Pawlak - Tax Court finds that CRA must allow stale-dated ITC claims on late-filed GST/HST returns
The GST/HST "audit to net tax provision" (s. 296(2)) indicate that when the Minister assesses a registrant on audit, the Minister is required to take into account any unclaimed input tax credits that were available for the applicable reporting period in making that assessment. Webb J has extended this provision to also apply to the situation where a registrant has filed GST or HST returns beyond the normal limitations period for claiming ITCs for the reporting period in question (two or four years, depending on the type of registrant) - so that, in this case, the registrants, on filing returns very late, were entitled to ITCs well in excess of the taxable supplies made in the applicable reporting periods.
Neal Armstrong. Summary of Pawlak v. The Queen, 2012 TCC 355 under ETA s. 296(2).