Citation: 2011TCC550
Date: 20111201
Docket: 2011-530(IT)APP
BETWEEN:
JAMES CARCONE,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
D'Arcy J.
[1]
The Applicant, James
Carcone, has made an application under section 166.2 of the Income Tax
Act (the “Act”) for an order extending the time within which
notices of objection may be filed with regard to two reassessments that the
Minister of National Revenue (“the Minister”) asserts he made on December 31,
2003 (the “Reassessments”). The Reassessments are in respect of the Applicant’s
1999 and 2000 taxation years.
[2]
The Applicant
previously made an application to the Minister under section 166.1 of the Act
for an extension of time within which to serve on the Minister a Notice of
Objection for his 1999 and 2000 taxation years. The Minister refused the
Application.
[3]
The first issue before
the Court is whether the Reassessments were mailed to the Applicant on December
31, 2003 or sent to him at any other time. The second issue is, if the Reassessments
were mailed to Mr. Carcone, were they mailed to his authorized mailing address.
[4]
I heard from three
witnesses: the Applicant; his accountant, Mr. Carmine Rossi; and Mr.
Michael Coombs, a Canada Revenue Agency (“CRA”) collections enforcement officer.
[5]
I found Mr. Carcone and
Mr. Rossi to be credible witnesses. I will discuss Mr. Coombs’ testimony in the
course of my reasons for judgment.
Summary of Facts
[6]
Mr. Carcone testified
that he first became aware of the Reassessments in early 2004 when he received
a letter from the CRA informing him that he was in arrears in his income tax
payments. He contacted Mr. Rossi and asked him to pursue the matter with the
CRA.
[7]
Mr. Rossi testified
that he contacted the CRA on numerous occasions in 2004 and 2005 in an attempt
to obtain a copy of the Reassessments. He was not successful.
[8]
Mr. Carcone testified
that he also attempted to obtain copies of the Reassessments from the CRA. He
noted that his efforts continued into the summer of 2010 when he sought
assistance from his Member of Parliament. Mr. Carcone testified that the first
time he saw a copy of the Reassessments was a few days before the hearing of
this application when he received the Respondent’s book of documents.
[9]
Mr. Carcone has resided
at 3629 Birchmeadow Crescent in Mississauga, Ontario (the “Birchmeadow address”) since 1984. Mr. Carcone noted
that since 1984 his authorized mailing address for the purpose of his personal
income taxes has been the Birchmeadow address. Since 1984, the Birchmeadow
address is the only address that has appeared on his personal tax returns; he
has never filed any other address with the CRA and has never requested that his
address be changed.
[10]
Mr. Carcone owns 50% of
the shares of J.C. Carcone Carpenters Corporation (the “Corporation”). His
spouse owns the remaining 50% of the shares. The Corporation carries on the
business of providing general contracting services relating to construction.
[11]
The Corporation has
reported three different mailing addresses to the CRA. Prior to July 2003, the
authorized mailing address for the Corporation was the Birchmeadow address. The
Corporation changed its authorized mailing address to 102 Lakeshore Road East, Mississauga, Ontario (the “Lakeshore address”) in June 2003 and to 2395 Cawthra Road, Mississauga, Ontario in October 2004.
[12]
The fact that the
Corporation changed its address is relevant for the purposes of this application
since it was the Respondent’s evidence that the CRA changed the authorized
mailing address of the Applicant to the Lakeshore address. It was the
Respondent’s evidence that this change occurred on May 25, 2004 and continued
until April 21, 2005.
[13]
There was no evidence
before the Court that the Applicant authorized or otherwise initiated the
change in his personal mailing address. It appears that the CRA changed the
address in error.
[14]
The Respondent filed
with the Court the affidavit of Mr. Coombs. Mr. Coombs also testified at
the hearing and was cross-examined on his affidavit and his evidence-in-chief.
Mr. Coombs’ affidavit states that the CRA mailed the Reassessments to the
Applicant at the Birchmeadow address on the date they were issued, December 31,
2003. Mr. Coombs states in his affidavit that the CRA also mailed the
Reassessments to the Applicant on June 11, 2004 and faxed them to the Applicant
at his Birchmeadow address on April 21, 2005.
Summary of Law
[15]
The Court may not grant
an application made under section 166.2 of the Act unless the Applicant has
previously made an application to the Minister under section 166.1 for an
extension of the time for serving a notice of objection.
[16]
Paragraph 166.2(5)(a)
of the Act provides that no application shall be granted by the Court
under section 166.2 unless “the application was made under subsection 166.1(1)
within one year after the expiration of the time otherwise limited by this Act
for serving a notice of objection . . .”
[17]
The time limit for
serving a notice of objection is prescribed in subsection 165(1) of the Act,
which, during the relevant period, read as follows:
A taxpayer who objects to an assessment under this
Part may serve on the Minister a notice of objection, in writing, setting out
the reasons for the objection and all relevant facts,
(a) where the assessment is in respect of
the taxpayer for a taxation year and the taxpayer is an individual (other than
a trust) or a testamentary trust, on or before the later of
(i) the day that is one year after the taxpayer's
filing-due date for the year, and
(ii) the day that is 90 days after the day of mailing
of the notice of assessment; and
(b) in any other case, on or before the day
that is 90 days after the day of mailing of the notice of assessment.
[18]
In the application
herein, the date from which the calculation of time must be done is the day of
mailing of the notice of the reassessment.
[19]
Where a taxpayer such
as the Applicant alleges that a notice of reassessment was not mailed or
otherwise communicated to him, the Minister bears the burden of establishing
that the notice was in fact mailed or otherwise communicated to the taxpayer.
As the Federal Court of Appeal noted in Aztec Industries Inc. v. Canada,
[1995] F.C.J. No. 535 (QL), [1995] 1 C.T.C. 327, 95 DTC. 5235 (“Aztec”),
at paragraph 10 (QL), “. . . the facts are peculiarly within his knowledge and
he alone controls the means of adducing evidence of them. A number of statutory
provisions recognize the Minister's burden in this respect and are clearly
designed to alleviate it.”
[20]
The Applicant also
argued that if the CRA mailed the Reassessments, it did not mail them to his
authorized mailing address.
[21]
In The Queen v. 236130
British Columbia Ltd., 2006 FCA 352, 2007 DTC 5021, the
Federal Court of Appeal stated the following, at paragraph 22, with
respect to the effect of the Minister mailing a notice of assessment to an
incorrect address:
In the end, the reassessments were mailed to the wrong address on both
occasions. As was stated in L.B. Scott v. M.N.R. [1960] C.T.C. 402 (Ex.
Ct.) (Scott) at p. 417:
. . . it is in
my opinion also to be inferred that Parliament never intended that such a
notice could be given effectively by the “mailing” of it to the taxpayer at
some wrong or fictitious address, and I find nothing in the statute to suggest
that a taxpayer should be bound by an assessment or fixed with notice of
assessment upon the posting of a notice thereof addressed to him elsewhere than
at his actual address or at an address which he has in some manner authorized
or adopted as his address for that purpose.
[22]
The onus is therefore on the
Minister to show that the Reassessments were sent to his authorized mailing address.
Application of the Law to the Facts
[23]
It is the Applicant’s
position that the Reassessments were never mailed or otherwise sent to him.
[24]
The Respondent provided
evidence to support her position that the Reassessments were mailed to the
Applicant on December 31, 2003, the date they were originally issued by the
Minister, that they were mailed a second time on June 11, 2004, and that
they were faxed to the Applicant on April 21, 2005.
[25]
The Court must consider
all three dates. As my colleague Justice Bowie noted in Central Springs Ltd.
et al. v. The Queen, 2006 TCC 524, 2006 DTC 3597 at paragraph 9, “The law
is settled that when notices of assessment are not mailed but come to the
attention of the taxpayer by personal delivery then the time within which they
may be objected to starts to run with that personal delivery.”
[26]
Before considering the
evidence before the Court, I will discuss whether Mr. Coombs’ affidavit
satisfies the conditions of subsections 244(9) and 244(10) of the Act.
[27]
Subsections 244(9) and
244(10) of the Act are frequently used by the Minister to present
evidence to the Court. Subsection 244(9) provides that an affidavit in which an
officer of the CRA sets out that he has charge of the appropriate records and
that a document annexed to the affidavit is a document or true copy of a
document, or a printout of an electronic document, made by or on behalf of the
Minister
or by or on behalf of a taxpayer is evidence of the nature and contents of the
document.
[28]
Subsection 244(10) of the
Act provides that an affidavit of an officer of the CRA that sets out
that he has charge of the appropriate records and has knowledge of the practice
of the CRA may be used as evidence of statements contained in the affidavit
that relate to whether a notice of objection to, or appeal from, an assessment
was received within the time allowed under the Act.
[29]
Paragraph 1 of the
affidavit of Mr. Coombs states the following:
1. I am employed as an officer with the Toronto West TSO of
the Canada Revenue Agency (the “CRA”) and had carriage of this matter on behalf
of the CRA. As such, I have personal knowledge of the facts set out below, save
and except what is stated to be on information and belief, and where so stated,
I believe that information to be true. Where I have referred in my affidavit to
information without expressly disclosing the source, the information was
derived either from my first-hand knowledge or from my review of the CRA’s file
relating to James Carcone (the “Applicant”).
[30]
Mr. Coombs testified
that he is a collections enforcement officer with the CRA who had carriage of
the Applicant’s file for three months, from August 2009 to October 2009.
[31]
Mr. Coombs did not
state in his affidavit that he had charge of the appropriate CRA records.
Further, it was clear from his testimony that he did not have charge of the
records. As a result, the Respondent cannot rely on subsections 249(9) or
(10) of the Act.
The alleged mailing of the Reassessments on December
31, 2003
[32]
The Respondent relied
on the following evidence to support her position that the Reassessments were
mailed on December 31, 2003 to the Applicant’s authorized address:
a.
The affidavit and oral
testimony of Mr. Coombs with respect to the mailing practices of the CRA.
b.
Reconstructed Notices
of Reassessment (Exhibits R-2 and R-3).
c.
A printout of the CRA’s
electronic record of the Applicant’s authorized mailing address (Exhibit A-6).
[33]
Mr. Coombs described,
at pages 12 and 13 of his affidavit, the CRA’s mailing practices with respect
to income tax assessments. This description is attached to these reasons as
Schedule A.
[34]
Mr. Coombs testified
that the description was not based upon his personal knowledge. It was based
upon a discussion he had had with a manager at the CRA’s Initial Processing
Unit, located in Ottawa, Ontario.
[35]
Mr. Coombs stated the
following during his examination-in-chief by the Respondent’s counsel:
Q. Would you turn to page 12, please, to
paragraphs (a) to (h), which continue on page 13. What steps did you take to
confirm that the information contained within these two pages is correct?
A. What I did
was contact a manager at the Initial Processing Unit in Ottawa. Do you want her name?
Q. Yes, please.
A. Her name is
Marie-Josée Gagne. She confirmed for me that this is the process. I am not
in the Mailing Unit, so I have no idea how the process works. She clarified
these issues for me so that I could complete the affidavit.
[Emphasis added.]
[36]
Clearly, the evidence
provided by Mr. Coombs with respect to the CRA’s mailing procedures was hearsay
evidence. This Court and the Federal Court of Appeal have, in certain situations,
allowed such hearsay evidence.
[37]
The Federal Court of
Appeal, in Kovacevic v. The Queen, 2003 FCA 293 at paragraph 16, noted
the following:
I accept that when legislation requires that documents
be sent by a large organization such as a government department by ordinary
mail, but does not require registered or certified mail or evidence of a more
formal means of sending, the observation of Bowman J. in Schafer is
reasonable. Generally, it would be sufficient to set out in an affidavit, from
the last individual in authority who dealt with the document before it entered
the normal mailing procedures of the office, what those procedures were. . . .
[38]
The Federal Court of
Appeal’s comments recognize that, in most instances, the person who sent the
particular notice of assessment will not be available to testify. As a result,
this Court and the Federal Court of Appeal have allowed the CRA to discharge
its evidentiary burden by providing affidavits or calling a witness to testify
as to the ordinary mailing procedure for a notice of assessment.
[39]
However, such hearsay
evidence is only allowed when it meets the tests of reliability and necessity.
These tests are not met in the present application.
[40]
The Court was not
provided with the name of the last person in authority who dealt with the
Applicant’s Notices of Reassessment. Instead, the Respondent produced Mr.
Coombs, who admitted that he had “no idea” how the CRA mailing process worked.
It is my view that, at a bare minimum, the tests of reliability and necessity require
the Respondent to produce a witness who has knowledge of the CRA’s mailing
practices with respect to notices of assessment.
[41]
The necessity of
providing such a witness can been seen by reviewing the following statements
made by Mr. Coombs at paragraphs a), b) and c) on page 12 of his affidavit,
a) income tax assessments are processed
electronically in our computer system and the information is released
electronically to the Media Services Print Shop of the Electronic and Print
Media Directorate in a Daily Assessing Schedule (“DAS”) for printing of the
Notices of Reassessment and . . . the date of the notice is post dated to the
date of mailing; and
b) James Carcone’s, (the Applicant) Notices of
Reassessment for the 1999 and 2000 taxation years were released in DAS 71 with
the notices post-dated to December 31, 2003;
c) there is no record of any problems with the
download of information pertaining to this DAS.
[42]
These statements were
crucial to the Respondent’s case. However, since the Respondent’s only witness,
Mr. Coombs, had no knowledge of the CRA’s mailing process, it was not possible
to determine the reliability of the statements.
[43]
Mr. Coombs testified
that he based his statements solely on the information provided to him by a Ms.
Gagné. Mr. Coombs did not explain, in either his
affidavit or his testimony, how Ms. Gagné determined that the Applicant’s Notices
of Reassessment were part of DAS 71 or how she determined that DAS 71 did not
encounter any problems on that specific day.
[44]
Further, attempts by
counsel for the Applicant to test, on cross-examination, the reliability of the
statements Mr.
Coombs made on pages 12 and 13
of his affidavit proved fruitless. This can be seen from the following exchange
between Mr. Coombs and counsel for the Applicant:
Q. Mr. Coombs, still referring back to your
paragraph 17, which deals with the mailing practices, in subparagraph (b) you
state:
"James Carcone's Notices of Reassessment for the 1999 and 2000
taxation years were released in DAS 71 with the notices post-dated to December
31, 2003."
Is that correct?
A. That is what I was informed, yes.
Q. This all came from Ms Gagne?
A. Correct.
Q. Are you aware, sir, that, when the CRA
issues a reassessment initially, they actually put down a batch number, and
that batch number is taped onto the actual T2 return of the year in question
when the assessment was issued?
A. I am not.
[Emphasis
added.]
[45]
In addition, the
evidence before the Court raises general concerns with respect to the
reliability of the evidence provided in Mr. Coombs’ affidavit. The affidavit
contained a number of statements which were shown on cross‑examination to
be either incorrect or not within Mr. Coombs’ knowledge. The remaining part of
my reasons provides examples of the numerous incorrect statements contained in
the affidavit.
[46]
In summary, the
description in Mr. Coombs’ affidavit of the CRA’s mailing practices is hearsay
evidence. The evidence before me does not support a finding that this hearsay
evidence was either reliable or necessary. As a result, I have given it no weight.
[47]
In an attempt to meet
her burden, the Respondent also produced reconstructed Notices of Reassessment
(Exhibits R-2 and R-3). Such evidence does not help the Respondent; evidence
that the CRA generated notices of reassessment is not evidence that the CRA
mailed the Reassessments to a taxpayer at his authorized mailing address.
[48]
For the foregoing
reasons I have concluded that the Respondent has not met the burden of
establishing that the Reassessments were mailed to the Applicant on December
31, 2003.
[49]
I also wish to note
that the Respondent has also not shown that, if the Reassessments were mailed,
they were mailed to the Applicant’s authorized mailing address.
[50]
The Respondent relied
on the reconstructed Notices of Reassessment and the affidavit evidence and
oral testimony of Mr. Coombs to support her position that the CRA mailed the
Reassessments on December 31, 2003 to the Applicant’s authorized mailing
address.
[51]
During his
examination-in-chief, Mr. Coombs confirmed that the address on the
reconstructed Notices of Reassessment was, in the words of counsel for the
Respondent, “where this notice of reassessment would have been sent”.
[52]
During
cross-examination, Mr. Coombs stated, in the first instance, that the address
that appeared on the reconstructed Notices of Reassessment, that is, the
Birchmeadow address, would have appeared on the original Notices of Reassessment.
However, he then admitted that the address that appeared on the reconstructed Notices
of Reassessment was the address that was contained in the relevant CRA file at
the time the reconstructed Notices of Reassessment were printed. He
also admitted that there was no way of knowing if the Notices of Reassessment
were mailed to the Birchmeadow address or another address that may have been
contained in the relevant CRA file at the time of the alleged mailing of the Notices
of Reassessment.
[53]
In light of this
testimony, it is clear that reconstructed Notices of Reassessment cannot be
used to prove the address that appeared on the original Notices of Reassessment.
[54]
The Respondent also
relied on an extract from the CRA’s internal records and on paragraphs 13 and
17 of Mr. Coombs’ affidavit as evidence that the authorized mailing address of
the Applicant was the Birchmeadow address from October 22, 1992 to
May 24, 2004, the Lakeshore address from May 25, 2004 to April 20, 2005 and the
Birchmeadow address after April 20, 2005.
[55]
Paragraph 13 of Mr.
Coombs’ affidavit states the following:
13. A careful examination and search of the records of the CRA
shows that, on May 25, 2004, the Applicant’s address on the CRA file had been
changed to 102 Lakeshore Road East, Mississauga, Ontario L5G 1E8 (“Lakeshore”) as a result of the Applicant’s indication
on this T1 Tax Return filing.
[Emphasis added.]
[56]
On cross-examination,
Mr. Coombs admitted that he did not examine the relevant T1 tax return, the
Applicant’s 2003 T1 tax return. He based his statement in the affidavit solely
on an examination of an internal system of the CRA that is referred to as the
RAPID system.
[57]
The Respondent included
the relevant extract from the RAPID record in her book of documents. The document is
entitled, Individual Identification, Mailing Address, Historic View.
This document shows the Birchmeadow address as the Applicant’s mailing address from
October 22, 1992 to May 24, 2004. It shows that the Applicant’s mailing address
was changed to the Lakeshore address on May 25, 2004. The source of
the change is shown as “T1 Return”.
[58]
The difficulty for the
Respondent is that the Applicant produced his 2003 T1 income tax
return,
which shows the Birchmeadow address as his mailing address.
[59]
On the evidence before
me, it is clear that the excerpt from the CRA’s RAPID system and paragraph 13
of Mr. Coombs’ affidavit are incorrect. The applicant did not change his
address on his 2003 T1 income tax return. The CRA changed the Applicant’s
authorized mailing address in error.
[60]
Since the entry in the
RAPID system is erroneous, I can place no weight on the document, including the
reference to the date the CRA changed the Applicant’s mailing address. The
Respondent has produced no reliable evidence to show why the address was
changed. However, I note that the Corporation changed its address to the
Lakeshore address in July 2003. This raises the question whether the CRA
changed the Applicant’s address in July 2003 (prior to the alleged mailing of
the Notices of Reassessment) as opposed to the date asserted by the CRA, namely
May 25, 2004 (after the alleged mailing).
[61]
For the foregoing
reasons, the Minister has not shown that, if the Reassessments were mailed on
December 31, 2003, they were mailed to the correct mailing address.
The alleged mailing of the Reassessments on June 11,
2004
[62]
Mr. Coombs states the
following at paragraph 14 of his affidavit:
14. A careful examination and search of the records of the CRA
shows that on June 11, 2004, the Applicant Requested another copy of the
Notices of Reassessment and thus the CRA has re-printed and mailed out on the
same day, a copy of Notices of Reassessment as requested by the Applicant.
[63]
Mr. Coombs admitted,
during cross-examination, that this statement was incorrect. He acknowledged
that the CRA employee who received the request on June 11, 2004 did not
have the authority to reprint the Reassessments.
[64]
Mr. Coombs also
admitted, on cross-examination, that if the Reassessments had been mailed on
June 11, 2004, then, according to the CRA’s RAPID system, they would not
have been mailed to the Applicant’s authorized address.
[65]
In short, the
Respondent’s evidence with respect to the alleged June 11, 2004,
mailing of the Notices of Reassessment did not survive cross-examination and
can be given no weight by the Court.
The alleged faxing of the Reassessments on April 21,
2005
[66]
The Respondent’s
evidence with respect to the alleged faxing of the Notices of Reassessment to
the Applicant was provided at paragraph 17 of Mr. Coombs’ affidavit, where he
stated the following:
17. A careful examination and search of the records of the CRA
shows that on April 21, 2005, the Applicant contacted the CRA to advise that
the address on the file is incorrect. The CRA then changed the address back to
the original Birchmeadow address as requested by the Applicant. The CRA then
faxed a copy of the Notices of Assessment and Reassessment to the Applicant to
the Birchmeadow address.
[Emphasis added.]
[67]
On cross-examination,
Mr. Coombs acknowledged that he did not review the fax in question, but instead
relied on a CRA internal system referred to as the ACSES journal.
[68]
The Applicant provided
the Court with a copy of the April 21, 2005 fax. As Mr. Coombs
acknowledged during cross-examination, it did not contain a copy of the
Reassessments. His statement at paragraph 17 of his affidavit was incorrect.
[69]
In summary, the
Respondent has not provided any reliable evidence to show that the
Reassessments were mailed to the Applicant on December 31, 2003 or June 11,
2004 or faxed to him on April 21, 2005. As a result, the Respondent has not
established that the Notices of Reassessment were mailed or otherwise provided
to the Applicant.
[70]
Counsel for the
Respondent argued that the Applicant’s application should fail because the
Applicant was aware of his liability for taxes in respect of his 1999 and 2000
taxation years. This argument has no merit. As the Federal Court of Appeal
stated in Aztec, supra, at paragraph 19 (QL), “. . . Furthermore,
the fact that the taxpayer, or its receiver, were aware of the Minister's claim
or that the receiver paid some trust moneys on account thereof simply cannot
serve to prove the dates of the mailing of the notices of assessment, still
less their existence.”
[71]
For the foregoing
reasons, the Applicant’s application for an order extending the time within
which notices of objection to the Reassessments may be filed is dismissed on
the grounds that no such order is required as the Minister has failed to prove
either the existence or date of mailing of the Notices of Reassessment. The
Applicant is awarded his costs.
Signed at Vancouver, British Columbia, this 1st day
of December 2011.
“S. D’Arcy”
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