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MINISTER'S OBLIGATION TO ASSESS WITH ALL DUE DISPATCHWhen a taxpayer files his annual income tax return with Revenue Canada, Revenue Canada, through the Minister of Revenue, has a positive duty to assess that tax return. The Income Tax Act requires that the Minister, with all due dispatch, examine the tax return and assess the tax, interest and penalties for the year. The Courts have held that the words "all due dispatch" mean "within a reasonable time" thus putting an obligation on the Minister requiring him to act within a reasonable period of time. If the Minister fails to act within such a reasonable period of time then the taxpayer will have no liability for taxes, interest and penalties for the applicable year. Several taxpayers have gone to Court and successfully argued that the Minister has failed to meet his duty to act with all due dispatch and accordingly the Court has held that they have no income tax liability for the taxation year in question. The question of what is "all due dispatch" or "a reasonable time" varies with the circumstances of each case. One of the leading cases in this area is the 1989 Tax Court of Canada decision in J. Stollar Construction Ltd. v. M.N.R., [1989] 1 C.T.C. 2171. In J. Stollar Construction Ltd., the taxpayer's return of income for its 1976 taxation year was sent to the Minister on March 2, 1977. The taxpayer had not paid the amount of tax which it estimated was owing at the time it filed its return of income for the year. The Minister did not assess until July 5, 1983, and failed to adduce any evidence to explain the delay. The Court held that the Minister's delay in assessing invalidated the assessment because he did not assess with all due dispatch. Although the J. Stollar Construction Ltd. decision was reversed by the Federal Court Trial Division on consent, there is authority to the effect that the principals enunciated in that case remain correct. One of the most recent decision in this area is that of Laurence Ginsberg v. Her Majesty the Queen [1994] 2 C.T.C. 2063. The taxpayer filed his income tax returns for the 1987 and 1988 taxation years on April 28th, 1989. The Notices of Assessment for both the 1987 and 1988 taxation years were dated December 21st, 1990. Both returns were assessed as filed. At trial, the Minister was unable to explain the delay of 18 months in assessing the returns. The Court held that if there is a delay that prima facia indicates a failure to examine an assessment of the return with all due dispatch then there is an onus on the Minister to establish by evidence pertaining to the manner in which the return was dealt with that the delay was not unreasonable. Since in the Ginsberg case the Minister was unable to establish any special circumstances relating to these returns which established that the 18-month delay was reasonable. Accordingly, the Court allowed the Appeal of the taxpayer. However, were circumstances exist which provide a reasonable basis for delaying the issuance of the initial notices of assessment, the Minister may be found to have issued the initial assessments "with all due dispatch" notwithstanding a considerable lapse of time. For example, in Hutterian Bretheran Church v. The Queen, [1979] C.T.C. 1, notices of assessment were not issued until eight years after filing of the returns of income. The Federal Court Trial Division held that the assessments were made with all due dispatch as the Minister had deferred assessing pending the decision of the Supreme Court of Canada in related personal assessments. In any circumstances where the Minister takes more than a year to assess a taxpayer's income tax return consideration should be given to whether a Notice of Objection should be filed on the basis that the Minister failed to act with all due dispatch.
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