In this case, Justice Webb has confused the law on void assessments. It had been somewhat settled that assessments made after the normal reassessment period were void. In this case, Justice Webb has overlooked those earlier authorities to conclude that the rule in ITA s. 152(8) can validate a late assessment unless the taxpayer objects.
Here, Justice Webb had cleverly concluded that a late reassessment resulting in tax payable could not have been made under the taxpayer relief section 152(4.2), so that 165(1.2) did not preclude objection, because that 152(4.2) only allows the Minister to make late reassessments at taxpayer’s request in order to give refunds or reduced tax payable.
Faced with that conclusion of Justice Webb, the Crown argued that the fact that the reassessment was made outside the normal limitation period meant it was void and there could be no appeal against it. (Ironically, this would normally be an argument that a taxpayer would make, not the Crown.)
Justice Webb said the reassessment was saved by the fact that Mr. Freitas didn’t challenge the reassessment’s validity and ITA s. 152(8) says a reassessment is valid notwithstanding any defect or omission.
But in Lornport Investments Ltd. et al v The Queen, [1992] 1 CTC 351 (FCA), the Federal Court of Appeal had said that a late reassessment is void and not saved by s. 152(8). Here’s what the court said there:
“[7] … It seems to me that [subsection 152(8)] is not addressed to a situation where an assessment is issued out of time but rather to a situation where an assessment is issued in time but contains an “error, defect or omission” or that such is contained in any proceeding under the Act relating to it.
“[8] I have come to the conclusion, in the particular circumstances of this case, that the second reassessment, which was vacated by the court order of April 20, 1989, did not supersede and nullify the first reassessment. It seems to me that the court order amounted to judicial recognition that the second reassessment, issued as it was beyond the statutory time limit, was not legally issued. It did not, for that reason, displace and render the first reassessment a nullity.”
Recently, the Chief Justice in 594710 British Columbia Ltd. v. The Queen, 2016 TCC 288 summarized the law:
“[37] In Blackburn Radio and in Canadian Marconi [8] the FCA confirms that an out of time assessment is void. Section 169.1 is only aimed at precluding the TCC from doing anything but vacating or varying an assessment or reassessment. The TCC cannot vary or vacate an assessment or reassessment if it is void because it is void from the beginning and does not exist – the assessment or reassessment is simply not given effect.
[38] Also subsection 152(8) does not apply to an out of time assessment as per Lornport Investments. [9]“
Blackburn Radio was a Tax Court decision of Judith Woods, who now is a judge of the Federal Court of Appeal. In Blackburn she said:
“[58] This comment from Lornport is dispositive of this issue. Subsection 152(8) does not save a statute barred reassessment.
“[62] The above passages make it clear that it is not necessary to object to an out of time reassessment, unless the Minister has alleged fraud or misrepresentation.[2] In my view, Canadian Marconi is strong authority that an out-of-time reassessment is void absent an allegation of fraud or misrepresentation. There is no such allegation in this case.”