RE INDEPENDENT STEAMSHIP CO LTD

HCMP000208A/1969

 

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

 

MISCELLANECUS PROCEEDINGS NO. 208 OF 1969

-----------------

 

	In the matter of an application by Independent Steamship Co. Ltd. for leave to apply for an order of Mandamus
	and
	In the matter of an Assessment to Corporation profits Tax in respect of the Year of Assessment 1966/67
	and
	In the matter of Section 64 of the Inland Revenue Ordinance, Cap.112

-----------------

Coram: Full Court (Blair-Kerr, Mills-Owens, and huggins, JJ.)

Date of Judgment: 18th March 1970

 

-----------------

JUDGMENT

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Mills-Owens, J.

1. I agree that no objection lies to an unconfirmed provisional assessment. Section 62(2) clearly requires confirmation of a provisional assessment. Section 64(1) also proceeds on the basis that a provisional assessment is to be confirmed if it is to be the subject of review and appeal under Part XI, that, I think, emerges from the fact that the period within which objection is to be lodged is expressed by reference to the date of notice given under section 62(2).

2. It is true that section 64(1) refers to "the date of the notice under subsection (2) of section 62 confirming or amending such (provisional) assessment", when section 62(2) contains no reference to amendment of provisional assessments. In the present case there is no suggestion that the provisional assessment was ever amended, as such. In any event the reference to amendment in section 64(1) cannot override the clear requirement of section 62(2) that provisional assessments are subject to confirmation. In endeavouring to reconcile these provisions - in particular to find a meaning for the reference to amendment in Section 64(1) - it is permissible, in my view, to read that reference as contemplating that under section 62(2) a provisional assessment may be confirmed with amendment; that would be consistent with the reference to amendment in the proviso to section 59(2) which speaks of the assessor provisionally accepting a return as substantially correct, in which case he has some minor reservation which ultimately he must resolve and where therefore, his provisional assessment may well come to be amended. In such a case confirmation under section 62(2) would take into account the amendment and operate as a confirmation with amendment.

3. It is true also that section 59(2) provides that a provisional assessment shall be valid for all purposes, but the intention, I have no doubt, is to enable tax based on the taxpayer's return to be recovered pending the inquiries which the assessor deems necessary. The subsection provides for the case where the taxpayer's return is accepted as substantially correct, in which case, therefore, it is reasonable to require payment of tax calculated on the basis of the return. The wording of section 59(2) is to be contrasted with the wording of section 60, relating to additional assessments, which specially invokes the provisions of the Ordinance relating to appeals.

4. The reference in section 64(1) to amendment by notice given under section 62(2) may therefore, I think, be reconciled with the provisions of section 62(2) if those provisions are read as extending to confirmation with amendment; in my view, they are capable of being so read, especially when regard is had to the fact that section 59(2) expressly contemplates amendment of provisional assessments.

5. On the question whether a provisional assessment may be appealed against I would take the view that it is inherent in the nature of a provisional assessment that sooner or later it must be confirmed (with or without amendment), unless it be withdrawn or superseded by a 'firm' assessment. The object of providing for provisional assessments must be to allow the assessor a latitude which otherwise he might not have; to meet the occasion when it might be urged that the taxpayer is being unduly harassed by successive (firm) assessments. A provisional assessment gives fair warning to the taxpayer that the matter remains open. It also allows of speedy recovery of tax admittedly due (section 59(2)). But it is not, in my opinion, to be taken as intended by the legislation that the whole machinery of appeal laid down by Part XI may be invoked in respect of a provisional assessment; the appeal could well be rendered nugatory by reason of the assessor deciding, in the course thereof, that his inquiries under section 59(2) are to be resolved in favour of the taxpayer.

6. As to the proviso (c) to section 62(1), the object, as I see it, is to preclude the reopening of concluded assessments. Such a situation might arise where, either, an additional assessment is made, or, an assessment previously made is amended - amended, possibly, in favour of the taxpayer. The proviso (c), as it appears to me, was intended to embrace both situations. The reference therein to an 'amended assessment' is not necessarily a reference only to an amended provisional assessment; it is equally capable of being a reference to a 'firm' assessment which comes to be amended. It must, surely, be open to an assessor to accept a taxpayer's objection, formal or informal, to a 'firm' assessment and to act upon such acceptance by substituting an amended 'firm' assessment without thereby reopening extraneous matters, that is to say matters not arising out of the (accepted objection. The proviso does not assist on these questions of construction, in my opinion.

7. The Australian case of Scarfe & ors. v. The Federal Commissioner of Taxation (1928) 28 C.L.R. 271, relied upon by counsel for the applicant taxpayer, does not in my view assist him, the decision being one to be viewed, as it appears, in the context of the legislation on which it was based. The contention for the taxpayer in the present case is that where a statute provides for an appeal if objection is lodged 'within' a specified period after a stated event (as in section 64(1)), the word 'within' is not necessarily to be read as delimiting a starting point of time as well as the final point of time for the objection; in other words that, in the context of a statute, 'within' may mean 'not later than' the end of the specified period. In the Australian case the court found reason, in the context of the relevant legislation, to adopt that construction. In the context of the Ordinance which we are now concerned with, I see no reason to give to the word 'within' any meaning other than its ordinary meaning.

8. On the second point, namely that the alleged objection fails by reason that it did not raise the matter of the balancing allowance, I agree that it is clearly the case that it made no reference whatsoever to that matter; on the contrary, it was confined to the entirely different matter of a trading loss. On this aspect of the case also, therefore, the Commissioner is entitled to succeed.

9. As has been pointed out, this is not a case of the Commissioner taking advantage of a technicality.

10. I would therefore dismiss the application.

  

18th of March 1970

 

Representation:

Mr. H. Litton (P.H. Sin & Co.) for Applicant.

Mr. E. Thistlethwaite for Inland Revenue Department.

Judgment handed down.

HCMP000208/1969

 

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

 

MISCELLANEOUS PROCEEDINGS NO. 208 OF 1969

-----------------

 

	In the matter of an application by Independent Steamship Company Limited for leave to apply for an order of Mandamus
	and
	In the matter of an Assessment to Corporation Profits Tax in respect of the Year of Assessment 1966/67
	and
	In the matter of Section 64 of the Inland Revenue Ordinance, Cap.112
	-----------------

Coram: Full Court (Blair-Kerr, Mills-Owens & Huggins, JJ.)

Date of Judgment: 18 March 1970

 

-----------------

JUDGMENT

-----------------

 

Blair-Kerr J.:-

1. The precise terms of the letters exchanged between the Inland Revenue Department and the applicants (or their agents) is of some importance. On 3rd February 1967 the Commissioner wrote to the applicants as follows:-

"Notice of Provisional Assessment and Demand for Corporation Profits Tax .............................. The assessor has provisionally assessed your profits under the terms of the Inland Revenue Ordinance and has computed your provisional liability as follows:-

	Assessable profits per return	Less:	Loss brought forward - Section 19(2)	Assessable profits
	$94,854		-	$94,854

Tax payable:- 15% on above profits

$14,228

	...................................................................................................................
	This tax is payable on or before 14th March 1967."

The applicants paid the $14.228: but on 28th February 1967 a firm of accountants, acting on behalf of the applicants, wrote to the Commissioner stating that as the applicants

"	.......... feel aggrieved by such assessment we have been directed by them to submit to you herein a notice of objection in terms of section 64 of the Inland Revenue Ordinance and claim that the assessment be revised in due course.
	The grounds on which we rely are that referring to your letter of 14th September 1965 you have instructed that an amount of loss $49,961 for the year ended 31st March 1959 will be carried forward if audited accounts for the year ended 31st March 1960 are submitted.
	We report that we now have instructions to submit such audited accounts."

On 20th March 1967, the assessor wrote to the applicants acknowledging the letter of 28th February and said:-

"	I would advise that as the said assessment is only a provisional one, which has to be confirmed or amended in due course, your letter has not been regarded as a formal objection under s.64(1). As and when a firm assessment is issued, and if your clients are still aggrieved by the firm assessment, they may on receipt of the notice of assessment lodge an objection ..............................
4.	Incidentally I must point out that the aggregate loss to the year ended 31st March 1959 of $49,961 is available for carry-forward for set-off and has in fact been utilised in the assessments for 1963/64 to 1965/66. Perhaps paragraph 2 of your letter under reply means that your clients intend to claim the loss sustained for the period 1st April 1959 to 14th September 1959 when their shipowning business was reported to have ceased."

This latter suggestion was not referred to by the applicants' accountants when they forwarded their clients' audited accounts on 5th May 1967; but in a "computation" attached to this letter there appears a note which reads:-

"The balancing allowance is claimed, please calculate."

2. On 12th April 1967, the Commissioner wrote to the applicants as follows:-

"Notice of Assessment and Demand for Corporation Profits Tax .............................. The assessor has assessed your profits under the terms of the Inland Revenue Ordinance and has computed your liability to tax as follows:-

	Assessed profits	Less:	Loss brought forward - Section 19(2)	Assessable profits
	$158,762		$25,400	$133,362

Tax payable:- 15% on above profits

$ 20,004

Tax paid on provisional assessment

$14,228

Total deduction

$14,228

	Additional net tax payable	$ 5,776
		======

	................................................................................................................................
	If you object to this assessment you must give me notice in writing WITHIN ONE MONTH of the date hereof stating precisely the grounds of your objection."

The letter appears to have been delivered to the applicants' accountants, who wrote to their clients on 15th April 1967 as follows:-

"	The assessor of Inland Revenue Department has assessed your taxable profits for the year .......... in the sum of $158,762 as per his notice dated 12th April 1967.
	If you feel aggrieved by such assessment for any reason please give us instructions in writing within three weeks from the date quoted in order to enable us to lodge an objection within the prescribed time."

On 9th May 1967, the applicants wrote to their accountants saying:-

"The following is a summary of the objections we have raised in connection with the Corporation Profits Tax Assessments for the past few years."

And, having set out their objections, the letter ended thus:-

"Your attention to the above will be highly appreciated."

3. The accountants took no action on their clients' letter prior to 12th May 1967, and Mr. Litton agrees that the applicants forfeited their right to lodge any objection to the assessment of 12th April 1967.

4. However, he submits that it is still open to the Commissioner, indeed that the Commissioner is duty bound by law, to consider the letter of objection dated 28th February 1967.

5. I think it is of some importance that the relevant sections of the Inland Revenue Ordinance should be viewed as a whole. The proviso to section 59 (2) reads:-

".......... if the assessor accepts the return as substantially correct, but considers it necessary to make further inquiries on any matter, he may make immediately a provisional assessment in the amount of the return which until amended shall be a valid assessment for all purposes."

Section 60 reads:-

"          Where it appears to an assessor that a provisional assessment made under subsection (2) of section 59 should be increased or that for any year of assessment any person chargeable with tax has not been assessed or has been assessed at less than the proper amount, the assessor may, within the year of assessment or within six years after the expiration thereof, assess such person at the amount or additional amount at which according to his judgment such person ought to have been assessed and the provisions of this Ordinance as to notice of assessment, appeal and other pro-ceedings shall apply to such assessment or additional assessment and to the tax charged thereunder."

Section 62 reads:-

"

(1) The Commissioner shall give a notice of assessment to each person who has been assessed stating the amount assessed and the amount of tax charged.

(2) Where the assessment is a provisional assessment made under subsection (2) of section 59 the person assessed shall be notified accordingly by the Commissioner, and he shall further be notified in due course by the Commissioner if such provisional assessment is confirmed. The confirmation of a provisional assessment shall not preclude the making of an additional assessment subsequently under section 60."

Section 64(1) reads:-

"Any person aggrieved by an assessment made under this Ordinance may, by notice in writing to the Commissioner, object to the assessment; but no such notice shall be valid unless it states precisely the grounds of objection to the assessment and, in the case of an assessment other than a provisional assessment, is received by the Commissioner within one month after the date of the notice of assessment or, in the case of a provisional assessment, within one month after the date of the notice under subsection (2) of section 62 confirming or amending such assessment."

Section 64(2), so far as relevant, reads:-

"On receipt of a valid notice of objection under subsection (1), the Commissioner shall consider the same and .......... may confirm, reduce, increase or annul the assessrent ....."

Section 70, so far as relevant, reads:-

"Where no valid objection .......... has been lodged within the time limited by this Part against an assessment as regards the amount of the assessable .......... profits assessed thereby ............................ the assessment as made .................... shall be final and conclusive for all purposes of this Ordinance as regards the amount of such assessable .......... profits."

6. It seems to me to be wrong that a taxpayer should have the right to set in motion the whole machinery of review and appeal - if need be, to the Privy Council - against a provisional assessment. As counsel for the Commissioner said, this would mean that the assessor would be unable satis-factorily to conduct further inquiries while the questions raised were before the courts; and, in the end, the entire proceedings might be rendered nugatory because the assessor, as a result of his further inquiries, might increase or reduce his provisional assessment.

7. The first matter to consider is: what are the Commissioner's powers under section 60? This section appears to contemplate three situations:-

	(1)	that there has been a provisional assessment; and, as a result of the assessor's further inquiries under the proviso to section 59(2), it appears to him that the provisional assessment "should be increased";
	(2)	that there has been no assessment at all in respect of some year of assessment; that this fact has come to the notice of the assessor within six years from the expiration of that year; and that he has decided to make an assessment for that year;
	(3)	that there has been an assessment in respect of some particular year; but, within six years from the expiration of that year, it has come to the assessor's notice that the person liable to tax has been assessed "at less than the proper amount".

The words "the Assessor may .................... assess such person at the amount or additional amount at which ................... such person ought to have been assessed", apply to all three situations. But obviously the expression "additional amount" could not apply to situation (2). It does apply to situation (3) where there has been a previous assessment, (or a provisional assessment which has been confirmed) but the assessor, at a later date, decides that there are further assessable profits upon which tax should be paid. In my view, the words "additional amount" do not apply to situation (1). In the case of (1), the assessor assesses such person "at the amount .......... at which .......... such person ought to have been assessed" - not "at the additional amount .......... at which .......... such person ought to have been assessed". In other words, there is a re-assessment of the assessable profits for the year in question. But, so far as provisional assessments are concerned, section 60 contemplates only cases in which the provisional assessment, in the assessor's view, should be increased. What happens if, as a result of his further inquiries, the assessor is of the opinion that the assessment should be reduced or even withdrawn altogether? Is he precluded from reducing or withdrawing it? Surely not. True, the proviso to section 59(2) does not say, in so many words, that the assessor may reduce or withdraw a provisional assessment; but I do not think that he requires statutory authority to do so. The proviso makes it plain that the person assessed must pay the tax demanded on the provisional assessment and that he may be prosecuted if he fails to do so. It is a legally valid assessment, although provisional; and it remains so "until amended". The legislature appears to have used the word "amended" in a very loose sense; but the intention is clearly to maintain the validity of the provisional assessment until it has been replaced by something more permanent.

8. The Shorter Oxford Dictionary defines the word "provisional" as:-

".................... of the nature of a temporary provision or arrangement; provided or adopted for present needs or for the time being";

and I agree that, from the very nature of things, it was never the intention that a provisional assessment should be left in the air. Section 62 speaks of it being confirmed; other sections speak of it being amended; and, whether, on amendment, the figure for assessable profits is increased or decreased, it is clear from the language of section 60 and from the procedure adopted by the assessor as disclosed in the above correspondence, that there is a re-assessment.

9. If, upon the re-assessment, the assessable profits are increased, the Commissioner, in his notice, must give credit to the person assessed for any tax which he may have paid under the provisional assessment; and he "demands" only the balance of tax due on the new assessment. If, upon the re-assessment, the assessable profits are reduced, there is no "demand" for tax. The person assessed presumably gets a refund. But, in either case, there are not now two assessments standing side by side - one provisional and one "firm". When the provisional assessment is increased or reduced as a result of the assessor re-assessing the person "at the amount at which such person ought to have been assessed", the provisional assessment ceases to exist and the new assessment, or re-assessment, becomes the assessment.

10. Section 62 appears to be designed to ensure that the person assessed is kept informed of every action taken by the assessor in relation to assessments. In my view, subsection (1) is wide enough to cover every contingency, except confirmation of a provisional assessment. If the legislature had not enacted subsection (2), the Commissioner would, never-theless, have been required under subsection (1) to give notice of a provisional assessment. He would further have been required under subsection (1) to have given notice of any re-assessment upon the assessor deciding that a provisional assessment should be "amended". The legislature has chosen to provide specially for notices relating to provisional assessments; but the only reason for this would appear to be that confirming a provisional assessment could not reasonably be said to be making an assessment.

11. With respect to my Brothers, I find great difficulty in accepting the view that the word "confirmed" in subsection (2) of section 62 may mean "confirmed with amendment", or that the word "if" in subsection (2) of section 62 really means "whether". It seems to me that the word "if" is clearly conditional, and that if the provisional assessment is not confirmed, it is unnecessary to send a notice saying so in so many words. But this does not relieve the Commissioner from his legal obligation under subsection (1) to give his notice of any re-assessment upon the provisional assessment being amended.

12. Turning to section 64(1), it is, of course, easy to criticise the way in which this subsection has been drafted. It might be said, for example, that a provisional assessment is no longer provisional after it has been confirmed. But surely the broad intention is clear enough. The person assessed is given a right to object to an assessment; but it is a qualified right. The notice of objection must comply with certain requirements. Firstly, it is provided that no notice of objection shall be valid unless it states precisely the grounds on which the assessment is challenged. Secondly, in the case of a "firm" assessment, no notice of objection shall be valid unless it is received by the Commissioner within one month after the date of the notice of assessment. Thirdly, in the case of a provisional assessment, no notice of objection shall be valid unless it is received by the Commissioner within one month after the date of a notice saying that it has been confirmed; and fourthly, if the provisional assessment is not confirmed, but is "amended", no notice of objection shall be valid unless it is received by the Commissioner within one month after the date of a notice amending such assessment.

13. In the case of a "firm" assessment, section 64(1) makes no reference to the section under which the notice of assessment issues. But clearly it is subsection (1) of section 62, and it could not be suggested that section 64(1) is defective because it makes no reference to section 62 so far as "firm" assessments are concerned. In the case of provisional assessments which have been confirmed "or amended", there is a reference to subsection (2) of section 62. So far as notices confirming a provisional assessment are concerned, the reference is strictly accurate because such notices issue under that particular subsection. But, if it is true to say that when a provisional assessment is amended, there is a re-assessment and that the re-assessment is the assessment, the Commissioner is obliged to notify the person assessed under subsection (1) of section 62. If that is so, it seams to me that the reference in section 64(1) to subsection (2) matters not. The point is that a notice of objection is not valid unless it is received by the Commissioner within one month after the date of the notice amending the provisional assessment; and all notices in relation to assessments and amendments thereof issue under the authority of section 62.

14. If, of course, the intention of the legislature was that the word "confirmed" should be read as meaning "confirmed with or without amendment" or if it is possible to say that the legislature used the word "if" in the sense of meaning "whether" and that, in notifying the person assessed that the provisional assessment has not been confirmed, the Commissioner has a further duty specifically under subsection (2) of section 62 to give notice that the provisional assessment has been amended, giving details of "the amount assessed and the amount of tax charged" this avoids doing any violence to the language of section 64(1). But, with respect, I should have thought that to construe the two sections as I have done does less violence to the language of the two sections taken together. Anyway, it makes no material difference because however one looks at this question, the obvious intention of section 64(1) is that no objection should lie to an unconfirmed provisional assessment.

15. I agree with what my Brother Mills-Owens J. is about to say in relation to proviso (c) to section 64(1), always remembering, of course, the provisions of section 70. But I do not think that the proviso assists us on the question of construction which has arisen in this case.

16. As it seems to me, the Commissioner's notice of 3rd February 1967 was issued under section 62(2). The applicant had no right to object upon receiving this notice. The provisional assessment was not confirmed, It was "amended". There was consequently a re-assessment for the year; and this re-assessment became the assessment. The Commissioner was therefore obliged to give notice of this re-assessment; and he did so on 12th April 1967. In my view, this notice was given under section 62(1), or the alternative view is simply to regard it as a notice under section 62. But upon the issue of that notice, the provisional assessment ceased to exist. The applicants were clearly warned that if they wished to object to "the assessment" (and that is how it was described), notice of objection should be lodged within one month. Their agents failed to carry out their instructions; and, presumably, that is why this application is now being made.

17. As to the meaning of the word "within" in section 64(1) counsel for the applicants cited Scarfe and others v. The Federal Commissioner of Taxation⁽¹⁾. I am not prepared to say if this case could be of any assistance to this Court because the Australian legislation was not available to the Court. But it is difficult to see how this decision could, in any way, alter the plain meaning of the words "within one month after the notice .........." in section 64(1).

18. However, in my view, this appeal must also fail for the reason that the applicants' letter of 28th February 1967 did not raise the ground of objection on which they now rely in seeking an order of mandamus. The $49,961 referred to in that letter was a trading loss. The letter makes no mention of a balancing allowance.

19. Mr. Litton's submission was that the letter must be considered in the light of all previous correspondence on the subject of the balancing allowance. For myself, I am quite unable to accept that submission. The notice of objection referred to in section 64(1) is the foundation of the Commissioner's jurisdiction under section 64(2) to consider, and thereafter confirm, reduce, increase, or annul the assessment objected to; and the subsection says that "no such notice shall be valid unless it states precisely the grounds of objection ..........". In my view the letter of 28th February 1967 did not state any ground of objection, precisely or at all.

20. I agree with counsel that the Commissioner has no valid notice of objection before him. The Commissioner's jurisdiction under section 64(2) is founded upon the receipt by him of a valid notice of objection; and there is therefore no ground upon which this Court could consider issuing an order of mandamus.

21. I would myself refuse the application.

 

 

	(W.A. Blair-Kerr)
	President.

 

Representation:

H. Litton instructed by Messrs. P.H. Sin & Co. for the Applicant.

E. Thistlethwaite, Crown Counsel, for the Respondent.

 

 

(1) (1920) 28 C.L.R. p.271.

HCMP000208B/1969

 

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

 

MISCELLANEOUS PROCEEDINGS NO. 208 OF 1969

-----------------

 

	In the matter of an application by Independent Steamship Company Limited for leave to apply for an order of Mandamus
	and
	In the matter of an Assessment to Corporation Profits Tax in respect of the Year of Assessment 1966/67
	and
	In the matter of Section 64 of the Inland Revenue Ordinance, Cap. 112
	-----------------

Coram: Full Court (Blair-Kerr, Mills-Owens & Huggins, JJ.)

Date of Judgment: 18th March, 1970.

 

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JUDGMENT

-----------------

 

Huggins, J: This is an application for an order of mandamus addressed to the Commissioner of Inland Revenue requiring him to determine an objection lodged by the applicants in respect of an assessment of corporation profits tax. The issue which arises is whether the objection has been validly made so as to require the Commissioner to consider it and to make a decision upon it.

1. The applicants are shipowners. Between August 1956 and September 1959 they operated one vessel, but at the end of that period they sold her at a sub tantial loss and I think it is not disputed that after allowing for depreciation at the rate prescribed by the Inland Revenue Ordinance they would have been entitled to a balancing allowance under s. 38 in the sum of $1,050,190 against subsequent profits. From September 1959 until 1963, however, the company neither owned nor operated any vessel and there were no profits against which a balancing allowance could be made. Indeed, the Commissioner regarded the applicants as having ceased business altogether. Be that as it may, in July 1963 the applicants purchased another vessel and commenced trading with her, as a result of which they made profits. In respect of the year of assessment 1966/67 the applicants submitted the necessary return. On the 3rd February, 1967 the Commissioner gave notice of a provisional assessment under s.59(2). That assessment made no mention of any loss brought forward under s.19(2), which we are told would include any balancing allowance. By a letter dated the 28th February, 1967 the applicants' accountants purported to give notice of objection against this provisional assessment, the terms of the letter being as follows:-

	"We have been directed by the above company to acknowledge the notice of assessment and demand for Corporation Profits Tax for the year of assessment 1966/67 and as they feel aggrieved by such assessment we have been directed by them to submit to you herein a notice of objection in terms of Section 64 of the Inland Revenue Ordinance and claim that the assessment be revised in due course.
	The grounds on which we rely are that referring to your letter of 14th September, 1965 you have instructed that an amount of loss $49,961.00 for the year ended 31st March, 1959 will be carried forward if audited accounts for the year ended 31st March, 1960 are submitted.
	We report that we now have instructions to submit such audited accounts."

The Commissioner replied, indicating that he did not regard this letter as a formal objection under s.64(1) as there had been only a provisional assessment, and on the 12th April, 1967, he gave a further notice of assessment, which indicated that additional nett tax was payable. The notice was accompanied by a computation headed "Firm Assessment" and allowed for a sum of $25,400 as loss brought forward under s.19(2). Again no mention was made of any balancing allowance. No objection was lodged in respect of this assessment.

2. The material parts of s.64(1) are:-

"	64. (1) Any person aggrieved by an assessment made under this Ordinance may, by notice in writing to the Commissioner, object to the assessment; but no such notice shall be valid unless it states precisely the grounds of objection to the assessment and, in the case of an assessment other than a provisional assessment, is received by the Commissioner within one month after the date of the notice of assessment or, in the case of a provisional assessment, within one month after the date of the notice under subsection (2) of section 62 confirming or amending such assessment:
	Provided that -
	.......................
	.......................

(c)

where the assessment is an additional or amended assessment, the person so assessed shall have no further right of objection than he would have had if the additional or amended assessment had not been made, except to the extent to which by reason of the additional or amended assessment is fresh liability in respect of any particular is imposed on him or an existing liability in respect of any particular is increased."

There can be no doubt that unless the context indicates otherwise a provisional assessment made under s.59 is an "assessment made under this Ordinance" so that at first sight the opening sentence of s.64(1) appears to contemplate an objection to a provisional assessment. S.59(2) lays down three alternative courses of action open to an assessor where a person furnishes a return, (a) to accept the return and make an assessment accordingly, (b) to reject the return and make an assessment upon an estimate of the tax chargeable, and (c) to make a provisional assessment. Alternative (c) is contained in the proviso, which says:

"Provided that if the assessor accepts the return as substantially correct, but considers it necessary to make further inquiries on any matter, he may make immediately a provisional assessment in the amount of the return which until amended shall be a valid assessment for all purposes."

Despite the forthright statement that a provisional assessment shall be valid "for all purposes" counsel for the Commissioner submits that it is valid for all purposes except for purposes of an objection. Perhaps it is not necessary for him to go quite as far as that for what in effect he submits is that although not in any sense "invalid" a provisional assessment is not open to objection because the Ordinance (in particular s.64) supplies no method of lodging a valid notice of objection against it.

3. I must concede at once that the drafting of the relevant provisions leaves much to be desired and if, as we are told, s.64(1) was enacted in its present form in 1965 with the purpose of making appeals against provisional assessments incompetent it is a little surprising that the Legislature did not express its intention more clearly. The inclusion of the words "in the case of a provisional assessment" would obviously support the implication contained in the opening sentence that every assessment, including a provisional assessment, may be objected to. The argument for the Commissioner requires the subsection to be read as though it said "... in the case of an assessment which is not in substitution for a provisional assessment ..... and in the case of an assessment which is in substitution for a provisional assessment......". There is a related difficulty arising from the fact that "in the case of a provisional assessment" a notice must be given "within one month after the date of the notice under subsection (2) of section 62 confirming or amending such assessment". Strictly a notice under s.62(2) cannot itself confirm a provisional assessment but can only give notice that a provisional assessment has been confirmed. Even disregarding such niceties of language one finds that there is no express reference in s.62(2) to a notice amending, or giving notice of the amendment of, a provisional assessment. Indeed counsel on both sides seem to argue that there is no such thing as an amending assessment or a notice of amended assessment: they say that there can be only an "additional" assessment under the provisions of s.60. In my view it is impossible on a reading of the whole Ordinance to hold that there is no such thing as an amended assessment. The proviso to s.59(2), whence is derived the power to make a provisional assessment, expressly indicates the possibility of amendment and one is not to assume that the Legislature included the words "until amendment" to no purpose. Mr. Justice Mills-Owens has suggested to us that a notice of confirmation under s.62(2) may be a notice that the assessment is confirmed with amendment: it would then be, in the words of s.64(1) a "notice under subsection (2) of section 62 ... amending such assessment". Whatever way one approaches the Ordinance there are difficulties of construction and the one which strikes me most forcibly concerning this approach is that the Legislature has elsewhere in the Ordinance contrasted confirmation and amendment too often for the word "confirmed" when it appears in s.62(2) to combine confirmation and amendment, while such a construction would involve that the words "or amending" in s.64(1) were surplusage. I am, however, greatly indebted to my learned brother for his suggestion because it has shown me another possibility which, I think, does less violence to the language of the Ordinance than any other.

4. I agree that it is unfortunate that the draftsman has lumped together in s.60 provisions relating to increases of provisional assessments and assessments additional to what I any call substantive assessments, i.e. assessments under paragraphs (a) and (b) of s.59(2), but in my view this does not prevent the first type of additional assessment from being at the same time an amended assessment. Although s.60 does not use the word "amend" in any of its cognate forms it deals with the case where the sum arrived at by the provisional assessment is subsequently thought by the assessor to be too low and, therefore, to require "amendment". (No question can arise of a provisional assessment's being too high because every provisional assessment must be "in the amount of the return" so that any disputed matter can only lead to an increased and not to a decreased liability). Having come to the conclusion that any amendment of a provisional assessment must be made under s.60 I then ask myself How is the taxpayer to be informed of the amendment? The contention before us has been that notice must be given under s.62(1). The reason for that contention is that the only provisions relating to notice of assessment are subsections (1) and (2) of s.62 and that subsection (2) applies only "if such provisional assessment is confirmed". Nevertheless, as Mr. Justice Mills-Owens points out, s.64(1) appears to contemplate "a notice .... amending" (or, more accurately, a notice of amendment) given under s.62(2) and it occurs to me that the clue to the solution to the problem may lie in the draftsman's not being a devotee of Fowler. Perhaps in the better English usage "if" is a conjunction introducing a clause of condition or supposition although there is authority stretching back at least as far as the Authorised Version of the Bible for its use as a synonym for "whether": see Genesis 8.8. If one reads s.62(2) as though it said "... and he shall further be notified in due course by the Commissioner whether such provisional assessment is confirmed", one gets the position that if an assessor decides to amend a provisional assessment notice must be given under s.62(2) that the provisional assessment is not confirmed. It is perhaps not an unreasonable assumption that the Legislature contemplated that in such a case the notice should go further and should indicate what figure had been decided upon as being the correct assessment. In that event the notice could not unfairly be described, in the words of s.64(1), as a "notice under subsection (2) of section 62 .... amending such assessment". In my view the notice dated the 12th April 1967 was a notice under s.62(2) of amendment of the provisional assessment.

5. It fallows from there that "in the case of a provisional assessment" (which I agree should be taken to mean "in the case of an assessment which is in substitution for a provisional assessment") where the provisional assessment is not confirmed notice of objection must be given within one month of the notice informing the taxpayer that the provisional assessment is not confirmed and amending the assessment. Whether the increased assessment is still a "provisional" assessment it is not necessary for us to decide. It has been argued for the appellants that the notice of objection dated the 28th February, 1967 was given within the period prescribed by s.64(1). While this, also, is not necessary to our decision I cannot accept that argument because this much at least is clear, that the notice of objection was not intended to be valid unless it was served "after" the date of the notice of the amendment of the provisional assessment.

6. That brings me to the question whether the Ordinance does contemplate an objection to a provisional assessment at all. What possible purpose could there be in the Legislature's providing for an objection to a provisional assessment which had ex hypothesi been superseded by an amended assessment? It is contended on behalf of the applicants that proviso (c) to s.64(1) may make it necessary to do so because otherwise the taxpayer may find himself barred from raising an issue which was raised by the provisional assessment. This argument is based upon the words "shall have no further right of objection than he would have had if the .... amended assessment had not been made, except to the extent......"; which appear in proviso (c) to s.64(1). As it seems to me the purpose of this proviso was to produce finality. Once a taxpayer acquires a right to object he must proceed with any objection he may have and if he fails to do so the fact that an additional or amended assessment is made which raises the same issue does not entitle him to raise the issue by objection to the later assessment: his right to raise the issue is statute barred except to the extent of any fresh or increased liability. What is said by the applicants is that the reference to an "amended assessment" in proviso (c) can only be to a case where a provisional assessment has been "amended" under s.60 because there is no other case where an assessment can be amended: therefore, the proviso suggests that where there has been a provisional assessment the right to object to an amended assessment is limited because there was a previous right to object against the provisional assessment itself. Counsel for the Commissioner agrees that the reference to an "amended assessment" can only be to a case where a provisional assessment has been "amended" under s.60 but submits that the words "or amended" are surplusage, since where there has been a provisional assessment an "amended" assessment is also an "additional" assessment: he says they were inserted ex majore cautela.

7. In my view the submission of cocunsel for the applicants involves a circular argument. Proviso (c) can only apply to the present case if there is a right of appeal against a provisional assessment, which is the very thing we have to decide. If there was no right to object "if the additional or amended assessment had not been made", the proviso cannot have the effect of limiting the right to object to the additional or amended assessment.

8. The conclusion I have reached is that the nature of the provisional assessment is governed entirely by the proviso to s.59(2). If such an assessment is to be, until amended, a valid assessment for all purposes the implication is that when amended it ceases to be valid for all purposes. It would not necessarily follow that it was to be invalid for all purposes but I think the obvious intention was that it was to be merged in the amending assessment. It was for this reason that the Legislature limited the time for objection by reference to the notice of confirmation or of amending assessment. Despite the words in s.64(1) "in the case of a provisional assessment" what must be objected to is not the superseded provisional assessment but the amended assessment into which it becomes merged. I am not greatly concerned that if there is no power to object to a provisional assessment the Commissioner may keep the taxpayer at bay indefinitely by failing to confirm the assessment or to give notice of an amended assessment. It would certainly have been better if he had been required to give notice of confirmation or amendment within a prescribed time, though I hasten to add that there is nothing to suggest that there has ever been any unreasonable delay. In theory he could deprive taxpayers of any opportunity to object by giving notices of provisional assessment and never confirming or amending the assessment, but that possibility arises, I suspect, from an over sight and not from any intention of the Legislature. The possibility is not a convincing argument in favour of a right to object to a provisional assessment.

9. In view of my conclusion upon the first contention of the Commissioner it may be unnecessary to deal with the second, but as the matter is within small compass I will express a view upon it. It seems to me that as a rule if the Commissioner declined to determine an objection we would be obliged to grant mandamus unless the notice disclosed no ground at all for an objection. What counsel for the Commissioner really asks us to do is to make a declaration as to the effect of the notice if valid or, more specifically, a declaration that the objection did not extend to the question whether a balancing allowance should have been made: what he says here is not that there is no ground for objection but that the ground which the applicants wish to have considered is not mentioned in the notice. I see no reason why a notice should not be valid to the extent of giving the Commissioner jurisdiction and yet be insufficient to raise one or more objections which the objector desires to raise. Suppose a taxpayer desires to raise two matters of objection but through inadvertence mentions only one in his notice. Can it be said that the notice is wholly invalid because it does not mention both grounds of objection? It may be that the Commissioner could not go beyond the terms of the notice and consider the ground which was omitted (there is no express power to allow amendment of a notice of objection) but I think the notice would be valid as far as it went. In the present case the notice does state precisely one ground of objection (whether good or bad) although it is questionable whether it raises the ground now sought to be pursued. The loss of $49,961 mentioned in the notice of objection is a nett loss carried forward from the year of assessment 1958/59, the year before the sale of the ship which resulted in the capital loss now sought to be brought into account. That capital loss is not referred to in the letter of the 28th February, 1967 either directly or by reference. Since apparently the applicants submitted no proper return for the year 1959/60 it was assumed by the assessor that they had ceased business and he made a "nil" assessment under s.59(2)(b). According to the papers before us the only reference to a balancing allowance of $1,050,190 made in a communication addressed to the Department of Inland Revenue was made on the 1st September, 1965. This was in reply to a letter dated the 23rd August, 1965 stating that the applicants were not liable to tax for the year of assessment 1963/64 (the year in which business was resumed) and that a loss of $35,113 was being carried forward, this being the balance of the loss of $49,961 sustained in 1958/59. The letter of the 1st September was from the applicants accountants and the substance of it was in these terms:-

	"Our clients inform us that for the year of assessment 1959/60 there was a loss carried down to the sum of $93,781.00 which after adding the loss on the sale of s/s Marite (1,050,190.00) would far exceed the amount of loss brought forward as on the 1963/64 computation.
	Our clients desire to have the detailed computation of the loss brought forward so that such may be taken into account when an appeal is lodged in future when there is tax payable."

A reply from the assessor, dated the 14th September, 1965, indicated in detail how the original figure of $49,961 had been arrived at and pointed out that no audited accounts had been received for the year 1959/60. Nothing further appears to have transpired until the notice of provisional assessment was given on the 3rd February, 1967 and when the purported notice of objection (the letter of the 28th February, 1967) was lodged the audited accounts for 1959/60 had still not been submitted. For my part I do not see how it could be asserted that this letter stated "precisely" that which is said to have been the real ground of objection. It is true that the assessor seems not to have appreciated the significance of the letter of the 1st September, 1965, but that he had so failed was apparent from his reply of the 14th September, 1965. One would have expected the applicants or their advisers immediately to press for an assurance that a loss in excess of $35,113 would be carried forward from the year 1963/64, such loss taking into account the balancing allowance claimed. This would, presumably, have involved their supporting their claim with audited accounts, which, as I have said, were still not forthcoming. If they had incorporated the letter of the 1st September, 1965 in the notice of objection by reference, that might possibly have been sufficient to indicate the basis of the applicants' objection to the fact "that the amount of loss $49,961 for the year ended 31st March, 1959 will be carried forward", although even then one would have to give a liberal interpretation to the word "precisely". As it is, I do not think the notice gave any indication of the real ground of objection. It is, as I understand it, conceded that the figure of $49,961 carried forward for 1958/59 was correct, although that is what is objected to, and that that figure ought to be carried forward from 1959/60 unless the balancing allowance is taken into account. There really being nothing, therefore, for the Commissioner to consider I am inclined to think that we should have been justified in refusing to grant the discretionary remedy which is sought although counsel for the Commissioner said he was not asking us to refuse an order in the exercise of our discretion.

10. I would dismiss this application on the ground that no appeal lies against an assessment made under the proviso to s.59(2).

 

18th March, 1970.

 

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