Date: 20001220
Docket: 98-2778-IT-G
BETWEEN:
BRENT GLYNN McCLELLAND,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bell, J.T.C.C.
ISSUE:
[1]
The Respondent filed a Notice of Motion seeking an Order of this
Court:
(a)
striking the Notice of Appeal and dismissing the appeal; and
(b)
in the alternative, an Order quashing the appeal.
LEGISLATION AND RULES:
[2]
The relevant portion of section 58 of the Tax Court of Canada
Rules (General Procedure) ("Rules") reads as
follows:
58.
(1) A party may apply to the Court,
...
(b) to strike out a pleading because it discloses no
reasonable grounds for appeal or for opposing the appeal,
and the Court may grant judgment accordingly.
(2) No
evidence is admissible on an application,
...
(b) under paragraph (1)(b).
[3]
Subsection 165(1) of the Income Tax Act
("Act") reads:
(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 ...
[4]
Subsection 169(1) of the Act reads in part as follows:
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
...
RESPONDENT'S SUBMISSIONS:
[5]
With respect to Part (a) of the motion, Respondent's counsel,
in respect of the Appellant's Notice of Appeal with respect
to "Relief Sought" said:
The first paragraph there is that the Appellant is asking this
Court for a determination that the Notice of Appeal and Notice of
Objection in respect of those taxation years be considered
valid.
[6]
Paragraph 1.a) under that heading reads:
1.
The Appellant therefore claims as follows:
a)
That the Appellant's appeal be allowed and that the Notice of
Objection dated January 2, 1998 in respect of the Appellant's
assessments by the Minister for taxation years 1988, 1989,1990,
1991, 1992, 1993, 1994, 1995 and 1996 be considered as valid;
[7]
The subsequent paragraph reads as follows:
b)
That
the Appellant's Notice of Objection dated January 2, 1998 be
referred back to the Minister for consideration;
c)
The reasonable and proper costs of this action;
d)
An Order vacating the garnishment proceedings against the
Appellant; and
e)
such further and other relief as to this Honourable Court may
seem appropriate.
[8]
Counsel then referred to section 171 of the Act which
provides that:
(1)
The Tax Court of Canada may dispose of an appeal by:
(a)
dismissing it; or
(b)
allowing it and
(i)
vacating the assessment,
(ii)
varying the assessment, or
(iii)
referring the assessment back to the Minister for reconsideration
and reassessment.
[9]
Counsel's position was:
... there is no appeal from an assessment here.
[10] He then
said:
The issue is whether or not the substance of what is the
appeal to this Court falls within those three subparagraphs and
we will move on to ... what is an assessment and what is an
appeal from an assessment because in order for me to explain to
you why it is that this appeal does not fall within either an
appeal from assessment under 169 or gives the Court the remedial
abilities under section 171, I have to go through what is an
assessment and what is an appeal from an assessment.
[11] Counsel
steadfastly clung to his position that:
We do not have an appeal from an assessment. What we have is a
request by the Appellant to refer a Notice of Objection to the
Minister for a determination.
[12] He
submitted that:
There is no objection or dispute with the assessment. You can
look at the Notice of Objection and you can read the pages of the
Notice of Objection but not once does the Appellant say that
"my tax is too high."
[13] Then
followed this exchange:
His Honour: Are you assuming for a moment that the Notice of
Objection was filed for any reason other than a disagreement with
the assessment?
Mr. Yaskowich: Your Honour, there may be disagreement but
there is also, I submit to you, the obligation of the taxpayers
to raise in issue something that the Minister is capable of
remedying.
[14] Counsel
then referred to a number of decisions[1]. Counsel submitted:
... that an Appellant cannot come to this Court to ask the
Court to refer a Notice of Objection back to the Minister because
that Appellant is not identifying an error in an assessment made
by the Minister. What he's asking for is a declaration.
[15] Counsel
also submitted that:
... he's also asking for the appeal to be allowed, and I
have stated, and I think you have my position on this point, that
you can't just allow it in a vacuum. You have to allow it
with instructions to the Minister to do something because if you
do not, then you are sitting here with Notice of Assessments that
are out there, which will remain to be out there unless you
vacate the assessments and I would suggest, Your Honour, that
there's no ... that there is nothing in the pleadings which
brings those assessments into issue. I suggest that this appeal,
as framed, is beyond redemption. There are no -- the Appellant is
not challenging any merits going to what is the substance of the
assessment that the Minister has made.
[16] Having
concluded his submission with respect to Rule 58(1)(b)
Counsel turned to a Statement of Agreed Fact with respect to the
submissions under Rule 58(3)(a) claiming that the Court
has no jurisdiction over the subject matter.
[17] The
Agreed Statement of Facts provided, inter alia, that
returns for the above years were filed under cover of a letter
dated September 11, 1997 which said that the returns were being
filed on behalf of the Appellant "without prejudice to his
right to claim his artist's expenses at some future
date."
[18] For the
years in question the Appellant reported employment income. He
also reported income under the heading "Gross Business
Income" which was identical to the amounts in each year
under the heading "Net Business Income". The Appellant
was reassessed in respect of all those years. The Appellant then
filed a Notice of Objection, within the time required, in which
he set out the following:
I am objecting to the assessments noted above as I wish to
include my art as a business for the purpose of determining
personal income tax ... I have incurred expenses for studio
space, art supplies and art related travel.
[19] That
Notice of Objection refers to his art history and
"reasonable expectation of profit" apparently some
discussion with Revenue Canada about that concept having been
had. There followed a series of correspondence between the
Appellant and Revenue Canada. A letter of June 1, 1998, Revenue
Canada reads:
It is the position of the Department that at the time you
filed your objections you should have had in your possession the
necessary documents and information to support the issue(s) in
dispute. You have had additional time since the objection was
filed on January 2, 1998 to compile the necessary paperwork. As a
result a final extension to June 30, 1998 has been allowed so
that the required information can be provided for my review. No
further extensions will be granted. If the required information
is not received by me on or before that date, I will recommend
that the assessments be confirmed.
[20] After
further correspondence from the Appellant to Revenue Canada the
Appellant received a letter dated July 17, 1998 from Amir Bhaloo,
Chief of Appeals, Revenue Canada, reading, in part, as
follows:
The above noted objections cannot be accepted as valid at this
time. The reason for this is you have not specified what it is
you are disputing in accordance with subsection 165(1) of the
Act.
All of the returns filed for the years 1988 to 1996 inclusive
have been assessed as filed so we are unable to determine what
part of the assessments you disagree with.
[21]
Respondent's counsel then said, with respect to the Notice of
Objection, that:
... not once does it raise any issue respecting the income
that he derived from the art or any expenses that he's
claiming. It's not clear if he's claiming that
there's a reasonable expectation of profit, as that word has
been used. ...we don't know if the business that he claims to
have had suffered a loss. We don't know anything because we
don't have in this document any information.
[22] He also
said:
I think that if a case comes before you and an assessment of
tax is not put in issue, then this Court lacks the jurisdiction
to hear it.
[23] Later he
said:
He wants Revenue Canada to make that determination but without
giving Revenue Canada any documents or any vouchers for any
listing of numbers of expenses, which would allow anybody, an
accountant, anybody from Revenue Canada or otherwise to look at
what it is being claimed as a business.
[24] He stated
that the Notice of Appeal does not raise an issue upon which the
Court can adjudicate.
[25] Finally,
counsel said
If you agree with me that the Notice of Appeal does not raise
the issue of whether or not this is a business, then, and this is
why we were compelled to bring the motion, is because if it
doesn't raise the issue of whether or not there is a
business, whether or not there are losses, whether or not there
are expenses, whether or not those expenses are reasonable, then
we don't have an appeal from an assessment, and that's
what brings us to the jurisdictional argument that is the basis
of this motion.
APPELLANT'S SUBMISSIONS:
[26]
Appellant's counsel referred to the words cited above from
the Notice of Objection and submitted that the reason for the
Notice of Objection was stated in the document. He also said that
the Notice of Appeal referred to the Notice of Objection.
Paragraph 1.a) of the Relief Sought portion, as set out above,
asks, inter alia,
That the Appellant's appeal be allowed.
[27] It also
asks that the Notice of Objection be considered as valid. Counsel
had some difficulty with the proposition that the Appellant could
appeal after the expiration of a defined period after filing the
Notice of Appeal, without having a confirmation or other document
from the Minister. He argued that subsection 165(3) required the
Minister to take some action. It reads as follows:
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
actions.
ANALYSIS AND CONCLUSION:
[28] The
Appellant seems to have been so intent on Mr. Bhaloo's
decision that the Notice of Objection was not valid that he did
not fully appreciate the Appellant's ability to file a Notice
of Appeal regardless of Mr. Bhaloo's decision. Subsection
169(1) provides that where a taxpayer has served Notice of
Objection to an assessment, the taxpayer may appeal after 90 days
have elapsed after service of the Notice of Objection if the
Minister has not notified the taxpayer that the Minister has
vacated or confirmed the assessment or reassessed. That appears
to be the reason that part of the relief sought by the Appellant
was that this Court consider the Notice of Objection as
valid.
[29] I
conclude that it was clear that the Notice of Objection raised
the matter of expenses as an issue. It is noted that the gross
income for each year reported by the Appellant was the same as
the net income. Obviously, no expenses had been deducted from
that. Even a cursory review of the income tax returns and the
Notice of Objection would have informed Revenue Canada of this
obvious fact. That combined with the Appellant's words in his
Notice of Objection, namely:
I am objecting to the assessments noted above as I wish to
include my art as a business for the purposes of determining
personal income tax ... I have incurred expenses for studio
space, art supplies and art related travel.
persuades me that the Notice of Objection set out sufficient
reasons and facts for it to be considered valid. It is well known
that almost any kind of written notice indicating even an attempt
to object to an assessment has been accepted by Revenue Canada
for years. The attempt by this motion to deprive a taxpayer of
access to the judicial system in respect of his complaint is both
regrettable and inappropriate. Not only do I conclude that the
Notice of Objection is clear[2] as to the taxpayer's quest but the Notice of
Appeal, in referring to that Notice of Objection and asking that
the appeal be allowed, is also valid.
[30] Revenue
Canada's position that it did not have information about
figures is of no moment. Examinations for discovery are not only
provided for in General Procedure cases but are conducted as a
matter of course. Such examinations in this case will furnish the
Agency with answers to all its queries.
[31] The
motion will be dismissed. A telephone conference will be
arranged, in accordance with discussion with counsel, to hear
submissions on the matter of costs.
[32] The
Appellant, by filing an Amended Notice of Appeal would assist
himself, the Respondent and the Court.
Signed at Ottawa, Canada this 20th day of December,
2000.
"R.D. Bell"
J.T.C.C.
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