The taxpayer reported $42,000 of employment income on his return, and received a refund of approximately $4,000 based on $13,000 of source deductions (including $11,000 of income tax) having been withheld. CRA later concluded that no deductions had been made - therefore, the taxpayer was reassessed on the basis that his income was the $29,000 he actually received, so that the amount of tax shown on the reassessment was less than that in the original assessment. However, as his account was no longer credited for source deductions, his refund was denied an a balance of taxes owing was shown.
The taxpayer sought an order vacating the reassessment and leaving the original assessment (on $42,000) in place on the basis that the employer had deducted but failed to remit $11,000 of deductions.
C Miller J found that the Tax Court lacked the authority to make such an order. Firstly, whether deductions have in fact been collected is a matter for the Federal Court, not the Tax Court. However, C Miler J found that there was nothing to preclude him from making a finding of fact confirming that the taxpayer received net pay (para. 26).
Secondly, C Miller J found that "it is well-settled that the Court cannot increase the assessment under appeal" (para. 30). This follows from the principles that the Minister may not appeal an assessment, and that allowing an increase to such an assessment would constitute an "indirect" appeal (paras. 28-29).