Robert Newton v. Minister of National Revenue, [1981] CTC 2978

The Chairman [Translation]:—This is an application to serve a notice of objection beyond the prescribed time limit, under section 167 of the Income Tax Act.

The applicant stated the following:

1) On October 5, 1979, the Minister of National Revenue issued notices of reassessment for the 1974, 1975, 1976 and 1977 taxation years.

These assessments are numbered 72621404, 55188668, 54425658 and 55803611 respectively.

2) These assessments put the applicant’s income considerably higher than that initially declared.

3) When the Department carried out a review of the returns of income for the 1973, 1974, 1975, 1976 and 1977 taxation years, Mr Robert Newton arranged to be represented by Mr James Gauthier, his accountant, who had prepared the said returns over the years.

4) Since all his accounts and the preparation of the returns had been handled by his accountant, Mr Newton left the whole matter in the latter’s hands.

5) After analysing the situation and on the recommendation of his accountant, Mr Newton apparently agreed to declare additional income.

6) Mr Newton did not really understand the reason for this increase but agreed to it on the strength of his accountant’s comments.

7) He had agreed all the more readily to this voluntary declaration of additional income since he had received assurances that the total increase in income tax for the years in question would be $15,000 at most.

A period of 14 months and 23 days elapsed between the date the reassessments were issued and the date of the application for an extension of time, which was brought only a few days before the date on which the Board would have lost its authority to grant the requested extension under paragraph 167(5)(a) of the Income Tax Act.

This fact does not of itself necessarily constitute an insurmountable obstacle to the application of section 167 of the Act, but it is certainly an important factor to be considered before the application can be allowed.

An application for a time extension cannot be allowed unless all the conditions stipulated in section 167 of the Act are met. In addition to the conditions in subsection 167(3) concerning the procedure to be followed in making an application for an extension, and the obstacles preventing such applications from being made, as set out in paragraphs 167(5)(a) and (b) of the Act, which is not at issue in the present case, the remaining conditions must still be applied.

These conditions can be summarized as follows:

1. The applicant must set forth the reasons why it was not possible to serve the notice of objection within ninety days of the date of the notice of assessment (subsection 167(2) of the Act);

2. He must demonstrate that the notice of objection would have been served within the prescribed ninety-day period if circumstances had permitted (subparagraph 167(5)(c)(i) of the Act);

3. He must establish that the application was brought as soon as circumstances permitted it to be brought (subparagraph 167(5)(c)(ii) of the Act);

4. He must show that there are reasonable grounds for objecting to the assessment (subparagraph 167(5)(c)(iii) of the Act);

5. He must convince the Board that the circumstances of the case were such that it would be just and equitable for the Board to make an order allowing the application (subsection 167(1) of the Act).

It is clear that the applicant bears the burden of proof concerning the facts he submits to the Board in order to obtain the requested extension.

since the assessments of the applicant dated October 5, 1979, were made by the Minister on a net assets basis, which, by its very nature, is not the most accurate way of calculating income, counsel for the respondent agreed that there are reasonable grounds for objecting to the assessments and the applicant therefore fulfils the conditions of subparagraph 167(3) (c) (iii) of the Act.

The applicant himself received the notices of assessment; as he was not happy with the assessments he forwarded them to his accountant for analysis. The accountant, Mr James Gauthier, had prepared the applicant’s returns for the previous few years and had taken part in preparing the assessments calculated on a net assets basis. In the notices of assessment issued on October 5, 1979, the Minister of National Revenue claimed even more tax than had been estimated at the time of the inquiry. After analysing the assessments, Mr Gauthier said, in response to a question from the applicant, there was nothing for it, that the tax would have to be paid.

On the back of the notice of assessment it is clearly stated that a notice of objection must be served on the Minister of National Revenue within ninety days from the day of mailing of the notice of assessment (subsection 165(1) of the Act). The applicant’s plea of ignorance of this legal time limit is not acceptable to the Board; responsibility for complying with the conditions stipulated in the Income Tax Act lies fundamentally with the taxpayer.

The applicant did not serve the notices of objection within the prescribed time limit. In order to obtain a time extension the applicant must show why it was not possible for him to do so. Since ignorance of the Act is not acceptable, the applicant has given no reason why he could not serve his notices of objection within the time limit prescribed by the Act. Among the courses of action open to him, the applicant could have taken that of serving the notices of objection himself if he did not agree with his accountant’s conclusion. Within the ninety-day period he could have consulted another accountant and instructed him to serve the notices of objection. In view of the facts I must conclude that it would certainly have been possible for the applicant to serve his notices of objection within the legal time limit. Therefore the applicant does not satisfy the conditions of subsection 167(2) of the Act.

Consequently, the applicant is also unable to show that the notices of objection would have been served within the ninety-day period if circumstances had permitted (subparagraph 167(5)(c)(i) of the Act). There was nothing to prevent the applicant from filing his notices within the prescribed time limit.

Did the applicant establish that the application was brought as soon as circumstances permitted? Even if there were valid obstacles making it impossible for him to serve the notices of objection within 90 days (which is obviously not so in this case), he would have had to establish that there were valid reasons preventing him from filing his notices of objection sooner than 14 months and 23 days after the day of mailing of the notice of assessment. There is a contradiction between paragraph 18 of the reasons for the application, in which it appears that counsel had only recently taken over the case, and his statement that it took him five or six months to straighten out the facts about the assessments based on net assets.

Even if the applicant had been able to satisfy the conditions of subsection 167(2) and subparagraphs 167(1 )(c)(i) and (ii) of the Act, he would still have had to explain his complete failure to act concerning the assessments until the time he handed the matter over to his legal counsel, which was considerably after the expiry of the time limit for serving an objection to an assessment.

I must therefore conclude that even though the applicant may have had valid grounds for objecting, he did not meet certain essential conditions stipulated in the Act, beginning at section 167. The Board cannot find that it would be just and equitable to make an order extending the time for objecting.

The application is therefore dismissed.

Application dismissed.