2017 FC 1173
Ottawa, Ontario, December 20, 2017
PRESENT: The Honourable Mr. Justice Martineau
ORDER AND REASONS
Citing the Court’s authority under section 18.2
and the Federal Courts Act, RSC 1985, c. F-7, the applicant is
seeking an emergency suspension and interlocutory injunction order to prevent
the Minister of National Revenue [the Minister] from issuing a reassessment
under subsection 152(4) or any other provision of the Income Tax Act,
RSC 1985 c. 1 (5th Supp.) [ITA] for the 2004 taxation year or
any other previous year.
For the following reasons, I am not satisfied in
this case that the applicant has discharged his burden of demonstrating to the
Court that his notice of application for judicial review dated December 5, 2017
— seeking a writ of prohibition and various declaratory conclusions — raises a
serious question, i.e. that he would suffer irreparable harm if the motion for
a suspension and interlocutory judgment is not allowed, and that the balance of
probabilities is in his favour based on the public interest in this case (see RJR-Macdonald
Inc v Canada (Attorney General),  1 S.C.R. 311, 111 DLR (4th)
The Canada Revenue Agency [CRA] Voluntary
Disclosure Program promotes compliance with Canada’s tax laws by encouraging
taxpayers to make voluntary disclosures to correct past omissions in their
dealings with the CRA. Taxpayers who make valid voluntary disclosures must pay
the taxes and interest, but without the penalties or prosecution they would
otherwise face. Unless an application was filed prior to the 10-year rule,
which came into effect on January 1, 2005, applications filed for taxation
years from 1985 to 1994 will not be accepted. See Information Circular IC00-1R5
regarding the Voluntary Disclosure Program [the Circular].
In 1978, the applicant allegedly transferred
$300,000 to a bank account in the Bahamas, a tax haven. That amount came from
savings. Apparently wanting to put his affairs in order and not pass his tax
problems on to his heirs, the applicant voluntarily disclosed the unreported
income for the years from 2005 to 2014. The voluntary disclosure was apparently
received by the CRA on January 7, 2015, and accepted on June 17, 2015, on
behalf of the Minister under subsection 220(3.1) of the ITA and the Circular.
In this case, the CRA accepted the applicant’s
disclosure, waived the penalties, and granted interest relief for the tax years
from 2005 to 2014.
However, in August 2016, based on information
provided by the applicant, the CRA began an audit of the applicant’s income tax
returns from 1980 to 2004. As explained in an affidavit by Michel Audet, a CRA
auditor, given the applicant’s inability to provide details or documents
regarding the initial transfer of $300,000 or the management of his bank
account beginning in 1978, he evaluated two assessment scenarios, choosing [translation] to “include
total investment income ($173,460) in taxable income for 2004, distributed
among dividends from Canadian sources and interest based on a percentage equal
to the distribution of his portfolio for the taxation years from 2005 to 2014
to allow him to claim a dividend tax credit [sic] and only assess the penalty
for failing to file form T1135 and the penalties set out in subsections 162(10)
and (10.1) of the Income Tax Act”.
In short, the applicant is now arguing that
issuing any assessment in relation to the adjustment proposal prepared by the
CRA on November 7, 2017, would be contrary to the agreement entered into
following the voluntary disclosure by the applicant, who argues that issuing a
reassessment for any year prior to 2005 is contrary to the CRA’s common practice,
when a taxpayer making a voluntary disclosure is not prepared to commit [translation] “tax
For their part, the respondents vigorously
dispute the applicant’s interpretation of the letter dated June 17, 2015, and
the Circular and the effects that he attributes to them. In fact, on reading
the acceptance letter, the CRA was very clear: the voluntary disclosure was
only valid for the 2005 to 2014 taxation years, which the applicant is
challenging, claiming that the letter dated June 17, 2015, and the Circular
must not be read literally.
The best that can be said at first glance is
that the evidence is contradictory. I therefore agree with counsel for the
respondents that the applicant has not, at this stage, submitted convincing
evidence of the essential allegations behind his motion for suspension and an
interlocutory injunction — particularly that the respondents in fact agreed to
not raise reassessments for tax years prior to the tax years in question in the
applicant’s voluntary disclosure that results in the application of the
doctrine of estoppel in public law (see Immeubles Jacques Robitaille Inc v
Québec (City), 2014 SCC 34, at paras 19, 20 and 24).
On another hand, as this is a question of the
possible merits of a prohibition to prevent the exercise of discretion that is
clearly assigned tot he Minister by the ITA — that of issuing a reassessment —
it must be noted that the applicant was unable to cite any specific
jurisprudence in this regard, and even less so for a motion for an interlocutory
injunction aimed at suspending, to the sole benefit of the applicant, the
application of a law of general application such as the ITA, the
constitutionality of which is not in question.
In his affidavit, the applicant stated that he
understands that [translation] “the reasons raised in support of [his] application for
judicial review are related to fairness”, while he does not “challenge the merits of an assessment before this Honourable
Court”. That said, he generally alleges that “the
hasty issuance of assessment would cause [him] serious and irreparable harm”,
without clarifying. As well, the fact that this application for judicial review
can become moot does not constitute irreparable harm according to jurisprudence
(see United States Steel Corporation v Canada (Attorney General), 2010 FCA
200, at para 17).
Moreover, there is another appropriate and
effective recourse for raising a substantive issue related to the admissibility
of an assessment allegedly raised against the contents of the agreement and the
representations cited by the applicant — not yet proven at this stage of the
proceedings — particularly as the Minister (following an objection) and the Tax
Court of Canada (following an appeal) can cancel an assessment (see subsection
165(3) and section 171 of the ITA; section 18.5 of the Federal Courts Act;
Canada (National Revenue) v JP Morgan Asset Management (Canada) Inc.,
2013 FCA 250, at para 81).
The balance of convenience clearly favours the
respondents. The public interest — i.e. the orderly application of the ITA —
takes precedence here over the financial and other inconveniences that the
applicant may face by having, like all taxpayers, to follow the normal
challenge procedure set out in the ITA.
For these reasons, this motion is dismissed.
Given the results, the applicants are entitled to costs.