Glatt – Federal Court orders CRA to pay interest on a refund where CRA thought there was no statutory authority for interest
Following his assessment for a s. 163.2 penalty, the taxpayer paid $1M to CRA so as to offset interest which would be borne by him if the assessment were upheld. After the assessment was vacated pursuant to a consent judgment, CRA issued a Notice of Reassessment showing the cancellation of the penalty and a refund of the $1M but denying any refund interest on the basis that s. 164(3) requires a taxation year to be specified in order for interest to be paid – and a s. 163.2 penalty is not calculated by reference to any particular taxation years.
A significant difficulty with this CRA position was that the Notice of Reassessment in fact, in its upper right-hand corner, stated “Tax year 2012.” Diner J found that this was not an administrative error that was corrected by s. 152(8). The Crown further argued that s. 164(3) also lacked traction on the basis the Notice was improperly described as a “Reassessment” rather than as a “notice of refund” or “refund receipt.”
It is unclear whether the taxpayer would have succeeded if CRA had not made the “mistake” of referring to 2012 in the Reassessment, given that Diner J also indicated that denying interest on the refund was inconsistent with Grenon.
He took the unusual step of ordering CRA to pay the interest, rather than remitting the matter back to CRA for further consideration.
Neal Armstrong. Summary of Glatt v. Canada (National Revenue), 2019 FC 738 under s. 164(3).