Mammone - Federal Court of Appeal finds that s. 152(9) did not permit CRA to change the factual basis for its reassessment beyond the normal reassessment period

In December 2013, CRA purported to retroactively revoke the registration of a pension plan (the “New Plan”) to which a transfer had been made in 2009 of the commuted value of the taxpayer’s interest in his old (OMERS) registered pension plan. CRA, in reliance on the retroactive character of that revocation, then immediately reassessed the taxpayer to include the amount of the transfer in his income under s. 56(1)(a)(i) on the basis that the exemption for RPP-to-RPP transfers was not available. However, the initial revocation was invalid due to inadvertent failure by CRA to comply with the 30-day notice requirement in s. 147.1(12). CRA did not discover this mistake until well after the normal reassessment period for 2009, and then issued a second (this time, valid) notice of revocation.

Woods JA applied the statement in Gramiak “that allowing the Minister to raise an argument based on a legal and factual basis that is different from the one underlying the assessment after the normal reassessment period has expired would in effect do away with the limitation period.” She indicated that a valid revocation notice was an essential factual underpinning for the s. 56(1)(a)(i) income, and since a valid revocation in fact did not occur until 2017, “clearly, this was not a factual basis on which the reassessment was based when it was issued.” Thus:

[T]he Minister’s position impermissibly avoids the limitation period for the 2009 taxation year. The Minister’s reliance on the 2017 revocation notice was a new factual basis underlying the reassessment raised long after the limitation period had expired.

As the factual basis for the Minister’s reassessment had changed beyond the normal reassessment, the Minister was precluded from relying on having validly made a retroactive revocation of the New Plan.

Woods JA was well aware of s. 152(9), which at that time stated that “the Minister may advance an alternative argument in support of any assessment at any time after the normal reassessment period” but found that s. 152(9) had no traction, stating:

Moreover, this was more than a “new basis” to support the reassessment. It was also a new fact that did not materialize until after the limitation period had expired, when the Minister issued the second notice. (emphasis added)

S. 152(9) now states that “at any time after the normal reassessment period, the Minister may advance an alternative basis or argument”. She stated that this amended language “expands the scope of the new arguments that the Minister may make after the expiry of the limitation period,” but given the bolded language above, it is not clear that this expanded language would have changed the result.

Neal Armstrong. Summaries of Mammone v. Canada, 2019 FCA 45 under s. 152(4) and s. 152(9).