Citation: 2013 TCC 320
Date: 20131007
Docket: 2013-1145(IT)APP
BETWEEN:
PHETH DOUANGCHANH,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Woods J.
[1]
The applicant, Pheth DouangChanh,
seeks an extension of time to file a notice of objection with respect to a reassessment
made under the Income Tax Act for the 2007 taxation year.
[2]
The conclusion that I have reached
is that, although the application should be dismissed, a previously-filed
notice of objection is valid. My reasons are set out below.
[3]
The applicant was represented by
his daughter at the hearing and he also made submissions on his own behalf.
Each of them also testified.
Positions of parties
[4]
The respondent opposes the
application on the ground that the applicant failed to file a similar
application with the Minister of National Revenue within the deadline as
required by s. 166.2(5)(a) of the Act.
[5]
The applicant submits
that the application should be allowed. First, he submits that his accountant
assured him that the appropriate paperwork had been filed. Second, he submits
that this decision has devastating financial consequences and that the
application should be granted on grounds of fairness.
[6]
During my consideration
of this issue after the initial hearing was concluded, I observed that the
relevant reassessment may have been issued after the normal reassessment period
had expired and therefore it may be statute barred. If the reassessment is
invalid on this basis, a prior reassessment would be valid and a notice of
objection that was filed with respect to the prior reassessment would also be valid.
Accordingly, I directed that the hearing be reopened to consider this issue.
[7]
For ease of reference,
I will refer to the latest reassessment as the “Latest Reassessment” and the
immediately prior reassessment as the “Prior Reassessment.”
[8]
At the subsequent
hearing, the respondent submitted that the Latest Reassessment was issued at the
applicant’s request pursuant to s. 152(4.2) of the Act. Accordingly,
although it was issued after the normal reassessment period, it is not statute
barred. The respondent further submitted that there is no right to object to
the Latest Reassessment by virtue of s. 165(1.2) of the Act.
Applicable legislation
[9]
The legislative requirements for
an extension of time to serve a notice of objection are set out in subsection
166.2(5) of the Act. It is reproduced below together with related
provisions.
166.1 (1)
Extension of time 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.
166.2 (1)
Extension of time by Tax Court - 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.
[…]
(5) 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
(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.
[10]
The legislative
requirements relating to reassessments made after the normal reassessment
period at the request of a taxpayer are set out below.
152.(4.2)
Reassessment with taxpayer’s consent - Notwithstanding subsections (4),
(4.1) and (5), for the purpose of determining, at any time after the end of the
normal reassessment period of a taxpayer who is an individual (other than a
trust) or a testamentary trust in respect of a taxation year, the amount of any
refund to which the taxpayer is entitled at that time for the year, or a
reduction of an amount payable under this Part by the taxpayer for the year,
the Minister may, if the taxpayer makes an application for that determination
on or before the day that is ten calendar years after the end of that taxation
year,
(a) reassess tax,
interest or penalties payable under this Part by the taxpayer in respect of
that year; and
(b) redetermine the
amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2),
127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer's
tax payable under this Part for the year or deemed by subsection 122.61(1) to
be an overpayment on account of the taxpayer's liability under this Part for
the year.
165.(1.2)
Limitation on objections – Notwithstanding subsections (1) and (1.1), no
objection may be made by a taxpayer to an assessment made under subsection
118.1(11), 152(4.2), 169(3) or 220(3.1) nor, for greater certainty, in respect
of an issue for which the right of objection has been waived in writing by the
taxpayer.
Assessment
history
[11]
It is useful to set out a
chronology of events relating to the initial assessment and subsequent
reassessments for the 2007 taxation year.
(a)
August 25, 2008 – initial
assessment issued
(b) November 9, 2009 – reassessment issued
(c)
August 30, 2010 – Prior
Reassessment issued that disallows charitable donation
(d) February 17, 2011 – notice of objection filed with
respect to charitable donation
(e)
February 17, 2011 – Minister
acknowledges receipt of notice of objection and indicates that since the issue
is common to several taxpayers, decisions on the file will be deferred pending
resolution of related objections
(f)
March 24, 2011 – Applicant requests
that Minister allow carrying charges (supporting documents submitted subsequently
pursuant to request of Minister)
(g)
August 24, 2011 – end of normal
reassessment period
(h) October 18, 2011 – Latest Reassessment issued allowing
carrying charges
(i)
February 19, 2013 – Minister
informs applicant that the objection regarding the charitable donation is
nullified by the Latest Reassessment and that it is too late to object or apply
for an extension regarding the subsequent reassessment
(j)
March 15, 2013 – application to
extend time filed with the Tax Court of Canada
(k) March 27, 2013 – notice of objection and application
to extend time filed with the Minister
(l)
June 26, 2013 – further application
to extend time filed orally at the hearing (This was at the request of the
respondent on the ground that the earlier application was premature.)
Analysis
[12]
I would first comment
that the circumstances of this case are sympathetic. The applicant filed an
objection relating to a charitable donation. The Minister then issued a
reassessment concerning carrying charges which, according to the respondent,
took away the applicant’s right to object to the charitable donation.
[13]
Something does not seem
right about this. I do not understand why the Minister issued the Latest
Reassessment dealing with the carrying charges, which if valid would have the
effect of denying the applicant the right to object to the charitable donation.
I would have thought that the Minister’s decision on the carrying charges could
have been delayed until there was a resolution regarding the charitable
donation.
[14]
Counsel for the
respondent suggests that it does not matter what the Minister might have done.
The issue is simply to consider what the Minister actually did. It is submitted
that the law is clear on this point and that the application to extend time
should be disallowed on the grounds that:
(a)
the applicant has
failed to comply with s. 166.2(5)(a) because he had not made a prior
application to the Minister within the time period allowed; and
(b)
the applicant is precluded
from objecting to the Latest Reassessment because it was issued under s.
152(4.2).
[15]
I agree with counsel
that I need to consider the events that actually occurred. I turn now to the
submissions of the Crown.
Requirement for
prior application to Minister
[16]
The respondent submits
that an application to extend time with respect to the Latest Reassessment cannot
be allowed unless the applicant has made a similar application to the Minister
within the time permitted, which is one year and 90 days from when the notice
of reassessment was sent. It is evident from the chronology of events above
that this deadline was not satisfied. The application to the Minister was made
much later.
[17]
The applicant submits
that his accountant told him that all the paperwork had been submitted. However,
the applicant has not been able to reach his accountant and he was not able to
establish that a timely application was made to the Minister.
[18]
The applicant also
argued that the application should be allowed on grounds of fairness.
Unfortunately for the applicant, the requirement to make a timely application
to the Minister is required by the legislation and this Court cannot ignore it.
It is the prerogative of Parliament to set strict timelines, which it has done
in this case (The Queen v Carlson, 2002 FCA 145).
No objection to
Latest Reassessment
[19]
At the subsequent hearing, I asked the parties for
submissions on whether the Latest Reassessment was statute barred. If this is
the case, then the Latest Reassessment is not valid and the Prior Reassessment
is valid. In addition, the notice of objection with respect to Prior
Reassessment is also valid so that the applicant’s appeal rights have not been
extinguished.
[20]
The respondent submits that the Latest
Reassessment was made at the request of the applicant pursuant to s. 152(4.2)
and therefore it is not statute barred. The respondent further submits that the
applicant is precluded from objecting to the Latest Reassessment in these
circumstances (s. 165(1.2)).
[21]
The question to be determined is
whether the Latest Reassessment was made pursuant to s. 152(4.2). I conclude
that it was not on the basis that the applicant did not intend to make a request
pursuant to s. 152(4.2).
[22]
The request was made through
a T1 Adjustment Request form. The form indicates that it should be used “to
request an adjustment (a reassessment) to an individual income tax return.”
[23]
The form was sent
within the normal reassessment period and not long after the objection to the
charitable donation was served. Shortly before this, the Minister had informed
the applicant that no action would be taken on the file pending decisions on
similar charitable donations.
[24]
In these circumstances,
I would have thought it very unlikely that the applicant intended to request a
reassessment to be made after the normal reassessment period thereby removing
his appeal rights with respect to the charitable donation.
[25]
I would conclude that
the applicant did not make a request for a reassessment pursuant to s.
152(4.2). In this case, the Latest Reassessment which was issued by notice
dated October 18, 2011 is statute barred.
[26]
The result of this
conclusion is that the Prior Reassessment that was issued by notice dated
August 30, 2011 is still valid as well as the notice of objection dealing with
the charitable donation. In other words, the applicant’s appeal rights with
respect to the 2007 taxation year have not been extinguished.
[27]
Finally, I would note
that a similar result was reached on different facts by Justice Angers in St
Germain v The Queen, 2009 TCC 518.
Conclusion
[28]
With respect to the application for an extension of time to file a
notice of objection with respect to the Latest Reassessment, the application
will be dismissed. However, the applicant’s appeal rights with respect to the
2007 taxation year are preserved through the notice of objection that was filed
on February 17, 2011.
[29]
Each party shall bear
their own costs with respect to this application.
Signed at Toronto, Ontario this 7th day of October
2013.
“J. M. Woods”
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