Date: 19980622
Docket: 96-507-GST-G
BETWEEN:
WILLOW POND SERVICES LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Hamlyn, J.T.C.C.
[1] A Statement of Agreed Facts was filed. It reads:
STATEMENT OF AGREED FACTS
1. The Appellant is, among other things, a property management
company which provides property management services for its own
properties as well as for other owners of multi-unit
buildings;
2. as part of the arrangement with the owners of the
buildings, the Appellant paid the salaries of the superintendents
resident in the buildings and also the salaries of other
employees (the “salaries”);
3. for the period January 1, 1991 to August 31, 1991, the
Appellant, in calculating the amount of goods and services tax
(“GST”) exigible on the fees it charged for its
services to the owners, did not treat the salaries as a taxable
supply for purposes of the Excise Tax Act, R.S.C. 1985, c.
E. 15, as amended (the “Act”) and, accordingly, did
not collect or remit GST in respect of the salaries;
4. for the purposes of this appeal only, the Appellant accepts
that for the period January 1, 1991 to August 31, 1991, the
salaries are a taxable supply;
5. in the winter and spring of 1992, the Department of
National Revenue (“Revenue Canada”) attended at the
offices of the Appellant to review a number of issues, including
whether the salaries were a taxable supply. At the request of
Revenue Canada, the Appellant supplied documents and information
to Revenue Canada on the issue of the salaries, which documents
and information to Revenue Canada on the issue of the salaries,
which documents and information pertained to the period January
1, 1991 to August 31, 1991 (Tab 1);
6. based on these requests, it was assumed by the Appellant
that Revenue Canada was interested in the period January 1, 1991
to August 31, 1991;
7. following its review, Revenue Canada issued a notice of
assessment against the Appellant dated April 15, 1992 (the
“notice”) (Tab 2);
8. the notice stated that the assessment pertained to the
period August 1, 1991 to August 31, 1991;
9. the notice stated that the amount owing was $29,955.55 of
which $17,105.10 related to GST exigible on salaries of
$244,358.53 paid during the period January 1, 1991 to August 31,
1991;
10. the salaries paid by the Appellant from January 1, 1991 to
August 31, 1991 were $244,358.53, and it is not disputed by
the Appellant that the amount of GST exigible on those salaries
is $17,105.10. However, the salaries actually paid by the
Appellant from August 1, 1991 to August 31, 1991 were
approximately 1/8 of $244,358.53;
11. as required by the Act, on receipt of the notice, the
Appellant paid the amount owing of $29,955.55 in full;
12. subsequent to the issuing of the notice and at the request
of the Appellant, Revenue Canada provided to the Appellant its
working papers on the issue of the salaries, which working papers
included the notation “Willow Pond Services Inc. - 01/01/91
to 08/31/91 (Tab 3);
13. in June 1992 the Appellant objected to the assessment on
the issue of the salaries (Tab 4) and in November 1995 the
assessment was confirmed (Tab 5);
14. in August 1997, the Appellant first raised the fact that
the notice stated the assessment pertained to the period August
1, 1991 to August 31, 1991;
15. in respect of GST exigible for the period January 1, 1991
to August 31, 1991, the only notice received by the Appellant was
that dated April 15, 1992, which on its face stated that it
pertained to the period August 1, 1991 to August 31, 1991;
and
16. the Appellant acknowledged on its examination for
discovery that the only prejudice it suffered as a result of the
discrepancy between the amount of the assessment ($17,105.10) and
the stated period of assessment (August 1, 1991 to August 31,
1991) is that it has had to pay the full $17,105.10 in GST on the
salaries.
ISSUE
[2] The issue is whether the Minister of National
Revenue’s (the “Minister”) assessment of the
Appellant for the period January 1, 1991 to July 31, 1991 is
valid notwithstanding the fact that the Notice of Assessment
issued for that period states that the assessment pertained to
the period August 1, 1991 to August 31, 1991.
THE APPELLANT’S POSITION
[3] The Notice of Assessment dated April 15, 1992, which
stated that it pertained to the period August 1, 1991 to August
31, 1991, was the only Notice of Assessment received by the
Appellant in respect of the entire period from January 1, 1991 to
August 31, 1991.
[4] As for the period January 1, 1991 to July 31, 1991, it is
submitted that pursuant to section 298 of the Excise Tax
Act (the “Act”) the Minister is
statute-barred from reassessing the Appellant for Goods and
Services Tax (“GST”) exigible on salaries paid during
that period. Paragraph 298(1)(c) limits the period
during which a person may be assessed under section 296 of the
Act to “four years after the tax became
payable.” In the present case that period of time has
passed.
[5] Consequently, the Appellant has overpaid the GST exigible
on the salaries for the period August 1, 1991 to August 31, 1991,
and the Minister should be directed to reassess the Appellant for
that period.
THE MINISTER’S POSITION
[6] The Notice of Assessment dated April 15, 1992 was
expressed in terms that clearly made the Appellant aware of the
assessment raised by the Minister in that it set out the amount
of tax owing.
[7] Error is a matter of degree. The error complained on the
face of the Notice of Assessment dated April 15, 1992 is not an
error that can be described as a ‘substantial or
fundamental error’ such that it cannot be saved by the
curative provisions of the Act.
[8] The language of subsection 299(4) of the Act is
clear: “An assessment shall, ... be deemed to be valid and
binding notwithstanding any ... error, defect or omission ... in
any proceeding under this Part ...”. These words
must be given some weight. To accept the Appellant’s
argument that simply because the Notice of Assessment refers to
only the last month of the eight month period assessed is to ask
this Court to apply an overly formalistic approach to a Notice of
Assessment.
ANALYSIS
[9] With respect to the Appellant’s submission that,
pursuant to paragraph 298(1)(c) of the Act,
the Minister is statute-barred from reassessing the Appellant for
GST exigible on salaries paid during the period January 1, 1991
to July 31, 1991, the implicit assumption in this argument is
that owing to the error made in respect of the period for which
tax was payable the Minister is bound to reassess the taxpayer.
Of course, the Minister may not reassess the taxpayer now because
the limitation period under the Act has expired.
Therefore, what the Appellant is really asking the Court to find
is that the Minister is obligated to reassess the taxpayer.
[10] In the Appellant’s submission, the Minister is
obligated to reassess the taxpayer because he has made an error
in the Notice of Assessment. He relies upon the decision of
Cullen J. in The Queen v. Riendeau.[1] In that case Cullen J. held that
liability for tax is not affected by an incorrect or incomplete
assessment, so that the fact that a reassessment had been based
on a repealed section of the Act was not fatal. In
obiter, he also made the following comments at page
6079:
Error will be a matter of degree. Sections 152(3), 152(8) and
166 combined clearly indicate that this error by the Minister of
National Revenue is far from fatal. The cases only limit these
sections where there is substantial and fundamental error; in
such cases, the court will not allow the Minister to hide behind
the provisions.[2]
[11] The question to be answered is whether the error
contained in the Notice of Assessment, namely the failure of the
Minister to correctly state the period for which tax was owing by
the Appellant, constitutes a ‘substantial and fundamental
error’ which would render the assessment a nullity.
[12] I conclude the assessment remains valid in spite of the
error. It is well established that an assessment may be valid
although the reason assigned by the Minister for making it was
erroneous. The fact that an error was made in the Notice of
Assessment does not affect the validity of the assessment:
M.N.R. v. Minden.[3] Other cases have confirmed this proposition. It is
clear that errors such as the failure to state the applicable
section of the Act,[4] citing a section of the Act that had been
repealed,[5]
changing the reasons for which an assessment is based,[6] or failure to clearly
delineate the tax liability under different taxing statutes[7] will not be fatal
to an assessment.
[13] Furthermore, the error of the Minister is not an error in
the assessment, but merely an error in the Notice of Assessment.
An appeal against an assessment of tax by the Minister is an
appeal against the amount of the assessment: Vineland Quarries
and Crushed Stone Ltd. (supra). Here, the Minister has
correctly assessed the taxpayer; that is, he has ascertained
liability for GST under the Act, and fixed a total in
accordance with the provisions of the Act. However, he has
incorrectly stated the time period for which tax is due in the
Notice of Assessment. It is trite law that the Notice of
Assessment is merely a piece of paper which advises a taxpayer of
an assessment. In an appeal of an assessment of tax to the Tax
Court of Canada, the Court is concerned with the correctness of
an assessment of tax under the Act not with the decision
of the Minister as articulated in the Notice of Assessment:
Nicholson Ltd. v. M.N.R.[8]
[14] Finally, I would observe that the Appellant has always
been aware of the quantum of tax owing, and has suffered no
prejudice as a result of the error of the Minister, other than
having to pay a greater amount of tax if unsuccessful in this
appeal. Paragraphs 5, 8 and 12 of the Statement of Agreed Facts
make it clear that the Minister, in performing the operation of
assessing the Appellant, relied upon the correct period of time
during which tax liability arose. In preparing the Notice of
Assessment, an error was made in stating that period of time. If
the Minister had, in the operation of assessing tax, relied upon
incorrect dates, I may well have found that this constituted a
fundamental and substantial error such that the assessment was
invalid. This was not the situation in the case at bar.
[15] On the basis of all of the foregoing, I conclude that the
error incorrectly stating the time period in which the liability
to pay tax arose is not fatal to the assessment.
[16] The appeal is dismissed with costs.
Signed at Ottawa, Canada, this 22nd day of June 1998.
“D. Hamlyn”
J.T.C.C.
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