Docket: A-368-13
Citation: 2014 FCA 224
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CORAM:
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NADON J.A.
GAUTHIER J.A.
SCOTT J.A.
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BETWEEN:
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NORMAND VACHON
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Appellant
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and
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HER MAJESTY THE QUEEN
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Respondent
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REASONS FOR JUDGMENT OF
THE COURT
(Delivered from the bench at Montréal,
Quebec, on October 8, 2014.)
SCOTT J.A.
[1]
This is an appeal by Normand Vachon (the appellant)
from a decision of Justice Tardif (the judge) of the Tax Court of Canada
(the TCC), who, among other things, authorized the Minister to make an
assessment for the 2003 and 2004 taxation years, despite the expiration of the
limitation period referred to in subparagraph 152(4)(a)(i) of the Income
Tax Act, R.S.C. (1985), c. 1 (5th Supp.) (the Act), on the ground that
the taxpayer made a misrepresentation attributable to neglect.
[2]
From the appellant’s standpoint, the only issue
is whether the judge erred in considering that the reassessments made by the
Minister were related to a “misrepresentation that is
attributable to neglect, carelessness or wilful default” as stated in
subparagraph 152(4)(a)(i) of the Act.
[3]
The parties agree that the judge had to examine
the appellant’s behaviour at the time he filed his income tax returns to
determine whether he exercised due diligence.
[4]
In Aridi v. The Queen, 2013 TCC 74, 2013
DTC 1189, the TCC points out at paragraph 34 that “it
is not the accountant’s neglect that makes it possible to disregard the
limitation period under subparagraph 152(4)(a)(i) of the ITA. It is the
taxpayer’s neglect at the time of the misrepresentation that must be analyzed”.
[5]
In the case at bar, the judge found that the
appellant had indeed paid very significant amounts that should have been used
to pay all or part of his tax debt, but, instead, the accountant Mr. Simard
diverted the amounts in question to serve his own interests, thereby defrauding
the appellant (para. 27 of the decision).
[6]
The judge then analyzed the relationship between
the appellant and his accountant before concluding that the appellant failed to
exercise due diligence in his relations with Mr. Simard. In this regard, he
referred to, among other things, the fact that the appellant should have read
and followed up on the letters received from the respondent in 2007 and
subsequently.
[7]
The respondent acknowledges that the judge did
not indicate what misrepresentations were made in the income tax returns or
what the appellant knew or ought to have known when they were filed. The
respondent emphasizes, however, that the evidence on the record is such as to
enable the Court to perform this exercise and to draw conclusions on these
points.
[8]
Before this Court, the parties referred on several
occasions to a number of pieces of evidence in the record to support their
respective positions.
[9]
The relevant factual background is highly complex.
To assess the appellant’s behaviour at the time of filing of his income tax
returns would require an assessment of the evidence without the benefit of
hearing the witnesses and in the absence of important documents that are usually
part of this type of dispute (including the income tax returns of the appellant
and his company). It is therefore inappropriate in the present case for this
Court to substitute itself for the TCC in order to rule on this key issue of
the dispute.
[10]
For these reasons, we conclude that the appeal
should be allowed, with costs. The decision of the judge dated October 24,
2013, dismissing the appellant’s appeal from the assessments for the 2003 and
2004 taxation years will be set aside, and the matter will be referred back to
the Chief Justice of the TCC so that he can assign it for rehearing. The costs
at trial will depend on the outcome of the new hearing.
“A.F. Scott”
Translation
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