Executive Summary: Key Legal and Evidentiary Issues

• Judicial review concerned the Minister’s February 22, 2024 decision denying the applicant’s second taxpayer relief request under subsection 220(3.1) of the Income Tax Act for 2022 penalties and arrears interest.

• The Canada Revenue Agency accepted that the applicant’s omission of the RBC Investor Services Trust T4A income was an honest mistake without intent to lie or commit fraud but emphasized her responsibility to file complete and accurate returns.

• The applicant argued that because the 2020 and 2022 tax years were reassessed at the same time, she had no prior warning to prevent a second failure to report income and relied on alleged CRA error and delay.

• The court held there was no evidence of CRA delay or error, no requirement for prior notice before assessing penalties under subsection 163(1), and no entitlement to an opportunity to respond before a penalty is imposed.

• Applying the reasonableness standard from Vavilov and related authorities, the court found the officer’s analysis coherent and properly focused on the Guidelines and the applicant’s history, without misapprehending the evidence.

• The application for judicial review was dismissed, and the court ordered that it be dismissed without costs.

Facts of the case

The case was a judicial review in the Federal Court between applicant Stéphanie Séguin and the Attorney General of Canada as respondent. The Notice of Application was filed on January 25, 2025. The application originally referred to several matters, including a Notice of Reassessment dated October 11, 2023 for the 2022 taxation year and two taxpayer relief decisions dated December 12, 2023 and February 22, 2024, as well as a suspension under subsection 188.2(2) of the Income Tax Act. At the hearing, the applicant confirmed that the application related solely to the Minister’s February 22, 2024 decision denying her second administrative request under subsection 220(3.1) to cancel penalties and arrears interest arising from the reassessment of her 2022 tax return. The court summarized subsection 220(3.1), which authorizes the Minister to waive or cancel all or any portion of penalties or interest otherwise payable under the Act within a specified ten-year period. The court also referred to CRA’s Information Circular IC07-1, Taxpayer Relief Provisions, which indicates that relief is generally considered where there are extraordinary circumstances beyond the taxpayer’s control, actions of CRA, or inability to pay or financial hardship, while allowing other circumstances to be considered.

Tax reassessments and first relief request

On October 5, 2023, the applicant received two Notices of Reassessment for the 2020 and 2022 taxation years. For 2020, she was charged $14.04 in arrears interest due to unreported income from a T4 slip issued by Nova Scotia Health Authority, which she did not dispute. For 2022, she was charged $140.64 in arrears interest for failure to report a T4A from RBC Investor Services Trust, plus federal penalties of $770.20 and provincial penalties of $352.71, and again she did not dispute the failure to report the income. On the same date, October 5, 2023, she contacted CRA to request a waiver of penalties and interest for 2022 under the taxpayer relief provisions. In that request, she stated that she had entered the RBC T4A information in her TurboTax return but that a blank return had been submitted to CRA, described the omission as an honest mistake without intent to lie or commit fraud, apologized, and offered to pay the balance rapidly. She voluntarily paid the tax debt in full that same day. On December 12, 2023, a CRA officer denied the relief request.

Second-level review and applicant’s arguments

On December 27, 2023, the applicant sought a second-level review, advancing new circumstances based on CRA error and delay. She argued that, although the denial at first-level review referred to a second occurrence within a specified three-year period, she had not previously been notified of a second failure to report income because both reassessments (2020 and 2022) were issued on the same date. She stated that this timing prevented her from avoiding a second occurrence in 2022. In support of her position, she relied on what she described as “Income Tax Audit Manuel (sic), Chapter 28.0”, and claimed that CRA failed to advise her of the consequences of another omission within the three-year period, failed to advise her in writing that a penalty under subsection 163(1) was being considered, and did not give her an opportunity to respond before a penalty was imposed.

Minister’s decision and application of the Guidelines

On February 22, 2024, a CRA Taxpayer Relief Team Leader advised the applicant that the Minister had decided to deny her second administrative relief request. The officer noted her good compliance history, accepted that the omission of the RBC T4A was an honest mistake with no intention of lying or committing fraud, and considered her argument that simultaneous reassessments for 2020 and 2022 prevented her from avoiding a second occurrence. The officer concluded there was no delay on CRA’s part in reassessing the returns and that, even if 2020 had been reassessed earlier, that would not explain or relate to the failure to include the RBC T4A income for 2022. He determined that the circumstances described were not beyond the applicant’s control and did not warrant relief under the taxpayer relief provisions. He emphasized that it was the applicant’s responsibility to file complete and accurate T1 returns and noted this was a second reoccurrence in the last five years where she failed to report income.

Court’s analysis of the issues and standard of review

In her written submissions, the applicant initially identified four issues, including whether her error could be justified as an honest mistake, whether another officer might have decided differently, whether lack of prior notice made the penalties and interest unjustified, and whether the relief was warranted under the Guidelines. At the hearing, she accepted that the only issue was whether the Minister’s decision to deny her second administrative request was reasonable, and she also accepted that the applicable standard of review for the discretionary decision under subsection 220(3.1) was reasonableness, as confirmed in Northview Apartments Ltd v Canada (Attorney General) and Stemijon Investments Ltd v Canada (Attorney General). The court summarized the reasonableness framework from Vavilov, stressing judicial restraint, deference to administrative decision-makers, and the need to assess whether the decision is justified, transparent, and intelligible, with an internally coherent and rational chain of analysis. The court noted that it was not its role to conduct a de novo analysis or to reweigh the evidence, and that it could only intervene if the officer had fundamentally misapprehended or failed to account for the evidence, referring to Vavilov and Doyle v Canada (Attorney General).

Outcome and disposition

The court found no merit in the applicant’s contentions about CRA delay or error, or about any requirement to provide prior notice of a possible penalty under subsection 163(1) or an opportunity to respond before a penalty is imposed. It held that there was no evidence that a taxpayer is entitled to such prior notice or opportunity, and that the applicant had not shown any error in the officer’s conclusion that there was no CRA delay or error. The court concluded that the officer had carefully considered the relevant factors and the applicant’s particular circumstances in denying relief, and that it was reasonably open to him to find that the penalties and arrears interest did not arise from circumstances beyond her control or from CRA error or delay. The decision was found to be based on internally coherent reasoning and justified in relation to the applicable facts and law. For these reasons, the court dismissed the application. As counsel advised that the respondent did not seek costs, the court ordered that the application for judicial review be dismissed without costs.