BETWEEN:
and
____________________________________________________________________
Appeals heard on February 12, 14, and 15 2007 at Ottawa, Canada.
Before: The Honourable Justice Wyman W. Webb
Appearances:
____________________________________________________________________
JUDGMENT
The appeals from the reassessments made under the Income Tax Act ("Act") for the 2000, 2001 and 2002 taxation years are allowed in part and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the income of the Appellant for each of these years was as follows:
|
|
2000 |
2001 |
2002 |
|
Income as reported on the tax returns |
$10,038 |
$7,562 |
$7,795 |
|
Amount Reassessed as Underreported Income |
$21,778.34 |
$50,328.23 |
$23,203.57 |
|
Adjustments to be made pursuant to this Judgment |
($8,089.87) |
($33,482.70) |
($3,764.61) |
|
Revised Income: |
$23,726.47 |
$24,407.53 |
$27,233.96 |
The penalties imposed under subsection 163(2) of the Income Tax Act are reduced to reflect the revised taxes that are payable on the income of the Appellant as reduced above but are otherwise confirmed.
Signed at Ottawa, Ontario, this 18th day of April 2007.
Webb J.
BETWEEN:
TAHER ABOU SAID,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[1] The Appellant was educated as a professional engineer but since he was unable to find work as a professional engineer after he immigrated to Canada he carried on a business as a taxi driver in 2000, 2001 and 2002. In the tax returns that were filed under his name, the following amounts were reported as his gross income and net income from this taxi business for each of the following years:
|
Taxation Year |
Gross Income |
Net Income |
|
2000 |
$24,520 |
$6,638.69 |
|
2001 |
$24,520 |
$7,562.37 |
|
2002 |
$23,490 |
$6,275.06 |
[2] The Canada Revenue Agency ("CRA") reassessed the Appellant based on a net worth analysis and included the following amounts in his income as unreported income and assessed the following penalties pursuant to subsection 163(2) of the Income Tax Act ("Act"):
|
Taxation Year |
Amount Added as "Unreported Income" |
Penalties |
|
2000 |
$21,778.34 |
$1,916.04 |
|
2001 |
$50,328.23 |
$3,988.20 |
|
2002 |
$23,203.57 |
$1,150.09 |
[3] The reassessments were confirmed by the Minister of National Revenue on June 19, 2006.
[4] Bowman J. made the following comments on the net worth method of determining a taxpayer's income in the case of Bigayan [2000] 1 C.T.C. 2229, 2000 DTC 1619:
2 The net worth method, as observed in Ramey v. R. (1993), 93 D.T.C. 791 (T.C.C.), is a last resort to be used when all else fails. Frequently it is used when a taxpayer has failed to file income tax returns or has kept no records. It is a blunt instrument, accurate within a range of indeterminate magnitude. It is based on an assumption that if one subtracts a taxpayer's net worth at the beginning of a year from that at the end, adds the taxpayer's expenditures in the year, deletes non-taxable receipts and accretions to value of existing assets, the net result, less any amount declared by the taxpayer, must be attributable to unreported income earned in the year, unless the taxpayer can demonstrate otherwise. It is at best an unsatisfactory method, arbitrary and inaccurate but sometimes it is the only means of approximating the income of a taxpayer.
3 The best method of challenging a net worth assessment is to put forth evidence of what the taxpayer's income actually is. A less satisfactory, but nonetheless acceptable method is described by Cameron J. in Chernenkoff v. Minister of National Revenue (1949), 4 D.T.C. 680 (Can. Ex. Ct.) at 683:
In the absence of records, the alternative course open to the appellant was to prove that even on a proper and complete "net worth" basis the assessments were wrong.
4 This method of challenging a net worth assessment is accepted, but even after the adjustments have been completed one is left with the uneasy feeling that the truth has not been fully uncovered. Tinkering with an inherently flawed and imperfect vehicle is not likely to perfect it.
[5] The Appellant did not produce any evidence to support that his income for each of the years in issue was the amount as reported in the tax returns filed under his name. When questioned directly about how the gross revenue amount was determined for each year, the Appellant was unable to provide any explanation. The only document produced by the Appellant in relation to the calculation of his income from the taxi business for any of the three years in issue was a short document for 2001 that only listed in summary form various payments that he had made in that year. There was no reference to any revenue for 2001 in this document. The Appellant was carrying on a taxi driver business with presumably varying amounts received as fares but yet reported exactly the same gross revenue amount for 2000 and 2001.
[6] The Appellant also did not prepare his own net worth statements. The Appellant chose instead to simply challenge the net worth prepared by the CRA. This is another alternative available to the Appellant but, as with the other method of proving "that even on a proper and complete 'net worth' basis the assessments were wrong", still results, as Bowman J. noted above, in leaving one "with the uneasy feeling that the truth has not been fully uncovered".
[7] Counsel for the Respondent, at the beginning of the hearing, noted that in the net worth analysis for 2001, an amount of $1,600 should be deducted as this was included twice - once as an estimate of airfare ($1,600) and once as the actual airfare incurred ($1,530). As well, it should be noted that the amounts for income taxes for 2001 and 2002 were included twice in the net worth analysis and therefore the amount of $1,480.01 should be deducted for 2001 and the amount of $296.23 should be deducted for 2002.
[8] The net worth analysis was completed in three parts - the assets at the end of the base year (1999) and at the end of each of the years under review were listed, the liabilities at the end of each of these years were listed and the personal expenditures for each of the three years under review (2000, 2001 and 2002) were estimated. As part of the personal expenditure amounts for 2000 and 2001 amounts identified as "Additional Expenditures per Withdrawal Analysis" were also taken into account.
Assets
[9] The personal assets for each year were listed in Schedule A to the Reply to the Notice of Appeal filed by the Respondent. The Appellant, in dealing with the assets listed in this schedule, did not produce any evidence to suggest that his assets for any of the years listed (1999, 2000, 2001 and 2002) were other than the amounts as stated on this Schedule and therefore no adjustment will be made to the Schedule listing the assets for the Appellant for these years.
Liabilities
[10] The liabilities for each year were listed in Schedule A to the Reply to the Notice of Appeal filed by the Respondent. The Appellant, in dealing with the liabilities listed in this schedule, did not produce any evidence to suggest that his liabilities for any of the years listed (1999, 2000, 2001 and 2002) were other than the amounts as stated on this Schedule. The liabilities for these years ranged from a low of $10.20 in 1999 to a high of $675.17 in 2001. No adjustment will be made to the Schedule listing the liabilities for the Appellant for these years.
Personal Expenditures
[11] The main area of dispute related to the amounts identified as personal expenditures for 2000, 2001 and 2002.
[12] The first item for personal expenditures was food. The Appellant testified that he ate out frequently during the years in question at the Mediterranean bakery and at a pizza place. He also drank coffee. The estimate of the Appellant was that he only spent $5 per day on food during each of these years. The amounts used in the net worth analysis were $4,875.37 for 2000, $4,934.66 for 2001 and $4,987.81 for 2002 which is $13.36 per day for 2000, $13.52 per day for 2001 and $13.67 per day for 2002. The amounts used in the net worth analysis were based on information from Statistics Canada. Since the evidence of the Appellant was that he ate out frequently and since he also testified that when he took a trip to Saskatoon in 2001 the amount spent on food was significantly greater than $5 per day, no adjustment to the net worth analysis for the food will be made as the amounts used were only $13.36 per day for 2000, $13.52 per day for 2001 and $13.67 per day for 2002.
[13] The amounts listed for shelter was $3,570.05 for 2000, $3,661.27 for 2001 and $3,743.05 for 2002, all based on information from Statistics Canada. The Appellant was living with Carol Simpson during the years in issue and stated that he did not pay rent - he only paid for parking. Carol Simpson also testified and she confirmed that the Appellant only paid for parking. The amount that the Appellant stated as the amount for parking was $40 per month. Carol Simpson testified that the cheque from the Appellant to her dated June 21, 2001 in the amount of $600 was for parking. Based on an amount of $40 per month, this would represent a payment of 15 months of parking. Since the number ($600) is divisible evenly by $40, this is consistent with payment of a multiple of $40.
[14] Carol Simpson also testified that the cheque that she received from the Appellant dated August 29, 2001 for $300 was paid to her to reimburse her for certain expenses she incurred on a trip to Granby; the cheque from the Appellant dated December 19, 2001 for $650 was paid to her to reimburse her for certain expenses related to a New Year's vacation; and the cheque from the Appellant dated November 8, 2002 for $1,000 was paid to her for a couch. These cheques had formed the basis for the conclusion by the Respondent that the Appellant was paying for shelter. Although the amounts are not for shelter, per se, since they have not been included elsewhere they will remain as personal expenditure amounts under the heading "shelter". The categorization of a particular personal expenditure as shelter or some other personal expenditure does not impact the net worth analysis.
[15] As a result, I find that the amount that should have been used for shelter should have been $480 per year for parking plus three amounts referred to above ($300 + $650 for 2001 and $1,000 for 2002) and therefore the assessment should be reduced by the following amounts related to the shelter:
|
Year |
Amount Used for Shelter |
Revised Amount for Shelter |
Reduction |
|
2000 |
$3,570.05 |
$480 |
$3,090.05 |
|
2001 |
$3,661.27 |
$1,430 |
$2,231.27 |
|
2002 |
$3,743.05 |
$1,480 |
$2,263.05 |
[16] The next item under expenditures was identified as "household operations" and consisted of charges for a telephone. The Appellant testified that he had a cell phone and dial-up internet access. The Appellant did not produce any evidence to dispute the amounts as shown for "household operations" and therefore no adjustment will be made to these amounts. The Appellant testified that he used the cell phone in his taxi business. The percentage that the Appellant testified that he used the telephone in his business was 99% to 100%. However no amount was claimed on his tax return as a business expense for the telephone. Copies of cheques payable to Bell Mobility were introduced into evidence and the amount of these cheques varied from approximately $43 to approximately $48. Since the Appellant had only one phone and his testimony on the percentage use was only in general terms, I will allow a claim of $250 per year for the cost of the telephone as a business expense.
[17] The amounts used for clothing were $467.29 for 2000, $479.23 for 2001 and $489.93 for 2002. The Appellant testified that he did not spend that much on clothing and would only purchase a few items at clearance prices. He also testified that he may have purchased some new shirts prior to his trip to Lebanon in 2001. The Appellant did not produce any receipts in relation to this and his evidence was only general in nature. On cross examination the Appellant was directed to his American Express bill dated August 9, 2000 which included slightly less than $400 of purchases for items that appear to be clothing items all purchased on August 5 and 6, 2000. As a result, no adjustment will be made to the amount included for clothing.
[18] The amount related to transportation resulted in some conflicting and confusing evidence. The Appellant testified that he did not use his own vehicle in the taxi business. He would, instead, swap cars with Garish Beri and use Mr. Beri's car, for which he paid a daily fee to Mr. Beri of $50/day for the period from January to June in 2001 and $60/day for the period from September to December 2001. The Appellant would meet Mr. Beri at a service station where they would swap cars and Mr. Beri would drive the Appellant's car to Mr. Beri's house. The Appellant would drive Mr. Beri's car to Mr. Beri's house when his shift was over and retrieve his own car.
[19] The Appellant testified that he gave his accountant a list of all of the expenses that he incurred in the taxi business and a copy of the list for 2001 was entered as Exhibit A-6. The list includes the following items:
1-Professional Engineers of Ontario: $160.50
2-Taxi driving license: $144.00
Garish Beri (Taxi Rental fees)
a-Rate $50/day
3-January to June 13th (6*4*5*50 + 2*4*6*50)= $8,400
b-Rate $60/day
4-September 15th to December 21st
(2*6*60 + 2*4*6*60 + 3*6*60) $5,400
(The amount on the schedule for the last item is $5,400 but the mathematical result of the amounts in brackets is $4,680).
[20] No amount is shown on this schedule for fuel or for maintenance and repairs. However, on the tax return that was filed under the Appellant's name for 2001, the following amounts were claimed as expenses:
Business tax, fees, licences (etc.) $145
Motor Vehicle Expenses: $2,312.63
Lease: $14,500
[21] Even using the amounts of $8,400 and $5,400 from above, these amounts only total $13,800 for the lease payments. Using the corrected amount of $4,680, the lease payments would only total $13,080.
[22] The vehicle that was being used in the taxi business was Mr. Beri's vehicle not the Appellant's vehicle. The Appellant testified that when Mr. Beri's car was delivered to him the fuel tank was full and when he returned the vehicle the Appellant was to deliver it with a full tank of fuel. No evidence was provided to suggest that the Appellant was responsible for any maintenance and repairs to Mr. Beri's vehicle yet an amount of $2,250 (adjusted for business use) was claimed in the tax return filed for the Appellant for 2002.
[23] As well in the statements included with the Appellant's tax return for each year there is a scheduling calculating the percentage business use of a motor vehicle. Since the motor vehicle that was used in the taxi business was Mr. Beri's vehicle and not the Appellant's vehicle, the relevance of this schedule is unclear. The Appellant was paying rent for the use of Mr. Beri's vehicle and lease payments were claimed as an expense. Based on the testimony of the Appellant and Mr. Beri, the Appellant's use of this vehicle would have been all for the taxi business. The Appellant's own vehicle was not used in the taxi business, except possibly as part of the deal whereby Mr. Beri could use this vehicle to transport himself back home after meeting the Appellant. Even accepting this use as a business use would not result in the number of kilometers being driven for business use as stated on the schedules to the tax returns. Mr. Beri testified that he only lived about 10 to 15 kilometers from the place where he would meet the Appellant. Using the numbers from Exhibit A-6 for 2001 for the number of days, this would only result in approximately 3,420 kilometers being driven for this use which is significantly less than the 37,520 shown on the schedule to the tax return filed for Appellant for 2001 as the number of business kilometers driven.
[24] As a result, the Appellant has failed to satisfy the onus on him to establish on a balance of probabilities that the amount used for transportation (as a personal expenditure) is incorrect and no adjustment will be made to the amount for transportation.
[25] The next item was personal care. The Appellant testified that he did not spend any more than $100 per year on personal care items and approximately $10 every two months on hair care. I accept the Appellant's testimony with respect the amount spent on personal care and hair care and therefore the amount for personal care is reduced to $160 for each of the three years.
[26] There was a small amount ($63.42) for recreation for 2002 and since no evidence was presented in relation to this amount, no adjustment will be made to this item.
[27] The Appellant testified that in 2000, 2001, and 2002 he did not buy any newspapers, books or magazines but instead would read the newspapers on the internet or borrow a book from the library. I accept the Appellant's testimony on this item and therefore the amounts for reading material and other printed material should be reduced to nil for each year.
[28] The Appellant did not dispute the amount shown for education of $3,955.57 in 2000. The Appellant stated that these were tuition fees paid to the University of Toronto. An amount of $1,148.87 was claimed for eligible tuition fees for 2000 in Schedule 1 to the income tax return filed for the Appellant for 2000. No evidence was provided to explain the difference between the $3,955.57 and the amount claimed of $1,148.87.
[29] The Appellant did not dispute the amount claimed for alcohol and tobacco of $480 per year.
[30] The amounts shown as security were the amounts for Canada Pension Plan contributions as shown on the tax returns filed for the Appellant for each of the years and therefore no adjustment will be made to these amounts.
[31] The amount shown as gifts and contributions is based on a charge to the American Express card of the Appellant for this amount which is identified on the credit card statement dated August 9, 2000 as "gift items". No adjustment will be made to this amount.
[32] The miscellaneous category consisted of two amounts - one for professional fees of $432 and the other for lottery tickets of $170. The same amounts were used all three years. The receipt from the Professional Engineers of Ontario dated August 2000 was attached the tax return filed for the Appellant for 2000 and showed that the annual fees were $139.10 (including GST) in that year. This amount (together with the $10 paid to the Ontario Professional Engineers Foundation for Education) was claimed as "Professional fees" in that return. The amount paid to the Foundation for Education should have been claimed as a charitable donation. Since the Appellant indicated that he did not have any income as a professional engineer in 2000, the amount of the professional fees would not have been deductible under section 8 of the Act.
[33] Exhibit A-6 produced by the Appellant showed that the fees were $160.50 in 2001. There was no evidence of the amount of professional fees for 2002 however the Appellant produced a receipt dated August 9, 2005 indicating that the fees were $214 (including GST) in that year. This would mean that fees increased from $160.50 in 2001 to $214 in 2005 or approximately, on average, $13.37 / year. Therefore the amount that should be used for professional fees for 2002 should have been $174.
[34] Since the professional fees would not have been deductible in any of these years since the Appellant did not have any source of income that was the engineering profession, the amounts should be included as part of the net worth analysis.
[35] The Appellant also testified that he would spend approximately $10 per month on lottery tickets.
[36] The amounts under the miscellaneous category should have been the following amounts for each of these years:
|
Year |
Amount Used for Miscellaneous |
Revised Amount for Miscellaneous |
Reduction |
|
2000 |
$602 |
$259.10 |
$342.90 |
|
2001 |
$602 |
$280.50 |
$321.50 |
|
2002 |
$602 |
$294 |
$308 |
[37] With respect to the amounts included for travel, the Appellant testified that his brother had given him $4,000 in cash towards the airline tickets purchased in 2000 and that he paid the balance of the amounts for the tickets for 2000 from his own resources. I accept the Appellant's testimony in relation to the $4,000 from his brother and therefore the amount for travel for 2000 is to be reduced by $4,000.
[38] Also included in travel were the amounts of $675.17 in 2001 for airfare for a trip to Saskatoon and $218.74 in 2002 for a hotel in Saskatoon. The Appellant testified that he went to Saskatoon in January of 2002 for a job interview and that he was reimbursed for the expenses that he incurred. I accept the Appellant's testimony in this regard and the amounts for travel for 2001 should be reduced by $675.17 and for 2002 should be reduced by $218.74.
[39] There is also an amount of $6,000 identified in relation to the trip by the Appellant to Lebanon in 2001 and which was to reflect the amount that he spent while in Lebanon. The Appellant testified that he stayed with his family when he was in Lebanon and did not spend $6,000 while he was there. The Appellant testified that he spent no more than $2,000 while he was in Lebanon and I accept his testimony on this matter. Therefore the amount of $6,000 for 2001 should be reduced to $2,000.
[40] Also included in the travel category was the sum of $4,000 which the Respondent alleged was given by the Appellant to Mr. Beri. However both Mr. Beri and the Appellant testified that the Appellant advanced Mr. Beri this sum of $4,000 by three cheques all dated September 13, 2001 (two for $1,500 each and one for $1,000). The amount was repaid as a set off against the amounts that the Appellant owed to Mr. Beri for using Mr. Beri's car in the taxi business. Based on the schedule submitted as Exhibit A-6, these amounts would have been repaid by the end of 2001 (based on the evidence that the payment was set off against the amounts payable by the Appellant for taxi rental fees). As a result this was not a gift but an advance or a loan and the amount for travel for 2001 should be reduced by $4,000.
[41] The Appellant testified that he paid for the other items included in travel and therefore the other amounts are confirmed.
Additional Personal Expenditures per Withdrawal Analysis
[42] Following the determination of the estimated personal expenditures the CRA completed an analysis of the withdrawals from the Appellant's accounts during the years in question. The auditor from the CRA testified that in completing this analysis, transfers between bank accounts were taken into account and would not be treated as a net withdrawal. The objective of the analysis was to determine if the personal expenditures as identified were confirmed by the net withdrawals from the accounts. If the net withdrawals exceeded the personal expenditures otherwise determined this would indicate that there may be additional personal expenditures that were not taken into account in the personal expenditure analysis.
[43] The onus of proof remained with the Appellant to explain the significant net withdrawals in 2000 and 2001. The Appellant testified that he withdrew very significant amounts of cash prior to his trip to Lebanon in 2001. This was confirmed by copies of credit vouchers for $12,966 (US) and $24,428 (Cdn) dated June 21, 2001.
[44] The Appellant testified that he left some of the money in his bank account in Lebanon but was unable to provide any evidence of the amount that he left in his bank account in Lebanon. Since no amount was included in the Appellant's assets at the end of each year for any funds in any account in Lebanon, even if the Appellant could establish the amount that was left in Lebanon it would not have any net affect on the net worth analysis as the amount would be deducted from the Additional Personal Expenditures per Withdrawal Analysis and the same amount would be added to the assets at the end of the year.
[45] As part of the Respondent's documents there is a cheque drawn on the Chase bank for $12,000 (US) dated August 23, 2001 payable to the Appellant. The notes of the auditor in the detailed review of the deposits and withdrawals indicate that mutual funds were purchased with this cheque and that no credit was provided to the Appellant for the mutual funds purchased with this cheque. The Appellant testified that this represented a return of a portion of the money that he had taken to Lebanon. The Respondent had suggested (without any evidence other than the statements of the Appellant) that the Appellant had a business in Lebanon and that the funds that he brought back with him were from this business. The Appellant's testimony was that he did not have a business in Lebanon during these years under review. As well the Appellant only made one trip to Lebanon during the three years under review (which would suggest that it is unlikely that he had a business there) and this amount is less than the amounts withdrawn on June 21, 2001. The burden of proof that is on the Appellant is on the balance of probabilities and I accept the Appellant's testimony that this amount ($12,000 US) was simply a return of the funds that he had withdrawn on June 21, 2001.
[46] As a result the $12,000 US amount should have been deducted in determining the net withdrawals. Based on the documents submitted by the Respondent, the exchange rate as of August 27, 2001 was 1.5422 and therefore $12,000 (US) would be equivalent to $18,506.40.
[47] In addition to the $12,000 US cheque referred to above, the Appellant testified that he had $6,000 (US) in cash with him when he returned. While there is a specific reference in the Revised Withdrawal Analysis prepared by the auditor to the mutual funds purchased with the $12,000 US cheque referred to above (and hence this mutual fund would have been included as an asset of the Appellant) there is no such reference to any mutual fund purchased or deposit made with the $6,000 US cash. The Appellant could not link this cash to any deposit or mutual fund purchase and therefore failed to satisfy the onus that was on him to show that this $6,000 US had been taken into account in determining his assets at the end of 2001 and should be deducted in determining the additional personal expenditures per the net withdrawal analysis. As a result no adjustment will be made in relation to the cash of $6,000 US.
[48] As a result the following is a summary of the adjustments to be made to the income of the Appellant for each of these years:
|
Item |
2000 |
2001 |
2002 |
|
Airfare included twice |
|
$1,600 |
|
|
Income Taxes included twice |
|
$1,480.01 |
$296.23 |
|
Shelter |
$3,090.05 |
$2,231.27 |
$2,263.05 |
|
Telephone Expense |
$250 |
$250 |
$250 |
|
Personal Care |
$205.43 |
$211.71 |
$217.33 |
|
Reading material & other printed material |
$201.49 |
$206.64 |
$211.26 |
|
Miscellaneous |
$342.90 |
$321.50 |
$308. |
|
Travel - Cash from the Appellant's brother |
$4,000 |
|
|
|
Saskatoon trip |
|
$675.17 |
$218.74 |
|
Trip to Lebanon |
|
$4,000 |
|
|
Loan to Mr. Beri (identified as money given to friend) |
|
$4,000 |
|
|
Funds Returned (Adjustment to Withdrawal Analysis) |
|
$18,506.40 |
|
|
|
$8,089.87 |
$33,482.70 |
$3,764.61 |
[49] The net result in relation to the income as reassessed is as follows:
|
|
2000 |
2001 |
2002 |
|
Income as reported on the tax returns |
$10,038 |
$7,562 |
$7,795 |
|
Amount Reassessed as Underreported Income |
$21,778.34 |
$50,328.23 |
$23,203.57 |
|
Adjustments to be made pursuant to this Judgment |
($8,089.87) |
($33,482.70) |
($3,764.61) |
|
Revised Income: |
$23,726.47 |
$24,407.53 |
$27,233.96 |
Penalties
[50] The revised income amounts are significant when compared to the income as reported. The Appellant stated that he had not signed the tax returns that were introduced into evidence. The signature pages were included for the 2001 and 2002 tax returns and neither return was signed by the Appellant. The signature page was not included for the 2000 tax return.
[51] The Appellant did however engage an accounting firm to prepare these returns on his behalf and these returns were filed with the CRA. The Appellant, as he proclaimed several times during the hearing, was educated as a professional engineer. Therefore the Appellant ought to have known that he had a duty to file a tax return and in fact he retained an accounting firm to do so. The unsigned tax returns could have been rejected by the CRA but they were not. If the unsigned returns are not the tax returns for the Appellant then the Appellant would have failed to fulfill his obligation to file tax returns under section 150 of the Act. Since the returns were obviously filed with the CRA, I find that the tax returns that were filed on the instructions of the Appellant were the Appellant's tax returns for each of these years.
[52] During cross-examination counsel for the Respondent directed the Appellant's attention to Schedule 5 of the tax returns for 2001 and 2002. For each of these years Schedule 5 was partially completed indicating that the Appellant had a daughter. No first name was given nor was the date of birth completed but the amount was claimed for an eligible dependent on Schedule 1 as if this daughter existed. The Appellant adamantly denied that he had a daughter but could not explain why he claimed an amount for this non-existent daughter except to blame the accountants who were not present.
[53] In Venne v. The Queen, [1984] C.T.C. 223, 84 DTC 6247, Strayer J. of the F.C.T.D. made the following comments on the meaning of gross negligence for the purposes of penalties imposed under subsection 163(2) of the Act:
"Gross negligence" must be taken to involve greater neglect than simply a failure to use reasonable care. It must involve a high degree of negligence tantamount to intentional acting, an indifference as to whether the law is complied with or not.
[54] In this case, the Respondent has satisfied the onus of proof imposed on the Respondent under subsection 163 (3) of the Act. The tax returns filed on behalf of the Appellant included a claim for a non-existent daughter. The Appellant did not have any records to support the amount shown as revenue in his tax returns and the Appellant could not provide any explanation for how the revenue amount was determined. The only document that the Appellant produced in relation to the expenses was a short one-half page listing of various expense items. The Appellant who was carrying on a taxi business with varying fares reported exactly the same amount as revenue for two of the three years. There were no books and records for the taxi business. As a result the Appellant showed "an indifference as to whether the law is complied with or not" and the assessment of the penalties under subsection 163 (2) of the Act is upheld and the penalties will be applied to the revised amount that is determined as the Appellant's tax liability for each year after taking into account the adjustments to his income as provided herein.
Signed at Ottawa, Canada, this 18th day of April 2007.
"Wyman W. Webb"
Webb J.
COURT FILE NO.: 2006-2813(IT)I
STYLE OF CAUSE: Taher Abou Said v. Her Majesty the Queen
PLACE OF HEARING: Ottawa, Canada
DATE OF HEARING: February 12, 14, and 15 2007
REASONS FOR JUDGMENT BY: The Honourable Justice Wyman W. Webb
DATE OF JUDGMENT: April 18, 2007
APPEARANCES:
|
For the Appellant: |
The Appellant himself |
|
Counsel for the Respondent: |
Andrew Miller |
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada