Dockets: 2011-2552(IT)APP
2011-2553(GST)APP
BETWEEN:
ALGONQUIN LANDSCAPING LTD.,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Application heard on February 7 and
December 10, 2012
at Ottawa, Ontario
By: The Honourable
Justice J.M. Woods
Appearances:
|
Agent for the Applicant:
|
Jeremy
Lenser
|
|
Counsel for the Respondent:
|
Christopher Kitchen
|
____________________________________________________________________
ORDER
UPON
application for an extension of time to institute appeals with respect to
assessments made under the Income Tax Act and the Excise Tax Act,
IT IS
ORDERED THAT:
(a)
the application is
dismissed with respect to assessments made under the Income Tax Act for
the 2002, 2004 and 2005 taxation years,
(b)
the application is
granted with respect to an assessment made under the Income Tax Act for
the 2003 taxation year, and the time within which an appeal may be instituted
is extended to February 15, 2013 provided that a valid notice of appeal is
received by that date,
(c)
the application is
dismissed with respect to assessments made under the Excise Tax Act for
reporting periods in 2004,
(d)
the application is
dismissed with respect to assessments made under the Excise Tax Act for
reporting periods in 2003 because the applicant is not out of time to institute
an appeal,
(e)
the application is
granted with respect to assessments made under the Excise Tax Act for
reporting periods from April 1, 2002 to December 31, 2002, and the time within
which an appeal may be instituted is extended to February 15, 2013 provided
that a valid notice of appeal is received by that date, and
(f) the parties shall bear their own costs in
respect of this application.
Signed at Ottawa, Ontario this 13th day of December 2012.
“J. M. Woods”
Citation: 2012 TCC 437
Date: 20121213
Dockets: 2011-2552(IT)APP
2011-2553(GST)APP
BETWEEN:
ALGONQUIN LANDSCAPING LTD.,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Woods J.
[1]
Algonquin Landscaping Ltd. has applied
for extensions of time to institute appeals with respect to assessments made
under the Income Tax Act for the 2002, 2003, 2004 and 2005 taxation
years and with respect to GST assessments made under the Excise Tax Act
for quarterly reporting periods between April 1, 2002 and December 31,
2004, inclusive.
[2]
Algonquin was represented at the
hearing by its shareholder, Jeremy Lenser.
[3]
By way of background, an
audit by the Canada Revenue Agency was commenced
in 2006 relating to GST for Algonquin and income tax for Algonquin and Mr.
Lenser. The audit resulted in assessments for which notices of objection were
duly filed.
[4]
Mr. Lenser stated that
collection action was taken with respect
to the assessments. This included placing liens on two properties, freezing
bank accounts, and issuing requirements to pay to customers of the landscaping
business. Mr. Lenser said that the business then deteriorated from having
10 employees to none.
[5]
As a result of the
objections, reassessments were issued in
April 2009 which reduced the assessments substantially. For example, the income
tax assessments issued to Algonquin for the 2002, 2003 and 2004 taxation years
were reduced from $184,577 to $4,875. The GST assessments were reduced from
$89,170 to $37,922. (Affidavits of Jina Choi, Ex. J for income tax and Ex. P
for GST.)
[6]
This application by
Algonquin is for an extension of time to institute appeals with respect to the
subsequent income tax and GST reassessments. A related application by Mr. Lenser
was resolved on consent.
[7]
At the outset, I would
comment that it is clear from the evidence that Mr. Lenser has had
difficulty in complying with the correct procedures to file objections and
appeals in relation to assessments. It appears, though, that he always intended
to keep Algonquin’s appeal rights open.
Partial consent
[8]
At the commencement of
the hearing, both parties made concessions.
[9]
As for the respondent,
it has consented to an application being granted with respect to the income
tax assessment for the 2003 taxation year. This application will be granted on
condition that a valid notice of appeal is filed.
[10]
As for Algonquin, it
withdrew its application with respect to income tax assessments for the 2004
and 2005 taxation years and with respect to GST assessments for quarterly reporting
periods in 2004. Therefore, the application with respect to these assessments
will be dismissed.
[11]
The assessments that remain to be
considered are the income tax assessment for the 2002 taxation year and GST
assessments for quarterly reporting periods in 2002 and 2003. These assessments
were all issued in April 2009.
2002 income tax assessment
[12]
The application with respect to
the income tax assessment for the 2002 taxation year should be dismissed
because this assessment is a so-called nil assessment.
[13]
The assessment reduced federal tax
to zero. There is no relief that this Court can give in these circumstances and
therefore the application should be dismissed on the ground that there is no
reasonable grounds for appeal. The applicable principle is well-established in
the case law: The Queen v Interior Savings Credit Union, 2007 FCA 151.
[14]
Mr. Lenser expressed
concern about keeping this year open so that losses could be carried forward to
future years.
[15]
Whether the 2002
taxation year is kept open or not in this application does not affect the
carryover of losses. The usual course of action to deal with loss carryovers is
to have them determined in the taxation year in which the losses are being
applied to reduce tax, or to formally request that the Minister make a notice
of determination of loss.
[16]
I would also note that
counsel for the respondent tried to provide some assistance to Algonquin at the
hearing by suggesting that Mr. Lenser deal with the carryover situation quickly
because the ten year carryover period has almost expired.
GST assessments
[17]
The quarterly reporting periods that
are at issue for the GST assessments are from April 1, 2002 to December 31,
2003. A notice of assessment that includes these periods was mailed on April 3,
2009.
[18]
It is the position of
the respondent that Algonquin is out of
time to apply for an extension of time for the GST assessments. The respondent submits
that the time limit expired on July 2, 2010 and that the application to extend
time was not sent until October 12, 2010.
[19]
In response to the
respondent’s submission, Mr. Lenser stated that he had other correspondence
with the Canada Revenue Agency that would support his claim of filing on time
and he asked for an adjournment to locate these documents. The adjournment was
granted on February 7, 2012, and a second adjournment was granted on October
22, 2012 because Mr. Lenser had not yet received documents that he had
requested pursuant to an access to information request.
[20]
The hearing finally
reconvened on December 10, 2012, at which time Mr. Lenser introduced
two documents in support of his claim, one dealing with the year 2002 and the
other dealing with 2003. Mr. Lenser provided advance notice of these documents
to counsel for the respondent by letter dated October 30, 2012. The letter and
the documents were entered into evidence as Exhibit A-7.
[21]
The document that
relates to 2002 is a letter by Algonquin
that was sent to the Canada Revenue Agency requesting an extension “to file our
appeal regarding tax year 2002.”
[22]
The letter is dated April 26,
2010, which is before the deadline for applying for an extension which was July 2, 2010. In my view, the letter
should be accepted as a valid application to extend time to institute an appeal
to this Court with respect to GST assessments for reporting periods in 2002.
[23]
The letter has some
deficiencies, but they are not fatal ones.
[24]
For example, the letter
was addressed and sent to the Canada Revenue Agency instead of the Court. The Agency
routinely remedies this kind of problem by forwarding such letters to the
Court, as indeed the Agency did with the out‑of‑time letter dated
October 12, 2012.
[25]
Another deficiency is
that the letter does not state which assessments are at issue. This is also not
fatal. The evidence as a whole supports Mr. Lenser’s submission that he
routinely filed correspondence that was intended to apply to all of ongoing matters.
It makes sense that the letter be interpreted in this manner.
[26]
It is appropriate in
the circumstances to give a generous interpretation to the letter. I accept
that it is an application to extend time for the GST assessments for reporting
periods in 2002.
[27]
I turn now to the
second document which relates to 2003. It is not a letter sent by Algonquin,
but a letter sent by the Canada Revenue Agency acknowledging receipt of a
notice of objection by Algonquin. The heading at the top of the letter refers
to the 2003 taxation year. There is no reference to income tax or GST on the
first page of the letter, which is the only page that was provided. There is a
reference to Algonquin’s income tax number, but this number was referred to in
other correspondence by the CRA dealing with both GST and income tax.
[28]
The letter is dated
August 28, 2009, which is shortly after both income tax and GST assessments
were issued in April 2009.
[29]
Mr. Lenser submits that
this letter is evidence that Algonquin appealed the GST assessments for
reporting periods in 2003.
[30]
The CRA letter is
certainly evidence that some form of objection or appeal filed was filed by
Algonquin for the year 2003. According to the respondent, the CRA considered
Algonquin to have filed an objection to the income tax assessment for 2003. The
respondent introduced the subsequent notice of confirmation of that assessment.
[31]
Algonquin’s objection
or appeal letter was not entered into evidence. Mr. Lenser indicated that
he could not find it and the access to information request did not turn it up.
[32]
In this circumstance,
it is appropriate to make an inference about the letter. The central question
is whether it dealt with both GST and income tax or only income tax.
[33]
It seems likely that
Algonquin sent the letter within 90 days after receiving assessments for both
income tax and GST. The assessments were all issued in April 2009. It seems to
me that this is strong evidence that Algonquin intended to object or appeal all
of the assessments issued in respect of 2003.
[34]
Further, it would not
be surprising if Algonquin’s letter did not refer to either income tax or GST.
The correspondence that Algonquin typically sent to the CRA was vague.
[35]
Considering all the
circumstances, it is appropriate to give the benefit of the doubt to Algonquin.
This will enable it to have its appeal dealt with on the merits. I would also
note that Mr. Lenser gave the respondent advance notice of Algonquin’s position
on this letter. It was open to the respondent to introduce the actual notice of
objection in support of its position.
[36]
I would conclude that
Algonquin filed a notice of objection to the GST assessments for reporting
periods in 2003 and that this objection was filed on time. The Minister has not
responded to this objection.
[37]
Where does that leave
us? Since the Minister has not responded to the objection, Algonquin is still
in time to institute an appeal to this Court. The applicable provision of the Excise
Tax Act is reproduced below.
306. Appeal - A person
who has filed a notice of objection to an assessment under this Subdivision may
appeal to the Tax Court to have the assessment vacated or a reassessment made
after either
(a) the
Minister has confirmed the assessment or has reassessed, or
(b) one hundred and eighty days have
elapsed after the filing of the notice of objection and the Minister has not
notified the person that the Minister has vacated or confirmed the assessment
or has reassessed,
but no appeal under this section
may be instituted after the expiration of ninety days after the day notice is
sent to the person under section 301 that the Minister has confirmed the
assessment or has reassessed.
[38]
Since Algonquin is not
out of time to institute an appeal, no extension of time is required and
therefore the application to extend time will be dismissed as not being
necessary. Algonquin may now file a notice of appeal with this Court in respect
of quarterly GST reporting periods in 2003.
Conclusion
[39]
In light of the findings above,
(a)
the application will be
dismissed with respect to assessments made under the Income Tax Act for
the 2002, 2004 and 2005 taxation years,
(b)
the application will be
granted with respect to an assessment made under the Income Tax Act for
the 2003 taxation year, and the time within which an appeal may be instituted
will be extended to February 15, 2013 provided that a valid notice of appeal is
received by that date,
(c)
the application will be
dismissed with respect to assessments made under the Excise Tax Act for
reporting periods in 2004,
(d)
the application will be
dismissed with respect to assessments made under the Excise Tax Act for
reporting periods in 2003 because Algonquin is not out of time to institute an
appeal, and
(e)
the application will be
granted with respect to assessments made under the Excise Tax Act for
reporting periods from April 1, 2002 to December 31, 2002, and the time within
which an appeal may be instituted will be extended to February 15, 2013
provided that a valid notice of appeal is received by that date.
[40]
The notices of appeal that are
filed pursuant to this Order should indicate whether Algonquin elects to have
the appeal governed by the Court’s informal procedure. The election could be
made for the 2003 income tax appeal if the amount at issue is below $12,000. It
can be made for the GST appeal regardless of the amounts at issue.
[41]
It is appropriate that
each party bear their own costs in
respect of this application.
Signed at Ottawa, Ontario this 13th day of December 2012.
“J. M. Woods”
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