Date : 20040630
Docket : T-2332-03
Citation : 2004 FC 943
BETWEEN :
CHRISTINE ELWELL
Applicant
AND :
MINISTER OF NATIONAL REVENUE
Respondent
ROULEAU, J.
[1] This is an application for judicial review of the decision of the Minister of National Revenue dated November 14, 2003, not to exercise the discretion conferred by subsection 220(3.1) of the Income Tax Act (the "Act") to cancel and waive the interest and penalties assessed against the applicant with respect to her 1997 taxation year.
[2] The facts leading up to this application are as follows. On April 2, 2001, the applicant received notice from Revenue Canada that she had failed to file her income tax return for the 1997 taxation year which was due to be filed on June 15, 1998. The applicant responded by letter dated August 21, 2001, indicating that she had filed her 1997 income tax return. Her letter states as follows:
Further to our many conversations and letter dated April 2, 2001 requesting that I file my 1997 tax return, enclosed please find a copy of it for your records. Please forgive the delay in getting this to you but we had to reconstruct it from old records that thankfully my mother had kept. You will note that all of the attachments to it are the second copy.
As I have indicated to you, my position is that the return was filed when due and the fact that we had to rely on copies of the attachments proves this. It also follows that any tax due was paid at that time. I don't know if old banking records are available to further prove this but I am happy to cooperate with you as we move forward.
Please let me know what else I might do to address your concerns.
[3] On November 20, 2001, the applicant received a Notice of Assessment for the 1997 taxation year, indicating that she owed $5,437.00 whereas the return which she had filed indicated that the amount of tax owed on business income was $4,214.15. The applicant assumed that the difference between these amounts related to the respondent's refusal to accept her spousal RRSP deduction of $3,000.00.
[4] Thereafter, on January 31, 2002, the applicant submitted a request to the Revenue Canada Fairness Committee pursuant to subsection 220(3.1) of the Act for a waiver of the penalties and interest which had been imposed by the Minister. Ms. Elwell set out the grounds for her request in the following terms:
Further to the advise of Ms. Lagopoulos of the Audit division, I write to request a reconsideration of the reassessment done related to the 1997 taxation year. There are two main grounds for this request. The first is that it is my position that Revenue Canada lost my 1997 return. When I was ask [sic] to file 1997 again, all of my records were copies, eg. Copies of T4's etc. There were no original documents, supporting my view that I did send in the return, with the original documents. I would have had no reason to not file the 1997 return and in fact your notice of reassessment indicated that I had paid the tax due for 1997. Therefore there should be no late penalty or interest fee respecting 1997.
The second main request for a reconsideration is that when the 1997 notice of reassessment was sent, it was indicated that my spousal RRSP claim for 3000 was denied. As a result, this additional amount was added to my income and then penalties and interest became owed for this amount, times five years!
It is my view that Revenue Canada failed to review the top page of the 1997 return which clearly indicated that Steve Shallhorn is my spouse. The RRSP receipt from the Bank that was returned to me by Revenue Canada was made out to him but the copy of the one I had from the Bank, which I sent with the copy of 1997 tax return, had both my name and Steve's name on it. According to the North York Tax department which we checked with when we filed the 1997 return originally, said it was appropriate f should owe anything related to the 1997 tax year. The reassessment of some 11,000 in outstanding taxes, penalties and interest is in error and has caused me and my family considerable grief in trying to reconstruct what happened so may years ago. I understand that until my reassessment is complete, it is not your policy to assess any additional penalties or to pursue any collection actions.
[5] By letter dated May 6, 2002, Canada Customs and Revenue Agency ("CCRA") denied the applicant's request for cancellation of the penalties and interest, stating its reasons as follows:
The Fairness Legislation allows for the cancellation of interest and penalties where they were charged due to an error by Canada Customs & Revenue Agency (CCRA) or due to circumstances beyond a client's control. One of the factors involved in making this decision is the history of taxpayer compliance in regards to filing their returns.
In accordance with subsection 150(1) of the Income Tax Act, you have to file an individual return for each year in which tax is payable. You must do this without notice or demand, by the due date of the return.
Our records show we issued several requests and demands to file starting in November of 1998. We did not receive you 1997 return until September of 2001. A review of your account also indicates that we had to issue requests and demands for prior year returns.
The late filing penalties that were charged on these returns indicate to me that you were aware of the consequences of not filing your returns on time. My review indicates that you have not exercised reasonable care in meeting your tax obligations.
After reviewing the circumstances presented and giving careful consideration to the Fairness Legislation, I have determined that the cancellation of the penalties and interest would not be appropriate.
(emphasis added)
[6] The applicant became aware of the decision on June 5, 2003, when she received her 2002 Notice of Assessment. Ms. Elwell then requested a review of the decision on June 10, 2003 and made written submissions pertaining to the reasons relied upon by the Committee for denying her relief. By letter dated November 14, 2003, CCRA advised her that because of her poor compliance history for the six taxation years from 1991 to 1996, the decision denying her relief from the arrears interest and the late filing penalty was appropriate and the original decision would stand.
[7] The applicant now seeks to have that decision set aside on the grounds that the respondent failed to observe a principle of natural justice and procedural fairness and based its decision on an erroneous finding of fact made in a perverse or capricious manner or without regard to the material before it.
[8] I am allowing the application for the following reasons.
[9] First, and most importantly, the respondent has failed to produce any documentary evidence to establish its allegation that, commencing in November of 1998, it issued several requests and demands on the applicant to file her 1997 tax return. This statement is contained in paragraph six of the affidavit of Alice Shields, at the relevant time, Director of Taxation, who reviewed the applicant's request for reconsideration of the original fairness decision and who confirmed the original fairness decision denying relief. The statement also appears in the decision of the original Fairness Committee dated May 6, 2002.
[10] However, none of the documents submitted by the respondent is a demand or request for the applicant to file her 1997 tax return. At the hearing before me, I questioned counsel for the respondent as to why such evidence was not before the Court and she was unable to offer any explanation. I therefore accept the applicant's statement that she was not aware of any problems with her 1997 tax return until April 2, 2001.
[11] Furthermore, I am not satisfied that the applicant was accorded procedural fairness by the respondent when it reviewed her request for reconsideration of the fairness. The original decision of the Fairness Committee is dated May 6, 2002. Ms. Elwell maintains that she never received that decision and was not aware of it until June 5, 2003, when she received a Notice of Assessment for her 2002 taxation year which showed a balance of $13,600.45 being interest and penalties relating to her 1997 return.
[12] I accept the applicant's explanation because again the respondent has not provided any documentary evidence which satisfies me that the original decision of May 6, 2002 was, in fact, ever sent to her. What the respondent has proffered, and what is attached to the affidavit of Ms. Shields, is not a copy of a properly formatted letter on the respondent's letterhead, but a computer screen printout of the decision. While the document establishes that a decision was made by the Fairness Committee, its format leaves great doubt in my mind that it was ever actually sent to the applicant.
[13] Additionally, once Ms. Elwell became aware of the Committee's decision in June of 2003, she immediately sought a review and reconsideration. In support of her request, she submitted a document which attempted to provide explanations for the reasons which the original Fairness Committee had relied upon in its decision of May 6, 2002, to deny her request for waiver of penalties and interest. I cannot ascertain from the decision of Ms. Shields, who reconsidered the request and upheld the previous fairness decision, that she took any of the applicant's explanations into account. Her decision of November 14, 2003, simply reiterates and relies upon the applicant's compliance history as grounds for denying her relief.
[14] It is apparent that this matter has been rife with delays, due in most part, to the respondent's failure to communicate with the applicant. In keeping with this, while the respondent steadfastly continued to refuse to allow the applicant's $3000.00 RRSP spousal contribution, it was not until February of 2004, long after she had commenced her judicial review application, that it advised her of the reason for its refusal; namely, that her banking institution had failed to indicate the contributors name on the RRSP receipt. Ms. Elwell has agreed to correct this error and to obtain the necessary information from her bank.
[15] In conclusion, the evidence leaves me doubtful that the applicant has been accorded procedural fairness in the decision-making process and that all relevant factors were taken into account by the decision-maker. I am satisfied that there are circumstances here which were beyond the applicant's control and that, through no fault of her own, she was not aware of any problems with her 1997 tax return until April of 2001. She took immediate steps to rectify the situation and sought to have the interest and penalties waived but again faced delays which were not of her own doing.
[16] For all of these reasons, the decision of the Minister of National Revenue dated November 14, 2003, not to exercise the discretion conferred by subsection 220(3.1) of the Income Tax Act to cancel and waive the interest and penalties assessed against the applicant, is set aside. The matter is referred back to CCRA for reconsideration by a different decision-maker in accordance with these reasons. The applicant is to be allowed sixty days from the date of this Order to obtain the corrected RRSP receipt from her banking institution.
JUDGE
OTTAWA, Ontario
June 30, 2004
FEDERAL COURT OF CANADA
SOLICITORS OF RECORD
DOCKET : T-2332-03
STYLE OF CAUSE : CHRISTINE ELWELL v. MINISTER OF NATIONAL REVENUE
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: June 3rd , 2004
REASONS : The Honourable Mr. Justice Rouleau
DATE OF REASONS: June 30, 2004
APPEARANCES:
Christine Elwell FOR THE APPLICANT
Suzanne Bruce
Department of Justice FOR THE RESPONDENT
SOLICITORS OF RECORD:
None FOR THE APPLICANT
Morris Rosenberg
Deputy Attorney General
of Canada
Ottawa, Ontario FOR THE RESPONDENT