Date:
20121019
Docket:
T-1005-10
Citation:
2012 FC 1223
Toronto, Ontario, October 19, 2012
PRESENT: The Honourable Mr. Justice Campbell
BETWEEN:
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NANCY HUNTER
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Applicant
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and
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CANADA REVENUE AGENCY
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Respondent
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REASONS FOR
ORDER AND ORDER
[1]
The
present Application is a judicial review of a decision of the Canada Revenue
Agency (CRA), dated May 30, 2010, in which the Applicant’s request for interest
relief pursuant to the taxpayer relief provision of subsection 220(3.1) of the Income
Tax Act, RSC 1985 c I (5th Supp) (the Act) was denied. The Applicant
submitted her application in November of 2009 seeking relief of arrears
interest in the amount of $18,528.32. The interest had arisen on the
Applicant’s account due to tax liability imposed on the Applicant in the course
of a tax audit for the 2001 and 2002 tax years.
[2]
The
interest relief provision found in subsection 220(3.1) of the Act allows the
Minister of National Revenue to grant interest and penalty relief to taxpayers
in certain circumstances. The exercise of this discretionary power of the
Minister is guided by ministerial guidelines found in Information Circular IC
O7-1 (the Guidelines). The Guidelines state that a taxpayer can seek interest
and penalty relief on one or more of the following grounds: (1) extraordinary
circumstance beyond the control of the person seeking relief, such as natural
disasters or serious illness; (2) actions of the CRA such as delays and errors;
and (3) taxpayer’s inability to pay or financial hardship. In Bozzer v
Minister of National Revenue, 2011 FCA 186 (FCA), the Federal Court of
Appeal confirmed that the Guidelines accurately reflect the purpose of subsection
220(3.1).
[3]
The
application submitted by the Applicant stated that relief was sought on all
three of the above grounds. However, the argument in the accompanying
narrative, while citing delays of the CRA, is essentially based on the
Applicant’s view that her tax liability was not warranted. The narrative outlines
the circumstances that led to the Applicant’s tax liability and expresses the
Applicant’s view that the CRA mishandled her audit. It also cites the length of
time it took for the CRA to complete the audit and the subsequent appeals. The
“extraordinary circumstances” cited by the Applicant on Form RC4288 of the
application relate to the CRA’s conduct during the audit and expresses the view
that legitimate expenses were denied in the course of the taxpayer’s audit. Thus,
I find that the Applicant supported her application with grounds well outside
the scope of the Guidelines.
[4]
The March 30,
2010 Decision of the Minister’s delegate (Decision) to deny the Applicant’s
request is responsive to the Applicant’s request because it addresses CRA delay
and error. On the question of CRA delay, the Decision provides as follows:
I have reviewed your file,
including the reassessment made for 2001 and 2002 and the consideration of your
Notices of Objection by Appeals Division. Relief from interest was granted for
175 days at the time of reassessment and I conclude that is adequate to account
for any delays on the part of the agency in finalizing your audit. The Appeals
Division addressed your objections in a timely manner and no relief is
warranted on account of delay on their part.
With respect to CRA error, the decision
provides as follows:
There are no errors in the
reassessment by Mr. Ladouceur and our Appeals Division had reduced the
reassessment in regard to any disallowed expenses or other items you were able
to support when filing your Notices of objection.
(Decision, Applicant’s
Application Record, p. 6)
[5]
With
respect to the present challenge to the Decision, the Minister’s discretion
under the fairness provisions of the Act is reviewable on a standard of
reasonableness
(Lanno v Canada Customs and Revenue Agency, 2005 DTC 5245 (FCA) at paras
3 to 7; Canada Revenue Agency v Telfer, 2009 FCA 23 at para 2).
[6]
The
Applicant’s challenge is stated in the first paragraph of her written
submissions:
This is an application for
judicial review in respect of the decision of the Canada Revenue Agency (CRA)
to reject legitimate business expenses claims for the 2001 tax year of the
Applicant, Nancy Hunter. Further, the CRA has been unjust in their penalty and
interest charges against the Applicant due to undue delays and numerous errors
made by the auditor during the audit and the review process.
(Applicant’s Application Record,
p. 178)
At paragraph 23 of the submissions, the
Applicant states the primary issues for determination: the errors in the audit
prepared by the CRA; the erroneous decision to disallow legitimate expenses;
and the unfairness of the interest amount levied by the CRA (Applicant’s
Application Record, pp. 185 - 186). I find that these substantive arguments are
irrelevant to a determination on the present Application given the narrow scope
of s.220(3.1) of the Act as described above.
[7]
In
argument during the course of the hearing of the present Application, the
Applicant raised a fairness argument with respect to the Minister’s process for
considering her application for interest and penalty relief. Prior to
submitting her application, the Applicant learned that interest relief requests
are normally subject to a two-tier process within the CRA. That is, in the
normal course, a taxpayer whose request is refused by a first-level
decision-maker is entitled to seek a second-level review and has the
opportunity to submit additional materials. However, on March 26, 2010, two
months before her decision was rendered, the Applicant was informed by letter that
her particular request would be treated as a second-level application. The
reason stated was that the CRA had already granted interest relief in 2006, and
her request for additional relief was, therefore, a second-level request. The
Applicant did not raise an objection with respect to this procedure when she
was so notified; indeed, she did not respond to the letter. The Applicant stated
that she did not object because she did not understand that this was her last
opportunity to obtain interest relief from the CRA.
[8]
During the
course of the present hearing, the Applicant argued that she was entitled to
another opportunity to make her case before the CRA. When pressed to identify
the unfairness of not receiving another chance, the Applicant articulated that
a second-level assessment would provide another opportunity to demonstrate to
the CRA that mistakes were made in the course of her tax audit. I find that this
argument was made on a continuing mistaken impression that the interest and
penalty relief regime is a means to remedying the perceived errors of the CRA in
assessing her tax liability. As a result, I give the argument no weight.
[9]
However, during
the course of the hearing the Applicant did point to CRA documents, disclosed in
the course of this judicial review, which she argued do indicate that the CRA
had incorrect information with respect to the Applicant’s compliance with her
tax obligations. This is a factor cited in the Guidelines as a relevant
consideration when considering whether her relief is warranted. The Applicant
argued that a second-level assessment would provide the opportunity to correct
this information. However, I find that because the Minister’s Decision does not
rely on the identified information, its existence is not a relevant
consideration on the present Application.
[10]
In
conclusion, given the above analysis, I find that there is no basis upon which
to find that the Minister’s decision is unreasonable.
ORDER
THIS
COURT ORDERS that
The present
Application is dismissed.
I make no order
as to costs.
“Douglas R. Campbell”
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