Court allows Iristel application for judicial review into wage subsidy denial to stand

A federal court has dismissed the Canada Revenue Agency’s efforts to extinguish an application for judicial review from Iristel Inc. which claims the CRA improperly withheld more than $600,000 owed to it under the Canada Emergency Wage Subsidy (CEWS) program. In an order issued Friday, Judge Kevin Aalto wrote that the CRA's October, 2020 motion to have Iristel’s application struck “misses the point,” and that Minister Diane Lebouthillier “cannot evade a review” of her agency's conduct. Iristel alleges that the CRA has abused its power and subjected the company to procedural unfairness in its decision on whether or not to pay the wage subsidy. In an August 2020 application, Iristel said it claimed emergency subsidies totalling $605,714 across three reporting periods during which it saw dramatically decreased revenue due to the COVID-19 pandemic. The CRA then denied it that money in late June 2020 because of an ongoing audit of Iristel’s finances (and subsequent lawsuit), according to the Iristel application. The CRA argued in response to the application that the company should have to run its complaint through an objection and appeal process within the tax court, which the CRA said has jurisdiction over such matters. Judge Aalto wrote that because issues of procedural fairness and abuse of powers do not fall in the jurisdiction of the tax court, Iristel pursuing its complaint there “would eliminate any need to scrutinize the conduct of the Minister in exercising the discretion granted.” “If the Minister, as alleged, is withholding payment of CEWS to Iris for an improper purpose then that conduct is reviewable by this court." In its motion, the CRA also requested to enter an affidavit from Marie Lusson, a Senior Technical Specialist in the Compliance Programs Branch of the CRA, providing details of an examination of Iristel’s application for the subsidy. Judge Aalto called the affidavit frail, as Lusson had little direct knowledge of the decision on the company’s application. “In other words, she was a ‘straw’ affiant with no direct knowledge of anything other than identifying a document she located in CRA files.” In his decision to deny the CRA’s motion, Aalto awarded costs to Iristel. The company is still duking it out with the CRA over an audit and court case, in which the company says it is owed $63.2 million in unpaid tax returns that its survival hinges on. Meanwhile, the CRA says it suspects Iristel is involved in a “carousel scheme” to claim tax refunds that it did not pay in the first place. In July 2020, the Federal Court of Appeal agreed to hear Iristel’s case against the CRA’s conduct, while at the same time dismissing Iristel’s request for interim relief in the form of the unpaid tax returns. The tax return case itself is proceeding separately in tax court. Iristel said filings in that case from the CRA indicate “suspicions, not findings,” and thus the withholding of the wage subsidy is incorrect. The court dismissed a previous request from the government to throw out an application for judicial review from Iristel, in which the company sought a review of the CRA’s conduct in the audits into the company. In January, Aalto wrote that he disagreed with the argument, put forward by the Attorney General on behalf of the CRA, that Iristel’s application for review was made in bad faith. — Reporting by Hannah Daley and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

Court allows Iristel application for judicial review into wage subsidy denial to stand

News | March 8, 2021

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Court allows Iristel application for judicial review into wage subsidy denial to stand

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