CRA had assessed the taxpayer for interest under ETA s. 280 for his failure to file returns for what had now been found by Smith J to be a taxable activity of providing psychotherapy services. Smith J found that such interest was not payable because the taxpayer had established a due diligence defence, based on having consulted on the tax status of his supplies with his accountant and with professionals in his health care network. In this regard, he stated (at paras. 54-55):
l’École polytechnique … 2004 FCA 127, confirms that the reasonable diligence defence can be used against an administrative penalty established under the scheme of section 280 of the ETA [stating]:
[D]ue diligence excuses either a reasonable error of fact, or the taking of reasonable precautions to comply with the Act.
I find based on this, that “in order to establish a due diligence defence to a penalty an appellant must show he either (a) made a reasonable error in his or her understanding of the facts, or (b) took reasonable precautions to avoid the event leading to the penalty”: Comtronic Computer Inc. v. The Queen, 2010 TCC 55, paragraph 35.