After the Crown is served with the notice of appeal, it has 60 days to file a reply, unless:
- the appellant consents to the filing of the reply after the 60-day period; or
- the Court allows the Crown to file the reply after the 60-day period.
The reply must be served within 5 days of the expiration of the 60-day period or, if a time extension was granted, within the time agreed to by the parties or specified by the Court.
What Happens if the Crown Did Not File Its Reply on Time?
If the Crown is late in filing its reply, the allegations of fact contained in the notice of appeal will be presumed to be true for the purposes of the appeal.
However, this presumption is rebuttable.
In the normal course of things, it is the appellant who must disprove the assumptions of fact stated in the reply. The failure by the Crown to file its reply on time has the effect of reversing the burden of proof, meaning that the Crown must now disprove the allegations of fact made by the appellant in the notice of appeal.
This very rarely happens, so don’t count on it.
How Is a Reply Structured?
A reply is generally structured as follows:
The reply starts by giving some background on the appeal, such as the taxation year(s) under appeal, the reassessment(s) under appeal, etc.
Next, the reply will refer to the facts mentioned in the notice of appeal and state which facts are:
- denied; or
- unknown (to the Crown).
The reply then generally gives a history of the key dates up to the appeal, including details of the reassessment(s).
This next section is important, as the Crown is required to state here the findings or assumptions of fact made by the Minister of National Revenue (CRA) when reassessing. In simple terms, when the CRA reassesses a taxpayer, it relies on facts. When the Crown writes its reply, it must state those facts upon which the CRA based its reassessment. These facts are called “assumptions.”
Example: The taxpayer is a freelancer and claimed business expenses of $14,000 in 2014. The CRA decides to audit this taxpayer and, in the course of the audit, asks the taxpayer to support his business expenses. The taxpayer was only able to provide receipts for $8,000 and claims that the receipts for the remaining $6,000 were lost. In the absence of evidence to support the business expenses of $6,000, the CRA auditor is entitled to assume that those expenses were never incurred.
Assumptions of fact made by the CRA are presumed to be true, except for specific circumstances. What does this mean concretely? It means that you, as the taxpayer, must bring forward evidence at trial to disprove those assumptions.
After the assumptions of fact, the Crown can state other facts, which were not assumed, but which it intends to rely upon in court. The Crown has the burden to prove these other facts.
Provisions Relied Upon
In this section, the Crown will state the legislative provisions it is relying upon to support its case.
In this last section, the Crown will state the reasons in support of its position. It is common for the Crown to rely on many arguments in support of a single position.
For example, if the Crown’s position is that the amounts claimed by the taxpayer as business expenses are not deductible, the Crown could argue that “the expenses claimed by the appellant are not deductible because the appellant did not carry on a business. Alternatively, if the appellant carried on a business, the expenses are not deductible because they were not made or incurred for the purpose of gaining or producing income from his business.”
Note that the Crown need not adopt the same basis as the CRA in defending a reassessment. In concrete terms, this means that if the CRA relied on reason “A” to reassess a taxpayer, the Crown need not rely on reason “A” but may invoke other reasons such as reason “B” or reason “C”. Although the Crown can generally advance a new argument or basis in support of the reassessment, it cannot increase the amount of tax under appeal (assuming the normal reassessment period has expired).
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Last updated: October 4, 2018