Citation: 2007TCC176
Date: 20070321
Docket: 2006-1342(IT)I
BETWEEN:
JOHN P. MURGESCO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
O'Connor, J.
[1] The following extracts from the Reply to the Notice of Appeal summarize the essential facts:
A. STATEMENT OF FACTS
...
4. The Appellant failed to file his income tax return for the 1997 taxation year on or before the due date of April 30, 1998.
5. The Appellant filed his 1997 taxation year on October 3, 2005, and a Notice of Assessment in respect of that taxation year was issued, dated December 19, 2005.
6. In assessing the Appellant for the 1997 taxation year, the Minister of National Revenue (the "Minister") assessed the Appellant's net income to be the amount of $50,107.00, ... . The Minister also assessed arrears interest in the amount of $1,046.78, and a late filing penalty in the amount of $177.01.
7. The Appellant filed an Internet Notice of Objection to the assessment of the 1997 taxation year on January 10, 2006.
8. By Notification of Confirmation dated March 14, 2006, the Minister confirmed the Notice of Assessment dated December 19, 2005, in respect of the 1997 taxation year.
9. In assessing tax, interest and penalties for the 1997 taxation year, and in confirming that assessment, the Minister assumed the same facts as follows:
(a) the Appellant's income tax return for the 1997 taxation year was required to be filed on April 30, 1998;
(b) the Appellant failed to file his 1997 income tax return on or before April 30, 1998;
(c) the Appellant submitted his 1997 income tax return to the CRA on or around October 3, 2005;
(d) the Appellant was in receipt of total income from all sources for the 1997 calendar year totalling $51,660.00, which was reported by the Appellant for that taxation year;
(e) the Appellant was entitled to a deduction from total income for RRSP contributions totalling $1,553.00 for the 1997 taxation year, thereby making his net income the amount of $50,107.00;
(f) the Appellant was allowed the basic personal amount of $6,456.00 for the 1997 taxation year, in the calculation of his gross non-refundable tax credits;
(g) the Appellant was allowed the amount of $11,332.26 for the 1997 taxation year for tax deducted and remitted to the Minister, to offset his taxes payable;
(h) the federal tax payable by the Appellant for the 1997 taxation year amounted to $8,440.19;
(i) the Appellant made a payment against his outstanding 1997 tax liability, as calculated by him, in the amount of $1,65.44, on October 3, 2005, and no other payments were made by the Appellant, or were available to apply to this taxation year, at any other time, including on April 30, 1998;
Note: The Appellant claims there were overpayments for prior years which should have been applied with the result that no interest should have been charged.
(j) prescribed interest was assessed in respect of the outstanding taxes payable assessed for the 1997 taxation year from April 30, 1998, to the date the amount noted in subparagraph 9(i) above was paid, namely October 3, 2005;
(k) as the Appellant failed to file his 1997 income tax return by its due date, a late filing penalty was assessed in respect of the 1997 taxation year, based on a filing date of the return determined by the Minister to be October 3, 2005;
(l) prescribed interest was assessed in respect of the assessed unpaid late filing penalty and unpaid arrears interest for the 1997 taxation year from April 30, 1998, to the date of the assessment, namely December 19, 2005; and
(m) the late filing penalty was calculated to be the amount of $177.01 as follows:
|
Fed tax assessed
|
$ 8,440.19
|
|
Provincial tax assessed
|
$ 3,933.29
|
|
Subtotal
|
$12,373.48
|
|
LESS: Tax deducted
|
11,332.26
|
|
Balance due April 30/98 $ 1,041.22 x 17% = $177.01
|
B. ISSUES TO BE DECIDED
10. The issues are whether:
(a) the Appellant is liable to pay arrears interest for the 1997 taxation year, in the amount assessed;
(b) the late filing penalty, in the amount of $177.01, was properly assessed for the 1997 taxation year; and
(c) the Tax Court of Canada has discretion to reduce or cancel all or part of the arrears interest and late filing penalty if they are otherwise properly assessed.
C. STATUTORY PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT
11. He relies on sections 2, 3, 4, 5, 6, 8, 117, 146, 152, 153, 161 and 162, subsection 150(1), 220(3.1), 248(1) and 248(11), paragraph 118(1)(c) and Regulations 4300 and 4301 of the Act, as amended.
12. He respectfully submits that since the Appellant did not file his income tax return for the 1997 taxation year until October 3, 2005, which was after the due date of April 30, 1998, the Minister has properly assessed a late filing penalty pursuant to subsection 162(1) of the Act in respect of the tax payable that was unpaid when the return was required to be filed.
13. He further submits that the Appellant is liable to pay interest for the 1997 taxation year, in accordance with subsections 161(1), 161(11) and 248(11) of the Act.
14. He also respectfully submits that this Honourable Court is without jurisdiction to grant the Appellant any discretionary relief in respect of the waiving or the reducing of the properly assessed interest and penalty, under subsection 220(3.1) of the Act.
15. He requests that the appeal be dismissed.
Submissions
[2] Counsel for the Respondent referred to a decision of Lamarre Proulx, J. of this Court in George v. Canada, 93 DTC 312 where the following is stated at page 313:
...
For the year 1987, the Appellant raised the argument that the amount of overpayment of tax should have been used by the Minister to compensate the amount of tax owed by the Appellant for the year 1988. ...
...
The issues raised by the Appellant respecting his 1987 taxation year are however not grounds for a valid appeal before our Court. The Appellant is not disputing his assessment for the year 1987, but has raised grounds of set-off and interests on the reimbursement of overpayment. Our Court's jurisdiction, by virtue of section 169 of the Act, is to hear appeals from assessments and the relief that we may grant is to vary or vacate the assessment. This is not the relief that is asked by the Appellant for the year 1987 and therefore, the appeal is quashed as not being a valid appeal before this Court.
...
For the year 1988, the Appellant submitted the argument that the Minister should have used the amount of the 1987 overpayment of tax to compensate the amount of tax owed in 1988, and in this manner reduce the amount of interests owed.
There is a long standing jurisprudence and doctrine to the effect that there is no right of set-off or compensation afforded to the taxpayer. In the case of the Queen v. Lamothe, 58 D.T.C. 1057, Justice Wells says the following at page 1058:
Set-off is not a common law right but a statutory one, and was originally based on the English Statutes ... which, it is said, formed part of the Law of England introduced into Upper Canada by the Legislature of that Province in 1792. As far as I know, these statutes never became part of the general law of the provinces of Canada, that is, Upper and Lower together, and there would therefore, in my opinion, be no statutory right to set off in a matter involving the Government of the Dominion as a whole.
...
[3] Counsel also mentioned other cases where this Court permitted reductions of interest because of an overpayment of tax by the taxpayer in an earlier year but those decisions are distinguishable because the taxpayers in those cases had specifically instructed the Minister in writing to apply the earlier overpayments of tax to the subsequent year or years in question.
[4] The Appellant's Notice of Appeal summarizes his position as follows:
"On the date, May 01, 1998, when any penalties/interest allegedly started accruing, my account did not have any balance owing to the Minister of National Revenue. In fact, there was a credit balance owing to me of $1,239.31. This credit was comprised of balances owed to me of $1,159.95 and $1,144.80 for the taxation years 1996 and 1995, respectively less the balance for 1997. Therefore, no penalties or any other sanctions should be levied since no balance was actually owing to the Minister of National Revenue."
[5] The Appellant submits further that it is the practice of the Minister not to assess interest in circumstances such as his where an overpayment of tax in prior years matches or exceeds the amount assessed in subsequent years. That proposition appears reasonable but the Minister's practice in some cases does not make it law. The outcome to the Appellant may seem to be unfair but there are provisions in the Act, in particular subsection 220(3.1), which are part of the "Fairness Package" and which permit the Minister to waive interest in certain circumstances. This discretion is granted to the Minister not to this Court.
[6] In conclusion, as there is no set-off against the Minister as explained in George, the interest arrears have been properly assessed. Also, as the 1997 year was late filed the penalty of $177.01 has been properly assessed.
[7] The appeal is dismissed.
Signed at Ottawa, Canada this 21st day of March, 2007.
"T. O'Connor"
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