Citation: 2014 TCC 69
Date: 20140305
Docket: 2013-3748(IT)APP
BETWEEN:
MICHAEL FURLONG,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Woods J.
[1]
Michael Furlong is attempting to
correct a mistake that he believes he made by failing to claim a deduction for
interest in the proper taxation years. The relevant period is the 2007, 2008
and 2009 taxation years.
[2]
When Mr. Furlong first discovered
the mistake, he filed a form, T1 Adjustment Request, which asked the Canada
Revenue Agency (CRA) to allow the deductions.
[3]
Mr. Furlong believed that one CRA
official appeared to be in agreement with the request, but that an official who
took over the file was not satisfied that the deductions were proper. The
interest deduction was ultimately denied on the basis that the borrowed money
was not used for the purpose of earning income.
[4]
Mr. Furlong fervently believes
that the deductions are proper and, moreover, he believes that adequate support
for the deductions was provided to the CRA. Mr. Furlong also believes that the
CRA did not give due consideration to his submissions, especially since the CRA
did not provide a second level of review even though Mr. Furlong made it clear
that he disagreed with their decision.
[5]
Mr. Furlong has applied to this
Court to seek an extension of time to institute an appeal with respect to this
matter. In the alternative, he asks that the CRA be required to give a second
level review of the T1 adjustment request.
Review of T1 Adjustment
Request
[6]
I will first deal with the
alternative submission which requests a second level review. Unfortunately for
Mr. Furlong, this relief is not something that this Court has the authority to
provide.
[7]
At the hearing, I explained to Mr.
Furlong and his son Gary Furlong, who represented him at the hearing, that the
Tax Court of Canada shares jurisdiction over income tax matters with the
Federal Court. In general, the jurisdiction of the Tax Court of Canada is
limited to reviewing assessments in order to determine whether they are
accurate. The jurisdiction does not extend to reviewing a decision of the CRA
to deny a T1 Adjustment Request.
[8]
Although this alternative relief
cannot be granted, I would note that Mr. Furlong’s submissions concerning
the lack of proper review were compelling. At my request, counsel for the
respondent agreed to communicate Mr. Furlong’s request for a second level
review to the CRA for their consideration.
Extension of time to
appeal
[9]
I now turn to Mr. Furlong’s
request for an extension of time to institute an appeal.
[10]
The respondent opposes this
request on the ground that Mr. Furlong is precluded from instituting an appeal
from the assessments for the 2007, 2008 and 2009 taxation years because Mr.
Furlong failed to file valid notices of objection with respect to these
assessments.
[11]
Mr. Furlong does not dispute that
notices of objection to the assessments were not filed in time.
[12]
In these circumstances, it is not
appropriate to grant an application to extend time to appeal from the relevant
assessments.
[13]
The relevant legislative provision,
s. 167(5)(b)(ii) of the Act, requires that an applicant demonstrate that
it is just and equitable to grant the application given the reasons set out in
the application and the circumstances of the case. This requirement has not
been satisfied.
[14]
If Mr. Furlong’s application is
granted, it would simply prolong an appeal that is doomed to failure. An
application to extend time cannot remedy the fundamental problem with the
notice of appeal which is that proper notices of objection to the relevant assessments
were not filed. This requirement is mandated by subsection 169(1) of the Act.
[15]
If an extension of time is
granted, the respondent would no doubt then apply to this Court to have the
notice of appeal quashed for failure to comply with a preliminary step. The
Court would be required to grant such an application.
[16]
Gary Furlong, the appellant’s
representative, acknowledges that these requirements are not satisfied. He
suggests, though, that Parliament must have intended for taxpayers to be able
to appeal from denials of T1 adjustment requests if the request is made within
the statutory period for reassessing. It is only common sense that a right of
appeal would be given, it is submitted.
[17]
This argument appears to be
reasonable and logical, but the scheme of the Act does not permit such
an appeal to this Court. I express no view as to whether a remedy may be
available in the Federal Court.
[18]
In general, taxpayers who wish to
have income tax assessments reviewed by this Court need to follow the strict
deadlines that are legislated for filing notices of objection and notices of
appeal. This was not done in this case. These limitation periods may appear to
be too short, but they are the deadlines that Parliament has imposed.
[19]
Gary Furlong further submits that
this Court has jurisdiction over this matter because the CRA’s denial of the T1
Adjustment Request is a determination which may be appealed. This argument is
based on subsections 152(4.3) and 165(1.1) of the Act.
[20]
In particular, Mr. Furlong submits
that the denial of the T1 Adjustment Request is a determination referred to in
subsection 152(4.3) of the Act. He further submits that subsection
165(1.1) of the Act gives this Court jurisdiction to hear appeals with
respect to such determinations. These provisions are reproduced below.
152.(4.3) Consequential
assessment - Notwithstanding subsections (4), (4.1) and (5), if the
result of an assessment or a decision on an appeal is to change a particular
balance of a taxpayer for a particular taxation year, the Minister may,or
if the taxpayer so requests in writing, shall, before the later of the
expiration of the normal reassessment period in respect of a subsequent
taxation year and the end of the day that is one year after the day on which
all rights of objection and appeal expire or are determined in respect of
the particular year, reassess the tax, interest or penalties payable by
the taxpayer, redetermine an amount deemed to have been paid or to have
been an overpayment by the taxpayer or modify the amount of a refund or
other amount payable to the taxpayer, under this Part in respect of the
subsequent taxation year, but only to the extent that the reassessment,
redetermination or modification can reasonably be considered to relate to
the change in the particular balance of the taxpayer for the particular
year.
(Emphasis added)
165.(1.1) Limitation
of right to object to assessments or determinations -Notwithstanding
subsection 165(1), where at any time the Minister assesses tax,
interest, penalties or other amounts payable under this Part by, or makes
a determination in respect of, a taxpayer
(a) under
subsection 67.5(2) or 152(1.8), subparagraph 152(4)(b)(i) or subsection
152(4.3) or (6), 161.1(7), 164(4.1), 220(3.4) or 245(8) or in
accordance with an order of a court vacating, varying or restoring
an assessment or referring the assessment back to the Minister for
reconsideration and reassessment,
(b) under
subsection 165(3) where the underlying objection relates to an assessment
or a determination made under any of the provisions or circumstances
referred to in paragraph 165(1.1)(a), or
(c) under a
provision of an Act of Parliament requiring an assessment to be made that,
but for that provision, would not be made because of subsections
152(4) to 152(5),
the taxpayer may
object to the assessment or determination within 90 days after the day
of sending of the notice of assessment or determination, but only to the
extent that the reasons for the objection can reasonably be regarded
(d) where the assessment
or determination was made under subsection 152(1.8), as relating to any
matter or conclusion specified in paragraph 152(1.8)(a),
152(1.8)(b) or 152(1.8)(c), and
(e) in any other
case, as relating to any matter that gave rise to the assessment or
determination and that was not conclusively determined by the court,
and this subsection shall not be read or construed as limiting
the right of the taxpayer to object to an assessment or
a determination issued or made before that time.
(Emphasis added)
[21]
The problem that I have with this
argument is that a determination regarding a T1 Adjustment Request is not a
determination contemplated by subsection 152(4.3) of the Act.
[22]
This provision is designed to
require the Minister to issue consequential reassessments to conform with
changes that are made in an “assessment” or in a “decision on an appeal.”
[23]
In the circumstances of this case,
Mr. Furlong does not seek conformity with an “assessment” or a “decision on an
appeal.” Accordingly, subsection 152(4.3) has no application.
[24]
Gary Furlong also referred me to
comments by judges of this Court to the effect that it is preferable for
appeals be heard on their merits rather than being decided on procedural
grounds.
[25]
I agree with this sentiment, but provided
that the relief sought is not prohibited by the Act. Unfortunately for
Mr. Furlong, the relief that he seeks is clearly prohibited.
[26]
The application will be dismissed.
Signed at Ottawa, Ontario this 5th day of March
2014.
“J. M. Woods”
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