Citation: 2016 TCC 194
Date: 20160914
Docket: 2014-3806(IT)APP
BETWEEN:
EMMANUEL
AZZOPARDI,
Applicant,
and
HER
MAJESTY THE QUEEN,
Respondent,
Docket:
2014-3807(IT)APP
BETWEEN:
THOMAS
AZZOPARDI,
Applicant,
and
HER
MAJESTY THE QUEEN,
Respondent.
CONSOLIDATED
REASONS FOR ORDER
Bocock J.
I. Overview
of the Various Applications to Extend Time
[1]
These applications were heard together. They
involve two brothers who were reassessed in respect of a common investment in a
limited partnership. Both brothers failed to file Notices of Objection and/or
Notices of Appeal within the respective 90 day period prescribed under sections
167 and 169 of the Income Tax Act (the “as of right” period) for
various taxation years.
A. Certain Applications allowed on
consent
[2]
With respect to certain taxation years, 2001 and
2002 for Thomas and 2001, 2003, 2005 and 2011 for Emmanuel, the Respondent does
not oppose the application for an extension of time to file Notices of Appeal.
Such applications were clearly brought within the one year discretionary period
(the “one year grace period”) after the expiration of the as of right period.
[3]
The Court is satisfied, that Thomas and Emmanuel
Azzopardi brought their above-described applications within the one year “grace
period” after the expiration of the 90 day “as of right period”. Additionally,
they had bona fide intentions to appeal, attempted to do so as soon as
circumstances permitted, have reasonable grounds for their appeals and it is
just and reasonable to grant the applications. Therefore, the Notices of Appeal
as filed for those specific taxation years shall be received by the Court and
those appeals shall proceed to hearing by virtue of the Order attached to these
reasons.
B. Years Remaining in Dispute
[4]
The referenced years above do not include all the
taxation years which the Azzopardi brothers would like to appeal. For Thomas,
2011 and 2012 and for Emmanuel 2002 remain in dispute. These disputed applications
comprise the subject matter of the consolidated reasons for Order which follow.
[5]
The Court shall deal with Thomas’ and Emmanuel’s
applications separately since they involve slightly different facts and legal
determinations.
II. Issues
in both Applications
A. Thomas’ application in brief
[6]
Thomas’ applications involve two years. 2011
involves an application to extend the time to file a Notice of Appeal. Although
his application does not request it, 2012 involves an application to file a
Notice of Objection which has never been filed.
B. Emmanuel’s application in brief
[7]
For Emmanuel’s 2002 taxation year, the Minister
returned an assessment of no tax payable or in common parlance, a “Nil”
assessment. Therefore, the Minister asserts that Emmanuel’s previous Notice of
Objection and Notice of Appeal are inapplicable since there is no right of
appeal from an assessment which does not claim an amount for tax: Babich v.
HMQ 2007 FCA 151 at paragraph 7. As described below, during the hearing of
the application, Emmanuel indicated he had requested a loss determination under
section 152(1.1) of the Act. The Court held its decision in abeyance to
learn the Minister’s position. Hence, the extended period between the original
hearing date and these reasons.
C. Analysis and
discussion regarding Thomas’ Application for 2011 and 2012 taxation years
[8]
Many decisions of this Court are issued
regarding the 90 day “as of right” and the “one year grace” filing periods for Notices
of Objection and Notices of Appeal alike. Generally, unless this Court can
constructively find that a taxpayer has, more likely than not, filed an
objection or appeal with some recognizable and connected authority within the
“as of right period” or filed an application to extend within the “one year
grace period”, the taxpayer is statutorily barred by Parliament from having her
or his appeal determined by this Court. In the absence of such an act or
constructive facsimile, this Court has no jurisdiction to grant an order. A
clear and mandatory prohibition impressed in the Income Tax Act (or Excise
Tax Act) emasculates such authority. The very wording of the sub-section 167(5)
clearly states so [explanatory comments in brackets and underscoring are added]:
(5) No order
shall be made under this section [i.e. the one year grace period] unless
(a) the
application is made within one year [the “grace period”] after the
expiration of the time limited by section 169 [the “as of right period”] for
appealing; and
(b) the taxpayer
demonstrates that,
(i) within the time otherwise limited by section 169 for appealing
the taxpayer
(A) was unable to act or to instruct another to act in the
taxpayer’s name, or
(B) had a bona fide intention to appeal,
(ii) given the reasons set out in the application and the
circumstances of the case, it would be just and equitable to grant the
application,
(iii) the application was made as soon as circumstances permitted,
and
(iv) there are reasonable grounds for the appeal. [underscoring
added]
[9]
The conjunction “and” placed between the one
year grace period and the four pronged evidentiary requirement together with
the preamble containing the negative mandatory language of “No order shall
issue” are plain, clear and fatal. The Federal Court of Appeal has said exactly
that on several occasions, none more clearly than in the case of MNR v
Minuteman Press, (1988) 88 DTC 6278 where the Court held:
…Once it has been
determined that no application was made for an extension of time to appeal
within the one year limit, the question of whether or not it would be just and
equitable to grant an extension of time to appeal does not arise.
[10]
If a taxpayer has not brought an application to
extend within the one year grace period, the Court has no jurisdiction to move
to a consideration of the subsequent four pronged evidentiary factors for
exercising its discretion.
[11]
Therefore, in considering any application to
extend the time to file a Notice of Appeal or a Notice of Objection, the first
issue is: factually did the taxpayer effectively or constructively file an
application to extend within the one year grace period. This first step cannot
be conflated with the subsequent or second one, namely, do evidentiary grounds exist
to grant the extension within the one year grace period?
[12]
Only after the Court concludes the application to
extend has been filed within the “one year grace period”, need it be concern
with the four pronged evidentiary requirements.
[13]
With respect to the 2011 taxation year of Thomas,
a Notice of Confirmation was issued on June 21, 2013. The Minister asserts no
Notice of Appeal was filed within the 90 day “as of right period” and that no
application to extend was filed within the “one year grace period” pursuant to
section 167(5)(a).
[14]
With respect to 2012, the Minister asserts that
neither a Notice of Objection nor an application to extend the time to file a
notice of objection was ever received by her pursuant to section 169(1). Such
subsection requires a notice of objection as a condition precedent to instituting
an appeal: Bormann v R, 2006 FCA 83 at paragraph 3 to 5, which states:
[3] Section
169(1) of the Income Tax Act obliges a taxpayer to serve [a] Notice of
Objection in order to appeal an assessment. In other words, service of a Notice
is a condition precedent to the institution of an appeal.
[4] As mentioned,
the appellant did not serve a Notice of Objection nor is there evidence that
the appellant made an application to the Minister to extend the time to file a
Notice of Objection.
[5] Once it is
clear that no application for an extension of time was made, the law is clear
that there is no jurisdiction in the Tax Court to further extend the time for
equitable reasons.
[15]
It is within this mandatory and binding legal
structure that the Court must consider the facts of the 2011 and 2012
applications of Thomas.
[16]
Additional facts were adduced at the hearing on
behalf of Thomas through his agent and brother, Emmanuel. During the several
years leading up to the hearing of this application, the Applicants had
retained various accountants and lawyers to assist with their various
assessments and reassessments concerning the underlying limited partnership
investments. Correspondence abounded and fogged the process. Many tax years, several
different taxpayers, statements of account, requirements to pay, queries from
taxpayer’s agents and responses from CRA employees all litter the documentary landscape.
Buried within this mound of papers were the 2012 Notice of Assessment dated
June 10, 2013 and the 2011 Notice of Confirmation dated June 21, 2013, the
subject of these applications.
[17]
Although no Notice of Objection for 2012, no
Notice of Appeal for 2011 or any application to extend within the one year
grace period may be found for either 2011 or 2012, there were nonetheless
certain documents which Thomas asserts constructively comprise those necessary
documents or at least demand a standstill of the one year grace period time
count.
[18]
The nature, chronology and dates of the
documents are relevant to such consideration, bearing in mind that the critical
final expiration filing dates for the “one year grace period” for extension
applications are September 19, 2014 for the 2011 appeal and April 30, 2015 for the
2012 objection. The events may be summarized as follows:
i.
April 3, 2012 – a
letter from CRA to the taxpayer regarding a Notice of Determination of the limited
partnership investment arising from certain of Minutes of Settlement concerning
a larger group of taxpayers of which Thomas and Emmanuel were two. In that
letter, CRA advised the taxpayers to file (or refile) the Notice of Objection
or appeal directly to the Tax Court of Canada. This letter precedes the Notice
of Confirmation of June 21, 2013 and the Notice of Assessment of June 10, 2013.
ii.
September 23, 2013 – A CRA letter issues confirming
that the 2001 and 2002 taxation years (notably not 2011 and 2012) are in
dispute and requesting payment in respect of outstanding tax for the 2011 and
2012 taxation years.
iii.
December 2, 2013 – A Request to pay in the
amount of $36,753.81 is served on Thomas and his bank.
iv.
February 11, 2014 – A letter from Thomas’
accountant to CRA requests various documentation relating to 2001, 2002 and
2011 taxation years (notably again not 2012). The letter requests the
underlying information relating to the partnership loss determination. The
letter also suggests individual appeals are “pointless” and that a “test case”
be selected and all other matters held in abeyance and thereafter bound by such
a result. A request is made that further notices of confirmation be held in
abeyance.
v.
March 11, 2014 – A letter of CRA, which appears
to be in response to the accountant’s February 11, 2014 letter, provides a
response to queries for information, confirms the April 3, 2012 advice that
individual partner reassessments would follow. The issue of the general partner’s
settlement authority is canvassed. Specifically the letter outlines the basis
of reassessment, confirms the partners’ individual reassessment calculations
and in the concluding paragraph advises that no Notices of Confirmation would
be held in abeyance, but appeals concerning disputes lie to the Tax Court of
Canada within 90 days of the receipt of any Notices of Confirmation.
vi.
March 12, 2014 – With serendipitous timing, a CRA
statement of account for Thomas arrives, which references a Nil balance owing. The
opening balance of approximately $30,000.00 is extinguished if one totals $12,300.00,
referencing a new $23,027.04 amount in dispute as of January 30, 2014, adjusting
some minor interest and transferring a credit balance to a 2014 installment
account. The statement also references $76,174.61 as the disputed amounts for
which Notices of Objection have been filed.
vii.
March 14, 2014 – a CRA letter to Thomas returns three
post-dated cheques payable to the Receiver-General originally sent by Thomas,
each in the amount of $6,150.00.
[19]
Given these facts, Thomas requests his 2011 and
2012 applications be allowed upon the basis that:
i.
CRA’s failure to provide partnership financial
and loss documentation prevents the marshalling of a proper appeal or
application;
ii.
The information and documents received from CRA
mislead Thomas: the statement of account and return of the cheques caused
Thomas to believe that 2011 and 2012 taxation years were properly before the
CRA and/or the Tax Court of Canada because no further liability was claimed and
the disputed amounts were enumerated as the subject to objection in the March
14th, 2014 letter; and
iii.
The March 12th 2014 inscrutable
statement of account and the March 14th, 2014 inexplicable return of
cheques are constructive acknowledgment by CRA that all taxpayer extension and/or
abeyance requests were consented to or, given the general confusion such
communications caused, constitute a more equitable start date for the grace period
in which to bring an application to extend the time to file a notice of appeal
and/or Notice of Objection.
[20]
For the reasons which follow, the applications
of Thomas for an extension to file a Notice of Appeal for 2011 and a Notice of
Objection for 2012 are dismissed.
[21]
While the inscrutable and non-descript statement
of account dated March 12, 2014 and the unexplained return of cheques dated
March 14, 2014 are confusing per se, when logically considered against
the specifically referable and addressed communications by CRA, especially the
specific response letter of March 11th, 2014, any such confusion is
resolved.
[22]
In addition, the letter of Thomas’ accountant dated
February 11, 2014 is no beacon of clarity. It fails to reference in any way an
appeal for the 2012 tax year. It does not request an extension to appeal or
object to either the 2011 or 2012 taxation years. Rather, it requests
“abeyance” or “rescission” of the notices of confirmation. Whatever was
intended, no such procedure exists. The letter concludes by saying …“it seems
pointless to expend time and effort on behalf of the CRA and myself objecting
and appealing and possibly proceeding to tax court on behalf of these 3
taxpayers when they have the same appeal.” Again, the letter proposes a lead
case for Emmanuel. If anything, it suggests no further objections or appeals
shall be brought.
[23]
As mentioned, in response to this February 11th
proposal letter, on March 11th, the CRA methodically responded to
each request: referencing the legal authority for notices of confirmation which
conformed to minutes of settlement, providing evidence of same to the taxpayers,
directing the representative to the legal authority binding the limited
partners to the minutes of settlement and denying the lead case request. Most
importantly, the letter states there is no legal authority to rescind or hold
the legally issued notices of confirmation in abeyance in the absence of an
appeal. Lastly and conclusively, it again directs the representative to appeal
to the Tax Court with each client required to initiate separate appeals for
each Notice of Assessment or Confirmation. The Court notes that had Thomas’
representative done so at the time, he would have been within the one year
grace period for 2011 and the as of right period for 2012.
[24]
Specifically, after the CRA letter of March 11th,
Thomas and his professional adviser had another 6 months or so (September 19,
2014 for 2011) to file an extension for an appeal and a month or more to file a
notice of appeal or another 13 months (April 30, 2015) to file an application
to extend the time to file an objection for 2012. Despite this lengthy and
deliberate response of March 11th, 2014, no notice of application is
filed. Nothing in the March 12, 2014 statement of account allowed Thomas or his
representative to conclude CRA accepted, acknowledged, construed or consented
to the receipt of an appeal for 2011 or an objection for 2012 in the face of CRA’s
clear and fulsome response just one day before. Similarly, the March 14, 2014
letter referencing no particular tax year (like the cheques enclosed) provides
no revocation by CRA of its March 11, 2014 definitive position.
[25]
It was not until October 22, 2014 that Thomas
filed an application to extend the time to file a Notice of Appeal for both
2011 and 2012. No application to extend the time to file a notice of objection
for 2012 has ever been filed. Again, the critical dates were September 19, 2014
for 2011 (appeal) and April 30, 2015 (objection) for 2012.
[26]
Moreover, the absence of focus on the part of
Thomas and his various agents has continued and is further relevant to 2012.
The Respondent’s Reply dated January 7, 2015 (dated almost 4 months before the
one year grace period for the 2012 application to extend the time for a notice
of objection would expire) provided additional warning. In paragraph 24 of the
Reply, it provides that the Applicant had until April 30, 2015 to apply for
extension to file a notice of objection. The Applicant failed to note this or,
in any event, heed it. Thomas also requested two adjournments which were
granted by the Court, the last on April 27, 2015 with three days left to file.
Notwithstanding all these potential reminders, no request to amend the 2012 application
was made by Thomas and, accordingly, no such order was granted during a period
while there was jurisdiction for this Court to do so.
[27]
Factually, making some effort, however
unfocussed, ill-addressed or malformed may have still allowed a cleft which the
Court could grasp. On the other hand, reaching the conclusion that such effort
and time would be wasted (as was the case with Thomas’ agent) and not filing
such a simple and formulaic notice, subsequent application or amendment provides
not such rung. The absence of some such filing robs this Court of jurisdiction
under subsection 167(5) and 169(1) and is fatal.
III. Analysis
and Decision regarding Emmanuel’s application for 2002 taxation year
[28]
The sole remaining basis for Emmanuel’s
application relates to a requested loss determination for the 2002 taxation
year.
[29]
Subsection 152(1.1) of the Act provides
as follows [underscoring added]:
Determination of
losses
(1.1)
Where the Minister ascertains the amount of a
taxpayer’s non-capital loss, net capital loss,
restricted farm loss, farm loss or limited partnership loss for a
taxation year and the taxpayer has not reported that amount as such a loss
in the taxpayer’s return of income for that year, the Minister shall, at
the request of the taxpayer, determine, with all due dispatch, the amount of the
loss and shall send a notice of determination to the person by whom the return
was filed.
[30]
During the hearing, Emmanuel advised the Court
that an outstanding request for a loss determination had been made to the
Minister on August 25th, 2015. The Court issued several Orders to
hold the decisions in both these applications in abeyance while the Minister
was allowed an opportunity to exercise her discretion to make a loss
determination. Written submissions were also requested and received from the
parties during that period.
[31]
Subsequently, the Court was advised that the
Minister would require more time to respond to the request. An extension was
granted. Respondent’s counsel advised the Court on May 26th, 2016
that the Minister considered Emmanuel’s request of August 26th, 2015
to be a request for an adjustment (presumably under sub-section 154(4.1)) and
not a loss determination request under sub-section 152(1.1).
[32]
The Court, having undertaken a path to learn the
Minister’s position regarding the purported loss determination request finds
itself no further ahead. Emmanuel is resolute he is entitled to a loss
determination. The Minister refuses to give one because she indicates such a
request has not been properly made. The Court is not prepared to delay its decision
in these applications further and will decide Emmanuel’s based upon the 2002
assessment before it.
[33]
Perhaps Emmanuel may re-submit his loss
determination request, hopefully in a format and referencing claimed losses sufficient
to evoke a definitive answer from the Minister, failing which his remedy to
compel such a determination will lay elsewhere. At present, the nub of the
issue is that the Minister asserts she can discern no difference on record
between the quantum of loss deducted by Emmanuel in his 2002 return and that
allowed by the Minister on the “as filed” assessment. Simply put, there appears
to be no difference between Emmanuel’s filing position and the Minister’s 2002
assessment relating to the loss claimed. Such a difference is the sine qua
non and object of any tax dispute.
[34]
On that basis, the determination of this 2002 application
to extend the time to file a notice of appeal is premature. There has been no discernable
loss determination to date which constitutes a dispute. At present, since only
a no tax payable or “Nil assessment” exists, no appeal lies to this Court: Babich
v HMQ, 2010 TCC 352, upheld by the Federal Court of Appeal, supra, at
paragraph 9. On that basis the application for extension of Emmanuel’s 2002
taxation year is dismissed.
This
Amended Order and Amended Reasons for Order are issued in substitution of the
Order and Reasons for Order dated September 12, 2016.
Signed at Ottawa, Canada, this 14th day
of September, 2016.
“R.S. Bocock”
Email this Content