Citation: 2013 TCC 90
Date: 20130410
Docket: 2012-2477(IT)I
BETWEEN:
NACOM INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDED REASONS FOR JUDGMENT
Bocock J.
I. Brief
Issue
[1]
This matter concerns a taxpayer’s
assertion that it hand delivered two corporate tax returns to the Canada
Revenue Agency (“CRA”). The CRA has no record of the taxpayer doing so until a
much later date. At stake, is the Appellant’s ability to receive the refundable
dividend tax on hand for two tax years.
[2]
The law in this matter is not in
dispute. Section 129(1) of the Income Tax Act (the Act) provides
as follows:
129.
(1) Where a return of a corporation’s income under this Part for a taxation
year is made within 3 years after the end of the year, the Minister
(a) may, […]
refund without application an amount […] equal to […]
(i) 1/3 of all
taxable dividends paid by the corporation on shares of its capital stock […]
(ii) its refundable
dividend tax on hand at the end of the year; […]
[3]
As well, only one factual matter is
in dispute, but it is the critical one. The Minister asserts the Appellant’s corporate
tax returns for taxation year 2007 (ending January 31, 2007) (the “2007
Return”) and taxation year 2008 (ending January 31, 2008) (the “2008 Return”)
were filed on March 29, 2011 (“the Minister’s Filing Date”). The Appellant
asserts both the 2007 Return and the 2008 Return (the “Returns”) were delivered
to the CRA on or about November 24, 2009 (“the Appellant’s Filing Date”).
[4]
Simply put, if the Minister’s
Filing Date prevails, no dividend tax refund is due to the Appellant. Conversely,
both parties agree that if the Appellant’s Filing Date is correct, the dividend
refund is owing to the Appellant.
[5]
The parties and the Court agree
that any authorities simply reinforce the legal rule which provides that in the
absence of a finding that the Returns were filed on or before January 31, 2010
for the 2007 Return and January 31, 2011 for the 2008 Return then no dividend
Refund is payable (collectively the “Statutory Deadlines”).
II. Testimony at the
Hearing
[6]
There were four witnesses at
trial. The Appellant’s accountant, Mr. Ted Lemon and the Appellant’s president
and officer, Mr. Nathan Jacob, who is also acting as Agent for the Appellant at
the Hearing, both testified for the Appellant. The Respondent called two
employees of the CRA, a Ms. Schmall, a non-filer unit officer and a Ms. Rehal,
a project coordinator responsible for mail operations at the Winnipeg Tax
Centre and related offices.
[7]
The relevant testimony may be
summarized for each as follows:
a) The
Appellant’s Accountant
[8]
Mr. Lemon, the Appellant
Accountant provided the following uncontroverted testimony related to the issue
of the time of filing by identifying the 2007 Return and 2008 Return, duplicate
copies of which bore the printed date of November 15, 2009 and November 17,
2009, respectively. Although he could not be certain of the date Mr. Jacob
received the returns from him, he suggested that this occurred sometime shortly
after their preparation. The issue of whether duplicate copies could be
generated by the computer software bearing a specific date at any time was
raised on cross-examination, but conclusively answered. Mr. Lemon also
identified the personal returns, of the shareholder receiving the dividend, the
T5 reflecting same and duplicate cheque dated January 28, 2007 in the amount of
the 2007 dividend. Much of this testimony was not in dispute. Mr. Lemon
provided anecdotal summary evidence of other lost T-1 personal returns, but in
the absence of direct objective evidence, this was not given weight since it
had no bearing on these T-2 corporate returns.
[9]
The Appellant’s officer and agent,
Mr. Jacob testified that he went to Mr. Lemon’s office sometime before November
24, 2009, reviewed the returns when he was in Winnipeg to visit his mother and hand
delivered the two returns to the Broadway Avenue offices of CRA on or about the
second business day of the week, which he reckons deductively was November 24,
2009. He stamped a CRA provided index card with the external date timer at the CRA,
but cannot find the date stamped index card presently. He assumed the 2007 and
2008 Returns were received by CRA shortly thereafter. He could not recall if he
put the 2007 and 2008 Returns in one or separate envelopes. He did nothing
until he discovered in February of 2011 that CRA had not received the Returns.
He delivered duplicate copies of the encoded Returns in late March, 2011. Prior
to allegedly delivering the Returns in November 2009, Mr. Jacob was in communication
with the CRA’s non-filer department because both 2007 and 2008 Returns had not
been filed on time. Such communications and requests for extensions ceased in
April 2009 until the reinitiated contact with CRA in early 2011 regarding a GST
dispute.
[10]
On cross-examination, Mr. Jacob
admitted that although he was expecting a refund, in relation to the Returns he
spoke to no-one at CRA regarding the 2007 and 2008 Returns during the period from
the Appellant Filing Date to February of 2011. He explained that, because he
was not actually expecting a cheque, any refund would be offset against
subsequent years’ liabilities or assessments. He also acknowledged that he had
not produced as evidence duplicate copies of subsequent years T-2 returns which
he claims to have subsequently stamped.
[11]
Mr. Jacob and also Mr. Lemon drew
attention to the time delay between receipt by CRA of any tax return and
acknowledgment in the CRA system that same had been received. At most, the
evidence revealed a period of over 30 days and not more than 45. All agreed
this was not material to the issue before the Court.
b) Ms.
Schmall, the Non-Filer Unit Officer
[12]
Ms. Schmall confirmed the hiatus
of contact with CRA and Mr. Jacob between April of 2009 until February of 2011.
This was supported by CRA diary notes taken by a CRA employee tasked with
receiving non-filer queries. As to a non-reminder by CRA of the non-filing
of the 2007 and 2008 Returns for over 25 months, Ms. Schmall simply indicated
that demands to file and pay are issued to taxpayers once, and if, CRA desires
to do so.
[13]
Ms. Rehal, who was responsible for
incoming mail and delivered correspondence for the Winnipeg Taxation Centre and
related offices, outlined in great detail the step by step process CRA takes in
receiving dropped mail at the Broadway facility, the pre-sort, the bagging,
carting, preliminary dating and shipping of such dropped mail to the Winnipeg
Tax Centre where a similar, but more refined process is undertaken, where the
date stamp from Broadway is carried over, the bar coded return is identified
and scanned and filed.
[14]
She testified that the likelihood
of permanent loss of a return was not likely at all because the mechanisms dealing
with mail were so regimented.
[15]
On cross-examination, she admitted
the Winnipeg Tax Centre handles 1.7 million pieces of mail a year with less
than a 1% temporary misplacement of mail. To her knowledge, it was
very unlikely that any mail would be permanently lost.
III. Submissions
[16]
Respondent’s counsel and Appellant’s
agent summarized the factual evidence for the Court. In summary the Respondent
identified the lack of direct evidence to prove the 2007 and 2008 Returns were
actually delivered to CRA. The stamped index card, subsequently stamped year’s
returns and stamped installment statements were not produced to establish
evidence or delivery or even a consistent code of conduct on the Appellant’s
part. As well, the Court should draw an adverse inference by the
absence of such evidence. The period of non-communication by the Appellant,
absence of opportunities for misplacement by CRA and the even more remote probability
of losing two separate returns all suggest the returns simply were not
delivered prior to the Statutory Deadlines.
[17]
The Appellant submitted that all
other steps to have the dividend reflected, returns prepared in 2009, relevant personal
returns prepared and filed were otherwise completed and documented. The volume
of mail and misplacement rate, the non-contact by CRA and the business as usual
undertakings on all other matters by the Appellant, at least on balance,
provide a reasonable basis for finding that the Appellant taxpayer delivered
the Returns in November of 2009.
IV. Analysis
[18]
The Court must determine on a
balance of probabilities whether the 2007 Return and 2008 Return were filed before
the Statutory Deadlines, by determining whether the Returns were delivered to
the CRA office on the Appellant’s Filing Date, as claimed by Mr. Jacob, or
on the Minister’s Filing Date, as reflected by CRA.
[19]
What the Court can believe with
certainty is that CRA did not knowingly have within its possession a copy of
the Returns until the March 29, 2011 date. The Court also can say with
certainty, based upon testimony, that the CRA does its utmost, to identify,
sort and act upon every piece of mail it receives. Beyond that, the CRA’s cannot
provide evidence as to what happened to the Returns prior to the date it
records as having received them. Accordingly, the testimony of Mr. Jacob and
his account must be analyzed.
[20]
The Court can reliably accept and
believe that the Returns were prepared in November of 2009 as corroborated by
both Mr. Lemon and Mr. Jacob. It can also say Mr. Jacob received them from Mr.
Lemon at that time.
[21]
As to whether they were delivered
to CRA, Mr. Jacob submits, as evidence of the delivery, that:
1.
he delivered them to CRA on or
around November 24, 2009 and date stamped an index card with that date;
2.
he heard nothing further from CRA
after the Demand to File and his initiated conversations with CRA in April
2009;
3.
he did nothing further after
November 2009 because he had filed the returns in that month;
4.
his attention thus turned towards
other tax matters such as GST in early 2011 and later his 2010 and 2011
Corporate Tax Returns; and
5.
he subsequently stamped the
duplicate 2007 and 2008 tax returns when again filed on the Minister’s Filing
Date.
[22]
With respect to each of these
assertions it is noted that:
1.
although Mr. Jacob said he
obtained same, the index card bearing the date stamp of the Appellant’s Filing
Date was not adduced into evidence before the Court;
2.
CRA’s non-response is a non
sequitur because Mr. Jacob did not receive a Notice of (Re)Assessment or
Revised Remittance Statement and himself did nothing;
3.
by comparison, Mr. Jacob’s
inactivity cannot plausibly be explained through the absence of a prompt from
CRA. The Appellant was not a model tax filer as witnessed by Mr. Jacob’
familiarity with the non-filer unit and his repeated requests for extensions of
the 2007 and 2008 prior to June of 2009 speak for themselves;
4.
as to his mind turning to other
matters, again Mr. Jacob appears to have been reactive to prompts from CRA. At
law, CRA has no legal requirement to repeatedly or continually notify a
non-filer of its failure. Mr. Jacob had been originally notified of his
non-filed position and cannot claim CRA is estopped on that basis from claiming
the Returns were not filed; and
5.
although he said he stamped the
duplicates, Mr. Jacob did not produce for the Court the filer stamped duplicate
copies of the 2007 Returns and 2008 Returns when filed with the received by CRA
on the Minister’s Filing Date.
[23]
Had some or perhaps any of the
forgoing assertions been supported by some evidence, the Court might be able to
say, on balance, that the 2007 Return and the 2008 Return were delivered to CRA
on the Appellant’s Filing Date and then improbably and irretrievably misplaced
to this day. However, in the absence of some evidence in the form of a date
timed receipt, subsequent complaint behaviour, continued and consistent contact
with CRA or subsequent and habitual stamping of duplicate returns, the Court
cannot find in the Appellant’s favour. In short, for the Court to accept the
improbable occurrence of CRA permanently losing two tax returns, the Appellant
must have offered some evidence, any evidence, that he was present at the CRA
on the Appellant Filing Date, reacted at some subsequent time to the
non-acknowledgment by CRA of the receipt of the Returns or otherwise
habitually obtained date stamps of other filed returns. Absent any evidence of
those probable actions, the improbable (the permanent misplacement of two
corporate tax returns by CRA) cannot, on balance, be found to have occurred and
the Minister’s Filing Date is accepted.
[24]
Accordingly, the Statutory
Deadlines for filing the Returns were not met and the appeal is dismissed.
These Amended Reasons for Judgment are issued in
substitution of the Reasons for Judgment dated March 28, 2013 in order to
correct the typographical errors underscored in heading II b) and paragraphs
12, 15 and 16 hereof.
Signed at Ottawa, Canada, this 10th day of April 2013.
“R.S. Bocock”
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