CRA states that it will not grant ITCs when it assesses following an audit but without receiving any GST/HST return
On the GST/HST side, CRA issues both
- non-binding “notional” (i.e., approximate) notices of assessment (NNOAs), which are issued in order to encourage the registrant to file returns and which “can be overridden at any time with a filed return by the registrant” and
- binding NNOAs which, as the term implies, “would require the registrant to file a Notice of Objection to make any changes to the assessment,” and which “will be issued on completed exams where full records were reviewed but … no returns were provided.”
In the latter type of situation, the binding NNOA will not grant any input tax credits, as CRA:
does not want to make a decision on behalf of the registrant on when to claim their ITCs. There is no legislative requirement to include ITCs when raising notional assessments. Registrants can either file their return(s) and include the ITCs, claim them on a future period, or be assessed based on sales.
Neal Armstrong. Summary of May 2019 CPA Alberta CRA Roundtable, GST Session – Q.14 under ETA s. 296(1)(a).