Aztec Industries Inc. v. The Queen, 95 DTC 5235, [1995] 1 CTC 327 (FCA)

Hugessen J.A. (Desjardins and McDonald, J J. A., concurring) :-This is a section 28 application to review and set aside a decision of the Tax Court of Canada by which the taxpayer’s application to extend time for filing notices of objection was denied. The objections sought to be made were with respect to notices of assessment allegedly issued by the Minister against the taxpayer (whose name was then Pioneer Steel Corporation) in March and May 1983, more than 11 years prior to the hearing in the Tax Court. The governing provisions of the Income Tax Act, R.S.C., R.S.C. 1985 (5th Supp.), c. 1 (the "Act") are subsections 166.1(1), 166.2(1) and 166.2(5):

166.1(1) 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.

166.2(1) A taxpayer who has made an application under subsection 166.1 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.

166.2(5) 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

(b) the taxpayer demonstrates that

(i) within the time otherwise limited by this Act for serving such a

notice or making such a request, as the case may be, the taxpayer

(A) was unable to act or to instruct another to act in the taxpayer’s name, or

(B) had a bona fide intention to object to the assessment or make the request,

(ii) given the reasons set out in the application and the circumstances of the case, it would be just and equitable to grant the application, and

(iii) the application was made under subsection 166.1(1) as soon as circumstances permitted.

[Emphasis added. I]

As can be see from the text of the latter of these provisions there is an outside limit, after which no extension of time may be granted, which is one year from the time otherwise limited for serving a notice of objection. That time is, in turn, fixed by subsection 165( 1 ): [1]

165(1) 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 balance-due day of the taxpayer for the year, and

(ii) the day that is 90 days after the day of mailing of the notice of assessment; and

(b) in any other case, on or before the day that is 90 days after the day of mailing of the notice of assessment.

[Emphasis added.]

Thus, the date from which the calculation of time must be reckoned is the "day of mailing of the notice of assessment".

The Tax Court judge correctly and succinctly stated the respective positions of the parties before him as follows:

The Crown alleges it forwarded notices of assessment to the applicant for employee withholdings on March 11, 1983; March 11, 1983; and on May 9, 1983. The applicant states that the Crown did not issue those notices of assessment and further states that if such were issued, they were only received by the applicant on March 19, 1993.

(Reasons for judgment, application record, pages 249-50)

After reviewing the evidence, he then concluded as follows:

The Court is satisfied on the evidence before it that Pioneer Steel Corporation received the notices of assessment and was properly assessed for the withholdings in question on March 11, 1983; March 11, 1983; and May 9, 1983 by notices of assessment. This is confirmed by Exhibit R-l which is a detailed letter from Revenue Canada in Toronto to Richter & Partners, the receiver, dated May 6, 1983. It also refers to the sum of $2,159.15 as trust moneys and this is the sum which was paid on June 30, 1983.

(Reasons for judgment, application record, pages 253-54)

As a result, the Tax Court judge dismissed the application as being out of time.

With great respect, I am of opinion that the Tax Court judge erred in law. There was, in my view, simply no evidence at all in the record before him from which he could conclude that the Minister had issued and mailed the relevant notices of assessment. Knowledge of the fact that the Minister was asserting a claim, and payment of a portion thereof by or on behalf of the taxpayer, does not constitute evidence of the existence or the mailing of notices of assessment. A finding of fact which is unsupported by any evidence is an error of law.

As I have indicated, the time for filing a notice of objection as well as the limitation on any extension of such time runs from the date of the mailing of the notice of assessment. The scheme of the statute is such that the act of assessment is not complete until notice has been sent to the taxpayer. Subsection 152(2) provides:

152(2) After examination of a return, the Minister shall send a notice of assessment to the person by whom the return was filed.

[Emphasis added.]

Subsection 165(1), supra, makes it plain that it is the mailing of the notice of assessment which starts the clock ticking against the taxpayer.

Where as in the present case, a taxpayer alleges not only that he has not received the notice of assessment but that no such notice was ever issued, the burden of proving the existence of the notice and the date of its mailing must necessarily fall on the Minister; the facts are peculiarly within his knowledge and he alone controls the means of adducing evidence of them. A number of statutory provisions recognize the Minister’s burden in this respect and are clearly designed to alleviate it.

Thus, a notice of assessment is deemed to have been made on the day it has been mailed:

244(15) Where any notice of an assessment has been sent by the Minister as required by this Act, the assessment shall be deemed to have been made on the day of mailing of the notice of the assessment.

It is also deemed to have been received on that date:

248(7) For the purposes of this Act,

(a) anything (other than a remittance or payment described in paragraph (b)) sent by first class mail or its equivalent shall be deemed to have been received by the person to whom it was sent on the day it was mailed;

The date of mailing is deemed to be the date of the notice:

244(14) For the purposes of this Act, the day of mailing of any notice or notification described in subsection 149.1(6.3), 152(4) or 166.1(5) or of any notice of assessment shall be presumed to be the date of that notice or notification.

And proof of the document itself may be made by the affidavit of a departmental official having charge of the file:

244(9) An affidavit of an officer of the Department of National Revenue, sworn before a commissioner or other person authorized to take affidavits, setting out that he has charge of the appropriate records and that a document annexed thereto is a document or true copy of a document made by or on behalf of the Minister or some person exercising the powers of the Minister or by or on behalf of a taxpayer, shall be received as prima facie evidence of the nature and contents of the document and shall be admissible in evidence and have the same probative force as the original document would have if it had been proven in the ordinary way.

In the proceedings before the Tax Court judge, the Minister attempted to prove the existence, date and mailing of the relevant notices of assessment in accordance with these provisions. At the hearing of the section 28 application, counsel for the Minister conceded, and it is now common ground, that the Minister failed in this proof. Indeed, the only documents that the Minister succeeded in proving by way of affidavit were three "final request for payment" forms. Two of these are dated March 11, 1983 and the third May 9, 1983. Except for the changes in dates and figures, these were all in identical terms and the relevant part reads as follows:

Final Request for Payment

Pioneer Steel Corporation

5404 Maingate Dr

Mississauga, Ont

L4W 1R8

Our records show that we have not yet received your payment for the amount you were recently assessed. Failure to make full payment immediately may result in the initiation of collection action without further notice. If this amount has been paid within the last few days, please accept our thanks and disregard this notice. However, if payment was made more than 15 days ago please provide details.

[Emphasis added.]

As the italicized words indicate, these notices are at best an indication that the Minister was of the view that an assessment had been made at some earlier unspecified date. There was no evidence of any kind of notice of such assessment ever having been sent to the taxpayer.

If there were any doubt that the documents produced by the Minister were not notices of assessment, the printing on the back of the form dispels it:

Inquiries

(These Instructions Apply Only When the Words "Notice of Assessment" Appear on the Front of this Form) If you wish to:

(a) receive clarification of any aspect of the assessment;

(b) make representations concerning some point with which you do not agree; or

(c) submit additional information,

you should inquire at the District Taxation Office in your area without delay, inquiries by mail should be addressed to "District Taxation Office" at the appropriate address.

Refer to your Employers’ Guide to Payroll Deductions for the telephone number/address.

If you are unable to resolve the issue by such an inquiry, you may wish to file an objection to your assessment by completing Form T400A, "Objection", or by sending a letter, stating all related facts, addressed to the Chief of Appeals of your District Taxation Office within 90 days of mailing of the notice of assessment.

The Income Tax Act, Canada Pension Plan and Unemployment Insurance Act, provide that any balance owing shall be paid when due, whether or not an objection is filed.

Interest is charged at the rate prescribed by law.

[Emphasis added. I

The words "notice of assessment" do not appear anywhere on the front of the forms.

No other evidence in the record, including the letter of May 6, 1983, to the receiver referred to by the Tax Court judge, affirms that a notice of assessment was issued and mailed or on what date. [2] At best that letter, like the "notices" described earlier, was simply a demand for payment which shows that the Minister was of the view that assessments had been made. That is clearly not enough. Furthermore, the fact that the taxpayer, or its receiver, were aware of the Minister’s claim or that the receiver paid some trust moneys on account thereof simply cannot serve to prove the dates of the mailing of the notices of assessment, still less their existence.

The Tax Court judge had two questions before him. The first was whether the Minister had proved that notices of assessment had been issued and mailed as required by law. The second, assuming such proof, was to know if the taxpayer had rebutted the presumption that such notices had been received. If the first question is not answered affirmatively the second does not arise. With respect, the judge appears to have approached the matter as though the burden of proof was on the taxpayer from the outset, whereas in the circumstances, unless and until the Minister proved the notices of assessment and the dates of their mailing, there was simply nothing for the taxpayer to respond to or deny.

The question remains as to the proper disposition of this application. The Tax Court judge dismissed the application for extension of time on the grounds that it was itself out of time. He was right to dismiss it but he should have done so on a different ground, namely that the Minister had failed to prove the existence or mailing of the notices of assessment. Since it is not inconceivable that questions of res judicata or issue estoppel may arise, it is appropriate that the grounds for dismissal should be stated in the formal order of the Tax Court.

Accordingly, I would allow the section 28 application, set aside the order of the Tax Court dated July 7, 1994 and remit the matter to the Tax Court so that the applicant’s application for extension of time may be dismissed on the grounds that the Minister has failed to prove the existence or date of mailing of the notices of assessment.

Application allowed.