Applying for an Extension of Time to File a Notice of Objection

In my last post, I explained the deadline for Objecting to an Assessment/Reassessment and the process for applying for an extension of time to object if the initial 90 day deadline is missed. 

A taxpayer has a right to dispute an Assessment/Reassessment by filing a Notice of Objection.  That right must be exercised within the 90 days after the date the Assessment/Reassessment is sent to the taxpayer. 

If the taxpayer fails to object within that 90 deadline but would like to object after the deadline has passed, the taxpayer may file an Application for an Extension of Time to Object.  An Extension of Time to Object will only be granted where the following four requirements are satisfied:

1. the application for an extension of time has been made within one year after the 90-day period for objecting has expired;
2. the taxpayer was unable to act within the 90-day period for objecting or had a bona fide intention to object within the 90-day period for objecting;
3. it is just and equitable to grant the application for an extension; and
4. the application for an extension was made as soon as practicable.

Generally, if the taxpayer has not filed a Notice of Objection within the 90-day objection period and the taxpayer did not make an Application for an Extension of Time to Object within one year after the 90-day objection period has expired, the taxpayer does not have any further opportunity to dispute the Assessment/Reassessment. 

In such circumstances, the Assessment/Reassessment stands and the taxpayer has lost his or her right to dispute the assessment of tax.

There have been rare circumstances where the taxpayers have successfully advanced arguments after more than one year and 90-days have elapsed, which resulted in a Notice of Objection being accepted.  These two cases from 2011 illustrate arguments that can be raised by a taxpayer who failed to file a Notice of Objection within the 90-day deadline and failed to file an Application for an Extension of Time to Object within the one year and 90-day period.

Lambo v. R., 2011 TCC 293

In Lambo v. R., 2011 TCC 293, the taxpayer made an application for an extension of time to object.  The CRA denied the application for extension of time to object because the application was not made within one year after the expiration of the 90-day deadline for objecting.

The taxpayer filed a Notice of Objection after the 90-day deadline expired but before the one-year deadline to file an application for extension of time.  However, the taxpayer did not formally make an application to extend time to object.  

The Tax Court of Canada decided that, despite not make a formal application to extend time, the taxpayer had demonstrated an attempt to dispute the reassessments and had otherwise satisfied the four requirements for the granting of an extension of time to object.  

In Lambo, the Tax Court of Canada also confirmed that the CRA has the burden of proving the Notice of Assessment exists and its date of mailing.  The clock does not start ticking on the 90-day deadline to object or the subsequent one-year deadline to apply for an extension of time to object, until the Notice of Assessment or Reassessment has been issued and mailed. 

Melanson v. R., 2011 TCC 569

In Melanson, the taxpayer was assessed by two Notices of Assessment dated March 17, 2009.  The taxpayer did not file a formal Notice of Objection until January 27, 2011.  This Notice of Objection was filed well after the 90-day deadline for objecting and after the one-year and 90-day deadline for an application to extend time to object.

However, the Tax Court of Canada found that the taxpayer had sent a letter to the CRA on June 17, 2009.  The letter was virtually identical to the Notice of Objection which was later filed in January, 2011 except the letter did not formally meet the requirements to be a Notice of Objection because it was not addressed to the Chief of Appeals at the appropriate CRA office.  The letter was sent two days after the expiration of the 90-day deadline for objecting. 

The Tax Court of Canada stated that “there is going to be a reluctance to see a taxpayer’s entitlements derailed on the basis of some formality.”  The Tax Court of Canada further stated that the taxpayer “took reasonable steps to comply with the law and acted on incorrect written information given by the Agency when she was told how to file an objection without being warned that she was already past the 90-day limitation period.” 

The Tax Court of Canada sent the matter back to the CRA to reconsider stressing that the CRA could:

1. treat the June 17, 2009 letter as an application for an extension of time to object and waive the formal requirements regarding how to make an application for an extension of time to object; or
2. accept the June 17, 2009 letter as a valid objection by waiving either:
• the requirement to file an application for an extension as a prerequisite to granting the extension; or
• extending the deadline for filing the objection.

 The Tax Court of Canada stated that “under either of these approaches, the June 17, 2009 letter could be accepted by the Minister as an objection.”

Conclusion

In conclusion, the above two cases provide creative arguments that could be raised with the CRA or the Tax Court of Canada in some circumstances.  The two cases also suggest that the Tax Court is encouraging the CRA to exercise leniency with respect to whether taxpayers comply with the formal requirements of the Income Tax Act in this context. 

In both of the above cases, the situation would have been more easily resolved had the taxpayers had been mindful of the statutorily imposed deadlines and made objections or applications to extend time to object that met the formal requirements of the legislation within the statutorily imposed deadlines.