O'Hagan – Tax Court of Canada indicates that whether a false statement engages a s. 163(2) penalty should be determined only as at the time of return filing

The taxpayer, who had a modest income, filed a return prepared by an “accounting firm” (DSC) claiming a false business loss of $214,176.

Before confirming the imposition of a gross negligence penalty, Russell J referred approvingly to the finding in Torres that wilful blindness can impute knowledge as well as constitute gross negligence, and adopted and applied the Torres indicators as to wilful blindness to find that in the circumstances the taxpayer should have first reviewed the return to ensure its correctness, rather than signing it without any review, or enquiry of DSC.

Russell J further stated that “whether … false statements or omissions in a return justify a subsection 163(2) penalty is determinable at the time the return is filed,” so that he did “not consider evidence heard that post-dates the filing of the 2009 return containing the false statement is of relevance.”

Neal Armstrong. Summary of O'Hagan v. The King, 2023 TCC 52 under s. 163(2).