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  • Richard Fonagy

What needs to happen for the Minister to re-assess past the normal re-assessment period of 3 years:



Is the reassessment of Mr. Robinson’s 2011 taxation year valid notwithstanding that it was issued beyond the normal reassessment period for the 2011 taxation year?


[61] Mr. Robinson’s original notice of assessment for his 2011 taxation year was dated June 11, 2012. Mr. Robinson’s 2011 taxation year was reassessed by a notice of reassessment dated May 31, 2016, more than 3 years after the original notice of assessment for that taxation year.

[62] Except in limited circumstances, the Act precludes the Minister from reassessing Mr. Robinson for a particular taxation year more than three years after the original assessment was issued for that year, referred to as the normal reassessment period. This is often referred to as statute-barring. In this case, the Minister alleges that, in filing his income tax return for the 2011 taxation year, Mr. Robinson made a misrepresentation attributable to neglect, carelessness or wilful default. If that is the case, the reassessment is not statute-barred.

[63] The onus to establish the misrepresentation and the neglect, carelessness or wilful default lies with the Respondent. While the standard is not a high one, the Respondent must present evidence to substantiate the misrepresentation and neglect, carelessness or wilful default.

[64] Moreover, where the Respondent establishes a misrepresentation attributable to neglect, carelessness or wilful default permitting a reassessment beyond the normal reassessment period, the reassessment is restricted to amounts related to the proven misrepresentation. The Minister is not able to reassess unrelated matters in that year on the basis of a misrepresentation.

Gross negligence requires a higher degree of neglect than a mere failure to take reasonable care. It is a marked or significant departure from what would be expected. It is more than carelessness or misstatement. [48]

[65] The reassessment of Mr. Robinson’s 2011 year raises both unreported income and deduction of expenses. In assessing Mr. Robinson beyond the normal reassessment period, the Minister relied on a number of assumptions of fact, but called no witnesses and tendered no evidence to substantiate those facts. The Respondent relies on Mr. Robinson’s evidence. Therefore, I must decide whether that evidence is sufficient to establish the misrepresentation and neglect, carelessness or wilful default.

[66] Mr. Robinson asserts that the unknown deposits in 2011 were not income. While he could not substantiate what they were, he is not required to do so because that would amount to placing the burden of proof on him. To establish a misrepresentation regarding those amounts, the Minister has the onus of establishing that those amounts were from an income source. In my view, the Respondent has not succeeded and thus has not established that there was a misrepresentation regarding the 2011 unknown deposits identified by CRA. Therefore, the reassessment of Mr. Robinson’s 2011 taxation year, insofar as it relates to unreported income associated with unknown deposits, is statute-barred.

[67] Mr. Robinson admitted that expenses he deducted in 2011 included the cost of dry cleaning; his vehicle expenses for 2011 include a court fine. For the reasons outlined above, expenses of this nature are not deductible in computing income. The 2011 invoices also include costs associated with incorporating an Alberta corporation, presumably Hydrocarbon Fluid. Incorporation costs are capital expenditures and not deductible. I have also found that none of the expenses deducted by Mr. Robinson in 2011 are deductible because they were on capital account. Thus, the Respondent has established that Mr. Robinson made a misrepresentation in his 2011 tax return with respect to expenses.

[68] Were these misrepresentations regarding expenses attributable to neglect, carelessness or wilful default? While I am not prepared to conclude that the misrepresentations were attributable to wilful default, I am satisfied that Mr. Robinson was careless or negligent in completing his returns. He is well-educated. While he has no specific tax expertise, he is a lawyer with significant commercial experience, including with a national law firm. Mr. Robinson prepared his own income tax returns. Having decided to prepare his own income tax returns, he is responsible for ensuring that his income tax returns comply with the law and for informing himself regarding that law. In my view, it does not require any particular expertise to know that personal expenses are not deductible in computing income and costs associated with incorporating a company or acquiring patents are capital expenditures.

[69] Moreover, were Mr. Robinson to listen to his own testimony, I have to believe that he would pause and ask himself whether what he described made sense – that he could spend thousands of dollars pursuing various initiatives, deduct all those expenses personally, and yet have any resulting successful activity carried on by a corporation such that he would not be subject to tax on the resulting success unless and until the shares of that corporation increased in value. Had he asked himself that question, he presumably would have, or at least should have, sought advice.

[70] I am satisfied that Mr. Robinson’s misrepresentation in his 2011 income tax return regarding expenses is attributable to carelessness or neglect. Therefore, the Minister is entitled to reassess Mr. Robinson’s 2011 taxation year beyond the normal reassessment period with respect to the deduction of expenses.

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