The HST Blog : Canada Harmonized Sales Tax Lawyer Cyndee Todgham Cherniak for Assessments, PST & RST Issues in Ontario, British Columbia & Quebec

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It is a basic concept - The Canada Revenue Agency (CRA)  (on behalf of the Minister) must send a taxpayer a notice of assessment for the assessment to be valid and, therefore, cause a tax debt to be owed to the Crown.  In the recent case of Siow v. The Queen, the Tax Court of Canada found as a fact the CRA had not issued a notice of assessment to the corporation within the 4 year limitation period. 

The facts of this case are not unique.  The CRA is going through past records and collections officers are charged with the task of collecting recorded tax debts.  Due to the passage of time, records on the part of the CRA and the taxpayer are not available.  In the Siow case, the CRA could not produce a notice of assessment for the Tax Court of Canada.  Due to the fact that no notice of assessment could be produced, the Tax Court had no option but to conclude that a notice of assessment had not been issued with respect to the original debt against the corporation.  The Court wrote:

The Respondent, on the other hand, produced no evidence or copies of any of the three Notices of Assessment it refers to in its Reply above, let alone any evidence of their mailing or even electronic summaries of the assessments to show they had even been issued.

The Court later stated:

In the case at hand, the Minister pleaded in his assumptions that in fact three assessments were sent and cannot produce even one, let alone prove any of them were mailed.

The CRA tried to use circumstantial evidence to show that an assessment had been issued.  The CRA filed with the Court a letter from the CRA to the corporation's accountants concerning the alleged assessments.  The Court could not rely on the letter from the CRA as proof of the assessments.  The Court stated:

There was no dispute that a Notice of Assessment is deemed to have been sent when mailed, not received. However, I have some difficulty with the Respondent’s arguments that the Court should accept that the Notices of Assessment were issued simply because of the cursory wording of [...a letter] or because the Appellant and his accountant held discussions with the CRA.

The CRA had asked the Court of blindly accept that the CRA had mailed the notices of assessments to the corporation.  However, the Court could not and stated:

I find the Respondent’s suggestion that the passage of time would make it difficult to prove the Notices of Assessment were mailed to be unacceptable considering the ease with which the Act allows a Minister to submit evidence of such procedure by affidavit evidence ‑ without the official in charge of mailing even attending to testify.

The Court found in favour of the appellant (on this point) because the CRA had not met its burden of showing that the notices of assessment had been issued and sent to the corporation.  Usually, the burden of proof in a tax case is with the appellant. However, where an allegation of fact is challenged by an assessed taxpayer, the burden can shift to the CRA.  The Court held:

I find that the Minister has not satisfied its onus of proving any of the three assessments were mailed and hence, four years have, regardless of which quarterly return is in issue, expired from the date such returns have been filed and the Minister is statute barred from assessing the Corporation for any of the reporting periods within the Assessment Period.
 

The Court ultimately found in favour of the CRA with respect to the director's liability provisions.  This will be discussed in tomorrow's post.