Indalex Ltd. v. The Queen, 86 DTC 6598, [1986] 2 CTC 482 (FCA)

Mahoney, J.:—The appellant moves, pursuant to Rule 324, without appearance, to join to the present appeal an appeal in respect of reassessments made by the Minister of National Revenue in accordance with the judgment of the Trial Division which is subject of the present appeal and cross appeal. The reassessments were made by the Minister in compliance with subsection 164(4.1) of the Income Tax Act. It is not suggested that they do not accord with the judgment of the Trial Division. The appellant’s notice of motion was filed with a consent signed on the respondent's behalf.

When the application first came before Mr. Justice Stone he asked the parties for representations:

(a) establishing the necessity for this application in the context of the pending appeal;

(b) providing the legal basis upon which such an order can be made.

The appellant has responded only to (a), taking the position that the effect of the reassessments is to “cancel and replace” the original assessments as stated on the faces of the notices of reassessment. The respondent, while maintaining her consent, now submits that the order is not necessary because the reassessments are really only modifications of the originals. She does, however, addressing (b), say that if the order is necessary, authority to make it is to be found in the Court's inherent jurisdiction. Without expressing a concluded opinion as to whether that authority exists, I agree that inherent jurisdiction is the only possible source. There is no statutory authority to initiate an appeal against an income tax assessment in the Federal Court of Appeal. Its jurisdiction is to deal with an appeal from a judgment of the Trial Division.

Subsection 164(4.1) of the Act was adopted December 20, 1984, with effect from February 15, 1984. It provides:

164. (4.1) Where the Tax Court of Canada, the Federal Court of Canada or the Supreme Court of Canada has, on the disposition of an appeal in respect of taxes, interest or a penalty payable under this Act by a taxpayer resident in Canada,

(a) referred an assessment back to the Minister for reconsideration and reassessment,

(b) varied or vacated an assessment, or

(c) ordered the Minister to repay tax, interest or penalties,

the Minister shall with all due dispatch, whether or not an appeal from the decision of the Court has been or may be instituted,

(d) where the assessment has been referred back to him, reconsider the assessment and make a reassessment in accordance with the decision of the Court,

(e) refund any overpayment resulting from the variation, vacation or reassessment, unless otherwise directed in writing by the taxpayer, and

(f) where paragraph (c) is applicable, repay any tax, interest or penalties as ordered,

and the Minister may repay any tax, interest or penalties or surrender any security accepted therefor by him to any other taxpayer who has filed an objection or instituted an appeal if, having regard to the reasons given on the disposition of the appeal, he is satisfied that it would be just and equitable to do so, but for greater certainty, the Minister may, in accordance with the provisions of this Act, the Federal Court Act or the Supreme Court Act as they relate to appeals from decisions of the Tax Court of Canada or the Federal Court, appeal from the decision of the Court notwithstanding any variation or vacation of any assessment by the Court or any reassessment made by the Minister under paragraph (d), and any such appeal from a decision of the Tax Court of Canada shall proceed as if it were an appeal from the assessment that was referred back, varied or vacated. [Emphasis added.]

In providing what the Minister may do, Parliament has overlooked the possibility that, as here, the taxpayer may be partially successful in appealing an assessment and may not be content with partial success. However, since the provision preserving the Minister’s position is expressed to be made “for greater certainty", it is not to be construed as denying the taxpayer a like preservation of his position on application of the maxim inclu- sio unius est exclusio alterius. Indeed, it may fairly be regarded as indicative of what Parliament thought the position would be even if it had not thought it prudent to express it “for greater certainty".

It is suggested that the decision of Jackett, P., in Abrahams [No. 1] v. M.N.R., [1966] C.T.C. 690; 66 D.T.C. 5451, lends substance to the appellant’s concern. In that case, the taxpayer had duly objected to the reassessment of his 1961 tax return and, in the absence of a timely reaction by the Minister, filed a notice of appeal in the Exchequer Court. A week after the appeal was initiated, the Minister issued a further notice of reassessment. As appears from Abrahams [No. 2] v. M.N.R., [1966] C.T.C. 694; 66 D.T.C. 5453, an appeal from the second reassessment was dealt with by the Court on its merits. Neither judgment discloses the procedural route by which the second appeal reached the Court. Be that as it may, in Abrahams [No. 1], it was held that the power to reassess under what is now subsection 152(4) of the Act had been properly exercised and, at 692 (D.T.C. 5452), that:

. . . The fact that an appeal has been initiated should not make any difference in the application of the provision.

Assuming that the second re-assessment is valid, it follows, in my view, that the first re-assessment is displaced and becomes a nullity. The taxpayer cannot be liable on an original assessment as well as on a re-assessment. It would be different if one assessment for a year were followed by an “additional" assessment for that year. Where, however, the “re-assessment" purports to fix the taxpayer's total tax for the year, and not merely an amount of tax in addition to that which has already been assessed, the previous assessment must automatically become null.

Parliament’s intention in enacting subsection 164(4.1) is clearly to benefit taxpayers who have succeeded in appealing assessments. It would be antithetical to that intention if the Minister's compliance with paragraph 164(4.1)(d) were to have the effect of depriving unwary taxpayers of the right to further pursue appeals in which they have only been partly successful. Such result would, in my opinion, be little short of entrapment. Accordingly, I would not extend the application of Abrahams [No. 1] to reassessments made pursuant to subsection 164(4.1) or a judgment subject itself to further appeal.

A judgment of the Trial Division disposing of an appeal from an assessment under the Income Tax Act is a judgment subject of appeal to this court under subsection 27(1) of the Federal Court Act, notwithstanding that the scope of the Trial Division’s judgment is prescribed by section 177 of the Income Tax Act.

177. The Federal Court may dispose of an appeal, other than an appeal to which section 180 applies, by

(a) dismissing it; or

(b) allowing it and

(i) vacating the assessment,

(ii) varying the assessment,

(iii) restoring the assessment, or

(iv) referring the assessment back to the Minister for reconsideration and reassessment.

The pertinent provisions of the Federal Court Act are subsection 27(1) and paragraph 52(b).

27. (1) An appeal lies to the Federal Court of Appeal from any

(a) final judgment,

(b) judgment on a question of law determined before trial, or

(c) interlocutory judgment,

of the Trial Division.

52. The Court of Appeal may

(b) in the case of an appeal from the Trial Division,

(i) dismiss the appeal or give the judgment and award the process or other

proceedings that the Trial Division should have given or awarded,

(ii) in its discretion, order a new trial, if the ends of justice seem to require it, or

(iii) make a declaration as to the conclusions that the Trial Division should have reached on the issues decided by it and refer the matter back for a continuance of the trial on the issues that remain to be determined in the light of such declaration;

I am unaware of any provision of the Income Tax Act which deals with either the right to appeal to this Court from a judgment of the Trial Division or the procedures for such an appeal.

The judgment presently under appeal is one authorized by subparagraph 177(b)(iv) of the Income Tax Act. Ordinarily, in disposing of this sort of appeal, the Court of Appeal will render a judgment authorized by subparagraph 52(b)(i) of the Federal Court Act and either dismiss it or, allowing it, give the judgment it concludes the Trial Division should have given. If the appeal is dismissed, the judgment of the Court of Appeal will, effectively, affirm the reassessment as the judgment of the Trial Division will stand. If, on the other hand, the appeal is allowed and the Court of Appeal gives the judgment it concludes the Trial Division ought to have given, the judgment on appeal must be given with reference to the assessment considered by the Trial Division, not the reassessment that ensued upon its judgment. It follows that, if the Court of Appeal is to be able to exercise all of its jurisdiction in disposing of the appeal, the effect of a reassessment ensuing upon a judgment of the Trial Division cannot be to render the original assessment a nullity, at least for purposes of the litigation.

What is presently before this Court is the Trial Division’s judgment. Necessary incidents of that judgment are both the original income tax assessments which were considered by the trial judge and the reassessments which issued as a result of her judgment. In my opinion, the reassessments, so long as they conform to the Trial Division’s judgment are, in fact, now before the Court. The order sought by the appellant is, therefore, unnecessary.

I would dismiss the application. This is not a case for costs.

Application dismissed.