Canada: Tax Court Appeals: Notice of Appeal

Last Updated: January 5 2016

Canadian Tax Lawyer File Notice of Appeal

Once a Notice of Confirmation from the Canada Revenue Agency confirming the audit assessment is received, the next level of disputing a tax assessment/reassessment is to have your Canadian Tax Litigation Lawyer file a Notice of Appeal with the Tax Court of Canada. The Notice of Appeal must be filed within 90 days from the date of the confirmation of the reassessment, but can be extended through an application to the court for up to one additional year. However, it should be noted that this extension application is rarely granted, and circumstances that warrant an extension must exist.

Offer to Settle

The Notice of Appeal begins the trial process, and the Department of Justice will be brought in to work with and represent the Canada Revenue Agency. It is very important that an offer to settle is made before the matter makes its way to trial, as discussed in another article posted on our website. However, before even getting to a settlement offer, there are a number of preliminary steps.

Once the Notice of Appeal has been filed with the Tax Court Registry, the taxpayer will be contacted by the Department of Justice, which represents Canada Revenue Agency at Tax Court. The Department of Justice must reply to the Notice of Appeal within 60 days with the Canada Revenue Agency’s position regarding the appeal. The taxpayer then has an opportunity (though they are not required) to respond to the Department of Justice’s reply within 30 days.

Document List & Examinations for Discovery

The two parties will then exchange a list of documents which identifies and briefly describes the documents that they will be relying on at the Tax Court. Next, Examinations for Discovery are typically arranged to provide a chance for each side to question the other side, under oath, about matters involved in the lawsuit. The purpose of the examination is to find out what the other party knows or thinks about the matters at issue, to uncover areas of agreement, and to obtain admissions from the other party which can later be used against them at trial. The Examinations for Discovery can be performed orally or sometimes in writing.

Once the Examinations for Discovery are completed, the parties usually make a joint application to the Hearings Coordinator to schedule a hearing date. It is typically between the completion of Examinations for Discovery and the hearing that a settlement offer is made from one party to the other. Again, it is very important that an offer to settle is made, as discussed in more detail in another article on our website.

Tax Court Trial Process

Assuming that a settlement is not reached, both the Department of Justice and the taxpayer (represented by their Canadian tax lawyer) will appear at the Tax Court to present their versions of the facts to a judge, arguing why they disagree with the other side’s decision and providing evidence to support their position. The Tax Court will hear the taxpayer’s case first, as presented by the Canadian tax litigation lawyer. This involves introducing evidence explaining the facts and reasons for the taxpayer’s appeal by calling witnesses to testify, and providing documents or other evidence such as expert or accounting testimony to support the tax arguments. After each witness for the taxpayer is called and examined by the tax appeal lawyer ("examination in chief"), the tax lawyers for the Department of Justice will be given an opportunity to cross-examine the witness.

Once the taxpayer’s case has been presented, the Department of Justice will present their response to the taxpayer’s case on behalf of CRA following the same procedure as the taxpayer, and the taxpayer’s tax litigation lawyer will be given an opportunity to cross-examine the witnesses called by the Department of Justice’s tax lawyer after each witness has been led through their examination in chief.

After both the Department of Justice’s tax appeal lawyers and the taxpayer’s income tax lawyers have presented their cases, there will be an opportunity for the taxpayer’s Canadian tax lawyers to respond to any arguments raised by the Department of Justice and present how the relevant tax law should be applied. The Department of Justice’s tax lawyers will do the same.

The Tax Court judge will decide the appeal based on the evidence and legal arguments about the relevant income tax law presented at court by the taxpayer’s income tax lawyer and Department of Justice tax lawyers. The Tax Court’s powers are determined by statute; specifically, the Tax Court of Canada Act. The Tax Court of Canada only has the power to uphold the Canada Revenue Agency’s assessment, vacate the assessment, or direct the Canada Revenue Agency to reassess the taxpayer for a different amount.

The Tax Court stage of a tax dispute is undoubtedly a big step up from the internal appeal process of the Canada Revenue Agency, as there are many more formalities and procedures that must be observed. Although an Informal Procedure for the Tax Court is available to make the Tax Court more accessible, it is only available for income tax cases where the amount of federal tax and penalties in dispute for each taxation year is $25,000 or less, excluding interest. It is also available for GST appeals where the amount in dispute is less than $50,000. Experience and judgment are crucial at this stage, as a misstep could lead to an unsuccessful appeal. Our experienced income tax lawyers specialize in income tax appeals and will assist in navigating through the complexity of the Tax Court and provide strong tax representation and guidance at each step of the appeal to Tax Court.

The information is thought to be current to date of posting. Income tax law changes frequently and content may no longer reflect the current state of the law. This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

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Useful Resources
Forms available to download for income tax filing in Canada.
Hear David J. Rotfleisch discuss timely and highly topical tax matters during appearances and interviews with specialist publications.
Useful explanatory videos of income tax matters.
The following questions and answers are based on the proposed measures that were announced on December 7, 2015.
The official Government website of the CRA.
This guide is for any person who deals with the Canada Revenue Agency (CRA). The guide gives you information on the 16 rights set out in the Taxpayer Bill of Rights and explains what you can do if you believe that the CRA has not respected your rights.
The Office of the Taxpayers' Ombudsman (OTO) works to enhance the Canada Revenue Agency's (CRA) accountability in its service to, and treatment of, taxpayers and benefit recipients through independent and impartial reviews of service-related complaints and systemic issues.
Ontario personal income tax is an annual tax collected from individuals who are Ontario residents on the last day of the tax year or have income earned in Ontario for the tax year.
The following documents provide instructions for filing your 2015 income tax return.
If you earned income in B.C. or operated a Corporation with a permanent establishment in B.C. last year you need to file an income tax return. Find out when you need to file your income tax return, and if any tax credits or rebates apply to you.
Generally, a corporation must file an Alberta corporate income tax return (AT1) for each taxation year during which it has a permanent establishment in Alberta.
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