Tax professionals are well aware of how critical it is to file Notices of Objection on time — generally within 90 days of the mailing of a Notice of Assessment. For professionals and taxpayers who find themselves unable to have met this deadline, section 303 of the Excise Tax Act (the “ETA”) (and section 166.1 of the Income Tax Act) provides some potential relief (i.e., an extension to file, provided certain preconditions are met).
A recent Tax Court of Canada (“TCC”) decision in Lamarnic & J Ltd. v. The Queen (2022 TCC 35) explores this rule but, at the same time, serves as a cautionary tale for taxpayers and tax professionals alike that these extension rules may only be available if the rules are strictly adhered to within set statutory timelines.
Legislative Background
The specific rules for providing for extensions of time are found here (ETA 303, and 304) and here (ITA 166.1 and 166.2), and include the following requirements:
- The extension application is made within one year after the expiration of time to make a Notice of Objection;
- The applicant demonstrates that (1) within the time for objecting, they were not able to object or had a bona fide intention to object; (2) it would be ‘just and equitable’ to grant the extension; and (3) the extension application was made as soon as circumstances permitted it to be made
Lamarnic Case
Lamarnic & J Ltd. (the “Taxpayer”) was a corporation owned and operated by its sole director/shareholder, Kanny Ng. The taxpayer was assessed for one of its previous quarterly reporting periods and received a Notice of Assessment dated December 29, 2017. A Notice of Objection appears to have been filed – very late – on or around January 23, 2020.
It is uncertain whether Mr. Ng was aware that the Taxpayer was required to first obtain an extension from CRA to allow for the late filing of the Notice of Objection under ETA 303(1). What is certain is that Mr. Ng. appeared to have taken no steps to apply to CRA for an extension within the required 1-year deadline.
When he found that his extension was not forthcoming, Mr. Ng then brought a further application to the TCC under ETA 304(1). That rule allows the TCC to intercede and grant an extension if a prior ETA 303(1) application was properly made (i.e., under the rules in ETA 303(7)).
Tax Court Application
At the TC, Mr. Ng, represented the corporate Taxpayer himself – not always a good idea – and attempted to argue the merits of Lamarnic’s appeal despite the TCC’s attempts to “dissuade him of this at least twice, [and] each time to no avail.” Unfortunately, and despite what appears to be significant handholding by the TCC, “Mr. Ng refused to address the assessment, the objection or the application to extend, particularly the relevant dates, and the absence of a compliant notice by [the Taxpayer].”
Fundamentally, the Taxpayer lost because it was required under ETA 303(7)(a) to make its extension application within one year of the 90-day deadline for the original Notice of Objection. That was March 29, 2019, which was not met.
Commentary
Lamarnic serves as a cautionary reminder of the harsh, statute-imposed deadlines that the ETA and ITA have where the 90-days deadlines for filing a Notice of Objection have been missed.
Perhaps there is also a cautionary reminder in there about the dangers of self-representation! Sometimes better to obtain professional assistance, as in complicated matters like this, you get what you pay for. Free is not necessarily better!
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