Carasco – Federal Court indicates that CRA relief under s. 152(4.2) must accord with the applicable substantive provisions

A taxpayer sought the deduction, in a relief application made pursuant to s. 152(4.2), of $195,000 in legal expense incurred by her in otherwise statute-barred years in connection with a human-rights action. CRA initially proposed to allow the requested deduction (and to also include the small related reward in the taxpayer’s income) but then, after the requested response period had expired, changed its view, and rejected the proposed adjustments on the basis that the legal fees did not qualify for deduction under s. 8(1)(b). In rejecting the taxpayer’s claim for judicial review, Strickland J stated:

[T]he Minister’s Delegate had no discretion and was compelled to apply s 152(4.2) of the ITA in accordance with the parameters set out in s 8(1)(b). In assessing the tax liability of a taxpayer, “the Minister generally has no discretion to exercise and, indeed, no discretion to abuse. Where the facts and the law demonstrate liability for tax, the Minister must issue an assessment” (JP Morgan …).

Neal Armstrong. Summary of Carasco v. Attorney General of Canada, 2022 FC 1665 under s. 152(4.2).