Pomeroy’s Masonry – Federal Court finds that CRA failed to consider the taxpayer’s need to apply an income tax credit to pay HST arrears
The taxpayer was arbitrarily assessed under s. 152(7), with these income tax assessments being collected (including through garnishments). The taxpayer ultimately filed the missing returns, which showed large refunds owing to it – except that the three-year time limit for claiming refunds under s. 164(1) had passed. The taxpayer’s accountant then applied under ITA s. 221.2(2) to have the income tax credits applied to pay unpaid HST of the taxpayer. CRA denied this request on the basis that its guidelines on such requests required that the taxpayer demonstrate exceptional circumstances explaining its failure to timely file income tax returns.
Southcott J directed CRA to reconsider the taxpayer’s request on the basis that it was inappropriate for CRA to rigidly follow those guidelines, rather than also taking other relevant considerations into account including the policy in favour of letting a taxpayer pay off tax debts and the taxpayer’s allegation that CRA’s refusal could render him bankrupt.
Neal Armstrong. Summary of Pomeroy’s Masonry Limited v. Canada (Attorney General), 2017 FC 952 under s. 221.2(2).