Harvey Uffelman v. Minister of National Revenue, [1985] 2 CTC 2323, 85 DTC 621

Taylor, TCJ:—This is an appeal heard in Calgary, Alberta, on August 21, 1985, against an income tax assessment, for the year 1982 in which the Minister of National Revenue imposed a penalty for late filing of $2,887.68 and added an amount of interest of $2,294.33. The Minister relied on sections 2, 3, 161(1) and 162(1) of the Income Tax Act, RSC 1952, c 148 as amended by SC 1970-71-72, c 63, s 1. At the commencement of the hearing, counsel for the appellant withdrew the part of the appeal dealing with the interest, but pursued that related to the penalty imposed.

Mr Uffelman testified that he had followed the same practice for the year 1982, as he had followed for 1981 — taken his farm documents and papers to Mr Forrest, who prepared his tax returns. He knew he had not signed it before April 30, 1983, but he also remembered that he had been very busy that particular time working in the fields. He recalled that Mr Forrest had told him at a later date that it had been mailed on time by Mr Forrest, and that should be satisfactory to Revenue Canada. This was the first time Mr Uffelman remembered not having signed and mailed his own return.

Mr Forrest, accountant for Mr Uffelman during the year in issue stated for the Court that Mr Uffelman had indeed brought into his office some time during the first two weeks of April 1983, his farm income papers, but that he (Mr Forrest) needed to wait for some additional information which was brought in by Mr Uffelman’s daughter on Friday, April 29, 1983. He had completed the return — typed it himself in fact and tried unsuccessfully to contact Mr Uffelman on Saturday, April 30, 1983. That year he had made out three or four hundred tax returns and Mr Uffelman's was the last one he was obligated to complete. On Monday, May 2,1983,* [1] since he was leaving for some holidays, Mr Forrest attempted again unsuccessfully to contact Mr Uffelman and finally mailed the return himself at the local post office during the noon hour. He remembered it was the noon hour because the post office was closed — as was the custom of the local postmaster — and he had to place it in the outside mail drop slot. He thought no more of it until he was informed of the penalty and interest charge.

The case which the appellant is required to meet is detailed in the reply to notice of appeal as follows:

In assessing the Appellant as he did, the Respondent relied upon the following assumptions of fact, inter alia, and as to the matter here in issue:

(a) the envelope in which the Appellant’s return of income was mailed, was postmarked May 26, 1983 and received in the mailroom of the Winnipeg Taxation Centre of Revenue Canada on May 30th, 1983.

Counsel for the respondent did question both Mr. Uffelman and Mr. Forrest regarding these above dates, and based his line of questioning apparently on a photostatic copy of that which was alleged to be the envelope received by Revenue Canada on May 30, 1983. It was not presented as an exhibit nor was even a photostat thereof, but the Court was asked to take judicial notice that a copy of the same photostat was included with the material provided by the respondent to the Court in advance of the hearing. No affidavit was provided to the Court by the Minister with respect to the envelope. The Court noted for the parties, that if indeed the appellant succeeded in casting serious doubt on the prime assumption of fact made by the Minister (referenced, supra, from the reply to notice of appeal) a very real question might develop as to whether the onus of proof should shift to the Minister — particularly in the light of the fact that the point at issue was penalty not tax. While treated from a somewhat different perspective (burden of carrying conduct of the trial) the comments to be found in The Queen v Taylor, [1984] CTC 436 at 441, 84 DTC 6459 at 6463 are of interest when looking at the question of a penalty:

On the procedural question, it was submitted by the Minister that tax appeals are civil proceedings, there being no provisions for examination of discovery, and since the facts are within the almost exclusive knowledge of the taxpayer, he should be the first to adduce evidence. It was argued by the taxpayer that because of the onus created by section 163, and the imposition of penalties, this was tantamount to quasi-criminal proceedings and the Minister should begin. I disagree and I choose to follow the reasoning of Lord Widgery CJ who dealt with taxation and fraud in the case of Regina v. Special Commissioners of Income Tax (ex parte Martin) (1971), 48 TC 1 (QB Div) aff 48 TC 9 (CA). At 7 he states:

“The other alternative ground upon which Mr Marcus Jones says the Commissioners were wrong in this case is that he says that these proceedings are quasi-criminal in nature. From that he draws the conclusion, and asks us to draw the conclusion, that the election rule shuld not apply to them. If the phrase ‘quasi-criminal proceedings’ is given a very wide meaning it may be that these proceedings could be embraced within it. It is a flexible expression not precisely defined, and it may not be wholly inappropriate if one gave it a sufficiently wide meaning to use it in that context.

But when one gets down to the facts of the matter it is quite clear that penalties which can be exacted on proof of fraud or wilful default do not spring from any criminal offence. The Acts do not provide that the taxpayer guilty of fraud or wilful default shall commit an offence and shall be punished as such. It is merely provided that financial penalties may be exacted, and that these penalties may be recovered in civil proceedings in the High Court. There is not so far, in my judgment, any close relationship between such proceedings and criminal proceedings. Of course any proceedings involving a penalty are in some measure penal, but it seems me that these proceedings are no nearer to the criminal law and no better qualified for the description of "quasicriminal proceedings' than would be an action to recover a penalty under a contract, or an action to recover exemplary damages in a suit for defamation

When there is an onus on each party, the taxpayer shall begin first . ..”

Put in the boldest possible relief, the Court is asked to accept by the appellant and his accountant, that the envelope allegedly enclosing the 1982 income tax return was placed in the Beiseker Post Office at noon on May 2, 1983, and remained there — apparently lost or misplaced by postal authorities — until May 26, 1983 on which date it was processed and forwarded to the Winnipeg office of Revenue Canada.

The Court does not overlook the fact that the Minister did not see fit to present as an exhibit the “phantom” envelope, but that must be cast against the fact that the appellant did not mount any challenge to the existence of such an envelope, and by deduction therefore such a basis for the minister's assumption regarding critical dates. As I see it, the appellant has not challenged the basis of the Minister’s assumption — that the envelope containing the return was postmarked Beiseker on May 26, 1983, and received by Revenue Canada on May 30, 1983. The essence of the attack mounted by the appellant, is that — accepting that situation and those dates to be factual — the responsibility for that does not rest with the appellant, nor indeed with his accountant. The appellant’s 1982 income tax return (again not specifically filed with the Court as an exhibit but included by the Minister in the documentation provided) is a fairly voluminous document containing several schedules and financial statements. One salient feature about it however, is that the tax return is neither dated, nor signed, although these aspects were not stressed by counsel for the respondent. Again the appellant did not challenge the form or content of the income tax return provided to the Court. As I see it, the Court is entitled to question, whether the return was therefore filed “. .. in prescribed form and containing prescribed information . . .'' (subsection 150(1)) — in view of its deficiencies. The appellant did not date or sign the tax return, nor mail it himself. He did not see the return when it was completed according to his testimony. With the April 30 deadline approaching, there is no evidence of effort on his part to be available (granted he was occupied on his farm) in order to review, date, and sign the return, and include the required cheque or payment — calculated to be $53,695. Except for a small amount of tax deduction ($280) from a minor source of Mr Uffelman’s income there had been no instalments of tax paid by him. That set of circumstances does not fulfil the taxpayer's own obligations under the Act, and accordingly on a prima facie basis he has not complied with the Act himself, irrespective of the proposition put forward that the “filing” in addition to the “preparation” was done in time by Mr Forrest. Looking at that proposition, there was no clear evi- dence presented that such an obligation (to file the return) was assigned to Mr Forrest. The taxpayer's testimony only implied that it was. Mr Forrest, in my view, might not have attempted to contact Mr Uffelman if he clearly had such authority. As I read the relevant jurisprudence, it takes more than just an act of substituting oneself for the taxpayer, in order to become that taxpayer for purposes of the Act — see Columbia Enterprises Ltd, [1983] CTC 204; 83 DTC 5247 a decision of the Federal Court of Appeal. I interpret the testimony of Mr Forrest to mean that almost in desperation — virtually at the last minute — unable to contact Mr Uffelman, he mailed the return himself on May 2, 1983 at noon. As an experienced accountant (some 400 returns that year) he must have been fully aware of the risk taken by mailing a return with at least a possibility of a substantial amount of penalty without registering it. If indeed Mr Forrest were the responsible agent for Mr Uffelman in mailing the return (a duty which neither Mr Forrest nor Mr Uffelman has shown to this Court was specifically assigned to him) — then such an action — (not registering the tax return) was indeed a serious risk at that point in time taken by Mr Forrest.

The evidence in this matter has not shown that Mr Uffelman fulfilled his own obligations as a taxpayer in filing a tax return in prescribed form, as required under the Act; or that Mr Uffelman designated Mr Forrest as his agent for the purpose of filing the return. In addition, the appellant has not succeeded in showing on the balance of probabilities, that the Court should accept the testimony of Mr Forrest that he did mail the return on May 2, 1983 (in whatever capacity), as contrasted with the conclusion regarding its mailing which was reached by the Minister as a result of the receipt of the return by Revenue Canada on May 30, 1983.

The appeal is dismissed.

Appeal dismissed.