Harika - Tax Court of Canada finds that s. 152(4)(a)(i) effectively refers to a misrepresentation “of fact”, which is engaged by an unreasonable filing position

The taxpayer, who had been assessed beyond the normal reassessment period to treat a real estate gain as business income rather than a capital gain, moved to have the Crown’s Reply struck on the basis that such reporting could not be a misrepresentation for purposes of s. 152(4)(a)(i), because misrepresentation (in light of the French version) meant a misrepresentation of fact, whereas the characterization of the gain was a question of mixed fact and law.

Before rejecting this request, Gagnon J stated:

[B]oth language versions of the provision are equivalent and indeed refer to a misrepresentation of the facts. …

[T]he word “misrepresentation” in English, alone, encapsulates the concept of a false, misleading, wrong or incorrect representation in relation to facts. …

… Because the filing position of a taxpayer involves the disclosing, reporting or characterization of the taxpayer’s underlying factual situation, any false, misleading, incorrect or incomplete disclosure, reporting, or characterization of those facts could constitute a misrepresentation [of the facts]. …

[A] reasonable filing position would be one where, upon review of all of the facts and circumstances that underlie a taxpayer’s situation (fully and accurately addressed), the Minister and the taxpayer could arrive at reasonable—albeit different—conclusions or positions based on a characterization of (or an application of the law to) such facts. Indeed, such an instance would be what [Inwest] has termed a mere “difference of opinion between the CRA and the taxpayer” .. .

[T]he Court cannot agree with the Appellant’s proposition that a question of income versus capital necessarily amounts to a mere difference of opinion. The reasonableness of the Appellant’s filing position—and relatedly, whether a misrepresentation has been made—ought properly to be put before the trial judge.

Neal Armstrong. Summary of Harika v. The King, 2025 TCC 81 under s. 152(4)(a)(i).