Date: 19991012
Docket: 1999-2778-IT-I
BETWEEN:
RICHARD JOHN TAYLOR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Order
Lamarre, J.T.C.C.
[1] A motion for an order pursuant to Rule 58(3) of the Tax Court of Canada Rules (General Procedure), quashing the appellant's appeal for his 1995 taxation year was presented by counsel for the respondent. The grounds for the motion are reproduced below:
a) the Notice of Objection dated April 13, 1999 in respect of the 1995 taxation year was not filed within the prescribed time limit as set out in subsection 165(1) of the Income Tax Act (the "Act");
b) the Appellant could not request an extension of time to file the Notice of Objection indicated in subparagraph (a) as the said request must be made within one year of the expiration of the time limit for serving a Notice of Objection as stipulated in subparagraph 166.1(7)(a) of the Act; and
c) the Notice of Appeal filed May 19, 1999 in regard to the 1995 taxation year is not valid as the Appellant has not filed a valid Notice of Objection with respect to the said taxation year as required by subsection 169(1) of the Act.
Facts
[2] The appellant appealed his assessment for the 1994 taxation year whereby the Minister of National Revenue ("Minister") disallowed the deduction claimed for business losses. Judge McArthur dismissed the appeal by a judgment rendered orally on May 21, 1998, a copy of which was sent to the appellant on June 22, 1998 (Exhibit A-6). In his Reasons for Judgment, Judge McArthur accepted as a fact that the appellant was a creditor of the business to which he had advanced money but found that there was no evidence of any losses arising from the advances.
[3] Following the above-mentioned judgment, the appellant wrote a letter to Revenue Canada on June 13, 1998 asking the Minister to reopen his tax return for 1995 in order to amend it as the appellant thought he could claim a loss for that year pursuant to the said judgment (Exhibit A-1).
[4] On April 7, 1999, an agent from Revenue Canada notified the appellant in writing that there was no evidence to support the existence of a loss resulting from having advanced the money. The appellant's request to claim a loss for 1995 was not allowed and the Minister accordingly did not reassess.
[5] On April 13, 1999, the appellant served on the Minister a Notice of Objection with respect to his 1995 taxation year (Exhibit A-3).
[6] On April 29, 1999, the Minister notified the appellant in writing that his Notice of Objection was not acceptable under subsection 165(1) of the Income Tax Act ("Act") as it was not filed within 90 days from the date of mailing of the Notice of Assessment for the 1995 taxation year, which was May 24, 1996 (Exhibit A-4). The Minister also advised the appellant that an extension of time for filing his objection for the 1995 taxation year could not be granted pursuant to subsection 166.1(7) of the Act as an application for such an extension had to be made within one year of the expiration of the time limit for serving a Notice of Objection.
[7] On May 19, 1999, the appellant filed an appeal in this Court with respect to his 1995 taxation year. The present motion is to quash that appeal on the ground that a condition precedent to instituting a valid appeal has not been met.
[8] The appellant submitted that when he wrote to Revenue Canada on June 13, 1998, following the judgment of Judge McArthur, he made a request for a consequential assessment for the 1995 taxation year pursuant to subsection 152(4.3) of the Act. According to the appellant, as his request was not granted by Revenue Canada, his Notice of Objection to the Minister's decision was made pursuant to subsection 165(1.1) of the Act and was consequently filed within the time limit. He therefore submitted that the motion for an order to quash his appeal for 1995 on the basis that he did not file a Notice of Objection on time should be denied.
[9] Subsections 152(4.3) and 165(1.1) read as follows:
152 (4.3) Consequential assessment. Notwithstanding subsections (4), (4.1) and (5), where the result of an assessment or a decision on an appeal is to change a particular balance of a taxpayer for a particular taxation year, the Minister may, or where the taxpayer so requests in writing, shall, before the later of the expiration of the normal reassessment period in respect of a subsequent taxation year and the end of the day that is one year after the day on which all rights of objection and appeal expire or are determined in respect of the particular year, reassess the tax, interest or penalties payable, or redetermine an amount deemed to have been paid or to have been an overpayment, under this Part by the taxpayer in respect of the subsequent taxation year, but only to the extent that the reassessment or redetermination can reasonably be considered to relate to the change in the particular balance of the taxpayer for the particular year. [Emphasis is mine.]
165 (1.1) Limitation of right to object to assessments or determinations. Notwithstanding subsection (1), where at any time the Minister assesses tax, interest or penalties payable under this Part by, or makes a determination in respect of, a taxpayer
(a) under subsection 67.5(2), subparagraph 152(4)(b)(i) or subsection 152(4.3) or (6) or 164(4.1), 220(3.4) or 245(8) or in accordance with an order of a court vacating, varying or restoring the assessment or referring the assessment back to the Minister for reconsideration and reassessment,
(b) under subsection (3) where the underlying objection relates to an assessment or a determination made under any of the provisions or circumstances referred to in paragraph (a), or
(c) under a provision of an Act of Parliament requiring an assessment to be made that, but for that provision, would not be made because of subsections 152(4) to (5),
the taxpayer may object to the assessment or determination within 90 days after the day of mailing of the notice of assessment or determination, but only to the extent that the reasons for the objection can reasonably be regarded as relating to a matter that gave rise to the assessment or determination and that was not conclusively determined by the court, and this subsection shall not be read or construed as limiting the right of the taxpayer to object to an assessment or a determination issued or made before that time. [Emphasis is mine.]
[10] Subsection 165(1.1) allows a taxpayer to object to an assessment or a determination made by the Minister in accordance, inter alia, with subsection 152(4.3).
[11] For subsection 165(1.1) to be applicable, it must be shown, inter alia, that the Minister did reassess or did make a redetermination pursuant to subsection 152(4.3).
[12] In the instant case, I do not find that subsection 152(4.3) is applicable. The result of Judge McArthur's decision (whereby the appellant's appeal for 1994 was dismissed) was not to change a particular balance of the appellant for a particular taxation year. If the appellant, when he requested the Minister in June 1998 to reopen the 1995 taxation year, had provided sufficient evidence and if the Minister had accepted that evidence, the reassessment, if any, would have been made pursuant to subsection 152(4) of the Act, as, at that time, the Minister was still within the normal reassessment period. The answer from the Minister on April 7, 1999 denying the appellant's request was not a reassessment or a redetermination of an amount deemed to have been paid or to have been an overpayment by the appellant for a subsequent taxation year, made pursuant to subsection 152(4.3). Indeed, no such reassessment or redetermination could have been made after the normal reassessment period, as the result of Judge McArthur's decision was not to change a particular balance of the appellant for a particular year. In other words, Judge McArthur's decision did not open the door to a consequential assessment pursuant to subsection 152(4.3) and no reassessment or redetermination was or could have been made pursuant to that subsection.
[13] I therefore conclude that subsection 165(1.1) is not applicable in the present case and that the Notice of Objection for the 1995 taxation year should have been filed within the time limit set out in subsection 165(1) of the Act. That not being the case, the appeal was not validly filed in accordance with subsection 169(1) of the Act.
[14] The respondent's motion is therefore granted and the purported appeal is quashed.
Signed at Ottawa, Canada, this 12th day of October 1999.
"Lucie Lamarre"
J.T.C.C.