ACo’s 2011 to 2013 taxation years were arbitrarily assessed under s. 152(7). Eventually, it filed tax returns for those taxation years after the normal reassessment periods for those years, claiming additional deductions. CRA considered that ACo could not effectively extend the normal reassessment period pursuant to a request by it to extend the s. 150(1) filing deadline for its 2011 to 2013 returns under s. 220(3).
The Directorate then noted that the normal reassessment periods started running with the arbitrary assessments and that the “CRA has concluded that the failure to file a return of income after being requested to do so under subsection 150(2) could be considered a misrepresentation [or] wilful default.”
However, the Directorate indicated that “to allow a taxpayer who has made a misrepresentation to use subparagraph 152(4)(a)(i) to reduce the amount of tax assessed would be inappropriate,” in light of various considerations. These included that the onus on the Minister under s. 152(4)(a)(i) to establish a misrepresentation attributable to neglect etc. implied that “the provision is only to be used by the Minister to increase assessed tax payable and not by a taxpayer to reduce tax payable;” and that it seemed inappropriate that a taxpayer could “open a statute-barred year to obtain a more favourable reassessment because they were (or claim to have been) careless or negligent when they filed their tax return or failed to file a return at all.”
Accordingly, s. 152(4)(a)(i) did not permit the Minister to reassess ACo in these circumstances.