Date: 20001220
Docket: 98-2778-IT-G
BETWEEN:
BRENT GLYNN McCLELLAND,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bell, J.T.C.C.
ISSUE:
[1] The Respondent filed a Notice of Motion seeking an Order of this Court:
(a) striking the Notice of Appeal and dismissing the appeal; and
(b) in the alternative, an Order quashing the appeal.
LEGISLATION AND RULES:
[2] The relevant portion of section 58 of the Tax Court of Canada Rules (General Procedure) ("Rules") reads as follows:
58. (1) A party may apply to the Court,
...
(b) to strike out a pleading because it discloses no reasonable grounds for appeal or for opposing the appeal,
and the Court may grant judgment accordingly.
(2) No evidence is admissible on an application,
...
(b) under paragraph (1)(b).
[3] Subsection 165(1) of the Income Tax Act ("Act") reads:
(1) A taxpayer who objects to an assessment under this Part may serve on the Minister a Notice of Objection, in writing, setting out the reasons for the objection and all relevant facts ...
[4] Subsection 169(1) of the Act reads in part as follows:
Where a taxpayer has served Notice of Objection to an assessment under section 165, the taxpayer may appeal to the Tax Court of Canada to have the assessment vacated or varied after either
(a) the Minister has confirmed the assessment or reassessed, or
(b) 90 days have elapsed after service of the Notice of Objection and the Minister has not notified the taxpayer that the Minister has vacated or confirmed the assessment or reassessed ...
RESPONDENT'S SUBMISSIONS:
[5] With respect to Part (a) of the motion, Respondent's counsel, in respect of the Appellant's Notice of Appeal with respect to "Relief Sought" said:
The first paragraph there is that the Appellant is asking this Court for a determination that the Notice of Appeal and Notice of Objection in respect of those taxation years be considered valid.
[6] Paragraph 1.a) under that heading reads:
1. The Appellant therefore claims as follows:
a) That the Appellant's appeal be allowed and that the Notice of Objection dated January 2, 1998 in respect of the Appellant's assessments by the Minister for taxation years 1988, 1989,1990, 1991, 1992, 1993, 1994, 1995 and 1996 be considered as valid;
[7] The subsequent paragraph reads as follows:
b) That the Appellant's Notice of Objection dated January 2, 1998 be referred back to the Minister for consideration;
c) The reasonable and proper costs of this action;
d) An Order vacating the garnishment proceedings against the Appellant; and
e) such further and other relief as to this Honourable Court may seem appropriate.
[8] Counsel then referred to section 171 of the Act which provides that:
(1) The Tax Court of Canada may dispose of an appeal by:
(a) dismissing it; or
(b) allowing it and
(i) vacating the assessment,
(ii) varying the assessment, or
(iii) referring the assessment back to the Minister for reconsideration and reassessment.
[9] Counsel's position was:
... there is no appeal from an assessment here.
[10] He then said:
The issue is whether or not the substance of what is the appeal to this Court falls within those three subparagraphs and we will move on to ... what is an assessment and what is an appeal from an assessment because in order for me to explain to you why it is that this appeal does not fall within either an appeal from assessment under 169 or gives the Court the remedial abilities under section 171, I have to go through what is an assessment and what is an appeal from an assessment.
[11] Counsel steadfastly clung to his position that:
We do not have an appeal from an assessment. What we have is a request by the Appellant to refer a Notice of Objection to the Minister for a determination.
[12] He submitted that:
There is no objection or dispute with the assessment. You can look at the Notice of Objection and you can read the pages of the Notice of Objection but not once does the Appellant say that "my tax is too high."
[13] Then followed this exchange:
His Honour: Are you assuming for a moment that the Notice of Objection was filed for any reason other than a disagreement with the assessment?
Mr. Yaskowich: Your Honour, there may be disagreement but there is also, I submit to you, the obligation of the taxpayers to raise in issue something that the Minister is capable of remedying.
[14] Counsel then referred to a number of decisions[1]. Counsel submitted:
... that an Appellant cannot come to this Court to ask the Court to refer a Notice of Objection back to the Minister because that Appellant is not identifying an error in an assessment made by the Minister. What he's asking for is a declaration.
[15] Counsel also submitted that:
... he's also asking for the appeal to be allowed, and I have stated, and I think you have my position on this point, that you can't just allow it in a vacuum. You have to allow it with instructions to the Minister to do something because if you do not, then you are sitting here with Notice of Assessments that are out there, which will remain to be out there unless you vacate the assessments and I would suggest, Your Honour, that there's no ... that there is nothing in the pleadings which brings those assessments into issue. I suggest that this appeal, as framed, is beyond redemption. There are no -- the Appellant is not challenging any merits going to what is the substance of the assessment that the Minister has made.
[16] Having concluded his submission with respect to Rule 58(1)(b) Counsel turned to a Statement of Agreed Fact with respect to the submissions under Rule 58(3)(a) claiming that the Court has no jurisdiction over the subject matter.
[17] The Agreed Statement of Facts provided, inter alia, that returns for the above years were filed under cover of a letter dated September 11, 1997 which said that the returns were being filed on behalf of the Appellant "without prejudice to his right to claim his artist's expenses at some future date."
[18] For the years in question the Appellant reported employment income. He also reported income under the heading "Gross Business Income" which was identical to the amounts in each year under the heading "Net Business Income". The Appellant was reassessed in respect of all those years. The Appellant then filed a Notice of Objection, within the time required, in which he set out the following:
I am objecting to the assessments noted above as I wish to include my art as a business for the purpose of determining personal income tax ... I have incurred expenses for studio space, art supplies and art related travel.
[19] That Notice of Objection refers to his art history and "reasonable expectation of profit" apparently some discussion with Revenue Canada about that concept having been had. There followed a series of correspondence between the Appellant and Revenue Canada. A letter of June 1, 1998, Revenue Canada reads:
It is the position of the Department that at the time you filed your objections you should have had in your possession the necessary documents and information to support the issue(s) in dispute. You have had additional time since the objection was filed on January 2, 1998 to compile the necessary paperwork. As a result a final extension to June 30, 1998 has been allowed so that the required information can be provided for my review. No further extensions will be granted. If the required information is not received by me on or before that date, I will recommend that the assessments be confirmed.
[20] After further correspondence from the Appellant to Revenue Canada the Appellant received a letter dated July 17, 1998 from Amir Bhaloo, Chief of Appeals, Revenue Canada, reading, in part, as follows:
The above noted objections cannot be accepted as valid at this time. The reason for this is you have not specified what it is you are disputing in accordance with subsection 165(1) of the Act.
All of the returns filed for the years 1988 to 1996 inclusive have been assessed as filed so we are unable to determine what part of the assessments you disagree with.
[21] Respondent's counsel then said, with respect to the Notice of Objection, that:
... not once does it raise any issue respecting the income that he derived from the art or any expenses that he's claiming. It's not clear if he's claiming that there's a reasonable expectation of profit, as that word has been used. ...we don't know if the business that he claims to have had suffered a loss. We don't know anything because we don't have in this document any information.
[22] He also said:
I think that if a case comes before you and an assessment of tax is not put in issue, then this Court lacks the jurisdiction to hear it.
[23] Later he said:
He wants Revenue Canada to make that determination but without giving Revenue Canada any documents or any vouchers for any listing of numbers of expenses, which would allow anybody, an accountant, anybody from Revenue Canada or otherwise to look at what it is being claimed as a business.
[24] He stated that the Notice of Appeal does not raise an issue upon which the Court can adjudicate.
[25] Finally, counsel said
If you agree with me that the Notice of Appeal does not raise the issue of whether or not this is a business, then, and this is why we were compelled to bring the motion, is because if it doesn't raise the issue of whether or not there is a business, whether or not there are losses, whether or not there are expenses, whether or not those expenses are reasonable, then we don't have an appeal from an assessment, and that's what brings us to the jurisdictional argument that is the basis of this motion.
APPELLANT'S SUBMISSIONS:
[26] Appellant's counsel referred to the words cited above from the Notice of Objection and submitted that the reason for the Notice of Objection was stated in the document. He also said that the Notice of Appeal referred to the Notice of Objection. Paragraph 1.a) of the Relief Sought portion, as set out above, asks, inter alia,
That the Appellant's appeal be allowed.
[27] It also asks that the Notice of Objection be considered as valid. Counsel had some difficulty with the proposition that the Appellant could appeal after the expiration of a defined period after filing the Notice of Appeal, without having a confirmation or other document from the Minister. He argued that subsection 165(3) required the Minister to take some action. It reads as follows:
On receipt of a Notice of Objection under this section, the Minister shall, with all due dispatch, reconsider the assessment and vacate, confirm or vary the assessment or reassess, and shall thereupon notify the taxpayer in writing of the Minister's actions.
ANALYSIS AND CONCLUSION:
[28] The Appellant seems to have been so intent on Mr. Bhaloo's decision that the Notice of Objection was not valid that he did not fully appreciate the Appellant's ability to file a Notice of Appeal regardless of Mr. Bhaloo's decision. Subsection 169(1) provides that where a taxpayer has served Notice of Objection to an assessment, the taxpayer may appeal after 90 days have elapsed after service of the Notice of Objection if the Minister has not notified the taxpayer that the Minister has vacated or confirmed the assessment or reassessed. That appears to be the reason that part of the relief sought by the Appellant was that this Court consider the Notice of Objection as valid.
[29] I conclude that it was clear that the Notice of Objection raised the matter of expenses as an issue. It is noted that the gross income for each year reported by the Appellant was the same as the net income. Obviously, no expenses had been deducted from that. Even a cursory review of the income tax returns and the Notice of Objection would have informed Revenue Canada of this obvious fact. That combined with the Appellant's words in his Notice of Objection, namely:
I am objecting to the assessments noted above as I wish to include my art as a business for the purposes of determining personal income tax ... I have incurred expenses for studio space, art supplies and art related travel.
persuades me that the Notice of Objection set out sufficient reasons and facts for it to be considered valid. It is well known that almost any kind of written notice indicating even an attempt to object to an assessment has been accepted by Revenue Canada for years. The attempt by this motion to deprive a taxpayer of access to the judicial system in respect of his complaint is both regrettable and inappropriate. Not only do I conclude that the Notice of Objection is clear[2] as to the taxpayer's quest but the Notice of Appeal, in referring to that Notice of Objection and asking that the appeal be allowed, is also valid.
[30] Revenue Canada's position that it did not have information about figures is of no moment. Examinations for discovery are not only provided for in General Procedure cases but are conducted as a matter of course. Such examinations in this case will furnish the Agency with answers to all its queries.
[31] The motion will be dismissed. A telephone conference will be arranged, in accordance with discussion with counsel, to hear submissions on the matter of costs.
[32] The Appellant, by filing an Amended Notice of Appeal would assist himself, the Respondent and the Court.
Signed at Ottawa, Canada this 20th day of December, 2000.
"R.D. Bell"
J.T.C.C.
[1] The Queen v. B. & J. Music Ltd., [1980] 2 F.C., McMillen Holdings Ltd. v. M.N.R., 87 DTC 585, Toner v. The Minister of National Revenue, 90 DTC 1675. Consoltex Inc. v. Her Majesty the Queen, 92 DTC 1567, Keyes v. The Minister of National Revenue, 89 DTC at 91, Route Canada Real Estate Inc. (In Receivership) v. H.M.Q., 1996 2 C.T.C. 2430.
[2] Albeit without monetary details.