Date: 19971010
Docket: 95-985-IT-G
BETWEEN:
MAJOCA INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
P.R. Dussault, J.T.C.C.
[1]
The appellant is challenging five assessments for failure to
comply with requirements to pay made under section 224 of the
Income Tax Act ("the Act") in respect
of Gérald Doyon, the tax debtor. The notices of assessment
are numbered 29832, 29833 and 29834, all of which are dated
May 30, 1994, and 29838 and 29839, dated July 21, 1994.
The requirements to pay were sent to the appellant on October 29,
1993, and January 6, 1994.
[2]
In making the assessments under subsection 224(4) of the
Act, the Minister of National Revenue ("the
Minister") relied, inter alia, on the facts set out
in subparagraphs (a) to (i) of paragraph 8 of the Amended Reply
to the Notice of Appeal. Those subparagraphs read as follows:
[TRANSLATION]
(a)
Assessment no. 29832, dated May 30, 1994, for $1,991.03:
(i)
A requirement to pay relating to an amount owed by Gérald
Doyon to the Receiver General of Canada was sent to Majoca Inc.
by registered mail on January 16, 1994 [sic], and was
received by the said corporation on January 17, 1994, but
the corporation never responded to it;
(ii)
Majoca Inc. wrote a cheque to CIBC Visa on March 25, 1994,
to pay Gérald Doyon's personal account;
(iii)
Gérald Doyon signed cheque no. 0538 from Majoca
Inc.'s bank account no. 401-256839-001 at the Hongkong Bank
of Canada;
(b)
Assessment no. 29833, dated May 30, 1994, for $3,200.00:
(i)
After no response was received to a requirement to pay, the
respondent made an assessment;
(ii)
Majoca Inc. had issued a cheque for $3,200 payable to
Gérald Doyon, who had signed cheque no. 0545, dated April
1, 1994, from Majoca Inc.'s bank account
no. 410-256839-001;
(c)
Assessment no. 29834, dated May 30, 1994, for $1,757.16:
(i)
After no response was received to a requirement to pay, the
respondent made an assessment;
(ii)
The Hongkong Bank of Canada debited Majoca Inc.'s account
no. 401-256839-001 on April 11, 1994, to pay legal fees for legal
opinions given after the respondent had sent requirements to pay
and seized accounts;
(iii)
The said debiting of Majoca Inc.'s account was authorized
by Gérald Doyon on March 7, 1994;
(d)
Assessment no. 29838, dated July 21, 1994, for $14,600.00:
(i)
After no response was received to a requirement to pay dated
October 29, 1993, relating to an amount owed by Gérald
Doyon to the Receiver General of Canada, the respondent made an
assessment;
(ii)
Majoca Inc. had issued cheques payable to Gérald Doyon,
who had signed the said cheques, which were drawn from Majoca
Inc.'s bank account no. 401-256839-001 at the Hongkong Bank
of Canada;
Date
Cheque
number
Amount
December 1,
1993
0515
$1,500
December 10,
1993
0514
$800
November 22,
1993
0510
$7,000
November 22,
1993
0509
$5,300
Total
$14,600
(e)
Assessment no. 29839, dated July 21, 1994, for $31,000.00:
(i)
Further to a requirement to pay for failure to pay, the
respondent made an assessment;
(ii)
Majoca Inc. had issued a cheque for $31,000 to Gérald
Doyon, who had signed the said cheque no. 0451, dated
December 6, 1993, from the corporation's bank account
no. 401-256839-001 at the Hongkong Bank of
Canada;
(f)
The requirement to pay dated October 29, 1993, sent to Majoca
Inc. in connection with Gérald Doyon, the tax debtor, was
returned marked [TRANSLATION] "we are not liable for any
payments or advances", while no response was received to
the requirement to pay dated January 6, 1994, sent to the same
corporation;
(g)
The amounts claimed in the two requirements to pay are
$529,866.99 and $539,447.39;
(h)
When the requirement was issued and then received on
January 17, 1994, Gérald Doyon was a tax debtor for
$529,866.99 within the meaning of the Income Tax Act;
(i)
When the requirement was issued and then received on
January 17, 1994, the appellant was or was about to be a
debtor of Gérald Doyon, the tax debtor.
[3]
Marc Weldon, a collection officer for Revenue Canada, testified
that he had discovered that Mr. Doyon owned all of the
appellant's shares when he examined the income tax returns
of the appellant and Mr. Doyon for previous years. Further, since
he had noted that the appellant had already paid Mr. Doyon
salaries and dividends and had advanced money to him, and given
that no progress was being made in the negotiations for the
payment of Mr. Doyon's tax liability, he decided to take
the necessary steps to intercept any amounts that might be paid
to him in that regard. The first requirement to pay was therefore
sent to the appellant on October 29, 1993,[1] on the basis of that
information.
[4]
Daniel Phaneuf, also a collection officer for Revenue Canada,
testified that he used the same information to send the appellant
another requirement to pay on January 6, 1994.
[5]
The requirements of October 29, 1993, and January 6, 1994, which
were prepared using form T1118A or B, duly completed with a
reference to the tax debtor, Mr. Doyon, contain four paragraphs
encompassing all the amounts that might be paid and that were
covered by subsections 224(1), (1.1) and (3) of the Act at
the relevant time.
[6]
Counsel for the appellant is not challenging the requirements to
pay as such, although, as I understand it, his argument that the
assessments are invalid seems to be based on the fact that the
requirements related only to amounts the appellant might lend or
advance to the tax debtor, that is, amounts covered by
subsection 224(1.1) of the Act. It is clear simply
from reading the documents in question that this is not the
case.
[7]
At the start of the hearing, counsel for the appellant admitted
that Mr. Doyon owed taxes and that the appellant had paid
the assessed amounts.
[8]
Before considering the validity of each assessment, I will note
that Mr. Phaneuf of Revenue Canada testified that although
the appellant made a number of payments by cheque following each
requirement to pay, assessments were issued only in respect of
payments he was sure were made to Mr. Doyon or for his
benefit.
[9] I
will deal with each assessment separately. However, I believe it
should be pointed out first that each notice basically states the
same thing (except for the amounts and dates written[2] in the blank spaces)
under the heading NOTICE OF ASSESSMENT CONCERNING:
[TRANSLATION]
The liability under subsection 224(4) of the Income Tax Act in
the amount of $________ for failure to comply with a requirement
to pay dated __________, concerning Gérald Doyon, S.I.N.:
[the number is written in], and for paying $_________ to him, for
him or on his behalf on _________.
I. Assessment for $1,991.03 - Notice #29832, May 30,
1994
[10] The
notice of assessment refers to the requirement to pay of January
6, 1994, and to a payment made to Mr. Doyon, for him or on his
behalf, the amount of which was equal to the amount assessed. The
payment in question was made in fact by the appellant to CIBC
Visa through a cheque signed by Mr. Doyon. The amount was
credited to Mr. Doyon, the cardholder.
[11] In his
testimony, Mr. Doyon stated that the CIBC Visa card was used to
pay the appellant's expenses and not his personal expenses.
However, he did not provide any explanation of what type of
expenses had been put on the account and paid through the cheque
for $1,991.03. Mr. Doyon also said that he paid his personal
expenses with cash or a personal credit card, if he had one at
the time, which he could not remember.
[12] I
consider this evidence insufficient to vacate this
assessment.
[13] While the
Reply to the Notice of Appeal and the Amended Reply to the Notice
of Appeal indicate that the assessment was made under
subsection 224(4), they make no reference to subsection
224(4.1). Although this point was not raised by counsel for the
appellant in relation to this assessment, I believe that it
should be discussed now, if only to clarify the situation
immediately. Since the payment in question was not made directly
to the tax debtor but rather was made by the appellant on his
behalf, it is covered by subsection 224(1.1) of the
Act,[3] and
the appellant's failure to comply with the requirement
means that it is liable to pay the amount in question itself
under subsection 224(4.1) of the Act, not subsection
224(4).
[14] The
notice of assessment also refers only to subsection 224(4)
of the Act, and not to subsection 224(4.1). However,
the liability to pay $1,991.03 is clearly indicated:
[TRANSLATION]
[F]or failure to comply with a requirement to pay dated
January 6, 1994, concerning Gérald Doyon ... and for
paying $1,991.03 to him, for him or on his behalf.
(emphasis added)
[15] I do not
think that the mere failure to mention a provision of the
Act in a notice of assessment makes an otherwise valid
assessment invalid, especially where the notice clearly states
the nature of the tax liability and there is no possibility of
confusion. The purpose of subsections 224(4) and (4.1) is to
penalize a failure to comply with a requirement. Although the
amounts in question are different in nature, the requirement
mentions each and every one of them, whether they are covered by
subsection 224(1), (1.1) or (3).
[16] On this
point, reference can also be made to subsections 152(3) and (8)
and section 166 of the Act. In Belle-Isle v.
M.N.R., 63 DTC 347 (T.A.B.), Mr. Boisvert, Q.C., of the
Tax Appeal Board commented on previous equivalent provisions as
follows at page 349:
Where the above texts are concerned, it matters little under what
section of the Act an assessment is made. What does matter is
whether tax is due.
[17] This
comment has been repeated, inter alia, by the Federal
Court of Appeal in Riendeau v. The Queen, 91 DTC 5416, at
page 5417.[4]
[18]
Accordingly, this assessment is confirmed and the appeal is
dismissed.
II. Assessment for $3,200.00 - Notice #29833, May 30,
1994
[19] This
assessment under subsection 224(4) of the Act, which
relates to a $3,200.00 payment made to Mr. Doyon by cheque on
April 1, 1994, is for failure to comply with the requirement of
January 6, 1994.
[20] Since no
evidence was adduced by the appellant about this assessment, the
assessment is confirmed and the appeal is dismissed.
III. Assessment for $1,757.16 - Notice #29834, May 30,
1994
[21] This
assessment relates to a payment made by debiting the
appellant's bank account at the Hongkong Bank of Canada to
pay legal fees for legal opinions requested by the bank in
connection with requirements to pay issued and account seizures
carried out by the Minister. The payment authorized by Mr. Doyon
is dated April 11, 1994, and the assessment is for failure
to comply with the requirement of January 6, 1994.
[22] Mr. Doyon
testified that the payment related to the garnishment of a bank
account under the name of Immeuble Lacombe, 20 percent of
the shares of which were owned by the appellant and not him.
[23] Counsel
for the appellant argued that the appellant made this payment to
cover legal fees for which it, and not Mr. Doyon, was
responsible, and he referred to the invoice adduced in evidence
by counsel for the respondent.[5] According to that invoice, $355.76 was owed for
an opinion concerning Immeuble Lacombe's new account and
there was a previous balance owing of $1,401.40. Moreover, the
bank debit memo[6]
is marked [TRANSLATION] "Legal Fees (Legal Opinions Re:
Requirements to Pay and Account Garnishment)".
[24] The
assessment was made for failure to comply with the requirement to
pay and for having paid $1,757.16 to Mr. Doyon, for him or on his
behalf.
[25] Failing
any additional explanation by Mr. Doyon or any documents from the
appellant concerning the other opinions requested in connection
with the previous balance of $1,401.40, I consider the evidence
insufficient to reduce the assessment by more than $355.76. This
assessment is therefore reduced from $1,757.16 to $1,401.40.
[26] The
comments made above about the sufficiency of the notice of
assessment are also applicable here.
IV. Assessment for $14,600.00 - Notice #29838, July 21,
1994
[27] This
assessment relates to the following four payments made to
Mr. Doyon by the appellant by cheque:
$800.00
-
December 1, 1993
$1,500.00
-
December 1, 1993
$5,300.00
-
November 22, 1993
$7,000.00
-
November 22, 1993
[28] The
assessment is for failure to comply with the requirement to pay
of October 29, 1993.
[29] Mr. Doyon
testified that the appellant had paid him all of these amounts as
salary and not as an advance or loan, which meant that he did not
have anything to repay in this regard. Counsel for the appellant,
referring to this Court's decision in Meredith v. The
Queen, 94 DTC 1271, and to the Exchequer Court's
decision in Associated Investors of Canada Ltd. v. M.N.R.,
67 DTC 5096, argued that a payment of salary must be
distinguished from an advance or loan, since it is not covered by
the requirement to pay provided for in subsection 224(1.1)
and therefore cannot be the subject of an assessment under
subsection 224(4.1).
[30] I admit
that I have some difficulty understanding this argument, since
the notice of assessment states on its face that the assessment
was made under subsection 224(4) of the Act, not
subsection 224(4.1). To start with, the payment of a salary is
clearly covered by subsection 224(1) of the Act.
Subsection 224(3) also applies to any amount paid
periodically and subsequently as remuneration. The penalty for
failure to comply with these two provisions is an assessment
under subsection 224(4) of the Act. The assessment
under this subsection is therefore valid.
[31] Counsel
for the appellant argued that if the assessment is otherwise
found valid, it should be reduced to take account of the rules in
the Quebec Code of Civil Procedure on the portion of
salary that is normally exempt from garnishment.[7]
[32] While
subsection 225(5) provides that provincial rules on exemptions
from seizure may apply where goods and chattels are seized under
section 225, such a rule does not exist and has not been
recognized in the case of a requirement to pay under section 224
of the Act.[8]
[33] The
assessment is therefore confirmed and the appeal is
dismissed.
V. Assessment for $31,000.00 - Notice #29839, July 21,
1994
[34] This
assessment relates to a $31,000.00 payment made by the appellant
directly to Mr. Doyon through a cheque dated December 6, 1993.
The assessment is for failure to comply with the requirement to
pay of October 29, 1993.
[35] Mr. Doyon
testified that this was also a payment of salary, specifically
the salary the appellant had agreed to pay him for six months
when he had to live in Florida to receive medical treatment but
continued to handle the appellant's business from
there.
[36] Since
counsel for the appellant made the same arguments in respect of
this assessment as in respect of the assessment discussed under
point IV above, the assessment is confirmed and the appeal is
dismissed for the same reasons.
[37] In
short:
-
the appeal from the assessment for $1,991.03 made under the
Income Tax Act, notice of which is numbered 29832 and
dated May 30, 1994, is dismissed;
-
the appeal from the assessment for $3,200.00 made under the
Income Tax Act, notice of which is numbered 29833 and
dated May 30, 1994, is dismissed;
-
the appeal from the assessment for $1,757.16 made under the
Income Tax Act, notice of which is numbered 29834 and
dated May 30, 1994, is allowed and the assessment reduced to
$1,401.40;
-
the appeal from the assessment for $14,600.00 made under the
Income Tax Act, notice of which is numbered 29838 and
dated July 21, 1994, is dismissed; and
-
the appeal from the assessment for $31,000.00 made under the
Income Tax Act, notice of which is numbered 29839 and
dated July 21, 1994, is dismissed.
[38] The whole
with costs being awarded to the respondent.
Signed at Ottawa, Canada,
this 10th day of October 1997.
"P. R. Dussault"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 5th day of March
1998.
Benoît Charron, Revisor
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