Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Can the Minister reassess an amended return that is filed more than 3 years after the original assessment?
Position: No
Reasons: The law specifically states that for a Canadian-controlled private corporation, an assessment, reassessment or additional assessment may only be made before the day that is 3 years after the end of the normal reassessment period.
September 21, 2012
Burnaby-Fraser Tax Services Office HEADQUARTERS
9737 King George Boulevard Income Tax Rulings
Surrey, BC V3T 5W6 Directorate
Katharine Skulski
Attention: Dale Kooyman
2012-044740
Minister’s ability to reassess under subsection 152(4)
We are replying to your facsimile of May 11, 2012, requesting our interpretation of when the Minister may exercise her powers under subsection 152(4) of the Act.
Unless otherwise stated, all statutory references in this letter are to the Income Tax Act, R.S.C. 1985, c. 1 (5th Suppl.) (the “Act”), as amended to the date hereof.
The corporate taxpayer, which we understand to be a Canadian-controlled private corporation, failed to file tax returns for the taxation years XXXXXXXXXX inclusive. In XXXXXXXXXX, the CRA issued arbitrary assessments pursuant to subsection 152(7).
The taxpayer subsequently filed returns for XXXXXXXXXX inclusive, which were accepted, and the CRA issued reassessments accordingly. In XXXXXXXXXX, the taxpayer filed “amended returns” for the XXXXXXXXXX taxation years. These returns were sent to Audit for review even though they were received after the statute barred date of XXXXXXXXXX.
The taxpayer has therefore asked whether the Minister would be able to exercise her powers under subsection 152(4) to reassess the XXXXXXXXXX taxation years to take into account the adjustments requested by the taxpayer in the “amended returns” that we understand would have lowered the taxable income arbitrarily assessed in XXXXXXXXXX.
Although assessments are normally issued as a result of a taxpayer filing a tax return, the Minister may assess a taxpayer pursuant to subsection 152(7) for a particular taxation year notwithstanding that a return has not been filed. The Minister’s authority to make an assessment, reassessment, or additional assessment is governed by the limitation provisions set out in subsection 152(4). But for certain exceptions, assessments and reassessments are statute barred following the expiry of the normal reassessment period as defined in subsection 152(3.1). In this regard, subsection 152(3.1)(b) provides that the period for Canadian-controlled corporations and other taxpayers is three years from the date of the initial assessment or notice that no tax is payable. As such, the normal reassessment period for the XXXXXXXXXX taxation years ended in XXXXXXXXXX. In order to reassess beyond that date, one of the exceptions in subsection 152(4) would have to apply. We understand that none of these exceptions apply in this case.
With respect to the taxpayer’s request for the Minister to issue reassessments beyond the statute-barred date on the basis that the taxpayer was grossly negligent in not filing its tax returns, we are of the view that the Minister would be unable to do so. Subparagraph 152(4)(a)(i) permits the Minister to make an assessment, reassessment or additional assessment of tax at any time for a taxation year in order to remedy any misrepresentation that is attributable to neglect, carelessness or wilful default. However, assuming the changes requested by the taxpayer are otherwise permitted under the Act, there would be no misrepresentation in the “amended return” to remedy. As such, the Minister would not be able to re-open the statute barred years.
In our view, the taxpayer’s remedy would have been to either file an objection to the assessments pursuant to subsection 165 within 90 days of the sending of the subsection 152(7) assessment or request an adjustment to the XXXXXXXXXX taxation years within three years of the notice of assessment having been sent, but these time periods have now expired.
We trust that these comments will be of assistance.
Terry Young, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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