Docket:T-1832-12
Citation: 2013 FC 1238
[UNREVISED ENGLISH CERTIFIED
TRANSLATION]
Ottawa,
Ontario, December 11, 2013
PRESENT: The Honourable Mr. Justice Roy
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BETWEEN:
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COGESCO SERVICES LIMITED
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Applicant
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and
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ATTORNEY GENERAL OF CANADA
(Representing the Canada Revenue Agency)
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Respondent
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REASONS FOR JUDGMENT AND JUDGMENT
[1]
CONSIDERING the
application for judicial review made by the applicant regarding the decision made
by the Canada Revenue Agency (CRA) who refused on August 24, 2012, a request
for relief made under subsection 220(3.1) of the Income Tax Act, RSC
1985, c 1 (5th suppl.) (the Act);
[2]
CONSIDERING the
arguments that were presented by both parties;
[3]
GIVEN both
arguments presented by the applicant that the answer given in English to its request
for relief submitted in French is a breach of the decision-maker’s duty of
procedural fairness and that the said decision to refuse the relief requested
is an unreasonable decision that must be reversed;
[4]
For the following reasons, the application for
judicial review must be allowed.
[5]
In regard to the first argument, the applicant discontinued
it at the hearing and, therefore, that it became moot.
[6]
The second question deals with the unreasonableness
of the decision to refuse the relief.
[7]
This case is very simple. The taxpayer was assessed
a penalty of $2,500 per taxation year where the tax return was not completed
and produced, the whole under subsection 162(2.1) of the Act. In a first request
for relief, the relief was for $15,000 (i.e. six taxation years: 2005-2010) and
nearly $3,000 in interest. The applicant stated in the request that it was a non-resident
corporation that claimed that it did not have to file tax returns. It added
that it never intended to avoid its tax obligations and, believing that the
fact that it had losses was sufficient to not have to make tax returns, it
requested that the penalties not be imposed on it. The CRA answered on
February 7, 2012, that it did not qualify for relief since it is only possible
in cases where circumstances out of the taxpayer’s control prevent it from
fulfilling its tax obligations.
[8]
A second request was made in March 2012 for $12,500
and nearly $3,000 in interest. The amount in penalties for which relief was
requested was reduced for the fact that the taxpayer agreed to payer a penalty
for the year 2010.
[9]
The taxpayer argued that in 2009, the Tax Court
of Canada had found in favour of another taxpayer in identical circumstances (Goar,
Allison & Associates Inc. v Canada, 2009 TCC 174 (Goar)). It was
only in 2010 that the Federal Court of Appeal made a determination finding that
even if no tax is payable, subsection 162(7) of the Act applies in lieu of
subsection 162(2.1), the writing of which is deficient (Exida.com
Limited Liability Co. v Canada, 2010 FCA 159, [2011] 4 FCR 408 (Exida.com)).
[10]
The taxpayer reiterates that it never intended
to avoid its tax obligations. However, it raises the vacillations in case law to
request that its penalties and interest be levied. While Goar did not
have precedential value (Exida.com, above, paragraph 3), it was a decision
that applied well to the applicant’s circumstances. In addition, the question that
it was asking was not simple. The Tax Court of Canada judge had decided in Goar
that no penalty under subsection 162(2.1) of the Act could be imposed on a
non-resident corporation if there are no taxes payable.
[11]
The judge of the same Court as in Exida.com
rather found that subsection 162(2.1) allowed the penalty to be imposed in
the same circumstances. The Federal Court of Appeal found that subsection 162(2.1)
does not apply, but that the conditions of subsection 162(7) have been
fulfilled and that a penalty is due.
[12]
The letter in reply, for which judicial review
is requested, is particularly terse. It states that no new information was
offered and that the facts are the same. Then, the author wrote:
The Federal Court of
Appeals’ (sic) decision in the case of Exida LLC DTC 5105
was to uphold Canada Revenue Agency’s assessment. They stated that although
162(2.1) had no application, the penalty under 162(7) was applicable and the
amount levied was identical to the sum levied under 162(2.1).
[13]
It would be difficult to blame the taxpayer for
being confused since that was not the question. The taxpayer’s argument is that
case law favoured its point of view until the Federal Court of Appeal decision
that the CRA refers to put an end to the debate. These are new facts that,
according to the taxpayer, would warrant the granting of relief.
[14]
The CRA did not deal with this claim in any way.
[15]
With respect, the reply given by the CRA does
not answer the applicant’s argument. Indeed, the reply given on August 24,
2012, corresponds much more to the reference made in the job slips submitted by
the respondent. It reads: “[a]ll similar or identical cases are to be processed
in accordance with the FCA decision.” The CRA no longer had to worry about the faulty
writing of subsection 162(2.1). Subsection 162(7) could be a supplement
under the Federal Court of Appeal. The problem is that the applicant does not
dispute that the decision of the Federal Court of Appeal deals with the
question. Rather, it claims that for the previous years, it could avail itself
of some case law. It stated that the law is a situation out of its control. In
any case, the text of subsection 220(3.1) does not have the limits that the
respondent can impose on it, in the applicant’s view.
[16]
All agree in this case that judicial review must
be based on a standard of reasonableness (Telfer v Canada Revenue Agency,
2009 FCA 23). It is also agreed that the standard of reasonableness was stated
in Dunsmuir v New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 (Dunsmuir).
[17]
In my view, this is indeed where the problem
lies for the respondent. Its decision does not seem to me to satisfy the
criteria that the Supreme Court of Canada introduced in Dunsmuir:
[47] ... A court
conducting a review for reasonableness inquires into the qualities that make a
decision reasonable, referring both to the process of articulating the reasons
and to outcomes. In judicial review, reasonableness is concerned mostly with
the existence of justification, transparency and intelligibility within the
decision-making process.
But it is also concerned with whether the decision falls within a range of
possible, acceptable outcomes which are defensible in respect of the facts and
law.
[18]
On reading the decision letter of August 24,
2012, or on reading the job slips, I do not see how the respondent dealt with
the argument presented by the applicant. He seems to have missed the question.
[19]
I am aware that the reasons given in support of
a decision do not have to be perfect or particularly elaborate. The inadequacy
of reasons is not a stand-alone basis. However, the reviewing court must also
discern the reasons that led to the decision. Otherwise, the decision cannot be
said to be reasonable. In Newfoundland and Labrador Nurses’ Union v Newfoundland and Labrador (Treasury Board), 2011 SCC 62, [2011] 3 S.C.R. 708, the
Supreme Court of Canada seems to unequivocally stress the point:
[14] Read as a
whole, I do not see Dunsmuir as standing for the proposition that the “adequacy”
of reasons is a stand-alone basis for quashing a decision, or as advocating
that a reviewing court undertake two discrete analyses—one for the reasons and
a separate one for the result ... It is a more organic exercise—the reasons
must be read together with the outcome and serve the purpose of showing whether
the result falls within a range of possible outcomes. This, it seems to me, is
what the Court was saying in Dunsmuir when it told reviewing courts to
look at “the qualities that make a decision reasonable, referring both to the
process of articulating the reasons and to outcomes” (para 47).
The conclusion at the
end of paragraph 16 seems to deal with the question:
. . . In other words,
if the reasons allow the reviewing court to understand why the tribunal made
its decision and permit it to determine whether the conclusion is within the
range of acceptable outcomes, the Dunsmuir criteria are met.
[20]
The respondent never answered the question
asked. The applicant does not dispute that a penalty is payable for the year
where the Federal Court of Appeal dealt with the question. Rather, it asks
whether it should not benefit from being given relief since two Tax Court of
Canada decisions differed on the question of the application of subsection 162(2.1)
and the Federal Court of Appeal determined that this subsection could not
apply, but that subsection 162(7) supplemented it.
[21]
There is no question here of substituting one
point of view for another. Simply, the reasons given for refusing the request
for relief do not correspond in any way to the argument advanced by the
applicant.
[22]
Therefore, I find that the application for
judicial review must be allowed, with costs.
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