It's the Destination, Not the Journey: The Significance of the Tax Assessment Process in Tax Appeals

• Author: Harry Erlichman & Elizabeth Chasson
• Pages: 81-98

81

Chapter 5

It’s the Destination, Not the Journey:

The Signif‌icance of the Tax Assessment

Process in Tax Appeals

harry erlichman & elizabeth chasson

A. INTRODUCTION

In tax appeals, as in life, t here exists a great question: Is it the destination

or the journey?

This article will ex plore the signif‌icance in the tax appeal process of

they way in which the assessment, which is being appealed, was raised. The

courts have long recognized that the manner of assessment is distinct from

the product of the assessment. This distinction is reinforced by a considera-

tion of the role of the Minister’s assumptions that underlie the assessment.

It is useful to remember that the Supreme Court in Johnston clearly main-

tained that the facts found or assumed on which a taxation is based must be

accepted unless questioned and the burden is on the appellant to show the

conclusion below was not warranted.1 The Cour t also said, “The allegations

necessary to the appeal depend upon the construction of the statute and its

application to the facts and the pleadings are to facilitate the determination

of the issues.”2

In the normal course, the factual issues that must be determined relate

to the activities of the t axpayer that invite the application of the statute, not

the process by which the Minister found or assumed the “facts” that he

relied upon, or t he way in which he determined that part icular provisions

1 Johnston v. Minister of Na tional Revenue (1948), 3 DTC 1182 at 1183 (S.C.C .) [Johnston].

2 Ibid.

82 harry erlichman & elizabet h chasson

of t he Income Tax Act3 applied. There are exceptions, such as those that

involve the Investigations Division of the Canada Revenue A gency in cir-

cumstances that raise Canadian Charter of Rights4 issues.

1) Tax Court Jurisdiction

The jurisdiction of the Tax Court underlies what issues are allowed before

that Court. T he only relief that a tax payer may achieve is to have an assess-

ment vacated, va ried, or referred back to the Minister for reassessment in

a def‌ined manner. For example, there is no jurisdict ion to hear an issue of

negligence or determine damages when relief is sought against an i ndivid-

ual for what he has done or failed to do as a servant of the federal Crown.5 In

Main Rehabilitation v. The Qu een, the Federal Court of Appeal stated:

[I]t is al so plain and obvious that the Tax Court does not have the jurisdic-

tion to set aside an assessment on the basis of an abuse of process at com-

mon law or in breach of section 7 of the Charter. … Courts have consistently

held that the actions of the CCRA cannot be taken into account in an ap-

peal against assessments … t he question is not whether the CCRA off‌icials

exercised their powers properly, but whether the amounts assessed can be

shown to be properly owing under the Ac t. 6

2) Statutory Parameters

Section 152 of the Inc ome Tax Act is the statutory starting point for an exam-

ination of the nature of the assessment process. It sets out, in subsections

152(4)–(6.1) the time limits within which the Minister may assess, reassess,

or make an additional assessment. It also provides t hat tax liability is “not

affected by an incorrect or incomplete assessment or by the fact that no as-

sessment has been made” (subsection 152(3)). A s well, section 166 of the

Act provides that an assessment shall not be vacated or varied on appeal

by reason only of any irregu larity, informality, omission, or error in the

3 R.S.C. 1985 (5th Supp.), c. 1 [the Ac t].

4 Canadian Char ter of Rights and Freed oms, Part I of the Constit ution Act, 1982, bei ng Sched-

ule B to the Canad a Act 1982 (U.K.), 1982, c. 11.

5 See Van Le enen v. Minister of National R evenue, 91 DTC 1265 at 1269 (T.C.C.).

6 2004 DTC 6762 at 6763–64 (F.C.A .); see also Hardtke v. The Quee n, 2005 DTC 676 at

paras. 13–16 ( T.C.C.); Attorne y General of Canada v. Webste r, 2003 DTC 5701 at para. 21

(F.C.A.), where the F.C.A. s tated that “[i]f the assessments a re incorrect as a matter of law,

it will not matte r whether the objection process was f‌l awed. If they are correct, t hey must

stand even if the obje ction process was f‌lawed. See a lso Burrows v. Canada, 2005 TCC 761 at

paras. 35–44 .