I agree, it is quite dumb. But here are a couple of (not so good) reasons I suspect why (take them with a grain of salt):
- You must be in Canada when applying for the Citizenship. I believe you are not able to apply outside of Canada. Historically speaking, this stipulation makes sense; the government previously stipulated that the applicant must have intention to remain in Canada. Therefore, it is natural to only allow applications from within Canada. I suspect that when forgoing this requirement via legislation, the stipulation to apply from Canada was not amended.
- For the government to pursue legal avenues in the case of misrepresentation. I do believe misrepresentation cases are dealt with by a judge. In accordance with these procedures, I believe the government wishes to deal with the person in Canada, as opposed to muddying the water with international laws. I suspect this reason is also why one must inform IRCC if they leave the country.
- Unfair advantage. I won't even try to argue this point because it makes no sense to me. But I suspect it is possibly a reason behind the restriction.
In any case, I suspect only point two is reasonable. Point one is just typical bureaucracy. Point three makes no sense but I have a feeling IRCC justifies it in this sense. If you see reason in point 3, do let me know because I may be missing some context.
Therefore, all-in-all, I think the restriction is horrible and only proves to slow down the process. Hopefully someone else can pitch in and elaborate on any other potential reasons.
