Morris v. R., 97 DTC 1394, [1998] 1 CTC 2479 (TCC)

Somers D.J.T.C. :

This is an application by the Applicant for an Order extending the time within which he may serve on the Minister of National Revenue (the “Minister”) Notices of Objection in respect of the 1993 and 1994 taxation years.

The Minister initially assessed the Applicant’s income tax returns for the 1993 and 1994 taxation years by Notices of Assessment dated and mailed to the Applicant on March 17, 1994 and March 22, 1996 respectively.

The Minister reassessed the Applicant’s income tax return for the 1993 taxation year by Notices of Reassessment dated and mailed to the Applicant on May 5, 1994, June 8, 1995 and February 26, 1996.

The Applicant did not serve on the Minister Notices of Objection to the said February 26, 1996 reassessment nor to the said March 22, 1996 assessment for his income tax returns for the 1993 and 1994 taxation years respectively in accordance with section 165 of the Income Tax Act (the “Act’).

In accordance with subsection 165(1) of the Act, to be considered valid, a Notice of Objection to the February 26, 1996 reassessment in respect of the 1993 taxation year should have been served on the Minister on or before May 26, 1996 and a Notice of Objection to the March 22, 1996 assessment in respect of the 1994 taxation year should have been served on the Minister on or before June 20, 1996.

The Applicant served on the Minister on October 29, 1996, an Application for extension of time to file Notices of Objection under section 166.1 of the Act to the February 26, 1996 reassessment and to the March 22, 1996 assessment of his income tax returns for the 1993 and 1994 taxation years respectively.

Upon receipt of the said application, the Minister considered it, but refused it and notified the Applicant by registered mail of the decision by letter dated November 21, 1996.

An application, under subsection 166.2(1) of the Act, for an extension of time within which to serve on the Minister Notices of Objection to the February 26, 1996 reassessment and to the March 22, 1996 assessment of his income tax returns for the 1993 and 1994 taxation years respectively was filed by the Applicant with this Court on February 21, 1997 together with undated Notices of Objection.

In accordance with subsection 166.2(1) of the Act, to be considered valid, an Application for an extension of time within which to serve on the Minister Notices of Objection to the February 26, 1996 reassessment and to the March 22, 1996 assessment of his income tax returns for the 1993 and 1994 taxation years respectively should have been filed with this Court on or before February 19, 1997.

The Respondent submits that the application for an extension of time within which Notices of Objection may be served with respect to the 1993 and 1994 taxation years should be dismissed.

The Applicant failed to comply with the statutory condition required by subsection 166.2(1) of the Act in that he did not apply to this Court to have the application granted within the 90 days after the day on which notification of the decision was rendered by the Minister, pursuant to subsection 166.1(5) of the Act.

The reasons put forth in the application do not demonstrate that the Applicant was unable to act or instruct another to act in his name within the time otherwise limited by the Act for serving Notices of Objection for the 1993 and 1994 taxation years as required by clause 166.2(5)(Z?)(i)(A) of the Act, nor did the Applicant have a bona fide intention to serve Notices of Objection as required by clause 166.2(5)(è)(i)(B) of the Act.

The reasons given by the Applicant are as follows:

Following a review of my tax returns by Revenue Canada, rental losses were disallowed for the above two taxation years. In an effort to resolve the dispute with the tax auditor I reluctantly accepted his proposal, only to find out, after the 90-day period to file an objection had lapsed, that recent jurisprudence had not been considered by the auditor and Revenue Canada in assessing my situation.

It is my firm belief that had I been made aware of this important ruling I would never have accepted the auditor’s proposal and I would have objected vigorously before the expiration of the 90-day time period.

The Applicant became aware on December 11, 1995, of the decision of the Federal Court of Appeal in the case of Tonn v. R. (1994), 96 D.T.C. 1806 (T.C.C.), which pertained to a business venture which did or did not have any real expectation of profit.

In Court, in summarizing his reasons for the application for extension of time, the Applicant reiterated that he did not intend to file an objection until he found out about the Tonn decision.

In the case of D'Arcy v. R. (1994), [1995] 2 C.T.C. 2027 (T.C.C.), Associate Chief Judge Christie of this Court said the following:

It is perfectly clear that what precipitated the applicant’s desire to object to the Minister’s assessment was the fact of the decision of the Federal Court of Appeal in Thibaudeau. That decision was made public on May 3, 1994. Prior to that date it would have been treated in strict confidence by members of the Court and its employees. Whatever may be the scope of clause (A) I do not think that a taxpayer can demonstrate an inability to serve a notice of objection or to instruct another to do so by a prescribed date if prior to that time there is to her knowledge nothing in existence that would motivate her to adopt that course of action. The existence of inability to act or to instruct another to act with reference to serving a notice of objection presupposes the presence, prior to the time limit imposed by the Act, of a desire on the part of a taxpayer to effect such service.

Further I cannot appreciate how, in the circumstances just described, a taxpayer could go through the mental process of forming a bona fide intention to object to an assessment. At the time the applicant was required to have that intention she was oblivious to the existence of the fact that subsequently impelled her desire to object.

This decision has been followed in similar circumstances by this Court.

The reasons given by the Applicant are similar to the reasons given in the D’Arcy case. It is a well-established jurisprudence that the taxpayer cannot rely on lack of awareness of legislation or misleading advice to advance his position.

The Applicant did not submit valid reasons for an extension of time within which Notices of Objection may be served. The Applicant did not have a bona fide intention to object to the reassessment. He did not provide reasons of the existence of the inability to act or to instruct another person to act with reference to serving Notices of Objection.

In light of the jurisprudence referred to and the reasons given in the application, the application is dismissed.

Application dismissed.