Federal Appeal


Income tax

Administration and enforcement

Taxpayer entitled to rely on expiry of normal reassessment period to finalize his tax payable

In 2009, taxpayer established new pension plan in which he was sole member, which was registered as pension plan pursuant to Income Tax Act effective January 1, 2009, and transferred $640,080.91 to new plan. In 2013, Minister of National Revenue sent notice of intention to revoke registration of new pension plan retroactively as of January 1, 2009 on basis that plan did not satisfy registration requirements. Twenty-eight days later Minister provided notice of revocation and also issued notice of reassessment for 2009 taxation year, which included amount transferred to new plan in taxpayer’s income. Notice was sent on last day before expiry of time period that Minister was able to reassess this amount. Approximately three and one-half years later, Minister concluded that notice was ineffective because it was sent two days earlier than permitted by Act. Minister sent second revocation notice which stated that it superseded earlier one and was being issued to correct timing error, and that it was effective on retroactive basis to January 1, 2009. Appeal by taxpayer was dismissed. Tax Court of Canada determined that factual basis for reassessment relied on by Minister did exist at time it was issued and that there had been no change to factual basis of reassessment. Taxpayer appealed. Appeal allowed. Revocation notice was factual element that was necessary in order to support legal basis of income inclusion. In this case, applicable revocation notice was sent in 2017, which was long after limitation period had expired. This was not factual basis on which reassessment was based when it was issued, or when limitation period expired. Tax Court’s conclusion relied on new factual basis and this was error of mixed fact and law which attracted palpable and overriding error standard of review. Taxpayer was entitled to rely on expiry of normal reassessment period to finalize his tax payable for 2009 taxation year. In issuing second revocation notice and relying on it for purposes of reassessment, Minister was in effect seeking to do away with limitation period.

Mammone v. Canada (2019), 2019 CarswellNat 744, 2019 FCA 45, Donald J. Rennie J.A., Judith M. Woods J.A., and J.B. Laskin J.A. (F.C.A.); reversed (2018), 2018 CarswellNat 91, 2018 TCC 24, David E. Graham J. (T.C.C. [General Procedure]).

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