Date: 20021223
Docket: 2002-1556-IT-I
BETWEEN:
LEO CHOW,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
AND BETWEEN:
2002-1561(IT)I
LEO'S THE PLACE CABARET LTD.,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Beaubier, J.T.C.C.
[1] These appeals pursuant to the Informal Procedure were heard together on common evidence at Vancouver, British Columbia on September 16 and on December 11, 2002. They were adjourned on September 16 to allow the Appellants to gather further evidence. Mr. Chow and the Appellants' accountant, Wayne Low, testified. The Respondent called the assistant auditor on these files, Michael Fortney.
[2] Mr. Chow has appealed net worths assessed for 1997 and 1998. He filed income tax returns for 1995, 1997 and 1998 in which he reported income of $6,000 in each year. His only source of income was from Leo's The Place Cabaret Ltd. ("LTPC"). That, plus the cost of living in Vancouver caused these reassessments. Mr. Chow owned 67% of the shares of LTPC which operated a bar and restaurant on Main Street in Vancouver. A great deal of LTPC's business was on a cash basis and the accounting and recording of the cash received was inadequate. Mr. Fortney testified that when LTPC's staff received cash, they did not put it in the cash register and record the sale as the cash was received. Rather the staff simply pocketed the cash. Mr. Fortney understood that the cash may or may not have been put in the cash register later on. Moreover, LTPC's bank records did not accord with its income reported.
[3] At the opening of the hearing on September 16, 2002, the Respondent conceded a reduction in the assessments of Leo Chow and Leo's The Place Cabaret Ltd. in the amount of $17,400 in each of 1997 and 1998. That is so adjudged.
[4] Respecting the remaining sums assessed against each Appellant, the Court finds as follows:
1. Mr. Chow gave the only testimony for the Appellants based on first hand knowledge. He is not believed. He did not provide any supporting evidence to back up his testimony. He testified that the discrepancy in the net worth accounting was caused by gifts or loans received from a line of credit opened for him by his parents.
2. Mr. Chow is not believed for the following reasons -
(a) No documents were supplied in evidence which actually recorded advances from his parents or recorded the line of credit he alleged, nor did his parents testify.
(b) The audit was based on Mr. Chow's original interview and statements he made about his income and personal expenses. He stated then that his only income was from LTPC and that he received a starting advance from his parents in 1993 or 1994. He did not refer to any other source of funds, whether income, loans or gifts. Mr. Fortney testified that, later, when he was advised that these assessments would occur, Mr. Chow referred to his parents as sources in 1997 and 1998.
(c) The Appellants offered no supporting documents or testimony, although these appeals were adjourned for that purpose in the midst of trial on September 16, 2002.
3. Leo Chow's -
(a) 1997 income tax return was filed on August 13, 1999, and
(b) 1998 income tax return was filed on September 24, 1999.
No excuse was given for the fact that they never filed on April 30 in each proper year.
4. After the Respondent's concessions are calculated, Mr. Chow was assessed for about 300% of the income he reported. Moreover, his income tax returns of round numbers coupled with the way that Mr. Fortney testified LTPC's cash was handled and deposited indicates that both Appellants were negligent and indifferent as to whether the law was complied with or not. They were both grossly negligent in the matters in question.
5. Therefore, respecting Leo Chow for 1997 and 1998, the assessments of income, penalties for gross negligence and penalties for late filing are confirmed for the remaining amounts assessed.
6. LTPC was assessed a corresponding identical set of sums for each of Leo Chow's years' net worth as already described and for penalties for gross negligence. They reflected Mr. Chow's assessments exactly. No particular evidence was offered on behalf of LTPC. Rather it was included in what is described herein respecting Mr. Chow. However, Mr. Fortney's description of LTPC's cash and income dealings confirms LTPC's gross negligence, and the consequent assessments. Therefore LTPC's assessments are
confirmed respecting the amounts of the assessments which remain in dispute.
Signed at Saskatoon, Saskatchewan, this 23rd day of December, 2002.
|
"D.W. Beaubier" |
J.T.C.C.COURT FILE NO.: 2002-1556(IT)I and 2002-1561(IT)I
STYLE OF CAUSE: Leo Chow v. The Queen
Leo's The Place Cabaret Ltd. v. The Queen
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: September 16, 2002 and December 11, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge D. W. Beaubier
DATE OF JUDGMENT: December 23, 2002
APPEARANCES:
Agent for the Appellant: Leo Chow
Counsel for the Respondent: Victor Caux
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-1556(IT)I
BETWEEN:
LEO CHOW,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the appeals of
Leo's The Place Cabaret Ltd.v. Her Majesty the Queen,(2002-1561(IT)I)
on September 16 and on December 11, 2002 at Vancouver, British Columbia,
by the Honourable Judge D. W. Beaubier
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Victor Caux
JUDGMENT
The appeals from the reassessment made under the Income Tax Act for the 1997 and 1998 taxation years are allowed in accordance with the attached Reasons for Judgment.
Signed at Saskatoon, Saskatchewan, this 23rd day of December, 2002.
|
"D. W. Beaubier" |
J.T.C.C.
2002-1561(IT)I
BETWEEN:
LEO'S THE PLACE CABARET LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the appeals of
Leo Chow v. Her Majesty the Queen,(2002-1556(IT)I)
on September 16 and on December 11, 2002 at Vancouver, British Columbia,
by the Honourable Judge D. W. Beaubier
Appearances
Agent for the Appellant: Leo Chow
Counsel for the Respondent: Victor Caux
JUDGMENT
The appeals from the reassessment made under the Income Tax Act for the 1997 and 1998 taxation years are allowed in accordance with the attached Reasons for Judgment.
Signed at Saskatoon, Saskatchewan, this 23rd day of December, 2002.
|
"D.W. Beaubier" |
J.T.C.C.