Docket: T-1727-14
Citation:
2015 FC 223
Ottawa, Ontario, February 20, 2015
PRESENT: The
Honourable Mr. Justice Fothergill
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BETWEEN:
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JOE FIORUCCI
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Applicant
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and
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THE MINISTER OF NATIONAL REVENUE AND THE CANADA REVENUE AGENCY
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Respondent
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JUDGMENT AND REASONS
[1]
Joe Fiorucci (the Applicant) has brought an
application for judicial review of a refusal by the Minister of National
Revenue (the Respondent) to adjust his tax return for the 2000 taxation year. The
Applicant asks the Respondent to permit a business investment loss of $144,683
and thereby apply an allowable business investment loss (ABIL) of $72,341.50
pursuant to subsection 152(4.2) of the Income Tax Act, RSC, 1985, c 1
(the Act).
[2]
For the reasons that follow, the application for
judicial review is dismissed with costs.
I.
Facts
[3]
The Applicant was self-represented in this
proceeding but appeared together with his accountant, Mr. Martin Lapedus. The
Applicant filed only a brief affidavit in support of his claim. In paragraph 6
of his affidavit, the Applicant deposed that he “claimed
a small business loss on [his] 2000 personal income tax return in the amount of
$72,341 which was disallowed.”
[4]
The Respondent filed the affidavit of Nicole
Giroux, an officer with the Sudbury Office of the Canada Revenue Agency (CRA). Ms.
Giroux’s affidavit and its exhibits demonstrate the following:
(a)
On November 14, 2002, Mr. Martin Lapedus, the
Applicant’s accountant, submitted a written request to the CRA for the ABIL.
(b)
On May 14, 2003, the CRA acknowledged receipt of
the requested ABIL and asked for further information to be submitted within 30
days.
(c)
On June 19, 2003, the CRA wrote to Mr. Lapedus
to inform him that they had not received the supporting documentation and gave
the Applicant a further 30 days to provide it, failing which no action would be
taken with regard to the requested ABIL.
(d)
Having received no reply within 30 days, the CRA
denied the requested ABIL and closed the file.
(e)
On August 8, 2007, Mr. Lapedus wrote to the CRA
to advise that the Applicant was unable to locate a copy of the financial
statements of his corporation JOFCO Construction Inc. (JOFCO) for the 2000
taxation year to support his claim for the ABIL. He asked the CRA to provide a
copy of the 2000 T2 return and financial statements to the Applicant.
(f)
On October 2, 2007, the CRA telephoned Mr.
Lapedus and told him that JOFCO’s 2000 T2 return had not been filed. Mr.
Lapedus requested a copy of the 1999 T2 return instead.
(g)
On October 15, 2007, the CRA forwarded a copy of
JOFCO’s 1999 T2 return and financial statements to JOFCO, to the attention of
the Applicant.
(h)
On June 21, 2011, the Applicant made a request
under subsection 152(4.2) of the Act (the taxpayer relief provisions) for the
ABIL.
(i)
On August 15, 2011, the CRA wrote to the
Applicant to inform him that his request for an adjustment to his 2000 return
under the taxpayer relief provisions could not be considered because it was
received after the ten-year limitation period.
(j)
On October 3, 2011, the Applicant made another
request for the ABIL. Following further correspondence between Mr. Lapedus and
the CRA, the CRA agreed to review the request under the taxpayer relief
provisions (the First Level Request).
(k)
On May 2, 2013, the CRA wrote to the Applicant
and stated the following:
Normally, a request to adjust a return must
be made within three years from the mailing date of the respective “Notice of
Assessment”. However, subsection 152(4.2) of the Income Tax Act allows
certain adjustments to returns that are otherwise normally barred by statute,
provided that all relevant documents to support the claim are provided at the
time of the request.
[. . .]
In order for us to consider your request for
adjustment, we require additional information. Please complete the enclosed
questionnaire and return it to our office along with the supporting
documentation.
(l)
On May 22, 2013, Mr. Lapedus telephoned the CRA
to request a 30 day extension, which was granted until July 2, 2013.
(m)
On May 27, 2013, Mr. Lapedus wrote to the CRA to
acknowledge receipt of the questionnaire, and stated that much of the
information requested by the CRA was not available due to a flood. He conceded
that it would be difficult to substantiate the Applicant’s claim.
(n)
On June 6, 2013, the CRA completed its review
and proposed to deny the ABIL because the Applicant had not provided: (i) a
copy of the shareholder loan account from the general ledger of the corporation
and details of all transactions in the account; (ii) documentation confirming
that the funds were transferred to the corporation (either the original
cancelled cheques, certified true copies of both the front and back of all
cheques, or other documentary evidence showing the transfer of the funds into
the corporation’s account); and (iii) documentation to support the
corporation’s inability to repay the loans due bankruptcy, insolvency or
winding-up.
(o)
On November 21, 2013, the CRA advised the
Applicant of its decision to deny the First Level Request, stating that it
could not permit the ABIL without supporting documentation in accordance with
section 39 and subsection 152(4.2) of the Act (the First Level Decision).
(p)
On December 11, 2013, the Applicant applied to
the Director of Tax Services of the CRA for a review of the First Level
Decision.
(q)
On March 24, 2014, the CRA wrote to the Applicant
to acknowledge receipt of the request. In this letter, the CRA repeated its
demand from the First Level Review for supporting documentation.
(r)
On April 4, 2014, Mr. Lapedus provided the CRA
with a partially completed questionnaire. He also informed the CRA that he had
previously submitted all of the documentation that was available. Mr. Lapedus
took the position, on behalf of the Applicant, that the CRA had only three
years from the date of assessment to request information regarding JOFCO, and
if the information had been requested in 2002 to 2004, then it would have been
available.
(s)
On April 28, 2014, the CRA completed the review
and proposed to deny the ABIL because the Applicant had once again not provided
the necessary supporting documentation.
(t)
On July 11, 2014, the CRA denied the second
level request, referencing its letter dated July 10, 2014.
[5]
In oral submissions before this Court the
Applicant alleged, apparently for the first time, that neither he nor Mr.
Lapedus had any notification from the CRA regarding his 2000 income tax return
until he received a telephone call from a tax collector in 2007. He denied
receiving a notice of assessment with respect to any of his income tax returns,
and specifically denied that he or Mr. Lapedus had received correspondence from
the CRA dated May 14, 2003 or June 19, 2003 (Exhibits A and B to the Affidavit
of Nicole Giroux). In its letter dated May 14, 2003 addressed to Mr. Lapedus,
the CRA wrote as follows:
We have
received a request from you dated November 14, 2002 to adjust your client’s
return to include an allowable business investment loss in 2000.
[…]
In order for us to complete the request for
adjustment, we require additional information. Please complete the enclosed
questionnaire and return it to our office along with the supporting
documentation.
[6]
The Applicant acknowledged to the Court that the
requested supporting documentation was available until approximately 2008.
II.
Analysis
[7]
The standard of review for a decision of the
Minister under subsection 152(4.2) of the Act is reasonableness (Lanno v
Canada (Customs and Revenue Agency), 2005 FCA 153, [2005] FCJ No 714; Panchyshyn
v Canada (Canada Revenue Agency), 2008 FC 996, [2008] FCJ No 1241).
[8]
Subsection 152(4.2) of the Act permits certain
adjustments to be made to income tax returns that are otherwise barred by
statute.
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(4.2)
Notwithstanding subsections (4), (4.1) and (5), for the purpose of
determining, at any time after the end of the normal reassessment period of a
taxpayer who is an individual (other than a trust) or a testamentary trust in
respect of a taxation year, the amount of any refund to which the taxpayer is
entitled at that time for the year, or a reduction of an amount payable under
this Part by the taxpayer for the year, the Minister may, if the taxpayer
makes an application for that determination on or before the day that is ten
calendar years after the end of that taxation year
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(4.2) Malgré les paragraphes (4),
(4.1) et (5), pour déterminer, à un moment donné après la fin de la période
normale de nouvelle cotisation applicable à un contribuable — particulier
(sauf une fiducie) ou succession assujettie à l’imposition à taux progressifs
— pour une année d’imposition, le remboursement auquel le contribuable a
droit à ce moment pour l’année ou la réduction d’un montant payable par le
contribuable pour l’année en vertu de la présente partie, le ministre peut,
si le contribuable demande pareille détermination au plus tard le jour qui
suit de dix années civiles la fin de cette année d’imposition, à la fois :
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(a) reassess tax,
interest or penalties payable under this Part by the taxpayer in respect of
that year; and
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a) établir de
nouvelles cotisations concernant l’impôt, les intérêts ou les pénalités
payables par le contribuable pour l’année en vertu de la présente partie;
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(b) redetermine the amount, if any,
deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3),
127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the
taxpayer’s tax payable under this Part for the year or deemed by subsection
122.61(1) to be an overpayment on account of the taxpayer’s liability under
this Part for the year.
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b) déterminer de
nouveau l’impôt qui est réputé, par les paragraphes 120(2) ou (2.2),
122.5(3), 122.51(2), 122.7(2) ou (3), 122.8(2) ou (3), 127.1(1), 127.41(3),
ou 210.2(3) ou (4), avoir été payé au titre de l’impôt payable par le
contribuable en vertu de la présente partie pour l’année ou qui est réputé,
par le paragraphe 122.61(1), être un paiement en trop au titre des sommes
dont le contribuable est redevable en vertu de la présente partie pour
l’année.
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[9]
The Applicant has not identified any error on
the part of the Respondent in considering his request for an ABIL. The sole
ground advanced by the Applicant before the Court was that neither he nor Mr.
Lapedus was informed until 2007 that supporting documentation would be required
in order for the CRA to consider his claim. The Applicant did not offer sworn
testimony from either Mr. Lapedus or himself to substantiate this allegation,
which was raised for the first time in oral submissions. The Applicant was
aware of the contents of the Affidavit of Nicole Giroux well in advance of the
hearing, but he chose neither to cross-examine Ms. Giroux nor offer alternative
sworn evidence in rebuttal. I reject the Applicant’s assertion that he and Mr.
Lapedus did not receive the CRA’s demands for supporting documentation in 2003.
[10]
Furthermore, I note that the letter from the CRA
dated May 14, 2003 referred specifically to a request from Mr. Lapedus dated
November 14, 2002 to adjust the Applicant’s return to include an ABIL in 2000.
In addition, in his own affidavit the Applicant deposed that he had claimed a
small business loss on his 2000 personal income tax return in the amount of
$72,341, but that this was disallowed by the CRA. It is simply not credible for
the Applicant to maintain that he was unaware of the CRA’s assessment of his
2000 tax return or the need for documentation to support the ABIL until 2007.
His claim that the supporting documentation could not be obtained due to the
passage of time is similarly unworthy of belief.
[11]
The Applicant’s suggestion that a three-year
limitation period applies to the CRA’s power to demand supporting documentation
for the purpose of reassessment under subsection 152(4.2) of the Act leads to
an absurdity. Under subsection 152(4.2) of the Act, a ten-year limitation
period is prescribed for the Minister to exercise discretion in deciding
whether to reassess a taxation year when the normal three-year limitation period
has expired. If the Applicant’s position were correct, then any reassessment
under subsection 152(4.2) of the Act would have to be conducted without a
requirement of supporting documentation. In any event, I am satisfied that the
Applicant and Mr. Lapedus were both aware of the need to provide documentation
in support of the requested ABIL by May, 2003 at the very latest. By the
Applicant’s and Mr. Lapedus’ own admission, the documentation was available at
that time.
[12]
The Applicant has failed to identify any error
or procedural defect in the Respondent’s consideration of the requested ABIL,
and accordingly the application for judicial review is dismissed with costs.
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