Date:
20080923
Docket:
A-20-08
Citation:
2008 FCA 284
CORAM: DESJARDINS
J.A.
NOËL
J.A.
TRUDEL
J.A.
BETWEEN:
HER MAJESTY
THE QUEEN
Appellant
and
WILLIAM L.
GRAY
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered
from the Bench at Fredericton, New Brunswick, on September 23, 2008)
NOËL J.A.
[1]
This is an appeal
from a judgment of the Tax Court of Canada dated December 11, 2007 allowing the
respondent’s appeal filed with respect to his 2002 taxation year and quashing
the reassessment dated February 24, 2006 on the basis it was not issued within
the normal reassessment period set out in subsection 152(3.1) of the Income
Tax Act, R.S.C. 1985, ch. 1 (5th Supp.) (the Act).
[2]
The only issue in
this appeal is the validity of the reassessment issued with respect to the
respondent’s 2002 taxation year. The underlying liability stems from
withdrawals made by the respondent from his Registered Retirement Savings Plan
(RRSP) which were not reported for income tax purposes. These unreported
withdrawals are admitted.
[3]
A reconstructed
notice of assessment for the respondent’s 2002 taxation year dated June 5, 2003
(hereinafter “the first assessment”) was entered as evidence at trial the
effect of which was to accept the respondent’s return as filed and provide for
a refund in the amount of $235.58. While the name and the address appearing on
the Notice were recognized by the respondent as being correct, he took the
position that he never received it.
[4]
A Notice of
Reassessment was subsequently issued on February 24, 2006 (hereinafter “the
second assessment”) adding to the respondent’s income for the year 2002, the
RRSP withdrawals made in that year and claiming the unpaid taxes.
[5]
The respondent took
issue with the second assessment and the Tax Court Judge allowed the appeal
which ensued. He found as a fact that the first assessment was never received
by the respondent and consequently he held that the second assessment was too
late, and therefore invalid.
[6]
This is the decision under
the appeal.
Decision
[7]
The appeal must
succeed. In our view, the Tax Court Judge erred in law in failing to determine
when the normal reassessment period began to run on the facts before him. Had
he done so, he would have been bound to conclude that the second assessment was
not out of time.
[8]
Subsection 152(3.1)
defines the “normal reassessment period” as follows:
|
(3.1) For the purposes of subsections (4), (4.01), (4.2), (4.3), (5) and
(9), the normal reassessment period for a taxpayer in respect of a taxation
year is
(a) where at
the end of the year the taxpayer is a mutual fund trust or a corporation
other than a Canadian-controlled private corporation, the period that ends 4
years after the earlier of the day of mailing of a notice of an original
assessment under this Part in respect of the taxpayer for the year and the
day of mailing of an original notification that no tax is payable by the
taxpayer for the year; and
(b) in any
other case, the period that ends 3 years after the earlier of the day of
mailing of a notice of an original assessment under this Part in respect of
the taxpayer for the year and the day of mailing of an original notification
that no tax is payable by the taxpayer for the year.
|
(3.1) Pour l’application des paragraphes (4), (4.01),
(4.2), (4.3), (5) et (9), la période normale de nouvelle cotisation
applicable à un contribuable pour une année d’imposition s’étend sur les
périodes suivantes :
a) quatre
ans suivant soit le jour de mise à la poste d’un avis de première
cotisation en vertu de la présente partie le concernant pour l’année,
soit, s’il est antérieur, le jour de mise à la poste d’une première
notification portant qu’aucun impôt n’est payable par lui pour l’année, si, à
la fin de l’année, le contribuable est une fiducie de fonds commun de
placement ou une société autre qu’une société privée sous contrôle canadien;
b) trois
ans suivant le premier en date de ces jours, dans les autres cas.
|
[my emphasis]
It
is also useful to note that subsection 248(1) of the Act defines an
“assessment” as including a reassessment and subsection 152(8) provides that an
assessment is deemed to be valid notwithstanding any error, defect or omission
in the assessment.
[9]
Against this
background, two possibilities arise from the Tax Court Judge’s finding that the
first assessment was never received. Either it was mailed by Revenue Canada but never reached the respondent or it was never mailed.
Under both scenarios the second assessment is valid.
[10]
If the first
assessment was mailed on June 5, 2003, the three year limitation period is
computed from that time, and the second assessment having been issued on
February 26, 2006 is within the three year period. If the first assessment was
never mailed, the three year period has not begun to run, and therefore the
limitation period had yet to start when the second assessment was issued.
[11]
It follows that there
is no basis in law for the Tax Court Judge’s conclusion that the second
assessment was out of time, and therefore invalid.
[12]
The appeal will be
allowed, the Judgment of the Tax Court will be set aside and Judgment will be
rendered on the basis that the 2006 reassessment was validly issued. Since this
matter came before us pursuant to the informal procedure, and the appeal is
that of the Crown, the respondent is entitled to his reasonable and proper
costs pursuant to section 18.25 of the Tax Court of Canada Act.
"Marc
Noël"
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-20-08
APPEAL FROM A JUDGMENT OF THE TAX COURT
OF CANADA DATED DECMBER 11, 2007, DOCKET NO. 2007-1684(IT)I.
STYLE OF CAUSE: HER MAJESTY THE QUEEN v. WILLIAM L. GRAY
PLACE OF HEARING: Fredericton
DATE OF HEARING: September 23, 2008
REASONS FOR JUDGMENT OF THE COURT BY: DESJARDINS, NOËL, TRUDEL JJ.A.
DELIVERED FROM THE BENCH BY: NOËL J.A.
APPEARANCES:
|
Ms. Lynn W. Gillis
|
FOR THE APPELLANT
|
|
Mr. William
L. Gray
|
FOR THE RESPONDENT
|
SOLICITORS OF RECORD:
|
John H. Sims, Q.C.
Deputy Attorney General of Canada
|
FOR THE
APPELLANT
|
|
Self-represented
|
FOR THE
RESPONDENT
|
Email this Content