Maurice Boisvert:—This case concerns a motion to obtain an extension of time to appeal from assessments dated November 12, 1970 covering the taxation years 1961 to 1967 inclusive.
The reasons therefor, as set out in the application are the following:
(TRANSLATION)
The reasons for this application for an extension of time are the following:
(1) Mr Louis Vachon, residing at Ste-Marie, Beauce County, Quebec, the Subject of reassessments on November 12, 1970, made an assignment of his property on December 3, 1970, as appears in a judgment by the Assistant Registrar of the Bankruptcy Court, Quebec District;
As appears from the order referred to in the preceding paragraph, Mr Gaston Béliveau was appointed trustee in bankruptcy for the said Louis Vachon;
When the said trustee learned that a reassessment had been sent to Mr louis Vachon the time for sending a notice of objection to the Minister of National Revenue had expired;
They accordingly took the necessary steps to obtain photocopies of these notices of assessment from the representatives of the Assistant Deputy Minister of National Revenue, since the trustee was not in a position to obtain them from the bankrupt;
When they were received by the trustee they were examined, and, on being so advised, the inspectors in the bankruptcy of Louis Vachon commissioned the undersigned counsel, Mr Louis Dorion, to ask for an extension of time in which to submit a notice of objection against the said assessments to the Minister of National Revenue, in conformity with subsection 61A(1) of the Income Tax Act;
Both the trustee and the counsel responsible for making this application, as well as the inspectors in the bankruptcy of Louis Vachon, have acted with all due diligence in submitting this application.
The section of the Income Tax Act (RSC 1952, c 148, as amended), which applies here, states that:
61A. (1) Where, because of the death, incapacitating sickness or bankruptcy of a taxpayer no objection to an assessment under section 58 or appeal to the Tax Appeal Board under section 59 has been made or instituted within the time limited by section 58 or 59, as the case may be, for so doing, an application may be made to the Tax Appeal Board for an order extending the time within which a notice of objection may be served or an appeal instituted and the Board may make an order extending the time for objecting or appealing and may impose such terms as it deems just.
(2) The application referred to in subsection (1) shall set forth the reasons why it was not possible to serve the notice of objection or institute the appeal to the Board within the time otherwise limited by this Act for so doing.
(3) An application under subsection (1) shall be made by filing with the Registrar of the Tax Appeal Board or by sending by registered mail addressed to him at Ottawa 3 copies of the application accompanied by 3 copies of a notice of objection or notice of appeal, as the case may be.
(5) No order shall be made under subsection (1) . . .
(a) unless the application to extend the time for objecting or appealing is made within one year after the expiration of the time otherwise limited by this Act for objecting to or appealing from the assessment in respect of which the application is made;
(b) if the Board . . . has previously made an order extending the time for objecting to or appealing from the assessment; and
(c) unless the Board ... is satisfied that,
(i) but for the circumstances mentioned in subsection (1) . . . , an objection or appeal would have been made or taken within the time otherwise limited by this Act for so doing,
(ii) the application was brought as soon as circumstances permitted it to be brought, and
(iii) there are reasonable grounds for objecting to or appealing from the assessment.
The motion was heard in Quebec City on October 12, 1971 under the provisions of the foregoing section.
On the one hand it was allowed that Louis Vachon’s bankruptcy had provided the grounds for this motion. On the other, respondent proved that appellant had not acted with sufficient diligence to object to the assessments within the time limit, and that he had not established that he was prevented from acting in accordance with the Act by circumstances beyond his control or knowledge. The assessments are dated November 11, 1970 and the application for an extension of time is dated August 11, 1971. It was accompanied by a Notice of Objection to each assessment made for the above-mentioned years.
The evidence establishes that on December 8, 1970 appellant was informed by a letter from a special investigator of the Department of National Revenue, giving complete information relating to the assessments. On November 16, 1970 respondent effected seizure and on December 3, 1970 appellant made an assignment of his property. On December 14, 1970 the bankrupt was examined by the Receiver in accordance with the provisions of the Bankruptcy Act. At this examination appellant stated that the Notices of Assessment had brought about his insolvency. The trustee appointed was Mr Gaston Béliveau, who was informed of the assessments, first by the bankrupt and then by respondent’s representative on February 15, 1971. A letter was sent by appellant’s trustee in bankruptcy the same day, requesting inter alia return of the documents seized in December 1970, cancellation of the notice of seizure against the debtor’s immovables, and finally an injunction to stay proceedings. The Act required the trustee to submit his objections within 90 days (subsection 58(1) of the aforementioned Act). The moment he decided to challenge the assessments, his first duty was to submit Notices of Objection. Far from acting with diligence, he procrastinated.
Since the first meeting of the creditors of the bankrupt Louis Vachon, held on December 23, 1970, at which Maurille Savard, the representative of the Department of National Revenue, Taxation Division, was present, the trustee has been fully aware of the assessments made by the aforementioned Division. Instead of carrying out the provisions of the Income Tax Act for challenging the assessments, he tried unsuccessfully to have the assessments cancelled by a motion before a judge sitting in matters of bankruptcy.
I have come to the conclusion that the trustee’s motion does not show grounds which made it impossible for him to file the Notice of Objection within the time limit. Subsection 46(7) of the Act reads as follows:
46. (7) An assessment shall, subject to being varied or vacated on an objection or appeal under this Part and subject to a re-assessment, be deemed to be valid and binding notwithstanding any error, defect or omission therein or in any proceeding under this Act relating thereto.
sections 58, 59 and 60 of the Act indicate the procedure to be followed and specify the tribunals which have jurisdiction to cancel an assessment. Under subsection 44(3) trustees in bankruptcy are substituted for bankrupts and are required to do what the bankrupt has failed to do.
I feel I must refer the parties to two judgments, one by the Supreme Court of Ontario, delivered by Smily, J in Carnat Construction Co Ltd, 37 CBR 47; the other by the Superior Court, Bankruptcy Division, delivered by Edouard Martel, J in Continental School of Music and Melvin C Zwaig, CA, Trustee-Respondent, and Her Majesty the Queen in Right of Canada. This latter decision is dated October 20, 1971.
In the two aforementioned cases, the learned Judges came to the following conclusions:
The provisions of The Income Tax Act are binding on the estate of the bankrupt debtor; and there is no conflict with the provisions of The Bankruptcy Act. There is no question that The Bankruptcy Act provisions must be complied with, by the filing of proof of claim by the Crown with respect to income tax, and that an income tax assessment may be disallowed by the trustee, and that in such event the Crown is called upon to proceed under the provisions of The Bankruptcy Act and appeal from that disallowance. But in so far as determining the amount of the tax, that should be done in accordance with the provisions of The Income Tax Act. The trustee may properly inquire into the matter to determine whether the assessment is properly made in order that he may decide whether or not there should be proceedings taken against that assessment which would be complying with the terms of The Income Tax Act and thus provide for the procedure such as filing objections, and so forth, and also disallow the claim. However, when that disallowance comes before the Court, then the proper procedure is that the amount of the income tax be determined under the provisions of The Income Tax Act rather than by the Court in bankruptcy deciding the matter on the merits. S 46(7) of The Income Tax Act applies to such a case.
For the foregoing reasons I have to dismiss. the motion.
Motion dismissed.