It appears that these refunds are being withheld when an audit is about to take place even if the returns have been filed and duly paid. Is this authorized? CRA responded:
Subsection 164(1) of the Income Tax Act and subsection 229(1) of the Excise Tax Act require that the Minister pay refunds with "all due dispatch" after the corresponding return is filed. This term allows for some discretion on the part of the Minister. When determining a refund amount, it is both fiscally responsible for the CRA to examine the potential liability of the claimant where other amounts may be due and payable and fair to both parties… .
