INCOME TAX |
Reassessment |
Gaucher v. Canada
A-275-00
Rothstein J.A.
16/11/00
6 pp.
Appeal from T.C.C. decision on motion for determination of question of law--Issue whether taxpayer assessed under derivative assessment pursuant to ITA, s. 160(1) may object to assessment by challenging primary assessment on which derivative assessment based--Appellant's former husband assessed for $350,000 of tax, confirmed by T.C.C.--Shortly before T.C.C. confirmed assessment, appellant's former husband transferred residence to her and, few months later, declared bankruptcy--Thereafter, MNR assessed appellant under ITA, s. 160(1) (when person makes non-arm's length transfer of property for less than full consideration, both transferor and transferee jointly and severally liable to pay transferor's tax)--Appellant arguing MNR reassessed former husband after 3-year limitation period provided in ITA, s. 152(3.1) had expired and wishing to raise limitation period as defence to her assessment under ITA, s. 160(1)--T.C.J. found appellant precluded from raising limitation period defence on basis T.C.C. confirmed MNR's reassessment and not open to appellant to interfere with that decision--Appeal allowed--T.C.J. erred in coming to that conclusion--Basic rule of natural justice that, barring statutory provision to contrary, person not party to litigation cannot be bound by judgment between other parties--Appellant not party to reassessment proceedings between MNR and her former husband--Those proceedings did not purport to impose any liability on her--When MNR issues derivative assessment under ITA, s. 160(1), special statutory provision invoked entitling MNR to seek payment from second person for tax assessed against primary taxpayer--Second person must have full right of defence to challenge assessment made against her, including attack on primary assessment on which second person's assessment based, and to raise any defence primary taxpayer could have raised against primary assessment--Result may be that assessment against secondary taxpayer quashed or reduced--However, that will have no effect on assessment against primary taxpayer against whom primary assessment final and binding--No reason why appellant cannot raise limitation period as defence to assessment made against her under ITA, s. 160(1)--Will be open to parties to address question of whether MNR entitled to invoke ITA, s. 152(4) (MNR allowed to reassess beyond reassessment period where misrepresentation by taxpayer)--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 152(3.1), (4), 160(1).