This recent Federal Court of Appeal affirmation of the deadline to file an objection or an application for extension to appeal an assessment demonstrates that the statutory deadlines are not a suggestion. In this case the corporation did not file a GST/HST return for the 2010 tax year and was assessed an imputed amount in November 2011, meaning that the CRA effectively guessed at what the return should have been and assessed the taxpayer for that amount.

“Technically a taxpayer can file an application for an extension to appeal within 1 year after the expiration of the appeal period but it is granted at the discretion of the CRA.”

First question, can the CRA do this? Yes. If a taxpayer doesn’t meet their obligations to file, the CRA can impute the taxpayer’s liability under subsection 299(1), which reads as follows:

“The Minister is not bound by any return, application or information provided by or on behalf of any person and may make an assessment, notwithstanding any return, application or information so provided or that no return, application or information has been provided.“

Part IX of the Excise Tax Act (GST/HST) does not require the Minister (CRA) to wait until the taxpayer has filed a return for the period.

Further, section 12 of the Interpretation Act reads as follows:

Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

In other words, the CRA and the courts are to interpret the provision and the Act so that it meets the objective of collecting tax as authorized by law. If the taxpayer hasn’t filed or otherwise explained why they can’t file, the CRA is well within its considerable power to come up with its own number and that amount is deemed to be valid under subsection 299(3) unless otherwise vacated or reassessed on objection or appeal. Which brings us to the next mistake by the taxpayer…

Generally a taxpayer who has been assessed or reassessed for tax has 90 days after the date on the assessment letter to file an objection and are guaranteed to have it heard by an appeals officer. Technically a taxpayer can file an application for an extension to appeal within 1 year after the expiration of the appeal period but it is granted at the discretion of the CRA.

In the case above, the taxpayer failed to file their GST/HST return by the deadline. They were then contacted multiple times by the CRA to file and neither filed nor made arrangements for a delayed filing. On November 18, 2011, the CRA issued an imputed assessment (likely considerably more than what was actually collected by the taxpayer). It wasn’t until November 2, 2015, (almost 4 years later) that the taxpayer filed a notice of objection (NOO). The NOO was rejected because it was outside the 90 day objection period. The taxpayer then filed a request for extension to appeal on October 23. 2017. This request was denied also because the request had to be made no later than 1 year after the end of the 90 day appeal period. The taxpayer then filed a request for extension of time to the Tax Court of Canada (TCC) and was again denied an extension because they didn’t meet the conditions for such an extension under subsection 304(5). The taxpayer then appealed the Tax Court decision to the Federal Court of Appeal and here we are.

Most likely it was inattention on the part of the taxpayer to their legal requirement to file a return that launched this nearly 13 year odyssey. This is a cautionary tale that deadlines are not suggestions and that continuing to appeal upwards when it comes to statutory law on deadlines is likely to be futile.

If you have a tax assessment that you don’t agree with and are within the 90 days after the date on the assessment, get in touch with a ZheroTax pro and they will give you the straight goods on what your probability of success and put their fee on the line by offering their services on contingency. The taxpayer in the case above would have been best served by getting professional tax help at the beginning and not wasting more than a decade and thousands of dollars fighting a case that couldn’t be won.