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A Matter of Time

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The filing date of a corporate tax return is called into question in court.

There have been a number of publications containing tax tips that deal with claims that can be made or not made and certain traps that unwary taxpayers may fall into. I obviously haven’t read them all, but in those I have read I have yet to see any mention of what happens if a taxpayer and the Canada Revenue Agency (CRA) get into a dispute over when a return was filed. In Nacom Inc. v Her Majesty The Queen[2012 – 2477(T)I], heard in the Tax Court of Canada on March 4 and 5, 2013, the appellant claimed to have filed tax returns almost two years before CRA claimed to have received them.

 

The appellant filed its corporate income tax returns for the taxation years ending January 31, 2007 and January 31, 2008, claiming dividend refunds. The Minister denied the refunds on the basis that the returns were not filed within three years after the end of the corporation’s taxation years as required by Section 129 of the Income Tax Act. The appellant claimed that the returns had been filed on or about November 24, 2009. CRA claimed they were not filed until late March, 2011.

 

At trial, the appellant’s president stated that he had signed the returns in question and personally delivered them to the Broadway Avenue offices of CRA in Winnipeg. He stated that he had stamped an index card provided by CRA with the external date timer at the CRA office, but was unable to find the card. As evidence, he produced copies of the returns showing that they had been printed on November 15 and 17, 2009. Nacom’s accountant backed up the claim relating to the date the returns were printed, and suggested that the president received them shortly after their preparation.

 

In February 2011, the appellant became aware that CRA did not have the returns and delivered duplicates in late March 2011. The president explained that he had not contacted CRA regarding the 2007 and 2008 returns even though he was expecting refunds as he thought the refunds would likely be used to offset subsequent years’ taxes owing. The appellant testified that he had been in contact with CRA’s non-filer department concerning the 2007 and 2008 returns but that contact had ceased in April 2009.

 

The respondent’s position was clear. They claimed that the appellant had not filed the returns before March 2011. They had no record of an earlier filing. An officer from the non-filer department confirmed that there was no contact with the appellant between April 2009 and February 2011. Also testifying was a CRA employee who was responsible for incoming mail and delivery of same to the Winnipeg Taxation Centre. She described the process taken by CRA in receiving mail and stated that it was almost impossible for them to lose returns.

 

The taxpayer’s appeal was dismissed. The taxpayer could not produce any evidence that the returns were filed on or about November 24, 2009. The court agreed that, given the procedures in place, it was highly unlikely that CRA would lose the returns.

 

We advise our clients to document their tax records to death in order to be able to substantiate claims made on their returns. But I’m not sure how much attention is paid to substantiating filings. In the old days, we requested a receipt for anything we mailed and followed up if nothing was received within a month. It didn’t often happen, but occasionally the department claimed not to have received the documents. Canada Post was usually blamed, so we would send another copy and all would be well. In today’s world, I wouldn’t use regular mail to send anything to CRA. I would send it by registered or certified mail so there is a written record of it being sent.

 

In this case, the taxpayer’s president claimed to have personally delivered the returns and to have received a stamped receipt to that effect. However, the fact that he was unable to produce the receipt was fatal in his attempt to demolish the crown’s case. The court ruled on the objective evidence in the case, but subjectively, I might be inclined to believe the taxpayer. I don’t think many taxpayers would take this matter to court unless they were certain that they had filed the returns when they said they did.

 


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