The taxpayer here tried to get an extension of time to appeal reassessments of his 2009 and 2010 tax years. He filed his request in the Tax Court almost 2 1/2 years after the 2014 reassessments.
To excuse the delay, the taxpayer referred to his depression and the fact that his accountants let him down. His first accountant had, though, properly filed objections to the assessment. But that account became ill.
The 2nd accountant made a hazardous choice: instead of filing a Tax Court notice of appeal against the confirmed reassessments, the accountant: “chose rather to file amended tax returns for the 2009 and 2010 tax years.” [38]
Evidently, CRA ignored those amended returns or refused to accept them. (Although CRA has discretion, in the case of individuals, to adjust assessments beyond the normal reassessment period: ITA s. 152(4.2), it likely will refuse if it disagrees with the taxpayer’s filings, as one might expect where the CRA has reassessed.)
Presumably, after CRA collection action, Mr. Gauthier scrambled to correct his accountant’s error.
As the Court noted, it has no discretion to extend the time for filing an appeal if the taxpayer misses the one year +90 days extension limit.
The taxpayer did, though, suggest a remedy that the Court seems to have rejected too quickly. He said that the 2014 reassessments were made beyond the normal reassessment period. [16] The Court said this was an argument on the merits of the reassessments (rather than on the extension issue) and so it rejected the argument.
The Court did not refer to Lornport Investments 1992 CarswellNat 251 (FCA), where the Federal Court of Appeal held that a reassessment issued beyond the statutory time limit was not “legally issued” and so does not affect the prior assessments. [Lornport , 8]
In Blackburn Radio Inc. v. The Queen, 2012 TCC 255, Justice Woods (now on the Federal Court of Appeal) followed Lornport and also considered “whether a taxpayer must object to a statute-barred assessment”. Relying on The Queen v Canadian Marconi Company, [1992] 1 FC 655, 91 DTC 5626, she concluded that an objection to a statute-barred assessment “was not necessary unless the Minister was alleging fraud or misrepresentation”. [Blackburn , 61]
Justice Woods concluded:
“[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. 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.”
It was the same in Gauthier’s case: there was no evident suggestion that he had made a negligent misrepresentation in his returns justifying a late reassessment. The result would be that the earlier assessments would continue to be valid.
As there would have been no need to object to the void reassessments, there would also be no need to appeal them. So, though the Tax Court would properly have dismissed the extension application, the basis for the dismissal would have been that there was no need to appeal and no need for an extension.
Mr. Gauthier also raised an argument about a rule in the Civil Code of Québec that suspends limitation periods if complying was beyond the person’s control. As Justice Guy Smith noted, the Québec Court of Appeal rejected the application of that rule to tax cases in Andreou c. Agence du Revenu du Québec, 2018 QCCA 695. And now the Tax Court has done the same. The ITA offers its own overriding limitation period and the Québec rule is subordinate to that.