Words and Phrases - "acknowledgement"

The taxpayer claimed losses and other deductions in her 1988 income tax return respecting two sets of transactions (the “Trinity Denton” and “Sierra Trinity” transactions). The taxpayer’s 1993 objection respecting losses from the Trinity Denton transactions was settled in a 1994 settlement agreement. However, except as described below, CRA did not take any action to collect the taxes acknowledged by that settlement to be owing. On January 4, 2011, the taxpayer filed a Notice of Appeal respecting losses from the Sierra Trinity transactions – but due to an error, also disputed the disallowance of the Trinity Denton losses (because new counsel were unaware of the 1994 settlement). This error was identified in the Minister’s Reply. On December 19, 2014, the Minister reassessed (under the “Third Reassessment”) to essentially allow the Sierra Trinity losses, but applied a portion of the resulting refund as repayment (by way of set off) of the taxes owing by the taxpayer under the 1994 settlement.

The taxpayer sought recovery of this collection by way of set-off on the basis that it was contrary to the 10-year collection limitation period (“CLP”) in s. 222(4), and brought this application for judicial review when the Minister’s representative rejected this position, consistent with the CRA published position that the filing of a notice of objection or an appeal to the Tax Court is an acknowledgment of the related tax debt.

In finding that the taxpayer’s appeal to the Tax Court did not constitute an “acknowledgement” of her 1988 tax liability so as to restart the running of the CLP under ss. 222(5) and (6)(b), Strickland J stated (at paras. 66-67, 76):

It would … be absurd if the limitation period could be both restarted by the filing of an appeal to the Tax Court pursuant to s 222(5)(a) and (6)(b) and, at the same time, also be extended pursuant to s 222(8). This could have the result of two different limitation periods running with respect to the same matter. …

[T]he Minister’s general conclusionary statement that filing an appeal with the Tax Court is an acknowledgement of debt, thereby restarting the limitation period, is not justified, intelligible or transparent and is unreasonable … .

… [T]he plain meaning of “acknowledgment” requires an admission or confirmation by the person making the acknowledgment of the thing alleged, be it an admission of liability for damages, blame, responsibility or liability for a tax debt.

In any event , the Appeal did not admit or confirm that the 1988 debt was validly owed and instead “dispute[d] the validity of the amounts assessed” (para. 96).

The application for judicial review was allowed and the matter remitted back to the Minister for redetermination taking into account the above reasons.