BETWEEN:
and
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Appeals heard on February 15, 2005 at Montreal, Québec
Before: The Honourable Justice Louise Lamarre Proulx
Appearances:
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JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1996, 1997 and 1998 taxation years are allowed and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant's income for each of the years 1996 to 1998 is in the amount of $14,000, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Ontario, this 16th day of March, 2005.
"Louise Lamarre Proulx"
BETWEEN:
RICHARD MONTON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[1] This is an appeal by way of the informal procedure. The question at issue concerns the amount of the Appellant's income for each of the fiscal years 1996 to 1998.
[2] In order to establish and confirm the assessments dated May 22, 2001, for the taxation years 1996, 1997 and 1998, the Minister of National Revenue (the "Minister") relied on the following assumptions of fact described at paragraph 11 of the Reply to the Notice of Appeal (the "Reply") as follows:
Business net income not declared
a) The Appellant had not filed any income tax return for his 1996, 1997 and 1998 taxation years;
b) During a telephone conversation on May 23, 2000, between our agent from the Identification and Observation Section, and the Appellant, the latter mentioned to our agent that he received only the following approximate amounts as business net income, for the 1996, 1997 and 1998 taxation years:
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1996 |
1997 |
1998
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$22,000 |
$24,000 |
$25,000 |
c) Consequently, on September 5, 2000, the Minister assessed the Appellant, pursuant to subsection 152(7) of the Act, as follows:
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1996 |
1997 |
1998
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Business net income |
$32 000 |
$34 000 |
$35 000 |
d) On August 11, 2000, in reply to the assessments dated September 5, 2000 for the 1996, 1997 and 1998 taxation years, the Appellant sent income tax returns claiming to have had no income during these years;
e) The Identification and Observation Section's agent was not satisfied at all with the income tax returns filed by the Appellant, and sent them to the Minister's Audit Section, for review;
f) Based on the information on hand, the Minister's Auditor reassessed the Appellant for his 1996, 1997 and 1998 taxation years, on May 22, 2001, reducing the amounts as the Appellant's business net income by $10,000 for each taxation year in litigation;
g) During a telephone conversation on September 9, 2002, between the Objection Section agent and the Appellant's representative, the latter mentioned to our agent that the Appellant did not receive any income, for the 1996, 1997 and 1998 taxation years;
h) On November 5, 2002, the Appellant's representative filed with the Minister amended income tax returns for 1996, 1997 and 1998, declaring the following amounts as business net income:
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1996 |
1997 |
1998
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Business net income |
$10 000 |
$14 000 |
$12 000 |
i) The Appellant never provided the Minister with any proof of income or expenses for the years in litigation;
[3] The Appellant and Mr. Jean-Claude Roy, the Minister's agent testified.
[4] The Appellant explained that in those years he did home renovations. It was while he was at work that he received a phone call from the Minister's agent inquiring about his annual income. This event is narrated at paragraph 11b) of the Reply.
[5] At the hearing, the Appellant swore that the amounts mentioned to the Agent were gross income and not net business income, as was assumed by the agent.
[6] It is on the basis that the amounts mentioned by the Appellant over the phone were net business income amounts that the Appellant was assessed. Moreover, as explained by Mr. Roy, the Appeals officer, an arbitrary amount of $10,000 was added.
[7] The Appellant said that at that time, two of his three children were living with him. His parents provided him with financial assistance. He now receives welfare payments as he had hurt his back while working.
[8] Mr. Roy stated that he had spoken with the Appellant's parents and that they had confirmed that they were providing a house to their son as well as some financial aid. They evaluated their overall assistance in the amount of $12,000 per year.
[9] Mr. Roy also stated that on December 23, 1996, the Appellant produced his income tax returns for the taxation years 1993, 1994 and 1995. The amounts of net business income that he had declared were $10,000, $11,000 and $6,800 respectively.
Conclusion
[10] I am inclined to believe the Appellant when he says that the income he was talking about to the auditor was gross income and not net income. It would be surprising that he had told the agent phoning him that he had doubled his net business income from the preceding years.
[11] I have to take into account that the Appellant's parents provide him and his family with a house and alimony payments. The parents have estimated the money value of these advantages to be $12,000. I also have to take into account as well that the Appellant now receives welfare payments.
[12] Thus, on one hand, I am not convinced that the numbers given by the Appellant were amounts of net business income. However, on the other hand, the Appellant has to earn some money to make a living for himself and his family. I therefore decide that the amount of income for each of the years in question is surely as high as the income declared for the year 1997 that is $14,000.
[13] The appeals are allowed and the assessments are referred back to the Minister for reconsideration and reassessment on the basis that the Appellant's income for each of the years 1996 to 1998 is in the amount of $14,000.
Signed at Ottawa, Ontario, this 16th day of March, 2005.
"Louise Lamarre Proulx"
Lamarre Proulx, J.
STYLE OF CAUSE: RICHARD MONTON AND THE QUEEN
PLACE OF HEARING: Montreal, Québec
DATE OF HEARING: February 15, 2005
REASONS FOR JUDGEMENT BY: The Hon. Justice Louise Lamarre Proulx
DATE OF JUDGMENT: March 16, 2005
APPEARANCES:
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Agent for the Appellant: |
John Apissoghomian
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Counsel for the Respondent: |
Claude Lamoureux |
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Ontario