Deerhurst Resorts Limited v. Minister of National Revenue, [1989] 2 CTC 2082, 89 DTC 352

Mogan, T.C.J.:—This is an application under section 167 of the Income Tax Act, S.C. 1970-71-72, c. 63, for an order extending the time within which the applicant may object to an assessment, notice of which was mailed on September 4, 1987. The assessment does not levy tax on income with respect to a particular taxation year but it levies only a penalty in the circumstances described below.

The applicant carries on business near Huntsville, Ontario and has many employees. For the month of July 1987, the applicant deducted an aggregate amount of $180,732.21 (representing income tax and premiums for unemployment insurance and Canada Pension Plan) from the salary and wages paid to its employees during that month. The aggregate amount so deducted was required to be remitted to the Receiver General of Canada on or prior to August 15, 1987 pursuant to regulations made under the Income Tax Act, the Unemployment Insurance Act, R.S.C. 1985, c. U-1, and the Canada Pension Plan, R.S.C. 1985, c. C-8.

The applicant had recently installed equipment to produce computerized cheques and it did, in fact, mail a computerized cheque to the Receiver General of Canada on August 15, 1987, in the purported amount of $180,732.21. Through some malfunction, the amount of the cheque expressed in words did not agree with the amount expressed in figures and the cheque could not be cashed. When Revenue Canada returned the cheque, the applicant immediately forwarded two fresh cheques on August 25, 1987 paying the full amount of $180,732.21 with respect to the July payroll.

On September 4, 1987, Revenue Canada mailed to the applicant a notice of assessment levying a penalty in the amount of $18,073.22 being precisely 10 per cent of the aggregate deductions from the July payroll which should have been remitted on August 15, 1987. The notice of assessment did not identify a particular taxation year but it was clearly the assessment of a penalty from the following words which were typed on the form of assessment:

Since our records indicate that your payment of $180,732.21 was remitted late, you have been assessed the penalty for late remittance in the amount indicated. This amount is due immediately and is hereby requested.

There is nothing in the notice of assessment to indicate that any portion of the penalty was levied in respect of the applicant's failure to remit by August 15, 1987, premiums deducted with respect to Unemployment Insurance ("Ul") or the Canada Pension Plan (“CPP”) although the applicant would have known that the aggregate amount of $180,073.21 comprised three different amounts representing income tax and premiums for UI and CPP. At the hearing, the Court was informed that the penalty of $18,073.22 was allocated as follows:

The Income Tax Act, the Unemployment Insurance Act, the Canada Pension Plan and the respective regulations made under those three statutes provide for source deductions from salary and wages, the timely remittance of amounts deducted and a penalty of ten per cent for failure to remit within the prescribed time. The relevant statutory provisions are as follows:

The above statutory provisions leave no doubt as to the authority of the Minister of National Revenue to levy the penalties in the aggregate amount of $18,073.22 which are under review herein. When the hearing of this application commenced, counsel for the Minister of National Revenue informed the Court that the Minister did not oppose the application under section 167 of the Income Tax Act for an extension of time to object to the portion of the penalty related to income tax but that the Minister opposed the application for an order extending the time to object to the penalties relating to Ul and CPP because this Court, in the Minister's view, does not have jurisdiction to grant such an order.

Under the Income Tax Act, there is a specific provision in section 165 for serving a notice of objection within a 90-day period and a further provision in section 167 granting this Court authority to make an order extending the time within which such a notice of objection may be served. The respondent herein submits that there is no comparable statutory authority in the Unemployment Insurance Act or the Canada Pension Plan granting this Court authority to extend the time to "object" to amounts assessed under those two statutes. It is therefore necessary to consider the provisions of the Unemployment Insurance Act and the Canada Pension Plan.

Unemployment Insurance Act

As indicated in the above table of statutory provisions, subsection 53(6) provides that an employer who fails to remit to the Receiver General of Canada within the prescribed time those amounts deducted as Ul premiums is liable to a penalty of ten per cent of the amounts which he failed to remit; and subsection 56(1) authorizes the Minister of National Revenue to assess an employer “for an amount payable by him under this Act.” The provisions of the Unemployment Insurance Act which are analogous to the objection/ appeal provisions of the Income Tax Act are as follows:

Subsection 61(2)

Where the Minister has assessed an employer for an amount payable by him under this Act, the employer may appeal to the Minister for a reconsideration of the assessment, either as to whether any amount should be assessed as payable or as to the amount so assessed, within ninety days of the day of mailing of the notice of assessment.

Subsection 61(6)

On an application or an appeal under this section, the Minister shall, with all due despatch, determine the question raised by the application or vacate, confirm or vary the assessment, or reassess, and he shall thereupon notify any person affected.

Subsection 61(9)

Where the Minister is required to notify a person who may be or is affected by a determination under this section, he may cause that person to be notified, in such manner as he deems adequate, of his intention to make the determination or of that determination, as the case may be.

Subsection 70(1)

The Commission or a person affected by a determination by, or a decision on an appeal to, the Minister under section 61 may, within ninety days after the determination or decision is communicated to him, or within such longer time as the Tax Court of Canada on application made to it within those ninety days may allow, appeal from the determination or decision of that Court in the manner prescribed.

Although this Court has authority under subsection 70(1) to extend the time for an appeal to the Court (if the application to extend time is brought within the 90 days), there is no statutory authority for this Court to extend the 90-day period within which an employer may “appeal” to the Minister under subsection 61(2).

Canada Pension Plan

Subsection 21(6) provides that an employer who fails to remit to the Receiver General of Canada within the prescribed time those amounts deducted as CPP premiums is liable to a penalty of ten per cent of the amounts which he failed to remit; and subsection 22(1) authorizes the Minister of National Revenue to assess an employer "for an amount payable by him under this Act". The provisions of the Canada Pension Plan which are analogous to the objection/appeal provisions of the Income Tax Act are as follows:

Subsection 27(2)

Where the Minister has assessed an employer for an amount payable by him under this Act, the employer or his representative may appeal to the Minister for a reconsideration of the assessment, either as to whether any amount should be assessed as payable or as to the amount so assessed, within 90 days of the day of mailing of the notice of assessment.

Subsection 27(5)

On an application or an appeal under this section, the Minister shall, with all due despatch, determine the question raised by the application or vacate, confirm or vary the assessment, or re-assess, and he shall thereupon notify any employee affected or his representative and the employer or his representative.

Subsection 27(7)

Where the Minister is required to notify an employee who may be or is affected by a determination under this section, he may cause the employee or his repre- sentative to be notified, in such manner as he deems adequate, of his intention to make the determination or of the determination, as the case may be.

Subsection 28(1)

An employee or employer affected by a determination by or a decision on an appeal to the Minister under section 27, or the representative of either of them, may, within 90 days after the determination or decision is communicated to him, or within such longer time as the Pension Appeals Board or any member thereof on application made to it or him within those 90 days may allow, appeal from the determination or decision to the Pension Appeals Board by sending a notice of appeal in prescribed form by registered mail to the Chairman of the Pension Appeals Board at Ottawa.

The Pension Appeals Board has authority under subsection 28(1) to extend the time for an appeal to that Board but there is no statutory authority for this Court to extend the 90-day period within which an employer may "appeal" to the Minister under subsection 27(2).

As stated above, the notice of assessment dated September 4, 1987, was a notice with respect to three different assessments made by the Minister of National Revenue under three different statutes: subsection 227(10.1) of the Income Tax Act; subsection 56(1) of the Unemployment Insurance Act and subsection 22(1) of the Canada Pension Plan. In Pure Spring Company Ltd. v. M.N.R., [1946] Ex. C.R. 471; [1946] C.T.C. 169, Thorson, P. stated: "The assessment is different from the notice of assessment, the one is an operation, the other a piece of paper . . .”. I have not found any reason why the Minister of National Revenue should not send one "piece of paper" as notice of his assessments under three different statutes so long as the person to whom the notice is sent could reasonably be expected to know that he is being so assessed. In this proceeding, the applicant should have known and must have known that the penalty of $18,073.22 was levied under three different statutes because the aggregate source deductions of $180,732.21 with respect to the July 1987 payroll were computed by the applicant itself in accordance with the requirements of the Income Tax Act, the Unemployment Insurance Act and the Canada Pension Plan. Indeed, the applicant knew that the precise components of the aggregate source deductions were: income tax $129,252.91, Ul premiums $32,367.50 and CPP premiums $19,111.80.

Immediately after receiving the notice of assessment dated September 4, 1987, the applicant corresponded with Revenue Canada explaining the circumstances which led to the error in the computerized cheque and asking that the penalty be withdrawn. Apparently, the applicant allowed the 90-day objection period to pass thinking that the penalty might be withdrawn. In any event, a notice of objection was not served within the 90-day period and this application was filed soon thereafter.

The original notice of assessment dated September 4, 1987 was not produced to the Court in this application. Also, no argument was presented as to whether the applicant was misled by any statement that may have been printed on the back of the notice describing the procedure for an objection. The Minister appears to regard a notice of objection served within the 90- day period under subsection 165(1) of the Income Tax Act as a valid "appeal" to the Minister under subsection 61(2) of the Unemployment Insurance Act and subsection 27(2) of the Canada Pension Plan. It is only when a notice of objection is not served within the 90-day period that the issue in this application is raised.

The Tax Court of Canada was established by a statute enacted pursuant to section 101 of the Constitution Act, 1867. This Court must therefore find its jurisdiction within the Tax Court of Canada Act, S.C. 1980-81-82-83, c. 158, as amended, or within such other statute as may confer specific jurisdiction on this Court.

Section 165 of the Income Tax Act provides for the service of a notice of objection within a 90-day period. And under section 167, the Tax Court of Canada is granted jurisdiction to make an order extending the time within which a notice of objection may be served "where no objection to an assessment under section 165 . . . has been made . . . within the time limited by that provision for doing so”. Section 165 relates only to assessments made under the Income Tax Act and it has no connection with other assessments which may be made by the Minister of National Revenue under other statutes like the Unemployment Insurance Act or the Canada Pension Plan. Therefore, the authority of this Court under section 167 of the Income Tax Act to make an order extending the time for objecting to an assessment is limited to those assessments which are made by the Minister of National Revenue under the Income Tax Act.

The applicant seeks an order extending the time within which it may “appeal” to the Minister of National Revenue from two assessments made by the Minister under the Unemployment Insurance Act and the Canada Pension Plan respectively. I cannot find any provision in either statute which grants to this Court the jurisdiction to make such an order. I have considered the recent decision of the Federal Court of Canada in M.N.R. v. Reaume, [1989] 1 C.T.C. 267; 89 D.T.C. 5091 and have concluded that it does not affect the application herein. The assessment under review in the Reaume case was made only under the Income Tax Act; and that case did not involve assessments made under two or more statutes but consolidated in one notice of assessment like the circumstances in this application.

I therefore conclude that an order should be issued extending the time within which the applicant may object to that portion of the penalty assessed on September 4, 1987 under the Income Tax Act; but the application herein, to the extent that it relates to assessments made under the Unemployment Insurance Act or the Canada Pension Plan, must be dismissed. As a result of the order to be issued herein, the Minister will be required to review the applicant's objection to the penalty assessed under the Income Tax Act. If the Minister should decide, in the course of that review, to grant some relief from the penalty assessed under the Income Tax Act, the Minister may want to consider whether he is in any way restricted by statute from granting similar relief to the penalties assessed under the Unemployment Insurance Act and the Canada Pension Plan.

Application granted in part.