Maureen Templin v. Her Majesty the Queen (Informal Procedure), [1994] 1 CTC 2741

Kempo, J.T.C.C. (orally):— This informal procedure appeal concerns Ms. Templin's 1988 taxation year.

The matter proceeded to hearing today on agreed facts as reflected in the pleadings except for those alleged in paragraph 4(b) of the respondent's reply to notice of appeal.

The notice of appeal, paragraphs headed "Statement of Facts”, "Reason for Appeal”, “Relief Sought" and "Sections of the Act Relied On”, alleged the following:

Statement of facts

1. The appellant filed a T1 Personal Income Tax Return for the 1988 taxation year.

2. In making an original assessment of the appellant's 1988 T1 Return the respondent levied federal and provincial tax and interest. The respondent also levied a penalty pursuant to 162(2) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act").

3. The appellant filed a notice of objection to the original assessment, specifically with respect to the penalty levied pursuant to subsection 162(2) of the Income Tax Act.

4. In responding to the notice of objection the respondent vacated the penalty levied pursuant to subsection 162(2). Additionally, in responding to the notice of objection the respondent levied a penalty pursuant to subsection 162(1) of the Income Tax Act.

Reason for appeal

The appellant appeals the imposition of a penalty pursuant to subsection 162(1) of the Income Tax Act.

In making an original notice of assessment the Minister of National Revenue did not levy a penalty pursuant to subsection 162(1) of the Income Tax Act and so this penalty was not included in the notice of objection filed by the appellant.

Subsection 165(3) of the Income Tax Act stipulates that in responding to a notice of objection the Minister of National Revenue may reconsider and vacate, confirm or vary the assessment or reassess.

The appellant therefore submits that in responding to the notice of objection the Minister is precluded from levying a penalty pursuant to subsection 162(1) of the Income Tax Act as this would constitute a fresh assessment and not reconsideration of the original assessment.

Relief sought

1. The appellant requests the deletion of the penalty levied pursuant to subsection 162(1) of the Income Tax Act.

2. The appellant seeks the costs of this action.

Sections of the Act relied on

1. The appellant relies on subsection 165(3) and Regulation 900(4) of the Income Tax Act.

The respondent's reply to notice of appeal, paragraphs 1-7 inclusive read:

1. He admits the facts stated in paragraphs 1, 2 and 3 under the heading “Statement of Facts” in the notice of appeal.

2. He denies all other allegations of fact stated in the notice of appeal.

3. In reassessing the appellant for the 1988 taxation year, the Minister of National Revenue (the "Minister") assessed a late filing penalty in the amount of $60.55.

4. In so reassessing the appellant, the Minister made the following assumptions of fact:

(a) the appellant’s return of income for the 1988 taxation year (the "return") was required to be filed with the Minister on or before April 30, 1989;

(b) on October 5, 1989 the Minister served on the appellant a demand for the return under subsection 150(2) of the Act;

(c) the return was not filed with the Minister until July 27, 1992;

(d) the amount of total tax and Canada Pension Plan contribution for the 1988 taxation year that was unpaid when the return was required to be filed was $426.20 and the total credits for federal sales tax and instalments were $175 as detailed in the true copy of the notice of assessment attached hereto and marked as Appendix "1".

5. The issue is whether the late fi ing penalty was properly assessed in accordance with section 162 of the Income Tax Act (the "Act").

6. He relies on sections 3, 150 and 162 and 165 of the Act as amended for the 1988 taxation year.

7. He submits that the return was not filed with the Minister as and when required by subsection 150(1) of the Act, that the appellant was liable to pay a late filing penalty for the 1988 taxation year pursuant to subsection 162(1) of the Act, and that the appellant was properly reassessed at the objection stage in accordance with the provisions of subsection 165(3) of the Act.

As stated earlier paragraph 4(b) was not admitted and both parties agreed it was not material to the issue.

In my opinion the Minister of National Revenue was not precluded by the operation of subsection 163(3) of the Income Tax Act and Regulation 900(4) from reassessing Ms. Templin under subsection 162(1) of the Act as was done. No question arises here with respect to time limitations as the Minister was well within the statutory three-year period and no quarrel was taken with the fact that Ms. Templin's situation fully supported the applicability of subsection 162(1) of the Act. Accordingly her liability for the penalty, as assessed, arose out of the Income Tax Act itself; it did not arise simply because the Minister, acting pursuant to his administrative duties, had issued and sent a piece of paper notifying her of that liability.

Stone, J.A., speaking for the Court in the case of Riendeau v. M.N.R., [1991] 2 C.T.C. 64, 91 D.T.C. 5416 (F.C.A.), confirmed at page 64 (D.T.C. 5417) a longstanding principle of fiscal law in this way:

As the cases and statutory provisions which were cited by [the trial judge] well show, liability for tax is created by the Income Tax Act, not by a notice of assessment. A taxpayer's liability to pay tax is just the same whether a notice of assessment is mistaken or is never sent at all.

In our view, the Minister’s mental process in making an assessment cannot affect a taxpayer's liability to pay the tax imposed by the Act itself. He may correct a mistake.

Accordingly, for the reasons given, the appeal is dismissed.

Appeal dismissed.