Executive Summary: Key Legal and Evidentiary Issues

• Judicial review sought against the CRA's denial of interest relief under s. 220(3.1) of the Income Tax Act.

• Applicant's tax debt arose from disallowed charitable donations made through a sham donation scheme.

• Self-represented applicant raised new evidence and arguments not presented during the CRA review process.

• Court applied the Vavilov reasonableness standard to assess the CRA’s decision-making process.

• Religious objection to paying interest was deemed insufficient to qualify for relief.

• Application was dismissed and nominal costs of $250 were awarded to the respondent.

Facts and outcome of the case

Background and reassessments

Soeb Desai, a self-represented litigant, sought judicial review of a decision by the Canada Revenue Agency (CRA) denying his request for relief from tax interest charges. His tax liability stemmed from reassessments related to the 2005 and 2006 taxation years. During those years, Mr. Desai had made charitable donations through the Global Learning Gifting Initiative, a tax shelter scheme later deemed a sham by the Tax Court of Canada. As a result, his claimed donations were disallowed, resulting in tax debt and interest.

Requests for relief and CRA decisions

Mr. Desai made two formal requests to the Minister of National Revenue under section 220(3.1) of the Income Tax Act to waive interest due to financial hardship and religious reasons. His first request, made in February 2022, was denied in February 2023 on the grounds that he had sufficient assets and borrowing capacity. A second request followed in March 2023, in which Mr. Desai claimed that his religion forbade paying or receiving interest. The CRA officer reviewing this request denied it in November 2023, stating that religious beliefs do not exempt individuals from paying tax or interest.

Judicial review and evidence issues

On judicial review, Mr. Desai introduced several new documents that were not before the CRA decision-maker, including personal financial statements and letters of support. The court, following established administrative law principles, declined to consider this new evidence, as exceptions to the rule that courts may only review the record before the original decision-maker did not apply. The court found that the CRA officer reasonably addressed the only issue raised in the second request—the religious objection—and followed the correct legal framework.

Arguments and court findings

Mr. Desai also raised new arguments during the judicial review hearing, including that the CRA’s delay in issuing reassessments led to the accumulation of interest. However, this was also not raised before the CRA and therefore could not form the basis for judicial review. In any case, the court noted that the CRA had already waived some interest due to internal delays and the COVID-19 pandemic. Citing case law, the court found no basis to interfere with the CRA’s discretionary decision.

Decision and costs

Madam Justice Go dismissed the application for judicial review, concluding that the CRA’s decision was reasonable and aligned with the statutory scheme. While Mr. Desai invoked Slau Ltd. v. Canada (Revenue Agency), the court pointed out that the Federal Court of Appeal had overturned that case and distinguished it from the present facts. The court awarded nominal costs of $250 to the Attorney General of Canada, rejecting the respondent’s request for full tariff-based costs but acknowledging their entitlement as the successful party.