There is an uncertain relationship among the concepts of the General Anti-Avoidance Rule ("GAAR"), the normal assessment period, and the role of a taxpayer's state of mind or intention at the time of self-assessment. The uncertain relationship arises when the Minister of National Revenue (“Minister”) issues a GAAR (re)assessment after the normal assessment period on a taxpayer with a good faith tax filing position.
OVERVIEW OF THE LEGISLATION
Limitation periods provide a sense of finality and certainty concerning one's liability under a given statute. Under the Income Tax Act ("ITA"), the normal reassessment period for a taxpayer in respect of a taxation year is a) the period that ends four years after the earlier of the day of sending a notice of original assessment (“Self-assessment”) under Part I of the ITA for mutual fund trusts and non-Canadian-Controlled Private Corporations; and, b) the period that ends three years after the earlier of the day of sending a notice of original assessment under Part I of the ITA for individuals and Canadian-Controlled Private Corporations.
Part XVI, section 245 of the ITA, contains the GAAR legislation. The GAAR was legislated shortly after the Supreme Court of Canada's ("SCC") rejection of the business purpose test in Stubart Investments Ltd. v. The Queen,  1 SCR 536. Tax provisions are meant to promote “purposes related to specific activities". The GAAR is a provision of last resort for the Minister, and when successfully invoked, ignores the tax effects that would otherwise result from the application of other provisions in the ITA. The GAAR's purpose is to prevent abusive taxation planning transactions that "frustrate or defeat the object, spirit or purpose" of a particular provision under the ITA. 
The Minister may at any time make an additional assessment of tax for a taxation year under Part I of the Act. Reasons that the Minister may make additional assessments include, among other things:
- The taxpayer or person filing the return made a misrepresentation attributable to neglect carelessness or willful default; or
- The taxpayer or person filing the return committed fraud in filing the return or in supplying information under the ITA .
The burden of proof lies on the Minister first to establish to the Court's satisfaction that the taxpayer has made any misrepresentation or committed any fraud when the assessment is based on fraud or misrepresentation.