Itzkovitch, 2026 FC 1215: misreading a TFSA notice of assessment is an innocent mistake, not a reasonable error under subsection 207.06(1)

2026 FC 1215 · Federal Court

Author: Sas Tullo

This is a judicial review of a Canada Revenue Agency decision refusing to waive the tax charged on an over-contribution to a Tax-Free Savings Account. The applicant had been abroad when the first notice arrived; his father paid the amount shown on its first page and died soon after, and the excess stayed in the account for another year. The CRA refused relief twice, and the Federal Court has now upheld the second refusal as both procedurally fair and reasonable. The case matters because TFSA over-contribution penalties are common, the relief provision is discretionary, and the court confirms once more that a good-faith misunderstanding of a notice is not the kind of error that opens the door to relief.

Facts

The applicant held a TFSA and exceeded his contribution limit in the 2021, 2022, and 2023 taxation years (para 4). On July 26, 2022, the CRA issued a TFSA notice of assessment for the 2021 excess (para 5). The applicant was outside Canada; his father received the notice, discussed it with him, and paid the $1,383.52 assessed, after which both believed the matter settled; the father fell ill and died in September 2022 (para 6). A second notice, for 2022, issued on July 18, 2023, and on receiving it the applicant learned that monthly tax was accruing on the excess and withdrew the funds (paras 7-8). He sought relief under subsection 207.06(1) of the Income Tax Act on the basis of the non-receipt of the original notice and his father’s illness and death; when the CRA refused, he applied for judicial review, then discontinued when the CRA agreed to a fresh reconsideration (para 9). After further submissions, the CRA refused again on August 15, 2025 (para 10). The second refusal letter opened with the words “In accordance with the recommendation of the Department of Justice, we are writing in response to another review” (para 15). The court declined to consider material in the applicant’s record that was not before the decision-maker (para 13).

Issues

The court framed two issues: whether the applicant was denied procedural fairness because the CRA did not conduct an independent review but simply followed the Attorney General’s direction, and whether the decision was unreasonable because the delegate failed to grapple with the applicant’s circumstances and did not explain why they were insufficient to warrant relief (para 12).

Holding

The application for judicial review was dismissed (para 38). The decision was procedurally fair (para 22) and reasonable (para 37). Although the respondent sought tariff costs, the court exercised its discretion to award none, each party bearing its own (para 39).

The court’s reasoning

Procedural fairness was reviewed on an approach akin to correctness, asking whether the procedure was fair having regard to all the circumstances, citing Canadian Pacific Railway Company v. Canada (Attorney General), 2018 FCA 69 at paragraph 54, and Heiltsuk Horizon Maritime Services Ltd v. Atlantic Towing Limited, 2021 FCA 26 at paragraph 107 (para 14). The applicant’s argument rested on the opening sentence of the decision letter, which he read as showing that the CRA had delegated the decision to the Attorney General (paras 15-16). Pentney J. rejected that reading. The procedural history explained the words: the earlier application had been resolved when the respondent agreed to send the matter back for reconsideration by a different delegate, and that litigation decision would likely have been taken on the Attorney General’s recommendation (para 18). The letter said the review was conducted pursuant to, not based on, that recommendation, and it confirmed that a CRA official not involved in the first two decisions had considered the facts (para 19). The delegate’s notes showed the submissions were considered, with no indication that the outcome rested on advice on the merits (para 20). It would stretch the words “beyond their reasonable meaning” to read them as saying the Attorney General dictated the result (para 21).

Reasonableness was assessed under Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, as confirmed in Mason v. Canada (Citizenship and Immigration), 2023 SCC 21 (para 23). The court could not reweigh the evidence, and only a sufficiently central error justifies intervention (para 24). Subsection 207.06(1) gives the CRA discretion to cancel the tax where the individual demonstrates that the liability arose as a consequence of a reasonable error and acted immediately to remove the excess (para 25).

The court identified two difficulties with the applicant’s submission that the delegate had failed to grapple with his circumstances (paras 26-27). First, the argument relied on a partial reading of the 2021 notice: its first page showed the amount owing, but the following pages set out the over-contributions month by month and stated that any excess should be withdrawn immediately to limit future tax (para 31). Second, the delegate had not doubted the applicant’s narrative; relief was refused because an innocent mistake, including misreading a notice, is not a reasonable error under section 207.06, a conclusion that reflects case law binding on the delegate, namely Weldegebriel v Canada (Attorney General), 2019 FC 1565 at paragraph 15, and Gada v Canada (Attorney General), 2025 FC 1573, quoting Worobec v Attorney General of Canada, 2025 FC 1319 at paragraph 57 (para 32). Under a self-assessment system the applicant had to inquire into the limits and read the whole notice (para 33). The existence of a reasonable error “will turn on the objective assessment of all the relevant evidence”, and that assessment here yielded an innocent mistake, which does not absolve ignorance of the law (para 35). The court grounded the rationale in Connolly v. Canada (National Revenue), 2019 FCA 161 at paragraph 69, decided under the parallel RRSP provision, with further reference to Yew v Canada (Revenue Agency), 2022 FC 904 at paragraphs 49-51, and Rempel v Canada (Attorney General), 2021 FC 337 at paragraphs 26-27 (para 36). Because the decision letter and notes showed that the personal circumstances were considered and explained why relief was denied, reasonableness was satisfied (para 37).

Practical implications

The decision adds to a consistent line of Federal Court authority on TFSA and RRSP over-contribution relief. The two statutory conditions in subsection 207.06(1) are cumulative, and the first, a reasonable error, is assessed objectively. Sympathetic circumstances that explain why the taxpayer did not act are not the same as circumstances that make the original error reasonable, and the court was explicit that the law, not sympathy, bound the delegate (para 29). In my view the case is a reminder that the relief is aimed at errors in making the contribution, such as being misinformed after reasonable inquiries (Connolly at para 69, quoted at para 36), and not at delays in fixing it once the Agency has given notice.

The procedural fairness holding is also of some general use. Decision letters issued after a consent reconsideration often refer to the Department of Justice or the Attorney General, and this judgment confirms that such a reference, read in context, does not by itself show that the delegate abdicated the decision (paras 18-21). An applicant who wants to make that argument will need something in the record showing reliance on advice as to the merits.

The current text of subsection 207.06(1) on the Justice Laws website shows an amendment history ending with 2022, c. 19, s. 52, so the provision has not been amended since the decision. Whether an appeal was taken is not verified here.

The takeaway is simple. A TFSA notice of assessment must be read to the end, and any excess must come out of the account immediately, because the window for relief closes with the first notice, not the second. Taxpayers who miss it should expect the oversight to be treated as innocent but not reasonable.

This comment is general information, not legal advice. The law may have changed since the decision; check the current text in the tax wiki.

Citation and links

Itzovitch v. Canada (Attorney General), 2026 FC 1215, reasons and judgment dated October 1, 2026, Pentney J. (the court’s cover page spells the applicant’s name Itzovitch and the reasons Itzkovitch). Reasons on the Federal Court’s site. Also on CanLII. The decision under review is the CRA’s refusal of August 15, 2025 to cancel the tax and interest on the over-contribution (para 10).