Section 165

In finding that s. 165(1) required receipt by the Minister of the taxpayer's Notice of Objection on a timely basis, Snider J. stated (at p. 6187) that:

"I accept that the word 'serve' includes the receipt of a document, or at the very least, awareness of the existence of a document."

Snider J. also indicated that s. 165(1) required that a Notice of Objection be served by registered mail. Here, the taxpayer alleged that he had mailed his Notice of Objection within the 90-day period, but such mailing was never received by the Minister. Accordingly, no valid Notice of Objection had been made.

The Tax Court lacked jurisdiction to consider the allegation of the taxpayer that an amount received by her from her employer was net of employee source deductions, so that she had already paid the tax in question. Such an allegation could be asserted by her in the Federal Court when the Minister attempted to recover the sums he considered to be payable.

A letter requesting more time to provide requested information did not qualify as a notice of objection.

The Deputy Judge had incorrectly taken the position that the 90-day period in s. 165(1) and the one-year extension period in ss.166.1(7)(a) and 166.2(5)(a) only began to run at the time that the taxpayer understood the meaning and significance of a notice of assessment that had been received by him many years previously. Nadon J.A. stated (at p. 6895):

"As this Court has held on numerous occasions, when a taxpayer is unable to meet the deadline prescribed by the Act, even by reason of a failure with the postal system, neither the Minister nor the TCC can come to his help ... . Hence, if a postal failure cannot save a taxpayer, he will not be saved by his failure to grasp the significance of a notice of assessment served on him."

Since the taxpayer had been neither diligent nor reasonable in the way he conducted himself following the service of the notice of assessment, it was not necessary to consider the doubtful proposition that the taxpayer could rely on the discoverability rule, i.e., the rule, which was developed entirely in the field of torts, that time will not start to run until a person has fully and clearly appreciated his or her legal rights.

The taxpayer filed waivers with respect to its 1985 and 1986 taxation years, was reassessed by the Minister beyond the waiver period in respect of the matters referred to in the waivers, and was further reassessed by the Minister, following an appeal by the taxpayer, pursuant to a judgment of the Tax Court issued pursuant to a consent to judgment. In responding to an argument that the Minister was still able to reassess the taxpayer for those taxation years in respect of the same matter in light of a subsequent development (the decision in The Queen v. Gulf Canada Resources Ltd., 92 DTC 6123 (FCA) and a resulting memorandum of understanding between an industry association and the Minister), Teitelbaum J. stated (at pp. 5654-5):

"While I am in agreement with the submission of the applicant that the waivers are unlimited and enabled the Minister to reassess as often as required, he is not obliged by the waivers to reassess. Therefore, although he has the authority to act on the waiver, he is under no duty, particularly after several reassessments have already been issued."

At the conclusion of the taxpayer's submissions before Cullen J. it came to the attention of counsel for the Crown for the first time that the taxpayer's assessment for one of the two taxation years in question showed zero tax owing. Cullen J. found that the failure of the Crown to raise this jurisdictional issue in the pleading could not give the Court jurisdiction to consider that taxation year.

Cullen J. also indicated that he took the decision in Aallcan Wood Suppliers Inc. v. The Queen, 94 DTC 1475 (TCC) "to mean that this Court has jurisdiction to consider a nil assessment year where the computations from the nil assessment year have an actual impact on another taxation year; it does not give the Court jurisdiction to consider a nil assessment directly". (p. 6022)

Because the Act provides a complete code prescribing the procedures to be followed in appealing a reassessment or note of confirmation, and assessment cannot be challenged by way of application for judicial review under s. 18.1 of the Federal Court Act.

Because the assessments of the taxpayer's 1982 and 1983 taxation years were "nil assessments", his appeals for those years were dismissed.

Because the only director and shareholder of a corporation that had been dissolved under the Business Corporations Act, 1982 (Ontario) would have an obligation to pay the tax assessed against that corporation, the correct plaintiff in an action challenging such reassessment was that individual. Reed J. issued an order amending the style of cause accordingly.

In reversing a finding that the taxpayer was precluded from seeking a declaratory order that it did not owe taxes which have been reassessed by the Minister, that it should not have been so assessed, or that in any event the taxes had been paid or the government was estopped from collecting those taxes from the taxpayer, Mahoney J.A. stated:

"We are all of the view that the learned trial judge erred in characterizing this action for declaratory relief as an appeal against the assessment in issue. Rather, many of the declarations sought are to the effect that, in law, the debt confirmed by the assessment has been extinguished."

In response to the disallowance by the trustee in bankruptcy of an assessment, Zuber J.A. stated:

"When the trustee in bankruptcy wishes to question the validity of an assessment against a bankrupt he, like anyone else, must seek his remedy within the Income Tax Act. ... To hold that the trustee in bankruptcy can disallow an assessment made pursuant to the Income Tax Act would be tantamount to clothing the trustee with the powers of the Tax Court. No interpretation of the Bankruptcy Act, R.S.C. 1985, c. B-3, can support such a conclusion."

Since a reassessment purported to fix the taxpayer's total liability for a taxation year, the previous assessment became void. Since no notice of objection was filed on a timely basis to the latest reassessment the court had no jurisdiction to consider the appeal.

There is no right of appeal from a nil assessment. "[T]here is nothing to appeal from the Minister's recorded thought of no tax owing."

A taxpayer was not entitled to appeal from a determination of its cumulative deduction account where the amount of tax for the year was not affected.

A taxpayer may validly waive his rights of appeal against reassessment by executing a compromise agreement with Revenue Canada. The enforceability of such an agreement is not vitiated by the threat of prosecution at the time of its execution, provided that the authorities have a substantial case against the taxpayer, and have no collateral purpose, such as a private grudge.

The taxpayer successfully appealed from reassessments denying the deduction of interest by it on a participating bond for its 1987 and 1988 taxation years, but did not file objections or waivers with respect to reassessments denying the deduction of interest on the bond for its 1989-1991 taxation years.

After finding that s. 152(4.3) did not permit the Minister, in giving effect to the successful appeal of the taxpayer for the 1987 and 1988 taxation years, to allow the deduction of participating interest for the 1989 to 1991 taxation years, Evans J.A. rejected a submission that s. 165(1.1) permitted the taxpayer to object to the Minister's reassessments for the 1989 to 1991 taxation years (in which the deduction of additional non-capital losses was allowed) on the basis that such reassessments had not also allowed the deduction of participating interest for the 1989 to 1991 taxation years. Evans J.A. stated (at p. 5089) that

"The right to object under subsection 165(1.1) does not extend to an objection to a reassessment under subsection 152(4.3) when the reason for the objection could not have been the subject of a reassessment under subsection 152(4.3) ... [T]hat there is no sufficiently close relationship ... between the change in Sherway's balance in 1987-88 and the deductibility of participating interest in 1989-91."

The taxpayer filed waivers with respect to its 1985 and 1986 taxation years, was reassessed by the Minister beyond the waiver period in respect of the matters referred to in the waivers, and was further reassessed by the Minister, following an appeal by the taxpayer, pursuant to a judgment of the Tax Court issued pursuant to a consent to judgment. In finding that the taxpayer was not entitled to an order of mandamus requiring the Minister to further reassess the taxpayer in respect of essentially the same matters in light of a subsequent development (the decision in The Queen v. Gulf Canada Resources Ltd., 92 DTC 6123 (FCA) and a resulting memorandum of understanding between an industry association and the Minister) Teitelbaum J. stated (at p. 5655):

"I am satisfied that subsection 165(1.1) of the Act was enacted with the intention of limiting the right of reassessment of matters forming the subject of a judgment by the Court. In effect, it serves as a reinforcement on the rule of res judicata in the context of appeals against an amount of assessment."

A waiver signed by the taxpayer was binding on him notwithstanding a criminal caution given to him by a Revenue Canada employee before the taxpayer signed the waiver.

Webb JA found that where an appeals officer considers and communicates rejection of subsequently-raised issues, this has the effect of amending the Notice, so that the new issues can also be raised in a Notice of Appeal. He also stated:

[S]ince the Minister accepted these submissions, it is a moot point whether the Minister could have refused to accept them on the basis that they were made well after the time permitted…for seeking an extension of time to file a notice of objection, had expired.

See summary under s. 169(2.1).

In 1992 the taxpayer, a large corporation under the Act, redeemed shares of a corporation not connected to the taxpayer for $338,213,849, resulting in a deemed dividend under s. 84(3), before s. 55(2) applied to convert a portion thereof into proceeds of disposition. Some of the redemption proceeds were not immediately payable. The taxpayer included $52,912,264 of the proceeds in its income in its 1995 return and paid Part IV tax thereon. The Minister reassessed the taxpayer to reduce the the 1995 deemed dividend which was subject to Part IV tax by $25,332,237.

The taxpayer's Notice of Objection indicated that this decrease to the 1995 deemed dividend should be reversed, without further discussion. The taxpayer's Notice of Appeal stated instead that no amount of deemed dividend should be included in "taxable [sic] income" in 1995. The Minister moved to have the taxpayer's appeal dismissed on the ground that it did not comply with s. 169(2.1).

After referring (at para. 34) to "the purpose of allowing the Minister to know the nature and quantum of tax litigation at the earliest possible date," Webb JA found that the issue raised in the Notice of Objection (where the taxpayer "was taking the position that it had filed its Part IV return correctly" for 1995 (para. 35)), did not match the position taken by the taxapyer on appeal (that the taxpayer received deemed dividends only in 1993 when the shares were redeemed), although the Notice of Appeal itself did not identify this issue (para. 39). Accordingly, the taxpayer had not complied with the requirement in s. 165(1.11) to raise this timing issue at the Objection stage.

The relief sought also did not match. Webb JA stated (at para. 47):

Asking for a full refund of all Part IV tax paid in relation to 1995, cannot be said to be the relief identified in the notice of objection, in which Bakorp was not asking for a full refund of all Part IV tax paid in 1995 but rather was asking to pay more Part IV tax that had been reassessed.

See also cases under s. 169(2.1).

The taxpayers, after donating art pieces and claiming charitable donations based on higher values than their purchase prices, were reassessed in 2002 and 2003 on the basis that the gift amounts were their cost, and for gross negligence penalties. They filed notices of objection, which the Minister held in abeyance pending the outcome of similar cases.

In 2012, the Minister reassessed them to vacate the penalties and the taxable capital gains that the taxpayers reported on the art pieces. The taxpayers argued that the 2012 reassessments should be vacated because the Minister had failed to act with due dispatch.

Webb JA dismissed the taxpayer's appeal. The Minister's obligation under s. 165(3) to consider a notice of objection "with all due dispatch" is not a basis for vacating the underlying assessment (Bolton). After noting that vacating the 2012 assessments would have the effect of reinstating the 2002 and 2003 assessments, which were for much higher amounts, he further noted (para. 17):

If, however, the result of vacating a reassessment would be that a person's tax liability would be increased (because the previous assessment was for a greater amount), the Tax Court of Canada could not grant that remedy in any event (Anonby v. The Queen, 2013 TCC 184; 2013 DTC 1154).

The taxpayer appealed an assessment which entailed gross negligence penalties under s. 163(2). CRA sent the taxpayer a notice of confirmation which neglected to address the taxpayer's complaint about the s. 163(2) penalties. After some further correspondence, CRA indicated that its confirmation applied to the s. 163(2) penalties, and sent the taxpayer a revised notice, back-dated to match the original noticee, which clarified this point.

Blanchard J. found that the amended, back-dated notice only served to clarify the original notice of confirmation (para. 21), and did not replace it. He stated (at para. 19):

In my view, once the Minister decides to confirm an assessment or reassessment and notifies the taxpayer in writing of his decision pursuant to subsection 165(3) of the ITA, his duties under the ITA in relation to reconsideration of assessments are completed. ... The [original notice of confirmation] is the only effective notice of the Minister's action in the circumstances. Any revised notice or amended notice that does not change the Minister's decision cannot be considered a substitute for the Notice of Confirmation.

The expiration of approximately 14 months between the filing of a notice of objection by the taxpayer and a reassessment by the Minister did not represent a failure to act with all due dispatch given that the issues involved were complex, and it was difficult to obtain information from the taxpayer.

In confirming the dismissal at trial of a motion to vacate reassessments that the Minister had made more than 10 years following the filing by the taxpayer of notices of objection, the Court found that vacating reassessments is not an appropriate remedy for undue delay in dealing with an objection and notes (at p. 5078) that "the taxpayer may appeal to the Tax Court under paragraph 169(1)(b), or commence proceedings in the Federal Court to compel the Minister to consider the objection and deal with it".

The taxpayer argued that his assessment should be vacated because the Minister failed to act with all due dispatch to reconsider his assessment. Hugessen JA dismissed the taxpayer's appeal. Ginsberg, decided a week before, establishes that this is not a basis to vacate an assessment. Moreover, the taxpayer's right to appeal under s. 169(b) (i.e. where the Minister has taken 90 days or more to respond to a notice of objection) would be nonsensical if the effect of the Minister's failure were already to vacate the assessment.

The taxpayer, an accountant, argued that his assessment should be vacated because the Minister failed to process his returns with all due dispatch. Desjardins JA accepted the trial judge's finding that the Minister had not done so, but disagreed that the assessment should be vacated. The scheme of the Act does not support such a result - for example, s. 152(3) (liability is not affected by "the fact that no assessment has been made"), s. 152(8) (assessments are deemed "valid and binding notwithstanding any ... defect or omission"), and s. 166 ("an assessment shall not be vacated ... by reason only of any ... omission").

A more appropriate remedy for an inconvenienced Taxpayer would be a Mandamus application.

By indicating that he wished to appeal immediately to the Federal Court, the respondent precluded himself from later complaining that the failure of the Minister to give the respondent an opportunity to be heard before the reassessments were finalized by Notice of Confirmation amounted to a denial of natural justice.

The indication that the taxpayer wishes to appeal directly to the Federal Court should be set out in the Notice of Objection rather than in the covering letter.

It was noted that where the s. 165(3)(b) route is chosen, then the content of the "Statement of Facts and Reasons" in the Notice of Objection "should, for all practical purposes, be the same in both form and substance as if that portion of the notice of objection were a statement of claim."

After the Minister had assessed the predecessors of taxpayer on the basis that amounts paid by them to purchase seismic data exceeded the fair market value of the data, so that the full purchase price did not qualify as CEE, the taxpayer filed Notices of Objection. The Minister then issued Notifications of Confirmation which, based on the subsequently-decided decision in Global Communications, found that none of the purchase qualified for treatment as CEE (although the Minister did not purport to increase the tax payable by the taxpayer).

Rothstein J.A. stated (at para. 33) that he was "unable to agree" with the analysis of Rip J. in the Tax Court that the expiry of the normal reassessment period was stayed or extended until the Minister took action under s. 165(5) as "the implication of such an interpretation is that because a taxpayer files a Notice of Objection, the Minister has an unlimited time to reassess the taxpayer to increase tax payable after the normal reassessment period." Although s. 165(5) allowed the Minister to reassess after the expiry of the normal reassessment period where a Notice of Objection had been filed, in light of s. 152(5) the Minister could not so reassess as to include in the taxpayer's income amounts that were not included in an assessment or reassessment made within the normal reassessment period. Here, however, the effect of the Minister's Notice of Confirmation was not to include additional amounts in the taxpayer's income.

S.165(6) did not empower the Minister to accept a Notice of Objection that had not been served on a timely basis as required by s. 165(1).

Following the serving of notices of objection by the taxpayer to 1995 reassessment and a settlement of the issues raised in notices of objection with the Minister following the filing of appeals to the Tax Court, in 1999 the Minister issued new reassessments of the relevant taxation years pursuant to s. 169(3). The taxpayer then served notices of objection against the new reassessments raising issues that had not been included in his prior appeals but were set out in the original notices of objection.

In finding that s. 165(7) did not validate the appeal of the taxpayer, Rothstein J.A. stated (at p. 5630):

"Subsection 165(7) does not apply to permit a subsequent appeal from a reassessment issued under subsection 169(3) that disposes of a prior appeal. Paragraph 165(7)(a), in its context, is concerned with a taxpayer's receiving a second reassessment in the period prior to the taxpayer filing a notice of appeal. Paragraph 165(7)(b) is concerned with the period after the taxpayer files a notice of appeal but before the appeal is dealt with ... . It does not apply after appeal proceedings have been disposed of and, in particular, after they have been disposed of under subsection 169(3)."

After filing 1984 Notices of Objection to 1984 reassessments, on January 13, 1986 the taxpayer filed a Notice of Appeal to the Tax Court from December 16, 1985 reassessments. The position of the Crown was that although the taxpayer could have filed a Notice of Objection to the December 16, 1985 reassessment, because the taxpayer instead appealed directly to the Tax Court he did not meet the requirement, in order for s. 225.1(3) to be available, that he had "objected" after 1984. In rejecting this submission, Collier J. stated (p. 6281):

"The legislation clearly enables the taxpayer to object either by way of notice of objection or by way of an appeal to this Court or the Tax Court of Canada. The election of proceeding by way of appeal does not, in my opinion, mean the taxpayer has not objected."

S.165(7) had no application where notice of objection to the first reassessment was filed after the second reassessment was made. It was noted that theAbrahams (66 DTC 5451) and Walkem (71 DTC 5288) cases would have been differently decided if s. 165(7) had then been in place.

S.165(7) does not permit the making of an appeal against a reassessment which was made by the Minister following a decision of the Tax Review Board.

Following the issuance of notices of reassessment dated October 30, 1973 the Minister obtained a certificate for unpaid taxes and provisional court orders based on the certificate. On May 7, 1974 further notices of reassessment were issued.

Since the May 7, 1974 notices of reassessment gave credit for the amounts of the October 30, 1973 notices of reassessment they represented additional assessments, rather than replacements of the October 30, 1973 assessments, and the procedures taken pursuant to the October 30, 1973 reassessments accordingly were valid. In addition, even if the May 7, 1974 notices had been reassessments properly speaking, the seizure and execution procedures would have been valid by virtue of s. 165(7).