Date:
20070515
Docket: A-329-06
Citation: 2007 FCA 188
CORAM: LÉTOURNEAU
J.A.
EVANS
J.A.
SHARLOW
J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
ANCHOR POINTE
ENERGY LTD.
Respondent
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
The Issue on Appeal
[1]
Who bears
the onus of proof with respect to assumptions of fact first relied on by the
Minister of National Revenue (Minister) in confirming a reassessment pursuant
to subsection 165(3) of the Income Tax Act (Act)?
[2]
This was
the question put on consent, by way of motion, to the Tax Court of Canada (Tax
Court) pursuant to paragraph 58(1)(a) of the Tax Court of Canada General
Rules (General Procedure), S.D.R./90-688a (Rules). In a decision rendered
on July 21, 2006, the motions judge determined that the burden to prove such
assumptions was on the Crown: see Anchor Pointe Energy Ltd. v. Her Majesty
the Queen, 2006 TCC 424 (Anchor Pointe TCC). Hence the appeal
seeking a reversal of that decision.
The Facts
[3]
In 1991,
five predecessors of the respondent acquired seismic data and, in their income
tax returns filed for the 1991 taxation year, claimed the costs of the data as
a “Canadian Exploration Expense” (CEE). Eventually the five predecessors
amalgamated to form the respondent.
[4]
In
February and March 1994, the Minister reassessed the predecessor companies and
reduced the deductions made by each company. The Minister based his
reassessments on the assumption that the predecessor companies had deducted
more than the fair market value of the seismic data. Later in March 1994, the
appellant objected to these reassessments. By agreement between the respondent
and the Minister, the Notices of Objection were held in abeyance pending a
decision of this Court in Global Communications Ltd v. The Queen, 99 DTC
5377 which was rendered on June 18, 1999. In that case, our Court confirmed that
seismic data purchased for the purpose of resale or licensing does not qualify
as CEE within the meaning of paragraph 66.1(6)(a) of the Act.
[5]
On March
28, 2000, some four years later and approximately nine months after this Court
released its decision in Global Communications, the Minister confirmed the
reassessments on the basis of the assumptions that the predecessor companies’
purchase of seismic data was for more than the fair market value and did not
qualify for CEE because it was purchased for the purpose of resale or licensing,
and not for exploration purposes.
[6]
The
respondent filed on June 26, 2000 a Notice of Appeal with the Tax Court.
[7]
In its
Reply to the respondent’s Notice of Appeal, the Minister included the
assumptions that the predecessor companies’ purchase of seismic data was not
effected for the purpose of determining the existence, locations, extent, or
quality of an accumulation of oil or gas, and that the seismic data was not
used for exploration purposes. These assumptions represented a radical change
from those made at the initial stage of the assessment. While initially the
Minister admitted the deductibility of the CEE, but not for the amount claimed,
he was now taking the position that they were not deductible at all. This, I
should say, would not increase the amount of tax claimed by the appellant,
since the normal period for reassessing had expired.
[8]
The
respondent moved to strike these assumptions on the basis that they were
included in the Minister’s reply as a result of the decision in Global
Communications, and could not have been assumed at the time of assessment
because Global Communications had not yet been decided. The Tax Court
ordered that these assumptions be expunged from the Minister’s reply because
“it [was] not true that ‘in assessing the Minister assumed’ [those] facts”: see
Anchor Pointe Energy Ltd. v. Her Majesty The Queen, 2002 DTC 2071,
paragraph 27 (T.C.C.). This Court affirmed the Tax Court’s decision, on the
basis that “It is misleading for the Crown to say that
the Minister made certain assumptions in reassessing, when those assumptions
were made in confirming a reassessment”: see Canada v. Anchor Pointe Energy Ltd., 2003 FCA
294, at paragraph 22. However, the Court noted at paragraph 28:
I do not understand [the Tax Court] to say that assumptions of fact
made on confirming a reassessment cannot be pleaded. The Minister, as a result
of reading the Notice of Objection filed by a taxpayer or a subsequently
decided case such as Global, may make assumptions of fact. I see no
reason why such assumptions may not be included in the Crown's Reply. However,
the assumptions must be pleaded accurately.
[9]
As a
result of this decision, the Crown filed an amended Reply, stating that the
relevant assumptions had been made in confirming the reassessments. These
assumptions were made after the expiration of the normal reassessment period as
set out in subsection 152(3.1) of the Act.
The decision of the Tax Court
[10]
The
motions judge conducted an extended review of the jurisprudence as it relates
to the onus of proof in taxation cases, ultimately concluding that the Minister
should bear the burden of proving assumptions made in confirming an assessment.
The central basis for his conclusion found at paragraphs 25 and 26 was:
It is clear that the focus is upon the assessment which the Minister
may confirm or vary or he may reassess... Whether the Minister has confirmed or
not the appeal is from the assessment. Had Parliament intended that a taxpayer
should have to appeal from a confirmation it is perfectly capable of saying so.
[11]
In the
motions judge’s view, the taxpayer’s burden is to demolish assumptions made by
the Minister in assessing and not in confirming the reassessment. He thought it
inappropriate to saddle the taxpayer with the onus of disproving assumptions
made at the objection stage. He disagreed with the statement of Cattanach J. in
Parsons v. M.N.R., [1984] 1 F.C. 804 that the confirmation of an
assessment is part of the assessment process, finding that this statement was
inconsistent with a more recent pronouncement of Rip J. of the Tax Court which,
he believed, was implicitly confirmed by this Court: ibidem, at
paragraph 27. Furthermore, the motions judge took the position that placing the
onus on the Minister was more procedurally fair, as “The cards are already
stacked in favour of the Crown” and there was “no reason for stacking the cards
any further”: ibidem, at paragraph 28.
[12]
The issue raised
in this appeal is a novel one. I believe that, in advancing their respective
position, both parties have overstated the jurisprudence upon which they rely.
For a better understanding of these reasons, it is useful to summarize the
arguments submitted on appeal.
The appellant’s submissions
[13]
First, the
appellant argues that the motions judge misdirected himself in law in
concluding that the Crown bears the onus of proving assumptions made on
confirmation and in stating that the jurisprudence supports that conclusion.
[14]
She points
out that, under the legislative scheme laid out in the Act, the Minister must
reconsider a tax assessment when the taxpayer objects to the assessment. When
the Minister does not change the amount of tax assessed upon reconsideration,
the Minister must issue a notice of confirmation, whether the Minister’s
decision was based on the same or different considerations that motivated the
assessment. If the taxpayer is still dissatisfied, he or she may then appeal
the assessment to the Tax Court. The issue in an appeal to the Tax Court is the
“correctness of the Minister’s decision as to the quantum of tax liability”: see
appellant’s memorandum of fact and law at paragraphs 21 to 23. The
jurisprudence is to the effect that the taxpayer’s appeal is from the
Minister’s final decision regarding the taxpayer’s tax liability, and that the
Minister’s assumptions in making that final decision must be accepted unless
demolished by the taxpayer.
[15]
In other
words, contrary to what the motions judge stated at paragraph 27 of his reasons,
there is no principled reason why the Crown should be required to prove facts
that the Minister relied on to justify the assessment, simply because those
facts were not assumed prior to the Minister’s final confirmation.
[16]
Second,
the appellant submits that the case of Johnston v. Minister of National
Revenue, [1948] S.C.R. 486 runs directly contrary to the motions judge’s
holding and, indeed, treats facts assumed by the Minister at the objection and
initial assessment stage in the same manner. These assumptions must be
demolished by the taxpayer: see appellant’s memorandum of fact and law, at
paragraph 32. While the motions judge purported to rely on decisions of the
Supreme Court, he, the appellant claims, provided little insight as to how they
support his conclusion: ibidem, at paragraph 36.
[17]
Third, the
appellant argues that, as a matter of principle, there is no onus upon the
Minister to prove that his assessment of tax is correct. Rather, the assessment
is deemed to be valid and it is the taxpayer’s burden to show that it is not: ibidem
at paragraph 38.
[18]
Fourth, counsel
for the appellant maintains that this Court has repeatedly stated that the
Crown has an obligation to plead the assumptions made in confirming an
assessment: ibidem at paragraphs 40 to 42. The Attorney General in this
case was simply doing what the Court previously stated it had an obligation to
do. The motions judge, she says, has effectively created two categories of
assumptions: those made in assessing or reassessing on the one hand, which the
taxpayer has the onus to disprove, and those made in confirming an assessment
or reassessment, which the Crown has the onus to prove. The appellant submits
that this distinction is not supported by jurisprudence which points instead
towards treating all assumptions made up to the final decision of the Minister
in the same manner. Though the act of reassessment is a distinct administrative
act from the act of confirmation, this Court’s comments differentiating the two
acts in Canada v. Anchor Pointe Energy Ltd., supra, were made in
reference to the necessity for accuracy in pleading. Crown pleadings must be
accurate precisely because the taxpayer bears the burden of disproving the
Minister’s assumptions. Any additional facts assumed by the Attorney General in
defending the Minister’s final decision on taxation must indeed be proven by
the Minister, but the assumptions made on the confirmation of an assessment
remain the Minister’s assumptions and must be disproved by the taxpayer: ibidem
at paragraphs 43 to 53.
[19]
Fifth, the
appellant submits that the motions judge’s holding is unfair to the Minister.
The taxation system is based on self-reporting and self-assessment. The
pertinent facts are therefore generally within the peculiar knowledge of the
taxpayer. In the instant case, the respondent’s purposes in purchasing the
seismic data are within its control. If the burden of proof is laid on the
Crown, it will have to prove a negative: that the respondent did not acquire
the seismic data for the purpose of exploration and did not use it for
exploration. This would be a difficult and potentially impossible task: ibidem
at paragraphs 54 to 56.
[20]
Finally,
the appellant argues that the making of an assessment refers to the
determination of a taxpayer’s liability. It is therefore irrelevant whether
that liability was finally determined after an assessment, a reassessment or a
confirmation of an assessment or reassessment. Consequently, it would be an
absurd result if the taxpayer has the onus of proving new facts pleaded as the
Minister’s assumptions where an objection results in a reassessment, but the
Crown has the onus of proving new facts pleaded as the Minister’s assumptions
where an objection results in the confirmation of an assessment.
The respondent’s contentions
[21]
First, the
respondent argues that the case law is clear that the taxpayer bears the onus
of proof only with respect to the Minister’s assumptions of fact made at the
time of assessment. The term “assessment” refers to the administrative act of
fixing tax liability culminating in the issuance of a notice of assessment. It
does not include the administrative appeal process which involves the
confirmation of the assessment: see respondent’s memorandum of fact and law at
paragraphs 15 to 17. The respondent relies upon paragraph 49(1)(d) of the Tax
Court of Canada Rules (General Procedure) requiring every Reply to state
“the findings or assumptions made at the time of assessment by the Minister
when making the assessment”.
[22]
Second,
the respondent points to this Court’s holding in Canada v. Anchor Pointe Energy
Ltd., supra, which, its counsel says, is to the effect that allegations
made at the time of confirmation cannot be pleaded in the Reply as assumptions,
but must be pleaded separately. Counsel for the respondent submits that the
distinction between these two types of allegations would serve no purpose if
there is no difference in the parties’ onus as regards each type of allegation.
As assessments form the basis for appeals to the Tax Court, the ordinary rules
of pleading support the view that a taxpayer need only refute the facts and law
that the Minister adopted in determining the amount of the assessment. If the
Minister alleges new facts on confirming the assessments, these facts are not
part of the assessment, but rather the Minister’s own affirmative pleadings
which he should be required to prove: ibidem at paragraphs 19 and 22 to
23.
[23]
Third, the
respondent maintains that though the Act requires the Minister to consider an
objection “with all due dispatch,” it stipulates no consequences for the failure
of the Minister to deal with a notice of objection in a timely manner. The
notice of confirmation in this case was issued in 2000, more than four years
after the expiration of the normal reassessment period. This time delay would
prejudice the respondent were it required to demolish the Minister’s
assumptions which related to a period eight years prior to the confirmation. On
the other hand, imposing the duty on the Minister will minimize this prejudice
and create an incentive for Crown auditors to be thorough, timely and accurate
in fact and law. This rule would not prejudice the Minister, who always has the
option of reassessing within the normal reassessing period: if the Minister
wishes to have the benefit of an assumption not made at the time of the initial
assessment, he can reassess: ibidem at paragraphs 25, 26, 29 and 30.
[24]
Fourth,
the respondent contends that when an appeals officer assumes new facts in
confirming an assessment, the taxpayer is denied the opportunity to be heard on
those new facts within the administrative appeal framework. The taxpayer’s only
opportunity to refute these new facts is to appeal to the Tax Court. The denial
of independent administrative review is further reason for imposing the burden
of proof on the Crown. Where an appeals officer has reassessed the taxpayer, on
an appeal to the Tax Court the burden is justifiably placed on the taxpayer,
who would have had the opportunity for administrative review of the
reassessment. Further, the taxpayer would be appealing the reassessment, not
the initial assessment, and delay is not likely to be a factor because
reassessments must generally be issued within the normal reassessment period: ibidem
at paragraphs 36 and 37.
[25]
Finally,
the respondent argues that the appellant’s interpretation of Johnston, supra, cannot be sustained.
Under the appellant’s interpretation of Johnston, the Crown would be entitled to assume
new facts even in its reply to the taxpayer’s appeal to the Tax Court. This is
clearly not the case. Further, Johnston was based on significantly
different legislation, and its pronouncements on the burden of proof appear to
be obiter dicta as there is no indication that there was any difference
between what was assumed by the assessor and what was assumed by the Minister
in that case: ibidem at paragraphs 39 to 41.
Analysis of the Tax Court decision
[26]
Though the
courts have ruled many times on the question of the burden of proof in tax
cases, this appears to be the first where the issue of a new assumption of fact
made by the Minister at the confirmation stage of an assessment is specifically
raised. While there is no Canadian judicial precedent squarely on point, some
previous decisions tend to support the appellant’s position.
Whether
assumptions of fact can be made by the Minister at the confirmation stage of an
assessment
[27]
In our
self-reporting system of taxation, the Minister makes assumptions of fact in
determining the tax liability of a taxpayer. As Rothstein J.A., as he then was,
said in Canada v. Anchor Pointe Energy Ltd., supra, “the practice
is for the Crown to disclose in its pleadings assumptions of fact made by the
Minister upon which his determination of the tax owing is based”; see paragraph
2. In the words of Bowman A.C.J.T.C., as he then was, these assumptions “are
supposed to be a full and honest disclosure of the facts upon which the
Minister of National Revenue relied in making the assessment”: Holm et al.
v. The Queen 2003 DTC 755, at paragraph 9.
[28]
When
pleaded, assumptions of fact place on the taxpayers the initial onus of
disproving, on a balance of probabilities, the facts that the Minister assumed:
see Canada v. Anchor Pointe Energy Ltd., supra, at paragraph 2, Hickman
Motors Ltd. v. Canada [1997] 2 S.C.R. 336, at paragraph 92. Unpleaded
assumptions have no effect on the burden of proof one way or the other: see The
Queen v. Bowens 96 DTC 6128, at page 6129, Pollock v. The Queen 94
DTC 6050, at page 6053.
[29]
Fairness
requires that the facts pleaded as assumptions be complete, precise, accurate
and honestly and truthfully stated so that the taxpayer knows exactly the case
and the burden that he or she has to meet: Canada v. Anchor Pointe Energy Ltd.,
supra, at paragraph 23, Holm et al. v. The Queen, supra, Canada v. Lowen [2004] 4 F.C.R. 3, at
paragraph 9. (F.C.A), Grant v. The Queen et al. 2003 DTC 5160, at page
5163, First Fund Genesis Corporation v. Her Majesty the Queen 90 DTC
6337, at page 6340, Shaughnessy v. Her Majesty the Queen 2002 DTC 1272,
at paragraph 13, Stephen v. Canada
[2001] T.C.J. No. 250, at paragraph 6.
[30]
That being
said, I cannot accept the rationale underlying the respondent’s submission that
new facts alleged at the confirmation stage cannot be pleaded as assumptions. In
its view, this is so because these facts were not part of the initial
assessment of the tax owing.
[31]
First,
this Court found in Canada v. Anchor Pointe Energy Ltd.,
supra, and Canada
v. Lowen, supra, that the Crown may in its Reply “plead that the
Minister assumed, when confirming an assessment, something that was not assumed
when the assessment was first made”: see Lowen at paragraph 10. In Canada v. Anchor Pointe Energy Ltd., Rothstein J.A. approved the
deletion made by the Tax Court of two assumptions that were not accurately
pleaded. But addressing the issue of whether the Crown’s pleadings in the Tax
Court may contain the Minister’s assumptions made at the time of his
confirmation of a reassessment, he went on to say at paragraph 28:
If paragraphs 10(q) and (r) had been properly pleaded, they would be
unobjectionable. However, paragraphs 10(q), (r) and (z) were not accurately
pleaded. Rip J. was correct in striking them out. As I read his reasons, Rip
J.'s sole reasons for striking paragraphs 10(q), (r) and (z) were inaccuracy
and pleading conclusions of law. I do not understand him to say that
assumptions of fact made on confirming a reassessment cannot be pleaded. The
Minister, as a result of reading the Notice of Objection filed by a taxpayer or
a subsequently decided case such as Global, may make assumptions of fact.
I see no reason why such assumptions may not be included in the Crown's Reply.
However, the assumptions must be pleaded accurately.
[Emphasis
added]
[32]
Second,
while it is true that assessment, reassessment and confirmation refer to three
specific actions by the Minister under the Act in the process of determining
the tax liability of a taxpayer, the word “assessment” also refers to the
product of that process. Hugessen J.A. nicely described the two meanings of the
word in Canada v. Consumers’ Gas Co. [1987] 2 F.C. 60 (F.C.A.). At page
67 he wrote:
What is put in issue on an appeal to the courts under the Income Tax
Act is the Minister's assessment. While the word "assessment" can
bear two constructions, as being either the process by which tax is assessed or
the product of that assessment, it seems to me clear, from a reading of
sections 152 to 177 of the Income Tax Act, that the word is there
employed in the second sense only. This conclusion flows in particular from
subsection 165(1) and from the well established principle that a taxpayer can
neither object to nor appeal from a nil assessment.
[33]
I agree
with the motions judge that the appeal is not from the confirmation of the
assessment. The appeal is, to use the words of Hugessen J.A., from the product
of that assessment: see also Parsons v. M.N.R., supra, at page
814, where Cattanach J. held that the “assessment by the Minister, which fixes
the quantum and tax liability, is that which is the subject of the appeal”.
That product refers to the amount of the tax owing as initially assessed or
determined, and subsequently confirmed. From the perspective of the process
itself, the assessment pursuant to sections 152 to 165 is not completed by the
Minister until, within the time allotted by the Act, the amount of the tax
owing is finally determined, whether by way of reconsideration, variation,
vacation or confirmation of the initial assessment: see Parsons v. M.N.R.,
supra, at page 814.
[34]
I have
answered some of the debated questions between the appellant and the respondent
in order to lay the foundation for the issue that is before us. This brings me
to the question of the onus of proof with respect to assumptions of fact made
by the Minister at the stage of confirmation of the initial assessment.
The
onus of proof in this case with respect to the assumptions of fact made by the
Minister at the confirmation stage of the initial assessment
[35]
It is
trite law that, barring exceptions, the initial onus of proof with respect to
assumptions of fact made by the Minister in assessing a taxpayer’s tax
liability and quantum rests with the taxpayer. In Les Voitures Orly Inc./Orly Automobiles Inc. v. The Queen, 2005 FCA 425, 2006 DTC 1114, at paragraph 20, this Court reasserted the
importance of the rule in the following terms:
To sum up, we see no merit in the submissions of the appellant that it
no longer had the burden of disproving the assumptions made by the Minister. We
want to firmly and strongly reassert the principle that the burden of proof put
on the taxpayer is not to be lightly, capriciously or casually shifted. There
is a very simple and pragmatic reason going back to over 80 years ago as to why
the burden is on the taxpayer: see Anderson Logging Co. v. British Columbia,
(1925) S.C.R. 45, Pollock v. Canada (Minister of National Revenue)
(1993), 161 N.R. 232 (F.C.A.), Vacation Villas of Collingwood Inc. v. Canada
(1996) 133 D.L.R. (4th) 374 (F.C.A.), Anchor Pointe Energy Ltd. v. Canada,
2003 FCA 294. It is the taxpayer's business. He knows how and why it is run in
a particular fashion rather than in some other ways. He knows and possesses
information that the Minister does not. He has information within his reach and
under his control. The taxation system is a self-reporting system. Any shifting
of the taxpayer's burden to provide and to report information that he knows or
controls can compromise the integrity, enforceability and, therefore, the
credibility of the system. That being said, we recognize that there are
instances where the shifting of the burden may be warranted. This is simply not
one of those cases.
[36]
I agree
with Bowman A.C.J.T.C., as he then was, that there may be instances where the
pleaded assumptions of facts are exclusively or peculiarly within the
Minister’s knowledge and that the rule as to the onus of proof may work so
unfairly as to require a corrective measure: see Holm et al. v. The Queen,
supra at paragraph 20.
[37]
However,
the case before us is, as was the Voitures Orly Inc. case, not one of
those cases. The purpose in buying the seismic data and the subsequent use made
of that data are within the exclusive and peculiar knowledge of the respondent.
In fact, the respondent in its Notice of Appeal, dated June 26, 2000, at page
27 of the appeal book, has asserted purpose and use in the following terms:
Each Predecessor Company purchased the Seismic Data with the intention
that it would be used for the purpose of determining the existence,
location, extent and quality of accumulations of petroleum and natural gas in Canada, and it has been used for that purpose.
The exploration activities undertaken by the Appellant
and its Predecessor Companies in connection with the Seismic Data have included:
a) geological, geophysical and
engineering analyses of the Seismic Data to determine potential prospects;
b) analysis of land availability;
c) farm-out agreements;
d) purchase of petroleum and natural gas
leases; and
e) drilling of wells. (my emphasis)
Unless these allegations are unsubstantiated, the evidence
supporting them is in the hands of the respondent. One would expect that, with
the pending litigation, measures have been taken to secure and preserve that
evidence.
[38]
The
motions judge pointed out, in his reasons for judgment, the existence of diverging
views in the jurisprudence as to, what I would call, the scope of application
of the rule regarding the onus of proof. Some cases appear to be limiting the
application of the rule to assumptions of fact made by the Minister at the
stage of the initial assessment. Consequently, assumptions of fact made
thereafter at the objection stage would not be governed by the rule, so that
the taxpayer would not bear the onus of disproving them. The motions judge adopted
this limitation. In his reasons, at paragraph 27, he provided the following
reasons in support of the limitation:
There is no reason, as a matter of principle, of law, of fairness or of
common sense that would justify my requiring a taxpayer to take on the added
onus of demolishing new reasons that the Minister has come up with in the course
of what is essentially an administrative review of an assessment. To plead that
the Minister, in confirming the assessment acted upon certain “assumptions” may
in some circumstances be a useful piece of information but it casts no additional
burden on the taxpayer. It is merely an assertion of additional facts or
reasons that the Minister has relied upon in his administrative review of the
assessment. Despite the great respect that I have for Justice Cattanach, I do
not accept the correctness of his obiter dictum in Parsons v. M.N.R.,
[1984] 1 F.C. 804 that the Minister’s reconsideration of the assessment on
objection is “part and parcel of the assessment process”. It is inconsistent
with what Justice Rip said in paragraph 27 of his reasons in this case quoted
above. That portion of his reasons was implicitly confirmed by Rothstein, J.A.
in the Federal Court of Appeal.
[39]
With
respect, I disagree with this position. First, I do not think that the
confirmation of Justice Rip’s finding in paragraph 27 of his reasons in Anchor
Pointe Energy Ltd. v. Her Majesty The Queen 2002 DTC 2071 (T.C.C.) goes
beyond an acknowledgment of the Crown’s obligation to plead accurately its
assumptions of fact. As previously mentioned, Rothstein J.A. reiterated that
assumptions of fact can be made at the confirmation stage of the assessment,
but never addressed the issue of the onus of proof of these assumptions.
[40]
Second,
the position taken by the motions judge ignores the second meaning of
assessment under section 152 to 177 of the Act, i.e. the product of the
assessment as opposed to the process. Either at the initial or at the objection
stage, the Minister is attempting to determine the tax liability, and quantum,
of the taxpayer. He is entitled throughout this period, until his final
determination, to rely upon facts newly discovered or revealed by the taxpayer,
and assume them. Nothing in the meaning of assessment requires or permits that
some facts be assumed by the Minister, others not, and that, as a result, two
categories of assumptions of fact can be created with a different onus for each
one. In my respectful view, this runs contrary to the rationale behind the onus
of proof, especially in this case where the Minister would have to prove a
negative, when all the evidence is in the hands of the taxpayer.
Whether the respondent is prejudiced by
the delay
[41]
Reassessments
took place in February and March 1994. The respondent’s Notice of Objection was
filed in March 1994. Under subsection 169(1) of the Act, the respondent could
have expedited the process by filing an appeal before the Minister responded to
the Notice of Objection. Paragraph 169(1)(b) gives a taxpayer the right to
appeal to the Tax Court to have the assessments vacated or varied after 90 days
have elapsed after service of the Notice of Appeal and the Minister has not
notified the taxpayer that he has vacated or confirmed the assessment or
reassessed. For reasons only and best known to the respondent, it decided not
to avail itself of that possibility. Rather it agreed to hold in abeyance its
appeal pending the determination of a related issue in Global Communications
Ltd.
[42]
As for the
delay between the time of the release of the decision in Global
Communications Ltd. and the time taken by the Minister to confirm the
initial reassessment, the respondent’s allegations of prejudice are, at this
time, merely allegations. No evidence has been submitted as to the existence,
nature and extent of that prejudice and whether it is irreparable. The credibility
of that allegation is undermined by the absence of any explanation as to why
the respondent did not exercise its right to proceed to an appeal in the Tax
Court once its objection had been outstanding for 90 days.
Other arguments raised by the respondent
[43]
I need not
address other arguments raised by the respondent as I see no merit in them.
Conclusion
[44]
To sum up,
the Minister was entitled, at the stage of confirmation of the initial
assessment, to plead new facts as assumptions of fact. The initial onus of
proof was on the respondent to demolish these assumptions, especially because
all relevant evidence was in the hands of the respondent and, if the onus were
to be on the appellant, the appellant would be facing the daunting, if not
impossible, task of proving a negative, i.e. that the seismic data was not
bought by the five predecessors of the respondent, and subsequently used by
them and the respondent, for exploration purposes.
[45]
For these
reasons, I would allow the appeal with costs for two counsel in this Court and
in the Tax Court, and I would set aside the decision of the Tax Court rendered
on July 21, 2006. Answering the question put on consent of the parties to the
Tax Court, I would rule that the
respondent bears the onus of proof with respect to
assumptions of fact first relied on by the Minister in confirming a
reassessment pursuant to subsection 165(3) of the Income Tax Act.
“Gilles
Létourneau”
“I
agree
John
M. Evans J.A.”
“I
agree
Karen
Sharlow J.A.”
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