Damn draconian. Even the evil Canada Revenue Agency does not have recourse to a court of no appeal.
Canadian tax disputes must, by law, go to the Tax Court. Either side can appeal the decision to the Federal Court of Appeal. Next step from there is the Supreme Court of Canada. The Supreme Court is not a fan of the CRA. The SCC is actually releasing a decision on Friday in respect to a provision of the Income Tax Act that I'm eagerly awaiting.
Anyhow the CRA can, in the absence of any response from a taxpayer, make assumptions about income and expenses and assess on them. I've done it myself as an income tax auditor. We try to be reasonable but in the deliberate absence of information from the taxpayer it was obvious which way I was going to go if there was a subjective judgment call.
The theory is that if the taxpayer would not give the necessary information to us they had to provide it at their own appeal because, at the Tax Court, it is up to the taxpayer to demolish the CRA's assumptions. This is based on the common sense position that the taxpayer has the information to prove the CRA wrong. As the Federal Court of Appeal of Canada said in a case I was involved in;
[44] To sum up, the Minister was entitled, at the stage of confirmation of the initial assessment, to plead new facts as assumptions of fact. The initial onus of proof was on the respondent to demolish these assumptions, especially because all relevant evidence was in the hands of the respondent and, if the onus were to be on the appellant, the appellant would be facing the daunting, if not impossible, task of proving a negative, i.e. that the seismic data was not bought by the five predecessors of the respondent, and subsequently used by them and the respondent, for exploration purposes.
In other words if the respondent (taxpayer) has the information then give it to the court. This makes very practical sense. If taxpayers, who control their own information, just refuse to provide it to the CRA then we couldn't do audits. If the CRA could not smoke them out by making assumptions it would not be able to audit taxpayers (I won't discuss whether that is a good or bad thing). So the law has a reverse onus of proof on tax matters. Unlike criminal law where the Crown has to prove a defendant guilty, in civil tax law the taxpayer has to prove the CRA wrong.