Citation: 2011 TCC 342
Date: July 7, 2011
Docket: 2011-345(IT)APP
BETWEEN:
ERWIN SUI,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Little J.
A. FACTS
[1]
The Applicant filed an application
to extend the time within which to file a Notice of Appeal under subsection
167(1) of the Income Tax Act (the “Act”) in respect of his 1999
taxation year.
[2]
The Applicant is a lawyer
specializing in securities law. He currently has outstanding appeals for his
1998 taxation year and his 2000 to 2007 taxation years.
[3]
The Applicant stated that he is in
a difficult legal situation. He said that, in 1998, he was forced out of the legal
partnership “Chitiz Sui Pundit Pathak & Sokoloff” which had an office in Toronto.
[4]
According to the Applicant, the
dispute with his former partners led to significant financial losses for him in
1998. However, he was unable to ascertain the amount of the losses since his
former partners refused to disclose the relevant financial information to him.
[5]
As a result of the problem
involving losses, the Applicant did not file his 1998 and 1999 income tax
returns.
[6]
On January 18, 2000, the Minister
of National Revenue (the “Minister”) requested that the Applicant file his
income tax returns for the 1998 and 1999 taxation years.
[7]
The Applicant advised the Minister
that he could not file his income tax returns for 1998 and 1999 since he was
not able to ascertain the losses from his partnership.
[8]
The Minister requested that the
1999 income tax return be filed as it would be possible under subsection
154(4.2) of the Act to adjust his 1999 income tax return once his 1998
losses had been determined.
[9]
The Applicant filed his 1999 income
tax return by self-assessing $24,000.00 in tax.
[10]
On March 19, 2001, the Minister reassessed
the Applicant for the 1999 taxation year and determined that $59,810.44
was payable in tax. According to the Minister, since no tax return was filed
for the 1998 taxation year, his 1995 income reserve of $62,173.14 was
deemed to have collapsed and could not be used to offset income in 1999.
[11]
On July 20, 2001, the Minister accepted
an application to extend the time within which to file a Notice of Objection in
respect of the Applicant’s 1999 taxation year. In a telephone conversation
on July 23, 2001, the Minister’s representative informed the Applicant’s agent
that the assessment would be confirmed, as the 1995 income reserves had
collapsed due to the lack of the 1998 income tax return. However, the
Minister’s representative also indicated that, once the 1998 income tax return
was filed, an amendment to the 1999 tax return could be requested. As a result,
a letter confirming the assessment (the “impugned letter”) was sent to
the Applicant on July 25, 2001. That letter reads as follows:
Appeals Division, Burnaby-Fraser
TSO
ERWIN SUI July
25, 2001
3347 TRUTCH STREET
VANCOUVER BC V6L 2T3 Account
number
XXX-XXX-XXX
Dear Sir:
Re: Your objection for the
1999 taxation year
This is further to your
representative’s telephone conversation of July 23, 2001, with Joanne Siemens
of the Appeals Division.
We have considered your objection
for the year shown above. As agreed, we hereby confirm the assessment under
subsection 165(3) of the Income Tax Act.
Yours sincerely,
L. Melissa
Team Leader
[12]
The Applicant did not file a
Notice of Appeal to the Tax Court after receiving this letter.
[13]
The Applicant said, during the
hearing, that the litigation between the Applicant and his former partners is
still ongoing.
[14]
During this period, from 2001 to
the present time, there has been no collection of the outstanding tax debt. The
Applicant believed that he had an understanding with the Minister’s
representative that further tax returns would need to be amended once the legal
situation involving the 1998 taxation year became clear.
[15]
In early 2008, the Minister’s
official responsible for the Applicant’s file retired and he was replaced with
a new official. The new official requested that the Applicant file all outstanding
tax returns.
[16]
By March 2009, the Applicant had
filed tax returns for 2000, 2001, 2002 and 2003 without knowledge of the
1998 losses or any relevant reserves.
[17]
In September 2009, the Minister
accepted the tax returns for the 2000 to 2003 taxation years as reported
amounts and assessed the 1998 and 2004 to 2007 taxation years without tax returns.
[18]
In response, the Applicant filed Notices
of Objection on November 30, 2009 for the taxation years 1998 to 2007. All Notices
of Objection were accepted and sent to the Appeals Division except for the 1999
taxation year.
[19]
The Minister’s position is that
the 1999 taxation year is statute barred since the period of one year and
ninety days has passed from the mailing of the Notice of Confirmation on July
25, 2001.
B. ISSUE
[20]
The issue is whether the Applicant
is allowed to file a Notice of Appeal to the Court for the 1999 taxation year.
C. ANALYSIS AND DECISION
[21]
The letter referred to above is
the main point to consider in this application. If the letter is a valid
confirmation, then the fact that the Applicant did not bring his application
within one year and ninety days from the date of the letter is determinative
and the application must be refused. This time limit is strict. However, the
Applicant argues that the impugned letter is not a Notification of
Confirmation since the letter did not set out the reasons for the decision to
confirm and the letter did not set out the Applicant’s appeal rights. Unfortunately,
the decision regarding the validity of this notice could have a major effect on
the Applicant due to the passage of time. If valid, his 1999 tax liability
crystallizes at $59,810.44 with no ability to apply past reserves or losses to
this amount as the ten‑year time limit to request amendments to 1999 tax returns
expired on December 31, 2009. This ten-year time limit is found in
subsection 152(4.2) of the Act. Subsection 152(4.2) provides as follows:
152(4.2)
Notwithstanding subsections (4), (4.1) and (5), for the purpose of determining,
at any time after the end of the normal reassessment period of a taxpayer who
is an individual (other than a trust) or a testamentary trust in respect of a
taxation year, the amount of any refund to which the taxpayer is entitled at
that time for the year, or a reduction of an amount payable under this Part by
the taxpayer for the year, the Minister may, if the taxpayer makes an
application for that determination on or before the day that is ten calendar
years after the end of that taxation year,
(a) reassess tax,
interest or penalties payable under this Part by the taxpayer in respect of
that year; and
(b) redetermine the amount, if
any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or
(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the
taxpayer’s tax payable under this Part for the year or deemed by subsection
122.61(1) to be an overpayment on account of the taxpayer’s liability under
this Part for the year.
[22]
Subsection 165(3) of the Act establishes
the Minister’s duty to confirm after receiving a notice of objection and reads:
165(3)
On receipt of a notice of objection under this section, the Minister shall,
with all due dispatch, reconsider the assessment and vacate, confirm or vary
the assessment or reassess, and shall thereupon notify the taxpayer in writing
of the Minister’s action.
[23]
It will be noted that the only
requirement in the section is to notify the taxpayer in writing. The
Applicant cites Johnston v The Queen,
2006 TCC 128, 2006 D.T.C. 2830, for the proposition that a notice of
confirmation is a nullity when it does not comply with the requirements of the Act.
However, the requirement that Justice Beaubier referred to in Johnston
was to mail the confirmation to the correct address. That is not the case here
since the Applicant admits to having received the impugned letter.
[24]
The letter from the Minister to
the Applicant referred to an earlier phone call between the parties where the
Minister’s position was explained.
[25]
I have concluded that the letter from
the Minister, dated July 25, 2001, is a valid Notice of Confirmation. I have
also concluded that the Applicant cannot appeal his 1999 income tax assessment
as there is no ability to extend the time to initiate an appeal beyond the
period of one year and ninety days from the sending of the Notice of Confirmation.
[26]
While the Applicant has
brought this application on the grounds that he did not receive reasons for the
confirmation nor an explanation of his appeal rights in the letter of July 25,
2001, I understand that his real issue is about fairness, i.e., was he
treated fairly by the Minister. It is the Minister’s abrupt change in position
in 2008, requiring tax returns to be filed and instituting the collection
process, with which the Applicant takes issue. I have concluded that this Court
cannot grant relief having determined that the letter of July 25, 2001 was a
valid Notice of Confirmation. That is not to say, though, that the Applicant
has no potential relief from this problem. The Federal Court of Canada may be
willing to grant the Applicant his desired relief in an action based upon
legitimate expectations, promissory estoppel or an unreasonable decision by the
Minister. In the alternative, since I am sympathetic to the Applicant’s
situation, I would suggest that the Applicant write the taxpayer’s Ombudsman
for possible relief. Both steps are not guaranteed to help, but since both
offices have broader powers than the jurisdiction of the Tax Court, the
Applicant might wish to consider these avenues.
[27]
The Application is
dismissed, without costs.
Signed at Vancouver, British Columbia, this 7th day of July 2011.
“L.M. Little”
Email this Content