A taxpayer recently succeeded in a judicial review of a Canada Revenue Agency decision to deny taxpayer relief (that is, a cancellation of a penalty). On February 27, 2013, the Federal Court of Appeal sided with the taxpayer in NRT Technology Corp. v. Attorney General of Canada, 2013 FC 200. The case is against the Attorney General of Canada and not the Canada Revenue Agency because the government department cannot defend itself in a judicial review - the Attorney General is the respondent if an interested party does not participate.
In short, the CRA assessed NRT Technology a penalty (a significant amount) for failure to remit payroll taxes on time (even though this is a payroll tax case, the principles would apply in the case of GST/HST). NRT Technology applied for taxpayer relief (that is, a cancellation of the penalty) and the CRA denied the request.
The starting point is the CRA has wide discretion to waive penalties and interest and, thereby, grant a taxpayer relief. In this case, the CRA took the position that NRT Technology failed to act quickly to remedy the error. The remittance was due on or before March 3, 2006 and NRT Technology remitted the amount on March 14, 2006 (without prompting by the CRA and operating under the mistaken belief the remittance was due on March 15, 2006). By the time the CRA realized that an error was made (in April 2006), the remittance had already been made by NRT Technology. Do you see the potential to extend this decision in the case of GST/HST filing deadlines?
The Federal Court of Appeal found the CRA's stated reasons for denying the relief to be unreasonable. The Federal Court of Appeal found that the reason was inconsistent with the evidence.
Some tax practitioners would have considered the CRA letter to be perfunctory. The usual reasons to deny the relief requested were being provided again. Some may have referred to the letter as "standard form". However, each taxpayer who is assessed deserves consideration. If evidence is presented to the CRA in the taxpayer relief process, it should be carefully considered and weighed. If a negative response does not appear to consider the evidence presented, then a judicial review may be warranted.
One cautionary note - judicial reviews can be expensive in terms of legal fees and taxpayers should consider this option when the amount of relief at issue warrants the expenditure. The Federal Court of Appeal is often deferential to the government decision-maker and success in a judicial review is not guaranteed. That being said, the NRT Technology case gives taxpayers hope that they will get a fair hearing by the Federal Court of Appeal.