Citation: 2010TCC390
Date: 20100722
Docket: 2010-216(IT)APP
BETWEEN:
SPECTROL INC.,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Webb, J.
[1]
The Appellant filed a document
with this Court on April 16, 2009 which, although it was identified as a Notice
of Appeal, stated that the Appellant was requesting an extension of time to
file a Notice of Objection in relation to the assessment of the Appellant’s
2003 and 2004 taxation years. The Appellant subsequently filed on January 18,
2010, a short document that is stated to be an Application for extension of
time within which an appeal may be instituted.
[2]
A hearing was held to
determine if the Appellant’s appeal to this Court can proceed. The Respondent
objected to the Appellant’s appeal on the basis that the Appellant had not
filed a notice of objection in relation to the assessment of its 2003 and 2004
taxation years. However, it seems to me that the correct interpretation of the
application being made by the Appellant is that it was an application to extend
the time within which a notice of objection may be served and not an
application to extend the time within which an appeal may be made to this
Court. The Appellant in paragraphs (B) and (D) of the document filed on April
16, 2009 (which was incorporated by reference into the document filed on
January 18, 2010) seeks an extension of time to file a notice of objection, not
an extension of time to appeal.
[3]
The Appellant had filed
its 2003 and 2004 tax returns within the time specified for filing such
returns. It appears that since the Appellant had claimed amounts for scientific
research and experimental development (SR&ED), the assessment for 2003 was
not issued until March 26, 2008 and the assessment for 2004 was not issued
until May 7, 2008.
[4]
The Appellant
introduced a letter from the Canada Revenue Agency (the “CRA”) dated September
16, 2008 which referred to notices of reassessment that would be mailed under
separate cover. The Appellant introduced this to question whether the original
assessments had been issued on March 26, 2008 and May 7, 2008. However the
letter dated September 16, 2008 is related to the review of the Ontario corporate tax returns, not the federal tax returns.
The reassessments referred to in the letter were reassessments issued under the
Ontario legislation not under the Income Tax
Act (Canada) (the “Act”).
[5]
The President of the
Appellant stated that the appellant did not receive the notice of assessment for
2003 until after an inquiry was made in 2009. It also appears clear that the
Appellant had not received the assessment for 2004 prior to filing the document
with this Court on April 16, 2009. I accept the Appellant’s testimony and I
find that the Appellant had not received the notice of assessment for 2003
until April 2009. Shortly after the Appellant received a copy of the notice of
assessment for 2003 in April 2009, the Appellant filed the document which is
stated to be a notice of appeal. Ray Kapoor, the President of the Appellant,
stated that at the same time as the appeal was filed with this Court he also
sent a document to the CRA.
[6]
Sadruddin Suleman, a
litigation officer with the CRA also testified. He stated that there was no
record of the CRA receiving a notice of objection or an application for an
extension of time to serve a notice of objection in relation to either the
assessment issued for 2003 or the assessment issued for 2004 other than Notices
of Objection for 2003 and 2004 that were received on May 5, 2010 – more than
two years after the assessment for 2003 was issued and approximately two years
after the assessment for 2004 was issued.
[7]
On cross examination,
Ray Kapoor acknowledged that he did not personally send the documents to the CRA.
It is, however, clear that Ray Kapoor and the accountant for the Appellant were
both very concerned about the Appellant’s SR&ED claims for 2003 and 2004
and the length of time that it was taking CRA to assess the Appellant’s 2003
and 2004 taxation years. The Appellant had received a proposal letter from the
CRA dated May 30, 2007 in which various adjustments to the SR&ED claims
were proposed. On July 31, 2007 the accountant for the Appellant sent an e-mail
to Elizabeth Sahsuvar of the CRA in which the accountant noted that they had responded
to the proposal letter several weeks earlier and in which he expressed concerns
about the Science Reviews. It seems obvious that the Appellant was very
concerned about the SR&ED claims and wanted to protect its right of appeal.
It seems to me that it is more likely than not that the Appellant sent to the CRA
in April 2009 the same document that was filed with this Court at that time and
I find that the Appellant did send the same document to the CRA in April 2009.
[8]
It appears that the
Appellant had previously been audited with respect to claims for SR&ED. It
is not clear whether previous audit issues were resolved at the audit stage or
only following the filing of a notice of objection. The accountant for the
Appellant acknowledged that when they received the copy of the notice of
assessment for 2003 in April 2009 they knew that the time to file a notice of
objection had expired and that they needed to obtain an extension of time to
file the notice of objection. As a result a document was drafted and filed with
this Court on April 16, 2009 and also sent to the CRA.
[9]
This document that was
filed with this Court on April 16, 2009 is clearly identified as a Notice of
Appeal to this Court. The top half of the first page is as follows:
FORM 21(1)(a)
NOTICE OF APPEAL – GENERAL
TAX COURT OF CANADA
BETWEEN
SPECTROL INC.
350 BRUNEL DRIVE
MISSISSAUGA, ONTARIO L4Z 2C2
Appellant
and
HER MAJESTY THE QUEEN,
Respondent
NOTICE OF APPEAL
[10]
However, paragraphs (A)
and (B) of this document state that:
(A)
I, SPECTROL INC., of 350
Brunel Road, Mississauga, Ontario
(B)
Hereby request an EXTENSION in time to
file a Notice of Objection to my 2003 and 2004 Scientific Research and
Experimental Development part denial due to insufficient documentation
(emphasis added
in original document)
[11]
Since this document was
formatted and set up as a Notice of Appeal to this Court it could easily not
have been recognized by the CRA as an application to extend the time to serve a
notice of objection and hence not entered into their records as such. All that
the litigation officer for the CRA could confirm was that there was nothing in
the records of the CRA to confirm that an application to extend time to serve a
notice of objection had been received. If it would have been received but not
recorded as such, then it would not appear in the records of the CRA. But this
would not change the fact that it had been received.
[12]
The procedure to follow
if a taxpayer wants to object to an assessment (or a reassessment) is set out
in the Act. Subsection 165(1) of the Act provides that:
165. (1) 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.
[13]
In this case, since the
Appellant is a corporation, the time period within which a notice of objection
to the assessments for 2003 and 2004 could have been served on the Minister is
90 days from the date of mailing of the assessments. As noted above, when the
Appellant received the copy of the notice of assessment for 2003 in April of
2009, the Appellant knew that it could not file a notice of objection at that
time since the 90 days from the date of the assessment (which, without any
evidence to the contrary, would be the date of mailing) had elapsed. Although
the Appellant did not receive the original notice of assessment, it appears
that it was mailed in 2008. The date of mailing (and not the date of receipt)
determines the time period within which a notice of objection may be served.
[14]
Section 166.1 of the Act
provides a procedure for a taxpayer to request an extension of time within
which a notice of objection may be served. This section provides as follows:
166.1 (1) Where no notice of objection to an assessment has been
served under section 165, nor any request under subsection 245(6) made, within
the time limited by those provisions for doing so, the taxpayer may apply to
the Minister to extend the time for serving the notice of objection or making
the request.
(2) An application made under subsection (1) shall set out the
reasons why the notice of objection or the request was not served or made, as
the case may be, within the time otherwise limited by this Act for doing so.
(3) An application under subsection (1) shall be made by being
addressed to the Chief of Appeals in a District Office or a Taxation Centre of
the Canada Revenue Agency and delivered or mailed to that Office or Centre,
accompanied by a copy of the notice of objection or a copy of the request, as
the case may be.
(4) The Minister may accept an application under this section that
was not made in the manner required by subsection (3).
(5) On receipt of an application made under subsection (1), the
Minister shall, with all due dispatch, consider the application and grant or refuse
it, and shall thereupon notify the taxpayer in writing of the Minister's
decision.
(6) Where an application made under subsection (1) is granted, the
notice of objection or the request, as the case may be, shall be deemed to have
been served or made on the day the decision of the Minister is mailed to the
taxpayer.
(7) No application shall be granted under this section unless
(a) the application is made within one year after the
expiration of the time otherwise limited by this Act for serving a notice of
objection or making a request, as the case may be; and
(b) the taxpayer demonstrates that
(i) within the time otherwise limited by this Act for serving such a
notice or making such a request, as the case may be, the taxpayer
(A) was unable to
act or to instruct another to act in the taxpayer's name, or
(B) had a bona
fide intention to object to the assessment or make the request,
(ii) given the
reasons set out in the application and the circumstances of the case, it would
be just and equitable to grant the application, and
(iii) the
application was made as soon as circumstances permitted.
[15]
The proper procedure to
follow to request an extension of time to file a notice of objection is to make
such request to the Minister, not this Court. If the Minister refuses the
application or 90 days have elapsed without a decision from the Minister, then
(and only then) the taxpayer may apply to this Court to have the application
granted to extend the time within which a notice of objection may be served.
[16]
Section 166.2 of the Act
provides that:
166.2 (1) A taxpayer who has made an application under subsection
166.1[(1)] may apply to the Tax Court of Canada to have the application granted
after either
(a) the Minister has refused the application, or
(b) 90 days have elapsed after service of the application
under subsection 166.1(1) and the Minister has not notified the taxpayer of the
Minister's decision,
but no application under this section may be made after the
expiration of 90 days after the day on which notification of the decision was
mailed to the taxpayer.
(2) An application under subsection (1) shall be made by filing in
the Registry of the Tax Court of Canada, in accordance with the provisions of
the Tax Court of Canada Act, three copies of the documents referred to in
subsection 166.1(3) and three copies of the notification, if any, referred to
in subsection 166.1(5).
(3) The Tax Court of Canada shall send a copy of each application
made under this section to the office of the Commissioner of Revenue.
(4) The Tax Court of Canada may grant or dismiss an application
made under subsection (1) and, in granting an application, may impose such
terms as it deems just or order that the notice of objection be deemed to have
been served on the date of its order.
(5) No application shall be granted under this section unless
(a) 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 or making a request, as the case may be; and
(b) the taxpayer demonstrates that
(i) within the time otherwise limited by this Act for serving such a
notice or making such a request, as the case may be, the taxpayer
(A) was unable to act or to instruct another to act in the
taxpayer's name, or
(B) had a bona fide intention to object to the assessment or make
the request,
(ii) given the reasons set out in the application and the
circumstances of the case, it would be just and equitable to grant the
application, and
(iii) the application was made under subsection 166.1(1) as soon as
circumstances permitted.
[17]
No appeal may be made
to this Court unless a notice of objection has first been served. Subsection
169(1) of the Act provides that:
169. (1) Where a taxpayer has served notice of objection to an
assessment under section 165, the taxpayer may appeal to the Tax Court of
Canada to have the assessment vacated or varied after either
(a) the Minister has confirmed the assessment or reassessed,
or
(b) 90 days have elapsed after service of the notice of
objection and the Minister has not notified the taxpayer that the Minister has
vacated or confirmed the assessment or reassessed,
but no appeal under this section may be instituted after the
expiration of 90 days from the day notice has been mailed to the taxpayer under
section 165 that the Minister has confirmed the assessment or reassessed.
[18]
In this case, when the
Appellant filed the document with this Court on April 16, 2009, there was no
decision from the Minister with respect to any application to extend the time
to file a notice of objection (the Minister does not even acknowledge receiving
this request) and 90 days had not elapsed from the date that the Appellant sent
the document to the CRA as the Appellant stated that the document was sent to
this Court at the same time as the document was sent to the CRA. As a result
the document filed on April 16, 2009 is not a valid application made to this
Court under subsection 166.2 of the Act.
[19]
However, the Appellant did
file another document with this Court on January 18, 2010, which would be more
than 90 days after the document was sent to the CRA in April 2009. Although
this document refers to the Appellant applying for an order extending the time
within which an appeal may be instituted for 2003 and 2004, this document
incorporates by reference the document filed on April 20, 2009. The April 20,
2009 document refers to a request for an extension of time to file a notice of
objection. It seems to me that the correct interpretation to apply to this
document is that it is an application to extend the time within which a notice
of objection may be served. In both paragraph (B) at the beginning of the
document and paragraph (D) near the end of the document the Appellant refers to
the request for an extension of time to file a notice of objection.
[20]
In order to grant the
Appellant’s application for an order to extend the time to serve a notice of
objection the requirements of subsection 166.2(5) of the Act must be
satisfied. The first requirement is that the Appellant’s application under
subsection 166.1(1) of the Act (which is the application to the
Minister) must have been made within one year after the end of the time period
within which a notice of objection could have been served. This condition is
satisfied as the application was sent to the CRA in April 2009 and the one year
time period referred to above would not have expired until June 2009 (which
would be 90 days plus one year after March 26, 2008 - the date of the
assessment for 2003). It is clear that the reason that the Appellant did not
serve a notice of objection within 90 days of March 26, 2008 is that the
Appellant did not receive the notice of assessment for 2003 until April 2009.
[21]
It is clear that the
Appellant had a bona fide intention to appeal. The Appellant had
responded to the proposal letter and had expressed concerns about the Science
Reviews before the assessments were issued. It also seems clear that if the
Appellant would have received the assessments for 2003 and 2004 when they were
sent in 2008, then a notice of objection would have been filed at that time.
The Appellant received a copy of the notice of assessment for 2003 only after
the Appellant had made an inquiry about it in 2009. Very shortly after
receiving the copy of the notice of assessment for 2003 (which was sent on
April 2, 2009) the Appellant sent the application for an extension of time to
serve the notice of objection to the Court and to the CRA. Therefore this
application to the CRA would have been sent on or about April 16, 2009 or
within 2 weeks of receiving the copy of the notice of assessment for 2003.
[22]
It also seems to me
that it is just and equitable in the circumstances that the application be
granted.
[23]
As a result the
Appellant’s application to extend the time within which a notice of objection
may be served in relation to the assessment of the Appellant’s 2003 and 2004
taxation years is granted, without costs, and the notice of objection is deemed
to be served on the date of this order.
[24]
The Appellant had also
made certain additional requests in paragraph (D) of the document dated April
16, 2009. These requests confirm that the Appellant was seeking a review of the
matter by the CRA and hence was seeking an extension of time to file the notice
of objection. However since none of these requests were addressed during the
hearing, I will not be addressing these additional requests.
Signed at Halifax, Nova Scotia, this 22nd day
of July 2010.
“Wyman W. Webb”
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