Monsell – Tax Court of Canada finds that CRA had the onus of substantiating assessments underlying s. 160 assessments where it had superior records access
The taxpayers (a husband and wife) received payments from a corporation that had been reassessed for its 2005 to 2007 taxation years and had not objected thereto. Their only ground of appeal to s. 160 assessments was that these “underlying” reassessments were incorrect.
D’Auray J quoted the principle in Mignardi that
where the facts concerning the underlying reassessments are exclusively or peculiarly within the knowledge of the Minister, the onus will shift to the Minister to show the correctness of the underlying reassessments
before finding that the onus was on the Minister to demonstrate the correctness of the underlying reassessments for the 2005 and 2006 years. This was so because the taxpayers did not have access to the corporate records for those years, whereas CRA had been given such documents and then lost them. The Minister failed to discharge this onus.
However, for the 2007 year, no audit was performed and the Minister reassessed solely on the basis of the information contained in the corporate tax returns. Thus, the onus instead was on the taxpayers to demonstrate that this reassessment was incorrect, which they failed to do.
Since the amount of this underlying reassessment for 2007 was greater than the amount of the two payments made to the taxpayers, their s. 160 assessments were upheld.