Motion heard on October 22, 2015 at
Vancouver, British Columbia
Before:
The Honourable Justice Gerald J. Rip
Appearances:
|
Counsel for the Appellant:
|
Gavin Laird
|
|
Counsel for the Respondent:
|
Perry Derksen / David Everett
|
ORDER
UPON
motion by the appellant, 684761 B.C. Ltd., for an Order to “determine if the ‘notice of additional
assessment’ [for its 2008 taxation year] received by the Appellant is really a
reassessment” and, in such case, the reassessment for the appellant’s 2007
taxation year, notice of which is dated December 16, 2011, appealed to this
Court, is valid.
AND UPON reading the motion materials and hearing
submissions from the parties;
IT IS
ORDERED THAT:
This appeal shall be stayed for a
period of 60 days from the date that the appellant files a Notice of Appeal
from the additional assessment but not later than June 30, 2016.
The appellant’s motion is otherwise dismissed with costs
in the amount of $500 to the respondent.
Signed at Ottawa, Canada, this 19th day of November 2015.
“Gerald J. Rip”
Citation:
2015 TCC 288
Date: 20151119
Docket: 2013-3379(IT)G
BETWEEN:
684761
B.C. LTD.,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR ORDER
Rip J.
[1]
The appellant, 684761 B.C. Ltd., made a
motion for the Court to “determine if the ‘notice of
additional assessment’ [for its 2008 taxation year] received by the Appellant
is really a reassessment” and, if so, that the reassessment of income for the
appellant’s 2008 taxation year before the Court is no longer valid.
[2]
The appellant has
appealed a reassessment of income for its taxation year ending June 30, 2008,
dated December 16, 2011.
[3]
The Minister of
National Revenue subsequently issued a ‘Notice of Additional Assessment’ dated
October 9, 2014 (the “NOAA”) assessing penalties under subsections 163(1) and
(2) of the Income Tax Act.
[4]
Both the
reassessment and additional assessment are in respect of the appellant’s
taxation year ending June 30, 2008.
[5]
The Notice of
Reassessment was introduced at the hearing of
this motion as an exhibit to the Affidavit of Denise Gauthier, an auditor with
the Canada Revenue Agency. It is this reassessment that has been appealed to
this Court.
[6]
The Minister issued the Notice of Reassessment
shortly before the appellant’s normal reassessment period for its 2008 taxation
year terminated. It was after the 2008 taxation year became statute barred that
the NOAA was issued by the Minister.
[7]
The Notice of Reassessment was a reassessment of
the appellant’s income for the year under Part I of the Income Tax Act.
The additional assessment was an assessment of penalties and interest. The appellant
has not yet filed an appeal from the additional assessment. The additional
assessment is not before this Court at this time. Nevertheless, the original
reassessment is subject to an appeal in this Court and its validity may be
considered by me.
[8]
The appellant’s “Corporation
Notice of Additional Assessment Summary of Additional Assessment”, Exhibit “E” to the Affidavit of Denise Gauthier, states:
[…]
Penalties:
[…]
Subsection
163(1), 163(2) and other penalty $ 97,381.00
Subsection
163(1) and 163(2) penalty 56,123.00
[…]
Interest:
[…]
Arrears Interest 52,381.98
[…]
Result of
this Assessment: $205,885.98
No amount is
described as assessed for Part I tax on the “Corporation
Notice of Additional Assessment, Summary of Additional Assessment”. According
to the appellant’s Notice of Reassessment for 2008, dated December 16, 2011,
the revised taxable income of the appellant is $2,445,020. This amount is not
changed by the additional assessment.
[9]
I note that if I find the additional assessment
is a reassessment, the actual reassessment would be vacated and become null. Any
subsequent reassessments of income would be issued after the appellant’s 2008
taxation year has become statute barred and the Minister would have the onus of
proving misrepresentation by the appellant that is attributable to neglect,
carelessness or wilful default in filing its income tax return for 2008:
subsection 152(4).
[10]
Counsel for the appellant argues that the
question before me is whether the additional assessment is in reality a
reassessment because it revisits and changes the previous reassessment and is
based, counsel argues, “upon the same transaction and
necessarily involves similar facts and evidence”. Hence, he submits, it
is in substance a reassessment.
[11]
Appellant’s counsel refers to the additional
assessment as an “esoteric” tool, a method by
which the Minister “bifurcate[s] one assessment process
into two distinct products …” He also asks me to “err on the side of caution … to protect the taxpayer’s
procedural rights.”
[12]
I cannot agree with the appellant that the
additional assessment is a reassessment. The opening words of subsection 152(4)
of the Act read as follows:
|
The Minister may
at any time make an assessment, reassessment or additional assessment of tax
for a taxation year, interest or penalties, if any, payable under this Part …
except that an assessment, reassessment or additional assessment may be made
after the taxpayer's normal reassessment period in respect of the year only
if …
|
Le ministre peut
établir une cotisation, une nouvelle cotisation ou une cotisation
supplémentaire concernant l'impôt pour une année d'imposition, ainsi que les
intérêts ou les pénalités qui sont payables par le contribuable en vertu de
la présente partie … Pareille cotisation ne peut être établie après
l'expiration de la période normale de nouvelle cotisation pour l'année que
dans les cas suivants …
|
[13]
In Coleman C. Abrahams v MNR, 66 DTC 5451,
President Jackett, as he then was, explained that a first reassessment is
displaced by a second reassessment; the first reassessment becomes a nullity.
But, if a reassessment is followed by an “additional”
assessment for the year, the prior assessment remains intact. The additional
assessment adds an amount of tax, a penalty or interest in addition to that
which has already been assessed. (See also Lambert v The Queen, 76 DTC
6363 (FCA)).
[14]
In the matter at bar, the Minister had assessed
an amount she had not assessed earlier, an additional assessment, an assessment
of a penalty. Notwithstanding that the assessed penalty may be based on events
culminating in the reassessment, it is still an amount, a penalty, in addition
to tax previously assessed for 2008. There is nothing esoteric about the
additional assessment. It is a procedure available to the Minister.
[15]
The appeal from the reassessment of income for
2008 remains a valid and proper appeal; the reassessment is still valid.
[16]
As of the date of this application, no appeal
from the additional assessment had been filed. The appellant claims that the
additional assessment must be based on the facts that led to the reassessment
and the appellant will suffer prejudice due to its burden of proving the
reassessment wrong while the Minister will have the onus of proving the
additional assessment correct. The taxpayer suggests that the Minister should
have the onus in appeals from both assessments. It is quite possible that the
Minister may plead additional facts to support the additional assessment. At
this stage we do not know what facts will be alleged by the Minister on any
future appeal from the additional assessment. In any event, the appellant’s rights
are not being violated. Many subsection 163(2) penalties are assessed in the
same notice of assessment as a taxpayer’s income for a taxation year. In these
appeals, the taxpayer is in the same position as the appellant: the taxpayer
has the onus of defeating the income assessment; the Crown has the onus of
proving the facts underlying the penalty. The procedure is described by Rouleau
J. in The Queen v Wellington Taylor, 84 DTC 6459, [1985] 1 FC 331.
[17]
Once the appellant appeals the additional
assessment, it may wish to apply to the Court for an Order joining both appeals
so that they may be heard together. At that time the trial judge will be in the
best position to determine if any of the appellant’s rights have been violated.
I will therefore stay proceedings in the current appeal until 60 days after the
filing of an appeal from the additional assessment but not later than June 30,
2016.
[18]
The appellant’s motion is otherwise dismissed
with costs in the amount of $500 to the respondent.
Signed at Ottawa, Canada, this 19th day of November 2015.
“Gerald J. Rip”
Email this Content