Katepwa Park Golf Partnership v. The Queen, docket 1999-2059-IT-I (Informal Procedure)

Date: 20000421

Docket: 1999-2059-IT-I

BETWEEN:

KATEPWA PARK GOLF PARTNERSHIP,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Rowe, D.J.T.C.C.

[1] The appellant, Katepwa Park Golf Partnership (Katepwa) appealed from assessments of income tax for the 1994 and 1997 taxation years. On May 9, 1995 and March 18, 1998, the Minister of National Revenue (the "Minister") assessed the appellant a late filing penalty in the sum of $2,500 and $2,500, respectively, in respect of the 1994 and 1997 partnership information returns. As set forth at paragraph 6 of the Reply to the Notice of Appeal (Reply), counsel for the respondent advised the appellant had not filed a Notice of Objection in respect of the assessment issued for the 1994 taxation year, as required by section 165 of the Income Tax Act (the "Act") and requested the purported appeal for the 1994 taxation year be quashed. Counsel for the appellant indicated the assessment for the 1994 taxation year had not come to the attention of Katepwa until after the issuance of the assessment for the 1997 taxation year. As a result, the ruling on the motion to quash the appeal for the 1994 taxation year was reserved until the conclusion of the evidence.

[2] In assessing the appellant, the Minister made the following assumptions of fact as set forth in paragraph 5 of the Reply:

"(a) Katepwa Park Golf Partnership ("Katepwa") was registered as a partnership on June 16, 1987;

(b) Katepwa has only filed a partnership information return with the Minister for the 1994 and 1997 taxation years;

(c) Katepwa partners consisted of 10 individuals and 1 corporation;

(d) the due date for Katepwa to file an information return with the Minister was five months after the end of the partnership's fiscal period;

(e) the fiscal period for Katepwa is the last day of February annually;

(f) the due date for Katepwa to file its information return for the 1994 taxation year was July 31, 1994;

(g) Katepwa filed the information return for its 1994 taxation year on April 10, 1995;

(h) the due date for Katepwa to file its information return for the 1997 taxation year was July 31, 1997;

(i) Katepwa filed the information return for its 1997 taxation year on February 4, 1998."

[3] Mervin Culham testified he is a Chartered Accountant carrying on practice in Regina, Saskatchewan. He acted as accountant for the appellant and prepared the annual financial statement as well as the T5013 partnership information return. The 1997 return was the first one he prepared for Katepwa. Prior to that, Gary Benson, C.P.A. had done the required filing during the early years of the partnership. Culham referred to a series of information returns - filed as Exhibit A-1 - for the taxation years 1989 to 1997, inclusive. Culham stated that when filing the 1997 information return he was aware Katepwa was comprised of 10 individuals - as limited partners - and one corporation as general partner pursuant to the Limited Partnership Agreement - Exhibit A-2 - and that at page 3, paragraph (i), described as the "Minimum Return" provision, the agreement gave the limited partners priority over the general partner in terms of receiving a return on equity. Culham stated the general partner had never been paid any money from the partnership. The original general partner had been Nicor Management Inc. but from 1987 onwards - until 1997 - the corporate member of Katepwa was R.L. Keith Holdings Inc. Culham stated he prepared the financial statement of Katepwa for the year ending February 28, 1997. As part of the statement, he prepared a schedule setting out the capital contribution of each partner and the share of net income of Katepwa attributable to each individual limited partner. Since the inception of the partnership, the only income paid to the limited partners - in the sum of $43.00 per unit - was during the 1997 taxation year. One limited partner owned two units and he received the sum of $85.00. Culham had calculated that, in order for the general partner to receive any payment - at all - under the terms of the partnership agreement, it required the limited partners - first - to have received the sum of $418,000. In respect of the partnership return for the 1997 taxation year, Culham stated he examined the T5013 form - including the Statement of Partnership Income - and filed the form entitled Partnership Information Return in the usual manner. He also provided the T5013 Supplementary slips to each limited partner indicating the amount of income received from Katepwa so it could be included in their personal returns of income for that taxation year. From examining the Katepwa file, Culham was aware all previous returns had been filed with the Minister in late February or early March. He merely followed the same procedure and did not examine the particular provisions of the Act pertaining to partnerships and the time deadlines for filing information returns. Upon receiving a Notice of Assessment issued to Katepwa by the Minister, indicating that a penalty had been levied pursuant to subsection 162(7.1) of the Act for failing to file the 1997 T5013 within the time specified by section 229 of the Income Tax Regulations (the "Regulations"), Culham began making inquiries of Revenue Canada. He wrote a letter explaining his understanding of the Regulations which was based on his view that the appropriate provision pertaining to Katepwa was paragraph 229(5)(b) and that the subsequent provision - 229(5)(c) - was unclear. The fiscal year end of Katepwa was February 28, 1997. The basis of the assessment issued by the Minister was that Katepwa had failed to meet the requirement of the provision by filing its information return for the 1997 taxation year before the due date of July 31, 1997. In Culham's view, by issuing the T5013 Supplementary slips to each limited partner by the end of February, 1998, and filing the information return at or near the same time, the information concerning the $43.00 income received by each limited partner - per unit of ownership - was available to be included in a personal income tax return for the 1997 taxation year. In addition, prior to the filing of those personal income tax returns, Revenue Canada would be aware - through the details set out in the information return - that there had been the sum of $43.00 paid per unit to the limited partners. Culham stated that when he was attempting to contact Revenue Canada - to better understand the nature of the assessment levied against Katepwa - the officials with whom he was speaking had difficulty locating the Katepwa file.

[4] Prior to commencing cross-examination, counsel for the appellant - with consent of counsel for the appellant - tendered a Book of Documents, tabbed 1-9, inclusive, which was filed as Exhibit R-1 and reference to a document at a tab number will indicate it is located in Exhibit R-1. Culham identified - at tab 1 - the Partnership Information Return of Katepwa for the 1994 taxation year. The return for the 1997 taxation year - at tab 2 - was the first one prepared by Culham. The Notice of Assessment - at tab 3 - pertaining to the 1994 taxation year had never been brought to Culham's attention until Katepwa received the Notice of Assessment - tab 4 - for the 1997 taxation year. At that time, he noticed there was a previous balance owing in the sum of $2,671.80. Since there was no information on file pertaining to any prior assessment, this prompted him to begin making enquiries. Later, Culham prepared the Notice of Objection - tab 5 - relating to the 1997 taxation year but not the 1994 taxation year. Culham stated he did not recall having read the Notification of Confirmation - tab 8 - issued by the Minister in response to his Notice of Objection. Counsel referred Culham to paragraph 1.1(o) of the partnership agreement - tab 9 - (also filed earlier as Exhibit A-2) - where it stated that "partners means the General Partner together with the Limited Partners". Culham stated he did not recall having looked at that particular provision. He agreed the information return for the 1997 taxation year had been filed on February 4, 1998 but disagreed with the assumption of the Minister that only two such returns - for the 1994 and 1997 taxation years - had ever been filed during the history of the partnership because copies were on the file that he had been given when assuming the responsibility - in 1997 - of all accounting requirements of Katepwa.

[5] In re-examination, Culham stated he contacted his client - Katepwa - concerning the assessment for the 1994 taxation year in which a penalty of $2,500 had been levied and no one had any knowledge of it, whatsoever.

[6] Counsel for the appellant made submissions concerning the requirements for filing of the information returns which, in his view, were ambiguous and pointed out no harm had been incurred by Revenue Canada as a result of the manner of filing chosen by Katepwa over a 10-year period.

[7] Counsel for the respondent submitted the evidence had not established that Katepwa had actually filed any information returns - as contained in Exhibit A-1- other than the ones filed - late - in respect of the 1994 and 1997 taxation years which led to the assessment of a $2,500.00 penalty in each case.

[8] As a consequence of the above submission, I permitted the appellant to re-open its case on the issue as to whether or not other information returns had been filed by Katepwa. After a brief adjournment, the former accountant of the appellant arrived and gave evidence.

[9] Gary Benson testified he is self-employed as a venture capitalist and is an accountant by training with a C.P.A. designation issued in the United States. He was referred to the information returns contained in Exhibit A-1 and identified his handwriting, commencing with the return for the 1991 taxation year which was the first one he prepared. Thereafter, he prepared the returns for the taxation years 1992 to 1996, inclusive, until Mervin Culham took over the file in 1997. In each year, ten T5013 slips were sent out, one to each limited partner. During the years Benson was in charge of filing the information returns, he placed the relevant return in an envelope with the required number of copies and hand-delivered them to the Revenue Canada office on Smith Street in Regina. Each year, he would hand in the return - contained in an envelope - to a receptionist/clerk and would have that person affix a date stamp to the outside of the envelope so as to establish the time the returns were filed. Each return would contain copies of the T5013 slips, handwritten by him. Then, two copies of the said slips were sent to each limited partner, one to be submitted to Revenue Canada together with an income tax return and the other to be retained in each limited partner's personal records. Since he was also a limited partner in Katepwa, Benson was well aware of the need for the information returns to be filed.

[10] In cross-examination, Benson stated he walked the returns over to the Revenue Canada office rather than mailing them. He always retained a copy of the information return - for each year - on the Katepwa file. On numerous occasions, when handing in the envelope containing the information return, he would request a receipt from the intake person but none was ever forthcoming. Further, he stated there is nothing in the Katepwa file to indicate the Minister ever acknowledged receipt of any information returns for the taxation years 1992 to 1996, inclusive. During those years, Benson said he had no contact with Revenue Canada concerning Katepwa other than to request the appropriate forms for filing the information returns on an annual basis. Benson stated he could not recollect ever having seen an assessment for the 1994 taxation year relating to Katepwa but the files were located in the Katepwa office throughout the year. Benson said he did not consult the Act or the Regulations pertaining to the manner of filing information returns as he merely followed the information provided with the forms and/or a guide issued each year by Revenue Canada. He continued to follow the same manner of filing as had been done in earlier years by his predecessor for Katepwa's 1989 and 1990 taxation years. Benson stated Culham did not speak to him about any penalty having been levied pertaining to the 1994 taxation year and no limited partner had ever reported any problem arising out of the issuance - each year - of the T5013 slips. Benson stated he came to Canada in 1975 and had worked as an accountant for the next three or four years but had not obtained Canadian accreditation.

[11] In re-examination, Benson stated he had followed the guide issued by Revenue Canada as he understood it to relate to the need for filing information returns. In his view, the returns had always been filed in time for the limited partners to have the T5013 slips in hand when filing their own personal tax returns by the usual date of April 30th of the year following the particular taxation year covered by the return.

[12] In renewing submissions, counsel for the appellant conceded there was no way in which Katepwa could absolutely establish that the assessment for the 1994 taxation year had not been received. Since there had been no Notice of Objection filed within the time required by section 165 of the Act, he agreed there was no valid appeal before the Court unless it could be found that the assessment had never been received, in which case the Minister could re-issue the assessment, thereby starting the process over again. In relation to the penalty levied in the assessment for the 1997 taxation year, counsel for the appellant submitted the evidence of Gary Benson had established that Katepwa had consistently followed the same practice for 10 years and had never been notified by Revenue Canada that it had been not been complying with the provisions of the Act and/or Regulations and that the purpose of the legislation had been met by the prompt issuance of the T5013 slips, in time - each year - for the income, if any, to be reported on the personal income tax return of a limited partner. Counsel also submitted the nature of the partnership agreement giving priority in receipt of net income to the limited partners, effectively - under the circumstances - eliminated any real possiblity the corporation, as general partner, would be receiving income.

[13] Counsel for the respondent submitted the assessment for the 1994 taxation year had been mailed out and that, in the absence of compelling evidence to the contrary, it should be regarded as having been received. Since there was no filing of a Notice of Objection within the proper time, the purported appeal for the 1994 taxation year was a nullity and should be quashed.

[14] An examination of the Notice of Assessment for the 1994 taxation year – tab 3 - dated May 9, 1995, indicates it was directed to: Katepwa Park Golf Partnership, c/o R.L. Keith Holdings Ltd. at 2347B Cornwall St, Regina, SK. There was no postal code used. The Notice of Assessment for the 1997 taxation year – tab 4 - dated March 18, 1998, was mailed to: Katepwa Park Golf Partnership c/o Katepwa Holdings Inc. at 2347B, Regina, SK, S4P 2L4. For the first time, the general partner during the 1997 taxation year was Katepwa Holdings Inc. Contained in tab 2 - towards the end of the bundle - there are a series of documents pertaining to action instituted - apparently within Revenue Canada as a consequence of some interest calculations undertaken by a clerk - to inquire into whether it was appropriate for the Minister to grant relief on payment of interest arising out of the 1994 assessment imposing a penalty in the sum of $2,500. On form TX 46C - Rev.93 - someone with the initials "HR" recommended the Minister waive interest in the sum of $816.09 as it had accrued on the outstanding balance in the sum of $2,671.80 under "Fairness". In addition, the author of the memo referred to ACSES diary for details. In the following six pages, - still at tab 2 - there are printed pages pertaining to the account of Katepwa. The author - on a page marked as "1" and dated March 11, 1998 - wrote as follows:

"1997 T5013 return recd on Feb 4/98. Period ending of Feb 2/97, therefore, return was due on July 31/97. When interest calculation clerk checked account, it was found that account had prior balance owing of $2,671.80 from May 9/95. Notice of Assessment for this balance was sent on May 9/95 but no collection letters were sent to client as address on account was incomplete. Address on account has now been corrected..."

[15] Later on, the author of this memorandum continued:

"As no collection letters were sent to client by either the system or Collections, I recommend that uncharged interest of $816.09 be waived. Notice of Assessment will be issued for 1997 LFP of $2500.00."

I presume LFP means Late Filing Penalty.

[16] Another two pages further on - still in tab 2 - there is a document entitled "Fairness Registry - Create Scratch Pad" and it refers to the account number of Katepwa. There, the author writes as follows:

"Recommend waiving interest of $816.09 on o/s balance ... No coll letters were sent to client - & no int update was done as address on acct was incomplete inhibiting all system action. Client has not been advised of this debt since May 9/95. LFP of $2500.00 is being issued on 1997 T5013 rtn."

Later, there is a document entitled "Subsidiary Ledger – Account Display" upon which someone has written,"No coll letters were sent".

[17] The information return for the 1994 taxation year was filed on April 10, 1995. The position of the Minister is that it should have been filed before the due date of July 31, 1994. The address given for Katepwa on that return was:

"Katepwa Golf Partnership

care of: R.L. Keith Holdings Ltd.

2347 B Cornwall St

Regina, SK

S4P 2L4"

[18] That same address was set out - in exactly the same form - two more times on the same page under the categories "Address of principal partner" and "location of books and records". Despite this, the Notice of Assessment for the 1994 taxation year does not have a postal code contained in the address.

[19] It is extremely difficult to establish the negative, in reference to the non-receipt of any document, otherwise presumed by law to have been delivered in the normal course. Under subsection 152(2) of the Act, the Minister is required to "send a notice of assessment to the person by whom the return was file". Of course, that relates to a return of income. There does not seem to be anything in section 229 of the Regulations - pertaining to Partnership Return - requiring the Minister to issue any acknowledgement of receipt or to confirm compliance or to advise of non-compliance. The wording of subsection 244(14) of the Act, is:

"For the purposes of this Act, the day of mailing of any ... notice of assessment shall be presumed to be the date of that notice or notification."

[20] The Notice of Assessment for the 1994 taxation year - advising Katepwa it had been assessed a late filing penalty - in the sum of $2,500.00 plus interest in the amount of $171.80 - under subsection 162(7)(A) [sic] was dated May 9, 1995. The Minister's own documents indicate no follow-up collection letters were sent after May 9, 1995 because the address was incomplete and the system - apparently - would not recognize it. It is reasonable to conclude the postal code - in place for several decades in Canada - is an integral part of any mailing address. Also contained in the documents - tab 2 - is an entry of some information for the Fairness Registry indicating the type of relief sought was cancellation of arrears interest and the reason for entertaining the application was: Departmental Delay. The Notice of Assessment - tab 4 - levying a penalty for the 1997 taxation year - was dated March 18, 1998 and was sent by mail to the correct address, including the postal code.

[21] In the case of Adler v. Her Majesty The Queen, 98 DTC 1414, Judge Hamlyn, Tax Court of Canada was dealing with an extension of time to file a Notice of Appeal. The taxpayer testified as to the non-receipt of the assessment in issue bearing a date of mailing of October 16, 1995. Her evidence was she was not aware of the existence of the assessment until July 28, 1997. At page 1415, Judge Hamlyn stated:

"The Minister of National Revenue (the "Minister") has taken the position in the matter that the mailing was, as indicated, on the 16th of October 1995, and the evidence of the Minister is to that effect, that the mailing of the assessment was commenced in the Minister's department at that time and that was sufficient mailing to meet the test of the Income Tax Act (the "Act") under section 160(2) of the Act.

The Applicant, according to the Minister, did not serve on the Minister a Notice of Objection to that assessment, and that the extension of time within which to institute an appeal to this Court was filed on September 9, 1997, and that this application should be dismissed because the Applicant did not serve on the Minister a Notice of Objection to the assessment dated October 16, 1995 as required by section 169 of the Act, and an Order granting the application therefore should not be made.

In terms of the analysis, I find that the Minister's evidence is that the Minister commenced the mailing processes to the Applicant of the Notice of Assessment at the address of the Applicant on the 16th of October, 1995. The Applicant stated she never received the assessment and did not know of the assessment until July of 1997.

The Applicant has applied for an Order at this time within which to extend the time to appeal to that assessment by Revenue Canada. I accept the Applicant's evidence that the Applicant did not have any prior knowledge of the Notice of Assessment and that she never did receive such an assessment from Revenue Canada.

The evidence of Revenue Canada was to the effect that the processes [process] of mailing was commenced on October 16, 1995 and that with the reading of the Act this notice shall be presumed to be the date of that mailing, that is, the date on the Notice of Assessment shall be presumed to be the date of that mailing. Now, that presumption that is in the Act is a rebuttable presumption.

I find that the Applicant had full control over her mailbox at the time in question and she was the only one who picked up the mail and her uncontroverted sworn testimony was that she did not receive the assessment. To me, that is very important.

And I refer now to the Antoniou v. M.N.R. case, 88 DTC 1415 (T.C.C.), which was cited to me by the Applicant. In that case, in November 1985, the Minister mailed Notices of Reassessment to the taxpayer at his proper address. The taxpayer alleged that he never received the notices and that he did not know about the reassessments until March 1987 when he was advised about them indirectly. The taxpayer wished to object to the reassessments and he applied to the Tax Court of Canada for an Order extending the time for service of the Notices of Objection. The Minister contended that the one-year limit imposed by section 167(5) had expired before the taxpayer's application was made.

Judge Brulé in Antoniou said at page 1418:

In light of the evidence adduced, the Court is satisfied that the Notice of Reassessment was sent by mail addressed to the appellant at his proper address on November 4, 1985. The Court also finds the appellant has established on a balance of probabilities he never received the Notice of Reassessment that had been mailed to him.

The date of mailing of a Notice of Assessment is presumed to be the date indicated in the Notice [subsection 244(14)]. This of course is in the absence of the evidence to the contrary. No evidence was introduced as to the mailing except by a Revenue Canada record officer's affidavit. After receipt of the reassessment was denied by the applicant herein and his testimony not disturbed under cross-examination and no rebuttal evidence offered, the Court concludes that there was no receipt of the Notice".

Judge Brulé goes on to say:

In the present case, although there probably were valid reassessments, no valid receipt of the mailing of the Notice having been established, after evidence indicated it had not been received, the time limited by subsections 165(1) and 167(1) of the Act for objecting to the reassessment has not expired. There is no basis to apply for an extension of time to file a Notice of Objection as the manner in which the purported reassessments for 1982 and 1983 was carried out was insufficient to complete the reassessment process. The present application is therefore a nullity.

From that, I conclude for this case, because there was no receipt of the assessment by the Applicant, the limitations imposed on the Act, which run from the day of the mailing, have not expired. Since there was no receipt of the notice by the Applicant, therefore, there was no date of mailing. Therefore, the application for an Order extending the time within which an appeal may be instituted to this Court is a nullity".

[22] In the decision of Aztec Industries Inc. v. The Queen, 95 DTC 5235 the Federal Court of Appeal allowed the taxpayer's application for judicial review of the Tax Court of Canada's ruling denying the application to extend time for filing Notices of Objection and - in the process - concluding the taxpayer had received the Notices of Assessment in the mail. The Federal Court of Appeal held the facts were not sufficient to prove the Minister had issued and mailed the relevant notices of assessment. At page 5237 of his judgment, Hugessen, J.A. stated:

"Where as in the present case, a taxpayer alleges not only that he has not received he notice of assessment but that no such notice was ever issued, the burden of proving the existence of the notice and the date of its mailing must necessarily fall on the Minister; the facts are peculiarly within his knowledge and he alone controls the means of adducing evidence of them. A number of statutory provisions recognize the Minister's burden in this respect and are clearly designed to alleviate it."

[23] The Court went on to hold that until the Minister was able to prove notices of assessment had been mailed that there was nothing to which the taxpayer could respond. Ordinarily, when the Minister sends out an assessment by regular mail, the Act (subsection 244(15)) deems the assessment to have been made that day and the taxpayer is then deemed to have received it - on the day it was mailed - by virtue of the provisions of subsection 248(7) of the Act.

[24] In the case of McIntyre v. M.N.R., 93 DTC 999, the Tax Court of Canada held the onus is on the Minister to prove the notices were sent to the proper address by producing the envelope to show that the reassessments had been sent to the correct address.

[25] In the within appeal, the evidence was that neither accountant had been aware of the mailing of the 1994 assessment by which the $2,500 penalty for late filing had been levied. The Minister's documents indicate the address on the 1994 Notice of Assessment was incorrect in that it lacked a postal code even though it had been provided - numerous times - by the appellant. At the hearing of the appeal, I indicated it was generally a tough proposition for any appellant to meet when it concerned the issue of non-receipt of an assessment. However, a thorough review of the evidence and the various documents issuing from employees and officials at Revenue Canada cast considerable doubt on whether the particular assessment for the 1994 taxation year was ever received by the appellant. If the automatic system of directing follow-up collection letters was not activated due to the incomplete - and incorrect - address for the appellant, then it is not unreasonable to draw the conclusion that the assessment - if mailed - was not received by Katepwa due to the absence of the postal code.

[26] In the case of Denelzen v. The Queen, unreported, Docket A-184-96 the Federal Court of Appeal considered the matter of a taxpayer who had provided the Minister with an incorrect address for his residence by asserting it was located on a certain "Drive" rather than on the correct "Avenue". In addition, the taxpayer had not included the postal code. To complicate matters and in furtherance of the infamous Murphy's law, an employee of Revenue Canada added the postal code to the address on the notice but made a typographical error in transcribing it from other documents. The argument before the Court was that the error of the Minister's employee superceded his own previous error. At page 3 of his judgment, Létourneau stated:

"There is simply no merit in the appellant's contention. If the notice of reassessment had been sent to the address indicated on his tax return without the addition of the postal code, it would have been mailed to the wrong address. Yet, the appellant would have had no valid ground of complaint because it would have been sent to the address that he gave. I honestly fail to see how the fact of sending the notice to the wrong address that he gave, with a wrong postal code, can give him a valid ground of complaint, especially as the Minister's erroneous intervention was induced and necessitated by the appellant's failure in the first place to provide his postal code as required. To put it another way, the appellant's failure to provide a correct and complete address "cannot be laid at the feet of the Minister" (Canada (Attorney General) v. Bowen, [1992] 1 F.C. 311, at p. 315 (F.C.A.))."

[27] The point to be taken from that decision - in my view - is that the inclusion of a proper postal code is a pre-requisite of a correct and complete address. With increasing reliance on technology in sorting and delivery of mail, it is understandable that postal codes have become increasingly significant, especially when the mail is being sent to businesses or persons occupying an office or residence in an urban downtown location. In this case, the address on Cornwall Street provided by the appellant was in a building in the center of Regina. This is not the same situation as a missing postal code in a letter or parcel sent to someone living along a rural delivery route where the letter carrier probably knows the recipient personally and is able to speed the item on its intended way despite deficiencies in the address.

[28] There is no assumption of fact contained in the Reply to the effect the Minister actually mailed the assessment dated May 9, 1995. On the copy of the document itself - tab 3 - there is a date of mailing entered as May 9, 1995 in the space provided but that does not prove the original of that document was actually sent. In addition, the appellant adduced evidence that a proper address was given in the information return filed on April 10, 1995. The best evidence adduced on behalf of the appellant was that no assessment for the 1994 taxation year had ever been received. The evidence of Mervin Culham is interesting in that he referred to the difficulty Revenue Canada officials had in locating the Katepwa file even though he provided them with the proper identification number. At this time, he was responding to the assessment for the 1997 taxation year and was attempting to discover the basis for the arrears - apparently relating to a 1994 assessment for the same penalty - because no one involved with the limited partners or the general partner was aware of it ever having been issued. There was no evidence adduced by the Minister on the matter of the issuance and/or mailing of the relevant assessment. I also took into account the Minister was unaware the information returns had been filed for the taxation years 1989, 1990, 1991, 1992, 1993, 1995, and 1996. I accept the evidence of Gary Benson that the returns were filed by him for the taxation years 1991 through 1996 and were hand-delivered by him to the Revenue Canada office on Smith Street in Regina, Saskatchewan. Apparently, Revenue Canada still cannot find those returns and - through counsel - denied having ever received any returns other than those in 1994 and 1997 which caused two separate assessments to be issued that - in total - levied penalties of $5,000 plus interest.

[29] Without receipt of the relevant assessment for the 1994 taxation year, there is no triggering of the presumption found in subsection 244(10) of the Act. It is not that the assessment is invalid, per se. Rather, it cannot have any force and effect with respect to the appellant until receipt has been established. In this case, the appellant's evidence and the reasonable inferences to be drawn from documents produced by officials employed by the Minister indicate a high probability of non-receipt by the appellant. Time did not commence to run as a result. Just as Judge Hamlyn found in Adler, supra, when there is no receipt of an assessment, the limitations under the Act do not commence to take effect since without receipt there is no date of mailing from which time would otherwise begin to be counted.

[30] The Notice of Appeal filed on behalf of the appellant did not contain any specific reference to non-receipt of the assessment for the 1994 taxation year but that is of no consequence. Any appeal filed would not be valid in view of the subsequent finding.

[31] Having regard to the evidence and applying the relevant jurisprudence, the motion brought by counsel for the respondent to quash the purported appeal for the 1994 taxation year on the basis the appellant had not filed a Notice of Objection in respect of the assessment, as required by section 165 of the Act, is dismissed. It is reasonable to conclude - on a balance of probabilities - that the assessment was never received by the appellant. The failure of the Minister to send the assessment in a proper manner does not mean the assessment is invalid and, therefore, subject to being vacated. However, the assessment cannot be acted upon in terms of enforcement at this stage of proceedings and it must - if time still permits - be given new life by means of proper service upon the appellant following which the provisions of the Act governing the filing of an objection and/or appeal will apply.

[32] With respect to the assessment for the 1997 taxation year, there is no doubt it was received, objected to and then confirmed by the Minister. The penalty section is 162(7.1) of the Act but the information return was required by Regulation 229(5) which reads as follows:

"Subject to subsection (6), a return required by this section shall be filed with the Minister without notice or demand

(a) in the case of a fiscal period of a partnership all the members of which are corporations throughout the fiscal period, within five months after the end of the fiscal period;

(b) in the case of a fiscal period of a partnership all the members of which are individuals throughout the fiscal period, on or before the last day of March in the calendar year immediately following the calendar year in which the fiscal period ended or with which the fiscal period ended coincidentally; and

(c) in the case of any other fiscal period of a partnership, on or before the earlier of

(i) the day that is five months after the end of the fiscal period, and

(ii) the last day of March in the calendar year immediately following the calendar year in which the fiscal period ended or with which the fiscal period ended coincidentally."

[33] The evidence of the Chartered Accountant - Mervin Culham - was that he prepared the annual statement and the T5013 information return. The 1997 taxation year was the first one he had prepared, having taken over the file from Gary Benson, C.P.A. who had done all the filings from 1991-1997. The Regulation applies to fiscal periods ending Aug 31, 1989 - if all members of the partnership were corporations - and December 31, 1988 in all other cases.

[34] The exhibit book - R-1 - at tab 1 - includes only the returns filed for the taxation years, 1994 and 1997. The position of the Minister, as discussed earlier, was that these were the only information returns ever filed. However, Exhibit A-1 was comprised of copies of information returns filed for 1989-1997, inclusive. Culham stated he had access to those earlier filed returns and merely followed the same procedure. The 10 individuals who were limited partners were the same throughout, although Katepwa Holdings Inc. took over as the general partner. The original Limited Partnership Agreement is Exhibit A-2. At page 3 of said agreement - paragraph (i) there is reference to a "minimum return" provision which is fully set out on page 18, article 6.1. The limited partners must receive net income from the operation of the partnership before any money is paid out to the general partner. The evidence of Culham was that no monies had ever been paid out to the general partner. Culham prepared the Financial Statement - tab 2 - for the year ending February 28, 1997. At page 7, he listed all of the partners, indicating their capital and share of net income. The income was only $43.00 per partnership unit - since the inception of the partnership. The total earned for all of the limited partners was $43 x 11 or $473.00. In accordance with the agreement - Exhibit A-2 - the limited partners had to receive a total of $418,000 before the general partner got a nickel. Culham prepared the T5013 slips in February, 1997 - approximately the same time as he prepared other documents such as T4 slips for clients - so individuals could report the income on their own individual tax returns. All previous returns in the history of the partnership had been filed in late February or March. Culham did not look up the particular Regulation - section 229 - but merely continued to file as had been done for many years. Then, an assessment arrived showing not only a $2,500 penalty for 1997 but - in effect - including a bill for an outstanding 1994 assessment for the same infraction. This came as a surprise to Culham and he contacted Revenue Canada by phone and letter, pointing out that in his view, paragraph 229(5)(b) of the Regulations was the most appropriate provision governing the filing of the information return because (c) was extremely unclear. The fiscal year end of the partnership was February 28, 1997. If subparagraph 229(9)(a) refers to corporations and 229(5)(b) to individuals and those provisions refer to a certain time following a fiscal period, then 229(5)(c) does not specifically indicate it is intended to refer to any other form of partnership. It merely states: "in the case of any other fiscal period of a partnership ...." Revenue Canada says the return should have been filed by July 31, 1997. From a taxation point of view, Culham's position is that the individual partners received their T5013's showing the $43.00 income and would have included them when filing their returns for the 1997 taxation year. Therefore, the whole purpose of the provision was met in that the income of individuals was provided to Revenue Canada so these people could not omit this amount from their return without there being a trail to follow, bearing in mind there was no money ever paid to the general partner.

[35] In my view, the wording of paragraph 229(5)(c) of the Regulations is unclear. There may be several different types of taxpayers which could be included in the phrase "in the case of any other fiscal period of partnership" such as a combination of individuals, corporations, trusts or other partnerships. However, the Minister's position is that the language is quite clear. Under paragraph 229(5)(a), if all members of the partnership are corporations, then the filing of the return is required within five months after the end of the fiscal period. Under 229(5)(b), if the partnership is composed entirely of individuals, then the due date for filing is March 31 following the calendar year in which the fiscal period of the partnership ended. As for the requirement for partnerships not fitting into those two categories, the filing requirement is the day that is five months after the end of the fiscal period. In the case of Katepwa, that date is July 31, 1997 since the fiscal period ended - annually - on the last day of February. It is interesting to see how Information Circular 89-5R- Partnership Information Return - dated June 21, 1991 - deals with these various categories. In my view, it sets out what the actual Regulation does not. At paragraph 14 - dealing with filing deadlines - after discussing the requirements for filing of partnerships composed strictly of corporations (a) and then all individuals (b) it went on, as follows:

"(c) In the case of the fiscal period of any other partnership (combination of individuals, corporations or trusts) ..."

By way of comparison, paragraph 229(5)(c) states:

"(c) in the case of any other fiscal period of a partnership ..."

[36] The Information Circular - in my opinion - is correct and sets out an explanation which is easy to understand when contrasted with other types of partnerships. The Regulation itself puts the cart before the horse when it refers to "the case of any other fiscal period of a partnership". The Minister's position is that the type of partnership - or, more accurately, the type it is not - determines the appropriate reference to the fiscal period which determines the date for filing, all of which is clear like a pristine mountain stream. The French version of the Regulation is not of any assistance in that the method of describing the types of partnership in 229(5)(a) and (b) is the same as in the English version and then (c) reads as follows:

"(c) dans le cas de tout autre exercice de la société de personnes, au plus tard le ..."

[37] The issue that is squarely before me with respect to the assessment issued for the 1997 taxation year is whether the appellant can seek relief by way of having established due diligence in attempting to comply with the Act and any relevant Regulations. It is clear that a due diligence defence exists regarding administrative penalties in the Act.

[38] In the case of Pillar Oilfield Projects Ltd. v. The Queen, [1993] G.S.T.C. 49-1, Judge Bowman - Tax Court of Canada - established a due diligence defence to the penalty in section 280 of the Excise Tax Act. In Ford (S.M.) v. Canada, [1994] 2 C.T.C. 2395, Judge Bell - Tax Court of Canada - relied on the judgment of Bowman J.T.C.C. in Pillar Oilfield, supra, and held the taxpayer had used due diligence in filing her tax return.

[39] In the case of Bennett (T.J.) v. Canada, [1995] 2 C.T.C. 2308, Judge Lamarre Proulx - Tax Court of Canada - held that the wording of subsection 162(2) of the Act - respecting late filing penalties - did not have the clarity necessary to make it an absolute liability provision and that a defence of due diligence existed but, unfortunately for the taxpayer, not on the evidence adduced in that appeal.

[40] In Toitures Express Inc. v. R. [1998] 1 C.T.C. 2861 Judge Lamarre Proulx again relied on Pillar Oilfield, supra, and allowed an appeal against the imposition of a penalty in subsection 227(9) of the Act for failure to pay an amount withheld.

[41] In Consolidated Canadian Contractors Inc. v. The Queen, [1998] G.S.T.C. 91, the Federal Court of Appeal, upheld the due diligence defence in Pillar Oilfield, supra, and established certain principles within an analytical framework that must be followed when determining whether a penalty such as the one found in subsection 162(7.1) of the Act - applicable to the within appeal - is a "strict liability" penalty that is open to a due diligence defence. In the course of his judgment, Robertson, J.A. referred to the decision of the Supreme Court of Canada in R. v. Sault Ste. Marie (City) [1978] 2 S.C.R. 1299 in which the issue of the concept of strict liability offences was raised. At page 91-8 - paragraphs 19-22 inclusive - of his judgment in Consolidated, supra, Robertson, J.A. commented as follows:

"[19] The Supreme Court in Sault Ste. Marie ultimately held that the pollution offence in question fell within the strict liability category. At p. 1328, Dickson J. Reasoned:

Since s. 32(1) creates a public welfare offence, without a clear indication that liability is absolute, and without any words such as "knowingly" or "wilfully" expressly to import mens rea, application of the criteria which I have outlined above undoubtedly places the offence in the category of strict liability.

[20] In my opinion, the true precedential significance of Sault Ste. Marie lies in the fact that it recognizes strict liability offences for which the defence of due diligence is available. It does not stand for the proposition that the defence of due diligence can be invoked only if a public welfare or regulatory offence is involved. That issue was not before the Supreme Court. Hence, in my view, it is open to this Court to determine whether the defence of due diligence may, as a matter of principle, be raised in the context of administrative penalties.

(b) Should the concept of strict liability be extended to administrative penalties?

[21] In the case before us, the Minister is arguing that the principles of Sault Ste. Marie are only applicable to regulatory offences and, since s. 280 does not qualify as a regulatory offence, no due diligence defence is available. In my view, this is too restrictive a reading of Sault Ste. Marie. That case stands for the proposition that due diligence is a legitimate defence in the context of a public welfare offence. It does not address whether administrative penalties entail absolute or strict liability. I know of no common law rule that would disallow a due diligence defence with respect to administrative penalties. For greater certainty, I take the position that there is no valid basis for maintaining absolute liability for all administrative penalties. I would adopt the reasons of Justice Dickson in Sault Ste. Marie, in which he rejected the argument that strict liability was inapplicable to regulatory offences, and apply those reasons to administrative penalties.

[22] To reiterate those reasons, there is no evidence that absolute liability has the effect of causing adherence to a higher standard of care. I am similarly unpersuaded that recognition of a due diligence defence would lead to inefficiency in the enforcement of legislation. With respect to penalties of an inconsequential nature, and cases where there is no convenient forum to determine whether due diligence has been established, absolute liability attaches according to the criteria set out in Sault Ste. Marie. (No one is going to accept, for example, that a due diligence [defence] is available for penalties imposed on over-due accounts payable, any more than one would expect to be able to plead due diligence with respect to parking meter violations.)"

[42] As to the question whether or not there is a rebuttable presumption that Parliament did not intend to establish absolute liability, (unless the penalty is trivial) and if manifest unfairness will give rise to a due diligence defence, Robertson, J.A. - at page 91-12 - paragraphs 35-39 inclusive -, stated:

"[35] Returning to the question of whether patent unfairness is a sufficient reason to import a due diligence defence into s. 280 of the Excise Tax Act, I must respond in the negative. The common law principle that there should be no punishment without fault is capable of supporting the concept of strict liability in cases involving administrative penalties. It is also capable of giving rise to a rebuttable presumption that Parliament did not intend to establish absolute liability in cases involving s. 280 of the Excise Tax Act. However, it is the Court's responsibility to consider the legislative context surrounding that provision and its purpose. After all, Parliament may have decided to impose absolute liability on the understanding that its benefits outweighed any unfairness to registrants. To extend relief solely on grounds of unfairness would, in my view, disregard the approach taken in Sault Ste. Marie. It would also be tantamount to declaring that all administrative penalties are subject to a due diligence defence provided that judges can identify a perceived quote "injustice". If the distinction drawn in Sault Ste. Marie between absolute and strict liability offences is to be applied to administrative penalties, then so too must its analytical framework. This is not to suggest that the task of distinguishing between strict and absolute liability provisions is problem-free. The benefit derived from the application of an analytical framework is that it deflects criticism based on judicial arbitrariness.

(d) The analytical framework

[36] In my opinion, Justice Dickson's analytical framework for identifying absolute liability offences is largely a reflection of what has become the "modern" approach to statutory interpretation. That approach involves a contextual and purposive analysis of legislation and was officially adopted by the Supreme Court in Stubart Investments, supra, per Estey J. at p. 578 quoting from Dreidger (2d) at p. 87. In Sault Ste. Marie, Justice Dickson held that before a statutory breach may be classified in terms of absolute liability, the court must consider: (1) the precision of the statutory language, (2) the importance of the penalty, (3) the subject matter of the legislation, and (4) the overall regulatory pattern adopted by the legislature. In my view, the last two factors call for a contextual and purposive analysis of the relevant provisions of the legislation. At least, this is the way in which courts have generally applied those factors: see Nickel City Transport, supra. Having regard to the criteria set out in Sault Ste. Marie, I propose to pursue the main issue raised on this judicial review application by applying the following analytical framework.

[37] The principle that there is to be no punishment without fault translates into a rebuttable presumption that Parliament did not "intend" to impose absolute liability. This presumption is also a logical extension of the understanding that penalties serve as an incentive to ensure that persons exercise a minimum standard of care in fulfilling their obligations imposed by law. The idea is to encourage people to exercise reasonable care so they can avoid breaching their legal obligations. If so, then the person being penalized should be able to plead that he or she acted in accordance with the required standard of care. Hence, it seems both fair and logical to assume that Parliament intended strict not absolute liability. This presumption, however, will be rebutted if the language chosen by the draftsperson is unequivocal that absolute liability was intended or where the penalty leads to trivial consequences. If the presumption is not rebutted on those grounds, then it is necessary to determine whether the due diligence defence is incompatible with the legislative scheme or whether it frustrates the purposes for which the penalty was imposed.

[38] As much as I reject the idea that unfairness or manifest injustice is a sufficient reason for implying a due diligence defence, I am of the opinion that a court is justified in reading words into an Act to avoid such a result, if it can be shown that the relief being granted is compatible with the legislative scheme and neither frustrates nor undermines its purposes. These restrictions should silence any potential argument that the Court is acting contrary to its proper constitutional role: see Canadian Pacific Airlines Ltd. v. British Columbia, [1989] 1 S.C.R. 1133, 59 D.L.R. (4th) 218 and M.N.R. v. Nassau Walnut Investments Inc. (1996), [1997] 2 F.C. 279, [1998] 1 C.T.C. 33, 97 D.T.C. 5051 (F.C.A.).

[39] If an implied due diligence defence does not run counter to what Parliament is seeking to achieve, the Minister has no room for complaint. On the other hand, if judicial recognition of the due diligence defence is contrary to the legislative scheme or purposes underlying s. 280 of the Excise Tax Act, registrants must accept the financial consequences which flow from non-compliance with that provision. However, the onus is on the Minister to convince the Court that an implied due diligence defence will lead to consequences of the kind needed to displace the presumption in favour of strict liability."

[43] The question of the precision of the language used in the legislation giving rise to the imposition of the penalty was considered by Robertson J.A. and - continuing on at paragraph 41 - he stated:

"[41] The language of the statute is the first consideration in determining whether an offence should be categorized as a mens rea, strict liability or absolute liability offence. Mens rea offences are usually qualified by words such as "wilfully" or "knowingly", as in the criminal context. The use of such terms in the regulatory sphere was the subject of appeal in Reference re s. 94 of the Motor Vehicle Act (B.C.), [1985] 2 S.C.R. 486 at 493-94, 24 D.R.R. (4th) 536, where the British Columbia legislature had amended its Motor Vehicle Act to expressly provided that it was an absolute liability offence to drive with a suspended driver's licence. Similarly, in R. v. Pontes, supra, the use of the word "automatic" in the statutory provision under scrutiny convinced the majority of the Supreme Court that the offence was one of absolute liability. In the present case, s. 280 of the Excise Tax Act does not use the type of precise and explicit language that one would expect of a provision entailing absolute liability."

[44] In the end, counsel for the Minister in Consolidated, supra, conceded the taxpayer had exercised due diligence and once the Court had established the defence existed in relation to a penalty imposed pursuant to section 280 of the Excise Tax Act relating to reporting Goods and Services Tax, there was no need for the Court to look at the facts in order to determine whether the defence had been made out, as is usually the case.

[45] Can it be said that Parliament intended absolute liability in subsection 162(7.1) of the Act? It reads as follows:

"Failure to make partnership information return. Where a member of a partnership fails to file an information return as a member of the partnership for a fiscal period of the partnership as and when required by this Act or the regulations and subsection (10) does not set out a penalty for the failure, the partnership is liable to a penalty equal to the greater of $100 and the product obtained when $25 is multiplied by the number of days, not exceeding 100, during which the failure continues."

[46] In my view, the wording in the subsection does not have the clarity necessary to make it an absolute liability provision. The phrase "is liable" does not entail absolute liability. This was the conclusion of Lamarre Proulx, J. T.C.C. in Bennett (T.J.) v. Canada [1995] 2 C.T.C. 2308. The wording contained in paragraph 229(5)(c) of the Regulations is unclear and - probably for that reason - Information Circular 89-5R - at paragraph 15 - included an explanation of other types of partnership which would give rise to a different filing deadline. The penalty of $2,500, imposed in 1994 and again in 1997, is excessive - bordering on punitive - in view of the fact each limited partnership only received the sum of $43.00 during the life of the partnership. When legislation uses language such as "fails" or "failure" it must - without more - be taken as not having stated in precise terms that no excuses can be considered and that the punishment will follow automatically no matter what defences may be raised for the failure, including, perhaps, an impossibility of performance under certain circumstances. For these reasons, I am satisfied the relevant penalty in the within appeal arises from a provision imposing strict liability and, therefore, is open to a due diligence defence.

[47] David M. Sherman pointed out in his article published in Canada GST Service (Toronto: Carswell, 1998) at 280-108 to 280-110, that even where the Pillar Oilfield defence has been applied, in most of the cases the appellant has not been able to make a defence on the facts presented to the Tax Court of Canada. Sherman points out Judge Bowman in Pillar Oilfield was not prepared to accept that innocent good faith constituted due diligence and in the case of Somnus Enterprises v. The Queen, [1995] G.S.T.C. 4 at 4-4 Judge Bowman stated:

"Mere innocent good faith is not in itself sufficient. It requires an honest attempt by the taxpayer to comply, to the best of his or her ability, with the requirements of the statute, using the sources of information, facilities and resources available to that taxpayer. In considering whether a taxpayer has exercised due diligence a factor may, depending upon the circumstances, be that taxpayer's level of sophistication in tax matters."

[48] In the within appeal, the appellant is a sophisticated entity - through its members - and it had experienced accountants managing its financial affairs in terms of complying with the Act. However, the appellant had been filing the information returns - required in the 1989 amendment to the Act - in the same manner without any response to the contrary emanating from the Minister. It seems to be that when something goes wrong there is often another complicating factor - usually not directly related to the first - which serves to compound the problem. Had the 1994 assessment of the penalty for late filing been received by the appellant or had follow-up collection letters been sent, there would not have been any need for the 1997 taxation year assessment because the filing date could have been corrected by the appellant's accountants. The appellant's accountants honestly believed they were filing the information return correctly and in a consistent manner. They found the wording to be confusing and, because the general partner was never entitled to any income from the partnership, reasonably concluded that the only significant members of the entity - from the standpoint of ever reporting any income - were the 10 individuals who were limited partners. In that sense, the object and spirit and purpose of the legislation were met by the appellant throughout the years during which the information returns were filed. The magnificent sum of $43.00 per unit held - earned by each limited partner in the 1997 taxation year - was reported to the Minister prior to each person filing their income tax return for the 1997 taxation year and they had been provided with the necessary T5013 slips to include in their returns of income. As a result, the Minister did not suffer from the partnership information return not having been filed in time pursuant to the different deadline imposed by paragraph 229(5)(c) of the Regulations. Surely, the reasoning behind the provisions of section 229 is so the Minister can track taxpayers involved in partnerships. The evidence in the within appeal is that the income was properly reported by each partner and - all other things being equal - the Minister received a share of the $43.00 which had taken them 10 years to earn.

[49] Counsel for the respondent advanced meritorious arguments against finding a defence of due diligence. As noted earlier, the appellant had the benefit - at all times - of expert accounting advice. The Minister's position is quite sensible in supposing that a close, deliberate and focused reading of the relevant provision would indicate that Katepwa - a partnership composed of 10 individuals and one corporation - does not fit into the category of a partnership having all corporations as members nor was it one composed of all individuals and, therefore, the provisions of paragraphs 229(5)(a) and (b) do not apply. The submission is that if these provisions do not apply, then it must follow that paragraph 229(5)(c) is the correct one.

[50] In Canada, we have a self-assessing system. That does not mean the Minister has to act as the accountant of each taxpayer or that there is any statutory responsibility to correct errors or offer advice. However, the entire process of citizens reporting income still has some characteristics of a two-way street. For example, there could be income from a trust - an entity for taxation purposes - which instead of being included in the appropriate return filed 90 days after the calendar year end, was, instead, included into the recipient's personal income prior to the April 30th deadline in a return pertaining to individuals. It would be unusual to find the Minister issuing an assessment for a late-filing penalty in relation to a trust return when the same income was otherwise properly reported. The Minister is not cast in the role of a financial adviser or tax planner but neither is he or she in a strictly adversarial position in relation to the 18 or 20 million Canadian taxpayers who file returns each year. The Minister - through Revenue Canada - issues guides, pamphlets, sets up information hotlines, and has officials appear on radio and television talk shows to inform the public about income tax in a general sense as well as explaining some apparent oddities and quirks or new provisions in an effort to assist them in accurately filing their returns of income. In the within appeal, the filing of the information returns was carried out each year in the same manner and accomplished - perfectly - the purpose for which the provision was intended. The penalty of $2,500 - in relation to the income generated by the partnership in its lifetime (less than $500) - as paid to the limited partners in 1997 - is extremely disproportionate. It is calculated on the number of days the failure continues - at a certain rate - until the maximum is reached. But, in the absence of notice the failure is occurring, how can the taxpayer rectify the error? The meter keeps running and the taxpayer - unaware there is a problem with the filing date of the information return - cannot mitigate the damage. When this situation occurs in relation to a manner of filing that has been consistent for several years, it is even more difficult to accept the validity of the penalty. There must be some sense of balance or fairness in the application of provisions making up the fabric of the system or we will find ourselves sinking into an absurd, dense bog of our own making in which insistence on perfect compliance with exceptionally technical provisions - for no apparent purpose within the context of a specific set of facts - will arouse cynicism or - even worse - contempt for an otherwise generally workable taxation scheme. I suppose, one could fault the appellant's accountants for having relied on the maxim, "If it ain't broke, don't fix it". However, there is also the venerable dictum about not disturbing sleeping dogs through inappropriate applications of force. The conduct of the Minister is not blameless even as it pertains to the issuance of the 1997 assessment. I fail to understand how Revenue Canada was unable to find the other information returns which had been filed between 1989 and 1997, inclusive. It would not be difficult to understand the pique on the part of the Minister when it appeared Katepwa had only ever bothered to file two information returns in 10 years and - even then - filed them late. On that basis, there would be little desire on the part of the Minister to consider waiving - as a policy matter - the imposition of any penalty. If there is no need to respond by way of acknowledging receipt, then where is the safeguard for persons filing the return other than to use registered mail or some other form of delivery in which a signature is obtained. As Judge Rip observed in the case of Ross v. The Queen, [1996] G.S.T.C. 33 at 33-6:

"Due diligence is nothing more than the degree of care that a reasonable person would take to ensure compliance with the Act. It does not require perfection or infallibility. It does, however, require more than a casual inquiry of an official in the Tax Department. I have great sympathy for taxpayers struggling with a complex and difficult statute, particularly in the early years..."

[51] In the above case, Judge Rip was referring to the Goods and Services Tax provisions of the Excise Tax Act which were new to the Canadian system only a few years earlier. However, the provision in the within appeal was added on October 26, 1989 and the fact one is a trained accountant does not mean perfection or infallibility is the standard to be met. The importing - under special circumstances - of a sense of give-and-take into certain administrative provisions of the Act will not be the ruination of the system nor will the Minister's considerable power be diminished in any significant manner. The fact the due diligence defence is rarely established by an appellant should indicate to the Minister that the universe is continuing to unfold as it should.

[52] Having regard to the evidence and my understanding of the relevant jurisprudence, I find as follows:

- First, that the defence of due diligence applies to subsection 162(7.1) of the Act.

- Second, that on the evidence before me the appellant has demonstrated it is entitled to the application of said defence in that it exercised due diligence in attempting to comply with the filing deadline in relation to a partnership information return, in accordance with a provision containing ambiguous language - when considered in a broad context – and taking into account the intent and purpose of the provision.

[53] As a result of the foregoing, the appellant's appeal for the 1997 taxation year is allowed - with costs - and the assessment is referred back to the Minister for reconsideration and reassessment on the basis the penalty issued pursuant to subsection 162(7.1) of the Act be deleted.

[54] The appeal from the assessment issued with respect to the 1994 taxation year is not the subject of any disposition other than as discussed earlier in these reasons.

Signed at Sidney, British Columbia, this 21st day of April 2000.

"D.W. Rowe"

D.J.T.C.C.