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GST — reopening audit after expiry of appeal period

My client was a construction contractor. He relied on his business manager to file GST returns and she failed to do so. My client was audited in 1994 for the 1991-94 period, and a large GST assessment was issued based on 7% of total sales.

The business manager filed a Notice of Objection, but was unable to follow up properly because her husband was ill with cancer and died. Without her making any submissions of substance, the Revenue Canada appeals officer upheld the assessment. The 90-day period for appealing to the Tax Court passed, and the 1-year deadline for applying for an extension of time to appeal also passed. Eventually Revenue Canada began seizing funds from my client's bank account. My client and his business manager went to their lawyer, who sent them to me.

Even though the time for appealing to the Tax Court had expired, I approached senior management at the local Tax Services Office and convinced them to reopen the audit to allow my client the input tax credits that should have been allowed on the original assessment. This required convincing the Revenue Canada officials that (a) intervening would be fair in light of the circumstances, and (b) they had legal authority to reopen the audit, even though the case had already gone through the Notice of Objection stage.

A new audit was ordered and, once the input tax credits were allowed, the tax bill was reduced by over $65,000.

(1998)