In CRA Document No. 2013-0487181I7 "Extension of the reassessment period" (July 12, 2013), the CRA was asked to provide its views on the operation of subsection 220(3) of the Income Tax Act.
Subsection 220(3) of the Act states,
220(3) The Minister may at any time extend the time for making a return under this Act. [emphasis added]
A corporate taxpayer failed to file a T2 return of income for a year. The CRA issued an arbitrary assessment pursuant to subsection 152(7) of the Act. Three years later, the taxpayer filed its T2 return, but the CRA refused to reassess as the "normal reassessment period" had expired (see subsection 152(4) of the Act).
In its technical interpretation, the CRA stated,
"Subsection 220(3) provides the Minister with the discretion to extend the time for making a return under the Act. However, such discretion must be exercised for a taxation year that has not become statute-barred."
The CRA may be correct about the result in this particular case, but a few points should be clarified.
It is clear that the Minister's discretion under subsection 220(3) is not subject to any limitation.
Practically, however, if the Minister exercises her discretion under subsection 220(3), certain other provisions relating to the Minister's ability to assess the taxpayer's return could be engaged. For example, the normal reassessment period does not run until the CRA issues an initial assessment. Or, the nature of the taxpayer could impact the CRA's ability to reassess: Subsection 152(4.2) of the Act allows the Minister to reassess tax, interest and penalties for a taxation year at any time after the end of the normal reassessment period if the taxpayer makes a request for a reassessment within 10 years after the end of that taxation year. However, subsection 152(4.2) applies only to individuals and testamentary trusts.
In the present case, while the CRA could, pursuant to subsection 220(3), extend the time for filing a T2 return, the CRA could not reassess the return because the normal reassessment period had expired and another relieving provision – such as subsection 152(4.2) – did not apply.
In another case, the result could be different.
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