[OFFICIAL ENGLISH TRANSLATION]
2000-4086(GST)G
BETWEEN:
JACKY OUAKNINE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on September 5, 2001, at Montréal, Quebec, by
the Honourable Judge Alain Tardif
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Pierre Zemaitis
JUDGMENT
The appeal from the assessment made under Part IX of the Excise Tax Act, the notice of which is dated October 21, 1999 and bears number PA99L0094, for the period from August 1, 1997 to March 31, 1999, is dismissed, with costs, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 26th day of October 2001.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 26th day of February 2003.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20011026
Docket: 2000-4086(GST)G
BETWEEN:
JACKY OUAKNINE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] This appeal concerns the amount of sales subject to the goods and services tax ("GST") during the period from August 1, 1997, to March 31, 1999.
[2] During that period, the appellant operated four women's clothing stores, one at the Galeries de Longueuil, one at the Galeries Lachine, another at Greenfield Park and, lastly, one at the Galeries Lachute.
[3] The stores in question were operated during the following periods:
- from August 1997 to April 1998 at the Galeries Lachine;
- from March to December 1998 at the Galeries Longueuil;
- from May to October 1998 at Greenfield Park, Quebec; and
- from May 1998 to February 1999 at the Galeries Lachute.
[4] For the entire period from August 1, 1997, to March 31, 1999, the appellant reported sales of approximately $35,000 for the purposes of computing the GST.
[5] In late September or early October 1999, the Minister of National Revenue (the "Minister"), through Maurice Mailloux, an auditor, initiated the process that was to lead to the audit of the sales subject to payment of GST. At that time, he went to the appellant's home to obtain all the books of account, data, documents and vouchers relevant and necessary to the conduct of the audit.
[6] The only documentation he obtained was a portion of the bank statements and a few insufficient and incomplete supporting documents. He had access to no books of account and observed that there were no cash register tapes, these being, according to the appellant, non-existent. There were no documents proving purchases, the reason given being that the inventory sold in the four stores came from the inventory of a store doing business under the style and trade name Chez Lily. According to the appellant, after that business closed, he had shared the property with someone else and thereby obtained $9,000 worth of clothing, which corresponded to half the inventory in question. He contended that he had used that inventory to operate the four stores involved in the instant case.
[7] During the audit, the appellant provided no invoices, but he did produce a few at the hearing, adding that he had no copies of cheques to prove certain purchases since all the suppliers had required that they be paid in cash.
[8] In the case of his commercial operations, he had no accounting data, used cash registers without cash register tapes and did not keep copies of invoices for his sales so that account would be kept of the amount of taxes he had to remit.
[9] He asserted and repeated that it was a very small business and that he had effected compensation-that is to say, he reimbursed himself for taxes paid-out of the amounts payable; but here again, there was no accounting, no records and no documentary evidence on the basis of which to audit the transactions.
[10] Thus, during the audit, he provided no documents or accounting records that would allow a satisfactory audit to be done.
[11] For a taxpayer operating a business, regardless of its size, the context or the circumstances, there is no valid reason for not having, at all times, all the documentary evidence and vouchers on the basis of which it can be determined whether the taxpayer subject to the obligation has satisfactorily discharged his responsibilities as an agent. This is a matter of management of the property of others, and thus it is essential to have impeccable accounting.
[12] Collecting taxes with the obligation to remit them to the government is a heavy responsibility which must be performed in an irreproachable manner, failing which there may and must be serious consequences for the person who fails to discharge the obligation he has freely accepted in deciding to operate a business.
[13] Section 286 of the Excise Tax Act (the "Act") provides as follows:
Keeping books and records
(1) Every person who carries on a business or is engaged in a commercial activity in Canada, every person who is required under this Part to file a return and every person who makes an application for a rebate or refund shall keep records in English or in French in Canada, or at such other place and on such terms and conditions as the Minister may specify in writing, in such form and containing such information as will enable the determination of the person's liabilities and obligations under this Part or the amount of any rebate or refund to which the person is entitled.
Inadequate records
(2) Where a person fails to keep adequate records for the purposes of this Part, the Minister may require the person to keep such records as the Minister may specify and the person shall thereafter keep the records so specified.
Period for retention
(3) Every person required under this section to keep records shall retain them until the expiration of six years after the end of the year to which they relate or for such other period as may be prescribed.
Electronic records
(3.1) Every person required by this section to keep records who does so electronically shall retain them in an electronically readable format for the retention period set out in subsection (3).
Exemptions
(3.2) The Minister may, on such terms and conditions as are acceptable to the Minister, exempt a person or a class of persons from the requirement in subsection (3.1).
Objection or appeal
(4) Where a person who is required under this section to keep records serves a notice of objection or is a party to an appeal or reference under this Part, the person shall retain, until the objection, appeal or reference and any appeal therefrom is finally disposed of, every record that pertains to the subject-matter of the objection, appeal or reference.
Demand by Minister
(5) Where the Minister is of the opinion that it is necessary for the administration of this Part, the Minister may, by a demand served personally or by registered or certified mail, require any person required under this section to keep records to retain those records for such period as is specified in the demand.
Permission for earlier disposal
(6) A person who is required under this section to keep records may dispose of the records before the expiration of the period in respect of which the records are required to be kept if written permission for their disposal is given by the Minister.
[14] The appellant argued that, in his capacity as agent, he remitted all the GST corresponding to sales of approximately $35,000. The appellant would like this Court to take his word alone by way of explanation and justification. He added that he certainly never made sales greater than that amount, giving as the main reason the fact that operating the four stores resulted in a loss of over $20,000.
[15] He would like this Court to believe him, although he admitted he had made a number of false statements regarding the same question and kept no records or supporting documents.
[16] The appellant claimed that he had very often gone several days without making a single sale and that he had spent his time reading crime novels and playing tic-tac-toe.
[17] Given his great availability, I find it hard to understand why the appellant did not have the time to keep records and to compile supporting documents to show that he was properly carrying out the mandate he had accepted.
[18] As a collector of the Quebec sales tax and the GST, he must have known that he would eventually have to account for his administration. He not only did nothing, he obviously deliberately organized his affairs so as to make any audit impossible.
[19] The testimony of the appellant's accountant showed that he had very limited knowledge of basic accounting practices, which no doubt explains his aggressive attitude toward the auditor, whom he criticized as having incorrectly carried out certain checks of credit card and Interac slips.
[20] As the accountant clearly had no qualifications, he in no way convinced me of the quality of his purported bookkeeping. He made a number of utterly gratuitous statements, in particular that 98 percent of the appellant's customers paid by credit card or Interac, whereas the appellant claimed that 90 percent of his customers paid that way. The percentages in both cases were pure fabrications and not supported by anything at all.
[21] The witness, who represented himself to be an accountant, did not know the number of businesses involved. He claimed that the cash register tapes were not necessary and, lastly, that the work he had done was correct, normal and satisfactory. He checked nothing and assumed to be truthful the information which the appellant had given him orally.
[22] I find this testimony worthless; what is more, it shows the appellant's utter indifference toward and disregard for his responsibilities as agent in collecting the GST.
[23] The appellant testified that he had acquired legal training abroad. The pleadings he signed and certain aspects of his performance before the Court indeed showed that he was able to represent himself and that he had well above average knowledge of business matters. This adds to the seriousness of his having submitted such a confused file and the total absence of intelligent accounting in support of his management.
[24] At the outset, he emphasized several facts likely to generate a certain amount of sympathy for the obvious purpose of taking the proceedings in an entirely inappropriate direction. I take no account of these facts, however much sympathy they might inspire, because they were not at all material in the circumstances.
[25] As to the evidence regarding the very object of the appeal, the appellant adduced no element, fact, document, book of account or other supporting document of any kind to prove its validity.
[26] I believe absolutely nothing of the appellant's testimony. Most of his explanations were contradictory, while others were implausible or simply weird.
[27] In particular, he stated that he had sold nothing in Lachute during a three-month period. With regard to this, his own witness, the administrator of the building where the appellant's store was located, flatly contradicted this testimony and denied that it could have been so.
[28] The appellant doggedly contended that he had benefited from termination of his lease two months before it was to expire, but his witness once again categorically denied the statement.
[29] The appellant submitted that all the statements concerning his sales, which he had himself made to the management of the shopping centre where he operated two stores, were false. He said he had considerably inflated the sales figures so that the lessor would not terminate his lease, a lease for which the consideration had nothing to do, however, with the volume of sales.
[30] On this point, Ms. Viens, a representative of the shopping centre in question, clearly stated that the information had absolutely nothing to do with the lease, particularly since sales in no way affected the amount of the rent.
[31] Ms. Viens also mentioned that the shopping centre always abided by the leases when tenants paid their rent. She ended her testimony by saying that the appellant had always paid his rent, thus refuting the appellant's basic argument that he had to inflate his sales figures so that his lease would not be terminated or left unrenewed.
[32] The burden of proof was on the appellant, and he tried to discharge it by attacking, criticizing and disputing the methodology adopted by the respondent. This was perhaps not an ideal approach, but, in the circumstances, the appellant himself brought about the situation by acting as he did. The sales as determined on the basis of the appellant's statements to the shopping centre's management may have been different for the other stores, but the appellant should have adduced credible evidence of that, which he did not do.
[33] Unfortunately, I cannot determine what the sales figures for the Galeries de Lachute store might have been. The only intelligent, valid and scientific way to do so was through adequate and truthful accounting.
[34] The appellant deliberately chose not to keep such accounting, and so he has only himself to blame if he does not like the conclusions drawn. Although the method used by the respondent was not perfect, it was the only one possible. The results obtained are not so unreasonable that the Court must intervene, particularly since the appellant adduced no evidence that might discredit the quality of the work performed by the respondent.
[35] There is a total lack of relevant evidence on which to base the disposition of the appeal. In addition, the testimony constituting the immaterial evidence is simply not credible. Furthermore, sales were evaluated in a fairly arbitrary way for one of the four stores, namely the Lachute store.
[36] However, the evidence affords no justification or ground for rejecting that approach, which was the only available approach in the circumstances. On the other hand, the method used for the other stores was satisfactory, appropriate and highly valid. The results moreover are plausible and reasonable.
[37] Despite the above-mentioned deficiency, I do not believe I need interfere to determine, in an equally arbitrary manner, the amount of sales that may have been achieved by the Lachute store. The appellant himself was the cause of his own misfortune in failing to keep any of the valid supporting documentation and in not having adequate accounting records.
[38] The appellant acted in a grossly negligent manner and displayed carelessness and recklessness tantamount to extremely gross negligence. The appellant had an obligation to have in his possession at all times all relevant supporting documents, books of account and data required for an auditable accounting. At the time of the audit, he had absolutely nothing that would have enabled an audit in accordance with good practice to be undertaken.
[39] The appellant collected and had to collect the applicable taxes on all sales. Since the amount of those taxes did not belong to him, he had a duty to be disciplined and meticulous in carrying out his responsibility as an agent. Instead, as the evidence showed, he was negligent, careless and utterly irresponsible, and accordingly the penalties are wholly justified. I therefore confirm that the penalties were correctly assessed.
[40] The appeal is dismissed, with costs.
Signed at Ottawa, Canada, this 26th day of October 2001.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 26th day of February 2003.
Erich Klein, Revisor