Citation: 2012 TCC 368
Date: 20121019
Docket: 2012-1190(IT)APP
BETWEEN:
SUNNY LYTLE,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Favreau J.
[1]
The applicant has
applied for an order extending the time within which notices of objection to reassessments
made under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.),
as amended (the “Act”), may be served on the Minister of National
Revenue (the "Minister"), concerning her 2001 and 2002 taxation
years.
[2]
Prior to this application,
the applicant had successfully appealed her 2001 and 2002 reassessments made
under the Act. The applicant is now filing an application for an
extension of time to file notices of objection against the reassessments dated
June 21, 2010, that were issued by the Minister as a result of the judgment
rendered by the Tax Court of Canada on January 29, 2010, in respect of docket number
2007-4312(IT)G (the "Judgment").
[3]
Following a net worth
analysis of the applicant for her 2001 and 2002 taxation years, the Minister
determined that the applicant's lifestyle and personal expenditures including
the purchase and maintenance of certain real estate properties, exceeded her
reported income in the 2001 and 2002 taxation years. On June 6, 2006, the
Minister reassessed the applicant's 2001 and 2002 taxation years to include in
her incomes, the following unreported incomes and to impose gross negligence
penalties:
|
|
Unreported income
|
Penalties
|
|
2001
|
$ 22,430.00
|
$ 3,179.00
|
|
2002
|
$152,081.00
|
$21,260.98
|
[4]
On January 29, 2010,
Little J. rendered his Judgment ordering the Minister to remove the following
amounts from the applicant's income:
|
2001
|
$ 10,000.00
|
|
2002
|
$ 105,000.00
|
and, accordingly, to reduce the penalties that were
levied.
[5]
According to the
supplementary affidavit of Daryl Argue, an officer of the Canada Revenue Agency (the "CRA"), filed on July 6, 2012, the Minister reassessed
the applicant's 2001 taxation year on June 21, 2010 in accordance with the Judgment.
The Minister sent a manual notice of reassessment to the applicant at 62–11737
236 Street, Maple Ridge, British Columbia, V4R 2E5 and attached a T7W-C to
the notice. A true copy of the 2001 manual reassessment is attached as Exhibit
"A" to the supplementary affidavit.
[6]
According to Daryl
Argue's affidavit filed on June 1, 2012, the Minister reassessed, on June 21,
2010, the applicant's 2002 taxation year in accordance with the Judgment. The
Minister sent a manual notice of reassessment to the applicant at 62–11737
236 Street, Maple Ridge, British Columbia, V4R 2E5 and attached a T7W-C to
the notice. A copy of the 2002 manual reassessment notice, the 2001 and 2002
T7W-Cs and computer printouts of the 2001 and 2002 reassessments are attached
as Exhibits "H" and "I" to the affidavit.
[7]
According to Daryl
Argue's affidavit filed on June 1, 2012, the applicant filed on December 13,
2011, a notice of objection dated December 8, 2011, relating to the
reassessments dated June 21, 2010. On December 22, 2011, the Minister sent a
letter to the applicant advising her that her notice of objection was invalid
and that the Minister could not grant an extension of time for the applicant to
file her notice of objection because the application had not been filed within
one year after the expiration of the time within which the applicant had to
file her objection.
[8]
In her notices of
objection for the 2001 and 2002 taxation years referred to in the preceding
paragraph, the applicant invoked the following reasons:
1) CRA has failed to calculate taxes payable in accordance
with the appeals judgement (sic) rendered by the Honorable (sic)
Justice Little, January 29, 2010 (court file #2007-4312(IT)G)
2) CRA has knowingly assessed the wrong taxpayer
3) New evidence filed since the appeal judgment makes CRA'S
calculations incorrect and therefore the statement of account incorrect.
4) CRA's refusal to meet and fairly deal with the authorized
representative has left the applicant no choice but to file this objection and
seeks costs as a result.
5) The statement of account should be set aside and
recalculated properly.
[9]
At the hearing, the
applicant's agent alleged that the applicant never received the official
notices of reassessment for 2001 and 2002 and that, for that reason, she was
deprived of her right to file notices of objection for the 2001 and 2002
taxation years within the prescribed time limit.
[10]
According to the
applicant's agent, only a T7W-C for each of the 2001 and 2002 taxation years was
effectively attached to the June 21, 2010 letter from Mr. Doug Tarbet of the
Appeals Division of the CRA as the said letter specifically stated that
"Notices of Reassessment will be issued under separate cover for the 2001
and 2002 taxation years".
[11]
The applicant's agent
filed at the hearing many letters exchanged amongst himself, the applicant, the
CRA and Mr. Matthew Canzer of the Department of Justice, wherein meetings
and copies or reproductions of the notices of reassessment were requested but without
success.
[12]
By letter dated May 25,
2011, Mr. Tarbet of the CRA provided to the applicant what he described as
being computerized copies of the 2001 and 2002 notices of reassessment supposedly
sent to the applicant on June 21, 2010. According to the applicant, the
documents enclosed with that letter were income tax return information dated May
25, 2011 and not notices of reassessment.
[13]
By letter dated July
22, 2011, Mr. Doug Tarbet of the CRA informed the applicant that her second and
third requests for reproduction of the notices of reassessment sent to her on
June 21, 2010 in respect of the 2001 and 2002 taxation years, have been
forwarded to the CRA's Ottawa Technology Centre which recently advised him that
they could not reproduce the notices of reassessment for the years in question.
[14]
On November 23, 2011,
the applicant received a letter from the CRA's Ottawa Technology Centre which
stated that a copy of the computerized notices of reassessment could not be
reproduced. The applicant seriously doubted that an important document produced
by computer could not be reproduced. In a letter dated December 1, 2011, to the
Chief of Appeals, the applicant's agent clearly stated that, in his view, the
documents were purposely being withheld so that notices of objection could not
be filed.
[15]
At the hearing, the
applicant's agent admitted that there was no problem with the name and address
of the applicant for the exchange of correspondence with the CRA and that no application
was made before March 20, 2012, the date on which the applicant filed an
application for an extension of time to serve her notices of objection for the
2001 and 2002 taxation years at the Tax Court of Canada.
[16]
Counsel for the
respondent alleged that the notices of reassessment for the 2001 and 2002
taxation years were mailed to the applicant on June 21, 2010, and that the T7W-Cs
were attached thereto. Respondent's counsel also pointed out that the
computerized copies of the 2001 and 2002 notices of reassessment sent to the
applicant in Mr. Tarbet's letter dated May 25, 2011, and filed by the
applicant's agent as Exhibit A-12, were not complete as one page was missing. Complete
copies of the said computerized notices of reassessment were filed by counsel
for the respondent as Exhibit R-1. Counsel for the respondent drew the Court's
attention to the fact that the net federal tax payable for 2001 and 2002
matched the amounts of net federal tax indicated on the computerized printouts
(Option C) of the 2001 and 2002 notices of reassessment sent to the applicant
on June 21, 2010, and filed as exhibits to the affidavit of Daryl Argue.
[17]
Counsel for the
respondent also alleged that the applicant tried to relitigate the issues dealt
with in the Judgment and she referred to the following documents:
(a) the letter dated March 3, 2010, addressed
to the CRA whereby the applicant's agent requested a meeting as soon as
possible prior to issuing revised reassessments to ensure that accurate
reassessments were issued by the CRA. This seems to indicate that the applicant
was looking for additional deductions and for changes to the Judgment;
(b) the letter dated September 1, 2010,
to the Department of Justice Canada whereby the then representative of the
applicant expressed his client's concern that the net worth analysis from which
certain deductions have been made was originally flawed and asked for a meeting
with the CRA's original auditor to satisfy his client's concerns that the
amount of tax determined by the net worth analysis was, in fact, appropriate;
and
(c) the notices of objection filed by
the applicant on December 8, 2011, in which there were specific references to
the fact that the CRA had failed to calculate tax payable in accordance with
the Judgment and that new evidence found since the Judgment made CRA's
calculations incorrect and therefore the statement of account incorrect.
Analysis
[18]
Counsel for the
respondent takes the position that the issues raised above by the applicant are
related to the appeals heard by Little J. and should therefore have been raised
at that time. Consequently, the applicant is precluded by the principle of res
judicata, by subsection 165(1.1) of the Act from objecting to
the reassessments and by subsection 169(2) of the Act from appealing the
reassessments. The relevant provisions of the Act read as follows:
165(1.1)
Limitation of right to object to assessments or determinations. Notwithstanding
subsection (1), where at any
time the Minister assesses tax, interest, penalties or other amounts payable
under this Part by, or makes a determination in respect of, a taxpayer
(a) under subsection 67.5(2) or 152(1.8), subparagraph
152(4)(b)(i) or
subsection 152(4.3) or (6), 161.1(7), 164(4.1), 220(3.4) or 245(8) or in
accordance with an order of a court vacating, varying or restoring an assessment
or referring the assessment back to the Minister
for reconsideration and reassessment,
(b) under subsection (3) where the
underlying objection relates to an assessment or a
determination made under any of the provisions or circumstances referred to in
paragraph (a), or
(c) under a provision of an Act of Parliament requiring
an assessment to be made that, but for that provision, would not
be made because of subsections 152(4) to (5),
the
taxpayer may object to
the assessment or determination within 90 days after the day of
sending of the notice of assessment or determination, but only to the
extent that the reasons for the objection can reasonably be regarded
(d) where the assessment or determination was made
under subsection 152(1.8), as relating to any matter or conclusion
specified in paragraph 152(1.8)(a), (b) or (c), and
(e) in any other case, as relating to any matter that gave rise to the assessment
or determination
and
that was not conclusively
determined by the court, and this subsection shall not be read or construed as
limiting the right of the taxpayer to object to an assessment
or a determination issued or made before that time.
169(2)
Limitation of right to appeal from assessments or determinations. Notwithstanding
subsection (1), where at any
time the Minister assesses tax, interest, penalties or other amounts payable
under this Part by, or makes a determination in respect of, a taxpayer
(a) under, subsection 67.5(2) or 152(1.8), subparagraph
152(4)(b)(i) or
subsection 152(4.3) or (6), 164(4.1), 220(3.4) or 245(8) or in
accordance with an order of a court vacating, varying or restoring the assessment
or referring the assessment back to the Minister
for reconsideration and reassessment,
(b) under subsection 165(3) where the
underlying objection relates to an assessment or a
determination made under any of the provisions or circumstances referred to in
paragraph (a), or
(c) under a provision of an Act of Parliament requiring
an assessment to be made that, but for that provision, would not
be made because of subsections 152(4) to (5),
the
taxpayer may appeal to
the Tax Court of Canada within the time limit specified in subsection (1), but
only to the extent that the reasons for the appeal can reasonably be regarded
(d) where the assessment or determination was made
under subsection 152(1.8), as relating to any matter or conclusion
specified in paragraph 152(1.8)(a), (b) or (c), and
(e) in any other case, as relating to any matter that gave rise to the assessment
or determination
and
that was not conclusively
determined by the court, and this subsection shall not be read or construed as
limiting the right of the taxpayer to object to an assessment
or a determination issued or made before that time.
[19]
Subsection 165(1.1)
of the Act is intended to prevent taxpayers from using certain
assessments or determinations that have been issued for specific purposes, as a
way to object to unrelated matters which have not previously been objected to.
It provides that a taxpayer may only object to the assessment or determination
on grounds which may reasonably be regarded as relating to a matter that gave
rise to the assessment or determination.
[20]
In Chevron Canada
Resources Ltd. v. R., [1999] 3 C.T.C. 140 (F.C.A.), the Federal Court of
Appeal has reviewed the scope of the limitation of subsection 165(1.1) on
a taxpayer’s right to object to a reassessment issued pursuant to a Consent
Judgment of this Court. The Court upheld the judgment and stated that the new
issues being raised by the taxpayer were reasonably related to the matter which
gave rise to the reassessment and concluded that these issues were conclusively
determined by the Tax Court in the Consent to Judgment. The taxpayer was then
barred by subsection 165(1.1) of the Act from objecting to the
reassessment in respect of those issues. The Court held that, by virtue of the principle
of res judicata, a judgment of a Court conclusively determines all
undecided and related issues subject to litigation, including those that could
have been raised at the time.
[21]
In this case, I am
satisfied that the issues being raised by the applicant in paragraph 17
above, are related to the matter that was before the Court previously and that
the Judgment had conclusively determined all the issues which had given rise to
the reassessments, including all undecided and related matters.
[22]
There is nothing before
me to indicate that it was not possible for the applicant to raise these issues
in her previous appeal, had she wished to do so, and there is no evidence
before me of any special circumstances that would warrant the overruling of the
principle of res judicata.
[23]
Therefore, the
applicant is prohibited by paragraph 165(1.1)(e) from objecting to
the reassessments of June 21, 2010 and by paragraph 169(2)(e) from
appealing the reassessments.
[24]
Even if we were to
accept that the applicant was entitled to file notices of objection to the 2001
and 2002 reassessments, the applicant did not do so within the prescribed time.
[25]
The reassessments for
the 2001 and 2002 taxation years were done manually in accordance with the Judgment
and were mailed with the T7W‑Cs to the applicant. The applicant did not
receive them but she knew the amounts being reassessed for 2001 and 2002.
Computerized copies of the 2001 and 2002 reassessments were mailed to the
applicant in Mr. Tarbet's letter dated May 25, 2011. The applicant filed
her notices of objection on December 8, 2011, more than 90 days after receiving
the said computerized copies of the reassessments.
[26]
If the applicant did
not agree with the Tax Court of Canada's decision of January 29, 2010, she
should have simply appealed to the Federal Court of Appeal.
[27]
For these reasons, the
motion is dismissed without costs.
Signed at Ottawa, Canada, this 19th day of October 2012.
"Réal Favreau"
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