Date: 20090123
Docket: T-919-08
Citation: 2009
FC 74
Ottawa, Ontario, January 23, 2009
PRESENT: The Honourable Mr. Justice Martineau
BETWEEN:
NORTHVIEW
APARTMENTS LTD.
Applicant
and
ATTORNEY
GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT AND
JUDGMENT
[1]
This is an
application for judicial review of a decision by the Minister of National
Revenue (the Minister) denying relief from interest and penalties for a total
amount of $6,101.70 as of March 21, 2008, arising from the reassessment of
Northview Apartments Ltd., 1998 to 2002 tax returns under s. 220(3.1) of the Income
Tax Act, R.S.C.
1985 (5th Supp.), c.1 (the Act), one of a set of provisions commonly referred to as “the
taxpayer relief provisions”. For the present proceedings and by order of this
Court dated July 4, 2008, Mr. Irwin Fineberg, a practicing dentist and
president of Northview Apartments Ltd., was authorized to represent the
applicant.
[2]
On November 29, 2007,
the applicant’s initial fairness request was allowed in part, and it was granted
partial relief from late filing penalties for the taxation years of 1999 and
2000 and the arrears interest and installment interest for the period from
November 10, 1999 to December 31, 2001. The applicant invoked death and
sickness of its administrators during the relevant period to sustain its
request for relief. On November 21, 1997, its then president Polly Namerow
passed away. Approximately one year later, Mrs. Charlotte Fineberg succeeded as
president of the applicant. Suffering from a brain tumor, she died on March 10,
2001. She was replaced by Mr. Fineberg on January 7, 2002. Meanwhile, Mr.
Fineberg underwent surgery to be implanted a Pacemaker. Furthermore, as “a
practicing dentist who had been away from the financial details of the
company”, Mr. Fineberg, as new president invoked finding it “most difficult to
arrange and receive reliable professional accounting services.” Accordingly,
“the sickness of Mrs. Charlotte Fineberg and Dr. Irwin Fineberg” was stated as
basis for the partial relief. Nonetheless, the balance of interest and
penalties remained payable.
[3]
It is the applicant’s
second fairness request that underlies the decision at issue in this
application. To support its second level application, the applicant made
several of the same arguments found in its initial fairness request but
additionally invoked third-party delay resulting from the “accountants, in
possession of the company’s prior financial detail [being] the party
exclusively qualified to file its tax returns”. Moreover, the penalties and
interests due were said to “[constitute] yet another hardship so severe as to be considered both
excessive and unfair”. It appears that no further evidence was presented in
support of the second application. Consequently, by letter dated May 8, 2008, a
Minister’s delegate, Mr. Gilles Lavergne, refused to provide additional relief
from interest and penalties to the applicant, stating that “the corporation
[had] not exercised a reasonable amount of care in conducting affairs and [had]
not acted quickly to remedy any delay or omission. Under the self-assessment
system of taxation, the responsibility for filling a return of income on or
before the filing due date rests with the corporation.” The applicant now
contests Mr. Lavergne’s decision.
[4]
Subsection
220 (3.1) of the Act, commonly referred to as a taxpayer’s relief application,
reads as follows:
|
220.(3.1)
The Minister may, on or before the day that is ten calendar years after the
end of a taxation year of a taxpayer (or in the case of a partnership, a
fiscal period of the partnership) or on application by the taxpayer or
partnership on or before that day, waive or cancel all or any portion of any
penalty or interest otherwise payable under this Act by the taxpayer or
partnership in respect of that taxation year or fiscal period, and
notwithstanding subsections 152(4) to (5), any assessment of the interest and
penalties payable by the taxpayer or partnership shall be made that is
necessary to take into account the cancellation of the penalty or interest.
|
220.
(3.1) Le ministre peut, au plus tard le jour qui suit de dix années civiles
la fin de l’année d’imposition d’un contribuable ou de l’exercice d’une
société de personnes ou sur demande du contribuable ou de la société de
personnes faite au plus tard ce jour-là, renoncer à tout ou partie d’un
montant de pénalité ou d’intérêts payable par ailleurs par le contribuable ou
la société de personnes en application de la présente loi pour cette année
d’imposition ou cet exercice, ou l’annuler en tout ou en partie. Malgré les
paragraphes 152(4) à (5), le ministre établit les cotisations voulues
concernant les intérêts et pénalités payables par le contribuable ou la
société de personnes pour tenir compte de pareille annulation.
|
[5]
Subsection
220(3.1) of
the Act gives the Minister discretionary authority to waive or cancel all or
any part of a penalty or interest otherwise payable under the Act by a taxpayer
or a partnership. According to the Guidelines for the Cancellation or Waiver
of Penalties and Interest, as a general rule, the Minister will grant
relief where the default giving rise to the penalty or interest in question is
due to: extraordinary circumstances beyond the applicant's control; actions of
the Canada Revenue Agency (CRA); or inability to pay or financial hardship. The
Minister may also grant relief if a taxpayer’s circumstances do not fall within
the previously stated situations. (Information Circular IC07-I, Taxpayer
Relief Provisions, May 31, 2007, paragraphs 23, 24).
[6]
Finally, other
factors may come into play and possibly limit the amount of interest relief.
Thus, the following factors
will also be considered when determining whether or not the CRA will cancel or
waive penalties and interest: (a) whether or not the taxpayer has a history of
compliance with tax obligations; (b) whether or not the taxpayer has knowingly
allowed a balance to exist on which arrears interest has accrued; (c) whether
or not the taxpayer has exercised a reasonable amount of care and has not been
negligent or careless in conducting their affairs under the self-assessment
system; and (d) whether or not the taxpayer has acted quickly to remedy any
delay or omission. (Information
Circular IC07-I, Taxpayer Relief Provisions, May 31, 2007, paragraph 33).
[7]
When the CRA issues a
decision not to grant the taxpayer the relief requested, the Act provides that
the taxpayer can request a second level of review to be performed by the CRA.
This second level of review is made by the Director of the relevant district
office or taxation centre. In the event that taxpayer relief is refused as a
result of a second level of review, then an unsatisfied applicant may apply to
the Federal Court for judicial review of the taxpayer relief decision made by
the CRA. (Information Circular IC07-I, Taxpayer Relief Provisions, May
31, 2007, paragraphs 103-108).
[8]
With regards to the
filling of a request, the guidelines set forth that taxpayers should provide
all relevant information to support their request including any relevant
documentation. In cases involving financial hardship (inability to pay), a
meaningful payment arrangement which covers at least the tax and the penalty
part, if applicable, and full financial disclosure including a statement of
income and expenses, as well as a statement of assets and liabilities should be
provided. (Information Circular IC07-I, Taxpayer Relief Provisions, May
31, 2007, paragraph 32 (g)). Finally, as to third-party actions, taxpayers are
generally considered to be responsible for errors made by third parties acting
on their behalf for income tax matters. However, there may be exceptional
situations, where it may be appropriate to provide relief to taxpayers because
of third-party errors or delays. (Information Circular IC07-I, Taxpayer
Relief Provisions, May 31, 2007, paragraph 35).
[9]
The
standard of review applicable to a decision made by the Minister under its
discretionary authority to waive
or cancel all or any part of a penalty or interest otherwise payable under the
Act by a taxpayer is now that of “reasonableness” In Dunsmuir v. New Brunswick, 2008 SCC 9, this standard is defined in
the following manner:
[47] Reasonableness
is a deferential standard animated by the principle that underlies the
development of the two previous standards of reasonableness: certain questions
that come before administrative tribunals do not lend themselves to one
specific, particular result. Instead, they may give rise to a number of
possible, reasonable conclusions. Tribunals have a margin of appreciation
within the range of acceptable and rational solutions. A court conducting a
review for reasonableness inquires into the qualities that make a decision
reasonable, referring both to the process of articulating the reasons and to
outcomes. In judicial review, reasonableness is concerned mostly with the
existence of justification, transparency and intelligibility within the
decision-making process. But it is also concerned with whether the decision
falls within a range of possible, acceptable outcomes which are defensible in
respect of the facts and law.
[10]
Although
it is not necessary for every element of the reasoning in the impugned decision
to pass a test for reasonableness, the reviewing judge must still be satisfied
that the administrative decision-maker made a reasonable decision, on the
whole, after fully reviewing the taxpayer's file and taking all the relevant
criteria into account.
[11]
The applicant raises
several arguments justifying a review of the May 8, 2008 decision. Firstly, the
applicant submits that the lack of reasoning of the November 29, 2007 decision
prevented it from addressing in its second level review application those
specific reasons the Minister was to have set out for its denial of full
relief. Reasons
were provided to the applicant justifying the partial relief, the whole in
accordance with the guidelines (Information
Circular IC07-I, Taxpayer Relief Provisions, May 31, 2007, paragraph 11).
Thus, by specifically stating “the sickness of Mrs. Charlotte Fineberg and Dr.
Irwin Fineberg” as grounds for its partial relief, the Minister properly used
of its discretion and rejected all other justifications submitted by the
applicant. Accordingly, the applicant further emphasized third-party delay as
grounds for relief in its second level review application. Moreover, the
Minister also rejected said justification. Thus, this Court has steadily
refused to accept that a taxpayer’s relief application be validly based on the
fault of the third party (Légaré v. Canada Customs and Revenue Agency,
[2004] 5 C.T.C. 44, 2003 FC 1047 at paragraph 10; Tadross v. Canada (Minister of National Revenue), [2005] 1 C.T.C. 201, 2004 FC 1698 at paragraphs
10-11; Babin v. Canada (Canada Customs and Revenue Agency), [2005] 4 C.T.C. 1, 2005 FC 972 at paragraph
12). It is the essence of our tax collection system that taxpayers are sole
responsible for self-assessment and self-reporting to the CRA. Thus, it was
open to the Minister to conclude that the applicant had been negligent in the
conduct of its tax affairs in waiting for more than eight years for a notice
from its accountant to ultimately remedy to its failure to comply with its tax
reporting obligations.
[12]
Furthermore,
the applicant submits that the Minister failed to take account of all the
evidence in his file. While the May 8, 2008 decision explicitly states that all documentation
provided was reviewed, extraordinary circumstances should have been sustained
with supporting documentation provided by the applicant, as required by the
guidelines. (Information Circular IC07-I, Taxpayer Relief Provisions,
May 31, 2007, paragraph 32 (g)). Thus, no documentation sustains the
applicant’s allege financial hardship. Without evidence to that effect, the
Minister has no obligation to further enquire on the inability to pay of the
applicant. Also, the Report on a Fairness Request dated May 22, 2008 submitted
as Exhibit A to Mr. Gilles Lavergne’s affidavit further details the analysis of
the applicant’s submissions in whole. I fail to see any reviewable error that
would affect the result in this case.
[13]
Whether or
not Mr. Fineberg had multiple oral communications with his accountant, it
remains that he satisfied himself by the apparent negligence of the latter
during the eight year period in question.
[14]
If Mr.
Fineberg’s version of events is true, perhaps he may have a direct recourse
against his accountant; however, this aspect of the claim is separate from
CRA’s involvement (Babin v. Canada (Customs Revenue Agency), [2005]
4 C.T.C. 1, 2005
FC 1195 at paragraph 21). In this regard, the evidence considered by the
decision-maker reveals that Mr. Fineberg had already been contacted by the
fiscal authorities in 2002 and 2005 about missing tax returns. The tax returns
were eventually filed more than two years after the last time CRA requested
compliance with the law. Despite such requests, Mr. Fineberg apparently did not
even make a single step to mandate another accountant.
[15]
In final
analysis, the Court finds the impugned decision reasonable in the circumstances
and also dismisses the applicant’s argument that there was a breach to the
rules of natural justice or procedural fairness.
[16]
For these reasons,
the present application for judicial review must fail. In the Court’s exercise
of its discretion, there will be no costs considering the factual situation of
this case.
JUDGMENT
THIS COURT ORDERS AND
ADJUDGES that:
This application for judicial review is
dismissed, without costs.
“Luc
Martineau”
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