Succession J S Robert Lafleur v. Her Majesty the Queen, [1974] CTC 1, 74 DTC 6033

Walsh, J:—This is a petition by defendant to determine a question of law set out as follows:

Has the Federal Court, Trial Division, jurisdiction to hear the action brought before it by plaintiff on July 20, 1973 in view of the fact that the said action results from a preliminary decision of the Tax Review Board, which decision neither allowed nor dismissed the appeal brought before the said Board by plaintiff, but only confirmed that the Minister of National Revenue had the authority to issue income tax assessments on the income of the late J S Robert Lafleur by virtue of section 46(4)(a)(i) of the Income Tax Act (RSC 1952, c 148) because the latter had made a misrepresentation or had committed a fraud for each of the tax years assessed?* (Translation)

‘Subparagraph 46(4)(a)(i) reads as follows:

46. (4) The Minister may at any time assess tax, interest or penalties under this Part or notify in writing any person by whom a return of income for a taxation year has been filed that no tax is payable for the taxation year, and may

(a) at any time, if the taxpayer or person filing the return

(i) has made any misrepresentation or committed any fraud in filing the return or in supplying any information under this Act, . ..

re-assess or make additional assessments, or assess tax, interest or penalties under this Part, as the circumstances require.

whereas, in the absence of a waiver by the taxpayer, the Minister could in all other circumstances by virtue of section 46(4)(b) only reassess within 4 years from the day of mailing a notice of an original assessment or a notification that no tax was payable for the year in question.

The years in question are 1954 to 1962 inclusive which were reassessed on May 2, 1968. Plaintiff objected and the reassessments were confirmed by the Minister in accordance with the Act and an appeal was then brought to the Tax Review Board. Although the declaration in the proceedings brought before this Court asking that the reassessments be annulled states that the said Board rejected appellant’s appeal by judgment dated March 29, 1973 and although the decision of the Board is entitled “Judgment” it is common ground between the parties that the only issue argued before the Board was the question of the right of the Minister to reassess for a period more than four years from the date of the original assessment on the basis of misrepresentation or fraud in filing the returns for the years in question, and that the question of the amount of tax to be paid as a result of these reassessments was not argued before or decided by the Board. The “Judgment” reads:

The respondent having proved that the late Robert Lafleur, Esq., made misrepresentations in filing his return of income in respect of each of the taxation years 1954 to 1962 inclusively,

It is hereby decided that the respondent is entitled to proceed with new assessments for the said years.

Plaintiff contends that there is a right to appeal to this Court from the said decision and that it is desirable that the right. to make these reassessments should be settled as, if the appeal is successful and leads to a final judgment in favour of plaintiff, the reassessments would automatically fail, so that it would only be in the event that the appeal is not successful that the Board would have to continue with the hearing of the appeal for the years in question and determine whether the assessments made should be vacated, varied or referred back to the Minister for reconsideration and assessment.

While this would appear to be a very practical manner of proceeding, and counsel agreed that the Tax Review Board usually proceeds on this basis, what we have to determine is whether, under the provisions of the Income Tax Act and the Federal Court Act an appeal from such a decision is permissible. Section 24 of the Federal Court Act merely states:

24. Except as otherwise provided by the Rules, the Trial Division has original jurisdiction to hear and determine all appeals that, under the Income Tax Act or the Estate Tax Act, may be taken to the Court.

Subsection 172(1) of the Income Tax Act provides:

172. (1) The Minister or the taxpayer may, within 120 days from the day on which the Registrar of the Tax Review Board mails the decision on an appeal under section 169 to the Minister and the taxpayer, appeal to the Federal Court of Canada.

Section 169 reads as follows:

169. Where a taxpayer has served notice of objection to an assessment under section 165, he may appeal to the Tax Review Board to have the assessment vacated or varied after either

(a) the Minister has confirmed the assessment or reassessed, or

(b) 180 days have elapsed after service of the notice of objection and the Minister has not notified the taxpayer that he has vacated or confirmed the assessment or reassessed:

but no appeal under this section may be instituted after the expiration of 90 days from the day notice has been mailed to the taxpayer under section 165 that the Minister has confirmed the assessment or reassessed.

Under the heading “Disposal of Appeal” the rights of the Board are set out as follows in subsection 171(1):

171. (1) The Board may dispose of an appeal by

(a) dismissing it, or

(b) allowing it and

(i) vacating the assessment,

(ii) varying the assessment, or

(iii) referring the assessment back to the Minister for reconsideration and reassessment.

The Board in the present case did none of these things. The appeal to the Tax Review Board appealed against the assessments for each of the years in question as well as for the years 1963, 1965 and 1966 on the grounds that the amounts added to plaintiff’s revenue had been paid to him on account of disbursements incurred or to be incurred for the account of clients and were never paid to him, and secondly that the reassessments for the years 1954 to 1963 [sic] were illegal and null by virtue of paragraph 46(4)(b) of the former Income Tax Act in force at the time. The decision therefore did not dispose of the appeal but merely of the second issue, namely whether the respondent was entitled to proceed with the reassessments for the years in question. In fact the Reasons for Judgment conclude with the sentence:

This is my finding, and the parties will shortly receive a new notice of hearing for this case, which will undoubtedly require a very lengthy hearing.

It cannot be said, therefore, that plaintiff’s appeal was “dismissed”, for only one part of it, the objection to the use by the Minister of subparagraph 46(4)(a)(i) of the former Act was dismissed, but the question of any change which might be made in the amounts claimed as a result of the reassessments for the years in question and the other years was left unsettled. Certainly the assessment was not, as a result of the “Judgment”, either “vacated”, “varied” or “referred back to the Minister for reconsideration and reassessment” so that by a strict application of subsection 171(1) it cannot be said that the Board has “disposed of the appeal”. I do not believe, therefore, that the “Judgment” rendered by the Board on March 29, 1973 is a “decision” within the meaning of subsection 172(1) from which an appeal can be brought to the Federal Court of Canada.

While no criticism is implied of the manner in which the Board proceeded, I can find no authority in the Act permitting the appeal of what amounts to a preliminary or interlocutory decision. The Board will therefore have to now resume the hearing of the case as foreseen in the Reasons for Judgment, and when a final decision is made disposing of the appeal in one of the ways permitted by subsection 171(1) of the Act, this decision may then be appealed, at which time the rights of respondent to reassess for the years 1954 to 1962 inclusive on which the present action is based can be dealt with by the Court, together with any appeal made with respect to the amounts involved or for the other years which were reassessed. I therefore find the present proceedings to be premature and answer the question submitted on the question of law in the negative.

In view of the fact that this is the first time that this issue has been raised there will be no costs on this petition.