Bonner, T.C.J.: —This is an appeal from an assessment of income tax for the 1976 taxation year. The issue is whether the respondent assessed “with all due dispatch" as required by subsection 152(1) of the Income Tax Act (Act) and, if not, whether the failure to do so invalidates the assessment. That subsection read in part as follows:
in English
(a) The Minister shall, with all due dispatch, examine each return of income, assess the tax for the taxation year, the interest and the penalties, if any, payable and determine the amount of refund, if any, to which a taxpayer may be entitled
in French
(b) Le ministre doit, avec toute la diligence possible, examiner sa declaration de revenu, fixer l'impôt pour l'annee d'imposition et l'interet et les pénalités payables, s'il en est et determiner le montant de remboursement, s'il en est . . .
In its notice of appeal the appellant pleaded that:
1. The Appellant is a corporation, resident in Canada, and files its returns with the Toronto District Taxation Office.
2. The Appellant filed its return of income for the 1976 taxation year within the time prescribed under paragraph 150(1)(a) of the Income Tax Act.
3. On July 5, 1983 the Minister of National Revenue issued a Notice of Assessment for the Appellant's 1976 taxation year wherein tax in the amount of $230,505.96 was assessed together with interest in the amount of $157,158.31.
4. By Notice dated September 30, 1983 the Appellant objected to the said assessment.
5. The said assessment was confirmed by the Minister by Notice dated March 29, 1985.
The respondent, in his reply to notice of appeal, admitted those facts. As to paragraph 2 the respondent asserted that the return of income was sent to him on March 2, 1977. The copy of the return of income forwarded to the court by the respondent pursuant to subsection 170(2) of the Income Tax Act indicates that it was not the first return ever filed by the appellant. In other words the respondent was aware of the appellant's existence. The respondent made reference in the reply to a failure by the appellant to pay instalments on account of its tax for 1976 and to pay the amount of the tax which it estimated was owing at the time it filed its return of income for the year. No attempt was made to establish a link between the failure to pay and the delay in assessing. The respondent called no evidence explaining why it took six years and five months to issue the assessment. The amount of tax assessed was the same as the amount estimated in the return of income. The respondent's counsel assured the court that no one knew why it took so long and she admitted that the matter "seems to have slipped through the cracks”. It is on those rather sparse facts alone that the appeal is to be decided.
In argument counsel for the appellant referred to three decisions which, he said, stand for the proposition that "with all the due dispatch” means a reasonable period in the circumstances and he suggested that subsection 152(3) and section 166 do not serve as "cure-alls" in the circumstances. Those provisions read:
152 (3) Liability for the tax under this Part is not affected by an incorrect or incomplete assessment or by the fact that no assessment has been made.
166 An assessment shall not be vacated or varied on appeal by reason only of any irregularity, informality, omission or error on the part of any person in the observation of any directory provision of this Act.
He argued that following the expiry of the with all due dispatch period the Minister's authority to issue an assessment ceases and that although the liability for tax continues, it continues only in theory because it is unenforceable by the issuance of an assessment.
Counsel for the respondent based her first argument on the opening words of subsection 152(4):
The Minister may at any time assess tax, interest or penalties under this Part . . .
Those words, she said, apply to the initial assessment of tax for a year, that is to say to the assessment referred to in subsection 152(1). According to the argument the words "with all due dispatch" apply only to the examination of the return required by subsection 152(1). This argument was not supported by any authority. I do not agree with it. The language of the statute is plain. The words in question apply to all the duties imposed on the Minister by the subsection. Section 152 deals with events in the normal sequence or flow, that is to say, the examination of the return, the initial assessment and the reassessment, if any. There is no basis for a conclusion that the subsection (4) word "anytime" applies to the initial assessment called for by subsection 152(1). It is clearly intended to apply to the subsequent assessment which the respondent is, by the subsection (4) word "may", permitted and authorized to make (subject always to the subsection (4) time limits).
Next, counsel for the respondent, while not conceding that the assessment was late, submitted that unlike subsection 152(4), 152(1) does not provide a consequence for delay in making the initial assessment. That, she said, is indicative of a legislative intention to avoid nullifying a tardy assessment. The words “with all due dispatch” are, she submitted, directory only, an indication of a Parliamentary desire that the assessments be issued within a period of time which is reasonable in the circumstances. She referred to no authority in support of her position save for the following passages from the Jolicoeur case:
In my opinion the words "with all due dispatch” have the same meaning as with all due diligence’ or within a reasonable time'. They appear in Sections 46(1), 58(3) and 105(2) of the Income Tax Act and other fiscal statutes. In a legal sense, they are interpreted as giving a discretion and freedom, justified by circumstances and reasons, to the person whose duty is to act. The acts involved are not submitted to a strict and general rule.
There is no doubt that the Minister is bound by time limits when they are imposed by the statute, but, in my view, the words 'with all due dispatch’ are not to be interpreted as meaning a fixed period of time. The 'with all due dispatch’ time limit purports a discretion of the Minister to be exercised, for the good administration of the Act, with reason, justice and legal principles.
I do not read Jolicoeur as authority for the proposition that the words are directory only. Fournier, J. made it quite clear that while the words give discretion and freedom to the Minister, such freedom must be justified by circumstances and reasons.
The words "with all due dispatch" and the words "avec toute la diligence possible” express a clear intention on the part of the legislature to require the Minister to act within a reasonable period, the length of which will vary in accordance with the circumstances of each case. The statutory language does not permit the formulation of a rigid time limit. The courts have in the past allowed the Minister considerable latitude. Thus for example in Hut- terian Brethren Church of Wilson v. The Queen assessments were found to have been made with all due dispatch even though the Minister deferred assessing action for a very long period of time while related issues of liability were being litigated. I have outlined the facts on which a conclusion must be reached in the present case. It is significant that the respondent has failed to adduce any evidence to explain a delay which, on the face of it, is inordinate. It is neither desirable nor possible to identify the last day of the period reasonably required to assess in the circumstances of this case. It is sufficient to say that if the words "with all due dispatch” are not to be deprived of all meaning,the period allowed by those words must be found to have expired long before the assessment under appeal was made.
I turn next to the question whether the respondent's failure to assess within the permitted time invalidates the assessment. It was the position of counsel for the respondent that despite the use of the word “shall” the statutory language in question is directory only and that the assessment is not affected by tardiness. It is difficult to reconcile that submission with section 11 of the Interpretation Act, R.S.C. 1985, c. 1-21 which provides: "The expression shall’ is to be construed as imperative and the expression 'may' as permissive.”
The proper approach is also described in Dreidger, Construction of Statutes, 2nd edition, at page 14 as follows:
In the decisions the word shall has been divided into two categories — mandatory and directory. These are no doubt convenient labels to describe results in a particular case, but the distinction is linguistically unsound. The word shall, unless used as a future auxiliary, is always obligatory. If 'directory' means only advice or direction, leaving it open to comply or not to comply with the statutory command, then the word shall is being misused; if it means that the advice or direction must be followed, then 'directory' is mandatory’.
It is submitted that the initial fundamental question is: who is prejudiced by compliance or non-compliance? The answer is easy where the statute itself prescribes a penalty, as in penal statutes; there, the violator must pay, and shall is therefore 'mandatory'. The difficult cases are those where the statute does not indicate what the consequences of non-compliance are to be. Hence, the consequences of compliance and non-compliance must be considered in the light of the purpose and text of the statute and the facts of the particular case. The courts have shown a tendency not to penalize an innocent person who was not a party to the violation.
In my view although the public as a whole is prejudiced by a failure on the part of the Minister to perform his statutory duties promptly, subsection 152(1) is a provision which is intended primarily to protect the individual taxpayer by bringing certainty to his financial affairs at the earliest reasonably possible time. In Nicholls v. Cumming Richards C.J. made the following remarks which, although relating to a failure to serve notice of a reassessment, are nevertheless helpful:
Looking at these provisions, there can be no doubt they were reasonable ones, intended for the protection of the ratepayer, providing also for the protection of the public, when the amount assessed was too low, but making it necessary that the party should have notice when it was intended to increase the amount of his assessment. Is this proceeding directory, or is it mandatory? Can any court properly say, that proceedings, which the legislature has required should be taken to protect taxpayers from unequal or unjust taxation, may be dispensed with, by holding that they are directory, and therefore, non-essential? I think not. On the contrary, I think reason and authority shew the proper rule to be, that provisions, intended for the security of the ratepayer, to enable him to know, with reasonable certainty, for what real and personal property he is taxed, and the amount, are essential conditions, and, if not observed, he is not legally taxed.
There are many authorities which shew, that provisions intended to regulate the manner of carrying out the system established by the statute, but which do not affect the rights of the taxpayer, are merely directory; and not strictly following them would not affect the validity of an assessment, but I do not think they apply to the case before us.
A failure to invalidate an assessment not made in compliance with the subsection would render meaningless a clearly expressed statutory command. The duty imposed and power conferred on the Minister by subsection 152(1) is to assess with all due dispatch. The respondent has by his tardiness failed both to perform the duty and to exercise the power. There is no basis for a conclusion that the language used by the Legislature Is intended to confer a power on the Minister to assess whenever he pleases coupled with a diffident expression of desire that he do so as soon as reasonably possible. Thus section 166 of the Act does not apply to save the assessment.
Finally, I will note that it is clear that subsection 152(4) reassessments are invalid if late unless saved by subsection 165(5). There is no reason to suppose that the same fate should not befall a subsection 152(1) assessment if it is late. For the foregoing reasons the appeal will be allowed with costs and the assessment will be vacated.
Appeal allowed.
Email this Content