Jerome, A.C.J.:—In this application the plaintiff seeks an order in the nature of certiorari quashing the decision of the Minister of National Revenue to issue two assessments and a reassessment of income tax against the plaintiff, on the grounds that the defendant failed to file the assessments with due dispatch and, at the time of their issue, the plaintiff was a dissolved corporation.
By resolution dated August 31, 1984 the shareholders of the plaintiff corporation resolved that the corporation be voluntarily dissolved. On September 4, 1984 the plaintiff filed its income tax return for the period ending August 31, 1984 and requested the Minister of National Revenue to assess its final income tax return. The Minister did so and on December 17, 1984 issued a notice of assessment which assessed the plaintiff's tax payable in respect of its 1984 taxation year as being in accordance with the tax return filed.
On March 27, 1985 the Minister of National Revenue of the province of Ontario issued a consent to the voluntary dissolution of the plaintiff. The corporation was dissolved by articles of dissolution which received their certificate on April 3, 1985.
A year and a half later, the defendant issued a notice of reassessment dated October 14, 1986, purporting to reassess the plaintiff for federal taxes of $33,391.70. The reassessment was a result of the defendant treating the gain on the disposition of certain leasehold interest by the plaintiff as income rather than a capital gain, thereby reclassifying net rental income earned by the plaintiff in the year as active business income instead of investment income. On December 8, 1986 the plaintiff filed a notice of objection but the defendant confirmed the reassessment by notice of confirmation dated January 12, 1988.
In addition to the reassessment, the defendant issued two notices of assessment to the plaintiff dated September 11, 1987 for tax owing under Part III of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the"Act"), in the amounts of $75,000 and $34,500 respectively. The plaintiff filed notices of objection on September 21, 1987 but the defendant confirmed the assessments by notices of confirmation dated February 17, 1988.
The plaintiff appealed to the Tax Court of Canada which, in a judgment dated October 26, 1988 ruled that as a dissolved corporation the plaintiff could not sustain its appeals so the Court lacked jurisdiction to consider the validity of the assessments.
In order for the Minister of National Revenue to issue valid assessments against a dissolved Ontario corporation, his act must fall within the parameters of section 241 of the Ontario Business Corporations Act, 1982, S.O. 1982, c. 4, as amended, which provides as follows:
241. (1) Notwithstanding the dissolution of a corporation under this Act,
(a) a civil, criminal or administrative action or proceeding commenced by or against the corporation before its dissolution may be continued as if the corporation had not been dissolved;
(b) a civil, criminal or administrative action or proceeding may be brought against the corporation within five years after its dissolution as if the corporation had not been dissolved; and
(c) any property that would have been available to satisfy any judgment or order if the corporation had not been dissolved remains available for such purpose.
The defendant submits that the assessments in question were in compliance with subsection 241(1)(b) in that they were civil or administrative actions or proceedings brought within five years of April 3, 1985, the date of the plaintiff corporation's dissolution, and I accept that argument.
The issuing of a notice of assessment or reassessment under the Income Tax Act is an administrative proceeding within the meaning of paragraph 241(1)(b) of the Business Corporations Act, R.S.O. 1980, c. 54. The facts demonstrate that the impugned assessments were issued within the prescribed five year limitation period and therefore valid.
However, the defendant's submission, that the Act does not confer upon a dissolved corporation the means by which to defend itself in the event that a "civil, criminal or administrative action or proceeding" is commenced against it subsequent to its dissolution, is untenable. Paragraph 241(1)(b) of the Act contemplates that where an action is brought against a dissolved corporation, the matter is to proceed as it normally would have; i.e., "as if the corporation had not been dissolved". I do not agree that the right to take advantage of an appeal procedure in the context of administrative proceedings or the right to defend itself in the case of civil litigation or criminal charges must be conferred upon a dissolved corporation by the statute which authorizes the commencement of the action.
A dissolved corporation has no status to commence legal proceedings, but having determined that the issuance of a notice of assessment or reassessment by the Minister is an administrative proceeding within the meaning of paragraph 241(1)(b), I reject the argument that the plaintiffs appeal to this Court from the decision of the Tax Court of Canada represents the initiation of legal proceedings. Once the Minister issues a notice of assessment or a notice of reassessment against a taxpayer, it must be open to the taxpayer to exercise his rights of appeal as set out in the Income Tax Act. These provisions permit the taxpayer to file a notice of objection, and if the assessment is confirmed by the Minister, to launch an appeal to the Tax Court of Canada, and at the relevant dates in this case, to this Court. Although the appeal to this Court is a trial de novo, it is not, in my opinion, the commencement of an action, rather it is a final stage of the appeal procedure. The denial of the fundamental right of this taxpayer to court scrutiny of this obligation to pay would be manifestly unjust.
Indeed, it has been established since the decision of the Supreme Court of Canada in Johnson v. M.N.R., [1948] S.C.R. 486, [1948] C.T.C. 195, 3 D.T.C. 1182 that a judicial appeal taken against an assessment (or reassessment) continues to be directed against the assessment (or reassessment) as such, and it was further established as far back as 1953 that the character of such an appeal remains unchanged even where it is conducted by way of trial de novo before this Court. (See The Queen v. Lavers, [1978] C.T.C. 341, 78 D.T.C. 6230, at pages 342-44 (D.T.C. 6231-32) and the cases referred to therein.)
It is therefore clear that under the appeal procedures provided by the Income Tax Act, a“ "proceeding" as that word is used in section 241 of the Ontario Business Corporations Act is commenced by the issuance of an assessment (or reassessment) and that all further steps taken by a taxpayer in the contestation thereof do not constitute the commencement of proceedings, but are consequential upon the assessing action of the Minister.
The defendant's motion striking out the plaintiff's statement of claim on the grounds that the plaintiff has no capacity to conduct this action is dismissed. Having so found, it is not necessary for me to deal with the merits of the plaintiff's section 18 application for an order in the nature of certiorari. That matter is adjourned sine die.
No order as to costs.
Reasons for order
erome, A.C.J.:—In this application the plaintiff seeks an order in the nature of certiorari quashing the decision of the Minister of National Revenue to issue two assessments and a reassessment of income tax against the plaintiff, on the grounds that the defendant failed to file the assessments with due dispatch and, at the time of their issue, the plaintiff was a dissolved corporation. For the reasons set out in the decision of 460354 Ontario Inc. v. The Queen, court file number T-2433-88, dated September 3, 1992, this matter is adjourned sine die.
Application dismissed.
Email this Content