COMMISSIONER OF INLAND REVENUE v AROHA HEENI [2019] NZHC 2843

COMMISSIONER OF INLAND REVENUE v AROHA HEENI [2019] NZHC 2843 [31 October 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-128[2019] NZHC 2843BETWEEN COMMISSIONER OF INLANDREVENUECreditorAND AROHA HEENIDebtorHearing: 31 October 2019Appearances: K B Chin, for the CommissionerDebtor in personJudgment: 31 October 2019ORAL JUDGMENT OF ASSOCIATE JUDGE BELLSolicitors:Inland Revenue Department (Ke Bin Chin), Takapuna, Auckland[1] This is a decision on an application to set aside a bankruptcy notice. TheCommissioner of Inland Revenue obtained judgment against Ms Heeni for unpaidtaxes in the Waitakere District Court on 5 November 2018 for $330,506.28. Abankruptcy notice based on that judgment was issued in February this year. There hasbeen no appeal against the District Court's decision, and no application for a stay ofexecution. That decision is final.[2] Ms Heeni filed her own application to set aside the bankruptcy notice. TheCommissioner contended that nothing in her application showed any grounds forsetting aside the bankruptcy notice.[3] When the matter was called before me on 12 September and on3 October 2019, Ms Heeni contended that the Commissioner had made incorrectassessments of her income tax liabilities. On 3 October 2019, I indicated thatassessments of income tax are final and conclusive under s 109 of the TaxAdministration Act once the period for challenge has expired, and the period forchallenge had expired in this case. I noted, however, that the Commissioner has thepower to review assessments. That is not something that the Court can compel. Thatpower is under s 113 of the Tax Administration Act.[4] I gave Ms Heeni the opportunity to provide further information to the InlandRevenue with a view to persuading the Commissioner to amend the assessments onwhich the judgment was based. If she could successfully persuade the Commissionerthat the assessments are incorrect then I would make adjustments to the bankruptcynotice to allow payment of a reduced sum.[5] Ms Heeni took the opportunity to provide further information to the InlandRevenue. The Commissioner has provided two affidavits by its officers addressingthe information provided by Ms Heeni. One affidavit is by a compliance officer whoconducted an audit of Ms Heeni's income in the years 2013 to 2016.The Commissioner made assessments after carrying out an audit. Those assessmentswere made in 2017. There was not any challenge to those assessments. The officermakes the point that a company run by Ms Heeni was LACQ. The general effect ofthat is that earnings of the company which were paid out to Ms Heeni were treated asincome in her hands.[6] Another officer has sworn an affidavit saying that she has reviewed theinformation provided by Ms Heeni and having reviewed the information she issatisfied that the original assessments can stand.[7] Today Ms Heeni has maintained that the assessments are still wrong. I cannotreview that matter myself. It was for Ms Heeni to persuade the Commissioner of theerrors, not me. As she has not persuaded the Commissioner to exercise the powersunder s 113 of the Tax Administration Act, the assessments stand. That means that thejudgment in the District Court stands.[8] I am not satisfied there is any other ground for setting aside the bankruptcynotice and, accordingly, I dismiss the application. That means that the Commissionercan begin a bankruptcy application based on non-compliance with the bankruptcynotice. That is because the time for complying with the notice has now expired.[9] I mention another matter. Ms Heeni said that the liquidators of her companyare looking to her for repayment of funds that she withdrew from the company. As Iunderstand it, she says that on the one hand she has been taxed on money that shewithdrew from the company; and, on the other hand, the liquidator is looking to her torepay that money. One can understand her concern that she cannot be caught underboth demands. While the bankruptcy notice stands, I would strongly urge Ms Heenito take further advice from other tax specialists or from a lawyer to see if there is someway of resolving that problem. The dismissal of her application to set aside thebankruptcy notice is not the end of the matter. While an act of bankruptcy hasoccurred, that is only one step towards the final step of making the order foradjudication. Ms Heeni may be able to resist the application once she takes legaladvice with a view to trying to reconcile both the demands of the liquidators againsther, with her liability to the Inland Revenue.[10] I make no order for costs; which may be resolved later in the proceeding..Associate Judge R M Bell