When a taxpayer disagrees with an assessment or reassessment, in order to dispute it they must file a formal Notice of Objection. The tax dispute process is administered by the CRA Appeals Division and can result in either the assessment being confirmed, vacated, or varied as discussed in our article on CRA objections.
If an assessment is upheld after objection, the CRA must issue a formal letter explaining their reasoning called a Notice of Confirmation. If the assessment is to be vacated or varied, a reassessment will be issued to the taxpayer.
In either case, if the taxpayer still disagrees with the CRA’s decision, their next step is to proceed to the Tax Court of Canada. Depending on the amounts in dispute, a taxpayer may proceed by way of the general procedure or the informal procedure. Conceptually, these can be thought of as the difference between a normal civil court and small claims court. For the purposes of this article, all references are to the general procedure; our sister article on the informal procedure outlines the limits and differences and can be referenced separately.
In either case, when a taxpayer files an Appeal to the Tax Court of Canada, they are in essence now a plaintiff in a civil claim with the CRA as a defendant; in many respects, filing such an Appeal can be thought of as “suing” the CRA – the Tax Court is a superior court akin to the provincial courts, though with a less broad jurisdiction as detailed below.
When a reassessment or confirmation is issued, the Income Tax Act or Excise Tax Act deems the amounts assessed to be valid and binding by operation of law in the same manner as an audit reassessment. Having gone through the CRA Appeals Division’s decision-making process, subject to some limited exceptions the taxpayer’s only course of action to preserve the tax dispute is to file a Notice of Appeal to the Tax Court of Canada. As a general rule, the limitation period for doing so is ninety (90) days from the date of the reassessment or confirmation, the same as the period for filing the initial objection.
If this initial ninety (90) day deadline is missed then there is still a statutory mechanism whereby which a taxpayer can file a valid Appeal. So long as a taxpayer files an Application for an Extension of Time within which to File a Notice of Appeal within one year of the expiry of the initial ninety (90) day deadline to object, the Tax Court may still deem the Appeal as validly filed.
As with objections, an extension of time application is not approved as of right – rather, the acts contain certain conditions precedent that the taxpayer must demonstrate they have met in order to have their Appeal accepted as valid. As with the conditions for an extension of time in the case of an objection, the taxpayer must prepare the formal Notice of Appeal and application to be filed together, and the taxpayer must be able to prove:
However, unlike in the case of late-filing an objection, whereby which, if the above conditions are met, the application must be granted, there is an additional requirement when late-filing an Appeal: the taxpayer must prove that there are “reasonable grounds” for bringing the Appeal. The reasonable grounds requirement is similar to the civil law concept of requiring a lawsuit to demonstrate a true “cause of action” on its face. This means that there must be a validly supportable and obvious legal or factual issue in dispute for the Appeal on the presumption that all of the facts and arguments set out in the Notice of Appeal are taken as truth.
As above, Tax Court litigation can be viewed as analogous to bringing a civil claim against a defendant. The process begins with preparing and submitting the formal Notice of Appeal; the appeal must clearly and concisely set out the salient facts, the issues to be decided, the legal arguments, and the relief requested.
Once the Notice of Appeal is filed with the Court, it will review and confirm that it conforms to the requirements and then serve it on the Attorney General of Canada, by way of the Department of Justice. The Crown then has a period of sixty (60) days within which to file and serve a rebuttal by way of a formal Reply in much the same form as the Notice of Appeal.
Once the Reply is filed and served, the Appellant will then have a period of thirty (30) days to file a formal “Answer” if deemed necessary. The rules of the Tax Court of Canada deem the Appellant to deny all allegations of fact in the Reply if no Answer is filed, so it is often rare that a formal Answer should be filed.
Together, the Notice of Appeal, the Reply, and the Answer are referred to as the Pleadings, and they form the basis for the litigation.
If you disagree with a reassessment or have received a Notice of Confirmation and wish to dispute the amounts, proper advice and representation are invaluable to ensure that the formal requirements of the acts are met and that you are in the best position to present a logical and winning case to the Tax Court of Canada.
It should also be noted that corporate taxpayers must be represented by counsel – non-lawyers, accountants, or agents cannot represent taxpayers in a general procedure appeal. The tax dispute lawyers at Devry Smith Frank LLP have years of experience practicing in the Tax Court and can advise you expertly, keep professional costs down, and maximize your chances of success.
B.A., J.D.
