Dominik Kramer, Magdalena Kramer, Helmut Kramer, Hildegard Gruber v. Minister of National Revenue, [1984] CTC 2784, 84 DTC 1709

Cardin, TCJ:—Dominik Kramer, Magdalena Kramer, Helmut Kramer and Hildegard Gruber have filed applications for an order extending the time within which notices of objection may be served with respect to the 1980 taxation year. The Minister’s reassessments of the taxpayers are in relation to a transaction common to all appellants. By agreement of the parties and leave of the Court, the applications were heard together.

Dominik and Magdalena Kramer are the parents of Helmut Kramer and Hildegard Gruber. Although not directly involved in the issue at bar, two other children, Nickolaus and Christina Kramer, were also involved in the transaction with the other members of the Kramer family and were reassessed on July 15, 1982 (Exhibits A-3 and A-4). The evidence is that the notices of objection for Nickolaus and Christina Kramer were filed within the prescribed delay and their assessment is presently under review. With respect to the applications for extension of the time to file notices of objection under subsection 167(1) of the Income Tax Act, RSC 1952, c 148, made on behalf of the applicants, Mr Harold Brudner a chartered accountant filed an affidavit dated November 3, 1983.

The Facts

By letter dated March 17, 1982, addressed to the applicants in care of Harold Brudner, Mr Sukhedeo, a field auditor for the Department of National Revenue, advised that since no agreement could be reached with Mr Brudner with respect to the adjusted cost base in the calculation of the capital gains realized by the applicants from the expropriation of their property in Markham, Ontario, the Minister of National Revenue would proceed to assess the applicants on the basis that the fair market value of the expropriated property on December 31, 1971, was $37,000 (Exhibit A-2).

The applicants were assessed on that basis for the 1980 taxation year by notice of reassessment dated June 24, 1982. With respect to those reassessments, the 90-day period in which the notices of objection could be filed, the 90-day period in which the notices of objection could be filed, expired on September 22, 1982. The notices of objection were not filed in the prescribed period.

Mr Brudner’s evidence for not filing the notices of objection within the 90-day period was that he had taken his vacation in July, that he was ill for part of the summer and also he had, at that time, difficulty with his office staff.

There is confirmed evidence that the notices of objection dated October 7, 1982 (Exhibits A, B, C and D attached to Mr Brudner’s affidavit) were signed on October 8, 1982.

Mr Brudner testified that he had prepared and signed the applications on October 6, 1982 (Exhibit E attached to affidavit) and instructed his secretary on October 8, 1982, to send by registered mail the applications and the notices of objection to the then Tax Review Board (Exhibit A-5 office memoranda).

On October 21, 1982, Mr Brudner received a letter [from] Mr Ekubor of the Collection Section of the Department of National Revenue with respect to bank guarantees for the tax arrears of the Kramer family, including Nickolaus and Christina Kramer and advising that the bank guarantees would expire on October 14, 1983 (Exhibit A-6).

On November 24, 1982, guarantees from the Bank of Nova Scotia, 95 Dundas Street, Toronto, with respect to the payment of taxes and penalties owed by the applicants and by Nickolaus and Christina Kramer, were forwarded to the Director of Taxation, Revenue Canada Taxation (Exhibit A-7).

On September 27, 1983, Mr H Henry of the Collection Section of the Department of National Revenue, wrote to Mr Brudner requiring the payment of tax arrears for the applicants, advising that bank guarantees would expire on October 14, 1983 (Exhibit A-11). On September 30, 1983, Mr Brudner sent to Mr Henry, copies of the notices of objection for the Kramer family, dated October 7, 1982.

On October 6, 1983, the Department of National Revenue again contacted Mr Brudner concerning the applicants’ tax arrears, to which Mr Brudner replied that he was still waiting for the outcome of the applications for extension of time filed with the Tax Review Board under subsection 167(1) of the Act. The Department of National Revenue subsequently advised Mr Brudner that they had no record of the applications. Mr Brudner then inquired at the Tax Review Board and was informed that after making a thorough search of its records, the applications were not registered with the Board. By letter dated October 13, 1983, Mrs Barrie, supervisor of the Collection Section, agreed to extend the bank guarantees until January 20, 1984, in order to permit Mr Burdner to trace the original notices of objection to obtain an extension from the Tax Review Board (Exhibit A-13).

On October 6, 1983, Mr Brudner inquired at the Customer Service of the Toronto Postal District office concerning the letter sent by registered mail on October 6 or 7, 1982 to the Tax Review Board (Exhibit A-14).

In reply, Canada Post stated that their records showed no dispatches or delivery to the Registrar of the Tax Review Board in Ottawa and advised that without the original registration receipt, which Mr Brudner admitted had been lost, the tracing of a registered item is virtually impossible (Exhibit A-15). The Board (which records its registered mail) could not find anything emanating from Mr Brudner’s office.

The question here is whether or not the Court has jurisdiction to grant the applications under subsection 167(1) of the Act in the circumstances above described. Paragraph 167(5)(a) states:

No order shall be made under subsection (1) or (4)

(a) unless the application to extend the time for objecting or appealing is made within one year after the expiration of the time otherwise limited by this Act for objecting to or appealing from the assessment in respect of which the application is made.

Counsel for the respondent is quite correct in stating that the Court would have no jurisdiction to grant the applications if Brudner’s affidavit, received by the Tax Review Board on November 8, 1983 is, or is meant to be, an application under Section 167. As I interpret the affidavit, Mr Brudner is attempting to establish that while they may not have been received by the Tax Review Board or the Department of Justice, the notices of objection were made very shortly after the expiration of the 90-day period, and the applications under section 167 were made well within the one year and 90-day period.

Whether or not the Court considers valid the reasons given by Mr Brudner for not filing the notices of objection within the 90-day period, Mr Brudner has nevertheles complied with subsection 167(2). Indeeed, he has met all the conditions of subsection 167(5), save paragraph (a), which the applicants must prove by establishing that the applications were made on October 7, 1982. It is not incumbent on the applicants to prove that the applications were received by the Tax Review Board or the Department of Justice, but they must establish theat they were, in fact, sent.

There is no evidence, whatsoever, of Mr Brudner’s voluntary procrastination in the discussions and the correspondence he had with officials of the Department of Natioal Revenue, either with respect to the adjusted cost base of the applicants’ property or in providing in Octobe of 1982, the reauired bank guarantees for the applicants’ tax liabilities. Mr Brudner acted quickly when he found out, in October 1983, the applications and the notice of objection had not been received by the Department of National Revenue, the Department of Justice nor the Tax Review Board. He did all he could, without success, to trace the lost documents.

I do not believe that the Court can rightly ignore Mr Brudner’s affidavit and his evidence at the hearing, nor Mrs Gruber’s testimony of having herself signed the notices of objection on October 8, 1982; of having taken the notices to other members of the Kramer family for signature, and returning them the same day to Mr Brudner.

The notices of objection of Christina and Nickolaus Kramer were signed on October 7, 1982 and were evidently received and accepted by the Department of Justice. Although the date of their assessment was July 15, 1982, rather than June 24, 1982, the transaction and the basis of their assessments were identical to those of the other members of their family (the applicants). I cannot see why Mr Brudner, representing all the members of the Kramer family, would make out notices of objection for two members of the family and not for all the members when the tax issues are identical.

Considering all the evidence, I can accept that the applications under section 167 and the required notices of objection, were made and signed by the applicants on October 7, 1982. Mr Brudner did not only intend to send the applications, he took every reasonable step he could to ascertain that they were sent as soon as possible after the 22nd of September, 1982, He had no reason to suspect that the applications had not been sent or were lost on the way and not received by the Tax Review Board. Indeed, in his statement of account to the Kramer family, dated Novermber 30, 1982, he entered a charge for filing the notices of objection (Exhibit A-8).

In these circumstances, which are unusual, I conclude that Mr Brudner, on behalf of the Kramer family made, in all good faith, applications for extension of time for filing notices of objection on October 7 or 8, 1982, and took the normal necessary steps to have the applications sent to the Tax Review Board within the meaning of paragraph 167(5)(a) of the Act. In my opinion, a stricter interpretation of the wording of paragraph 167(5)(a) would, in the circumstances, remove the discretionary power, which Parliament intended to confer on this Court in subsection 167(1).

The applications made on behalf of the applicants, dated October 6, 1982 is allowed and the notices of objection, signed by the applicants and dated October 7, 1982, are considered valid.

Applications granted.