Date: 20000523
Dockets: A-565-98, A-566-98, A-567-98
CORAM: STONE J.A.
ROTHSTEIN J.A.
EVANS J.A.
BETWEEN:
A-565-98
FRANK RUFFOLO
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
- and -
A-566-98
MARIO RUFFOLO
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
- and -
A-567-98
HARVIE RUFFOLO
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Toronto, Ontario on Monday, May 15, 2000
Judgment rendered at Ottawa, Ontario on Tuesday, May 23, 2000
REASONS FOR JUDGMENT DELIVERED BY: ROTHSTEIN J.A.
CONCURRED IN BY: STONE J.A.
EVANS J.A.
Date: 20000523
Dockets: A-565-98, A-566-98, A-567-98
CORAM: STONE J.A.
ROTHSTEIN J.A.
EVANS J.A.
BETWEEN:
A-565-98
FRANK RUFFOLO
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
- and -
A-566-98
MARIO RUFFOLO
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
- and -
A-567-98
HARVIE RUFFOLO
Appellant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
ROTHSTEIN J.A.
[1] These are appeals from the decision of Bonner J.T.C.C. dated August 19, 1998, (99 DTC 184) in which he found that the appellants, as recipients of dividends from Felm Investments Limited, were vicariously liable under section 160 of the Income Tax Act to pay the tax and interest owing by Felm. There is no issue about the derivative liability of the appellants. Nor is there any dispute about the Minister"s calculation of the tax owing by Felm. The dispute is with respect to arrears of interest.
[2] By notice of reassessment dated December 18, 1989 for Felm"s 1987 taxation year, the Minister assessed an amount of $136,021.37 for arrears interest. However, in the last notice of reassessment of Felm for its 1987 taxation year, issued by the Minister on April 2, 1990, the Minister stated "nil" in the boxes marked "arrears interest" and "balance unpaid". Nonetheless, in a May 6, 1991 notice of reassessment for Felm"s 1989 taxation year, in the box marked "previous balance", the Minister stated the sum of $161,138.26 (being the total of $136,021.37 stated in the December 18, 1989 reassessment of the 1987 taxation year plus accrued interest), with the sum in the box marked "balance unpaid" as being $246,174.59 which, it is agreed, includes the previous balance of $161,138.26.
[3] It is not necessary for purposes of this appeal to go into detail as to how the various amounts are calculated. Suffice it to say that the sum of $161,138.26 in issue arises from arrears interest applicable to the Felm 1987 taxation year. In any event, the appellants do not take issue with the calculations but, as will be apparent, rely on an alleged technical deficiency in the notice.
[4] On the April 2, 1990 notice of reassessment for the 1987 taxation year, the "balance unpaid" is stated as "nil". The Minister concedes that it was an error to show "balance unpaid" as "nil". However, while subsection 152(8) provides that an assessment is "deemed to be valid and binding notwithstanding any error, defect or omission in the assessment or in any proceedings under this Act relative thereto", the amount in the box marked "balance unpaid" is not an assessment, and therefore could not be deemed valid as such by operation of subsection 152(8). (See Friedberg v. Her Majesty the Queen , [Court File A-665-97, Thursday, April 6, 2000 per: Robertson J.A., at paragraph 2]).
[5] The Minister"s duty to assess in subsection 152(1) of the Act is in respect of "...the tax for the year, the interest and penalties, if any, payable ...". The determination of the "balance unpaid" is as a result of the assessment, but is not a component of the assessment of the tax, interest and penalties payable. It is included in the notice of assessment as a convenience but it is not part of the assessment. That the box marked "balance unpaid" is stated as "nil" is not binding on the Minister.
[6] The more serious challenge is with respect to the "nil" statement in the box marked "arrears interest" in the April 2, 1990 notice of reassessment for Felm"s 1987 taxation year. In these circumstances, the appellants say that the "nil" notation amounts to a nil assessment. They say that an assessment of interest cannot be revived by the Minister purporting to include such interest in the boxes marked "previous balance" and "balance unpaid" in the May 6, 1991 notice of reassessment of Felm"s 1989 taxation year.
[7] However, a close look at the April 2, 1990 notice of reassessment shows that some boxes are marked "adjustment", while others are not. On this particular form, the boxes marked "federal tax", "other penalties" and "provincial tax and penalty" are not stated to be adjustments. However, boxes dealing with instalment interest, arrears interest and refund interest are headed by the words "adjustment to interest". The form also includes a note which states:
| The result of this reassessment will be associated with previously assessed amounts, or other credits, if any, and a consolidated statement of account issued by the Taxation Centre at: Sudbury ONT P3A 5C3. |
[8] As I interpret the reassessment form, it provides that "federal tax", "other penalties" and "provincial tax and penalty" for the taxation year in question are to be stated. However, with respect to interest, what seems to be envisaged are only adjustments to prior assessments of interest. If there are no changes to a prior assessment of interest, then the Minister would be correct in stating "nil" in the box marked "adjustment to interest - arrears interest". The "nil"statement does not vacate any prior assessment of interest and this is made clear by the notation at the bottom of the form providing that the reassessment will be associated with previous assessed amounts and a consolidated statement of account issued.
[9] The form in question leaves something to be desired. It is not entirely clear as to what kind of adjustment "adjustment to interest - arrears interest" refers. It does not seem that it would refer to changes arising from the accrual of interest on a daily basis as long as principal amounts are outstanding. Rather, such adjustment would appear to refer to interest adjustments arising from changes in the amount of tax and penalties payable, or at least something other than the daily accrual of interest. Be that as it may, the form, while perhaps misleading unless read very closely, does provide that all that is to be stated for "arrears interest" are adjustments and that previously assessed arrears interest is not vacated by a "nil"statement of "arrears interest" on this form of notice of reassessment.
[10] I would dismiss these appeals with costs.
"Marshall Rothstein"
J.A.
"I agree
A.J. Stone
J.A."
"I agree
John M. Evans
J.A"