Minister should not be able to use taxation year as error that undermined validity of reassessment

Tax - Income Tax - Administration and enforcement

Minister of National Revenue assessed taxpayer, levying planner penalty pursuant to s. 163.2 of Income Tax Act, without specifying taxation year. Taxpayer paid $1 million (principal amount) to Minister in controversy, to offset interest if liable. Taxpayer was not found liable as parties settled his appeal resulting in consent judgment. Minister issued reassessment for specific taxation year, cancelling penalty and returning principal amount without interest. Taxpayer brought application for judicial review. Application granted. Minister’s refusal to pay interest was unreasonable and ran counter to current jurisprudence. Interest must be paid on principal amount. Section 164(3) of Act provided that Minister shall refund interest only where amounts had been collected in respect of taxation year. Minister argued that penalties for third party representatives under s. 163.2 of Act were not in respect of taxation year, and claimed that specified taxation year in reassessment was error. Reassessment was valid notwithstanding error, pursuant to s. 152(8) of Act. Minister should not be able to use taxation year as error that undermined validity of reassessment. There was no compelling evidence or legal authority that taxation year could not have been associated with imposition of planner penalty. Inclusion of taxation year in reassessment meant interest must be paid by operation of ss. 152(8) and 164(3)(e) of Act.

Glatt v. Canada (National Revenue) (2019), 2019 CarswellNat 2274, 2019 FC 738, Alan S. Diner J. (F.C.).

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