This summer, the Tax Court of Canada (the Tax Court) dismissed a taxpayer’s appeal in a decision that highlights the importance of strictly complying with all statutory tax filing obligations and notice requirements despite assurances by the Canada Revenue Agency (CRA) that strict compliance is not necessary.

Background

Generally, under the Income Tax Act (Canada), a taxpayer may object to a notice of assessment or reassessment of income tax issued by the Minister of National Revenue (the Minister) by serving a notice of objection, in writing, within 90 days after the day the Minister sent the relevant notice of assessment or reassessment.¹ If this deadline is missed, the Minister may grant an extension at its discretion, as long as the taxpayer applies to the Minister for such an extension within one year after the deadline (and certain other conditions are met). If the Minister does not grant this extension, the taxpayer may apply to the Tax Court for the extension within 90 days of the day the Minister’s refusal to extend was mailed to the taxpayer. The Tax Court may only grant an extension if the taxpayer met the one-year deadline for applying for an extension from the Minister.

In Adams v. The King, 2023 TCC 86, the taxpayer, Mr. Adams, filed his income tax returns for the 2016 and 2017 taxation years without claiming any deductions for legal fees incurred in those years and was issued notices of assessment. He later filed T1 adjustment requests seeking deductions of approximately CA$20,000 for each year for legal fees. The CRA issued a notice of reassessment for Mr. Adams’ 2016 taxation year and declined to allow the deduction for legal fees. For 2017, the CRA declined to issue a notice of reassessment to allow the deduction for legal fees. The CRA sent a letter explaining that it would take longer to process his requests due to their complexity. The CRA indicated that they would send notices of reassessment when the adjustments were complete, and that if the requested changes were not accepted, a letter of explanation under separate cover would be sent. The CRA continued to request additional information from Mr. Adams to support his claim for legal fees, which Mr. Adams provided. Meanwhile, the deadlines for serving notices of objection in respect of his 2016 and 2017 taxation years had passed.

During a telephone call with a CRA official in February 2020, Mr. Adams learned that the CRA had allegedly issued a letter on January 7, 2020, informing him that it did not accept his T1 adjustment requests. Mr. Adams claims to have never received this letter. After repeated requests, a copy of the January 7, 2020, letter was provided to Mr. Adams on February 17, 2022. Meanwhile, the one-year deadlines for applying to the Minister for an extension of time to serve notices of objection had passed.²

During a telephone call on April 1, 2022, the CRA advised Mr. Adams that it would not be possible to have the decision reconsidered. Shortly thereafter, Mr. Adams filed an application with the Minister for an extension of time to object to the reassessments, which was denied on the basis that the deadlines had passed. Mr. Adams then filed an application with the Tax Court for an extension of time, arguing that the CRA had led him to believe that further internal steps were available before a final decision would be made relating to his adjustment requests, and that it seemed premature to object before the CRA had made a final decision.

Tax Court decision

In dismissing Mr. Adams’ application, the Tax Court relied on two decisions where it considered taxpayers’ applications for an extension of time to meet filing deadlines set out under the Income Tax Act (Canada) and the Excise Tax Act (Canada).³ In these cases, the taxpayer had either relied on inaccurate statements made by the CRA as to the applicable deadline, or was led to believe by the CRA that meeting a particular deadline was not necessary. The taxpayers argued that the doctrine of estoppel applied, but the Tax Court determined that the CRA’s representations amounted to misrepresentations of the law to which the doctrine of estoppel does not apply and dismissed their applications.

In Mr. Adams’ case, the Tax Court determined that the CRA had led Mr. Adams to believe that there was no need to object to the notices of reassessment, which amounted to misrepresentations of law. Consistent with its prior decisions, the Tax Court dismissed Mr. Adams’ application for an extension of time, noting that these cases all teach the same lesson: statutory deadlines must be applied notwithstanding inaccurate representations of law by the CRA, even when the individual has relied on them to their detriment.

While these statutory deadlines are a non-negotiable matter for the CRA and the Tax Court, there is some leniency when it comes to the form that a notice of objection takes. The CRA has a form prescribed (T400A) for the purpose of serving a notice of objection, but it is not necessary that this form be used. As long as a written document, setting out the reasons for the objection and supporting facts, is properly served on or otherwise accepted by the CRA, the Tax Court may be willing to accept the document as a validly filed notice of objection.

Unfortunately, because the 2016 T1 adjustment request (dated August 22, 2018), was made before the final 2016 notice of reassessment was issued (on October 16, 2018), this request could not be considered a valid notice of objection filed in respect of the subsequently issued notice of reassessment. It is not clear whether Mr. Adams made the argument that his 2017 T1 adjustment request (if made after May 14, 2018, and before June 17, 2019), constituted a valid notice of objection.⁴ The court decision is not clear as to when this 2017 T1 adjustment request was actually made.⁵ Further, it appears that the letter Mr. Adams sent to the CRA on August 16, 2019, which purported to provide “additional information and evidence” in respect of his 2016 and 2017 T1 adjustment requests, did not constitute valid applications to the Minister to extend the time for filing notices of objection. 

This case is a reminder that tax deadlines must be strictly followed, even when the CRA incorrectly advises otherwise.

For more information on this topic, please contact the authors, Paige Donnelly and Brian Kearl.

[1] For individual taxpayers (other than certain trusts), the deadline to file a notice of objection is the later of the day that is (i) 90 days after the day the Minister sent the notice of assessment or reassessment, and (ii) 1 year after the taxpayer’s filing due date for the particular taxation year. This potentially longer notice of objection filing deadline does not apply to corporations, partnerships and certain trusts.

[2] January 14, 2020, in the case of Mr. Adams’ 2016 taxation year and December 17, 2020, in the case of his 2017 taxation year.

[3] Waldron v. The Queen, [1999] GSTC 31 (TCC) and Casey v The Queen, [1999] 2 CTC 2681 (TCC).

[4] See Randall v. R., 2008 TCC 621. However, see also, Petratos v. R., 2013 TCC 240 and Ihama-Anthony v. R., 2018 TCC 262.

[5] See footnote 6 of the reported decision.