Citation: 2013 TCC 207
Date: 20130621
Docket: 2011-3598(IT)APP
BETWEEN:
JOSEPHINE SICOLI,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Hershfield J.
[1] The
Applicant, Josephine Sicoli, has made an application under subsection 166.2(1)
of the Income Tax Act (the “ITA”), for an extension of time to
file Notices of Objection with respect to assessments made under the ITA
for the Applicant’s 2002 to 2009 taxation years, (collectively the “Assessments”).
The Assessments concern the failure of the Applicant to make source deductions.
[2] The Applicant has also made an application under the
relevant provisions of the Employment Insurance Act (“EIA”), and
the Canada Pension Plan (the “CPP”) for an extension of time to
file objections to assessments made under those Acts for the failure of
the Applicant to make source deductions. The Respondent asserts that no such
assessments were issued and that the applications concerning the EIA and
the CPP are thereby superfluous. I have no evidence to contradict the
Respondent’s position other than the Applicant’s belief that the total
assessment amount was all inclusive. A review of the assessments submitted at
the hearing indicates otherwise. Accordingly, I will proceed on the basis that
there have been no assessments under either the EIA or the CPP in
respect of which objections need to be filed.
[3] The Applicant submits that the business, a publishing
business, in respect of which the alleged failures occurred, was carried on by
a corporation known as Il Nuovo
Mondo Publishing Inc. of which the Applicant was the sole
shareholder and director. It is not disputed that Il Nuovo Mondo Publishing Inc.
carried on such business or that it was struck prior to the Applicant’s 2002
taxation year. The Applicant asserts that at no point in time has she carried
on a publishing business as an individual.
[4] Regardless,
notwithstanding any substantive issues with the Assessments issued by the
Minister of National Revenue (the “Minister”), the sole issue on this appeal is
whether the application is made beyond the statutory time limits set out in the
ITA.
[5] The relevant provisions of the ITA are as follows:
Subsection 165(1):
Objections to
assessment -- A taxpayer who objects to
an assessment under this Part may serve on
the Minister a notice of objection, in writing, setting
out the reasons for the objection and all relevant facts,
(a)
where the assessment is in respect of
the taxpayer for a taxation year and the taxpayer is
an individual (other than a trust) or
a testamentary trust, on or before the later of
(i) the day that is one year after
the taxpayer's filing-due date for the year, and
(ii) the day that is 90 days after
the day of mailing of the notice of assessment; […] [Emphasis
added.]
[…]
Subsection 166.1(1):
Extension of time [to object] by Minister
-- Where no notice of
objection to an assessment has been served under section 165, nor any request
under subsection 245(6) made, within the time limited by those provisions for
doing so, the taxpayer may apply to the Minister to extend the time for serving
the notice of objection or making the request.
Paragraph
166.1(7)(a)
When
order to be made -- No
application shall be granted under this section unless
(a) the application is made within one year after the expiration of
the time otherwise limited by this Act for serving a notice of objection or
making a request, as the case may be; and
[…]
Subsection
166.2(1):
Extension of time
[to object] by Tax Court -- A taxpayer who has
made an application under subsection 166.1[(1)] may apply to the Tax
Court of Canada to have the application granted after either
(a) the Minister has refused
the application, or
(b) 90 days have elapsed after
service of the application under subsection 166.1(1) and
the Minister has not notified the taxpayer of
the Minister's decision,
but no
application under this section may be made after the expiration of 90 days
after the day on which notification of the decision was mailed to
the taxpayer. [Emphasis added.]
Paragraph 166.2(5)(a):
When application
to be granted -- No application shall be granted under this section
unless
(a) the application was made under
subsection 166.1(1) within one year after the expiration of the time
otherwise limited by this Act for serving a notice of objection or making a
request, as the case may be; and
[…]
[6] Read together, these provisions require, in the case
of the ITA, that the Applicant file the application for extensions of
time within one year and 90 days from the day
of mailing of the notices of Assessments.
Chronology
of Events
|
Date of
Assessment
|
Year
|
Federal Tax
|
Provincial Tax
|
Penalty and Interest Only
|
|
February 26,
2009
|
2009
|
|
|
$3,388.82
|
|
April 10,
2009
|
2003
|
|
|
$3,388.82
|
|
April 25,
2009
|
2004
|
|
|
$698.36
|
|
May 26, 2009
|
2002
|
$5,446.93
|
$3,431.56
|
$6,229.84
|
|
May 26, 2009
|
2003
|
$17,427.18
|
$9,200.27
|
$15,795.74
|
|
May 26, 2009
|
2004
|
$77,741.31
|
$23,592.79
|
$50,367.41
|
|
May 26, 2009
|
2005
|
$55,744.90
|
$16,956.81
|
$9,432.17
|
|
May 26, 2009
|
2006
|
$98,862.41
|
$39,721.79
|
$41,789.42
|
|
May 26, 2009
|
2007
|
$7,778.28
|
$5,055.89
|
$2,501.41
|
|
May 26, 2009
|
2008
|
$7,624.94
|
$5,108.76
|
$1,481.37
|
|
May 26, 2009
|
|
|
|
$207.51
|
|
May 26, 2009
|
|
|
|
$75.61
|
|
May 26, 2009
|
|
|
|
$156.99
|
|
May 26, 2009
|
|
|
|
$302.12
|
|
May 26, 2009
|
|
|
|
$160.40
|
|
May 26, 2009
|
|
|
|
$268.79
|
|
May 26, 2009
|
2008
|
|
|
$576.66
|
|
TOTAL
|
|
$270,625.95
|
$103,067.87
|
$136,821.44
|
[7] I note that of these 17 Assessments, copies of which
are attached as exhibits to an affidavit (“affidavit”) of a Canada Revenue
Agency (“CRA”) collection officer (“affiant”), there are ten that I have
underlined. Those underlined assessments all relate to interest and penalties only.
However, only three of those ten show the year in respect of which the
assessment was being made. The affiant attributes the remaining seven to
various years in his affidavit. As well, these ten assessments (with the
exception of the assessment shown above as dated February 26, 2009) all show
previous and present balances owing as distinct from the other, not underlined,
assessments.
[8] I note here, as well, that the seven assessments that
are not underlined (which include federal and provincial taxes as well as
interest and penalties) all show the year in respect of which the assessment is
being made and all show previous and present balances. While I do not have
reason to believe that there is a double counting of interest and penalties,
the assessment presentation is not only confusing but raises issues.
[9] One issue that I will mention
is that subsection 152(4) of the ITA requires that assessments of interest
and penalties be made for a taxation year. In my view, that does not mean: as
attested to by an officer of the CRA. It means the assessment must on its face
be made for a taxation year. On that basis, I am inclined to suggest that seven
of the Assessments are not Assessments at all and no objections to them are
required. However, if I am to effectively allow the applications for all years,
treating seven of the Assessments as non-assessments, a judgment not requested
by the Applicant, would be impractical and effectively unnecessary.
[10] The relevant point here is that the
Assessments appear to have been rushed without adequate attention to the detail
required of assessments. As stated, some were separate assessments for interest
and penalties, some without applicable years noted on the face of the assessment
and some with taxes payable and interest and penalties cumulatively recorded,
all on the same day. It is not surprising that, in fact, mistakes were made.
[11] Aside from that general
impression, one interesting mistake to note is that the earliest assessment is
February 26, 2009. While it shows that the assessment for the 2009 taxation
year is for interest and penalties only, it also shows a total balance owing of
some $507,000 consisting of a previous balance of some $503,000. There is no
dispute that such balance owing includes the balances of all the Assessments made
in May 2009. The explanation for that impossible scenario is covered in the
affidavit. The affidavit states that the February 26, 2009 assessment was a
“May 2009 FTR Assessment” inadvertently dated in error. A similar error was
said to have been made in respect of the April 25, 2009 assessment which
according to the affidavit was actually made on May 26, 2009.
[12] These inadvertent errors have
particular relevance with respect to the Respondent’s reliance on subsection
244(10) of the ITA which reads as follows:
244(10) Proof of no appeal -- An affidavit of an officer of the Canada
Revenue Agency, sworn before a commissioner or other person
authorized to take affidavits, setting out that the officer has charge of the
appropriate records and has knowledge of the practice of the Agency and that an
examination of those records shows that a notice of assessment
for a particular taxation year or a notice of determination was
mailed or otherwise communicated to a taxpayer on a particular
day under this Act and that, after careful examination and search of those
records, the officer has been unable to find that a notice of objection or of
appeal from the assessment or determination or a request under
subsection 245(6), as the case may be,
was received within the time allowed, shall, in the absence of proof to the
contrary, be received as evidence of the statements contained in it.
[13] Where there is an allegation
that an assessment was neither mailed nor communicated to the taxpayer, the
Minister has the burden of disproving such allegations, as only the Minister
would be possessed of such information.
The ITA, however, recognizes the practical limitations on the Minister
and allows evidentiary relief by means of the foregoing provision.
This evidentiary relief may be satisfied by providing an affidavit as to the
ordinary mailing practices of the CRA.
This is a necessary provision. The chain of persons who handle outgoing mail,
from the printer to the mail box, can not possibly all be called to identify
the contents of each piece of outgoing mail and attest to each step along the
way to the mail box. Hence, swearing to the mailing practices can suffice. However,
as the cited paragraph of the ITA states: such sworn statement only applies
in the absence of evidence to the contrary. Evidence to the contrary includes
the probability of a very long list of steps all occurring on the same day. I
will refer to these steps momentarily but for now I just note that the
affidavit does not say that the normal or ordinary practice of the CRA is to prepare
and issue 17 complicated assessments and have them posted all on the same day. I
give some weight to this improbability although it can not, in and by itself,
be determinative as one explanation for the errors that occurred in this case is
consistent with sloppy or rushed work as opposed to dictating a finding that a
mailing could not have occurred as attested to by the affiant. In any event,
the evidence and confusion relating to the Assessments themselves which have
resulted in procedural errors, and, the Applicant’s evidence, taken together,
tend to give me serious doubts as to the reliability of a sworn statement that
relies on routine practices where there is nothing routine or ordinary about these
Assessments.
[14] I will expound on CRA procedural
errors in this case and on the evidence of the Applicant as I proceed with the
analysis. Nonetheless, as I said, and as will become more evident, the evidence
in this case is haunted by a degree of hurried carelessness on the part of the
CRA that strongly suggests the unreliability of evidence that relies on routine
or ordinary practices.
[15] Before continuing along this
path, it is necessary, for the sake of completeness, to set out a more complete
chronology of events even though the issue in this case relates principally to whether
the Respondent can establish the date of mailing of the Assessments. That is,
while the Applicant challenges the asserted mailing of the Assessments, she
also relies on the date she asserts was the date of being notified of them. So,
in order to cover all potentially relevant dates, a further chronology of
events is required.
[16] They are:
·
CRA asserted date of mailing Assessments: May 26, 2009.
·
Applicant asserts Assessments never mailed and reproduced
copies received: April 11, 2011.
·
Applicant’s Notices of Objection filed: July 7, 2011.
·
Minister’s notice refusing the
Notices of Objection as late filed: August 17, 2011.
·
Application to Minister for
extension of time: July 7, 2011.
·
Minister’s refusal to allow
extension of time: November 15, 2011.
·
Application to Tax Court of Canada for extension of time: November
15, 2011.
[17] As stated above, the main issue here comes down to
determining whether the CRA’s asserted mailing date of the Assessments will
stand. In making that determination, direct reference to the affidavit is
required in this case.
[18] The affidavit sets out the
following:
2. I have
charge of the appropriate records and knowledge of the practices of the Agency.
3. My involvement with the Applicant’s 2002,
2003, 2004, 2005, 2006, 2007, 2008 and 2009 taxation years was that:
(a) I was the collections officer assigned to
the file of II Nuovo Mondo Publishing Inc. (the “corporation”) in 2009;
(b) I requested Richard Lamarre in the
Non-filer Division of the Agency to establish a Business Number (the “BN”) for
the Applicant, who was the sole shareholder of the corporation when it was
struck from the corporate registry on November 2, 2001; and
(c) I requested Joan Boyko in the Trust
Compliance Division of the Agency to assess the Applicant for all the
assessments raised on the corporation after it was struck.
4. I have undertaken a careful examination
and search of the records of the Agency relating to the Applicant’s application
for the 2002, 2003, 2004, 2005, 2006, 2007, 2008 and 2009 taxation years and
these records demonstrate that:
(a) The Minister of National Revenue (the
“Minister”) assessed the Applicant for the 2002 taxation year by:
(i) Notice of Assessment dated
on May 26, 2009 in the amount of $698.36 to assess a penalty for late filing
(the “LFP”) of the 2002 T4 type return. The notice was mailed to the
Applicant at 13611 82 Street, Edmonton, AB, T5E 2V3 (the “2002 LFP
Assessment”). Attached hereto and marked as Exhibit “A” is a reprinted
copy of the 2002 LFP Assessment which was inadvertently dated April 25, 2009 in
error; and [Emphasis added.]
[…]
[19] Compare this last highlighted portion of the affidavit
with:
(h) The Minister assessed the Applicant for
the 2009 taxation year by:
(i) Notice of Assessment dated
on May 26, 2009 in the amount of $3,388.82 to assess for FTR and mailed
to the Applicant at 13611 82 Street, Edmonton, AB, T5E 2V3 (the “May
2009 FTR Assessment”). Attached hereto and marked as: [Emphasis
added.]
a) Exhibit “O” is a reprinted copy of
the May 2009 FTR Assessment which was inadvertently dated February 26, 2009 in
error; and
b) Exhibit “P” is a reprinted copy of
the same May 2009 FTR Assessment which was inadvertently dated April 10, 2009
in error;
[20] Even after acknowledging mailing date errors, the
mailing date set out in this paragraph 4 remains somewhat ambiguous. Although,
clause 4(h)(i)(b) is somewhat clearer than clause 4(h)(i)(a). At least in clause
4(h)(i)(b), the date of the assessment is in the same sentence as the date of
mailing. Still, neither of these portions of the affidavit clearly state the date
of mailing. On the other hand, paragraph 5(j) does recite the date of mailing
as May 26, 2009.
[21] Indeed, paragraph 5 augments paragraph 4 with a more comprehensive
list of procedural steps taken. Both paragraphs 4 and 5 of the affidavit are
set out in full in the Appendix to these Reasons.
[22] In paragraph 5, the preamble purports to list steps that
all occurred on the same day, namely May 26, 2009. While this list, based on
ordinary practices, clearly asserts a mailing date of May 26, 2009, as I said, I
have reason to believe that this case might reasonably be found to have been an
exception to the routine practices sworn to by the affiant. For example:
5. With respect to the issuance of the
assessments on May 26, 2009, as detailed in Exhibits “A” through “Q”
above:
[…]
(c) Joan Boyko stapled the assessments
together and placed the bundle in a slot labeled “letters with or without
envelopes” in the business centre in the Trust Compliance area in the Edmonton
Tax Services Office of the Agency;
(d) The support staff in the Trust Compliance
area in the Edmonton Tax Services Office of the Agency placed the assessments
in an envelope and placed the envelope on the outgoing mail shelf in the
business centre in the Trust Compliance area in the Edmonton Tax Services
Office in the Agency;
(e) The envelope was picked up by the staff
from the mailroom in the Edmonton Tax Services Office of the Agency;
(f) In the mailroom in the Edmonton Tax
Services Office of the Agency;
(i) the envelope was sealed and run through
a postage machine; and
(ii)
the envelope was placed in a
Canada Post bin and picked up by Canada Post at the end of the day;
(g) The assessments were mailed to the
mailing address for the Applicant’s BN account from the Edmonton Tax Services Office
of the Agency;
[…]
[23] I have no doubt that in the normal assessment situation,
the ordinary practices sworn to in steps 5(d) through (g), would be sufficient
evidence of the mailing date. However, this does not strike me as a routine
series of assessments.
[24] To further support this conclusion and causing further
concern as to the reliability of the affidavit, I note that during
cross-examination of the affiant the following was acknowledged:
1)
Some items
presented in the affidavit and seemingly presented as personal knowledge of the
affiant, such as the mailing practices were admitted to be known to the affiant
only as being the general practice of the CRA.
2)
There are
discrepancies or gaps between the dates set out in the affidavit and the CRA collections
account information diary.
(a) The affidavit
at paragraph 5(j) suggests that all the Assessments were mailed on May 26,
2009. However, the collections diary entry shows that the 2008 assessment was
reprinted three days later on May 29, 2009 by Joan Boyko due to an incorrect
interest calculation date. Similarly, paragraph 4(g) of the affidavit cites the
date of the 2008 assessment as May 26, 2009 but that does not accord with Ms.
Boyko’s diary entry.
(b) The diary
entries support paragraphs 5(a) to (c) of the affidavit, but are silent on
relevant information such as that in paragraphs 5(d) to (j). Paragraph 5(j) which
deals with the Applicant’s mailing address and the date of mailing, stands
alone. There is no diary or other record of how the assessments were addressed
for mailing. The ordinary routine is taken to impliedly suggest that if Ms.
Boyko put the right address on the Assessments, then the mailroom staff would
correctly address an envelope and mail the Assessments the same day. Perhaps,
something more than an implied suggestion is necessary.
[25] I will turn now to the Applicant’s evidence relating to
the mailing date.
[26] The Applicant and her controller testified at the
hearing. The most relevant portion of their testimony was that all
correspondence sent to the Applicant was delivered personally by the Applicant
to her controller and that neither of them had received any of the Assessments
and they did not have any notice of them until April 11, 2011. Such notice came
about by virtue of the Applicant’s counsel having made a request for any
assessments.
[27] The testimony of the controller was that he met with the
affiant on July 22, 2009 and was told that assessments against the Applicant
personally may be forthcoming. The suggestion was that if Il Nuovo Mondo Publishing Inc. was defunct,
then the Applicant would be held personally liable and that assessments would
be issued accordingly. That evidence casts further doubt as to whether the
assessments were mailed on May 26, 2009. The evidence of the affiant during
cross-examination confirmed the July meeting as well as confirming that he was
requested in June, 2010 to send copies of any assessments as none had been
received. Yet, he had no record of copies being sent. Rather, his notes
indicated that only statements of account were sent in response to this
request.
Conclusion
[28] All that said, I will permit the Applicant’s objection
to proceed. There are just too many CRA errors here not to raise grave doubts
as the mailing of the assessments. A lot was purportedly happening on May 26,
2009 in terms of rendering all these assessments, collating, bundling them etc.,
as listed in the CRA affidavit. It does not seem probable to me that the
affiant can rely on ordinary mailing practices in such a situation. Further, I
find the testimony of the controller credible in respect of his conversation
with the affiant. It suggests to me that even if there was a transfer of the
corporate liability to a new Business Number established for the Applicant personally
on or before May 26, 2009, the mailing of the Assessments that effected such a
transfer of liability got mishandled in the course of a harried attempt to
complete them, issue them and mail them.
[29] Such circumstances are such to warrant the kind of
scrutiny that became issues in Carcone v. The Queen,
where this Court also addressed an application for extension of time to object.
In Carcone, relying on subsections 244(9) and 244(10) of the ITA,
an affidavit of an officer of the CRA was produced as evidence of the date
and address of mailing of a notice of reassessment. Justice D’Arcy found that
such affidavits were still subject to the test of reliability, which in that
case the respondent did not meet. I do not wish to dwell on the specifics of
that case, however, I refer to it simply as an authority that I find buoys my
conviction in this case that the CRA officer’s affidavit fails under a
reliability test and in any event reliance on subsection 244(10) to evidence
the mailing date of May 26, 2009 can not withstand the evidence to the contrary
in this case.
[30] In other words, there are too many questions here to allow
the CRA the benefit of subsection 244(10) of the ITA with respect to a
May 26, 2009 mailing date. Failing proof of that or any other mailing date, the
law is quite clear. The time within which an objection to an assessment must be
made starts to run from the date of delivery of the assessment. See Central
Springs Limited et al. v. The Queen and Grunwald v. The Queen.
[31] The Applicant’s applications for an extension of time to
file Notices of Objection to the Assessments is therefore dismissed as the
Notices of Objection filed on July 7, 2011 were so filed within 90 days of notification
of the Assessments.
Signed at Ottawa, Canada this 21st day of June 2013.
"J.E. Hershfield"
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