Sangha – Federal Court rejects a CRA decision for failure to contain “a coherent assessment of the relevant law and significant facts and submissions”

Mr. Sangha entered the 2017 taxation year having made excess contributions to his TFSA, but then withdrew all the funds two months before received a CRA letter (the “June 2017 Letter”) informing him of his excess 2016 TFSA contributions and warning that if he continued to make excess contributions “in the future”, he could be subject to a monthly 1% penalty tax. However, Mr. Sangha contributed $35,000 to his TFSA in September 2017 (allegedly reflecting a misunderstanding that he was not required to wait until January 2018 to make this contribution), and maintained the resulting excess contribution for almost a year.

CRA assessed penalty tax, including on the excess monthly balances in 2017 prior to the June 2017 Letter. In response to the second request of Mr. Sangha for a penalty waiver pursuant to s. 207.06(1), the delegate’s decision relevantly only referred to the fact that Mr. Sangha had over-contributed following the warning.

Before allowing the application and returning the matter for reconsideration by another delegate, Walker J found that the letter thus had failed to address material issues including (i) the fact that the assessments effectively were retroactive to before the second overcontribution notwithstanding the wording of the June 2017 Letter (which given the emphasis of Mr. Sangha on this issue in his review application, was by itself “a determinative error”), and (ii) Mr. Sangha’s submission that the timing of his second overcontribution was a “reasonable error” (i.e., ignoring an issue specifically raised in s. 207.06(1).)

She concluded, applying Vavilov:

I find that the Decision does not reflect a coherent assessment of the relevant law and significant facts and submissions from the record and that the Minister’s refusal to exercise their discretion was not intelligible or justified.

Neal Armstrong. Summary of Sangha v. Canada (Attorney General), 2020 FC 712 under s. 207.06(1).