Gestions Cholette – Tax Court of Canada finds that failure to review a return containing an error that should have been detected was carelessness under s. 152(4)(a)(i)

Due to what Favreau J found to be carelessness of its external accountant, the taxpayer failed to include, in its income, taxable dividends totalling $920,700 received in 2010 from subsidiaries while, at the same time, claiming a s. 112(1) deduction of $920,700 in computing its taxable income, thereby understating its taxable income by that amount.

In finding that CRA had established carelessness or neglect in reassessing beyond the normal reassessment period to add back the dividend amounts, Favreau J stated:

[T]he failure to review the appellant's income tax return and the failure to question the accountant to ensure the accuracy of the information contained in the return demonstrate a lack of due diligence on the part of the appellant's officers. Considering the skills, experience and knowledge of the appellant's officers, I believe that they would have been able to discover the error had they taken the trouble to check the return as would a prudent and conscientious person.

Neal Armstrong. Summary of Gestions Cholette Inc. v. The Queen, 2020 CCI 75 under s. 152(4)(a)(i).