Date: 20020424
Docket: 2001-991-IT-I
BETWEEN:
HENRY P. ROSE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
__________________________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: Michael Taylor
____________________________________________________________________
Reasonsfor Judgment
(Delivered orally from the Bench at Vancouver, British Columbia, on Wednesday, January 16, 2002)
Margeson, J.T.C.C.
[1] It is the duty of the Appellant, in a case of this nature, to establish that the Minister of National Revenue's ("Minister") assessment is incorrect. Counsel for the Respondent has outlined the provisions of the Income Tax Act ("Act") which apply not only to this Appellant but to all taxpayers.
[2] The basic rule is that taxpayers have to file a return by April 30th of the subsequent year for earnings, all forms of income, during the previous year. In this particular case, employment income was in issue, which is covered by section 5 of the Act. That section sets out what a taxpayer's employment income is: one has to include income from an office, employment, salary, wages and other remuneration, including gratuities received by the taxpayer in the year. The Act creates a self-assessing system because the taxpayer is the one who knows how much he has earned in a year. The Minister has no way of knowing how much a taxpayer earned, except from the return that a taxpayer files.
[3] The Minister, of course, has the right to require of employees that they file returns and of employers, that they provide to the Minister information as to what taxpayers have earned. In this particular case, we have what is referred to as a T4. The employer is required to file a T4 to confirm what the taxpayer has earned. When the taxpayer files a return, he files a copy of the T4 to confirm what he has earned. That is part of the system. The Minister is entitled to rely upon the information contained in the T4 and upon the information provided by the taxpayer.
[4] In this particular case, there is no evidence before the Court that the Minister received any filing from the taxpayer. The taxpayer says that he did file a return before this reassessment took place. There is no information before me that the Minister has such a return, and indeed, the assessment that was made by the Minister was obviously based upon subsection 152(7) of the Act. This section entitles the Minister to make an assessment if no return has been filed.
[5] The Minister is not bound by a return or information supplied by, or on behalf of, a taxpayer, which is the T4, or the T1 which a taxpayer would file. If no return has been filed, the Minister may assess the tax payable under this part.
[6] The Minister did that on the basis of the only information available. That was the T4 which was filed electronically according to the evidence. The witness who testified on behalf of the Minister said that he accessed the information electronically in the Appellant's file and found the T4 which indicated that the Appellant had earned the amount of $51,277 in the year in question and indicated the deductions taken. Based upon that information, the witness made an assessment of the taxpayer under subsection 152(7) in accordance with the Act.
[7] It was incumbent upon him to advise the Appellant and he did so. He made it clear to the taxpayer that the taxpayer had a right to appeal to the Tax Court of Canada, and did discuss with him, (by the taxpayer's own admission) the taxpayer's position that he thought that he had earned $35,000 rather than $51,000. That is the way the conversation went between the two of them as far as the Court is concerned.
[8] The taxpayer did avail himself of his right to file an appeal to the assessment and that is what is before this Court.
[9] Every taxpayer in Canada who files an appeal has a right to come before the Court to be heard, to be listened to, and to have the information and the evidence that he provides, taken into account. But the Court must remind the Appellant that, at this stage, the Minister is entitled to rely upon the assessment that he made until it is established that the assessment is incorrect. The taxpayer seems to have the belief (incorrectly, unfortunately) which may have come to him from other sources, that the Minister has to prove that the assessment is correct.
[10] The law is such that, under our self-assessing system, it would be impossible for the Minister to meet that burden because the information as to what a taxpayer earns is, to a large extent, known only by the taxpayer himself and to some extent, by the employer. There are many forms of income which a taxpayer earns which nobody knows anything about except the taxpayer himself. That is the reason why the Act has what is commonly referred to as a type of reverse onus provision; that is, that the Minister does not have to prove that the assessment is correct, the Appellant has to establish that the assessment is incorrect.
[11] In this case, the only evidence presented as to the proper amount that the Appellant earned was the evidence that was submitted in the T4. The Minister was entitled to rely upon that and make the assessment. At that point in time, then, the assessment is deemed correct until the Appellant establishes that it is incorrect.
[12] What evidence has come before this Court to convince it that the Minister's assessment was incorrect? The only evidence presented is the belief of the Appellant, not supported by any documentation, even an analysis by himself, or what would be called a reconciliation of any sort, which would show that his records indicate that the assessment that the Minister made was incorrect, in that he earned only $35,000 in income rather than $51,277 that the Minister is indicating that he earned.
[13] The Appellant said that he believes that he received only $35,000 and that the other $16,000 was expenses that were owed to him for which he paid personally. Basically he says, "I only earned $35,000 and therefore the other $16,000 is for expenses paid by me. It has to be expenses which I had paid out on behalf of the company and for which they had not rebated me".
[14] When the Appellant was cross-examined he had to admit that he had no documents whatsoever to substantiate what he paid out. He had no receipts, no money orders, no cancelled cheques, no airline tickets, no reconciliation or no record from the company acknowledging that he was owed this amount of money. It is unreasonable that a company that was of the apparent size and means of the payor in this particular case, the employer, would not have had bookkeeping or record-keeping, which would have differentiated in its own records what amounts were submitted or remitted to employees by way of earnings and those amounts which were owing to employees as amounts paid by the employee on behalf of the company. That would be something that would be almost automatic in any bookkeeping system.
[15] From what the Appellant said, this was a substantial company and it had substantial holdings throughout the world at one point in time. This particular branch of it went bankrupt and may not have been operated in the same manner that the other parts of the parent company operated but there should have been records available to reflect what the Appellant is claiming here.
[16] In this particular case the company submitted to the Minister a T4 return which indicated that he earned $51,277. It refers to T4 earnings and certain deductions. It is true that according to the evidence given by the witness called on behalf of the Minister, that the amount of the deductions were improper and; the Court accepts that as a fact. But again, it is obvious from what the witness for the Respondent said, and from what the Court can reasonably deduce that there are many reasons why, at the end of the year, an employee may not have had sufficient deductions taken from him to comply with the Act, nor why the deductions may have been greater than required.
[17] As indicated, the amount of money that is deducted in a given year may be dependent upon the income that was earned in the previous year. It may be dependent upon the amount of income that the employer expects that the Appellant is going to make in the year in issue. It depends upon the information provided by the taxpayer to the employer and to the government. There are many reasons why the amount that should be deducted based upon an income of a taxpayer in the year might not be the correct amount.
[18] Therefore, the argument by the Appellant is not well taken that, since the employer did not deduct, in the year in question, an amount which would represent the expected deduction from earnings of $51,277, this is evidence which the Court can accept as proving that he only earned $35,000 rather than $51,277. There is no evidence from which the Court can conclude that the Appellant has established, on a balance of probabilities, that the Minister's assessment was incorrect.
[19] That being the state of the law and the Minister being entitled to rely upon the presumptions as being correct, the Court is satisfied that there is no evidence before it from which it can conclude that the assessment was incorrect.
[20] The Appellant should have been able to show that the assessment was incorrect if he had wanted to do so and he admitted that in evidence. But he did not have copy of the initial tax return that he filed and he had nothing to show that he filed a return for 1996 before the assessment was made by the Minister as he claimed. He had no summary or breakdown of the disputed amount and the Court has no copy of the covering letter sent to the Minister with respect to the discrepancy between the amount his employer said that he earned and what he said that he earned.
[21] According to him he paid expenses with respect to hydro, to cleaning up the restaurants, for air flights home, for accommodations, for transportation, for salaries to other employees, for a vehicle and a vehicle deposit. Those are all items for which receipts should be available and which one would expect to be available.
[22] In this particular case, either because the Appellant chose not to do so, or because he just did not think that they had to be presented or because he believed that merely by coming into Court and saying that he did not believe that the Minister's assessment was correct would be sufficient to rebut the presumption that the assessment was correct, there was no acceptable evidence to support his position.
[23] Further to that, the Appellant indicated that he contemplated at one time suing his own employer and that they made a settlement. Well, one would think, if the company made a settlement with him, that they must have had some reason for believing that the Appellant could establish what the amount of the indebtedness of the company was. If that is the case, then the Appellant certainly could have produced some of that evidence here today.
[24] His position here is extremely tenuous. The argument that he poses is based upon something that has not been established.
[25] Consequently, the Court will have to dismiss the appeal and confirm the Minister's assessment.
Signed at Ottawa, Canada, this 24th day of April 2002.
"T.E. Margeson"
J.T.C.C.
COURT FILE NO.: 2000-991(IT)I
STYLE OF CAUSE: Henry P. Rose and Her Majesty The Queen
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: January 16, 2002
REASONS FOR JUDGMENT BY: The Honourable T.E. Margeson
DATE OF JUDGMENT: January 24, 2002
DATE OF WRITTEN REASONS: April 24, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Michael Taylor
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-742(IT)I
BETWEEN:
RAYMOND A. FAUTLEY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on January 22, 2002 at Regina, Saskatchewan, by
the Honourable Judge Terrence O'Connor
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Tracey Harwood-Jones
Crystal McLeod, (Student-at-law)
JUDGMENT
The appeals from the reassessments made under the Income Tax Act for the 1997 and 1998 taxation years are allowed, without costs, and the matters are referred to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 24th day of April, 2002.
|
"T. O'Connor" |
J.T.C.C.