The standard of review of CRA interest or penalty relief decisions is almost invariably that of reasonableness rather than correctness

In general, the standard of review for a CRA decision under s. 220(3.1) or (3.2) is reasonableness, i.e., is the decision justified, transparent, and intelligible and within a range of possible, acceptable outcomes which are defensible in respect of the facts and the law. The Supreme Court in Dunsmuir, 2008 SCC 9 confirmed that the application of a correctness standard of review is limited to jurisdictional and some other questions of law including of natural justice or bias. In the area of taxpayer relief, there are only two post-Dunsmuir cases where a correctness standard of review was applied (Bozzer and, to a limited extent, Cayer).

Instances of unreasonable decisions have, in broad terms, been restricted to fettering of discretion (e.g., following the Information Circular slavishly), failure to consider relevant facts or arguments, and failure to observe other principles of procedural fairness or natural justice.

In allowing an application for judicial review, the Federal Court cannot mandate an outcome where more than one is possible.

Neal Armstrong. Summary of Brooke Sittler, "Review of Penalty and Interest Relief Requests Under the Income Tax Act", draft 2015 CTF Annual Conference paper under s. 220(3.1).