MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title: / DE SMET v KHANDELWAL
Citation: / [2016] ACTMC 7
DecisionDate: / 24 June 2016
Before: / Magistrate Dingwall
Decision: / See [53]
Category: / Decision
Catchwords: / CRIMINALLAW – dishonestly obtaining a financial advantage by deception under section 134.2(1) of the Criminal Code (Cth) – conduct constituting a deception – meaning of financial advantage – meaning of dishonesty.
Legislation Cited: / Acts Interpretation Act 1901(Cth) ss 2, 25
Commonwealth of Australia Constitution Act 1900 (Cth) s 81
Crimes Act 1914 (Cth) s 4J
Criminal Code Act 1995 (Cth) ss 133.1, 134.2
Evidence Act 2011 (Cth) s 184
Income Tax Assessment Act 1936 (Cth) ss 164, 166, 174-5, 177
Taxation Administration Act 1953 (Cth) ss 4A, 8AAZLF
Cases Cited: / Elias v Director of Public Prosecutions [2012] NSWCA 302
Fisher v Bennett (1987) 85 FLR 469
Harriman v R [1989] CLR 590
John Richard Walsh [1990] V. R. 80
Macleod v The Queen (2003) 214 CLR 230
Matthews v Fountain [1982] VR 1045
Peters v The Queen (1998) 192 CLR 493
R v Finlayson [1912] 14 CLR 675
William Sai Ming Ho & Anor (1989) 39 Crim A R 145
Parties: / Commonwealth Director of Public Prosecutions (prosecutor)
Tony James de Smet (informant)
Rishi Khandelwal (defendant)
Representation: / Counsel
Mr J Pappas(defendant)
Solicitors
Commonwealth Director of Public Prosecutions (prosecutor)
Mr B Aulich (defendant)
File Number: / CC 8785 – 8790 of 2010
CC 8792 – 8805 of 2010
CC 8808 – 8813 of 2010
CC 8815 – 8817 of 2010
CC 8819 – 8828 of 2010
CC 40315 – 40352 of 2011
CC 40354 – 40367 of 2011
CC 40369 – 40382 of 2011
CC 40384 – 40402 of 2011
CC 40404 – 40417 of 2011
CC 40419 – 40476 of 2011
CC 40478 – 40489 of 2011
CC 40493 – 40494 of 2011
CC 40496 – 40511 of 2011
CC 40854 – 40903 of 2011
CC 40905 – 40931 of 2011

MAGISTRATE DINGWALL

  1. In this matter the defendant, Rishi Khandelwal, is charged with 302 counts of dishonestly obtaining a financial advantage by deception contrary to s 134.2 (1) of the Criminal Code (Cth) (“the Criminal Code”) which is contained in the Schedule to the Criminal Code Act 1995 (Cth). Subsection 134.2 of the Criminal Code provides as follows:

“134.2 Obtaining a financial advantage by deception

(1)A person is guilty of an offence if:

(a)the person, by a deception, dishonestly obtained a financial advantage from another person; and

(b)the other person is a Commonwealth entity.

Penalty: Imprisonment for 10 years

(2)Absolute liability applies to the paragraph (1) (b) element of the offence.”

“Commonwealth entity” is defined in the dictionary to the Criminal Code as meaning “the Commonwealth” or a “Commonwealth authority”. “Commonwealth authority” is in turn defined as meaning “a body established by or under a law of the Commonwealth”. Certain bodies specified in the meaning provided in the dictionary are excluded as a “Commonwealth authority”. The excluded bodies do not include the Commissioner of Taxation. Although “body” is not defined, “person” is defined as including “a Commonwealth authority that is not a body corporate”. That definition supplements s 2(c)(1) of the Acts Interpretation Act 1901 (“ Acts Interpretation Act”) which provides that “person” includes “a body politic or corporate as well as an individual”.

  1. The first charge, in order of lodgment of informations, is CC 8785 of 2010. As amended, it alleges the following:

“That he, in the Australian Capital Territory, on 13 July, 2009 by deception,dishonestly obtained a financial advantage from another person, namely the Commonwealth, contrary to subsection 134. 2 (1) of the Criminal Code Act 1995 (CTH).”

The other 301 charges are in the same terms other than for the date of the alleged offence. The dates alleged in respect of all charges fall within the period commencing on 2 April 2008 and ending on 19 July 2010.

  1. Apart from the value of the financial advantage obtained, the prosecution has provided particulars (MFI P137), relating to each chargeas follows:

“Particulars of Deception

  1. The deception exercised in each case was thelodgment by the defendant of an income tax return in the name of another person, in circumstances where

a)the information contained in each of the income tax returns was false

b)the defendant knew that the information contained in the income tax returns was false, and

Particulars of Financial Advantage

  1. In respect of each of the charges the prosecution alleges that the defendant obtained a financial advantage, namely the payment of a tax refund to which he was not entitled. The prosecution alleges that the defendant received the moneys paid as income tax refunds through bank accounts held in the names of other people to which he had access.”
  1. The defendant has pleaded not guilty to all charges.
  1. The hearing of the charges proceeded as a summary hearing. Both the defendant and the prosecutor consented to the charges being heard and determined by the Magistrates Court, I note that the prosecutor also requested, pursuant to s 4J (4) of the Crimes Act 1914 (Cth), that the charges be heard and determined by the Magistrates Court on the basis that, in respect of each charge, the value of the property does not exceed $5000. Given that both the defendant and the prosecutor consented to a summary hearing and the likely cost and length of any trial on indictment, I considered it appropriate that the charges be heard and determined by the Magistrates Court pursuant to s 4J(4) of the Crimes Act 1914 (Cth).
  1. The defendant raised no objection and, indeed consented, to all charges being heard together.
  1. Although there are 302 charges, the prosecution alleges that the offences alleged to have been committed by the defendant are essentially a repetition of each other. It alleges that in relation to all charges the defendant lodged, or caused to be lodged, with the Australian Taxation Office (“the ATO”) an income tax return which represented that the taxpayer named in the income tax return had been employed in Australia during the relevant financial year; had earned the amount of income stated; and that the amount of tax stated had been withheld by the employer named in the return. It further alleges that those statements were false because the named taxpayer had not been employed by the named employer during the relevant financial year; had not received the amount of income stated; and the stated amount of tax had not been withheld by the stated employer in respect of the stated tax payer for the relevant financial year.
  1. The prosecution alleges that, in respect of the income tax return which is the subject of each charge, a tax refund was caused to be credited to the bank account nominated by the defendant in the income tax return. It further alleges that, as a result of his lodgment of the income tax returns, and the crediting of refunds to a number of bank accounts nominated by him in the various income tax returns, and in respect of which he had access, he was able to withdraw the money caused to be credited into those accounts and, in fact, withdrew from automatic teller machines much of the money that had been so credited.
  1. The prosecution alleges that, by reason of the falsehoods contained in each tax return, and the deception flowing from them, the defendant acted dishonestly. The financial advantage which he is alleged to have obtained from the Commonwealth in respect of each charge is the crediting of the relevant tax refund to the bank account nominated by him. It alleges that, at that point, the offences were complete as the defendant then had access to the money credited to the bank account and was, consequentially, in a better financial position than he had been in prior to the tax refund being credited to the bank account.

Evidence

  1. The first matter to be noted in respect to the evidence presented is that, pursuant to s 184 of the Evidence Act 2011 (Cth), the defendant made a number of formal admissions of matters of fact. He admitted as follows:

“1.I lodged or caused to be lodged with the Commissioner of Taxation, the Income Tax Returns particularised in each and every charge before the Court;

  1. In the evening of 3 August 2010 I drove my Nissan Coupe 350Z vehicle registered number NSW ARR-23P to an underground car park at the Gungahlin Shopping Centre and left the vehicle at that location;
  2. On 3 August 2010 I attended the Escape Internet Cafe on the top floor of the Canberra Centre where I accessed an internet computer terminal;
  3. At all times material to these charges I was employed as a public servant by the Australia (sic) Government in the Department of Health and Ageing (Foods Standards Australia and New Zealand);
  4. I admit the results of the fingerprint examination of the 228 paper based tax returns contained in the report of Rachael Kennedy dated 1 April 2011;
  5. I was the subscriber to mobile telephone services numbers 0433400031 and 0402677659;
  6. At all times material to these charges I held the following bank accounts:
  • Australia and New Zealand Banking Group Limited (account number: 45646210 11926303);
  • Commonwealth Bank of Australia (account number: 290310 484870): and
  • National Australia Bank (account number: 75117816)”.
  1. Due to the large number of charges and the modus operandi alleged to have been adopted by the defendant, the evidence presented by the prosecution is lengthy, extremely voluminous and complicated. The complications are greatly increased by the fact that all charges were heard together.
  1. The prosecution has led evidence which is directly relevant to each charge. This evidence has been helpfully marshalled and cross-referenced in Excel based spreadsheets provided to me as aides memoire. The spreadsheets have been placed onto a computer disk along with facsimile copies of a large number of the documents in evidence. These include ATO records in respect of electronic funds transfers, electronic income tax returns and manually prepared income tax returns; bank records; Department of Immigration and Citizenship (“DIAC”)records; statements signed by employers named in income tax returns; copies of documents indicating fingerprints found on them; and NetBank transaction records. The spreadsheet contained on the disk allows cross-referencing to the facsimile copies of documents by means of hyperlinks. By using the spreadsheets and hyperlinks, I have been able to consider the evidence that is directly relevant to each charge.

Did the defendant lodge the income tax returns?

  1. Based on this the defendant’s formal admissions, I am satisfied beyond reasonable doubt that he lodged the income tax return that is the subject of each charge.

Was the information in the income tax returns false?

  1. The prosecution has established, through evidence called from a number of witnesses, that approximately 165 of the employers nominated in the income tax returns lodged by the defendant had no record of employing the taxpayer named in the respective income tax return. In a small number of cases, the employer had a record of employing the named taxpayer for a short period of time, but that period is inconsistent with the earnings stated in the income tax return.
  1. The prosecution has also established, through exhibit P141, that in respect of each charge, the taxpayer named in the income tax return did not earn the income stated in the return and that the withholding tax stated in the return had not in fact been withheld by the stated employer.
  1. I am satisfied beyond reasonable doubt that, at the time the accused lodged each income tax return, the person named in the return as the taxpayer was not present in Australia and that, not only was the named person not in Australia at the time each income tax return was lodged, he or she had, in almost all cases, not been present in Australia for a period of time sufficient to earn the amount of income stated in the income tax return. I am also satisfied beyond reasonable doubt that the amount of income tax stated to have been withheld by the employer in each income tax return had not in fact been withheld.

Was the defendant’s conduct a deception?

  1. Section 133.1 of the Criminal Code provides as follows:

“In this Part:

. . .

deception means an intentional or reckless deception whether by words or other conduct, and whether as to fact or law, and includes:

(a)a deception as to the intention of the person using the deception or any other person; and

(b)conduct by a person that causes a computer, a machine or an electronic device to make a response that the person is not authorised to cause it to do.”

The offence provision, s 134.2, is contained in the Part to which s 133.1 refers.

  1. Theevidence clearly establishes that, upon the lodgment of each of the income tax returns, the return was processed through the computer operated by the Australian Taxation Office (“ATO”), which, together with the Commissioner of Taxation, constitute a statutory agency of which the Commissioner is the head (see s 4A, Taxation Administration Act 1953). A return that was lodged electronically was automatically processed by the computer and, provided various checks in relation to the completeness of the return were met, the computer would generate a password and then encrypt the return twice and send a lodgment reference to the lodging party. Once the return was decrypted, the computer automatically submitted it to the Electronic Lodgment System and assessment calculations were performed to determine a tax liability. It then generated a Notice of Assessment, and any taxation refund calculated to be owing to the taxpayer was sent by cheque or Electronic Funds Transfer to the bank account nominated in the income tax return. Where a returnwas lodged manually, information contained in the return was manually input into the computer and then processed in the same way as in the case of a return that was lodged electronically. In both cases, the examination of the information contained in the return, the calculation of the tax liability or credit, the issuing of a Notice of Assessment and the payment of any taxation refund occurred without any further human intervention.
  1. Counsel for the defendant submitted that false information in an income tax return is not sufficient to constitute a deception unless there is further evidence establishing that the wrong or misleading material deceived the person ultimately said to have provided the financial advantage, or suffered the financial disadvantage. He submitted that, because the prosecution alleges it was the Commissioner of Taxation who was deceived by the false income tax returns and it was the Commonwealth who suffered the financial disadvantage, the offence is not proven because s 134.2 of the Criminal Code requires the deception to have been practised against the Commonwealth entity from whom the financial advantage was obtained. He cited no authorities in support of this submission.
  1. There is clear authority for the proposition that, in order to establish an offence against s 134.2 (1) of the Criminal Code, it is not necessary to establish that the person upon whom a deception is practised is the person from whom the financial advantage flows (see Elias v Director of Public Prosecutions [2012] NSWCA 302 and William Sai Ming Ho Anor (1989) 39 Crim A R 145). Accordingly, in this case, it matters not if it was the Commissioner of Taxation who was deceived and the Commonwealth from whom the alleged financial advantage flowed.
  1. In any event, in view of the definition of “deception” contained in s 133.1 of the Criminal Code, I am of the view that it is unnecessary for the prosecution to prove that any person was deceived. It is sufficient if it establishes that the defendant’s conduct caused a computer to make a response that he was not authorised to cause it to do. Such a deception may occur without any person being aware of it. In this regard, I note, contrary to the assertion of Counsel for the defendant, the prosecution did not, in its particulars, allege that it was the Commissioner of Taxation who was deceived.
  1. I am satisfied beyond reasonable doubt that the lodging of the income tax returns in this case clearly resulted in the ATO computer responding to the information contained in the returns, that that responseincluded calculating the amount of the taxpayer’s liability for income tax, the issue of a Notice of Assessment and the transmission of a tax refund by Electronic Funds Transfer.
  1. Counsel for the defendant further submitted that, even if a deception has been established, the prosecution must prove that it is the wrong or misleading information which caused the financial advantage to be bestowed. He submitted that, in the case of income tax returns lodged either manually or electronically, it is the Commissioner of Taxation’s computer’s internal review of the documentation and the issue of a password which are the threshold, and process, which causes the computer to calculate and process a taxation refund or not. It is not the mere lodgment of an income tax return which has that effect.
  1. In my view, this submission takes a much too narrow view of the causative effect of the lodgment of an income tax return. The starting point of the whole process undertaken by the computer is the lodgment of the income tax return. It is central to the process because it contains the information upon which the computer operates. I am satisfied beyond reasonable doubt that in each case it was the lodgment of a false income tax return which caused the computer to make the response that it did.
  1. Counsel for the defendant further submitted, in effect, that the lodgment of the false income tax returns did not amount to deception because the income tax system operated on self-assessment which presumed all the particulars in the claim were correct and, in the absence of evidence to the contrary, is deemed to have been made by the taxpayer named in the return. It follows, as I understand this submission, that it cannot be established that the defendant’s conduct in lodging the income tax returns caused the computer to make a response that he was not authorised to cause it to do.
  1. He referred the court to s 164 of the Income Tax Assessment Act 1936 (“the Assessment Act”) which provides:

“Every return purportedly made or signed by or on behalf of any person shall be deemed to have been duly made by the person or with the person’s authority until the contrary is proved.”

He noted, that upon receipt of a return, the Commissioner of Taxation is obliged by s 166 of the Assessment Act to make an assessment, inter alia, of the tax payable and by s 174 to give notice of that assessment in writing to the person liable to pay the tax and that s 175 provides that the validity of any assessment “shall not be affected by reason that any of the provisions of this Act have not been complied with”. He further noted that s 177 of the Assessment Act(a provision which was in force at all relevant times but deleted in 2015) provides that a copy of an assessment “shall be conclusive evidence of due making of the assessment and . . . that the amount and all the particulars of the assessment are correct”. He also noted that s 8AAZLF of the Taxation Administration Act 1953 requires the Commissioner of Taxation to refund any surplus or credit standing in a taxpayer’s favour in a Running Balance Account, subject only to exceptions which are not relevant to this matter.