Tax Court of Canada


Income Tax

Administration and Enforcement

Minister failing to show that taxpayer failed to file return within reasonable period set out in demand

Penalty in amount of $29,225.45 was assessed against taxpayer in respect of repeated failure to file for 2013 taxation year. Taxpayer filed income tax return over eight months after date on which it should have been filed. Taxpayer appealed. Appeal allowed. Because of jurisdictional limit of $25,000 for informal procedure, penalty could only be reduced by $25,000. Matter referred back for reconsideration and reassessment on basis that penalty assessed was to be reduced from $29,225.45 to $4,225. Necessary conditions for application of penalty for repeated failure to file required examination of both English and French versions of Income Tax Act. French text required additional condition not required in English text and two texts were not reconcilable. Enactment of subsection 162(2) of Act was part of scheme modifying penalties arising as part of broader changes proposed in 1987 tax reform. Under old provision, ‘tax sought to be evaded’ was question of fact but could not include amount that had already been paid by instalment or whithheld by payer and remitted to Minister, thus penalty applied to amount that was same or no greater than amount of unpaid tax that current subsection 162(2) applied to. Conditions in English text widened application of penalty in comparison with French text that required fourth condition that taxpayer fail to comply with reasonable time set out in demand. English language version of text seemed to simply require that demand be sent and French version required that person fail to file return within time limit set in demand. French version reflected proper interpretation of s. 162(2) of Act, and s. 162(2) could not apply unless taxpayer failed to file within time period set out in demand. Relevant subsection of Act could only apply where four conditions were met; that person fail to file return as and when required by s. 150(1) of Act, that demand for return for year must have been sent under s. 150(2) of Act, that person must have failed to file return within reasonable period set out in demand, and that person must, before time of failure, have been liable for penalty for failure to file on time or for repeated failure to file on time for any of three preceding years. Minister did not show that third condition had been met.

Hughes v. The Queen (2017), 2017 CarswellNat 2535, 2017 TCC 95, Gaston Jorré J. (T.C.C. [Informal Procedure]).


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