CRA finds that a taxpayer could not now file returns for statute-barred periods that had been arbitrarily assessed so as to claim additional expenses

ACo’s 2011 to 2013 taxation years were arbitrarily assessed under s. 152(7). Eventually, it filed tax returns for those taxation years after the normal reassessment periods for those years, claiming additional deductions.

CRA considered that ACo could not effectively extend the normal reassessment period pursuant to a request by it to extend the s. 150(1) filing deadline for its 2011 to 2013 returns under s. 220(3). In this regard, CRA indicated:

[S]ubsection 164(1.5) indicates Parliament’s intention with respect to when relief from the three-year limitation of subsection 164(1) can be granted. Therefore, if a taxpayer does not meet the conditions for relief under subsection 164(1.5), it is our view that no further relief under subsection 164(1) may be provided under subsection 220(3).

Furthermore, ConocoPhillips (finding that s. 220(2.1) could not be utilized to allow a taxpayer to waive the requirement to file a notice of objection) suggested that “[s]ubsection 220(3), which, like subsection 220(2.1), is a general provision, cannot override the specific provisions contained within the objection regime in the Act.”

The taxpayer’s repeated failure to file returns when requested appeared in CRA’s view to amount to a misrepresentation referred to in s. 152(4)(a)(i). However, CRA indicated that “to allow a taxpayer who has made a misrepresentation to use subparagraph 152(4)(a)(i) to reduce the amount of tax assessed would be inappropriate,” in light of various considerations. These included that the onus on the Minister under s. 152(4)(a)(i) implied that the provision could only “be used by the Minister to increase assessed tax payable and not by a taxpayer to reduce tax payable,” and that it seemed inappropriate that a taxpayer could “open a statute-barred year to obtain a more favourable reassessment because they were (or claim to have been) careless or negligent when they filed their tax return or failed to file a return at all.”

Accordingly, s. 152(4)(a)(i) did not permit the Minister to reassess ACo in these circumstances.

Neal Armstrong. Summaries of 22 August 2022 Internal T.I. 2019-0810061I7 under s. 220(3), s. 152(4)(a)(i), s. 164(1.5) and s. 152(6).