http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/127501/index.do
Ford Credit Canada Limited v. The Queen (January 6, 2016 – 2016 TCC1, Lamarre ACJ.).
Précis: The taxpayer was reassessed on July 9, 2009 for its 2004 and 2005 taxation years. It duly filed notices of objection in a timely manner. After some back and forth the appeals officer wrote to the taxpayer on August 26, 2011 proposing to vacate the 2004 reassessment as part of a settlement offer. After more discussion reassessments were issued on December 19, 2011 for both the 2004 and 2005 taxation years. The taxpayer argued that the December 19, 2011 reassessment of its 2005 taxation year was out of time because of the August 26, 2011 letter had vacated the 2004 reassessment, not reassessed, which meant that the later reassessment of 2005 was not a “consequential” assessment.
The Tax Court held that the August 26, 2011 letter was neither a notification of a decision to vacate the 2004 reassessment nor did it operate to vacate that reassessment. Accordingly the appeal was dismissed with costs.
Decision: This first reported decision of the Tax Court for 2016 has got to win some sort of an award for chutzpah. The taxpayer’s position was that a letter from the appeals officer operated to vacate a prior reassessment of its 2004 taxation year. As a result, the taxpayer argued, a later reassessment of its 2005 taxation year could not be said to be “consequential” and was therefore statute barred:
[15] The appellant is of the view that, when the CRA stated in the letter that, "because we do not agree with all of the CRA Audit Division's adjustments, we are vacating the 2004 assessment in dispute", the CRA was making a statement that, on reconsidering the July 9, 2009 reassessment, it had decided to vacate it, and the appellant was notified of that decision by that letter. In the appellant's view, the reference to subsection 165(3) in the following paragraph of the letter confirms that the decision had been taken by the Minister to vacate the 2004 reassessment, which was in dispute at that time.
[16] If the appellant proves to be right in that interpretation, it would follow that the December 19, 2011 reassessment issued for 2004 was not issued pursuant to subsection 165(3) of the ITA as the matter would already have been disposed of by the letter dated August 26, 2011, and therefore that reassessment would have been issued after the normal reassessment period, which expired on July 13, 2009 for 2004, and consequently would be statute‑barred.
[17] The appellant further argues that the Minister did not have the authority to issue a consequential reassessment pursuant to subsection 152(4.3) of the ITA for the 2005 taxation year as this provision does not provide for the issuance of a consequential reassessment as a result of the Minister vacating a reassessment under subsection 165(3). (The appellant argues that the decision to vacate an assessment is not an "assessment or a decision on an appeal", which is a precondition found in the first sentence of subsection 152(4.3) for the exercise of the Minister's right to issue a consequential reassessment.)
[18] As a result, the appellant argues, the December 19, 2011 reassessment for 2005 could not have been issued pursuant to 152(4.3) and was therefore likewise statute‑barred.
Associate Chief Justice Lamarre dispatched the argument without much fuss:
[29] Ms. Patrick's explanation of the purpose of the letter makes sense in context. The appellant did not object to all of the adjustments made in the July 9, 2009 reassessment and, correspondingly, in the settlement offer dated June 20, 2011, the Minister did not offer to reverse all the adjustments in the reassessment (i.e., to vacate the reassessment). The Minister offered to reverse only the adjustments to which the appellant had objected.
[30] Secondly and alternatively, even if I were to accept that the use of the verb "vacate" in the August 26, 2011 letter was a reference to vacating under subsection 165(3), the letter merely explained what the Minister was willing to do if the settlement offer was accepted. The offer was never accepted by the appellant.
[31] That the letter only offered to "vacate" the reassessment as part of a settlement is clear from the text of the letter and the context in which it was sent. In the same letter, Ms. Patrick wrote that "although we do not fully support your position, the reassessment will be vacated" [emphasis added]. The future tense means that the assessment had not yet been vacated.
…
[34] I therefore conclude that the August 26, 2011 letter signed by Ms. Patrick was not notification of a decision to vacate nor did the letter itself vacate under subsection 165(3) the July 9, 2009 reassessment.
[35] This conclusion is sufficient to dispose of the appeal. On the basis of this conclusion, I find that the Minister's decision on the objection was reflected in the December 19, 2011 reassessment for 2004, which opened the door to the consequential reassessment issued on the same date for 2005.
The appeal was dismissed with costs.
Which goes to prove the adage that some ideas are best left on the drawing board.