Raymond Erwin v. Minister of National Revenue, [1983] CTC 2162, 83 DTC 148

Guy Tremblay:—This application for extension of time was heard on November 29, 1982, at the City of Vancouver, British Columbia.

1. The Point at Issue

The point at issue is whether the taxpayer is correct in contending that his application for an order extending the time within which his notice of objection, in respect of the 1979 taxation year, must be allowed.

Counsel for the Minister contends that the taxpayer had no reasonable explanation for not filing the said notice of objection within the time limit.

2. The Burden of Proof

The burden of proof is on the taxpayer who must give a reasonable explanation for not filing his notice of objection within the time limit, and to prove that the application itself was brought as soon as circumstances permitted it to be brought. Moreover, the taxpayer must prove that there are reasonable grounds for objecting to the notice of reassessment issued on July 6, 1981, pursuant to paragraph 167(5)(c) of the Income Tax Act, SC 1970-71-72, c 63, as amended.

3. The Facts

3.01 According to the application for extension of time, the taxpayer would have received the notice of reassessment for his 1979 taxation year, “ . after the time allowed to properly file a notice of objection”. However, the evidence adduced is to the effect that the taxpayer did receive the said notice of reassessment at the beginning of July 1981. The taxpayer did not dispute this fact.

3.02 The facts given in evidence by the taxpayer are well described in a letter sent by him to Revenue Canada on February 22, 1982:

This letter is to take the form of a formal dispute regarding my 1979 Income Tax Return. As of January 5th, 1982 my place of employment Coronation Realty Limited received a 3rd party demand on my 1982 wages.

On that date I wrote a letter to the Surrey taxation department requesting all documents and letters pertaining to my 1979 tax return that had been under review for that year.

I received in the mail February 18th, 1982 a letter and photocopies pertaining to all material relevant to my 1979 tax return which had been under review.

To basically outline the situation:

(a) On March 13th, 1981 a letter was sent to an incorrect address, which finally reached my proper place of residence later that month. It informed me that my 1979 tax return was currently under review and requested verification of certain items, to be produced within 21 days.

The man I was to see was R Low section 167-23. I made contact with him and sometime in the beginning of April, I went in with the items requested and met with Mr R Low.

Mr R Low informed me that the items I supplied would be held until a later date then returned. The conversation ended.

(b) I received no further telephone conversation or written data until I picked up a registered letter in June 1981. I SIGNED for this letter and it contained receipts and vouchers which I had submitted, upon your request.

(c) In the photocopies that I have now received from Revenue Canada it shows that a registered letter had been mailed to me as of May 12th, 1981, it contained a Schedule of Proposed changes which requested a reply from me within 21 days. I DID NOT RECEIVE this letter in the mail, nor was I contacted at my home or place of business, in regard to any such proposal. I state again it was a registered letter so, if in fact I did not receive this letter, it should have been returned to you.

(d) The photocopies that have been sent to me also contain a re-assessment acknowledgement statement that I did not receive.

(e) What I did receive was a notice of reassessment on July 6th, 1981, which Stated “Your return has been adjusted in accordance with our letter of May 12th, 1981.” WHAT LETTER! The first time I have seen the supposed letter of May 12th, 1981, was when I requested all relevant photocopies and information regarding my 1979 Tax return review, which I requested after receiving the 3rd party demand, January 5th, 1982.

3.03 In fact, the said letter dated May 12, 1981, was never received by the taxpayer. This is confirmed by a letter to the Director, Regional Office of the Department of Justice in Vancouver, from the Appeals Division, Revenue Canada, dated August 12, 1982. Indeed, in this letter one can read:

This letter (May 12, 1981) was returned to the Vancouver District Office marked “Carded”. This means that the addressee was not present when an attempt was made to deliver the letter, and he was so advised by card. The taxpayer did not claim the letter, and it was then returned marked “Unclaimed”. Notations on the envelope show that when the letter was returned to the sender, R Low of Section 167-43, the taxpayer was phoned on June 2, 1982 at 420-3682 (home phone number), but there was no answer.

3.04 The taxpayer testified that upon receiving the notice of reassessment, he decided to wait for a letter from Mr Low.

3.05 In September 1981, the taxpayer received a T7DR REV 78 Form, dated September 1, 1981, requesting the payment of the unpaid balance in the amount of $3,508.40, with respect to the notice of reassessment issued on July 6, 1981.

At the end of September 1981, the taxpayer received a notice of reassessment for the 1981 taxation year.

3.06 In November 1981, the taxpayer called the Department of National Revenue to speak to Mr Low. He was told that Mr Low was no longer working for the Department.

3.07 On January 5, 1982, he received a third party demand on his 1982 wages, as explained in his letter of February 22, 1982 (see paragraph 3.02 above).

4. Law — Cases at Law — Analysis

4.01 Law

The main provisions of the Income Tax Act involved in the present case are subsections 167(1) and 167(5). They read as follows:

Sec 167. Application to Review Board for time extension.

(1) Where no objection to an assessment under section 165 or appeal to the Tax Review Board under section 169 has been made or instituted within the time limited by section 165 or 169, as the case may be, for doing so, an application may be made to the Tax Review Board for an order extending the time within which a notice of objection may be served or an appeal instituted and the Board may, if in its opinion the circumstances of the case are such that it would be just and equitable to do so, make an order extending the time for objecting or appealing and may impose such terms as it deems just.

(5) When order to be made. No order shall be made under subsection (1 ) or (4).

(a) unless the application to extend the time for objecting or appealing is made within one year after the expiration of the time otherwise limited by this Act for objecting to or appealing from the assessment in respect of which the application is made;

(b) if the Board or Court has previously made an order extending the time for objecting to or appealing from the assessment; and

(c) unless the Board or Court is satisfied that,

(i) but for the circumstances mentioned in subsection (1) or (4), as the case may be, an objection or appeal would have been made or taken within the time otherwise limited by this Act for so doing,

(ii) the application was brought as soon as circumstances permitted it to be brought, and

(iii) there are reasonable grounds for objecting to or appealing from the assessment.

4.02 Cases at Law

1. Louis Vachon v MNR, [1972] CTC 2211; 72 DTC 1182;

2. James Wayne Elliott v MNR, [1978] CTC 2919; 78 DTC 1643;

3. Skirt Togs Industries Ltd v MNR, [1982] CTC 2156; 82 DTC 1155.

4.03 Analysis

4.03.1 The fact that there are reasonable grounds for objecting to the notice of reassessment is not in dispute.

4.03.2 It is the Board’s opinion that in receiving the notice of reassessment, the taxpayer knew, or was supposed to know, that the reassessment was the Minister’s decision for the 1979 taxation year.

He had received, in June 1981, all of the receipts and vouchers which he had submitted to Mr Low (see paragraph 3.02, subparagraph (b) of the letter). On the notice of reassessment, it was stated: “Your return has been adjusted in accordance with our letter of May 12, 1981.” (paragraph 3.02, subparagraph (e) of the letter).

This information was to confirm that the reassessment was the Minister’s decision.

4.03.3 Despite the unpaid balance of $3,508.40 claimed by the Minister at the beginning of September 1981 (it was still within the 90 day time limit from July 6, 1981), the taxpayer did not take any significant action. In fact, it was only in January 1982, when he received a copy of the third party demand on his 1982 wages, that he realized that it was time to do something. Unfortunately for him, it was too late.

4.03.4 Honestly, the Board cannot arrive at the conclusion that the preponderance of evidence is to the effect that the taxpayer gave a reasonable explanation for not filing his notice of objection within the time limit. Moreover, the fact that the taxpayer is a real estate salesman, therefore an experienced businessman, reinforces the Board’s opinion. Indeed, certainly the taxpayer knew for a long time that it is by assessment that Revenue Canada establishes the debt of a taxpayer and that, therefore, it is up to the latter to make the following step, ie, file an objection if he does not want to be obliged to pay. If he had had a doubt, it would have been easy for him to get information. Incidentally, the method used to file an appeal is explained on the reverse side of the notice of reassessment.

5. Conclusion

The application of the taxpayer for an order extending the time within which his notice of objection may be served is dismissed in accordance with the above reasons for decision.

Application dismissed.