Citation: 2012 TCC 110
Date: 20120403
Docket: 2010-3948(IT)I
BETWEEN:
DAVID HOMA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1]
The appellant, David Homa, is a retired engineer with
extensive experience dealing with computers. He submits that the computer
system used by the Canada Revenue Agency (CRA) is poorly designed and that this
has caused him to be assessed an excessive amount of interest. Approximately $100
is at issue.
[2]
The appellant seeks
to bring attention to the computer problem, not simply to rectify the damage to
him, but to shed light on a poorly understood problem for the benefit of all
taxpayers.
[3]
Three questions will be discussed
in these reasons.
(a)
Does this Court have
jurisdiction over the subject matter of this dispute?
(b)
Is the computer system
flawed?
(c)
Has an excessive amount
of interest been charged?
Background
[4]
On January 16, 2009,
this Court disallowed in part the appellant’s claim for a medical expense tax
credit with respect to the 2003, 2004 and 2005 taxation years.
[5]
The decision resulted
in the imposition of interest on unpaid tax for the 2003 and 2005 taxation
years. The appellant applied for interest relief on compassionate ground on April
4, 2009 (Ex. R-4). The application provides:
[…] He requests the committee to cancel the interest payments that
have accumulated since the time he filed his appeal and to waive the interest
payments over the next twelve months by the end of which time he will have paid
all the outstanding taxes. He estimates the total interest to be less than a
thousand dollars.
[6]
The application was allowed in
part. By letter dated December 1, 2009, the appellant was informed that
interest charged for the 2003 and 2005 taxation years would be cancelled (Ex.
A-1). Pursuant to this decision, the CRA cancelled interest accruing up to
January 4, 2010, which was the date that the decision was processed. The
amounts that were cancelled were $862.67 for the 2003 taxation year and $267.30
for the 2005 taxation year (Ex. A-15 and R-1).
[7]
Before the decision was
made, the appellant made a payment
arrangement with the CRA to pay amounts owing for the 2003 and 2005 taxation
years over time. Post‑dated cheques were provided for monthly payments up
to August 15, 2011 at which time the debt would be paid off in full if his
application was allowed (Ex. A-15). According to the appellant, this
arrangement was required by the CRA before it would consider the request for
interest relief.
Does Court have
jurisdiction?
[8]
In an amended notice of
appeal filed on January 6, 2011,[1]
the appellant describes the appeal in the following manner.
David Homa appeals from the Income Tax Act to the Tax Court of
Canada from assessments of interest dated September 23, 2010[2] and October 20,
2010 for the taxation years 2003 to 2009.
[9]
The documents referred
to above are statements of account which set out aggregate amounts owing in
respect of all taxation years.
[10]
Pursuant to a
preliminary motion brought by the respondent, I concluded that these documents
are not notices of assessment and do not give rise to a right of appeal to this
Court (2011 TCC 230).
[11]
I did not dismiss the
appeal entirely, however. The appeal was permitted to continue with respect to
assessments for which a notice of appeal would not be out of time. These
assessments relate to the 2006, 2007 and 2009 taxation years. This
was done on the basis that these assessments may impose interest for which
relief could potentially be given. I would add that this decision was in spite
of the appellant’s assertion at the motion that he was not appealing these
assessments.
[12]
At the hearing of the appeal, the
appellant requested that I reconsider this decision. He submitted that that is
recent jurisprudence which supports his position: Bozzer v The Queen, Canada
Revenue Agency and The Attorney General of Canada, 2011 FCA 186, 2011 DTC
5106.
[13]
The Bozzer decision does
not, in my view, shed light on the issue in the preliminary motion, which was whether
statements of account are notices of assessment.
[14]
The question in Bozzer
concerned the limitation period for making taxpayer relief applications under
s. 220(3.1) of the Act. The issue turned on an interpretation of the
phrase “interest … in respect of that taxation year.” In his analysis, Stratas
J. concluded that the relevant legislative provision was ambiguous and that the
taxpayer’s interpretation was to be preferred over the Crown’s narrower
interpretation.
[15]
The decision in Bozzer
does not address the question that is at
issue here, which is whether statements of account are notices of assessment.
There is no reason to revisit my earlier conclusion that they are not notices
of assessment.
[16]
There is, however, a valid appeal
with respect to assessments for the 2006, 2007 and 2009 taxation years. At
the hearing of the appeal, the appellant repeated the statement that he made at
the motion that he did not intend to appeal from these assessments. In light of
this statement, it is not appropriate that these assessments be considered.
[17]
These conclusions are sufficient
to dispose of the appeal, but I wish to briefly comment on the two other
questions mentioned above.
Is the computer
system flawed?
[18]
The appellant seeks
relief for excessive interest charged as a result of a flawed CRA computer
system.
[19]
The appellant’s
argument, as I understand it, is that the statements of account reflect interest
charged with respect to the 2003 and 2005 taxation years, which is contrary to
the CRA’s decision on interest relief. It is suggested that this error is
caused by a faulty CRA computer system, which was not designed to process
interest where some taxation years are interest-free.
[20]
On a related point, he
also argues that the CRA inappropriately applied refund amounts against amounts
owing for the 2003 and 2005 taxation years rather than against amounts owing
for interest-bearing years. This increased the overall assessment of interest,
it is submitted.
[21]
There is a fundamental
flaw with this argument. The appellant’s theory that there is a defect with the
computer system is based on the premise that the CRA completely nullified interest
for 2003 and 2005. However, the CRA did not completely waive interest. These
years were not totally interest-free.
[22]
Based on the evidence
presented, the CRA intended only to cancel interest which had accrued up until
the time that the decision was taken. Future interest accruals were not
affected.
[23]
As a result, no flaw in
the computer system has been demonstrated.
Has an
excessive amount of interest been charged?
[24]
The appellant testified that he only became aware that
the CRA did not intend to waive future interest during a meeting with the CRA
last summer. I have some sympathy with this because the CRA letter which
communicated the interest relief decision did not clearly spell out that future
interest was not being waived.
[25]
At the hearing, the
appellant seemed to suggest that future interest was waived because this is
what the letter communicated to him.
[26]
The evidence does not
support this. The evidence as a whole suggests that the CRA did not intend to
waive future interest.
[27]
The difficulty is that the
CRA did not clearly communicate its decision. The respondent disputes this on
the basis that the letter distinguishes past and future interest by the terms
“cancel” and “waive” in accordance with Information Circular IC-07-1. If the
proposition is that taxpayers should be familiar with information circulars
when interpreting correspondence from the CRA, I would strongly disagree. I
also note that even the respondent was not consistent with its use of the terms
“cancel” and “waive.” (See paragraph 3 of the original Reply filed on June 27,
2011.)
[28]
The wording of the CRA
letter is unfortunate, but it is not grounds for giving relief in this Court.
In an appropriate case, the principles of estoppel might be applied, but there
is not a sufficient evidentiary foundation to support the application of
estoppel here. Accordingly, even if there had been a valid appeal in respect of
an assessment, there is no relief that this Court could give.
Conclusion
[29]
The appeal will be dismissed. Each
party shall bear their own costs.
Signed at Toronto,
Ontario this 3rd day of April 2012.
“J. M. Woods”
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