The Canada Revenue Agency failed to provide the litigant with key documents for preparing his case
The Federal Court overruled the Canada Revenue Agency’s (CRA) denial of a taxpayer's request for relief from penalties and interest due to the CRA’s failure to provide procedural fairness in handling the case.
In Maloney v. Canada (Attorney General), 2024 FC 1474, the applicant sought taxpayer relief for penalties and interest related to past tax years. The court held that the CRA’s handling of the case was unfair, noting that the agency failed to provide the applicant with key documents required for preparing his case during the second review.
The court found that the CRA ignored repeated requests from the applicant for documents critical to understanding the case against him. The CRA also refused to disclose internal records and documents used in the first-level review, which, according to the court, breached procedural fairness.
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The applicant had requested relief from interest and penalties for tax years spanning 2000 to 2003. These charges stemmed from the applicant’s involvement in an offshore tax scheme that was later found fraudulent. His objections to reassessments were delayed for over seven years, leading to significant accrued interest on his tax debt.
The Federal Court also found that the CRA’s decision was unreasonable. The CRA failed to address the applicant's central argument that the agency's delays in resolving his objections contributed significantly to the large amount of arrears interest. The CRA acknowledged the delay but did not provide any justification or meaningful response to the applicant’s claims.
Additionally, the CRA’s refusal to waive interest for the period before 2015, citing the applicant’s ability to make payments, was flawed. The court noted that the CRA had discretion under the law to waive interest in cases where its delays were a contributing factor.
As a result, the court allowed the application for judicial review and ordered that the matter be reconsidered by a different CRA officer. The court emphasized that a new review should be conducted in line with principles of fairness and transparency.
