Citation: 2009 TCC 103
Date: 20090220
Docket: 2005-315(IT)G
BETWEEN:
HARRY BURSTEIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1]
The parties applied to
the Court for the determination of two questions of mixed law and fact under
section 58 of the Tax Court of Canada Rules (General Procedure) (the Rules)
and the Court accepted the application. The Court also allowed the parties to submit
evidence deemed necessary for the determination of the questions submitted to
the Court and to which the parties agreed. The memorandum setting out the evidence
reads as follows:
[TRANSLATION]
1.
The Appellant filed his income tax returns for
the 1997 and 1998 taxation years within the prescribed time, indicating his
address as “c/o Bruce Greenberg, 25 The Bridle Path, North York, Ontario,
M2L 1C9.”
2.
The initial assessments for the 1997 and 1998
taxation years were made on June 15, 1998, and November 8, 1999, respectively.
3.
On April 27, 2001, the Appellant submitted a Determination
of Residency Status form (Form NR73) to the Canada Revenue Agency (hereinafter
the “CRA”) indicating that he had left Canada on April 4, 1998, and that he was
residing at 46 Sharet, Tel Aviv, Apt. 4, Israel 62910.
4.
On May 29, 2001, the Appellant submitted a form
entitled “Waiver in Respect of the Normal Reassessment Period” for the 1997
taxation year, providing c/o Bruce Greenberg, 25 The Bridle Path, Toronto,
Ontario M2L 1C9, as his address, that is, the address appearing on his income
tax return.
5.
A letter dated October 22, 2002, was sent by the
CRA auditor, Judith Heath, to the Appellant, at his son’s, Jay Burstein, address
at 55 Banncockburn Avenue,
Toronto, ON M5M 2M9, concerning
a proposed reassessment.
6.
Josée Vigeant, of the law firm Heenan Blaikie, contacted
by telephone the auditor, Ms. Heath, to discuss the proposed reassessment and indicated
that she would provide Form T1013 duly signed by the Appellant for the year 1997.
7.
On November 22, 2002, the Appellant sent Form
T1013 to the CRA indicating his address in Israel, that is, 46 Sharet, Tel Aviv, Apt. 4, Israel 62910. Form T1013
also indicates Josée Vigeant and André P. Gauthier of Heenan Blaikie as duly
authorized representatives and their address, that is, 1250 Boulevard
René-Lévesque O., Suite 2500, Montréal, Quebec H3B 4Y1.
8.
Counsel for the Appellant sent submissions to Ms.
Heath concerning the proposed reassessment. After that, there was no communication
between these persons. The issue of which address the Notices of Reassessment
should be sent to never came up in discussions between Ms. Heath and counsel
for the Respondent or between Ms. Heath and the Appellant or any other of his
representatives.
9.
After Ms. Heath completed her analysis of the submissions
made by counsel for the Appellant and, thereby, her audit, believing that she
was doing the Appellant a service, she arranged for the Notices of Reassessment
dated September 30, 2003, for the 1997 and 1998 taxation years to be addressed
by the Minister of National Revenue to the Appellant as follows:
Harry Burstein
c/o Heenan
Blaikie
1250
René-Lévesque Blvd. West, Suite 2500
Montréal QC
H3B 4Y1
10.
Subject to the interpretation to be given to Form
T-1013, the Appellant never authorized the CRA to send the Notices of
Assessment to the address mentioned in the preceding paragraph.
11.
The Notices of Reassessment were not returned to
the sender by the firm Heenan Blaikie.
12.
On or around October 8, 2003, a statement of
account was addressed to André P. Gauthier regarding the Appellant demanding
payment of a debt in the amount of $6,806,666.80 for the years 1997 and 1998 for
which assessments were issued on November 30, 2003.
13.
On October 14, 2003, an e-mail was sent by
Joceline Pruneau, Mr. Gauthier’s assistant, to John Fuke, a lawyer from the Toronto office of the firm
Heenan Blaikie, requesting that he obtain from the Appellant the Notices
of Assessment as soon as possible.
14.
The Appellant was a client of Mr. Fuke when he
was a partner with the firm of Heenan Blaikie. Mr. Fuke, who is now retired, was,
at the time of the audit, no longer a partner and turned his clients over to
another partner, Ms. Bueschkens.
15.
In view of the fact that the Appellant never
received the assessments and therefore could not send them to his lawyers, his
lawyers contacted Revenue Collections of the Montréal Tax Services Office on
October 28, 2003, to obtain a detailed statement of the debts for the years
1997 and 1998.
16.
On October 28, 2003, counsel for the Appellant received
a detailed statement of account by fax, as requested.
17.
On November 20, 2003, Josée Vigeant went to
the client services division of the Montréal Tax Services Office and obtained a
computer printout of the assessments for the years 1997 and 1998 as, until that
date, neither Mr. Gauthier nor she had received the Notices of Assessment sent
by the CRA.
18.
On that same occasion, Ms. Vigeant hand-delivered
Form T652 to the Minister, signed by the Appellant, revoking the waiver in
respect of the normal reassessment period for the 1997 taxation year.
19.
It was not until that moment and after
requesting a history of the addresses in the CRA system that Ms. Vigeant initiated
a more active search within her own firm to trace the assessments.
20.
The firm Heenan Blaikie does business with an
outside company for the reception of mail. The company’s employees are not
authorized to open mail. When an envelope is not addressed to a lawyer but
rather to a client, the mailing service performs a search within the firm’s client
management system to find out the name of the partner responsible for the client.
In the case of the Appellant, the envelope containing the Notices of
Reassessment ended up in Ms. Bueschkens’s file of the firm Heenan Blaikie, who
was not in any way retained by the Appellant in the matter. Nor was she his
authorized representative. Although Mr. Gauthier and Ms. Vigeant were the
only lawyers with Heenan Blaikie in Montréal who had been acting for the Appellant
since at least November 2002, the client management system did not allow the
Notices of Reassessment to be sent to them, since it was not designed for that
purpose.
21.
Mr. Gauthier and Ms. Vigeant do not know at what
point the original copies of the assessments were sent to them following the
search. Mr. Gauthier and Ms. Vigeant were authorized to object and
raise any defence and grounds at their disposal.
22.
Mr. Gauthier and Ms. Vigeant are lawyers
specializing in tax matters and the CRA is in charge of the application of the Income
Tax Act (“I.T.A”).
23.
In December 2003, that is, within the required time,
the Appellant duly objected to the reassessments for the 1997 and 1998 taxation
years again indicating 46 Sharet, Apt. 4, Tel Aviv, Israel, 62910 as his
mailing address on the prescribed forms (T400A) signed by him. The Notices of
Reassessment are dated September 30, 2003. In the pre-printed box “name and
address of any authorised representative, if applicable” “Heenan Blaikie
L.L.P., 1250 René-Lévesque Blvd. West, Suite 2500, Montréal Quebec H3B
4Y1, Mtres Andre P. Gauthier and Josee Vigeant”
is entered.
24.
The memorandum of fact and law attached to the
Notice of Objection detailing some of the facts the Appellant relied on regarding
the adjustments made and it was stated somewhere that one of the issues was “Whether
the reassessment process in respect of both taxation years was completed on
September 30th, 2003” and the only submission made in that respect was the
following: “Further we submit that the Minister has not completed the
reassessment in respect of both taxation years.”
25.
By letter dated January 14, 2004, addressed at
46 Sharet, Apt. 4, Tel Aviv,
Israel 62910, the Chief of Appeals of the Toronto Centre Tax Services Office notified the Appellant that his file was assigned to Tom Kung.
26.
By letter dated January 30, 2004, addressed to
the Appellant’s lawyers, with a copy sent to the Appellant at his address in Tel
Aviv, Israel, the appeals officer, Tom Kung, gave the Appellant 30 days to
provide the documentation or make additional submissions, otherwise the
objections were to be processed on the basis of the information appearing in
the file. No contact was made, nor was any information provided either by the Appellant
or his lawyers to Mr. Kung during said period of 30 days, or before March 26,
2004.
27.
On March 26, 2004, Ms. Vigeant contacted Tom
Kung. Mr. Kung told her that the file would be assigned to somebody else considering
the type of issues raised. Ms. Vigeant did not provide any details as to
the Notice of Objection. The conversation lasted no more than a minute.
28.
On April 5, 2004, Vonda Yantsis, of the Appeals
Division, took the initiative to contact by telephone Ms. Vigeant to
inform her that she was now the agent in charge of reviewing the Appellant’s
file. To that end, she left a message in Ms. Vigeant’s voice
mailbox and noted that she would refer the file to headquarters, leaving her
contact information and inviting her to contact her if she required any
information.
29.
On October 8, 2004, Ms. Yantsis informed Ms.
Vigeant by telephone of the Minister’s position and his intention to confirm
the assessments. Ms. Vigeant asked to obtain certain documents that Ms.
Yantsis undertook to provide her with.
30.
A few minutes later, Ms. Yantsis called Ms. Vigeant
back to inform her that certain documents were not in the file and could not be
provided to her.
31.
According to Ms. Yantsis, it was during this
second telephone conversation that Ms. Vigeant said that the Appellant did not
authorize the sending of the Notices of Reassessment to the address of Heenan
Blaikie. According to Ms. Vigeant, it was rather during the first telephone
conversation that this discussion took place.
32.
October 8, 2004, was the first time the Appellant
or any of his other representatives provided information indicating or explaining
to the Minister or one of his representatives why the reassessment process had
not been completed by September 30, 2003. No other explanation was given to Ms.
Yantsis at the time or any time before the Notice of Appeal was submitted.
33.
In her report on how she dealt with the Notices
of Objection, Ms. Yantsis did not address the issue as to whether the Notices
of Appeal should have been sent to Israel, but rather whether the reassessment process
was completed when the Notice of Reassessment was sent.
34.
According to Ms. Yantsis, if she had known
that counsel for the Appellant were taking the position that the Notices of
Reassessment should have been sent to the Appellant at a given address in Israel, she would have seen to it that the
notices were sent to that address.
35.
By letter dated October 21, 2004, the Appeals
Division mailed out the Minister’s decision confirming the reassessments for
the 1997 and 1998 taxation years. The letter was addressed as follows:
Harry Burstein
C/O Heenan Blaikie – A.
Gauthier
2500 – 1250 Boul. Rene-Levesque
Montreal Quebec
H3B 4Y1
36. A copy of the letter and Notices of Cofirmation
was sent to “Mtres Andre P. Gauthier and Josee Vigeant Heenan Blaikie
L.L.P., 1250 Rene-Levesque Blvd. Suite 2500, Montréal, Québec H3B 4Y1.”
37. At paragraph 15 of his Notice of Appeal, the
Appellant indicates that [TRANSLATION] “On October 21, 2004, the Minister
of National Revenue confirmed the reassessments for the 1997 and 1998 taxation
years.”
38.
At paragraph 27 of the Notice of Appeal, the
Appellant indicates that [TRANSLATION] “the assessment process for the 1997 and
1998 taxation years was never completed as the assessments were not sent to the
Appellant in accordance with subsection 152(2) of the I.T.A.”
39. No allegation that the Appellant made any misrepresentation that is attributable to
negligence, carelessness or wilful default or committed any fraud in filing his
tax returns was alleged in the Respondent’s Reply to
the Notice of Appeal bringing subsection 152(4) I.T.A. into play.
[2]
An excerpt from the
testimony of the Appellant and Judith Heath, Respondent’s representative
and auditor in the Appellant’s matter, at their examination for discovery, was
adduced and is part of the evidence. The appeals officer, Vonda Yantsis, also
testified.
[3]
In their joint memorandum, the parties
frame the issues as follows:
[TRANSLATION]
(a) Notwithstanding the fact
that the Notices of Reassessment were not mailed to the Appellant’s address in Israel, is the Appellant precluded from
claiming that the reassessment process was not completed in accordance with
subsection 152(2) of the I.T.A.?
(b) Was the assessment process completed before the revocation of the
waiver in respect of the normal reassessment period took effect?
[4]
It was therefore
acknowledged from the outset that the Notices of Reassessment were not mailed
to the Appellant’s address in Israel but rather were addressed to the law firm’s Montréal office without
reference to the lawyers who were representing the Appellant. The latter
therefore submits that the assessment process was never completed and cites the
provisions of subsection 152(2) of the Income Tax Act (the Act) in
support of his claim. As for the Respondent, she submits that the Appellant had
a duty to raise the issue in his Notice of Objection and, considering that the
Appellant objected to the assessments within the time limit, he was not
prejudiced and cannot now challenge the process.
[5]
Subsection 152(2) of
the Act requires the Minister of National Revenue (the Minister) to send, after examination of a return, a
notice of assessment to the person by whom the return was filed. However, subsections 244(14) and
244(15) provide for presumptions as to the date when the assessment is made and
the mailing date. The subsections read as follows:
244(14) For the purposes of this Act, where any notice or
notification described in subsection 149.1(6.3), 152(3.1), 165(3) or 166.1(5)
or any notice of assessment or determination is mailed, it shall be presumed to
be mailed on the date of that notice or notification.
244(15) Where any notice of
assessment or determination has been sent by the Minister as required by this
Act, the assessment or determination is deemed to have been made on the day of
mailing of the notice of the assessment or determination.
[6]
When the Minister makes
an initial assessment without amending a taxpayer’s tax return, it is, for all
intents and purposes, without consequence. However, when the Minister’s initial
assessment or reassessment amends a taxpayer’s tax return, particularly when a
taxpayer has been audited, this could give rise to a potential conflict between
the taxpayer and the Minister whose ultimate resolution results in an objection
and, possibly, an appeal before this Court. The starting point of the
taxpayer’s objection process lies in the simple gesture of sending the
assessment to the person
by whom the return was filed.
[7]
Rothstein J.A. of the
Federal Court of Appeal made the following comment in Grunwald v. Canada, 2005 FCA 421 with respect to the term “send”
used in subsection 152(2):
Subsection
152(2) does not refer to mailing. It uses the term “send”. “Send” is clearly
broader than “mailing” and while it would include mailing, it would also appear
to include personal service on a taxpayer by an employee of CCRA, as occurred
in this case.
[8]
It therefore suffices to mail the Notice
of Assessment to the taxpayer’s address or to serve the notice by personal
service and the assessment is made on the date appearing on the notice. The
next step consists in filing a Notice of Objection and then filing an appeal to
this Court within the prescribed time limit. An objection or appeal cannot,
therefore, be filed, if there has been no sending.
[9]
Furthermore, if the Minister can demonstrate
that he in fact mailed the Notice of Assessment to the correct address, the
notice is deemed to have been received (see subsection 248(7)) and to have been made (see
subsection 244(15) above).
[10]
The Federal Court of
Appeal, in 236130 British Columbia Ltd. v. Canada, [2006] F.C.J. No. 1667, made the following comments
on the issue:
20 In my view, it is not necessary in this case to determine
whether, despite acknowledging that the procedure in place would have resulted
in the reassessments being mailed on time, the Tax Court Judge could hold that
the Minister had not discharged his onus. The fact that the reassessments were
sent to the wrong address leads to the conclusion that they were not issued at
all.
21 In this respect, I disagree with the
appellant’s contention that the error which led to the reassessments being sent
to the wrong address is attributable to the respondent and that therefore, it
cannot be “laid at the feet of the Minister” (A.G. of Canada v.
Bowen, 91 D.T.C. 5594 (FCA) at 5596). As the prescribed tax return form
requires, three addresses were given in the respondent’s tax return; a mailing
address, an address indicating where the Books and Records are kept, and the head office
address. Both the head office and the mailing address were correctly inscribed.
However, the reassessments were sent to the Books and Records address, which as
noted, did not reflect the proper postal code.
22
In the end, the reassessments were
mailed to the wrong address on both occasions. As was stated in L.B. Scott v. M.N.R. [1960] C.T.C. 402 (Ex. Ct.) (Scott)
at p. 417:
“… it is in my opinion also to be
inferred that Parliament never intended that such a notice could be given
effectively by the “mailing” of it to the taxpayer at some wrong or fictitious
address, and I find nothing in the statute to suggest that a taxpayer should be
bound by an assessment or fixed with notice of assessment upon the posting of a
notice thereof addressed to him elsewhere than at his actual address or at an
address which he has in some manner authorized or adopted as his address for
that purpose.”
23 The appellant argued that all three
addresses indicated by the respondent in its tax return are “in some manner
authorized or adopted” by it for mailing purposes. This of course ignores the
prescribed form which specifically requires a taxpayer to provide an address
for mailing purposes. In this case, this address happens to be different from
the head office address and the Books and Records address. Obviously the
mailing address is the only one authorized and adopted for mailing purposes.
24 I
agree with the respondent that absent an indication to the contrary, the
mailing address is the one to which mail is to be sent including the
reassessments here in issue. Had the reassessments been mailed to that address
rather than the address indicated for Books and Records, they would have been
made on time. The error is entirely attributable to the officers of the
Minister who when the first Notices were returned failed to verify the
respondent’s mailing address by examining the tax returns.
[11]
In the case at bar, the Minister
therefore chose to send the Notices of Assessment for the 1997 and 1998
taxation years by mail to the person by whom the return was
filed. The Appellant provided his mailing
address to the Minister in his tax returns for each of the years in question and
later in the Determination of Residency Status form (Form NR73), at the time of
the signing of a waiver allowing the Minister to assess the Appellant outside the normal assessment period for the year 1997 and one last time at the time of
the sending of Form T1013 dated November 22, 2002. The Notices of Reassessment were therefore not sent to the
Appellant’s correct address and, in my opinion, the reassessment process was
not completed in accordance with subsection 152(2) of the Act. In other
words, the Minister did not abide by the requirements of subsection 152(2) of
the Act. This position has been held for
a very long time. The
Exchequer Court, in Scott v. M.N.R., [1960] C.T.C. 402 interpreted
subsection 46(2) of the former version of the Act, the wording of which was
the same as subsection 152(2), as follows:
28. In this view, “the day of … original
assessment” referred to in Section 46(4) was in the present case May 28,
1953, and it remains to be considered whether the re-assessment under appeal
was made within four years from that day. This, it seems to me, turns on whether
what was on May 28, 1957 — which was the last day of the four year period —
completed the re-assessment and it raises the question whether the mailing of
the notice to the appellant in care of Mr. Wolfe Goodman was a valid discharge
of the Minister’s duty to give notice to the appellant and thereby to complete
the re-assessment. It was not disputed that Section 46(2), which requires the
Minister to send “a notice of assessment to the taxpayer”, applies as well as
to a reassessment as to an original assessment. Now, nowhere in the statute is
there any express definition of what Parliament intended by the word “send” in
Section 46(2), but inferentially from the references in Sections 51(1), 52(1),
57(1) and 58(1) to the “mailing of notice of assessment” and the prescription
of times by reference thereto, it would seem apparent that Parliament intended
that such notices should be given by post. This, however, being itself an
inference from language used in the statute, it is in my opinion also to be inferred
that Parliament never intended that such a notice could be given effectively by
the “mailing” of it to the taxpayer at some wrong or fictitious address and I
find nothing in the statute to suggest that Parliament intended that a taxpayer
should be bound by an assessment or fixed with notice of an assessment upon the
posting of a notice thereof addressed to him elsewhere than at his actual
address or at an address which he has in some manner authorized or adopted as
his address for that purpose. Vide Societa Principessa Iolanda Margherita di
Savoia (fondata dai Bonitesi), Inc. v. Broderick (1932), 183 N.E. 382,
where in a different context Kellogg, J. , speaking for the Court of Appeals of
New York, said at
page 384:
When the statute says that the superintendent
‘shall cause said notice to be mailed’ to all creditors ‘whose names appear …
upon the books’, we think the intent clear that the notice must be ‘mailed’
with an appropriate address upon the envelope,”
29. In the present case, the notice of re-assessment
which was put in the mail on May 28, 1957, while directed to the appellant, was
not directed to his actual address nor was it directed to either of the
addresses stated in his 1952 income tax return. Had it been so directed –
despite the fact that the appellant no longer lived at the residential address
or carried on business at the business address – and even despite the fact that
the assessor was aware of these facts – it might well be that in the absence of
any act on the part of the appellant to notify the Minister of a change of
address, he would be bound by the sending of a notice to either of the
addresses so given. That, however, was not done and it is accordingly
unnecessary to decide what might have been the effect if the notice had been
directed to that address. These, however, were the only addresses which the
appellant had indicated to the Department and it is not shown that Mr. Wolfe
Goodman or any other person was in fact authorized to receive notices on his
behalf. In this situation, while it was open to the appellant to adopt and
ratify and thus give effect to the sending of notice to that address as a valid
notice to him, he was under no obligation to adopt or ratify it and on the
evidence I do not think he ever did so. Nor does it appear that the notice so
sent in fact reached him as a result of the mailing of it on May 28, 1957,
either in the ordinary course of post, or later. In my opinion, such a mailing
or sending was not a valid mailing or sending of the notice within the meaning
of Section 46 (2) of the Act, and it follows that the re-assessment was not
made within the four year period limited by Section 46(4). Nor, in my opinion,
can the requirement of Section 46(2), that a notice of assessment be sent to
the taxpayer, be regarded as a directory provision of the Act. Vide
Nicholls v. Cummings (1877), 1 S.C.R. 395.
[12]
Is the Appellant
precluded from claiming that the reassessment process was not complied with
considering that a Notice of Objection was sent? The Minister submits that not
only was the Appellant not prejudiced, but that the latter should have clearly
raised the issue when he filed his Notice of Objection or before the revocation
took effect.
[13]
At paragraph 45 of his
Notices of Objection, the Appellant clearly submits that the Minister did not
complete the assessment process for the two years in question. For his part,
the Minister addressed the issue in his Notice of Confirmation and, more particularly,
in his Report on Objection, at paragraph 2 of page 16 by blaming the
Appellant for not informing the Minister of his change of address. The Minister was therefore well aware of the reasons supporting
the point in question. In my view, the Minister was given sufficient notice and
could have easily remedied this oversight by sending the assessment directly to
the Appellant in accordance with subsection 152(2) of the Act at the address he
had; he did not do so.
[14]
There is no provision in the Act
or in the Rules which provides that, by serving a Notice of Objection on the Minister,
the Appellant finalizes the assessment process and thereby remedies the Minister’s
failure. In the case at bar, it is only by pure chance that the Appellant was
informed of the existence of an assessment and the filing of a Notice of Objection
was used solely to protect his interest and not to complete the process. If,
once aware of a possible assessment, the taxpayer does not object to the
assessment because he or she believes that the process is flawed and that he or
she is wrong, the taxpayer suffers the consequences. In the case at bar, the Appellant
raised the issue in his Notice of Objection and the Minister chose not to send the
assessments again using the Appellant’s address. What is more, by waiving the
normal reassessment period, the Appellant again in some way informed the Minister
that something was amiss despite the presumed sending of the reassessment. In
both cases, the Minister did not change his ways.
[15]
The answer to both questions
is therefore in the negative. Considering
that the Minister never sent the reassessments to the Appellant in a manner
consistent with subsection 152(2) of the Act, the reassessments were not
made. This therefore brings us back to the dates of the initial assessments
made on June 15, 1998, for the 1997 taxation year and November 8, 1999, for
the 1998 taxation year, which means that all reassessments were made beyond the
normal assessment period unless the Minister can establish any misrepresentation that is
attributable to negligence, carelessness or wilful default or the commission of fraud in the tax returns filed by
the Appellant, which does not appear to be the case here in the light of his
written submissions.
[16]
Each party bears its own costs.
Signed at Edmundston, New Brunswick, this 20th day of February 2009.
“François Angers”
Translation
certified true
on this 28th
day of May 2009.
François Brunet,
Revisor
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