Bolton Steel Tube – Tax Court of Canada finds that a reassessment to purportedly implement a legally unsupportable settlement agreement is void

Bolton reported $1.2M of income and was reassessed for $0.6M of unreported income (later conceded by Justice to be only $0.4M).  Bolton and CRA settled on the basis that CRA would reassess to "add [$0.4M] to Bolton’s income."  CRA interpreted this as reassessing (as it in fact did) to increase Bolton’s previously assessed income (of $1.8M) rather than its previously reported income (of $1.2M) by $0.4M – perhaps on the basis that it regarded adding the fictitious income for this year as a quid pro quo for vacating reassessments of other taxation years.

In addition to finding that an assessment for fictitious income is void under the Galway principle, Campbell J rejected the Crown’s argument that, where a reassessment implements a settlement agreement, there is no prohibition against it being for more tax than a previous reassessment.  In any event, CRA’s interpretation of the settlement agreement was ridiculous.

Neal Armstrong.  Summaries of Bolton Steel Tube Co. Ltd. v. The Queen, 2014 TCC 94 under s. 152(1), General Concepts - Evidence, and s. 169(3).