CRA Audit Powers and Judicial Review: A Guide for Taxpayers
In the 2024 Budget, the government proposed to further extend the Canada Revenue Agency’s (CRA) audit powers and their power to require additional disclosure from taxpayers under an audit. However, while the CRA’s audit powers have expanded, taxpayers retain important safeguards from the CRA. Taxpayers have the right to challenge the CRA’s decisions through judicial review. A judicial review enables taxpayers to ensure that the CRA exercises its powers fairly and within the bounds of the law.
What is a Judicial Review
A judicial review is available to ensure government agencies, such as the CRA are exercising their authority fairly. This process offers taxpayers an avenue to challenge decisions made by the CRA that may seem unreasonable, procedurally unfair, or beyond the CRA’s legal powers.
In addition to audit decisions, CRA decisions relating to the denial of a Taxpayer Relief Application or Voluntary Disclosure can also be brought for judicial review. It is important to note that for Taxpayer Relief or Voluntary Disclosure, a judicial review is only available after a second level of review. A second level review may be requested after the CRA has issued a decision not to grant the taxpayer the relief they requested.
Limitation Period for Judicial Review
According to section 18.1 of the Federal Courts Act, an application for judicial review must be completed and filed within 30 days of receiving the decision or when the order was first communicated to the applicant.
If more than 30 days have lapsed, a judicial review may still be filed, however a motion for an extension of time must be brought before applying for the judicial review.
Grounds for Judicial Review?
A judicial review may only be relied upon if there is a ground for review. According to subsection 19.1(4) of the Federal Courts Act, the grounds for review are whether the CRA:
(a) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise its jurisdiction;
(b) failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe;
(c) erred in law in making a decision or an order, whether or not the error appears on the face of the record;
(d) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it;
(e) acted, or failed to act, by reason of fraud or perjured evidence; or
(f) acted in any other way that was contrary to law.
Federal Court Powers
The Federal Court, which oversees judicial review applications, has the authority to either uphold the CRA’s decision, order the CRA to reconsider, or declare the decision invalid. However, the court cannot substitute its own decision for that of the CRA. Its only role is to ensure the CRA acted within its legal and procedural limits.
Difference between Judicial Review and Tax Court Appeals
It is important to distinguish a judicial review from a Tax Court appeal. While a judicial review addresses the procedural fairness and legality of a CRA decision, a Tax Court appeal examines the substance of a tax assessment, including whether the taxpayer owes the amount assessed. A judicial review does not allow for new evidence, whereas Tax Court appeals may consider fresh evidence.
Conclusion
While the CRA’s powers have expanded drastically during the 2024 budget, judicial reviews remain a crucial safeguard for taxpayers. It ensures the CRA operates within the law and respects taxpayer rights. By understanding the process and grounds for judicial review, taxpayers can challenge unfair or unlawful decisions effectively.
***Disclaimer: This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.
Michelle Kosarnia