Kovacevic v. The Queen, docket 2002-390(IT)G

Date: 20020724

Docket: 2002-390-IT-G

BETWEEN:

JOZO (JOE) KOVACEVIC,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for judgment

Bonner, J.T.C.

[1]            Interlocutory applications have been made by both sides in this appeal from an assessment of the Appellant's liability as director under s. 227.1 of the Income Tax Act (the "Act").

[2]            The Appellant's application is for summary judgment allowing the appeal and for a declaration that the Notice of Assessment, which the Respondent says was dated and mailed to the Appellant on July 21, 1997, was not mailed and is a nullity.

[3]            The Respondent's application is for an Order quashing the appeal on the basis that the Appellant did not serve a Notice of Objection to the assessment under s. 165 of the Act and that ss. 169(1) of the Act permits an appeal to this Court only where a taxpayer has served a Notice of Objection under s. 165.

[4]            The appeal is, as noted above, from an assessment under s. 227.1 of the Act. Such assessments are made under part XV of the Act. Ss. 165(1) applies to assessments under part I of the Act. For that reason ss. 227(10) was enacted. It provides in part

The Minister may assess

(a)            any person for any amount payable by that person under subsection (8), (8.1), (8.2), (8.3) or (8.4) or 224(4) or (4.1) or section 227.1 or 235.

...

and, where the Minister sends a notice of assessment to that person, Divisions I and J of Part 1 are applicable with such modifications as the circumstances require.

[5]            It is long settled law that an assessment is not made until the Minister of National Revenue (the "Minister") has completed the assessing process by sending notice of the assessment to the taxpayer[1]. The threshold issue here is therefore whether notice of the assessment was sent to the Appellant.

[6]            In support of the Appellant's motion there was filed the affidavit of the Appellant sworn April 29, 2002. In that affidavit the Appellant states that he first learned of the assessment when visited by a collections officer of the Canada Customs and Revenue Agency (the Agency) on May 4, 2001. The Appellant states further that he did not receive a notice of the assessment at any time and that, if he had, he would have objected. That evidence was not shaken when the Appellant was cross-examined on his affidavit. The fact that the Appellant did not receive notice of the assessment is some evidence that the notice may not have been sent to him.

[7]            On behalf of the Respondent there was filed the affidavit of Joe Pereira, an official of the collections section of the Agency. In the affidavit Mr. Pereira states in part:

On July 18, 1997, I prepared Notices of Assessment to be issued against the directors of 954228 Ontario Limited pursuant to section 227.1 of the Income Tax Act. One of these Notices of Assessment, bearing the number 00325, was addressed to Mr. Joe Kovacevic, 561 Kelvedon Mews, Mississauga Ontario. This Notice of Assessment was dated and mailed to Mr. Kovacevic by Priority Post on July 21, 1997. ...

It is the Agency's policy and practice to maintain records and information electronically on a computer database. An electronic journal record is kept of all steps taken by the Agency's employees in the course of their involvement with a taxpayer's file. Once entered, the journal entries cannot be altered.

Attached to the affidavit is a printout of the electronic journal which appears to record in skeletal form the mailing of Notice of Assessment number 00325 by Priority Post on July 21, 1997.

[8]            Mr. Pereira's affidavit does not appear to have been made in reliance on ss. 244(10) of the Act. It makes no reference to Mr. Pereira's knowledge of the practice of the Agency and does not suggest that Mr. Pereira examined or searched the records of the Agency for a Notice of Objection or of Appeal from the assessment.

[9]            Mr. Pereira was cross-examined on his affidavit. Not surprisingly, he had no recollection of issuing the assessment independent of what was recorded in the electronic journal. He stated that on July 18, 1997, he "raised" the assessment, that is to say, he wrote on a form of Notice of Assessment the taxpayer's name, the amount, the company to which it pertained and a date, July 21, 1997. He described the course of events which would ordinarily take place thereafter. The form would be sent to a typing pool where a typed copy of the notice would be made and returned to him. Following that the original Notice of Assessment would be placed in an envelope and put in a pick-up basket for material intended to go to the mailroom. After the handwritten form of Notice of Assessment is completed prior to sending it to a typing pool no further entry is made in the electronic journal. The July 21 date was chosen to allow sufficient time for typing and mailing the form of Notice of Assessment. Thus, the journal record of both the date of sending and the fact of sending is a record made, not of events which had actually taken place, but rather of events which Mr. Pereira expected on July 18 would take place three days later. In this case the Agency possessed no record made at or after the time of mailing that the notice had in point of fact been mailed.

[10]          Mr. Pereira did not, at the time of the cross-examination, either have or produce a copy of the original Notice of Assessment.

[11]          The decision of the Court of Appeal in Aztec (supra) is authority for the proposition that where the taxpayer alleges that he has not received notice of the assessment the burden of proving the existence of the notice and the date of mailing is on the Minister. After all, as the Court of Appeal noted, those facts are peculiarly within the knowledge of the Minister who alone is able to adduce evidence of them. Here Mr. Pereira's present knowledge is limited to what is to be found in the electronic journal. That journal is not persuasive evidence of the fact of mailing. It is a record not of an event but of a prediction that the event would occur. At a minimum, some detailed evidence of what happens in the mailroom is required. The Minister has therefore failed to discharge the onus.

[12]          In light of the clear language of ss. 227(10) of the Act, it cannot be said that Divisions I and J of Part 1 of the Act providing for objections to and appeals from assessments under s. 227.1 have application.

[13]          Judgment will therefore issue allowing the Appellant's application and quashing the appeal on the ground that the assessment which is the subject of the appeal was never completed by the sending of a notice to the Appellant. The Appellant shall have his costs of the motion. The Respondent's application is dismissed without costs.

Signed at Ottawa, Canada, this 24th day of July 2002.

"Michael J. Bonner"

T.C.J.COURT FILE NO.:                                       2002-390(IT)G

STYLE OF CAUSE:                                               Jozo (Joe) Kovacevic

PLACE OF HEARING:                                         Toronto, Ontario

DATE OF HEARING:                                           May 8, 2002

REASONS FOR JUDGMENT BY:      The Honourable Judge M.J. Bonner

DATE OF JUDGMENT:                                       July 24, 2002

APPEARANCES:

Counsel for the Appellant: Howard W. Winkler

Counsel for the Respondent:              Brent E. Cuddy

COUNSEL OF RECORD:

For the Appellant:                

Name:                                Howard W. Winkler

Firm:                  Gowling, Lafleur, Henderson

                                                                                                Barristers & Solicitors

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2002-390(IT)G

BETWEEN:

JOZO (JOE) KOVACEVIC,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Motion heard on May 8, 2002 at Toronto, Ontario by

the Honourable Judge Michael J. Bonner

Appearances

Counsel for the Appellant:                                                  Howard W. Winkler

Counsel for the Respondent:                                                              Brent E. Cuddy

JUDGMENT

Upon application by the Respondent for an order;

a)              Dismissing the Application for an Extension of Time to File a Notice of Objection from the Minister of National Revenue's (the "Minister") Notice of Decision dated November 1, 2001 pursuant to section 58(3)(b) of the Tax Court of Canada Rules (General Procedure)(the "Rules");

b)             Quashing the Notice of Appeal pursuant to section 58(3)(b) of the Rules;

and for ancillary relief;

                And no Application to Extend the Time to file a Notice of Objection having been made;

                And upon reading the affidavit of Joe Pereira;

                And upon application by the Appellant for summary judgment allowing the appeal of the Appellant and for a declaration that the Notice of Assessment in this matter was not mailed to the Appellant as required by the Income Tax Act and as such the Notice of Assessment is a nullity;

                And upon reading the affidavit of the Appellant;

                And upon hearing what was alleged by the parties;

1.              The Respondent's application is dismissed;

2.              The Appellant's application is allowed and the appeal is quashed on the ground that the Assessment which is the subject of the appeal was never completed by the sending of a Notice of Assessment to the Appellant.

3.              The Appellant shall have costs of the appeal including both motions.

Signed at Ottawa, Canada, this 24th day of July 2002.

"Michael J. Bonner"

T.C.J.