[OFFICIAL ENGLISH TRANSLATION]
1999-946(IT)G
BETWEEN:
MARTINE PARISEAU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 2, 2002, at Sherbrooke, Quebec, by
the Honourable Judge Alain Tardif
Appearances
For the Appellant: Pierre Robillard
Counsel for the Respondent: Annick Provencher
JUDGMENT
The appeal from the assessments made under the Income Tax Act for the 1991, 1992, 1993 and 1994 taxation years is allowed without costs, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 6th day of June 2002.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 28th day of August 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020606
Docket: 1999-946(IT)G
BETWEEN:
MARTINE PARISEAU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] This is an appeal concerning the 1991, 1992, 1993 and 1994 taxation years.
[2] The assessments under appeal were made on the basis of the following assumptions of fact:
[TRANSLATION]
(a) during 1993 and 1994, the appellant operated a business called the New York Pub the activities of which included selling beverages;
(b) the appellant did not report all of her revenues on her tax returns for the 1991, 1992, 1993 and 1994 taxation years;
(c) further to a net worth audit, the Minister of National Revenue noted the following discrepancies with regard to the reconciliation of the appellant's capital (copies of the balance sheets and of the capital reconciliation are attached hereto to form an integral part hereof):
1995 $20,985.97
1996 $29,212.45
1997 $58,484.06
1998 $39,089.84
(d) the amounts indicated above are revenues that the appellant failed to report and that must be taken into consideration for the purposes of computing her income tax for those same taxation years;
(e) in filing her tax returns for 1991 and 1992, the appellant misrepresented the facts through neglect, carelessness or wilful default in failing to report substantial revenues;
(f) in filing her tax returns for the taxation years in issue, the appellant knowingly or under circumstances amounting to gross negligence made a false statement or an omission in failing to report the revenues indicated in paragraph (c);
(g) penalties in the following amounts were therefore assessed under subsection 163(2) of the Income Tax Act:
1991 $1,447.73
1992 $3,060.17
1993 $7,146.18
1994 $4,733.88
[3] The appellant met Pierre Ouellette when she was a student. At that point she was working at various places to support herself but her income was very modest. When she became pregnant with her first child, she decided to live with her boyfriend, the father of her child.
[4] During the periods when she was able to work, having completed her studies, she worked as a substitute teacher at different school boards.
[5] She worked sporadically and her income was minimal. When she became pregnant again, the couple decided to purchase a house since their apartment was too small.
[6] To do so, they obtained the cooperation of the appellant's father, who lent them $20,000 as a down payment on the purchase price of $70,000, with the balance being obtained through a mortgage loan. The house was thus acquired in co-ownership.
[7] The following spring, the couple invested in various projects such as landscaping and acquired various assets, including a swimming pool, a fence and a shed.
[8] During all of the periods under appeal, the appellant worked as a substitute teacher at different school boards when she was available. She was paid for the small number of hours she worked.
[9] For his part, the appellant's spouse decided to purchase a business where alcoholic beverages were sold. Since he had a criminal record, he could not hope to obtain the necessary licences to operate the business he wanted to acquire. He therefore asked his partner, the appellant, to take out an $8,000 loan to purchase the business in her name.
[10] Considering that he was her spouse and the father of their child, she agreed. The appellant thus became the sole owner of the business under a notarized agreement dated March 10, 1993.
[11] The appellant explained that, although she was the registered owner of the business, she was never in charge of it, a statement that was later confirmed by her spouse. She maintained that despite the titles of ownership, she had never had anything to do with the business. She did not do any work there and did not receive any income.
[12] She testified that she had essentially served as a figurehead because of the requirements surrounding the liquor licence.
[13] She stated that she had never administered, operated or contributed to the business. Her involvement was limited to occasionally writing cheques, paying certain accounts and occasionally depositing cheques.
[14] All of the family's expenses were covered by her spouse, who was also repaying the $8,000 loan taken out to purchase the business as well as the mortgage payments on the house.
[15] In substance, the appellant stated that she had not paid anything for the acquisition of either the business or the house. As well, she categorically denied having contributed to the financing or expenditures required for the landscaping, the purchase of the shed, and the installation of the fence and the pool.
[16] All of the payments were her spouse's responsibility; the appellant occasionally acted as representative or messenger.
[17] This was apparently how things had worked until the break-up, when the appellant left the home with the two children and some furniture and did not derive any profit or benefit from the titles to the two properties, that is, the bar called the New York Pub and the house.
[18] The respondent argued that the appellant's testimony should be disregarded since it contradicted a number of validly executed instruments, including two notarial instruments.
[19] Her claims were based on the following judgments:
Lise Bourret v. Her Majesty the Queen, Action No. T-1136-87, December 12, 1989 (90 DTC 6056);
Friedberg v. Canada, [1991] F.C.J. No. 1255 (Q.L.);
Caron v. Canada, [2002] T.C.J. No. 177 (Q.L.);
3099-2325 Québec inc. c. 2849-6810 Québec inc., [1999] J.Q. no 2748 (Q.L.);
Dussault-Zaidi c. Québec (sous-ministre du Revenu), [1996] A.Q. no 2969 (Q.L.);
Saykaly v. Canada (Minister of National Revenue - M.N.R.), [1976] F.C.J. No. 904 (Q.L.);
[20] The respondent concluded that the appellant's explanations were not valid because they were not consistent with the content of the documentary evidence, which was clear, precise and not subject to interpretation.
[21] The assessments under appeal were made on the basis of the net worth comprised of all of the assets of which the appellant was co-owner according to the titles.
[22] For her part, the appellant never denied having associated her name with the transactions in question, instruments and documents accepted by the respondent. She essentially maintained that she had not made any of the necessary expenditures and had never benefited from the property or from the business or the improvement of its assets. She stated that all of the payments and expenditures had been made by her partner, since she herself did not have the employment or the income to take on such responsibilities.
[23] The appellant explained that she took care of her children and worked occasionally when her services were required by one of the schools at which she had expressed an interest in working as a substitute teacher.
[24] All of the appellant's explanations are plausible and credible. I did not observe anything that would tend to diminish the quality of her testimony. The facts related were clear and consistent. The appellant did not avoid any questions and her answers did not give any reason to disregard any or all of her testimony. I therefore conclude that the appellant's evidence had all of the qualities to be admissible.
[25] Can I disregard that testimony and conclude that the assessments are valid simply on the basis that the appellant served as a figurehead for Pierre Ouellette? I do not believe so.
[26] The appellant provided the reasons and explained why she had agreed to have her name associated with the various transactions. Her reasons involved her spouse, the father of her child and the family breadwinner, and were therefore reasonable.
[27] Moreover, the appellant's spouse could not hope to obtain the necessary operating licences given his criminal record. As for the house, once again this was probably the only way of obtaining a mortgage loan given that her education was considered an asset, the bar was in her name and her father had agreed to provide the necessary cash. Her spouse, on the other hand, did not have much credibility because of his record.
[28] The appellant never knowingly made a false statement concerning her revenues; on the contrary, she simply reported the revenues as determined and indicated by her spouse who operated the business on his own.
[29] The respondent's valuation of the assets on which the notices of assessment under appeal were based was essentially taken from the titles of ownership. The appellant never concealed any revenue with respect to the acquisition of the said titles, as the respondent had assumed. Moreover, she could not hide that which she did not have. The titles were obtained through various loans, which the evidence established had been repaid not by the appellant but by her spouse.
[30] The evidence demonstrated clearly that the appellant neither benefited from nor received revenues that could have increased her asset base. The fact that she was the registered owner of the business and the co-owner of the house does not mean in any way that she received or hid revenues in order to hold the titles of ownership for them.
[31] The evidence submitted by the appellant never rejected or repudiated those actions made with regard to various transactions; it essentially established that the appellant had not profited nor increased her own wealth as a result thereof.
[32] The appeal should therefore be allowed in that she discharged the burden of proof that was on her by demonstrating on the balance of evidence that she had never received the revenues that the notices of reassessment attributed to her.
[33] In terms of costs, the appeal is allowed without costs since, although the appellant had reasons to act as she did, she nonetheless, unconsciously perhaps, led the audit onto the wrong track.
Signed at Ottawa, Canada, this 6th day of June 2002.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 28th day of August 2003.
Sophie Debbané, Revisor