163985 Canada Inc. v. The Queen, docket 98-355-IT-APP

Date: 20000215

Docket: 98-355-IT-APP

BETWEEN:

163985 CANADA INC.,

Applicant,

and

HER MAJESTY THE QUEEN,

Respondent.

The Honourable Judge P.R. Dussault

Reasons for Order

[1] This is an application made pursuant to the Income Tax Act (the “Act”) for an order extending the time within which the applicant may serve on the Minister of National Revenue (the “Minister”) notices of objection in respect of three assessments, the notices of which bear numbers 02911, 02912 and 02913 and are dated February 2, 1998.

[2] The applicant did not serve notices of objection within the time prescribed by paragraph 165(1)(a) of the Act, i.e. within 90 days after the day of mailing of the notices of assessment. Rather, on June 2, 1998 the applicant filed with the Minister an application for an extension of time to serve notices of objection and such notices were filed along with the application.

[3] On July 3, 1998 the Minister refused the request for an extension of time and on September 29, 1998 the applicant filed the present application with the Court.

[4] Basically, the applicant relies on subparagraph 166.2(5)(b)(i) of the Act. Paragraph 5 of the Application states the following:

De plus, l’Appelante [sic] n’a pu agir ni charger quelqu’un d’agir en son nom car l’Appelante [sic] a, pour la première fois, eu connaissance de l’existence desdits avis de cotisation lorsque monsieur Léger, du service de perception de l’Intimée, lui a remis une photocopie desdits avis de cotisation.

[5] In paragraph 9 of the Application, it is submitted that the respondent had the burden of establishing that the notices of assessment had been sent to the appellant.

[6] The Respondent submits that the applicant has not satisfied the conditions set forth in subparagraphs 166.2(5)(b)(i), (ii) and (iii) of the Act.

[7] Counsel for the applicant called many witnesses to demonstrate that the notices of assessment were never received in February 1998 shortly after being issued.

[8] The first witness was Mr. David Stein who described himself as the administrator of the applicant company’s as well as other companies’ affairs. His wife, Mrs. Sandra Stein, is the sole shareholder, director and officer of the applicant. Mr. Stein testified that he is in the office on a daily basis. He says that he has never received the notices of assessment in question, which were apparently issued on February 2, 1998. According to him, it is the receptionist-secretary who, on a daily basis, picks up the mail from the mailbox situated on the first floor of the building where the applicant’s office is situated. The mail is then sorted out and distributed unopened. All correspondence originating from governments and banks is handed over to Mr. Stein personally while everything else is distributed according to each employee’s responsibilities.

[9] Although Mr. Stein recognized that the applicant had duly received third party demands prior to the notices of assessment, he claimed to have seen the notices of assessment for the first time when the applicant’s counsel obtained copies from Mr. Pierre Léger of Revenue Canada who had initiated collection procedures.

[10] In cross-examination, Mr. Stein said that although he often spoke to Mr. Léger on the telephone, he did not tell Mr. Léger in February 1998 that he wanted to object to the three assessments at issue. His testimony is rather vague as to the subject of their conversation. Moreover, Mr. Stein did not remember having talked to Mr. Léger on the telephone in May and telling him of having already sent a letter concerning the February assessments.

[11] Mrs. Nina Patel was the receptionist at the applicant’s office in 1998. Her testimony tends to confirm that of Mr. Stein as she said that no notices of assessment were received in the mail in February 1998.

[12] Counsel for the applicant also called other witnesses including Mrs. Sandra Stein in order to prove that the notices of assessment were never received at the office. The testimony of those individuals is not very helpful, as they would not have been present in the office on a daily basis. However, I understand from their testimony that some of them would generally have been made aware of the receipt of such notices.

[13] Mr. Pierre Léger testified for the respondent. Mr. Léger personally issued the notices of assessment on February 2, 1998 as the applicant had failed to respond to third party demands previously issued. Mr. Léger said that in January 1998 he had already sent a letter to Mrs. Stein, for the applicant, to inform her of his intention to issue the assessments.

[14] Mr. Léger said that the three notices of assessment were put in separate unsealed envelopes and that those envelopes were deposited by him in the “Out” mail basket, to be processed in the mail room, which was the routine procedure. Although he could not identify the person that actually sealed and mailed the envelopes, Mr. Léger said that the notices would have been mailed in due course and that they had not been returned to Revenue Canada.

[15] In his testimony, Mr. Léger also referred to two telephone conversations with Mr. Stein. The first conversation would have taken place February 13, 1998. Mr. Léger said that during that conversation Mr. Stein told him he would object to the assessments but gave no particulars. Mr. Léger understood by that that Mr. Stein was referring to the notices of assessment issued February 2, 1998. Mr. Léger acknowledged that there were other notices of objection in Mr. Stein’s personal file but that, according to him, there could be no confusion as to which assessments Mr. Stein was referring to, due specifically to the fact that those assessments had been issued shortly before the telephone conversation took place.

[16] Mr. Léger said that the second conversation took place on May 19, 1998. He then referred to the February 1998 assessments and said that Mr. Stein informed him that he had already sent him a letter concerning those assessments. Mr. Léger said that he never received that letter.

[17] Counsel for the applicant claimed that the respondent had the burden of proof with regard to the notices of assessment having been duly sent to the applicant and that there was insufficient evidence in this respect. He also claimed that the evidence brought on behalf of the applicant reversed the presumption of subsection 244(14) of the Act. Counsel also pointed out that Mr. Stein could well have been referring to other assessments against himself or Mrs. Stein during his conversation with Mr. Léger on February 13, 1998.

[18] Counsel for the respondent relied on subsection 244(14) of the Act and on the testimonial evidence. He referred more particularly to Mr. Léger’s testimony regarding the telephone conversations with Mr. Stein during which Mr. Stein said that he “would object to the assessments” or that he “had already sent a letter concerning the February 1998 assessments”. Counsel for the respondent concluded that Mr. Stein had thus received the notices, which had been mailed in accordance with the usual procedure.

[19] Although counsel for the applicant stated that Mr. Stein could have been referring to other assessments against him or Mrs. Stein in his conversation with Mr. Léger, there is simply no evidence that there were other outstanding assessments that could have been objected to in either February or May 1998. Moreover, Mr. Léger specifically stated that he had been referring to the February assessments in his May 19, 1998 conversation with Mr. Stein. Mr. Léger’s testimony not only tends to prove that the notices of assessment had been duly mailed but also that they had in fact been received.

[20] Given Mr. Léger’s testimony, I can certainly entertain serious doubts as to the truthfulness of Mr. Stein’s testimony as well as of that of the other witnesses for the applicant. The timing of the February 13, 1998 conversation also reinforces Mr. Léger’s testimony.

[21] As the applicant failed to convince me on a balance of probabilities that the February 2, 1998 notices of assessment had not been received in due course, I have no choice but to dismiss the application for failure to satisfy the conditions set forth in subparagraphs 166.2(5)(b)(i) and (iii) of the Act.

Signed at Ottawa, Canada, this 15th day of February 2000.

"P.R. Dussault"

J.T.C.C.