Reassessments were valid and binding until set aside by Tax Court of Canada

Tax – Income tax – Administration and enforcement

When taxpayer was advised by CRA of intention to reassess him for 2005 to 2014 taxation years, he filed application under voluntary disclosure process (VDP) that was dismissed as not being voluntary. Taxpayer requested second-level VDP review before being advised of CRA’s intention to commence second audit for 2007-2016 . CRA sent taxpayer proposal letter, setting forth proposed reassessments arising from audit that included penalties and interest charges. Taxpayer applied for judicial review to quash proposal letter and motion for injunction to prevent issuance of proposed reassessments. While application was outstanding, Minister reassessed taxpayer under Income Tax Act and his second-level VDP application was dismissed, leading taxpayer to file Notices of Objection to reassessments and apply for judicial review of VDP decision. Taxpayer’s application for judicial review of proposal letter and motion for injunctive relief were dismissed. Taxpayer appealed. Appeal dismissed. Question of whether injunction could have issued restraining issuance of Notices of Reassessment pending determination of second-level VDP request was now moot. As matter of law, reassessments were valid and binding until set aside by Tax Court of Canada. Taxpayer’s argument that reassessments must be stayed or enjoined until he exhausted recourse mechanisms contemplated by VDP could not succeed as it would effectively nullify power granted to Minister under s. 152(4) of Act to reassess “at any time”. There could be no legitimate expectation that reassessment process would be suspended pending final consideration of VDP application. Contrary to taxpayer’s claim of possible harm, s. 225.1(1) of Act precluded enforcement action since he had filed notice of objection. Proposal letter was not reviewable decision or order as, while it might foreshadow Minister’s intention to reassess, it did not determine any of taxpayer’s rights.

Prince v. Canada (National Revenue) (2020), 2020 CarswellNat 201, 2020 FCA 32, Johanne Gauthier J.A., Donald J. Rennie J.A., and George R. Locke J.A. (F.C.A.); affirmed (2019), 2019 CarswellNat 2084, 2019 CarswellNat 801, 2019 FC 348, 2019 CF 348, Peter Annis J. (F.C.).

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