Case Summary: Naugle v. Attorney General of Canada

DECISION HERE

Citation: 2025 FC 926
Court: Federal Court of Canada
Date of Judgment: May 21, 2025
Judge: The Honourable Mr. Justice Southcott
Applicant: Valerie Naugle
Respondent: Attorney General of Canada (on behalf of the CRA)

Overview

Valerie Naugle brought an application for judicial review after the Canada Revenue Agency (CRA) denied her request to cancel taxes assessed on excess contributions to her Tax-Free Savings Account (TFSA) for the 2021 and 2022 taxation years. She argued the contributions were made in error and that she was unaware of the issue until 2023.

Background

  • Ms. Naugle, a clerk in Nova Scotia, inherited funds in 2019, which she later deposited into her TFSA, inadvertently exceeding her contribution limit.

  • She claimed she had no knowledge of the overcontribution until spring 2023, when she contacted the CRA about a 2022 tax refund and was informed of the issue.

  • The CRA assessed taxes and penalties of approximately $3,658 for 2021 and $875 for 2022, which Ms. Naugle subsequently paid.

  • She submitted two requests to the CRA for cancellation of these taxes, both of which were denied.

CRA’s Decision

  • The CRA officer relied on the presumption that Ms. Naugle received a 2021 Notice of Assessment electronically in July 2022, which warned her about the excess and advised her to withdraw the funds immediately.

  • Because she did not remove the excess contributions until 2023, the officer concluded she had not acted within a reasonable timeframe, which is a requirement under s. 207.06(1) of the Income Tax Act for discretionary tax relief.

Judicial Review and Court’s Analysis

  • The main issue was whether the CRA’s decision was reasonable.

  • The Court found the CRA’s analysis flawed and incomplete:

    • There was contradictory evidence in the CRA’s own records—one record indicated the 2021 NOA was sent electronically, while another suggested it was sent by paper.

    • The CRA officer did not acknowledge or address this inconsistency.

    • The decision assumed Ms. Naugle received proper notice in July 2022, which formed the basis for denying her request—but this assumption was not properly substantiated.

  • Furthermore, the decision lacked any meaningful analysis of whether Ms. Naugle’s overcontribution was a “reasonable error,” another requirement under the Income Tax Act for tax cancellation.

Outcome

  • The Court ruled the CRA’s decision unreasonable and granted the judicial review.

  • The matter was referred back to the CRA for redetermination by a different officer.

  • Ms. Naugle was awarded $75 in costs, covering her court filing fee.

Key Takeaway

Administrative decisions, especially those based on statutory discretion, must consider the full evidentiary record and provide clear, reasoned justification for conclusions. The CRA’s reliance on electronic notification presumptions must be supported by consistent documentation, and failure to consider contradictory evidence can render a decision unreasonable under the Vavilov standard.