Section 298

Subsection 298(1) - Period for Assessment

Paragraph 298(1)(a)

See Also

Quinco Financial Inc. (formerly Landex Investments Company) v. The Queen, 2013 TCC 20, aff'd 2014 FCA 108

statute-barring computation did not commence until residual ITCs claimed

For income tax planning reasons, the registrant followed a practice of not claiming input tax credits ("ITCs") for a number of successive monthly reporting periods ("Deferral Periods") and then, in its return for the reporting period following that grouping of Deferral Periods (the "ITC claim return"), claimed ITCs for the Deferral Periods equal to the amount of the ITCs to which it otherwise would be entitled minus GST received by it in the Deferral Periods through the receipt of credit notes. In returns for reporting periods subsequent to those for which it filed the ITC claim returns, it then made further ITC claims (for the "Residual ITCs") which effectively represented a reversal of the previous deductions it had made, in its ITC claims in the ITC claim returns, for the GST included in credit notes received by it. The Minister denied the claims for the Residual ITCs in reassessments made outside the four-year limitation period if it were viewed as commencing from the time of filing the ITC claim returns, but which were within that period if it commenced from the claiming by the registrant of the Residual ITCs.

In accepting (at para. 47) that the Minister was not statute-barred from denying the Residual ITC claims, D'Auray J noted that until the registrant made those claims, the Minister did not have a basis to reassess the registrant.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 232 - Subsection 232(3) no credit note ITC recapture if ITCs subsequently claimed 302

Articles

Joint Committee, "COVID-19 Measures", 1 June 2020 Joint Committee Submission

Scope of proposed discretion to extend deadlines

  • S. 7 of the Time Limits and Other Periods Act (COVID-19 Act) (the “Proposals”) would grant the Minister the exceptional power inter alia to order the suspension or extension of a time limit, or any other period, that is established under any ITA or ETA listed in the Schedule. The Joint Committee suggests that there are provisions missing from the Schedule, and suggests that it contain more generic language to cover what is being aimed at.

Understanding of reasonable limitations on CRA’s discretion to extend reassessment periods during COVID-19

One set of provisions that are already listed are ITA ss. 152(3.1) and (4) and ETA ss. 298(1) and (2), setting out permitted (re)assessment periods. Based on informal discussions with CRA officials, it is understood that the “Minister would likely exercise the authorities provided under s. 7 of the Proposals in a manner that would not displace acquired rights by reopening administrative proceedings which had achieved finality before the announcement of the Proposals, nor in a manner that could be duplicative or inordinately disruptive of certainty in proceedings and the rule of law, or not justified by the need to avoid unfair or undesirable effects of the COVID-19 crisis.” The following observations of the Joint Committee give shape to that understanding:

  • Where such reassessment periods had already expired before the announcement of the Proposals, any such order would not permit an assessment without the taxpayer’s consent.
  • For audits that had not been materially disrupted by COVID-19, no order would extend such a reassessment period.
  • Any order(s) would not result in a total prolongation exceeding six months.
  • Any such order would not suspend or extend any such reassessment period which would otherwise expire within a reasonable amount of time after September 13, 2020.

Paragraph 298(1)(e)

Administrative Policy

GST/HST Memorandum 16.2 Penalties and Interest 9 January 2009

Listing of penalties excluded from limitation period

78. Generally, the Minister may not assess a penalty more than four years after the person became liable for the penalty. However, there is no time limitation for assessing the following penalties:

• the 6% penalty assessed under section 280;

• the failure-to-file penalty under section 280.1;

• the penalty for false statements and omissions under section 285; and

• the third party penalty under section 285.1.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 124 - Subsection 124(3) retroactive amendments 48

Subsection 298(2)

See Also

Heath v. The Queen, 2018 TCC 119 (Informal Procedure)

CRA could effectively reverse notice of discontinuance by reassessing

The unrepresented taxpayer filed a notice of discontinuance for her appeal of the denial of the new housing rebate after being advised by Crown counsel that her appeal was unlikely to succeed – but a day later, was informed by Crown counsel that she would be allowed the rebate. However, the Registrar refused to accept the parties’ joint consent to judgment to this effect on the basis that a notice of discontinuance had already been filed.

Smith J agreed with the Registrar, noting (at para. 10) that Scarola, 2003 FCA 157 had established “that a discontinuance under subsection 16.2(2) [of the Tax Court of Canada Act] ‘produces the same effect as a judgment of dismissal by the Court’.”

He went on to note that CRA still appeared to have the ability to exercise its discretion to reassess to allow the rebate, stating (at para. 14):

… I leave it to the Minister to consider the appropriateness of a reassessment to implement the terms of the consent, possibly pursuant to subsection 298(2) … .

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Act - Section 16.2 - Subsection 16.2(2) notice of discontinuance could not be reversed even with Crown consent 240

Subsection 298(3)

See Also

Viterra Inc v. The Queen, 2018 TCC 29

consequential ETA reassessments were subject to essentially the same limitations as under the ITA

In 2007 and 2008, the Minister assessed to deny input tax credits for GST paid by the appellant on fees of investment managers who managed three defined benefit Pension Plans of which the appellant was the administrator. In 2016, the Minister made a reassessment which allowed such ITCs, but included an equivalent amount of unreported GST collectible by the appellant in respect of an alleged resupply of the investment management services by the appellant to the Pension Plans. In justifying this reassessment beyond the normal reassessment period, the Minister took the position that “unlike the corresponding provisions of the Income Tax Act, subsection 298(3) imposes no limits on the Minister’s power to reassess,” and that thus “the Minister is not precluded from reassessing on the basis of different transactions or even from increasing net tax” (para. 18).

While the wording of subsection 298(3) of the GST Act is different than the wording of subsection 165(5) of the Income Tax Act, Parliament’s intention is, in my view, the same: the Minister cannot, after the expiry of the reassessment period, use subsection 298(3) of the GST Act to increase the net tax of the GST registrant or to take into account different transactions that the ones that formed the basis of the reassessment that was made within the statutory reassessment period.

However, he found that the Rule 58 materials before him were insufficient to determine whether the 2016 reassessment was made taking into account a different transaction, stating (at paras 45, 46):

In order to answer the Rule 58 Question, the Court must determine whether the supply of the investment management services by third parties to the Appellant and by the Appellant to the Pension Plans is part of the same transaction, or a series of transactions, such that the Minister did not consider any new transactions when reassessing the Appellant. The relevant facts, including agreements, required to make such a determination are not before the Court.

For example … there may be an interrelationship between the Appellant’s acquisition of the investment management services and its resupply of such services to the Pension Plans. … The Court cannot answer the Rule 58 Question … in a factual vacuum.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(5) consequential reassessment must not take different transactions into account 213

Subsection 298(4) - Idem [Exception]

Paragraph 298(4)(a)

See Also

Prima Properties (92) Ltd. v. The Queen, 2019 TCC 4

a taxpayer was not negligent in failing to ask its accountant about a change in use of its rental property

The appellant, which until then had been leasing out its property for use as a hotel, leased the property to a different tenant (“PHS”), which was a non-profit organization, for stated use as a “supportive long-term housing project for 100 homeless adults living with mental illness”. Mr. Tehrani, the president of the taxpayer’s parent company, gave the company’s external accountant (Mr. Marzbani) a copy of the new lease (the “PHS Lease”), but did not ask any questions about the change in use. The appellant apparently continued to charge GST on the lease payments.

The position of the Crown was that the rents under the PHS Lease were exempt under Sched. V, Pt. I, s. 6.11, so that s. 206(4) deemed there to be a self-supply of the property at the commencement of the PHS Lease. As the assessment in question was made beyond the four-year time limitation in s. 298(1), at issue was whether the Crown had established a misrepresentation due to neglect or carelessness.

After noting that the s. 6.11 exemption turned on whether the underlying accommodation provided to the homeless was exempted under Pt. 1, s. 6(a) on the basis of continuous occupancy being given for at least one month, Paris J found that no misrepresentation had been established, as “no evidence was led regarding the nature of the arrangements governing the occupancy of the units in the Property by the clients of PHS” so that the Crown had not established that the s. 6(a) exemption was applicable.

In further finding that (even if there had been a misrepresentation) no carelessness or neglect had been established, he stated (at paras. 37, 46, and 49):

… [T]he potential significance, for GST purposes, of the fact that PHS’s intended use of the Property differed from that of Sunset would only have been apparent to a person with extensive knowledge of Part IX of the Act, and familiarity with the change of use provisions in subsection 206(4) of the Act. Here, Mr. Tehrani had neither, and I do not believe it reasonable to expect a lay business person to be knowledgeable about such matters. …

… [T]o expect Mr. Tehrani to initiate a discussion with Mr. Marzbani concerning the possible application of a highly technical provision of the Act would be to hold him to an unrealistically high standard of care.

Aridi … found that it was not sufficient to show negligence on the part of the taxpayer’s professional advisor in making the misrepresentation, and that the taxpayer must also be shown to have acted in a negligent or careless manner.

After quoting (at para. 44) the test in Robertson (2015 TCC 246, at para. 38, aff’d 2016 FCA 303) of the conduct of a wise and prudent person:

… (1) the taxpayer submits all materials to the professional advisor; (2) a discussion is had between the advisor and the taxpayer touching upon the inclusion or exclusion from income of the item; (3) that discussion gives rise to a review of the facts related to the inclusion or exclusion; and (4) a clear, factual confirmation made by the professional advisor leads to the misrepresentation.

he stated:

[I]t is not necessary to find that all four elements are present in order to find that a taxpayer has satisfied the “wise and prudent person” test. The determination is a contextual one… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) negligence by accountant does not establish negligence of taxpayer 222

832866 Ontario Inc. v. The Queen, 2014 TCC 93 (Informal Procedure)

failure to query GST treatment of self-supply

The appellant, a small custom-home builder, was held equally by a married couple (the DeMarcos). In 2006, the couple sold their home and moved into the appellant's model home. This change in use triggered an obligation of the appellant to pay GST on the fair market value of the home under the ETA s. 191 self-supply rule.

Rip CJ allowed the Minister's reassessment beyond the normal limitations period, finding that the appellant had been neglectful in its failure to report this transaction in its GST return. The appellant argued that it was unreasonable to expect the DeMarcos to spot the self-supply issue.

Rip CJ pointed out that the appellant did not ask its chartered accountant for guidance (paras. 21, 40) and instead relied on a bookkeeper who was unfamiliar with tax matters (paras. 25, 40), and stated (para. 41):

The fact that the move by the family into the model home was a transaction the DeMarcos and the appellant had never experienced before in the over the 20 years existence of the company ... did not disturb [Mrs. DeMarco] sufficiently to ask questions.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) failure to query GST treatment of self-supply 174

Reluxicorp Inc. v. The Queen, [2011] GSTC 138, 2011 TCC 336

The appellant collected rents and GST thereon on behalf of another hotel operator, and paid those amounts over to that operator rather than remitting the GST to the federal government. Lamarre J found that the appellant had failed to establish through documentary evidence that there was an agency relationship, and found that there was negligence supporting an assessment outside the normal four-year period. Before so concluding, she stated (at para. 35}:

...it cannot be said that the mistake was unavoidable. In addition, the appellant gave no indication that it had obtained a prefessional opinion prompting it, after a thoughtful, deliberate and careful analysis, to not report the tax it had collected... .

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Exclusive 75% was not substantially all 255
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) allocation based on relative exempt and taxable revenues 134
Tax Topics - Excise Tax Act - Section 217 - Imported Taxable Supply 167

Ha v. The Queen, 2011 TCC 271

The registrant's assessment beyond the normal period, for unreported income of $91,232, $50,125, $64,540 and $66,596 in successive years, and unremitted GST totaling $19,074.51 over the same period, was upheld subject to minor adjustments. The registrant had not kept proper records and the amounts were arrived at by a net worth assessment. V.A. Miller J. found that the net worth assessments were consistent with the registrant's lifestyle. The registrant's evidence to the contrary was not credible because his explanations to different CRA officials and the Court were largely unsubstantiated and mutually inconsistent.

Articles

Brent F. Murray, "Extending the Assessment Limitation Period", Canadian GST Monitor, No. 275, August 2011, p. 1.