[OFFICIAL ENGLISH TRANSLATION]
2000-2470(IT)I
2000-2484(IT)I
BETWEEN:
GARAGE A. CÔTÉ BAIE ST-PAUL INC.
JENNEY CÔTÉ,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on June 27, 2001, at Québec, Quebec, by
the Honourable Judge Pierre Archambault
Appearances
Agent for the Appellants: Jean-Pierre Forest
Counsel for the Respondent: Anne Poirier
JUDGMENT
The appeals from the assessments made under the Income Tax Act in respect of the 1996 taxation year are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that an amount of $11,400 should be excluded from the income added by the Minister and that the penalties and interest should be revised to take into account the exclusion of this amount.
Signed at Ottawa, Canada, this 8th day of August 2001.
|
"Pierre Archambault" |
J.T.C.C.
Translation certified true
on this 20th day of February 2003.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20010925
Docket: 2000-2470(IT)I
2000-2484(IT)I
BETWEEN:
GARAGE A. CÔTÉ BAIE ST-PAUL INC.,
JENNEY CÔTÉ,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Delivered orally from the bench
on June 27, 2001, at Québec, Quebec,
and edited for clarity and completeness.)
Archambault, J.T.C.C.
[1] These appeals were instituted by Garage A. Côté Baie St-Paul inc. (Garage) and Mr. Jenney Côté in respect of assessments made by the Minister of National Revenue (the Minister) for the 1996 taxation year. In the two appeals, the problem is essentially the same: the Minister added to Garage's income $15,400 in unreported income and considered that same amount as an appropriation of funds taxable in the hands of Jenney Côté under subsection 15(1) of the Income Tax Act (the Act).
[2] The assessments at issue resulted from the work of one of the Minister's auditors who discovered deposited in Jenney Côté's personal account certain amounts concerning which she was not given a satisfactory explanation. The following deposits were involved:
|
Date |
Amounts |
|
29-02-96 |
$10,000 |
|
29-02-96 |
$4,000 |
|
23-04-96 |
$400 |
|
13-05-96 |
$1,000 |
At the beginning of the hearing, the appellants informed the Court that they were no longer challenging the inclusion of the $4,000 deposit or the assessment of a penalty in respect of that amount.
[3] The only remaining issue is the treatment of the $10,000 deposit made on February 29, 1996, and the deposits totalling $1,400 made in April and May 1996. The appellants allege that the $10,000 represents a gift to Jenney Côté made on January 1, 1996 by a distant cousin, Amédé Côté. They also allege that the $1,400 represents a portion of the proceeds from the sale of equipment described as [TRANSLATION] "blowers".
Analysis of the evidence
[4] The problem raised by these two appeals primarily concerns the credibility of the evidence provided to the Court, more especially by the witnesses. The evidence-particularly that adduced by the appellants-was not entirely clear. Moreover, some of Jenney Côté's explanations appeared at first blush somewhat improbable and caused me to question his credibility. To begin with, there is the fact that the $10,000 gift to Jenny Côté from Amédé Côté was apparently made in cash using an amount of $10,000 that was allegedly withdrawn by Amédé Côté more than ten months before January 1, 1996. The fact that Amédé Côté used a cheque in making another gift, namely a gift of $25,000, in November 1996, also raised doubts.
[5] The reason given byJenney Côté in his testimony to explain why a cheque had been used in November 1996 appeared improbable. According to him, his cousin Amédé did this in order to be able to provide better evidence and precisely to avoid the kind of problem he found himself facing before this Court. However, the Minister's audit had not yet begun at the time the second gift was made.
[6] Among the other facts that created some doubt about Jenney Côté's testimony, there is the wording on the card accompanying the $10,000 gift and on which Amédé Côté indicated that he was making a gift of $10,000 to Jenney Côté.
[7] There is also the fact that some of the explanations given to the Court were not provided to the auditor at the audit stage. In particular, the card that accompanied the gift of January 1, 1996, was not given to her. Furthermore, only at a very late stage was Exhibit A-1 tendered in evidence as proof of the sale of the blowers on April 22, 1996, to a Gérald Tremblay for an amount of $1,500, $500 of which was allegedly paid as a down payment, with the balance payable on delivery.
[8] Taking all these circumstances into account, I am not at all surprised that the appeals officer felt unable to grant the changes that the appellants had requested at the objection stage. I myself cannot be absolutely certain that a gift of $10,000 was made by Amédé Côté to Jenney Côté and that a sale of blowers actually took place on April 22, 1996. However, the onus on the appellants was not to convince the Court beyond a reasonable doubt. They had to prove their case on a balance of probabilities. My assessment of the whole of the evidence that was presented to me leads me to the conclusion that Jenney Côté and Garage succeeded in showing that the Minister's assessments were incorrect. I find it probable that Amédé Côté gave $10,000 to Jenney Côté and that the blowers were indeed sold on April 22, 1996, for an amount of $1,500.
[9] First, there is the testimony of Jenney Côté who, under oath, said that he had received the gift of $10,000 and that he had sold the two blowers for an amount of $1,500 to Mr. Tremblay in April 1996. It is entirely likely that such a gift could have been given to Jenney Côté since Amédé Côté resided at Jenney Côté's home, where he received board as well. The fact that Amédé Côté was approximately 79 years old at the time the gifts were made and that he had neither children nor brothers or sisters makes it likely that he could have made and wanted to make the gift of $10,000. Furthermore, the Minister did not dispute the fact that Amédé Côté gave $25,000 to Jenney Côté in November 1996.
[10] In addition, Amédé Côté seems not to have had many expenses and he apparently did not deposit in the bank either his old age pension benefits or the benefits he received from the Régie des rentes du Québec. According to Amédé Côté's bank statements, the biggest and most regular deposits seem to have been interest payments, mainly from term deposits. These investments could have been made from the proceeds of $71,000 from the sale of a building by Amédé Côté to Jenney Côté.
[11] According to the testimony ofJenney Côté and his accountant, Mr. Forest, Amédé Côté was in the habit of keeping large sums of money at home. Consequently, even if the $10,000 withdrawn in February 1995 may have been spent before January 1, 1996, Amédé Côté had, in January 1996, the financial means to pay the $10,000 amount in question.
[12] By not taking the steps required to ensure Amédé Côté's presence at the hearing, the appellants ran a fairly substantial risk that the Court would not give any probative weight to the affidavit of Amédé Côté, since counsel for the respondent did not have an opportunity to cross-examine him. Moreover, counsel objected to the tendering of this statement in evidence. In disallowing the objection, I relied on the decision of the Federal Court of Appeal in Ainsley v. Canada, [1997] F.C.J. 701. The relevant passage reads as follows:
. . . In our view, given that the proceedings below were conducted in an informal way, it was not necessary in order for the letter to be admitted into evidence that its author be called. Moreover, in the exceptional circumstances described above, the applicant should be given an opportunity before closing his case to call David Munro, who he claims will support his case and who would have been called had he known in good time that the outside bookkeeper was going to be called by the respondent.
* See subsection 18.15(4) of the Tax Court of Canada Act, R.S.C. 1985, c. T-2, as amended, as read with paragraph 18.29(1)(b) of that statute.
[13] This passage was cited with approval by Judge Bowman in Brennan v. R., [1998] 1 C.T.C. 2143, at paragraph 7. At paragraph 12, Judge Bowman adds the following:
The Federal Court of Appeal decision in Ainsley was followed and analyzed by Christie A.C.J.T.C. in Yakubu v. R. (September 5, 1997), Doc. 96-4445(IT)I (T.C.C.). In his reasons for judgment, the learned Associate Chief Judge observed at p. 6:
It does not follow that the fact that documents are entered in evidence as exhibits in the course of a trial that what is said therein by way of statements of fact must necessarily be taken by the Court as being true. Presumably this was the intent of the Court of Appeal in Ainsley.
[14] Considering the age of Amédé Côté, in view of the fact that he lived just under 100 km from the place where the hearing was held and given the amount in question, namely $10,000, I am prepared to accept his affidavit as corroborating the testimony of Jenney Côté that he had indeed received a gift of $10,000 from Amédé Côté. Among the other circumstances that lead me to this conclusion, there is the fact that the evidence did not show that Garage and Jenney Côté had repeatedly failed to report income in the past. Moreover, it is interesting to note that the Minister did not see fit, in the circumstances, to make an assessment using the net worth method. If the Minister had thought that there had been such omissions on the part of Jenney Côté, he would in all likelihood have used that method of assessment.
[15] For all these reasons, the appeals of the appellants are allowed, without costs, and the assessments are referred back to the Minister for reconsideration and reassessment on the basis that the amount of $11,400 is to be excluded from the income added by the Minister and that the penalty and interest amounts are to be modified accordingly.
Signed at Montréal, Quebec, this 25th day of September 2001.
|
"Pierre Archambault" |
J.T.C.C.
Translation certified true
on this 20th day of February 2003.
Erich Klein, Revisor