Date: 20130118
Docket: T-522-12
Citation: 2013
FC 47
Ottawa, Ontario,
January 18, 2013
PRESENT: The
Honourable Mr. Justice Rennie
BETWEEN:
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SIVANATHAN
SIVADHARSHAN
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Applicant
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and
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THE MINISTER OF
NATIONAL REVENUE
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Respondents
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REASONS FOR
JUDGMENT AND JUDGMENT
[1]
The
applicant seeks judicial review of a decision of a delegate of the Minister of
Finance (the Minister) denying his request to amend his 2004 and 2005 T1 income
tax returns.
[2]
Subsection
152(3.1) of the Income Tax Act, RSC 1985, c 1 (the Income Tax Act)
provides that an income tax return may be reassessed within three years of
Notice of Assessment. There is an exception to the three year limitation
period in subsection 152(4.2) of the Income Tax Act. This provision
grants the Minister the discretion to reduce or refund tax payable after three
years have passed. The Canada Revenue Agency’s (CRA) policy is to only issue a
reassessment after the three year limitation period if the Minister is
satisfied that there would have been a reassessment if the request had been
filed in time.
[3]
I
find that the Minister reasonably exercised his discretion to deny the
applicant’s request to reassess outside the prescribed period. Therefore, this
application is dismissed.
Facts
[4]
The
applicant filed his 2004 and 2005 tax returns on June 15, 2006, reporting
$41,725 and $77,217 in net business income respectively for those years. The
Notices of Assessment were issued on August 4, 2006.
[5]
The
applicant was contacted by the CRA Collections Department regarding outstanding
taxes in October of 2006. The CRA agent’s notes of that conversation indicate
that the applicant stated that he was not worried about legal action because
the CRA did not know the origin of his income.
[6]
On
July 14, 2010, some four years later, the applicant filed an adjustment form to
amend his 2004 and 2005 tax returns. The applicant explained that he
mistakenly reported his income as $81,500 instead of $8,150 for 2005 and $44,500
instead of $4,450 for 2004.
[7]
As
he was outside of the three year limitation period his request was forwarded to
the taxpayer relief division. In order to process his request the CRA
requested further information, including his business records and bank statements.
[8]
The
taxpayer replied by explaining that he had been self employed as a
street-vender selling flowers and that the transactions had been in cash. He
also explained that he did not have bank accounts because he had been a victim
of identity theft. He provided supporting police reports.
[9]
The
applicant explained that he did not keep some of his business records. He also
said that some receipts had been lost when he moved from Ottawa to Toronto. The applicant provided further details regarding the identity theft. He
explained that the fraudster had rented a mail box in his name and so he had
not received the CRA’s correspondence.
[10]
The
applicant did not provide any financial records for 2004 or 2005. He said that
the Ottawa police department had custody of his bank and credit card statements
and he authorized the CRA to obtain those records from his bank.
[11]
In
the first level decision dated February 23, 2011, the applicant’s request for a
reassessment was denied because the Minister was unable to determine the
correct taxes payable for those years.
[12]
The
applicant requested an administrative review of the first level decision. In
the reconsideration decision dated February 10, 2012, his request for
reassessments was denied. The applicant did not provide evidence to
substantiate his income in 2004 and 2005. Therefore, the Minister did not
have adequate information to determine the correct taxes payable.
Issue
[13]
The
issue for this judicial review is whether the Minister’s decision is reasonable:
Lanno v Canada (Canadian Revenue Agency), 2005 FCA 153.
Analysis
[14]
Under
Canada’s self-assessing tax system the taxpayer is responsible for ensuring
that his tax returns are filed correctly.
[15]
The
applicant claims that his 2004 and 2005 income tax returns incorrectly stated
his income. He explains that he could not have earned such a high income
because he was a full-time student and worked as a street-vendor
[16]
This
may be the case, but the difficulty for the applicant is that he was unable to
produce any documentation to establish that his business was that of a
flower-seller and the amount of income actually generated. The Minister is not
obligated to accept a taxpayer’s assertion regarding his income without any
supporting evidence.
[17]
Subsection
230(1) of the Income Tax Act requires every person carrying on business
to keep records so that the correct tax payable can be determined. The
applicant either did not keep or has lost these records.
[18]
The
applicant has asked that the Minister obtain records from his financial
institution but this, in my view, does not advance his case. The taxpayer
bears the burden of obtaining this evidence and providing it to the Minister.
If these records were available the applicant should have obtained them.
[19]
As
the applicant did not provide the Minister with any evidence to demonstrate his
financial situation in 2004 and 2005, I consider it reasonable for the Minister
to have denied his request.
[20]
Secondly,
it was reasonable for the Minister to be sceptical about the assertion that the
income reported was the result of an error. In 2004 the applicant described
his income arising from his work as a “technical consultant” and in 2005 as a
“flower-seller”. There was no evidence, nor any description, to support either,
nor was any reasonable explanation tendered for the rapid transition in
employment.
[21]
The
Minister will, as a matter of policy (Information Circular IC-07-1), exercise
his discretion to extend the normal period for assessing where the Minister is
satisfied that the reassessment would have been made had the request been made
on time, and that the reassessment is correct in law.
[22]
The
decision of the Minister is assessed against a standard of reasonableness which
tests the criteria of justification, intelligibility and transparency and
whether it falls within a range of acceptable outcomes defensible in respect of
the facts and law: Canada (Citizenship and Immigration) v Khosa, 2009
SCC 12, [2009] 1 S.C.R. 339, para 46.
[23]
Discretion
vested in the Minister to grant relief against the operation of certain
provisions of the Income Tax Act is exercised in a legal and factual
context. In this case, that context includes an absence of evidence upon which
the Minister could reasonably exercise his discretion in favour of the
applicant.
JUDGMENT
THIS
COURT’S JUDGMENT is that:
1.
The
title of proceedings herein is amended to name only The Minister of National
Revenue as respondent.
2.
The
application for judicial review is dismissed.
3.
Costs
to the respondent.
"Donald J.
Rennie"
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