Phillip G. Wasson v. Her Majesty the Queen (Informal Procedure), [1993] 2 CTC 2338

Margeson, T.C.C.J. (orally):—This matter was heard under the informal procedure. It is the matter between Phillip G. Wasson and Her Majesty the Queen, 92-1901(IT). The issues are quite straightforward. They involve the questions as to whether or not the Minister was correct in assessing the appellant for instalment interest and penalties in the year 1990 on the basis that the appellant failed to make quarterly instalments as required by the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (hereinafter referred to as the "Act"), and the Regulations.

Four instalments were required and no instalments were actually paid during the relevant period of time. The amounts of income were substantial and the amount of tax involved was also substantial.

The calculation of the penalty and the interest is not in issue before me. The only surviving issues are whether or not the Minister properly reassessed and whether or not the Minister properly exercised his discretion in failing to waive penalties and interest pursuant to section 220 of the Act.

The appropriate subsection is 220(3.1), "Waiver of penalty or interest” and it reads as follows:

The Minister may at any time waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by a taxpayer or a partnership.

And, generally, subsection 220(1) says:

The Minister shall administer and enforce this Act and control and supervise all persons employed to carry out or enforce this Act and the Deputy Minister of National Revenue for Taxation may exercise all the powers and perform the duties of the Minister under this Act.

The evidence before me discloses in a general way that the appellant was involved in a business in which he was not required originally to make instalment payments. Subsequently, in respect to the taxation year in question, which is the year 1990, he embarked upon a business that required him to make instalment payments. His general evidence was that because of a change in his position he determined at some time later that he was required to make instalment payments. He sought legal advice and advice from his accountant and certainly relied upon them. He said he followed the advice and did not make instalments which were obviously required in the year in question. In an attempt to protect himself he paid a larger amount the next year to make sure that he would not suffer penalties and interest in that year. He was rewarded by being rebated less interest than he was required to pay when he owed Revenue Canada some money. But again, these are the facts of the case. He got $1,200 interest back the next year and had been assessed for $18,000 in interest and penalties in the year in question.

His position is that he got bad advice and as a result of that he suffered a loss. The Court is not deciding that issue.

On a motion by the Minister to dismiss the matter at the outset because the Court had no jurisdiction to hear the matter, I did not allow the motion because I was satisfied that the notice of appeal did set forth an appeal against the reassessment in question and what the appellant intended to withdraw before me was the fact that the calculations were not accurate under paragraph 4(a) of the appeal. The issues under paragraphs 4(b) and (c) of the appeal remained.

The appellant for his part says that the Tax Court has jurisdiction to vary the reassessment and to allow the remedy that he seeks. The remedy that he seeks is that the Court should decide that the reassessment was wrong based upon the fact that the Minister has improperly exercised his discretion, his argument being that the exercise by the Minister of the discretion, so-called, under subsection 220(3.1) is all part of the assessment process and therefore all the Court has to do is vary the reassessment or declare that the reassessment is incorrect and send it back to the Minister for further reassessment. He says this is an assessment and the discretion that the Minister is granted under the appropriate paragraph does not remove my jurisdiction to grant the relief sought.

The appellant points out that he changed his practice with respect to his business and unfortunately he did not get the correct advice. He said he relied on his accountant for advice, and he received improper advice, he acted to his detriment and therefore he should not be penalized here because there is a provision in the Act which allows the Minister to grant the relief which he seeks.

The respondent, for his part, says the whole question really is whether or not the Minister was correct in making the reassessment that he did. He argued that we are concerned with the reassessment pursuant to the relevant provisions of the Act. He says subsection 220(3.1), is not part of the assessment process. He says it is outside the assessment process. It is a discretion granted to the Minister after the process has been completed, the Minister makes the assessment, then the Act says if the Minister has calculated that penalties and interest are payable, he has the right to exercise his discretion under certain circumstances and waive the penalties. That, he says, is not part of the assessment, it is an administrative matter, a discretionary matter in the Minister and the Court has no jurisdiction over it. Whether the Minister exercised it or not is something which is not reviewable by this Court but is reviewable only before the Federal Court.

He says it is outside the assessment process under subsection 152(1) of the Act. The Minister must assess the interest and penalties and then he may waive them. According to the respondent, on the evidence it is obvious that the appellant understood from advice that he got that he did not have to make instalment payments and whether or not that advice was negligent is not the respondent's concern. It is not the business of this Court to decide that either or to prepare the groundwork for somebody who may want to start an action in another Court. The duty of the Court is to decide whether or not the assessment was correct and whether or not the penalties and interest were proper under the relevant sections of the Act. What happens thereafter is entirely up to the appellant. If he has some other remedy in some other Court, then he is free to pursue it.

Further, the respondent says that even if I do have the jurisdiction to consider the Minister’s discretion, he acted properly and there is no evidence to suggest that the Minister's decision was unreasonable.

The respondent says if a taxpayer gets bad advice and he suffers a loss as a result, that's the taxpayer's problem, he has to follow some other remedy. There is no jurisdiction in this Court to grant the relief sought.

In reply, the appellant's solicitor referred to Boisvert v. M.N.R., [1991] 1 C.T.C. 2573, 91 D.T.C. 752 (T.C.C.). He pointed out that this was not decided under the "fairness package", and that is correct. He referred further to the policy decisions of Revenue Canada with respect to when they may decide to waive penalties.

The parties further referred to Carole G. Joling v. M.N.R., file no. 90-889(IT), (T.C.C.) (unreported), which was a decision given orally by Judge Bonner. It does refer to the "fairness package". This is the only decision apparently that has been given on it. In that case Judge Bonner does say:

The appellant asked for relief against the late filing penalty and interest. She sought the relief under the so-called "fairness package”. Although she didn't identify the section of the Act on which she based that request, I assume it was subsection 220(3.1). This Court cannot entertain that claim. The discretion to waive penalty and interest which is created by subsection 220(3.1) of the Act is vested in the Minister and cannot be taken over, so to speak, by this Court.

The appellant argues that this was just an afterthought of the Judge and that it came up by the appellant after the case was heard. However, Judge Bonner's position was clear that the Tax Court does not have the jurisdiction to deal with it. I do not see how one would put the issue before the Court any more clearly than it was in that case. It was brought before the Court and the Court made a decision on it.

Counsel also referred to the case of Chalifoux v. M.N.R., [1991] 2 C.T.C. 2243, 91 D.T.C. 946 by Chief Judge Couture. In that case Chief Judge Couture did not grant the relief. The learned Chief Judge recommended that the Minister take the necessary steps with the Treasury Board for the latter to authorize him to return to the appellant the moneys belonging to her as confirmed in the notice of assessment, obviously being of the realization that there was nothing the Court could do about it. Perhaps as a result of that or other cases we do have this amendment to the Act which brought in subsection 220(3.1), which does give the Minister some discretion to grant some relief.

Regarding Boisvert, supra, both parties referred to this case. As is normal, it does not mean the same thing to the appellant as it does to the respondent. The appellant put it forward, I am sure, to enforce his argument that what we are dealing with here is the assessment process. It is the complete process and the Minister's discretion, so-called, is part of that assessment process. The respondent referred to the same sections of the decision on pages 2576-77 (D.T.C. 755):

This amounts to saying that an assessment is an operation carried out by the respondent to determine, in accordance with the Act, the tax, interest and penalties, where applicable, owed by a taxpayer for a taxation year. The respondent exercises these powers under the authority granted him by virtue of subsection 152(1) of the Act. Any other application, with respect to a tax return, of provisions of the Act or of the respondent's administrative policy that is explained in either the notice of assessment or an attached document does not lie within the Court's jurisdiction as to the assessment's validity, and the Court has no authority to issue an order concerning such an application.

That case was not dealing with the ministerial discretion, so-called, under the section that we are dealing with here and it was not decided under that provision. It does, however, support the general argument by the respondent that what we are dealing with in an appeal before the Tax Court of Canada is an assessment.

I have no doubt in my mind on the basis of the evidence given before me, and having due regard to the arguments made, that the only jurisdiction that I have is to deal with the assessment. The Tax Court of Canada can allow the appeal and quash the assessment, it can send the matter back to the Minister for reassessment and reconsideration based upon a variation of the assessment or it can dismiss the appeal and confirm the assessment. The Court is satisfied that the provisions of subsection 220(3.1) apply after the assessment process has been completed and it grants to the Minister a discretion, at any time to waive or cancel all or any portion of any penalty or interest otherwise payable.

I accept the position of Judge Bonner in Carole G. Joling v. M.N.R., supra, that under the “fairness package", subsection 220(3.1), this Court cannot entertain the claim. Judge Bonner refers to the term "discretion."

. . .to waive penalty and interest which is created by subsection 220(3.1) of the Act is vested in the Minister and cannot be taken over, so to speak, by this Court.

Now, it does not refer to discretion in the section. It says, "The Minister may at any time waive or cancel.” But the argument by the respondent is that that is a ministerial discretion and that this Court has no jurisdiction over it. This Court, as far as I am concerned, has no right to make a declaratory judgment of the nature that would be required if the appellant were to be successful here, because I would have to declare that the Minister was wrong in deciding as he did not to waive the interest and penalties. Even if I had that jurisdiction, I must say I would not be satisfied on the basis of the evidence before me that it was proved that the Minister had exercised his discretion improperly in this case.

I find that the Minister was correct in making the reassessment that he did. I will therefore dismiss the appeal and confirm the Minister's reassessment.

Appeal dismissed.