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Applications to Extend Time to File Must be Made Within Prescribed Time Limits

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In Thangarajah v. Her Majesty the Queen (2017 TCC 72), the applicant and her corporation (collectively, the “applicants”) were issued Notices of Assessment in November 2014 for unreported income under the Income Tax Act.  When the corporate applicant was audited by the CRA in early 2014, the applicant retained the services of an agent who held himself out to be a lawyer (the “agent”).  It was the applicant’s understanding that the agent would do whatever was required to deal with the Notices of Assessment.  In the months that followed, the applicant received calls from CRA Collections and the agent was informed and asked to take action.  It was unclear what the agent had actually accomplished for the applicants except that he sent a letter to a CRA Collection Officer dated September 10, 2015 advising, among others, that he would initiate the “appeal process” soon (the “Letter”).  The Collection Officer responded the following day indicating that the collection files had been updated with a further notation that an appeal had to be done as soon as possible.  CRA Collections eventually seized the applicant’s bank accounts, leading to the firing of the agent.  The applicants then found out that the agent was, in fact, a paralegal and that they suffered as a result of the agent’s failure to file the notices of objection.

The applicants made applications to the Tax Court of Canada (“TCC”) for extension of time to file notices of objection.  The main issue before the TCC was whether the Letter could be characterized as an application to extend time pursuant to subsection 166.1(2) of the Income Tax Act.  The Minister’s position was that the Letter should not be recognized as such.  

 While the TCC determined that the Collections Officer had a duty to inform the agent that he was out of time to file notices of objection and that the agent would have to file an application to extend time, the TCC commented that it was not a court of equity, and that the TCC had to make its decision based on the specific legislative provisions.  At the end, the TCC agreed with the Ministry’s decision that the Letter did not constitute an application to extend time as section 166.2(5)(a) specifically requires such application be made within one year from the expiry of the 90 days from the mailing of the Notices of Assessment.  The TCC further added that even if section 166.2(5)(a) were met, it would be difficult to characterize the Letter as such as it did not reference the statutory time limits and did not mention that the applicants were seeking an extension.  Accordingly, the applicant’s applications were dismissed.

 The TCC said in obiter that nothing turned on the fact that the agent misrepresented himself as a lawyer and that an error made by a professional advisor could not be a just and equitable reason for granting an extension of time unless the professional advisor acted with due diligence.  In the case, it was clear that the agent failed to exercise the diligence required of a professional advisor.

 Although Thangarajah dealt with applications to extend time under the Income Tax Act, parallel provisions are found at sections 303 and 304 of the Excise Tax Act.  While the TCC was sympathetic to the applicant’s situation, the case clearly shows that the TCC’s hands are “tied” and has no jurisdiction to “massage” the language of the relevant statutory provisions.  When the provisions clearly ask for such applications be made within a certain time limit, there is generally no excuse for taxpayers not to follow the rules.  Taxpayers who intend to rely on services of advisors to “fight” notices of objection must ensure their advisors are competent and have expertise in handling tax matters.  

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