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Protective Assessment - Section 74 (1) Income Tax Act

Updated: Nov 29, 2023



Protective Assessment under Section 74 (1) of the Income Tax Act


Section 74 (1) of the Income Tax Act "Where it appears to the Comptroller that any person liable to tax has not been assessed or has been assessed at a less amount than that which ought to have been charged, the Comptroller may, …, assess that person at such amount or additional amount as according to his judgement ought to have been charged."


Section 74(1) of the Income Tax Act grants the Comptroller of Income Tax (Comptroller) the authority to reassess an individual's tax liability if they believe that the individual has not been assessed at the correct amount or has not been assessed at all. This provision empowers the Comptroller to ensure that all individuals who are liable to pay income tax are properly assessed and that they are not paying less tax than they should be.


The Comptroller's powers under Section 74(1) are not limited to situations where there has been an intentional or deliberate attempt to evade tax. They can also be exercised if the Comptroller believes that an individual has simply made a mistake in their tax calculations or failed to disclose all relevant information.


In order to exercise their powers under Section 74(1), the Comptroller must have reasonable grounds to believe that an individual's tax liability has not been properly assessed. This means that they must have some evidence to suggest that the individual may have underpaid their tax or that they may have been entitled to certain deductions or allowances that were not claimed.


Once the Comptroller has established reasonable grounds to believe that an individual's tax liability has not been properly assessed, they can issue an assessment notice to the individual. This notice will set out the amount of tax that the individual is considered to owe, as well as the reasons for the assessment. The individual will then have the opportunity to appeal the assessment if they believe that it is incorrect.


Section 74(1) plays a crucial role in ensuring the fairness and accuracy of the income tax system. It allows the Comptroller to identify and correct any errors or omissions in individual tax assessments, ensuring that taxpayers are not overcharged or underpaid. This provision helps to uphold the integrity of the tax system and promotes a level playing field for all individuals.


How Bestar can Help

Protective Assessment - Section 74 (1) Income Tax Act

Section 74(1) of the Income Tax Act (ITA) empowers the Comptroller of Income Tax (Comptroller) to assess a taxpayer for additional tax if the Comptroller believes that the taxpayer has not been assessed or has been assessed for a lesser amount than what is rightfully due. This provision aims to safeguard the integrity of the tax system and ensure that all taxpayers fulfill their tax obligations.


Bestar can assist taxpayers in various ways related to Section 74(1) of the ITA:

  1. Tax Review and Risk Assessment: Bestar can conduct a thorough review of your tax returns and financial records to identify any potential areas of concern that could attract the Comptroller's attention under Section 74(1). This proactive approach can help you address any issues early on and minimize the risk of additional tax assessments.

  2. Tax Return Preparation and Filing: If you have been notified of an assessment under Section 74(1), Bestar can assist you in preparing and filing an amended tax return. We will meticulously examine the Comptroller's assessment notice, identify any errors or discrepancies, and prepare an accurate amended return that reflects your true tax liability.

  3. Tax Representation and Dispute Resolution: In case you face a tax audit or any other proceedings related to a Section 74(1) assessment, Bestar can represent you and advocate on your behalf. Our experienced tax professionals will interact with the Comptroller's office, provide necessary clarifications, and negotiate a fair settlement that protects your interests.

  4. Tax Planning and Advisory Services: Beyond addressing specific issues related to Section 74(1), Bestar can provide comprehensive tax planning and advisory services to help you manage your tax affairs effectively. We can assist in developing tax strategies, optimizing tax deductions, and ensuring compliance with all applicable tax laws and regulations.

Here are some examples of how Bestar has helped clients navigate Section 74(1) of the ITA:

  • Case: Another client faced a Section 74(1) assessment for claiming excessive business expenses. Bestar conducted a detailed analysis of the client's expense claims and identified areas where expenses were not adequately supported by documentation. After presenting a revised expense breakdown to the Comptroller, the assessment amount was significantly reduced.

If you have any concerns regarding Section 74(1) of the ITA or have received an assessment notice, do not hesitate to contact Bestar. Our team of tax experts is here to guide you through the process, protect your rights, and ensure a favorable outcome.

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