Federal Court


Income tax

Administration and enforcement

Circumstances were not beyond control of taxpayer who was complicit in or wilfully disregarded fraud

Taxpayer used tax preparation firm FA to prepare personal income tax return and claimed net business loss of $529,533. Canada Revenue Agency (CRA) issued reassessment denying claimed business losses and assessing gross negligence penalty of $82,721. Taxpayer became aware of fraud perpetrated by FA. CRA denied taxpayer’s initial request for taxpayer relief because taxpayer did not submit financial documentation for hardship and there were no extraordinary circumstances. Taxpayer brought application for judicial review of decision of Minister of National Revenue refusing to exercise discretion pursuant to s. 220(3.1) of Income Tax Act to cancel or waive gross negligence penalty on second-level request. Application dismissed. Minister did not fetter her discretion or unreasonably rely on unfounded facts or irrelevant factors. It was reasonable for Minister to deny request for relief. It defied logic that taxpayer was not aware of fake claim for business loss in relation to non-existent business. Fraud was perpetrated by FA but taxpayer was complicit in or wilfully disregarded fraud so circumstances were not beyond his control. Decision engaged with evidence of FA’s fraud and taxpayer’s complicity or wilful disregard of fraud. No evidence was filed to support finding of financial hardship.

Mior v. Canada (Attorney General) (2019), 2019 CarswellNat 2123, 2019 CarswellNat 727, 2019 FC 321, 2019 CF 321, Michael D. Manson J. (F.C.).

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