Digests

Decision Information

Decision Content

INCOME TAX

Reassessment

Canada v. Anchor Pointe Energy Ltd.

A-559-02

2003 FCA 294, Rothstein J.A.

7/2/03

16 pp.

Issues in appeal and cross-appeal, from interlocutory decision of Rip J. of Tax Court of Canada, ([2002] D.T.C. 2071), about two aspects of Crown's pleadings in tax appeals--Crown appeals striking of paragraphs 10(q), (r) and (z) of reply to notice of appeal (reply), assumptions arising from application of Global Communications Ltd. v. Canada, [1999] 3 C.T.C. 537 (F.C.A.) (Global) decision-- Respondent cross-appeals Rip J.'s refusal to strike other provisions of reply which set out factual allegations relevant to Global test for Canadian Exploration Expense (CEE) deductions-- Regarding appeal, issue simply one of accuracy of pleadings --Rip J. said pleadings inaccurate in respect of paragraphs 10(q), (r) and (z) when they stated "In reassessing, the Minister assumed the following facts"--Appellant argues words "In reassessing" meant "the process of assessing tax liability"--Income Tax Act stipulates specific actions Minister may take; assessing, reassessing, confirming--Act does not use term "process of assessing tax liability"-- Pleading of assumptions gives Crown powerful tool of shifting onus to taxpayer to demolish Minister's assumptions--Facts pleaded as assumptions must be precise and accurate so taxpayer knows exactly case it has to meet--No reason why requirement for precision and accuracy does not apply to Crown accurately stating circumstances in which assumptions arose--Rip J. correctly found paragraphs 10(q), (r) and (z) to be inaccurate and struck them from reply--Rip J.'s sole reasons for striking paragraphs 10(q), (r) and (z) inaccuracy and pleading conclusions of law--Minister, as result of reading notice of objection filed by taxpayer or subsequently decided case such as Global, may make assumptions of fact--No reason why such assumption may not be included in Crown's reply--However, assumptions must be pleaded accurately--Turning to cross-appeal, respondent says all references in reply to matters arising after its notice of objection, and first contained in Minister's notification of confirmation, should have been struck out by Rip J.--Respondent argues requirement arising from Global decision seismic data used for exploration and not for resale or licensing in order to qualify as CEE, new basis of assessing respondent--Rip J. found once notice of objection filed with Minister, normal reassessment period continues until Minister takes one of four actions described in Income Tax Act, s. 165(3)--Court unable to agree with Rip J. expiry of normal reassessment period stayed or extended until Minister takes action under s. 165(3)--Implication of such interpretation would be: because taxpayer files notice of objection, Minister has unlimited time to reassess taxpayer to increase tax payable after normal reassessment period--In case at bar, Minister confirmed respondent's reassessment after expiry of normal reassessment period--Whether Minister could rely upon Global decision as new basis or argument for reassessment--Question whether Minister purporting, through reliance on Global decision, to increase amount of respondent's income not included in assessment or reassessment made within normal reassessment period--In case at bar, Minister does not seek to rely on Global to increase respondent's taxes payable over amount included in Minister's reassessment prior to expiry of normal reassessment period--On confirming reassessment, Minister only relied on additional argument, no CEE deduction allowed where acquisition of seismic data for resale or licensing--Rip J. correctly found nothing objectionable about Crown's reply containing additional argument based on Global decision--Appeal and cross-appeal dismissed--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 165(3) (as am. by S.C. 1994, c. 7, Sch. VIII).

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