Rosenberg – Federal Court rejects a CRA argument that it is not bound by an agreement not to further audit the taxpayer

Following an audit of the taxpayer’s straddle transactions for his 2006 and 2007 taxation years, CRA and the taxpayer agreed that the taxpayer would not engage in further straddle transactions and CRA would not proceed with any reassessment of those taxation years unless a new fact pattern emerged. Three years after this agreement, a different CRA auditor issued a demand for information respecting the straddle transactions in the 2006 and 2007 returns.

Roy J rejected CRA’s argument that the Galway doctrine precluded CRA from tying its hands by entering into the agreement (as “the CRA has already assessed the taxpayer based on the facts as known and the legislation as understood,”) and further added that:

Far from disabling the Minister from fulfilling the primary purpose for which the legislation was created, the exercise of discretion to enter into this type of agreement helps fulfill the administration and enforcement of the ITA. …The agreement between the binding.

Neal Armstrong. Summary of Rosenberg v. MNR, 2016 FC 1376 under s. 152(1).