank account operated by the trust. Judge Sinclairconcluded, on a careful reading of the bank authority form, that Mr Krasniqi wasnamed as an additional person, but that he had limited authority only.63 This findingwas not challenged before me.[77] Over the disputed period, various amounts were transferred from Mr Brown'strusts (or entities associated with him) to the Krasniqi Discretionary Trust. TheCommissioner attributed those sums as income to Mr Krasniqi, on the basis that theywere remuneration for consultancy services provided by him. Mr Krasniqi acceptedthat one minor payment – NZ $3,525 – was indeed remuneration for his services.Mr Krasniqi said that the payments were made to repay loans made to Mr Brown byMazhar Krasniqi. He produced no evidence to support this contention. If this was aproper explanation for the payments, or if there was another explanation, it shouldhave been given by Mr Krasniqi and he should have produced corroborating materialto back up his version of events. He did not do so.63 Krasniqi v Commissioner of Inland Revenue, above n 1, at [101].[78] Ms Low criticised the Commissioner for focusing on payments into theKrasniqi Discretionary Trust's accounts, and not on withdrawals made from thoseaccounts.[79] To address this criticism, the Commissioner further reviewed the trust's bankstatements and Mr Krasniqi's bank statements. That review highlighted a number ofthings, many of which cast considerable doubt on Mr Krasniqi's explanation:(a) A number of withdrawals were made from the Krasniqi DiscretionaryTrust's accounts at places where there were also transactions conductedon Mr Krasniqi's personal bank account on the same day. By way ofexample, there were withdrawals made at the Sky City Casino fromboth Mr Krasniqi's personal account and the bank accounts of the truston the same days.(b) The records also showed that Mr Krasniqi was checking the balances,both of his personal account and of the Krasniqi Discretionary Trust'sbank accounts, on occasion, in the same places and on the same days.(c) There were several occasions where Mr Krasniqi's personal bankaccount was used at casinos where withdrawals were made at the sameplace and on the same day from the Krasniqi Discretionary Trust's bankaccounts.(d) There was something of a crossflow between amounts coming out ofthe trust's bank accounts and amounts being paid into Mr Krasniqi'spersonal bank account. For example, on 5 March 2007, NZ $310,000was paid by Mr Krasniqi from his personal account into the trust's bankaccounts. There was a further transfer of NZ $2,500 fromMr Krasniqi's account into the trust's accounts on 13 March 2007.There was then a series of transfers from the trust's accounts to MrKrasniqi's account – including a payment of NZ $40,000 on 2 May2007, a further payment of NZ $9,000 on 28 November 2007, a transferof NZ $80,000 on 10 April 2008, and a transfer of NZ $3,000 on 2February 2009.Without further explanation from Mr Krasniqi, and corroborating evidence to supportany explanation, it is reasonable to infer from these various transactions thatMr Krasniqi was the likely user of both accounts, and that he was using funds fromthe trust's accounts for his personal expenditure.[80] The onus was on Mr Krasniqi to explain the payments into the trust's accountsand his use of the trust fund. He did not do so. He did not provide any supportingdocumentation or evidence from family members. He did not produce the trust deedor any variation to the deed supporting his assertion that he was no longer a beneficiaryof the trust. He did not produce the trust's bank accounts or financial statements. Hedid not call the trustee(s) or his father, if indeed it was his father's trust. Put bluntly,Mr Krasniqi failed to demonstrate, with reasonable clarity, what the correctassessments should have been. He failed to discharge the onus of proof on him.[81] Mr Krasniqi has not persuaded me that the Authority was wrong to attributethe monies paid into the Krasniqi Discretionary Trust's bank accounts between 11October 2005 and 25 June 2009 as income assessable in his hands. This aspect of theappeal is dismissed.[82] One issue did, however, arise in the course of submissions on this issue whichneeds to be addressed.[83] The Commissioner accepted that there may well have been a relationshipbetween transfers from the trust's bank accounts into Mr Krasniqi's personal account.She acknowledged that a further review of the amount assessed was appropriate, toensure that no deposits were assessed twice – once when the deposit was paid in thetrust's bank accounts and again when it went into Mr Krasniqi's bank account.[84] I asked counsel to further consider this issue and I received a jointmemorandum in relation to it. I am advised that amounts likely to have been double-counted total AUD $132,000 and are as follows:(a) 2 May 2007 – AUD $40,000 was withdrawn from the KrasniqiDiscretionary Trust's accounts. On the same date, AUD $40,000 wasdeposited into Mr Krasniqi's Australian account;(b) 28 November 2007 – AUD $9,000 was withdrawn from the KrasniqiDiscretionary Trust's accounts. On the same date, AUD $9,000 wasdeposited into Mr Krasniqi's Australian account;(c) 10 April 2008 – AUD $80,000 was withdrawn from the KrasniqiDiscretionary Trust's accounts. On the same date, AUD $80,000 wasdeposited into Mr Krasniqi's Australian account; and(d) 2 February 2009 – AUD $3,000 was withdrawn from the KrasniqiDiscretionary Trust's accounts. On the same date, AUD $3,000 wasdeposited into Mr Krasniqi's Australian account.[85] It seems likely that these amounts have been double-counted in the defaultassessments. I direct the Commissioner to prepare amended assessments to ensurethat Mr Krasniqi is assessed only once in respect of each of the above amounts.(b) Payment by Whangaruru Farm Trust to Roverland[86] On 16 September 2004, the Whangaruru Farm Trust paid NZ $105,000 toRoverland for the purchase of a Range Rover motor vehicle. This sum was deemedto be income to Mr Krasniqi in the 2005 income tax year.[87] It was not in dispute that the Whangaruru Farm Trust was one of the trustsestablished and operated by Mr Brown.[88] Mr Krasniqi denied that the Range Rover was his vehicle. He said it belongedto Mr Brown. However:(a) there was no record of Mr Brown owning such a vehicle at the relevanttime; and(b) in an interview which Mr Brown gave under oath pursuant to s 19 ofthe Act, he stated that he owned and drove, at different times, a Prado,a Lamborghini, and other vehicles which he said he got in "as trades"and which were owned by his trusts, including, at one stage, a RangeRover. He said that he did drive these traded vehicles on occasion andthat others had access to them, including Mr Krasniqi.[89] Before the Authority, the Commissioner submitted that it was likely thatMr Krasniqi was the principal user of the Range Rover. It was noted that he spent agreat deal of time in this country and that he would have required transport when hewas here. It was noted that, in his evidence, Mr Krasniqi admitted driving the RangeRover, albeit "not very often", and that he said that it was not his car.[90] Mr Krasniqi's evidence was not accepted by the Judge, and she held that hehad failed to discharge the onus on him to show that the transaction was not for hissole benefit. It was noted that Mr Krasniqi did not produce any supporting evidence,and that it could reasonably have been expected that Mr Krasniqi would have beenable to produce some evidence as to the vehicle or vehicles he used in New Zealandat the relevant times, along with some supporting evidence to show that the RangeRover was Mr Brown's company car, and that it was not utilised by Mr Krasniqi ashis private vehicle. It was noted that those who knew his daily movements could havebeen called to give evidence. In the absence of such corroborative evidence, the Judgerefused to accept Mr Krasniqi's explanation. She concluded that the $105,000 hadbeen correctly assessed as income to Mr Krasniqi.[91] Before me, Ms Low argued that Mr Krasniqi's evidence was corroborated bythe sworn evidence of Mr Brown, given in the course of his s 19 interview.[92] I do not consider that Mr Brown's interview evidence does corroborateMr Krasniqi's evidence. The $105,000 payment was made by Mr Brown's trust – theWhangaruru Farm Trust – to Roverland to purchase the Range Rover. The vehiclesMr Brown was talking about in his interview were vehicles which he, or one or otherof his trusts, acquired as part payment in property deals. Mr Brown was notspecifically asked about the Roverland transaction.[93] If Mr Krasniqi wished to call Mr Brown to corroborate his explanation, it wasopen to him to do so. He failed to do so.[94] I cannot see any error in Judge Sinclair's approach, and again Mr Krasniqi hasfailed to satisfy me that she erred in this regard. The Authority was correct to find thatMr Krasniqi failed to discharge the statutory onus and it did not make any error in thisregard.(c) Payment to Flamur Krasniqi[95] Mr Krasniqi appeals the fact that the sum of NZ $100,025 was assessed asincome. The sum was transferred from the WBR Trust – one of Mr Brown's trusts –to his brother, Flamur Krasniqi. The transfer occurred on or about 3 October 2007.[96] It was common ground that Flamur Krasniqi also worked for Mr Brown, andthat he received money transfers from various of Mr Brown's trusts from time to time.Before the Authority, the Commissioner accepted that it was possible that the transferof the $100,025 could have been made to Flamur Krasniqi for his benefit. She,however, noted that the amount was not itemised in Flamur Krasniqi's bank statement,but that other transfers made by Mr Brown's personal assistant, a Ms Cannon, wereitemised. It was argued that the fact that the transfer was not itemised made it morelikely that it occurred on instructions from Mr Krasniqi, and that the amount was dealtwith in Mr Krasniqi's interests or on his behalf.[97] The Authority favoured the Commissioner's view. Judge Sinclair noted thatMr Krasniqi did not call his brother as a witness.64 On the evidence before her, theJudge was not satisfied that the amount assessed was not income to Mr Krasniqi.65[98] This issue is finely balanced. I note that the information obtained from theAustralian Tax Office is to the effect that this payment was made to a bank accountwith the National Australian Bank in Brisbane. Flamur Krasniqi's account with theCommonwealth Bank of Australia, unsurprisingly, does not record receipt of thetransfer. There is no information I am aware of showing who held or who controlled64 Krasniqi v Commissioner of Inland Revenue, above n 1, at [117].65 At [117].the National Australian Bank account. In the circumstances, I fall back on the onus ofproof. Mr Krasniqi could have called Mr Brown, his administrative assistantMs Cannon, who made the payment, or his brother, Flamur Krasniqi. If the paymentwas made to Flamur Krasniqi or for his benefit, then they would readily have beenable to say so. Mr Krasniqi did not call any of these persons as a witness. Again, hefailed to discharge the onus that was on him. Again, I am not persuaded by MrKrasniqi that the Authority's decision was wrong. This aspect of the appeal must alsofail.(d) Amounts paid into Mr Krasniqi's New Zealand bank account in December2009 and March 2011[99] The Commissioner assessed as income to Mr Krasniqi deposits made into hisNew Zealand bank account of NZ $85,479.45 on 4 December 2009, NZ $33,000 on15 December 2010 and NZ $135,000 on 2 March 2011.[100] It was Mr Krasniqi's evidence that, because of his frequent visits to NewZealand, he decided to buy a house for his family in Remuera, Auckland. He said thathe borrowed about $1,250,000 from his solicitor's nominee company and purchased ahouse in the name of his solicitor's trust company in or about November 2009. Hetold the Authority that a reduction in the price was agreed as there was an issue withregard to cladding, and that $85,479.45 was deposited by direct credit into his bankaccount on 4 December 2009 to enable him to fix the problem. He said that there wasa further payment of $33,000 into his account by the solicitors on 15 December 2010.Mr Krasniqi said that this amount was additional funding to finalise the repairs to thehouse. He said that there was a further deposit of $135,000 paid into his account on 2March 2011. Mr Krasniqi said that this was the deposit received on the sale of theproperty. Mr Krasniqi said that his family did not enjoy living in New Zealand, thatMr Brown's financial situation was deteriorating at the time and that the property wassold in February 2011. He said that the balance of the settlement proceeds – followingthe repayment of the mortgage advance, namely $395,000 – were deposited by chequeinto his account on 11 March 2011.[101] The Commissioner assessed the sums as income to Mr Krasniqi. It was arguedfor Mr Krasniqi that these were non-taxable capital receipts.[102] The Authority noted that Mr Krasniqi was involved in property sales anddevelopment.66 It was not satisfied on the evidence that the Remuera property was hisprivate home.67 It noted that no utility accounts or other evidence relating toMr Krasniqi's occupation of the property were produced, and observed that MrKrasniqi had consistently maintained that he did not have a permanent place ofresidence in New Zealand over the disputed period.68 It was noted that, in hisstatement of position, Mr Krasniqi specifically stated that he did not have a houseavailable to him in New Zealand.69 The Authority recorded that other than a ledgerstatement relating to the purchase, and a settlement statement relating to thesubsequent sale, no other documents were produced.70 It observed that Mr Krasniqicould have called either his wife or his solicitor to prove his ownership/occupation ofthe property, but that he did not do so.71 The Authority was not persuaded that theamounts had been incorrectly assessed as income to Mr Krasniqi.72[103] I share the Authority's reservations.[104] Clearly, if Mr Krasniqi was residing in the home, then monies received for itsrepair and from its sale would have been non-taxable capital receipts. However,Mr Krasniqi failed to produce any corroborating evidence to support his claim thatthe house was his private home. He did not, for example, provide any utility bills inhis name. He did not put forward any other evidence, for example, that his childrenwent to school in the local area. To the contrary, he maintained up until his writtenbrief that he did not have a permanent place of abode in New Zealand, and that his andhis family's home was in Australia. In his statement of position, he denied that he hada permanent place of abode in New Zealand, no doubt because at that point he wasdenying that he was a New Zealand tax resident. It was only at the hearing thatMr Krasniqi did a turn around, and claimed to have bought the Remuera house to useas a family home because, according to him, he was spending considerable amountsof time working in New Zealand looking after his family's financial investments.66 Krasniqi v Commissioner of Inland Revenue, above n 1, at [80].67 At [80].68 At [80].69 At [80].70 At [81].71 At [81].72 At [81].[105] I agree with Ms Roff's submission that Mr Krasniqi's evidence was conflicting,unconvincing and totally self-serving.[106] If Mr Krasniqi bought the property for his personal use, and funded thepurchase through a loan from his solicitor's nominee company, the Authority shouldhave been given documentation evidencing the purchase, and showing that theproperty was held in Mr Krasniqi's name or on trust for him.[107] The trust account ledger produced from the solicitors did not include thepayment of $33,000 or the payment of $135,000. The bank narrations were unhelpful.If Mr Krasniqi's version of events was correct, one would have expected that allrelevant transactions would have gone through the solicitor's trust account.Mr Krasniqi could not explain the absence of two of the three entries. It is alsosignificant that the Commissioner made a request under s 17 of the Act to MrKrasniqi's solicitors. She did not receive any further relevant documents as a result ofthat request. Mr Krasniqi tried to suggest that the solicitors did not retain copies ofrelevant documents. That explanation is simply not credible. Solicitors have aprofessional and regulatory obligation to retain client records.[108] If the house in Remuera was indeed Mr Krasniqi's private home, which hepersonally bought using his solicitor's services, he could reasonably have beenexpected to provide convincing evidence of that, rather than just relying on a singlepage printout from the trust account ledger, which did not display all of thetransactions which he said were related to the house.[109] Once again, Mr Krasniqi has failed to persuade me that the Authority waswrong in the conclusions it reached. Once again, he has failed to discharge the onuswhich was on him. This aspect of the appeal is also dismissed.The Commissioner's cross-appeal(e) Payment by Sun Marine Services into Mr Krasniqi's Australian bank account[110] On 20 December 2006, Sun Marine Services paid AUD $519,351.45 intoMr Krasniqi's Australian bank account.[111] The Commissioner's investigator gave evidence that Sun Marine Services wasa boat-yacht sales business operating in that part of Australia in which Mr Krasniqiand his family lived. Mr Krasniqi told the Authority that his father had sold a boat andadvanced him the proceeds of sale, so that he and his wife could buy a house inAustralia.[112] The Authority noted that the deposit did not come from any trust or other entityowned by Mr Brown, Mr Smith or Mazhar Krasniqi. It also noted that the paymentwas a substantial one-off payment. It was prepared to infer that it represented theproceeds of sale of a boat. Judge Sinclair expressed the view that there was no logicalbasis for assessing the amount as income under ordinary concepts.73[113] Before me, the Commissioner argued that the Authority's conclusion waswrong and that the Authority erred in finding that Mr Krasniqi had discharged the onusof proof in relation to this amount. It was said that the Authority's conclusion wasinconsistent with its credibility findings – summarised at [30] above. Further, theCommissioner did not accept that it was a one-off payment, noting that two furtherdeposits from Sun Marine Services were paid into the Krasniqi Discretionary Trust'saccounts on 14 August 2007 and 19 December 2007. It was argued that it was artificialfor the Authority to isolate one payment from a large number of regular deposits whichflowed to Mr Krasniqi from various sources throughout the disputed period, and thatan overall consideration of the circumstances of the case was necessary to appreciatethe nature and character of the payment.[114] I am not persuaded by the Commissioner's arguments. In my view, thefollowing are relevant:(a) The payment was not from Mr Brown, Mr Smith or Mr Krasniqi'sfather. It was from an unrelated third-party entity.(b) At the time it was made, it was a one-off payment of a large sum.73 Krasniqi v Commissioner of Inland Revenue, above n 1, at [91].(c) There is nothing to suggest that Mr Krasniqi was undertaking anyconsultancy services for Sun Marine Services, or that he derived anyother remuneration or income from that entity.(d) The Commissioner's investigator – Ms Banwell – in cross-examinationconfirmed that the amount came from a boat sales yard. This evidencewas consistent with Mr Krasniqi's evidence.(e) A person would not ordinarily be taxed on the sale of a boat.(f) The other payments from Sun Marine Services were not to Mr Krasniqipersonally, but rather to the Krasniqi Discretionary Trust. There wasonly one payment from Sun Marine Services direct to Mr Krasniqi.[115] I am not persuaded that the Authority's decision was wrong. There is nothingon the face of the payment to suggest that it was income according to ordinaryconcepts. It seems more likely that the payment resulted from the sale of a capitalitem – likely a boat. This aspect of the Commissioner's cross-appeal is dismissed.(f) Sums paid by Sun Marine Services to the Krasniqi Discretionary Trust[116] There were two deposits from Sun Marine Services into the KrasniqiDiscretionary Trust's bank accounts – the first of AUD $39,000 on 14 August 2007,and the second of AUD $27,300 on 19 December 2007.[117] It was Mr Krasniqi's evidence that the two deposits into the trust's bankaccounts came from the sale of his father's boat.[118] The Authority dealt with these amounts relatively briefly. Judge Sinclairsimply said that, on the evidence before the Authority, she was prepared to allow thesedeposits to be deducted, and she directed the Commissioner to amend her assessmentsaccordingly.7474 At [106]-[107].[119] The Commissioner argued before me that there is something of an illogicalityin the payments. The payment to Mr Krasniqi's personal account was made inDecember 2006. The payment of AUD $39,000 on 14 August 2007 into the trust'sbank accounts was some eight months later; the payment of AUD $27,300 into thetrust's bank accounts on 19 December 2007 was almost a year later. It was noted thatthere was no explanation offered as to why one of the payments went intoMr Krasniqi's personal bank account, and the other two payments were paid into theKrasniqi Discretionary Trust's bank accounts, nor as to why payments from the saleof Mazhar Krasniqi's boat would be made in part to Mr Krasniqi and in part to thetrust.[120] Again, I am not persuaded that the Authority's decision was wrong in thisregard, and for much the same reasons as I have set out in relation to the rather largerpayment from Sun Marine Services to Mr Krasniqi personally. I agree with theAuthority that there is nothing to suggest that the two payments were income toMr Krasniqi according to ordinary concepts. The Commissioner's cross-appeal inthis regard is dismissed.(g) International money transfers to Yacht Solutions[121] On 7 December 2006, there was an international money transfer from theBrown Family Trust in the sum of NZ $10,020 to Yacht Solutions at Boat Lagoon inPhuket. On 9 July 2008, there was another international money transfer, in the sum ofNZ $12,020, paid to Yacht Solutions in Phuket from the North Family Trust – anotherBrown entity.[122] Mr Krasniqi said that he did not know anything about these payments.[123] The Authority observed that the payments were not made to anyone inAustralia, and it concluded that there was no sufficient basis for their inclusion in thedefault assessments.75 It directed that they be removed from the assessments.7675 At [116].76 At [116].[124] The Commissioner submitted that the Authority was wrong to acceptMr Krasniqi's blanket denial, and that the Authority's decision as to why it excludedthe payments from the default assessments is unsatisfactory, because no explanationwas given for the finding.[125] I do not accept the Commissioner's arguments. The Authority implicitlyconsidered that the payments were not income under ordinary concepts paid toMr Krasniqi. In my view, it was correct to do so. There is nothing to connect thepayments with Mr Krasniqi. He did not live in Phuket. There were no passengermovements produced showing that he travelled to Phuket, and there was no referenceto Mr Krasniqi in the relevant international money transfers schedule prepared inrelation to these transactions. The payments were some 18 months apart. This aspectof the Commissioner's cross-appeal is also dismissed.Conclusion - Summary[126] For the sake of convenience, I summarise my findings:(a) Mr Krasniqi's appeal in relation to s 138G(2) of the Act is dismissed;(b) Mr Krasniqi's appeal in respect of the sum of NZ $1,309,185.04 paidinto the Krasniqi Discretionary Trust's bank accounts between 11October 2005 and 25 June 2009 is dismissed;(c) Mr Krasniqi's appeal in respect of the sum of NZ $105,000 paid byWhangaruru Farm Trust to Roverland for the purchase of a RangeRover on 16 September 2004 is dismissed;(d) Mr Krasniqi's appeal in relation to the NZ $100,025 transferred fromone of Mr Brown's trust to Mr Krasniqi's brother, Flamur Krasniqi, onor about 3 October 2007 is dismissed;(e) Mr Krasniqi's appeal in relation to the sum of NZ $253,479.45deposited into Mr Krasniqi's New Zealand bank account on 4 and 15December 2010 and on 2 March 2011 is dismissed;(f) The Commissioner's cross-appeal in relation to the sum of AUD$519,351.45 deposited by Sun Marine Services into Mr Krasniqi'sAustralian bank account on 20 December 2006 is dismissed;(g) The Commissioner's cross-appeal in relation to the sum of AUD$39,000 and AUD $27,300 – total AUD $66,300 – deposited by SunMarine Services into the Krasniqi Discretionary Trust's bank accountson 14 August 2007 and 19 December 2007 is dismissed; and(h) The Commissioner's cross-appeal in respect of the sums of NZ $10,020and NZ $12,020 transferred by international money transfer to YachtSolutions at Boat Lagoon, Phuket on 7 December 2006 and 9 July 2008is dismissed.[127] The Commissioner is directed to prepare amended assessments to allow forthose payments which have been assessed twice as noted in [82]-[85] above.Costs[128] Both the appeal and the cross-appeal have been dismissed. It is my preliminaryview that costs should lie where they fall.[129] If counsel do not agree with this view, then I direct as follows:(a) within 10 working days of the date of this judgment, the Commissioneris to file a memorandum seeking any costs and/or disbursements shewishes to claim;(b) within a further 10 working days, Mr Krasniqi is to file anymemorandum responding to the Commissioner's memorandum andseeking any costs and/or disbursements that he wishes to claim; and(c) the Commissioner is to file a memorandum in reply to any applicationMr Krasniqi may make for costs and disbursements within a further 10working days.I will then deal with the issue of costs on the papers, unless I require the assistance ofcounsel._____________________________Wylie J