REASONS FOR ORDER
D’Auray J.
BACKGROUND
[1]
The Minister of Revenu Québec, as an agent of
the Minister of National Revenue (the Minister), refused to grant the applicant
an extension of time to file notices of objection against three assessments for
which the notices were dated August 20, 2014 (the assessments at issue).
[2]
Following this refusal, the applicant is asking
this Court to grant an extension of time so that it may file notices of
objection against the assessments at issue, namely:
|
Notice
of assessment number
|
Notice
of assessment date
|
Lot
|
Address
|
|
14076501912390001
|
August 20, 2014
|
4 429 319
|
3984 boul. Ste-Anne, Québec
|
|
14183501212390001
|
August 20, 2014
|
1 541 426
|
390-394 rue Sauriol, Québec
|
|
14076502112390001
|
August 20, 2014
|
4 429 318
|
3986 boul. Ste-Anne, Québec
|
|
14317000112390001
|
November 18, 2014
|
--
|
--
|
Facts
[3]
The applicant is a management company that
operates four residential rental properties.
[4]
Claude Dion is the main shareholder and
president of the applicant.
[5]
The Agence du Revenu du Québec (the ARQ) audited
the applicant in February 2014 for the period from June 25, 2009, to
May 1, 2012. This audit was completed in December 2014. Between
August and December 2014, the applicant received a total of
11 notices of assessment and a proposed assessment.
[6]
Three rounds of assessments took place in this
case, the first being the assessments at issue, that is to say those from
August 20, 2014; the second round took place in November 2014; and
the third round took place in December 2014. Between the first round of
assessments and the second round of assessments, the applicant received a
proposed assessment in September 2014. I have reproduced the portion of
the text that pertains to the notices of assessment, since the wording used by
the ARQ is important in this case.
First round of assessments—four notices of assessment
dated August 20, 2014
Property located at 275 rue Letellier, notice of
assessment bearing the reference number 14076501512390001
[7]
This notice of assessment is in reference to
property 1 478 840, located at 275 rue Letellier in Québec
City. The notice of assessment indicates that the applicant applied for a new
residential rental property rebate (the property rebate) in the amount of
$6,648.09. According to the notice of assessment, the amount of $6,648.09 was
granted by the Minister. Thus, the assessment shows a credit balance of
$6,648.09.
[8]
However, the amount of $6,648.09 was withheld by
the ARQ because, according to the notice of assessment, the applicant does not
meet [translation] "the
legislative requirements for the following program account(s): 85657 8794
RT0001" with no further explanation.
Property located at 3984 boul. Ste-Anne, notice
of assessment bearing the reference number 14076501912390001
[9]
This notice of assessment is in reference to
property 4 429 319 located at 3984 boul. Ste-Anne in Québec
City. The notice of assessment indicates that the applicant applied for a
property rebate of $25,202.92. This property rebate was disallowed by the
Minister on the grounds that the application was not received within two years
of the date upon which the tax became payable on the purchase or the date of
the self-assessment.
[10]
The notice of assessment indicates that the
previously granted property rebate of $6,648.09 for the property at
275 rue Letellier is withheld because the applicant did not meet [translation] "the
legislative requirements for the following program account(s): 85657 8794 RT0001"
with no further explanation.
[11]
Under this assessment, the applicant did not owe
anything, since the assessment was void.
Property located at 3986 boul. Ste-Anne, notice
of assessment bearing the reference number 14076502112390001
[12]
This notice of assessment is in reference to
property 4 429 318 located at 3986 boul. Ste-Anne in Québec
City. This notice indicates that the applicant applied for a property rebate of
$25,202.92. This rebate was disallowed by the Minister on the grounds that the
application was not received within two years of the date upon which the tax
became payable on the purchase or the date of the self-assessment. The
applicant did not owe anything following this assessment, since the assessment
was void.
[13]
As with the assessment for the property located
at 3984 boul. Ste-Anne, the notice of assessment indicates that the
previously granted property rebate of $6,648.09 for the property at
275 rue Letellier is withheld because the applicant did not meet [translation] "the
legislative requirements for the following program account(s): 85657 8794 RT0001"
with no further explanation.
Property located at 390-394 rue
Sauriol, notice of assessment bearing the reference number 14183501212390001
[14]
This notice of assessment is in reference to
property 1 541 426, located at 390-394 rue Sauriol in
Québec City. This notice indicates that the applicant applied for a property
rebate of $3,593.46. This rebate was disallowed by the Minister on the grounds
that the application was allegedly not received within two years of the date
upon which the tax became payable on the purchase or the date of the
self-assessment.
[15]
Under this assessment, the applicant did not owe
anything, since the assessment was void. The notice of assessment also
indicates that the property rebate of $6,648.09 was withheld, since the
applicant did not meet [translation]
"the legislative requirements for the following program account(s): 85657 8794
RT0001" with no further explanation.
Proposed assessment received by the applicant in
September 2014
[16]
As I have already mentioned, the proposed audit
was received by the applicant in September 2014. The proposed assessment
was displayed graphically, with notes; it did not include a report or
description. A perusal of this proposed assessment reveals that it is difficult
to understand the proposed adjustments and the items that have already been
assessed and those that will be assessed later. It was not established in
evidence that this proposed assessment had been explained to the applicant.
[17]
The proposed audit covers the period from
June 25, 2009, to May 1, 2012, which includes the period of the
assessments at issue, issued in August 2014. According to the proposed
audit, the amount owed by the applicant was $166,551.34, calculated in the
following manner:
|
Total goods and services tax
|
$197,348.66
|
|
Total rebates
|
($31,797.32)
|
|
Total adjustments
|
$166,551.34
|
|
|
|
[18]
The "rebate" of $31,797.32 includes an
amount of $4,815, which serves to increase the rebate for the rue Letellier
property. Thus, according to the proposed assessment, the rebate granted for
the rue Letellier property totals $11,463.59, consisting of the amount of
$6,648.09 already granted during the August 20, 2014 assessment plus the
addition of an amount of $4,815 under the proposed assessment from
September 2014.
[19]
This correction in the proposed assessment is
hard to explain, since, according to the notice of assessment dated
August 20, 2014, bearing reference number 14076501512390001, the
applicant had allegedly claimed just $6,648.09 as a rebate for the rue Letellier
property.
Second round of assessments, for which notices are dated
November 5, November 7 and November 18, 2014
[20]
The three assessments in November 2014
establish the applicant’s net tax at $0.01. It would have made sense for this
second round of assessments to reflect the adjustments made in the
September 2014 proposed assessment. At the hearing, the respondent did not
explain why these assessments were issued. That being said, all of these
assessments were replaced by assessments issued in December 2014. The
language used in the notices of assessment is nonetheless just as important.
Notice of assessment dated November 5, 2014, for the
period from October 1, 2010, to October 31, 2010
[21]
This notice of assessment, dated
November 5, 2014, bearing reference number 14304000312390001, covers the
period from October 1, 2010, to October 31, 2010, and establishes the
net tax at $0.01.
[22]
It is worth noting that the notice of assessment
refers to the rebate of $6,648.08 for the property located on rue Letellier
with the following note: [translation]
"we are withholding your credit while we review
your account. Any amount due may be adjusted during processing of your rebate .
. . ." The second page of this notice also states that [translation] "the
amount of your (re)assessment does not include the amount of your pending
rebate. Once the rebate has been processed, a notice of (re)assessment will be
issued separately, if necessary."
Notice of assessment dated
November 7, 2014, for the period from April 1, 2011, to
April 30, 2011, and from May 1, 2012, to May 31, 2012
[23]
This notice of assessment, dated
November 7, 2014, bearing reference number 14307000112390003, covers the
period from April 1, 2011, to April 30, 2011, and establishes the net
tax at $0.01. This notice of assessment also bears reference number
14307000112390001, for the period from May 1, 2012, to May 31, 2012,
and also establishes the net tax at $0.01.
[24]
It is worth noting that the following note
appears again: [translation] "we are withholding your credit while we review your
account. Any amount due may be adjusted during processing of your rebate . . . ."
The second page of the notice of assessment for the two periods also indicates
that [translation] "the amount of your (re)assessment does not include the
amount of your pending rebate. Once the rebate has been processed, a notice of
(re)assessment will be issued separately, if necessary."
Notice of assessment dated November 18, 2014, for the
period from June 1, 2009, to June 30, 2009
[25]
This notice of assessment, dated
November 18, 2014, bearing reference number 14317000112390001, covers
the period from June 1, 2009, to June 30, 2009, and establishes the
net tax at $0.01.
[26]
It is worth noting that this notice of
assessment does not explicitly mention the unpaid rebate of $6,648.08 for the
rue Letellier property. However, the notice of assessment indicates that [translation] "the
amount of your (re)assessment does not include the amount of your pending
rebate. Once the rebate has been processed, a notice of (re)assessment will be
issued separately, if necessary."
Third round of assessments, for which all notices are
dated December 10, 2014
[27]
Through notices of assessment, all dated
December 10, 2014, the Minister issued several reassessments replacing all
of the assessments issued in November 2014. Among these reassessments is
one that replaces the assessment issued on August 20, 2014, namely the one
regarding the rue Letellier property.
Notice of reassessment replacing the assessments issued in
November 2014
Assessment for the period from October 1, 2010, to
October 31, 2010
[28]
This notice of assessment, which covers the
period from October 1, 2010, to October 31, 2010, and which bears the
reference number 14304000312390001, establishes the net tax at $73,737.72.
[29]
It is worth noting that this notice of assessment
replaces the one covering the same period, issued on November 5, 2014,
which established the net tax at $0.01.
[30]
This notice mentions that [translation] "the
amount of net tax does not take into consideration any rebate, instalment or
payment amount that was applied to the account."
Assessment for the period from April 1, 2011, to
April 30, 2011
[31]
This notice of assessment, which covers the
period from April 1, 2011, to April 30, 2011, and which bears the
reference number 14307000112390003, establishes the net tax at $73,737.72.
[32]
It is worth noting that this notice of
assessment replaces the one covering the same period, issued on
November 7, 2014, which established the net tax at $0.01.
[33]
This notice mentions that [translation] "the
amount of net tax does not take into consideration any rebate, instalment or
payment amount that was applied to the account."
Assessment for the period from May 1, 2012, to
May 31, 2012
[34]
This notice of assessment, which covers the
period from May 1, 2012, to May 31, 2012, and which bears the
reference number 14307000112390001, establishes the net tax at $31,843.31.
[35]
It is worth noting that this notice of
assessment replaces the one covering the same period, issued on
November 7, 2014, which established the net tax at $0.01.
Assessment for the period from June 1, 2009, to
June 30, 2009
[36]
This notice of assessment, which covers the
period from June 1, 2009, to June 30, 2009, and which bears the
reference number 14317000112390001, establishes the net tax at $18,029.91.
[37]
It is worth noting that this notice of
assessment replaces the one issued on November 18, 2014, which established
the net tax at $0.01.
Notice of reassessment granting a rebate
For the period from October 1, 2010, to
October 31, 2010
[38]
This notice of assessment, which covers the
period from October 1, 2010, to October 31, 2010, and which bears the
reference number 14303502412390003, grants the applicant a GST/HST rebate of
$8,500.
For the period from April 1, 2011, to April 30,
2011
[39]
This notice of assessment, which covers the
period from April 1, 2011, to April 30, 2011, and which bears the
reference number 14303502412390004, grants the applicant a GST/HST rebate of
$8,500.
For the period from June 1, 2009, to June 30,
2009
[40]
This notice of assessment, which covers the period
from June 1, 2009, to June 30, 2009, and which bears the reference
number 14317500412390001, grants the applicant a GST/HST rebate of $9,981.82.
Property located at 275 rue Letellier, notice of
assessment dated December 10, 2014, bearing the reference number
14076501512390001
[41]
This notice of assessment is for
property 1 478 840, located at 275 rue Letellier in Québec
City. The Minister grants a new residential rental properties rebate, in the
revised amount of $11,463.59.
[42]
It is worth noting that this notice of
assessment replaces the one dated August 20, 2014, for the same property,
which granted a rebate of $6,648.09.
[43]
As previously mentioned, this assessment is
poorly explained; the notice of assessment dated August 20, 2014,
indicates that the amount claimed as a property rebate is $6,648. Based on my
reading of the notice of assessment for the rue Letellier property, it would
appear as though the Minister granted a higher property rebate than that
requested by the applicant.
Notice of objection and application for time extension
[44]
The respondent argues that the applicant filed a
notice of objection dated March 5, 2015, contesting only the notices of
assessment dated December 10, 2014.
I do not agree with the respondent’s argument. It is clear that the applicant’s
notice of objection concerns all of the assessments against the applicant for
the 2009–2012 taxation years.
[45]
However, as of March 5, 2015, the deadline
to notify the Minister of objections had already passed for those assessments
whose notices were dated August 20, 2014.
[46]
On May 27, 2015, the Minister upheld the
December 2014 assessments, but did not address the August 2014
assessments, since the applicant could not object to the assessments from the
month of August without having first obtained an extension of time that would
allow it to object.
[47]
On June 17, 2015, the applicant filed an
application for extension of time with the Minister, for all of the notices of
assessment received between August 20, 2014, and December 10, 2014,
inclusive.
[48]
On March 16, 2016, the Minister disallowed
the application for extension of time for the assessments dated August 20,
2014, since, according to the Minister, the applicant had not demonstrated its
inability to act or its bona fide intention to object to the assessments in
question. Since the objections to the December reassessments were presented to
the Minister within the required timeframes, the Minister did not have to
respond to the application for extension of time with regard to these
assessments.
[49]
On April 14, 2016, the applicant filed an
application for extension of time with this Court, to submit a notice of
objection to the Minister for the following assessments:
|
Notice of assessment number
|
Notice of assessment date
|
Lot
|
Address
|
|
14076501912390001
|
August 20, 2014
|
4 429 319
|
3984 boul. Ste-Anne, Québec
|
|
14183501212390001
|
August 20, 2014
|
1 541 426
|
390-394 rue Sauriol, Québec
|
|
14076502112390001
|
August 20, 2014
|
4 429 318
|
3986 boul. Ste-Anne, Québec
|
|
14317000112390001
|
November 18, 2014
|
--
|
--
|
[50]
It is worth noting that the assessment dated
November 18, 2014, is no longer at issue before this Court, since it was
cancelled when a reassessment was issued, notice of which is dated
December 10, 2014.
[51]
During the hearing, Claude Dion, the
applicant’s president and main shareholder, mentioned having been in constant
contact with his counsel during the audit process. Mr. Dion stated that
his counsel’s mandate was to object to anything regarding GST and QST. He
further explained that he did not object before the deadline because he was
under the impression that the proposed assessment included all of the
assessments and that the property rebates were still being reviewed.
Mr. Dion also stated that the number of documents received created some
confusion for him and that he was waiting for the Minister to issue
reassessments following the proposed assessment, including the assessments
regarding the property rebates.
[52]
Audrey Barrette, Mr. Dion’s spouse,
also testified for the applicant. Ms. Barrette explained that she is a nurse—surgical
first assistant—and that she handles the administrative work for the applicant,
spending a few hours per week on it.
[53]
Ms. Barrette was aware that the applicant
could claim a rebate for new residential rental properties, but she explained
that all of the assessments received confused her. She stated that she did not
take any action after receiving the notices of assessment dated
August 2014, because according to those assessments, the applicant did not
owe anything. She waited for the proposed assessment and the resulting
reassessments. In this regard, the reassessments that took into account the
proposed assessment were issued in December 2014.
[54]
It is clear from Ms. Barrette’s testimony
as a whole that she appeared confused by all of the documentation received. For
example, she stated that she did not understand why the applicant had received
assessments dealing with rebates for input credits. She stated that the ARQ had
cancelled the applicant’s registrant number and that the ARQ had informed her
that the applicant could not claim input credits.
Issues in dispute
[55]
Does the applicant meet the conditions set out
in subsection 304(5) of the Excise Tax Act (the ETA)? If the answer
is affirmative, an application for extension of time will be granted.
ANALYSIS
[56]
In order for this Court to grant an application
for extension of time under subsection 304(5) of the ETA, the conditions
listed in this subsection must be met:
304 (5) When
application to be granted — No application shall be granted under this
section unless:
(a) the application was made under
subsection 303(1) within one year after the expiration of the time
otherwise limited by this Part for objecting or making a request under
subsection 274(6), as the case may be; and
(b) the person demonstrates that
(i) within the time otherwise limited by
this Act for objecting,
(A) the person was unable to act or to give a mandate to act in the person’s
name, or
(B) the person had a bona fide intention to object to the assessment or make
the request,
(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,
(iv) there are reasonable grounds for the
appeal.
[Emphasis added.]
[57]
The parties do not dispute that the criterion
set out in paragraph 304(5)(a) of the ETA is met.
Intention
[58]
The applicant asserts that it met the criteria
set out in subsection 304(5) of the ETA, which is to say that it had
always intended to object to the August 2014 assessments. The respondent,
by contrast, asserts that the applicant did not meet the conditions of
subsection 304(5) of the ETA, having not intended to object to the
assessments at issue, nor having been unable to act or to give a mandate to act
in its name.
[59]
According to the respondent, I should not
look at all of the facts and should limit my review to the sole fact that the
applicant failed to object to the August 2014 assessments within the
required timeframe.
[60]
I do not agree with the respondent. I am of the
opinion that I must analyze all of the facts in order to understand the context
of the issue, to determine whether, in this case, the applicant had the
intention to file a notice of objection. It must not be forgotten that during
the proposed assessment in September 2014, and during the reassessments in
November 2014, the applicant was still within the timeframe to object.
Thus, the correspondence received after the August assessments could have
impacted the applicant.
[61]
I am of the opinion that the applicant always
had a bona fide intention to object to all of the GST assessments.
[62]
Firstly, Mr. Dion’s testimony is
unequivocal. He clearly states that he always had the intention to object and,
in this regard, the applicant objected to all of the December 2014
assessments.
[63]
Ms. Barrette and Mr. Dion were
awaiting the result from the audit in progress. It is true that
Ms. Barrette did not think she could object to the assessments at issue
because they were void, but it remains nonetheless that, in her confusion, she
was convinced that the rental property rebate applications were still being
considered. As for Mr. Dion, it was clear that he would have made an
objection as soon as he received a final assessment result. Being in contact
with the ARQ, these two stakeholders understood that a proposed assessment
needed to be issued by the ARQ, followed by reassessments. Confused by the
receipt of several notices of reassessment, neither Ms. Barrette nor
Mr. Dion had understood that the August assessments were final and that
they needed to object to those assessments. In this regard, the facts that
follow support their position.
[64]
Upon receipt of the proposed assessment dated
September 5, 2014, it can be noted that the ARQ increased the credit
granted for the rue Letellier property. In my opinion, this confirms the
testimonies of Ms. Barrette and Mr. Dion, that they were both under
the impression that the rental property rebates were still being reviewed by
the ARQ.
[65]
In addition, the proposed assessment covers the period from
June 25, 2009, to May 1, 2012. A perusal of the proposed assessment
reveals that it is difficult to tell what remains to be assessed and what has
already been assessed. It is easy to understand why the applicant was under the
impression that the Minister would issue reassessments with regard to the
property rebate applications.
[66]
Ms. Barrette and Mr. Dion therefore
waited to receive notices of assessment regarding the rental property rebates
following this proposed assessment, to which they wanted to object, as they had
done for the notices of assessment received after.
[67]
The confusion persisted following the receipt of
the various notices of assessment issued in November, since they contained a
note regarding a pending rebate. The recurring reference to the rebate
applications still being processed once again left the applicant with no other
to way to interpret the whole thing. Furthermore, the assessments use the term
"rebate" to refer to rebates for input credits and to refer to
rebates for rental properties.
[68]
The assessments issued in December 2014
also refer to [translation] "rebate applications . . . made previously,"
which can, again, lead one to believe that they refer to the rental property
rebates already claimed. In addition, the increase in the rebate for the rue
Letellier property supports the applicant’s theory that the rental property
rebates were still being reviewed.
[69]
The applicant cited the decision in Patterson
Dental Canada Inc. v. The Queen
in support of its argument. In that case, the auditor’s observations regarding
a letter of interpretation published by the Canada Revenue Agency misled the
applicant, Patterson Dental. Patterson Dental did not object within the
required timeframe, since, based on the auditor’s observations, it believed
that the product it was selling was not a "zero-rated supply,"
whereas the state of the law in this regard was otherwise. In granting the
application for extension of time, Justice Masse made the following
remarks in Patterson Dental:
[27] Was the
Applicant, under the circumstances, unable to act? I am of the view that the
Applicant was unable to act, and unable to file a Notice of Objection
because the entire circumstances combined to suppress any intention that the
Applicant may have had to object. The decision by the Applicant to take no
further action at the time that it was assessed was not a fully informed one.
Had the Applicant known of the possible impact of Le Gardeur and Notice
No. 248, then it is clear that it would have acted with due dispatch and
it would have retained expert witnesses to provide an opinion as to whether or
not epinephrine was an essential ingredient of its anaesthetic solutions and
thus whether or not a Notice of Objection would have any likelihood of success.
[Emphasis added.]
[70]
In this case, the convergence of circumstances
also had the effect of suppressing any intention the applicant may have had to
object.
[71]
In the decision Industries Bonneville Ltee.
v. The Queen,
Justice Lamarre Proulx considered plausible the applicant’s erroneous
interpretation of the assessment and found it appropriate to allow the
application since the taxpayer did not understand the exact nature of the
assessment. Thus, it was decided that the applicant’s incomprehension of the
assessment at issue did not impact the existence of its intention to object.
[72]
I am of the opinion that the applicant always
had the intention of objecting to all of the GST assessments. The
incomprehension of the nature of the assessments at issue, due to the confusion
created by the numerous explanations given in the notices of assessment and the
proposed assessment, prevented the applicant from objecting within the
appropriate timeframe, the applicant having been persuaded that it would be
better to object once the "final assessments" had been issued.
Unable to act or to give a mandate to act in the person’s
name
[73]
In the case of Charles v. M.N.R., the taxpayer, whose assessment
concerned a disallowance of deduction (although it was wrongly believed that it
concerned a tax credit), was granted an extension of time.
[74]
In Patterson Dental, Masse J. held
that the applicant was unable to act because the information had caused
confusion; Patterson Dental was unable to make an informed decision with regard
to its objection, at the time when it had received the notice of assessment.
[75]
In this regard, the situation in the case at
hand is similar to those in Charles and Patterson Dental.
Fair and equitable to allow
the application
[76]
I will briefly review the other conditions
imposed by paragraph 304(5)(b) of the ETA.
[77]
I find that, given the particular circumstances
of this case, it is fair and equitable to allow the applicant’s application for
the following reasons:
a) The applicant was in constant contact with the ARQ between
August 2014 and December 2014.
b) The fairness and equity of the judicial system argues in
favour of the applicant’s position.
c) The interest of justice orders that the applicant be
allowed to be heard on the merits of the case.
d) The rebate amounts claimed are significant.
e) Whenever
there is doubt, the parties’ rights should be safeguarded, which translates in
the case at issue into holding a debate on the merits.
Application made as soon as the circumstances allowed
[78]
I am also of the opinion that the application
was made as soon as the circumstances allowed, for the following reasons:
a) The applicant showed that, upon receipt of the notices of
assessment dated December 10, 2014, it was still unaware of the nature of
the assessments and of how the property rebate applications had been processed.
b) It was seemingly upon receipt of the May 27, 2015,
objection decision that the applicant realized there was a possible error with
its file.
c) It
was around this date that the applicant became aware of its error, without
fully understanding the magnitude of it. In this regard, the applicant’s
application for extension of time, filed on June 17, 2015, shows
incomprehension with regard to the state of the assessments and a desire to
rectify the situation.
CONCLUSION
[79]
I am of the opinion that the applicant
demonstrated that it satisfies each of the conditions set out in
subsection 304(5) of the ETA.
[80]
Consequently, the application for extension of
time to file a notice of objection against the three assessments dated
August 20, 2014, is allowed.
Signed at Ottawa, Canada, this 11th day of October 2016.
"Johanne D’Auray"
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