Breakdown in trust not indication that accountant’s status as taxpayer’s authorized representative had been revoked

Federal court | Tax | Income tax | Administration and enforcement

Taxpayer was partner of investment firm for several years, and he incorporated and utilized 168 Inc. as holding entity for his personal investment in his firm upon receiving tax advice from accountant. After taxpayer retired in 2007, he noticed irregularities with his company’s tax returns for fiscal year ending 2009, which led to breakdown in trust between him and accountant. In 2012, taxpayer called CRA indicated he was not getting his mail and instructed CRA to update address on file to his address rather than accountant’s. Minister assessed “failure to file” penalties and arrears interest for 2009 to 2013 taxation years, as returns were filed in 2015 and all were past their due date. Taxpayer asked for Minister’s decision to be reviewed, and first reviewer exercised discretion to grant 169 Inc. partial relief by cancelling arrears interest for first two years but declined to provide further relief, second-level reviewer agreed with first-level reviewer and Minister’s delegate concurred with second-level reviewer’s recommendation. Taxpayer brought application for judicial review from Minister’s decision. Application dismissed. There was no breach of procedural fairness in this case, as there was no evidence to support assertion made in taxpayer’s memorandum of fact that accountant had been removed as its authorized representative at time CRA had telephone discussions with taxpayer. It was recognized there was breakdown in trust between him and accountant in 2010, but this did not constitute indication that accountant’s status as taxpayer’s authorized representative had been revoked. All evidence indicated that CRA attempted, in good faith, to follow up with accountant and upon receiving information that taxpayer was preparing returns and making payments, made best efforts to contact him. Decision was reasonable, as there was no dispute that taxpayer filed late returns and record demonstrated that it took taxpayer over four years to file complete and accurate returns after discovering accountant’s error. Taxpayer had responsibility to ensure, in some way, that either it or its representative duly filed its returns.

1680169 Ontario Limited v. Canada (Attorney General) (2019), 2019 CarswellNat 1478, 2019 CarswellNat 2372, 2019 FC 562, 2019 CF 562, Alan S. Diner J. (F.C.).

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