REASONS FOR JUDGMENT
D’Auray J.
[1]
Mr. Hall is appealing from assessments of tax,
penalties and interest in relation to excess contributions to his RRSP for the
2008, 2009, 2010, 2011, 2012 and 2013 taxation years.
[2]
At the beginning of the hearing, the respondent
waived the penalties for all of the taxation years. Therefore, the penalties
are no longer in issue in this appeal.
[3]
Mr. Hall’s RRSP contributions amounted to
$69,056 from his 1996 taxation year through to his 2008 taxation year. In his income
tax returns from 1996 through to his 2007 taxation year, Mr. Hall deducted RRSP
contributions in the amount of $57,477.
[4]
Mr. Hall had an amount of $12,029 of excess
contributions in his RRSP since the end of the calendar year in 2008 (composed
of a balance of $4,879 of undeducted contributions from prior years + a
contribution of $7,150 made by Mr. Hall into his RRSP in 2008).
[5]
Mr. Hall’s unused RRSP deduction room was:
NIL in
2008
NIL in
2009
NIL in
2010
$271 in 2011
$271 in 2012
$271 in 2013
[6]
Mr. Hall did not claim and was not allowed a
deduction for RRSP premiums for any of his unused RRSP contributions for the
2008, 2009, 2010, 2011, 2012 and 2013 taxation years.
[7]
Since Mr. Hall had an amount of $12,029 as an excess
contribution in his RRSP since 2008, he had to file an Individual Tax Return For
RRSP Excess Contributions (“Return”) on form
T1-OVP, for the 2008, 2009, 2010, 2011, 2012 and 2013 taxation years as and
when required by subsection 204.3(1) of the Income Tax Act (the “Act”). Subsection 204.3(1) reads as follows:
204.3(1) Within 90 days after the end of
each year after 1975, a taxpayer to whom this Part applies shall
(a) file with the
Minister a return for the year under this Part in prescribed form and
containing prescribed information, without notice or demand therefor;
(b) estimate in
the return the amount of tax, if any, payable by the taxpayer under this Part
in respect of each month in the year; and
(c) pay to the Receiver General the amount
of tax, if any, payable by the taxpayer under this Part in respect of each
month in the year.
[8]
Due to Mr. Hall’s failure to file a Return, the
Minister of National Revenue (the “Minister”)
assessed Mr. Hall pursuant to subsection 152(7) for his 2008, 2009, 2010, 2011,
2012 and 2013 taxation years as follows:
|
Year
|
Federal Tax
|
Late-Filing Penalty
|
Arrears Interest
|
|
2008
|
$515.00
|
$87.55
|
$220.84
|
|
2009
|
618.00
|
105.06
|
216.75
|
|
2010
|
618.00
|
105.06
|
170.93
|
|
2011
|
585.48
|
99.53
|
120.67
|
|
2012
|
585.48
|
99.53
|
81.38
|
|
2013
|
585.48
|
99.53
|
42.15
|
[9]
Mr. Hall does not contest that he over contributed
to his RRSP. Instead, Mr. Hall argues that he was not reassessed within the
three year time limit prescribed in subsection 152(3.1) and subsection 152(4)
of the Act. He argued that since he was reassessed on June 10, 2015 for
the 2008, 2009, 2010 and 2011 taxation years, these years were statute barred
at the time of the reassessment.
[10]
Mr. Hall submits that the respondent has not
proven that during the 2008, 2009, 2010 and 2011 taxation years, that he made
any misrepresentation attributable to neglect, carelessness or wilful default
or committed any fraud in filing his income tax returns. Accordingly, Mr.
Hall’s submission is that the Minister could only reassess him for his 2012 and
2013 taxations years, since all the other taxation years are statute barred.
[11]
In addition, Mr. Hall argues that in his view,
he should have not been assessed for having over contributed to his RRSP because
the excess amount on which he was taxed is based on or arose as a consequence
of reasonable error. He also submits that he took reasonable steps to eliminate
the cumulative excess in his RRSP.
[12]
The respondent’s position is that the time
period to assess Mr. Hall had not commenced until the Minister assessed him
pursuant to subsection 152(7) of the Act, on June 10, 2015, since he had
not filed a Return, as required by subsection 204.3(1) of the Act.
[13]
In other words, the respondent is arguing that
there is no time limit to assess a taxpayer when a Return has not been filed
with the Minister. In this appeal, it is the Minister under the authority of subsection
152(7) that prepared the Returns for RRSP Excess Contributions on behalf of Mr.
Hall and assessed him accordingly on June 10, 2015. The respondent argued that
pursuant to the provisions of section 152, the three year “normal reassessment
period” to reassess in this appeal runs until June 10, 2018, namely three years
after the issuance of the initial assessment on June 10, 2015. Therefore, the
Minister assessed Mr. Hall within the time limit prescribed under the Act.
[14]
With respect to the second argument of Mr. Hall,
the respondent submits that this Court does not have the jurisdiction to cancel
the amount of taxes owed by the appellant pursuant to subsection 204.1(4) of
the Act. Additionally, the respondent submits that this Court does not
have the jurisdiction to waive the interest.
Analysis
[15]
Mr. Hall’s first argument is that he was
reassessed outside of the limitation period for the 2008, 2009, 2010 and 2011 taxation
years. As a result, Mr. Hall submits that these years are statute barred and
cannot be reassessed as the respondent has failed to prove that he made any
misrepresentation attributable to neglect, carelessness, wilful default or
committed any fraud in filing his income tax returns.
[16]
However, Mr. Hall was required to file a Return
under subsection 204.3(1), which is in Part X.1 of the Act. Part X.1
applies when a taxpayer has over contributed to his or her RRSP.
[17]
Subsection 204.3(1) of the Act, requires
a separate return, which is different from the returns filed under Part I.
Additionally, the tax payable under Part X.1 is a separate tax from the tax
payable under Part I. Subsection 204.3(1) requires a taxpayer to pay the tax
payable under this Part (X.1), within 90 days of year end.
[18]
Since Part X.1 outlines a separate tax, requiring
a separate return from Part I, a return filed under Part I is not applicable to
the timing requirements set out in subsection 204.3(1). This approach applies
in the same manner to several other parts of the Act.
[19]
This Court in Gretillat v Canada, [1998]
TCJ No. 143, 98 DTC 1483, dealt with a similar issue to this appeal, involving
Part X.4 of the Act, which applies to excess contributions to an RESP.
The Court held that:
[14] The tax
payable under Part X.4 of the Act by a subscriber to an RESP on an excess
amount as defined in Part X.4 is a separate tax from the tax payable under Part
I of the Act.
[20]
Further, the Court in Gretillat, found
that the assessment period applicable to Part X.4 did not begin with the filing
of a return under Part I, but rather started when the taxpayer was assessed by
the Minister for tax payable under Part X.4.
[21]
The respondent cited Cable Mines & Oils
Ltd v Minister of National Revenue, 61 DTC 641, in support of their position
that a return filed under Part I would not begin the assessment period for the
tax payable under Part X.1. The Court in Cable Mines & Oils Ltd held
that:
[20] …an assessment issued under the
provisions of section 123(10) is an original assessment in respect of
withholding tax and is a quite different assessment from any original
assessment issued under section 46 in respect of a taxpayer’s own income….
[22]
Although Gretillat and Cable Mines
& Oils Ltd do not deal with Part X.1 of the Act, the same
principles outlined in those two cases would apply to this appeal. Since Mr.
Hall did not file the required Return for excess RRSP contributions under Part
X.1, the initial assessment in relation to this part occurred when the Minister
assessed Mr. Hall pursuant to subsection 152(7). As a result, the initial
assessment for tax payable under Part X.1 occurred on June 10, 2015.
[23]
Subsection 204.3(2) states that section 152 of
the Act applies to Part X.1 of the Act, “with
such modifications as the circumstances require”. As a result of
subsection 204.3(2), the limitation periods in subsection 152(3.1) apply to
Part X.1, with modification. The three year assessment period begins on the
sending of a notice of an original assessment.
[24]
In this case, the original assessment occurred
on June 10, 2015, when the Minister first assessed Mr. Hall for Part X.1 tax.
Therefore, the assessment period would run from June 10, 2015 until June 10,
2018.
[25]
Mr. Hall submits that it was unreasonable for
the Minister to assess the 2008 taxation year, seven years later, in 2015.
Although, in this case the Minister assessed Mr. Hall after a long period had
passed, subsection 152(7) of the Act does not provide any time limit for
the Minister to conduct an original assessment.
[26]
Further, Mr. Hall argued that the Minister never
provided notice or demand that he pay the tax under subsection 204.3(1).
However, the Act in paragraph 204.3(1)(a) specifically states that:
204.3(1) Within 90 days after the end of
each year after 1975, a taxpayer to whom this Part applies shall
(a) file with the
Minister a return for the year under this Part in prescribed form and
containing prescribed information, without notice or demand therefor; …
[Emphasis
added]
[27]
Since the Act does not require the
Minister to provide notice or demand that a taxpayer file a return under
subsection 204.3(1), the Minister’s assessment on June 10, 2015 was a valid
original assessment.
[28]
The resulting unfairness that can be caused by
the operation of these provisions is not the basis for overriding a valid
assessment. The Federal Court of Appeal in Lans v Canada, [2011] FCJ No.
1457, 2011 FCA 290, stated that:
[9] The fact
that the application of the law in particular circumstances may seem harsh, or
that CRA officials may not always have been very helpful, is not a ground on
which the Tax Court can grant relief from a lawful assessment….
[29]
To conclude on this issue, the assessment on
June 10, 2015 was the original assessment for the tax owing pursuant to Part
X.1, and therefore the three year limitation period began on that date.
[30]
Although the Minister’s assessment is lawful in
this case, it is still within the Minister’s discretion to completely waive the
tax owed under Part X.1.
[31]
Mr. Hall’s second argument is based on
subsection 204.1(4) of the Act, which states:
204.1(4) Where an individual would, but for
this subsection, be required to pay a tax under subsection (1) or (2.1) in
respect of a month and the individual establishes to the satisfaction of the
Minister that
(a) the excess
amount or cumulative excess amount on which the tax is based arose as a
consequence of reasonable error, and
(b) reasonable
steps are being taken to eliminate the excess,
the Minister may
waive the tax.
[32]
During the years in litigation, Mr. Hall was suffering
from mental illness. Mr. Hall filed letters with the Court, from different
psychiatrists stating that Mr. Hall was experiencing recurring depression
throughout the years in issue. Later on, during the period under litigation he
was diagnosed with Bipolar and Anxiety Disorder. He stated that he could not
explain why he over contributed to his RRSP in 2008 and was not capable of
making rational decisions during this time. He further stated that it was a
very difficult time for him and his spouse. Due to his illness, he lost his
employment in 1999 and he and his spouse almost lost everything during the
period under litigation. His excess contribution in 2008 was the product of a
reasonable error based on his mental condition at the time.
[33]
In 2008, he had nothing to gain by contributing
$7,150 to his RRSP, since during that year he only received income disability
insurance of $35,802.48. Mr. Hall was not working at the time of the hearing
and was still receiving disability insurance payments. He is still very
fragile. He also stated that he took reasonable steps to eliminate the excess
as soon as he was told by the Canada Revenue Agency that he had over contributed
to his RRSP.
[34]
During the hearing, I explained to Mr. Hall that
this Court does not have the authority to cancel the amount of taxes and
interest. The Minister alone has the authority to make such a decision. That
said, I advised him to apply for a cancellation of taxes under subsection 204.1(4)
of the Act.
[35]
I also advised Mr. Hall that he could also apply
to the Minister under subsection 220(3.1) of the Act to request that the
Minister waive the interest for the years under litigation.
[36]
Only the Minister has the authority to waive the
amount of tax under subsection 204.1(4) of the Act. If the Minister were
to refuse to waive the tax, then the appellant could ask the Minister to
exercise his discretion under subsection 220(3.1) of the Act and waive
the interest.
[37]
In light of the facts of this appeal, I
recommend that the Minister exercise his discretion for the taxation years in
issue.
[38]
As conceded by the respondent the penalties for
the taxations years are cancelled.
[39] Therefore,
the appeal is allowed with respect to the penalties only, the appellant is not
entitled to any further relief.
Signed at Ottawa,
Canada, this 5th day of October 2016.
“Johanne D’Auray”
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