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Docket: 2000-3831(IT)G |
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BETWEEN: |
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STEVE PETRIK, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
____________________________________________________________________
Appeal heard on April 20, 2004 at Lethbridge, Alberta
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Before: The Honourable Justice D.W. Beaubier |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Margaret McCabe |
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JUDGMENT
The appeals from the reassessments made under the Income Tax Act for the 1994 and 1995 taxation years are allowed, and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Saskatoon, Saskatchewan this 29th day of April, 2004.
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"D.W. Beaubier" |
Beaubier, J.
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Citation: 2004TCC322 |
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Date: 20040429 |
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Docket: 2000-3831(IT)G |
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BETWEEN: |
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STEVE PETRIK, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
REASONS FOR JUDGMENT
Beaubier, J.
[1] This appeal pursuant to the General Procedure was heard at Lethbridge, Alberta on April 20, 2004. The Appellant was the only witness.
[2] Paragraphs 9 to 12 inclusive of the Reply to the Notice of Appeal outline the matters in issue. They read:
9. The Minister further reassessed the Appellant on August 21, 1998 as follows:
(a) to increase the Appellant's claim for expenses by $28,168.40 from $12,949.79 to $41,118.19 for 1994, and by $17,052.24 from $0.00 to $17,052.24 for 1995; and
(b) to increase gross business income by $29,595.16 from $33,395.04 to $62,990.20 for 1994.
The revised gross business income for 1994 and the revised expenses and net incomes for 1994 and 1995 are set out in Schedule "A" attached to and forming part of the Reply.
10. In so reassessing the Appellant, the Minister relied on, inter alia, the following assumptions of fact:
a) the facts admitted and stated above;
b) at all material times the Appellant operated a landscaping business (the "business");
c) the Appellant, by T1 returns dated June 03, 1996, initially reported gross business income of $33,395.04 and total expenses of $75,413.39 for 1994, and gross business income of $32,748.55 and expenses of $52,107.90 for 1995;
d) the Appellant, by T1 amended returns dated July 02, 1997, reported gross business income of $33,683.04 for 1994 and no change to the 1994 expenses and 1995 income and expenses;
e) by way of his original 1994 T1 return, the Appellant understated the gross business income by the amount of $29,595.16;
f) in 1994, the Appellant incurred the amount of $41,118.19 as expenses in the gaining or producing of income from the business;
g) in 1995, the Appellant incurred the amount of $17,052.24 as expenses in the gaining or producing of income from the business;
h) the amounts of $22,697.20 and $25,070.66 claimed by the Appellant as expenses for the 1994 and 1995 taxation years, respectively, were not incurred and, if incurred, they were not incurred in the gaining or producing of income from the business (the "disallowed amounts");
i) the amounts of $11,598.00 and $9,985.00 claimed as capital cost allowance by the Appellant in the 1994 and 1995 taxation years respectively were not incurred by the Appellant;
j) the disallowed amounts, detailed in the attached Schedule "A", were not incurred, and if incurred, were the personal or living expenses of the Appellant.
B. ISSUE TO BE DECIDED
11. The issue is whether the Appellant incurred amounts as expenses beyond the amounts allowed by the Minister in the gaining or producing of business.
C. STATUTORY PROVISIONS RELIED ON
12. The Deputy Attorney General relies on sections 3, 9 and 18 and subsection 248(1) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Suppl), as amended (the "Act").
[3] Assumptions 10(b), (c) and (d) were not refuted by the evidence. The remainder are in dispute, and are essentially a question of verified numbers, questions of personal expenditures, or items claimed as expenses which are, in fact, capital.
[4] Respondent's working papers contained in Exhibit R-2 are the source of the material for the assessments and were reviewed in detail in cross-examination. From them, based on the Appellant's testimony, the Court allows the Appellant the deduction of additional expenses over those allowed by the Minister as itemized in R-2, and as described hereafter:
1994, page 3:
Freddies Paint: $140.19, $70.10 and $186.92;
Just for Pets: 75 percent of $155, $90 and $149.54;
Logic Lumber: $280.37, $934.58, $373.83, $280.37 and $225.78;
Thunderbird: $17.70, $15.46, $32.89, $11.85 and $29.58;
Page 5:
Fuel: 90 percent of $4,135.26.
Page 6:
G & E Insurance: $500, $800 and $350;
Page 10:
Rent, Banker's Commercial: $401.25, $433.86 and $10.54.
Page 17:
Capital cost allowance:
August 4, 1994, 1978 Ford one ton, capital expenditure, $3,210;
November 1994, 1972 Ford three-quarter ton, capital expenditure, $1,100.
1995, page 19:
Fuel Adjustment, add expense $2009.08;
Capital cost allowance, carry forward allowed balance from 1994.
[5] During 1994, the Appellant operated a landscaping business. He did not keep books after his divorce, upon separation from his wife. He did not invoice his bids or jobs in those years. He frequently dealt in cash. He was the subject of collection proceedings, and he had to sue on jobs. If he won a lawsuit, as with "Cornerstone", the lawyer collected and paid the Appellant's accounts from his trust account, and the Appellant never recorded it. See Exhibit A-1. The Appellant has no comprehension of the difference between a capital expenditure, an "expense" or capital cost allowance.
[6] The Appellant is obviously not well-to-do, and may belong in bankruptcy. He conducted his own case. His income tax returns were filed by an accounting firm that simply accepted what he had and reported it the same way. The "income" reported was the Appellant's bank account deposits. The "expenses" claimed were whatever he recorded as expenses. Then and now, there were often no back-up records.
[7] Crown counsel was generous in her cross-examination of the Appellant. Without that, he would not have been allowed the additional amounts described herein.
[8] The appealed is allowed to permit the Appellant to claim the additional sums described herein, and the assessments are referred to the Minister for reconsideration and reassessment accordingly.
[9] Properly appealed, this should be an informal appeal; nonetheless, the Respondent was put to great effort to get this matter before the Court, and even then the trial was conducted very fairly by Respondent's counsel herself. Nonetheless, and despite the courtesy granted by Crown counsel in this matter, and because of the circumstances of the Appellant, I am not awarding costs.
Signed at Saskatoon, Saskatchewan this 29th day of April 2004.
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"D.W. Beaubier" |
Beaubier, J.
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CITATION: |
2004TCC322 |
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COURT FILE NO.: |
2000-3831(IT)G |
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STYLE OF CAUSE: |
Petrik v. Her Majesty the Queen |
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PLACE OF HEARING: |
Lethbridge, Alberta |
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DATE OF HEARING: |
April 20, 2004 |
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REASONS FOR JUDGMENT BY: |
The Honourable Justice D.W. Beaubier |
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DATE OF JUDGMENT: |
April 29, 2004 |
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APPEARANCES: |
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Counsel for the Appellant: |
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Counsel for the Respondent: |
Margaret McCabe |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |