Citation: 2011TCC493
Date: 20111020
Docket: 2010-1738(IT)G
BETWEEN:
GUY FIETZ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1]
The parties made a
joint Motion pursuant to Rule 58 of the Tax Court of Canada Rules (General
Procedure). This Rule provides as follows:
58. (1) A party may apply to the Court,
(a) for the determination, before hearing, of a question of law, a
question of fact or a question of mixed law and fact raised by a pleading in a
proceeding where the determination of the question may dispose of all or part
of the proceeding, substantially shorten the hearing or result in a substantial
saving of costs, or
(b) to
strike out a pleading because it discloses no reasonable grounds for appeal or
for opposing the appeal,
and the Court may grant judgment accordingly.
[2]
By an Order of this
Court dated June 8, 2011, the question that was to be determined was stated as
follows:
Is the waiver
in respect of the normal reassessment periods as executed by the appellant on
February 2nd, 2006, a copy of which is Exhibit G to the affidavit of
Sally Yu, filed, effective to permit the Minister of National Revenue to
reassess the appellant pursuant to subparagraph 152(4)(a)(ii) of the Income
Tax Act (the “Act”) in respect of the 2002 taxation year after the
normal reassessment period for that year had elapsed?
[3]
The affidavit of Sally
Yu is her affidavit that was filed with this Court on May 31, 2011.
[4]
Subsection 152(4) of
the Income Tax Act (the “Act”)
provides in part as follows:
(4) The Minister may at any time make an assessment, reassessment or
additional assessment of tax for a taxation year, interest or penalties, if
any, payable under this Part by a taxpayer or notify in writing any person by
whom a return of income for a taxation year has been filed that no tax is
payable for the year, except that an assessment, reassessment or additional
assessment may be made after the taxpayer's normal reassessment period in
respect of the year only if
(a) the taxpayer or person filing the return
(i) has made any misrepresentation that is attributable to neglect,
carelessness or wilful default or has committed any fraud in filing the return
or in supplying any information under this Act, or
(ii) has filed with the Minister a waiver in prescribed form within
the normal reassessment period for the taxpayer in respect of the year;
[5]
If a waiver has been
filed with the Minister, the Minister may reassess a taxpayer after the
expiration of the normal reassessment period without having to establish that
there was a misrepresentation as described in subparagraph 152(4)(a)(i)
of the Act. However, the reassessment must relate to
the subject matter of the waiver. Subsection 152(4.01) of the Act
provided in 2002 in part as follows:
(4.01) Notwithstanding subsections (4) and (5), an assessment,
reassessment or additional assessment to which paragraph (4)(a) or (b)
applies in respect of a taxpayer for a taxation year may be made after the
taxpayer's normal reassessment period in respect of the year to the extent
that, but only to the extent that, it can reasonably be regarded as relating
to,
(a) where paragraph (4)(a) applies to the assessment,
reassessment or additional assessment,
(i) any misrepresentation made by the taxpayer or a person who filed
the taxpayer's return of income for the year that is attributable to neglect,
carelessness or wilful default or any fraud committed by the taxpayer or that
person in filing the return or supplying any information under this Act, or
(ii) a matter specified in a waiver filed with the Minister in
respect of the year; and
[6]
As discussed below,
since a waiver is linked to a reassessment as a result of the provisions of
subsection 152(4.01) of the Act, the question before me is whether the
waiver that was filed permits the Minister to reassess the Appellant as he was
reassessed on July 28, 2006. The particular issue related to the waiver is the
absence, in the waiver form itself, of a description of the matters being
waived. The box in which the matters being waived were to be described was left
blank. No other problems or issues in relation to the waiver were identified or
discussed.
[7]
The Canada Revenue Agency
(“CRA”) had conducted an audit of the Appellant’s 2002 and 2003 taxation years.
On May 2, 2005 the auditor for CRA sent a letter to the Appellant in which she
indicated that the CRA had conducted a limited review of the Appellant’s 2002
income tax return. In the letter the auditor was requesting documentation to
support the amounts that the Appellant had reported as capital gains in
schedule 3 to his income tax return.
[8]
Over the course of the
next few months the auditor for the CRA and the Appellant exchanged phone calls
or voice mail messages. The Appellant was indicating that he was seeking
additional information from his lawyer. The Appellant provided a consent form
indicating that his lawyer, Howard Morry, was to act as his representative.
Following the receipt of the consent, voicemail messages were exchanged between
Howard Morry and the auditor. On October 10, 2005 Howard Morry left a voicemail
message for the auditor in which he indicated that “he would be gathering the
supporting documentation and sending it the following week”. The auditor
did not receive the supporting documentation that Howard Morry had
indicated he would be providing.
[9]
On November 18, 2005
the auditor sent to the Appellant a letter (the “Proposal Letter”) outlining
the proposed adjustments to the Appellant's income and dividend tax credits for
2002 and 2003. The proposed adjustments were:
(a)
to increase the taxable
amount of dividends received;
(b)
to increase the taxable
amount of deemed dividends received;
(c)
the increase the amount
of his taxable capital gain;
(d)
to increase the amount
of his interest income;
(e)
to increase the amount
of taxable benefits;
(f)
to increase the amount
of employment income; and
(g)
to increase the amount
of dividend tax credits.
[10]
The adjustments
together with the notes related to the adjustments are 3 and one-half pages in
length. In the letter it was indicated that the proposed reassessments would be
delayed for a period of thirty days from the date of the letter to allow the
Appellant to submit additional information or explanations.
[11]
Following this letter Howard
Morry left a telephone message on December 10, 2005 requesting an
extension of time to respond to the Proposal Letter. This request was also made
by letter dated December 12, 2005 in which Howard Morry stated, in part, that
“[t]his request is being made due to the complexity of the proposed assessments,
as well as the coming holiday season. We would like an extension at least to
January 18, 2006”.
[12]
This extension request
was granted. On January 18, 2006 Howard Morry sent a letter by fax in which he
stated as follows:
I spent the day in Calgary yesterday gathering additional information for a response to the
proposed reassessments of the above captioned taxpayers. We are in the process
of reviewing the information and documentation we received and the interviews
we held with the taxpayers and their representatives. We will need some
additional time to complete our review, however, in the meantime, we do note the
following:
1. With respect to Triton Global Business Services
Inc. KPMG has confirmed that they should have added back the net accounting
write down of investment in subsidiary of $472,869.00. That was an oversight on
their part.
2. We do not have a copy of any letter which may
been sent to Lori Fietz. However, we understand one may have been sent
(presumably reducing the dividend included in her income in the year 2002).
Could you please send a copy of that letter, if any, to our attention.
3.
You indicated in your voicemail that we would
have to formally request the application of any capital gains exemption. Please
consider this letter a formal request.
We will be getting back to you shortly with our comments on the balance
of the proposed reassessments. We appreciate your patience on this matter.
[13]
Upon receiving the fax
from Howard Morry on January 18, 2006, the auditor for the CRA left a voicemail
message for Howard Morry in which she explained that since a part of the income
for which the Appellant was reassessed included amounts that had been included
in Mrs. Fietz’s income, that once his income for 2002 was finalized, that her
tax return would be reassessed to reduce her income by the amount that was
included in his income.
[14]
On January 20, 2006 Howard
Morry’s assistant, Bobbi Fielding, called the auditor for the CRA to discuss a
waiver for the normal reassessment period in relation to Mrs. Fietz. The auditor
for CRA indicated that the form for the waiver was available on the CRA's
website and that any reassessment issued for Mrs. Fietz in relation to her
2002 taxation year on or after May 23, 2006 would be after the expiration of the
normal reassessment period for Mrs. Fietz for that year. The auditor and Bobbi
Fielding also discussed the normal reassessment period for the Appellant’s 2002
income tax return and the auditor indicated that it expired on May 23,
2006. Later that same day the auditor called Mrs. Fietz back to indicate that
the form number for the waiver was T2029.
[15]
A copy of the waivers
was faxed to the auditor for CRA on February 6, 2006. The auditor reviewed the
faxed copy of the waivers that she had received. In the waiver form for the
Appellant the section of the waiver for the matters being waived was blank.
[16]
On February 13, 2006
Bobbi Fielding called the auditor for the CRA because she wanted clarification
with respect to the date on which the normal reassessment period for the
Appellant would lapse. The auditor indicated that the normal reassessment
period in relation to the Appellant’s 2002 taxation year expired on May 23,
2006. The auditor also indicated that once the CRA “received a signed waiver,
the 2002 income tax return year was open for reassessment after the normal
reassessment period”.
[17]
On February 16, 2006 the
auditor indicated that the time to respond to the Proposal Letter was extended
to February 27, 2006.
[18]
On February 16, 2006 Howard
Morry, the lawyer for the Appellant, sent a letter to the Auditor for the CRA
with the original waiver forms. In this letter Howard Morry stated as follows:
As requested, we are enclosing herewith the original of the
following documentation:
1. Waiver in Respect of the Normal Reassessment
Period signed by Guy Fietz on February 2, 2006;
2. Waiver in Respect of the Normal Reassessment
Period signed by Lori Fietz on February 2, 2006; and
3. Authorization to Release Information dated
January 27, 2006 signed by Lori Fietz.
[19]
The letter and the
original waiver forms were received by the auditor for the CRA on February 22,
2006. The auditor confirmed the receipt of these documents by calling Bobbi
Fielding on February 23, 2006. No extension to the deadline of February 27,
2006 to respond to the Proposal Letter was discussed at that time.
[20]
On April 10, 2006 the
auditor for the CRA called Gordon Ellison. She indicated to Gordon Ellison that
she had not heard anything from Howard Morry’s office since February 23, 2006.
The auditor asked if Howard Morry had any additional information to submit and
he indicated that he would contact Mr. Morry.
[21]
On April 14, 2006
another request to extend the deadline to respond to the Proposal Letter was made
by Bobbi Fielding. A further extension was granted to April 26, 2006. The
auditor also asked Bobbi Fielding to have Howard Morry call her on May 1, 2006.
On May 1, 2006 and May 4, 2006 the auditor left voicemail messages for Howard
Morry to call her. Voicemail messages were exchanged between Bobbi Fielding and
the auditor on May 8, 2006. On May 9, 2006 Bobbi Fielding called the
auditor to say that Mr. Morry was sick. A time was set for May 11, 2006 for
Howard Morry and the auditor to discuss the file. On May 11, 2006 Howard Morry
and the auditor discussed the file and he indicated that he would send their
response to the Proposal Letter on May 12, 2006.
[22]
On May 17, 2006 a letter
was received from Howard Morry. This letter, which was dated May 12, 2006 stated
as follows:
We are writing further with respect to the proposed reassessment of
Guy Fietz:
1. With respect to Note 1, if you do not accept
the separate dividends, we would ask you to make the corresponding adjustment
for Lori Fietz.
2. With respect to Notes 2 and 3, Mr. Fietz
maintains that the consideration taken back from Triton Global Business Services
Inc. (“TGBSI”) on the sale of his shares of Triton Global Communications Inc.
had the value attributed to them in his filings. As further evidence, the 2,775,000
shares of TGBSI taken back have been exchanged for shares of a publicly traded
company called NeoMedia Technologies Inc. (none of which shares have been
sold), the value of which are $374,000 U.S., which is a fraction (30%) of the $1,248,750
value you are attributing to the shares. He further maintains that he held half
the shares for his wife Lori’s benefit. If however you do not accept his
representations, then we would again ask that you apply the capital gains
deduction against Mr. Fietz’s capital gain and that you adjust Lori Fietz’s
return accordingly. Finally we assume that Mr. Fietz’s 2,775,000 shares taken
back by Mr. Fietz on the transaction will have an adjusted cost base of CDN
$1,940,932, notwithstanding the PUC grind. Please confirm.
3. With respect to Note 4, the interest was not
paid and therefore should not be included in Mr. Fietz’s income. However if it
is included, we would ask that you make a corresponding reduction in TGBSI's
income.
[23]
The Appellant was subsequently
reassessed for 2002 and 2003. The only change from the proposed reassessment as
set out in the Proposal Letter was an amount that was allowed for the capital
gains deduction. In all other respects the reassessment reflected the proposed
reassessment as set out in the Proposal Letter.
[24]
The Appellant argued
that the waiver was invalid based on the wording of the waiver form. The T2029
form states in part that:
In order for a Waiver to be valid, the matter(s) being waived must
be specified in the space provided …
[25]
The Appellant argued
that since no matters were specified in the T2029 form that was filed, the
waiver is not valid. However it seems to me that the validity or invalidity of
the waiver is to be decided based on the provisions of the Act and the
caselaw and not based on what is written on the form. The words on a form could
not change the Act or the caselaw and cannot make an otherwise valid
waiver invalid or vice versa.
[26]
The Appellant also
submitted an argument based on the following comments of Justice Sheridan in Holmes
v. The Queen, 2005 TCC 403, 2005 DTC 985, [2005] 4 C.T.C. 2280:
19 … under the scheme of the Income Tax Act, where the authority and
duty to prescribe the form of the waiver, to determine whether its subject
matter had been properly set out and whether to accept it as “filed” rests
exclusively with the Minister…. Had Mr. LeDuc rejected the waiver in its
amended form, for example, Mrs. Holmes would have been powerless to require the
Minister to receive it.
[27]
The argument of the
Appellant was as follows:
Mr. Fietz respectfully submits that Ms. Yu had to determine if the
subject matter on the Waiver was properly set out. Mr. Fietz further submits
that as the subject matter of the waiver was blank, Ms. Yu had no reasonable
alternative but to find the subject matter of the Waive [sic] was not properly
set out. Ms. Yu’s only reasonable course of action was to reject the Waiver as
it was invalid.
[28]
In Mitchell v. The
Queen, 2002 FCA 407, 2002 D.T.C. 7502, [2003] 1 CTC 194, Justice
Sexton, writing on behalf of the Federal Court of Appeal stated that:
40 It seems to me that Revenue Canada is obliged to
treat any document as a waiver, providing it contains the necessary
information. Revenue Canada
does not have an option as to whether or not to accept a waiver. A waiver is a
privilege which a taxpayer has, and, if sent, Revenue Canada cannot disregard it.
[29]
Following the cross
examination of the auditor for CRA by counsel for the Appellant (a copy of the
transcript of which was submitted during the hearing), counsel for the
Respondent asked a few questions which included the following exchange:
Q Earlier he asked you if you reviewed the
waiver and asked you if called Bobby [sic] or Howard to advise them that
the waiver was incomplete, and you said no. Can you tell us why?
A Well, because the form was completed by a
lawyer, so I didn’t anticipate that it was invalid. When I receive the waiver,
I check the names of the taxpayer, the social insurance number, the taxation
year. Those information were correct. Plus it was signed by the taxpayer or his
legal representative, and dated.
Q Thank you. When you received the waiver,
what did you think was being waived?
A All the adjustments stated on my proposal letters.
[30]
It seems to me that the
auditor for the CRA had simply assumed that since the waiver was sent to her by
the lawyer for the Appellant that it was being submitted as a valid waiver and
that the matters that the Appellant was waiving were the matters as set out in
the Proposal Letter. It seems to me that it is important to determine the
intentions of the parties in relation to the waiver.
[31]
In the Holmes
case the auditor for the CRA had prepared a waiver form but the accountants for
the Appellant made some amendments. The issue was whether the reassessment
(which was made after the expiration of the normal reassessment period) was
related to the matter that was specified in the waiver. As noted by Justice
Sheridan:
16 In considering the scope of a
waiver, it is appropriate to ascertain the intention of the parties.
[32]
There was a footnote
reference to Solberg v. The Queen, [1992] 2 C.T.C. 208 (Fed.
T.D.). In Solberg, the issue was whether a waiver that referred to Part III
of the Act, could justify a reassessment that was issued under Part I of
the Act. Justice Reed stated that:
13 Having concluded that the reference
in the waiver to Part III was an error, I must then consider whether the waiver
is invalid for the purposes of reassessing the taxpayer for Part I tax. I am
not prepared to so conclude. In my view, the error is a technical defect which
does not impair the substance of the waiver. The appropriate approach to the
interpretation of the waiver is to seek to ascertain the intention of the
parties as expressed in that document together with any relevant circumstances
for which evidence is available. This is consistent with the approach taken in
interpreting taxing statutes themselves, see, for example, Stubart
Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536, [1984]
C.T.C. 294, 84 D.T.C. 6305, at pages 315–16 C.T.C. (D.T.C. 6323).
[33]
The Federal Court of
Appeal approved this approach in Mitchell, above. Justice Sexton,
writing on behalf of the Federal Court of Appeal stated that:
37 Thirdly, in Solberg v. R., [1992] 2
C.T.C. 208, 92 D.T.C. 6448 (Fed. T.D.), the taxpayer signed a waiver of the
four-year time limit for reassessment for the taxation year 1979 pursuant to
subparagraph 152(4)(a)(ii) of the Income Tax Act, but later objected to
reassessment because the waiver only covered tax under Part III of the act,
while the reassessment concerned Part I. The Federal Court, Trial Division held
in Solberg that the reference to Part III in the waiver was inserted by
mistake, but was a technical defect only and did not impair the substance of
the waiver. The appropriate approach to the interpretation of the waiver is to
seek to ascertain the intention of the parties as expressed in that document
together with any relevant circumstances for which evidence is available. The
court concluded that the waiver was not a nullity as a result of the mistake
because it appeared from surrounding circumstances and from the text of the
waiver as a whole that both parties knew what was in issue. This approach taken
by the court in Solberg should be applied to our fact situation.
[34]
Therefore the appropriate
approach is to determine if the intention of the parties can be determined from
the form and the surrounding circumstances. The position of the Appellant is
that nothing should be read into the waiver in relation to the matter for which
the normal reassessment period was being waived and therefore the Appellant did
not waive the application of the normal reassessment period in relation to any
matter. This would mean that the Appellant would be in the same position as if
no waiver had been filed which would render the document dated February 2, 2006
meaningless. However, it seems to me that the Appellant must have intended to
waive the application of the normal reassessment period in relation to a
proposed reassessment with respect to some matter. Since the auditor for the
CRA only provided the form number to Bobbi Fielding, the Appellant or someone
on his behalf, located the form and inserted his name, address, social
insurance number, relevant taxation year (2002) and the date. It appears that
the Appellant signed the form (although the signature is not clear the first
letter appears to be a “G”) and the form was sent to the auditor for the CRA by
the lawyer for the Appellant. It does not seem to me that in taking all of
these steps the Appellant intended to file a meaningless document with the CRA.
[35]
In this case, it seems
clear to me that the intention of the Appellant was to file a waiver in
relation to the proposed reassessment as set out in the Proposal Letter. There
were numerous voice mail messages and communications between the CRA auditor
and a representative of the Appellant related to the request by the CRA auditor
for additional information in relation to the proposed reassessment. Almost all
of the communication related to the repeated requests for additional time to
respond to the proposed reassessment that were made by Howard Morry and
his assistant Bobbi Fielding, who were representing the Appellant.
[36]
No evidence was
presented with respect to the intentions of Howard Morry, Bobbi Fielding or the
Appellant in relation to the waiver. None of these individuals testified during
the hearing nor were any affidavits of any of these individuals filed at the
hearing.
[37]
In Bernardi (c.o.b. Bruno's Pizzeria & Main Street
Billiards) v. Guardian Royal Exchange Assurance Co.,
[1979] O.J. No. 553, Justice Blair,
writing on behalf of the Ontario Supreme Court – Court of Appeal, stated that:
28 … Where
a party has an evidentiary burden of establishing an issue, his failure, in
certain circumstances, to call necessary evidence to support his case justifies
a court in drawing the inference that the evidence of the witness who might
have been called would have been unfavourable to him. The broad principle on
which the rule is based is stated in Wigmore on Evidence, (3rd ed.) Vol. II, p. 162,
as follows:
The failure to bring before the tribunal some circumstance, document, or
witness, when either the party himself or his opponent claims that the facts
would thereby be elucidated, serves to indicate, as the most natural inference,
that the party fears to do so, and this fear is some evidence that the
circumstance or document or witness, if brought, would have exposed facts
unfavourable to the party. These inferences, to be sure, cannot fairly be made
except upon certain conditions; and they are also open always to explanation by
circumstances which make some other hypothesis a more natural one than the
party's fear of exposure. But the propriety of such an inference in general is
not doubted.
[38]
The above passage from
an earlier edition of Wigmore on Evidence was cited with approval by
Justice Rothstein (as he then was) in Milliken
& Co. v. Interface Flooring Systems (Canada) Inc., 251
N.R. 358, [2000] F.C.J. No. 129
(FCA).
[39]
In the Law
of Evidence in Canada, third edition, by Justice Lederman, Justice Bryant
and Justice Fuerst of the Superior Court of Justice for Ontario, it is stated
at p. 377 that:
§6.449 In civil cases, an unfavourable inference can be drawn
when, in the absence of an explanation, a party litigant does not testify, or
fails to provide affidavit evidence on an application, or fails to call a
witness who would have knowledge of the facts and would be assumed to be
willing to assist that party. In the same vein, an adverse inference may be
drawn against a party who does not call a material witness over whom he or she
has exclusive control and does not explain it away. Such failure amounts to an
implied admission that the evidence of the absent witness would be contrary to
the party’s case, or at least would not support it.*
§6.450 An adverse inference should be drawn only after a prima
facie case has been established by the party bearing the burden of proof.*
(* denotes a footnote reference that is in the
original text but which has not been included.)
[40]
As noted in Solberg,
above, the Minister has the onus of proving that the Appellant signed a waiver
in relation to the matters that were the subject of the reassessment in issue. In this case, the Crown did establish a prima
facie case that the intention of the parties was that the subject matter of
the waiver was intended to be all of the matters addressed in the Proposal Letter.
If the Appellant should then allege that the intention of the Appellant was
different, the onus of establishing this different intention would rest with
the Appellant. It seems to me that an adverse inference can be drawn in this
case. The adverse inference is that the Appellant’s intention in signing the
waiver was to execute the waiver in relation to all of the matters addressed in
the Proposal Letter. Since the Proposal Letter was 3 and one‑half pages
in length, it seems to me that I can also conclude, as an adverse inference,
that the omission in relation to the specific matters was simply inadvertent
and occurred because of an uncertainty of how to summarize the three and a half
pages and the Appellant still intended to waive the normal reassessment period
in relation to the matters as set out in the Proposal Letter.
[41]
Counsel for the
Appellant argued that even if something could be read into the waiver, it
should only be in relation to the matters referred to in the voice mail message
that the auditor for the CRA had left for Howard Morry shortly before the
waiver was signed and the matters discussed between the CRA auditor and Bobbi Fielding
immediately before the waiver was signed. These discussions related to the
amount of income that Mrs. Fietz had reported but which the CRA was proposing
to include in the Appellant’s income. This was only part of the proposed
reassessment. However, the Appellant did not call Bobbi Fielding as a witness
nor did the Appellant introduce a transcript of any of the voice mail messages
that the CRA auditor left for Howard Morry. It does not seem to me that brief
telephone conferences or voice mail messages in relation to one particular
subject matter should be interpreted to mean that the CRA was no longer
pursuing the other matters as set out in the Proposal Letter.
[42]
As well on May 12, 2006
(which was almost three months after Howard Morry sent the original waiver
forms to the CRA), Howard Morry wrote to the CRA “with respect to the
proposed reassessment of Guy Fietz” and specifically referred to “Note 1”,
“Notes 2 and 3” and “Note 4”. These references to the “Notes” would be references
to the Notes as set out in the Proposal Letter. Of theses it appears that Note
4 does not relate to the income that had been reported by Mrs. Fietz and
therefore it is clear that Howard Morry understood that all of the matters that
had been raised in the Proposal Letter were still being considered for a
proposed reassessment of the Appellant.
[43]
This argument is also
based on an assumption (not established facts) that the Appellant was
influenced by the voice mail message and the discussions between the auditor
for the CRA and Bobbi Fielding and therefore that the Appellant only intended
that the waiver be in relation to the income that had been reported by Mrs. Fietz
and which the CRA was proposing to include in his income. As noted above, it is
necessary to ascertain the intention of the parties and therefore unless the
Appellant intended to limit the waiver to these matters, this argument cannot
succeed. As noted above, it seems to me that an adverse inference can be drawn since
the Appellant, Howard Morry and Bobbi Fielding did not testify and the adverse
inference is that the Appellant’s intention in signing the waiver was not to
restrict the waiver to the reallocated income but his intention was to execute
the waiver in relation to all of the matters addressed in the Proposal Letter.
[44]
Paragraph 152(4.01)(a)
of the Act provides that the reassessment must be limited to the matters
specified in the waiver filed with the Minister in respect of the
particular year. As Justice Sheridan had noted in Holmes:
4….Although the Act prescribes the form of the waiver, it does not
prescribe the manner in which, or otherwise define how filing is to be achieved;
accordingly, whether a waiver has been “filed” will depend on the evidence
presented.
[45]
The Proposal Letter in
the circumstances of this case should be considered to have been filed with the
Minister as this letter was written and sent by the CRA auditor. Therefore it
seems to me that the waiver in this case consists of two parts – the waiver
form that was filed in February 2006 and the Proposal Letter. Since both of
these parts were filed with the Minister, the Minister could reassess pursuant
to subparagraph 152(4)(a)(ii) of the Act in relation to the
matters addressed in the Proposal Letter. Since the reassessment that was
issued on July 28, 2006 did relate to these matters with the only
exception being an additional deduction favourable to the Appellant (which the
Appellant had requested) the reassessment issued on July 28, 2006 can
reasonably be regarded as relating to the matter specified in the waiver filed
by the Appellant in this matter.
[46]
The question that was
posed did not link the waiver to the reassessment issued on July 28, 2006. As a
result of the provisions of subsection 152(4.01) of the Act, it seems to
me that it is necessary to compare a specific reassessment to the matters that
were waived. Therefore it seems to me that the question as posed cannot be
answered without referring to a specific reassessment since it is necessary to
determine if a specific reassessment can reasonably be regarded as relating to
a matter specified in a waiver. The question as posed (which does not identify
a particular reassessment) could be a valid question if the Appellant had waived
his right to have any matter specified and therefore the Minister could
reassess for any matter related to 2002. This would be analogous to signing a
blank cheque. This would raise the issue of whether the provisions of subsection
152(4.01) of the Act which limit the right of the Minister to reassess
after a taxpayer’s normal reassessment period to matters specified in the
waiver, are for the benefit of the taxpayer. It seems to me that this
limitation on the matters that may be reassessed by the Minister based on a
waiver (which would be matters that would be detrimental to a taxpayer) would be for the benefit of the taxpayer
as presumably the CRA would prefer an unlimited discretion to reassess a
particular year and a taxpayer would prefer that only specific matters could be
reassessed. Therefore the questions would be whether the Appellant could waive
this limitation and whether he did waive it in this case. Since this issue was not raised and since
it is not necessary to address this issue to answer the question that was
posed, I will leave this issue for another case.
[47]
The Appellant also
referred to the decision of the Federal Court of Appeal in Honeywell Ltd.
v. The Queen, 2007 FCA 22, 2007 DTC 5073, [2007] 3 C.T.C. 7. In that
case Justice Noël, writing on behalf of the Federal Court of Appeal stated
that:
32 A waiver when given by a taxpayer
and accepted by the Minister gives rise to a bargain of sorts. The taxpayer foregoes
the benefit of the normal prescription period for the particular year with
respect to the matter specified in the waiver, and the Minister, relying on the
waiver, acquires the right to reassess outside the normal assessment period,
but only with respect to the matter specified in the waiver. Just as the
taxpayer cannot alter the waiver once given, the Minister cannot issue a
reassessment that does not reasonably relate to the matter specified in the
waiver. As pointed out by Bowman C.J., this is made clear by the language
of subparagraph 152(4.01)(a)(ii) which provides that when relying on a waiver
the Minister may reassess, “but only to the extent that, [the reassessment] can
reasonably be regarded as relating to, ... a matter specified in a waiver filed
by the Minister in respect of the year, ...”. Accordingly, where a reassessment
has been issued pursuant to a waiver, the reference to a “reassessment” in
subsection 152(4) can only mean a reassessment as permitted by the waiver.
[48]
Since in my opinion,
the waiver in this case consists of two documents – the T2029 form signed by
the Appellant and the Proposal Letter - the Minister could reassess in relation
to the matters as set out in the Proposal Letter.
[49]
As a result I find that
the waiver in respect of the normal
reassessment period as executed by the Appellant on February 2nd,
2006, a copy of which is Exhibit G to the affidavit of Sally Yu, filed with
this Court on May 31, 2011, is effective to permit the Minister of National
Revenue to reassess the Appellant (as he was reassessed on July 28, 2006)
pursuant to subparagraph 152(4)(a)(ii) of the Income Tax Act (the
“Act”) in respect of the 2002 taxation year after the normal
reassessment period for that year had elapsed.
[50]
The Respondent is
entitled to costs, which are payable in any event of the cause.
Signed at Ottawa, Canada, this 20th day of October 2011.
“Wyman W. Webb”
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