http://decisions.fct-cf.gc.ca/fc-cf/decisions/en/item/110364/index.do 
McNally v. Canada (National Revenue) (June 18, 2015 – 2015 FC 767, Harrington J.).
Précis: The applicant, Mr. McNally, participated in a gifting tax shelter program, EquiGenesis 2012. More than two years had passed since he filed his 2012 tax return and the Minister had not assessed his 2012 taxation year. Mr. McNally brought a judicial review application for an order compelling the Minister to assess his 2012 taxation year. The Minister’s representative freely admitted that the delay was a matter of policy intended to discourage the use of such tax shelters.
The Court held that under the circumstances the Minister’s delay was abusive and ordered that the return be examined and assessed within 30 days. The application was granted with costs.
Decision: The parties were very candid about their positions:
[2] In his return, Mr. McNally is claiming a credit arising from his participation in a gifting tax shelter. The Minister frowns upon this particular type of shelter, notwithstanding that the Tax Court of Canada has yet to rule on their validity. He submits that the Minister is deliberately delaying the assessment of his return for an improper purpose; that purpose being to discourage participation in such shelters.
[3] For her part, the Minister freely admits that the main reason Mr. McNally’s return (like others in the same situation) has not been assessed is to discourage participation in these shelters. She submits that is a perfectly valid motive, not contrary to s 152(1) of the Act. In addition, she says she is delaying Mr. McNally’s return until the audit of the gifting tax shelter in which he participated is complete, and also in order to educate the public. These two motives are also perfectly valid, and are not in breach of section 152(1).
[4] According to Mr. McNally, the outcome of his assessment is a forgone conclusion. His credit will be disallowed as being an invalid charitable donation. However, until he is assessed he is unable to challenge that assessment through the appeal provisions in the Income Tax Act and, in all likelihood, to the Tax Court of Canada, and perhaps beyond.
The Court was equally candid about the Minister’s position:
[10] Beginning with the 2012 taxation year, the CRA developed what is known as the Gifting Tax Shelter (GTS) National Program, also known as the Intercept Project. It applies to widely marketed shelters which do not involve flow-through shares. Eight shelters, including the EquiGenesis 2012 Investment & Donation Program (EquiGenesis 2012) fell within the GTS National Program.
[11] The Minister and her predecessors have long been suspicious of these gifting tax shelters. As early as November 2003, a fact sheet entitled Tax Shelter Donation Arrangements was published. The then Canada Customs and Revenue Agency published a news release with respect to tax shelter donation arrangements. These arrangements are often described as buying low and selling high, such as the purchase of art that is valued for tax purposes at many times its cost.
[12] CRA published a Fact Sheet in November 2004 alerting investors of risks associated with certain tax shelter donation arrangements, including gifting trust arrangements, leverage cash donations and buy-low donate-high arrangements. It stated that it would challenge any arrangement that did not comply with the Income Tax Act and would audit tax returns of investors. Another alert warned that participation in a tax shelter gifting arrangement would likely result in a tax bill. Thousands upon thousands of taxpayers were reassessed and denied well over 2.5 billion dollars in claimed donations.
[13] It is said in those news releases that the goals of the Program include educating and protecting Canadians from gifting tax shelter schemes.
In the case of Mr. McNally and EquiGenesis 2012 the Court found that the Minister’s decision to audit was highly tainted:
[40] With respect to EquiGenesis 2012, I can say, to paraphrase Mr. Justice Phelan, the decision to audit is so tainted by the real reason for the GTS Program that the audit is an excuse for delay, not a reason for delay.
[41] Andre Malouf, a senior analyst in the Tax Shelter Audits Section, Aggressive Tax Planning Division, of the Compliance Program Branch, of the Canada Revenue Agency, admits that the 2012 Program is similar to the 2009 Program. Mr. Malouf said that more than a year ago, in March 2014. As sure as night follows day, Mr. McNally’s charitable tax donation will be disallowed. Although the Minister is responsible for administrating the Income Tax Act, ultimately it falls upon the courts to decide whether a claimed deduction is valid or not. It is plain and obvious that Mr. McNally’s rights have been trampled upon for extraneous purposes.
The Court held that the Minister’s delay was capricious and could not be allowed to stand:
[42] The Minister owes Mr. McNally a statutory duty to examine his return “with all due dispatch”. There may well be circumstances in which it will take some time to reach a conclusion with respect to a given return. It may well be appropriate to await the audit of third parties. However, this is not one of those cases. Although not as blatant as Roncarelli v Duplessis, [1959] SCR 121, as Mr. Justice Rand stated at p 140:
…there is no such thing as absolute and untrammelled "discretion", that is that action can be taken on any ground or for any reason that can be suggested to the mind of the administrator; no legislative Act can, without express language, be taken to contemplate an unlimited arbitrary power exercisable for any purpose, however capricious or irrelevant, regardless of the nature or purpose of the statute.
[43] The CRA is entitled to express concerns with respect to certain tax shelters and to warn that such shelters will be audited. In Mr. McNally’s case, however, the resulting delay is capricious and cannot be allowed to stand. Even assuming these secondary purposes to be valid, they are overwhelmed by the primary main purpose and cannot save the day (Canada (National Revenue) v RBC Life Insurance Company, 2013 FCA 50, [2013] 3 CTC 126, 2013 DTC 5051).
As a consequence the Minister was ordered to examine Mr. McNally’s 2012 tax return and issue a notice of reassessment within thirty days. The application was accordingly allowed, with costs.