In Paul C. Golini v. The Queen (2013 TCC
293) the Tax Court of Canada agreed to strike out portions
of a taxpayer's pleading suggesting that a protective
reassessment issued by the Canada Revenue Agency
("CRA") was invalid.
In June 2012, the CRA informed the taxpayer that his 2008 income
tax return had been selected for an audit. In the following
months, both parties continued to correspond and exchange
information. In August 2012, the CRA asked the taxpayer to
provide a waiver extending the limitation period to reassess
the 2008 taxation year. The taxpayer declined to do so.
In September 2012, the Minister reassessed the taxpayer and
informed him that the reassessment was a "protective
reassessment;" supporting documentation would be provided upon
completion of the audit.
The Crown brought a motion to strike out the allegation that the
reassessment was invalid. The taxpayer contended
that a "protective reassessment" was inconsistent
with the assessing provisions of the Income Tax
Act as it was issued solely to allow the Minister
additional time to complete an audit.
The Tax Court judge looked to Karda v. HMQ (2006 FCA 238) for
guidance on the issue. In that case, the Federal Court of
Appeal held that the Minister may issue a protective reassessment
where a taxpayer declines to provide a waiver so long as the CRA
has completed "some review" and has requested
further information. The Tax Court judge held that:
There is no law . . . to the effect that a protective assessment
is invalid if issued for the sole purpose of leaving the door open
to conduct or continue an audit.
He went on to note that:
. . . the law, I find, is clear that some review by the CRA
followed by inquiries for more information and a request for a
waiver, subsequently refused, is sufficient for a protective
assessment to be a valid assessment. And that is exactly what we
Whenever a taxpayer declines to grant the CRA a waiver, the
CRA almost invariably reassesses before the "normal
reassessment period" expires. There is nothing
surprising about that. What is noteworthy here, though, is
the willingness of the Tax Court to entertain the
Crown's request to strike out, before trial, an
argument put forward by a taxpayer. As we noted in our
blog post on the Federal Court of Appeal's decision in Canadian Imperial Bank of Commerce v. The
Parties are generally given the opportunity to make whatever
arguments they consider necessary to their case with the ultimate
determination being made by the trial judge who is in the best
position to decide questions of relevance and weight in light of
all the evidence. It is rather unusual for a legal theory,
novel though it is, to be taken off the table at such an early
stage. At the same time, courts are increasingly concerned
about "proportionality" and are reluctant to allow scarce
judicial resources to be spent on matters that are unlikely to have
any effect on the outcome of the hearing.
This decision is, therefore, consistent with recent
jurisprudence from the Federal Court of Appeal and should
reduce the number of issues to be decided at trial.
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