Tic Toe Tours LTD v. Minister of National Revenue, [1981] CTC 2776, 81 DTC 660

Taylor, D E:—This application was heard at Toronto, Ontario, on September 21, 1981. The full text of both the Application itself, and the Minister’s “Reasons for Opposing Application” are provided for the record:

APPLICATION FOR EXTENSION OFTIME FOR FILING NOTICE OF OBJECTION

The applicant hereby applies for an order of this honourable Board extending the time for filing Notices of Objections from reassessments of tax for the applicant’s 1975, 1976, 1977, 1978, and 1979 taxation years, notices of which were all dated 10 March 1981, on the following basis:

1. The reassessments in question result from an audit of both the applicant and

Ezriel Reichman, an employee of the applicant who was also reassessed.

2. The reassessments for Ezriel Reichman were all dated 23 March 1981 and

were received by Mr Reichman after the applicant had received its notices.

3. Mr Reichman, who was dealing with the respondent regarding the reassessments for both himself and the applicant, forwarded all notices of reassessment for both himself and the applicant, to the firm of chartered accountants who acted for both he and the applicant, upon receipt of his notices of reassessment.

4. Upon receipt of the said notices for both Mr Reichman and the applicant, the members of the accounting firm, C M Zeifman and Co., of Toronto, failed to recognize that the notices for the applicant bore a different date of mailing than the notices for Mr Reichman: March 10, 1981, rather than March 23, 1981.

5. The variance in the dates of mailing referred to in paragraph 4 above, only came to the attention of members of C M Zeifman and Co. on 15 June 1981, when the notices were reviewed in the course of gathering material together to be forwarded to Steven Kerr, of Verchere, Noel and Eddy, Barristers, of Toronto, tax counsel for both Mr Reichman and the applicant, who was retained, inter alia, to prepare Notices of Objection to the reassessments.

6. This application is being made as soon as possible after the Applicant and its accountants and tax counsel first became aware that the 90-day time period had expired, on 8 June 1981; this application is being made within one year from the expiration of the 90-day time period for filing a Notice of Objection.

7. If the applicant, through its accountants, had not inadvertently neglected to notice the variance between the date of mailing of the notices of reassessment for Mr Reichman and the date of mailing of the notices of reassessment for the applicant, Notices of Objection for the applicant would have been filed within the 90-day time period.

8. There are reasonable grounds for objecting from the reassessment; copies of the Notices of Objection for the applicant’s 1975, 1976, 1977, 1978 and 1979 taxation years are attached hereto as Appendices A, B, C, D, E and F, respectively.

REASONS FOR OPPOSING APPLICATION

The Respondent states that he will oppose the Application for an Order extending the time within which to serve Notices of Objection to reassessments for the 1975, 1976, 1977, 1978 and 1979 taxation years for the reason that the facts asserted by the applicant do not disclose any reason why it was not possible to serve Notices of Objection within the time limited by section 165 of the Income Tax Act, and therefore the Application does not satisfy the requirement of subsection 167(2) of the Income Tax Act.

WHEREFORE the respondent respectfully submits that the applicant’s Application be denied.

Mr Ezriel Reichman, president of the applicant, and Mr Israel Samuel Sa- chon, CA, gave testimony in support of the applicant’s contentions. Under cross-examination, it was apparent that the specific circumstances generally described in the Application which interfered with the required filing under section 165 of the Income Tax Act, SC 1970-71-72, c 63, as amended, amounted to human failure. Mr Reichman did not notice the date of the applicant’s reassessment; he did not recognize that since it was received some time before his personal reassessment, it probably bore an earlier date; the accountants did not check and properly record the different dates; and the applicant did not ensure that the matter had been pursued within the required time by the accountants. It would also appear from the testimony that during the critical 90-day period, efforts had been proceeding to resolve the dispute with Revenue Canada, and thereby avoid formalities. Accordingly, the file of the applicant had been active during that period.

The weight of the effort of counsel for the applicant was concentrated on showing that the Board’s jurisdiction under subsection 167(1) of the Act extended to the use of discretion and was permitted:

(a) in the Board’s opinion;

(b) it would be just and equitable;

(c) in the circumstances of the case.

Counsel recognized that there were certain restrictions and noted them as follows:

2. s 167(5)

However, there are restrictions on the discretion, in addition to the guidelines of justice and equity, which restrictions are imposed by s 167(5):

(a) there must be reasonable grounds for objecting (167(5)(c)(iii)); therefore the Board must examine the merits of the case, to insure that there is an apparent, or prima facie, basis for objecting;

(b) the application must have been brought as soon as circumstances permitted it to be brought (167(5)(c)(ii) );

(c) an objection would have been made within the time limit if the mistake hadn't occurred (167(5)(c)(i));

(d) no previous extension has been granted (167(5)(b)); and

(e) the application must have been made within one year after the expiry of the 90-day time limit (167(5)(a) ); therefore there is an absolute time limitation after which the Board has no jurisdiction to grant an extension, regardless of the reasonableness of the grounds for objection or whether it would be just and equitable to grant the extension.

With this emphasis, counsel for the Minister disagreed, and noted that the discretion allowed to the Board was not one encumbered merely by certain restrictions, but it was a discretion exercisable only when certain conditions were met. In counsel’s view, a major hurdle, not underlined by counsel for the applicant, was to be found in the interrelationship and interdependence among subsections 167(1), (2) and subparagraph (5)(c)(i). This led him to argue that the “circumstances of the case” (subsection 167(1)) were effectively synonymous with “the reasons why it was not possible” (subsection 167(2)) in order to meet the condition stipulated in subparagraph 167(5)(c) (i). Therefore, according to counsel, the Board could not exercise its jurisdiction until it was satisfied that the circumstantial impediments or disruptions advanced had rendered it “not possible” for the applicant to file his Notices of Objection within the allotted time. Further, it was the view of counsel for the Minister that the reason noted in the Application for the late filing, at best, only covered the last 13 days of the 90 days provided under section 165, but that no reason had been advanced by the applicant to show that it was “not possible” to file the required Notice of Objection during the previous 77 days, that portion of the statutory 90-day period which expired before that time.

Dealing first with the respondent’s “77 day” argument above, I am unable to see in subsection 167(2) of the Act any requirement upon the taxpayer to provide such a justification for not filing. As I read that section, filing on the 90th day would be just as valid as filing on the first or any other day of the stipulated period. However, in this matter, the impediment on the 90th day was nothing different than the impediment had been all along — a lack of knowledge on the part of the applicant and the accountants of the critical final date. This lack of knowledge did not arise as a result of any action, lack of action, or lack of notice by the Minister. The reassessment in question was received normally, and contained the standard warning regarding the statutory period of 9! days. I am impressed by the interpretation placed on section 167 by counsel for the Minister — that the “circumstances” are not sufficient if they merely outline the reasons why the filing was not done, they must underscore and substantiate why it was not possible to do so. It is certainly clear from the “Reasons for Opposing Application” filed by the respondent (supra) that it was the intention of the Minister to rely upon subsection 167(2) of the Act. Such an interpretation may appear extreme and seriously restrict the Board’s discretion to grant a “just and equitable extension”, but the argumet and jurisprudence which would negate that interpretation were not provided at the hearing of this application.

During argument, reference was made by both parties to the predecessor sections in the old Income Tax Act — subsections 61 A(1), (2) and (5). It was common ground that the new Income Tax Act provided somewhat more flexibility to the Board in granting an application, but there was little agreement on the extent or nature of that flexibility. Counsel for the applicant commented on this point, and I quote:

S. 167(1) is meant to afford relief where someone other than the taxpayer was responsible for missing the deadline

A comparison of subsection 167(1) of the present Act with s 61 A(1 ) of the former Act makes it clear that s 167(1) is intended to cover more situations than just the death, incapacitating sickness or bankruptcy of the taxpayer.

Furthermore, s 167(1) was intended to afford relief where someone other than the taxpayer was responsible for missing the deadline.

see: Savary Beach Lands Ltd v MNR, [ [1972] CTC 2608 at 2609]; 72 DTC 1497, at 1498 per Mr Chairman Flanigan:

“It goes without saying that the provisions of section 61A Of the old Act, which made it necessary for the delay to be the result of the incapacity of the taxpayer, were far more restrictive than the present section in the new Act, which removes that restriction and makes it possible for an application to be made where the fault, if such may be the term, in not filing within the prescribed time, is that of someone other than the taxpayer, individual or corporate.”

It is submitted further that where someone other than the taxpayer is at “fault” for missing the time limit, if the taxpayer has acted as prudently as possible, the Board should exercise its discretion to prevent the taxpayer from suffering an injustice or inequity in losing, through no fault of his own, the right to appeal the tax assessment.

It is submitted further that a taxpayer has acted as prudently as possible where he has consulted his professional advisors and has given the professional a clear mandate to take all necessary steps to contest the assessment.

Accordingly, the taxpayer has not done anything that would make it unjust or inequitable for the Board to grant the taxpayer an extension of time to object to the assessment; s 167(1 ) was enacted to give relief in circumstances of this nature, and such relief should be granted, ordering the time for filing a notice of objection to be extended.

It would appear to me from the above comments by counsel that he has interpreted the reference in Savary Beach (supra) as providing under the New Act, not only for the shift of the taxpayer’s responsibility for filing, to an agent, but also he regards any lack of fulfilment of that responsibility by the agent as equivalent to the “death, incapacitating illness or bankruptcy of a taxpayer” under the O/d Act. It might be contended that the “death, incapacitating illness or bankruptcy” of an agent would fulfil the conditions under the New Act while they would not have done so under the O/d Act, and that such an interpretation could be placed upon the word “fault” in the Savary Beach citation (Supra). But no jurisprudence was provided to the Board which would support the apparently much more liberal interpretation placed upon it by counsel for the applicant. Conversely, it might be argued that the respondent’s more restrictive interpretation is warranted in light of the fact that under the New Act, subsections 167(2) and (5) were retained unchanged from the Old Act.

A comment also should be made with regard to an alternative argument made by counsel for the applicant, based upon the decision in Domenic Mirotta v MNR, [1978] CTC 2922; 78 DTC 1645, at 2923 and 1646 respectively:

I would dismiss this application but for the fact that it deals with the imposition of a penalty under section 163 of the Act. The taxpayer therefore will be afforded an opportunity to present his case.

There is nothing in section 163 of the Act which would serve to affect the application of the provisions of subsection 167(2) of the Act upon which the decision in the instant matter is founded. The imposition of a penalty might be taken into consideration by the Board in exercising its discretion on what would be “just and equitable”, but it does not validate the reasons advanced in this application as to why it was “not possible” to file within the required time, which would permit the use of such discretion.

I am not persuaded that the “human frailty” argument, whether attributed to the taxpayer or to his agent, is sufficient to fulfil the requirements of section 167 of the Income Tax Act and permit the Board the use of its discretion. When the instant application is examined from the perspective relied upon by counsel for the Minister, there is no essential difference between it and the application of James Wayne Elliott v MNR, [1978] CTC 2919; 78 DTC 1643.

The application is denied.

Application denied.