Date: 20041116
Docket: T-453-04
Citation: 2004 FC 1606
EDMONTON, ALBERTA, NOVEMBER 16, 2004
PRESENT: THE HONOURABLE MR. JUSTICE MOSLEY
BETWEEN:
SATISH K.KHANNA
Applicant
and
ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR ORDER AND ORDER
[1] Mr. Satish Khanna seeks judicial review of the decision of the Minister of Revenue's delegate to deny his fairness application respecting interest arrears stemming from the assessment of his 1997 income tax return.
[2] Mr. Khanna bought a small business in October 1993. He expanded the space it operated in and renovated the premises, which increased its market value. He could have claimed the
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increase prior to February 24, 1994, by election, as a tax-free capital gain, but was not aware of the provision allowing this. He sold the business in 1997 and found out about the election only in 1998 when filing his return for 1997.
[3] Mr. Khanna then attempted to file the election late for the 1995 taxation year. It was not accepted. In 2000 his return for 1997 was audited and he was assessed as owing tax for the capital gain and interest from April of 1998. He filed a notice of objection to the reassessment, but also applied for consideration under the fairness provisions, primarily on the grounds that he was unaware of the statutory deadline for claiming a capital claims exemption and had suffered health problems related to his tax debt. That application was denied. Mr. Khanna then sought judicial review of that decision with respect to the interest accrued from April 1998 to March 2001.
[4] On March 15, 2002, this Court (on consent) ordered the Minister to give a fresh and independent consideration to the request for interest relief because the person who had considered the initial fairness application had also made the original decision to deny Mr. Khanna's request for reassessment of his 1995 return.
[5] Mr. Khanna submitted no new evidence for the second fairness assessment which was completed on February 2, 2004. An affidavit of the official who conducted the second assessment,
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Joyce Laverdiere, was filed by the respondent. Her recommendation, adopted by the Minister's delegate, was to deny the application on the ground that there was no reason to grant relief arising from Mr. Khanna's ignorance of the deadline. With respect to his health problems, there was no indication that they were in any way a cause of the failure to file on time.
[6] The decision to waive or cancel penalties and interest under the Income Tax Act R.S.C. 1985, c. 1 (5th Supp.) subsection 220(3.1), is discretionary. Thus there is no obligation on the Minister to waive or cancel penalties and interest in particular circumstances: Syal v. M.N.R., 99 D.T.C. 5451 (F.C.T.D.)
[7] In Kaiser v. Canada (Minister of National Revenue), [1995] F.C.J. No. 349 (T.D.)(QL), Justice Rouleau described the objective behind fairness reviews in the federal tax scheme at paragraphs 8, 10-11:
The purpose of this legislative provision is to allow Revenue Canada, Taxation, to administer the tax system more fairly, by allowing for the application of common sense in dealing with taxpayers who, because of personal misfortune or circumstances beyond their control, are unable to meet deadlines or comply with rules under the tax system. The language used in the section bestows a wide discretion on the Minister to waive or cancel interest at any time. To assist in the exercise of that discretion, policy guidelines have been formulated...
[8] The standard to be applied by the Court in considering judicial review applications from fairness decisions is that of patent unreasonableness: Sharma v. C.C.R.A., [2001] 3 C.T.C. 169 (F.C.T.D.).
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[9] In his oral presentation to the court, Mr. Khanna freely acknowledged that the error in failing to claim the capital gains exemption on his 1995 tax return was entirely attributable to his own lack of knowledge of the brief "window of opportunity" that had been provided tax payers under the Act. He believes, however, that the accrual of interest from April 1, 1998 to March of 2001, when his first application for fairness consideration was submitted is unjustified and attributable to the Minister's failure to inform him in 1998 that the capital gains tax was due. Mr. Khanna applied twice in 1998 for reassessment of his 1995 tax return. Denial letters were sent in response to both applications. He claims never to have received the second.
[10] Mr. Khanna argues that it was unfair for the Minister to take almost two years to reconsider his fairness application after it was ordered, on consent, by the Court. Further he contends that the Canada Revenue Agency ("CRA") officials who took part in the reconsideration failed to take into account all of the information he had previously submitted including the circumstances regarding the sale of his business, his attempt to re-file in 1998 and the responses he received from CRA in that year to his correspondence.
[11] While it is regrettable that the Minister took so long to reconsider the matter, I am unable to conclude that the delay following the consent order amounted to procedural unfairness. Moreover the procedural error which led to that order being made does not vitiate in any way the assessment made in 2000 that income tax and interest arising therefrom was owing for the 1997 taxation year.
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[12] Mr. Khanna was given the opportunity to make representations as to why the interest should be waived and the agency had all of the necessary facts upon which to make a reasoned and objective decision. To borrow Justice Rouleau's words from Kaiser, supra, absent bad faith on the part of the Minister, a breach of the principles of natural justice or consideration of extraneous or irrelevant factors, there is nothing to warrant the Court's interference with the exercise of the Minister's discretion.
[13] Having carefully reviewed the reasons of the review committee, adopted by the Minister's delegate in her decision letter to Mr. Khanna, I can find nothing patently unreasonable about the decision. However, given the protracted history of this matter and the length of time taken by the Minister to issue the second fairness assessment, I will exercise my discretion to decline to order costs in favour of the Respondent.
ORDER
THIS COURT ORDERS that:
The application is hereby dismissed. The parties shall bear their own costs.
"Richard G. Mosley"
Judge
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-453-04
STYLE OF CAUSE: SATISH K KHANNA v. AGC
PLACE OF HEARING: EDMONTON, ALBERTA
DATE OF HEARING: NOVEMBER 16, 2004
REASONS FOR ORDER AND ORDER: MOSLEY J.
DATED: NOVEMBER 16, 2004
APPEARANCES:
Satish K Khanna (self-represented) FOR APPLICANT
nM Margaret McCabe FOR RESPONDENT
SOLICITORS OF RECORD:
Self-represented FOR APPLICANT
Morris Rosenberg, Deputy Attorney General of Canada
Ottawa, Ontario FOR RESPONDENT
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