Extension to File Notice of Objection – Existing but Unknown Case-Law

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Extension to File Notice of Objection – Existing but Unknown Case-Law

Patterson Dental Canada Inc v The Queen, 2014 TCC 62

At issue was whether the court ought to grant the taxpayer’s application for an extension of time to file a Notice of Objection.   The deadline was not at issue, rather the legislative requirements for granting an extension were – specifically whether the taxpayer was unable to act or mandate someone else to act on its behalf due to circumstances attributable to the tax agency (Revenue Quebec).

The Court held that the lack of knowledge about the existing decision, and the failure of the auditor to bring the decision and existing Notice to the taxpayer’s attention created circumstances that made it impossible for the taxpayer to act in filing a Notice of Objection within the 90 day period.


The Taxpayer was selling what he believed to be a zero rated good.  After becoming aware of a competitor’s reassessment and a Revenue Quebec administrative position/interpretation in 2008, the taxpayer on his own motivation  changed the code of the good from zero rated to taxable in 2009 in an attempt to be in compliance with the tax laws.

The taxpayer was audited and the auditor reassessed (issued March 16, 2010) the taxpayer’s years before the change in tax code, confirming that the good was not zero rated, imposing interest and penalties in addition to the GST not collected.  The taxpayer hired outside counsel to assist with tax compliance and in March 2011 the counsel provided the taxpayer with all cases (Centre Hospitalier Le Gardeur c. Canada, 2007 TCC 425) that indicated that the administrative position  as to the tax-rate of the good may be wrong.  The taxpayer sought an expert opinion dealing with the tax-rate of the good (April 21, 2011), and immediately upon obtaining the opinion filed an application with the MNR to extend the period for filing a Notice of objection (April 27, 2011).  The MNR refused the request on July 19, 2012 (more than a year after application). The taxpayer applied to the TCC for an extension of time to file the Notice of Objection.


The court stated that the MN could not be said to have considered the application with due dispatch as required by subsection 303(5) of the excise Tax Act.  Also, the court found that the taxpayer, at all times, intended to comply with all of its tax responsibilities, and had the taxpayer known of the case challenging the administrative interpretation, he would have filed a Notice of objection within the time period prescribed.

The Court reviewed the relevant legislative provisions (Excise Tax Act, sections 301, 303, 304) and noted that although the taxpayer may file a Notice of Objection within 90 days of the assessment being sent, the failure to do so is not fatal as the legislation provides a great deal of flexibility when it comes to filing a Notice of Objection.  The taxpayer may apply to the Minister for an extension of time (within 1 year of the expiry of the 90 day period – sec 303), and that being refused may apply to the TCC for such an extension. In this case, the deadline was met, and the issue was whether the legislative criteria were met (at paragraph 21):

The issues therefore to be determined by the Court are:

  •  a)                 Was the Applicant unable to act or to mandate someone to act on its behalf within the 90 day period allowed for filing a Notice of Objection OR did the Applicant have a bona fide intention to object to the Assessment;

  • b)                 Would it be just and equitable to grant the Application given the reasons set out in the Application and the circumstances of the case; and

  • c)                 Was the Application made as soon as circumstances permitted it to be made.

The Court considered the question of whether the taxpayer was unable to act or have another act in its stead because of circumstances created by the tax agency.  The court disagreed that the agency mislead the taxpayer by confirming that the letter of interpretation was cast in stone, but the court stated that “it is arguable that [the auditor] should have been aware of, and should have advised the Applicant of the possible application [of the case] as well as the [contrary notice]”.

In determining whether the taxpayer was able to take, the court must take a contextual approach (Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54).  The SCC provided some guidance on “impossible for a person to act” in Cité de Pont Viau v. Gauthier Mfg. Ltd., [1978] 2 S.C.R. 516 at pp. 526-527, by stating that the “impossibility” is a relative factual question that does NOT ask whether there was an “insurmountable obstacle totally beyond [the taxpayer’s] control”, but rather “need only show that the action was impossible in fact, that there was a relative impossibility” (para 24).  The TCC held that the same interpretation is appropriate in this case.

The court agreed that the Applicant was unable to act and unable to file a Notice of Objection “because the entire circumstances combined to suppress any intention that the Applicant may have had to object” (para 27).  The court noted that the decision to not take further action was not an informed one because the Applicant did not know about the relevant court decision and the relevant Notice.

The court noted that an extension is appropriate:

The Court stated at paragraph 31 that:

[31]        I agree. I am of the view that it would be just and equitable to allow the Application in the circumstances of this particular case for the following reasons:

a)                 The Applicant was at all times completely transparent with the CRA during the audit process;

b)                The Applicant has demonstrated a history of willingness to voluntarily comply with its tax obligations;

c)                 Since the assessment has already been paid in full, the CRA will not suffer any prejudice as a result of the extension of time;

d)                The extension of time will permit a complete, open, frank and fully informed debate on the validity of the assessment;

e)                 The Applicant has demonstrated that it has an arguable position to defend and therefore it is in the interest of justice to allow it to do so;

f)                  A full debate on the merits will clarify the state of the law;

g)                 The total amount of GST and provincial sales taxes at stake are significant and amount to more than 1.6 million dollars including interest and penalties. The Applicant should not be deprived of this significant amount of money nor should CRA be enriched by this amount if in fact the assessment is based upon erroneous principles of law; and

h)                The Applicant submits that both the benefit of the doubt and the balance of convenience favours the Applicant.

The Court specifically noted that any doubt ought to be resolved in favour of safeguarding a party’s rights (Québec (Communauté urbaine) v. Services de santé du Québec, [1992] 1 S.C.R. 426, pp. 442-443).

The applicant acted as soon as circumstances permitted. In this case, the circumstances required that he obtain an expert opinion in order to provide cogent reasons in support of the challenge of the assessment as part of the Notice of Objection.

 The court also noted that the doctrine of officially induced error is not applicable to tax assessment appeal (Klassen v The Queen, 2007 FCA 339).  Specifically, the court also states at paragraph 38:

[38]        In addition, the learned author David Sherman in his work Canada GST Service – Sherman, Carswell, Toronto, arrives at the same conclusion. The author states:

In a criminal law context (such as a trial on charges for evasion of GST), one could likely rely on “officially induced error of law” as a defence. See R. v. Jorgensen, [1995] 4 S.C.R. 55 (S.C.C.). This does not apply to appeals of tax assessments, however.

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