TAX COURT OF CANADA
RE: EXCISE TAX ACT
2006-1956(GST)I
BETWEEN: LES ENTREPRISES M.A.J. INC.
Appellant
-and-
HER MAJESTY THE QUEEN
Respondent
[OFFICIAL ENGLISH TRANSLATION]
Held before the Honourable Justice BRENT PARIS, Tax Court of Canada, Chicoutimi, Quebec, on May 28, 2007.
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REASONS FOR JUDGMENT
APPEARANCES:
ANDRÉ MARTEL
for the Appellant
ROBERTO CLOCCHIATTI
Counsel for the Respondent
Registrar/technician: Claude Lefebvre
RIOPEL, GAGNON, LAROSE & ASSOCIÉS
215 Saint-Jacques Street
Suite 328
Montréal, Quebec
H2Y 1M6
GST-4984 Per: JEAN LAROSE
START OF REASONS FOR JUDGMENT: 1:49 p.m.
REASONS FOR JUDGMENT
HIS HONOUR:
These are the reasons for judgment in Les Entreprises M.A.J. inc. v. Her Majesty the Queen, 2006‑1956(GST)I. It is an appeal from a reassessment made by the Minister of National Revenue for the GST payable by the Appellant for the period from June 1, 2001, to February 28, 2005.
The issue is whether the Appellant failed to report $25,860 in taxable supplies during the said period.
The facts assumed by the Minister in making the reassessment are found at paragraph 6 of the Reply to the Notice of Appeal, which will form an integral part of these reasons even though I will not read it.
The burden is on the Appellant to prove on a balance of probabilities that these facts are not correct. In particular, the Appellant in this case must satisfy me that the $25,860 deposited in its bank account on June 21, 2004, did not come from taxable supplies it made in the course of its business.
The Appellant's sole shareholder, André Martel, testified that the deposit in question was an investment made using money he kept in a safe at home. At the time the deposit was made, he was in the hospital and wanted to make sure his corporation had enough liquidity to pay the amounts that came due.
He allegedly asked his son to get the money at his home and deposit it in the bank. After doing so, his son allegedly prepared a resolution of the Appellant's board of directors, Exhibit A‑2, to record the loan made to the corporation.
Mr. Martel initially maintained that the deposit had never been entered in the Appellant's records as income, but on cross‑examination he had to admit that his accountant had included the amount as income at one point. This resulted from the fact that the accountant had reclassified the amount as a deposit of funds by Mr. Martel on November 30, 2004.
Mr. Martel was unable to provide the date or the amount originally entered in the corporation's income. He said that he had always kept cash at home and that the amounts were his savings. He said that he had already invested some of the money in the Appellant, but he had no details on those deposits. In any event, the other investments allegedly involved much smaller amounts than the investment on June 21, 2004.
The question I must decide is a question of fact based on all the evidence adduced.
For the reasons that follow, I am of the opinion that the Appellant has been unable to demolish the Minister's assumption that the amount in question came from taxable supplies made by it.
To begin with, the circumstances in which the $25,860 was deposited in the bank and entered in the Appellant's records as income were not properly explained. They were not supported by any corroborative evidence from Mr. Martel's son or accountant. As noted by counsel for the Respondent, it was not clear why resolution A‑2, Exhibit A‑2, supposedly prepared by Mr. Martel's son at the time the deposit was made or shortly thereafter, showed an investment of $25,000 even though the correct amount was $25,860. The suggestion that Mr. Martel's son was not aware of the exact amount of the deposit is implausible given that his son supposedly went to get the money and deposited it in the bank.
Nor is it clear when the resolution was prepared, even though Mr. Martel said that his son did so in June 2004. The auditor, Mr. Riou, did not remember seeing it during his audit, and his audit report states that the deposits, including the one at issue today, remained unexplained and unsupported by vouchers at the conclusion of the audit.
Absent evidence that a copy of the resolution was provided by the Appellant's representatives who met with Mr. Riou, I infer that that document was not submitted by the Appellant at the objection stage, well after the time when one would have expected it to be produced.
The fact that the Appellant's accountant initially recorded the amount as business income was not sufficiently explained. It seems more likely to me that, if the amount was an investment, Mr. Martel would have given his accountant instructions to this effect from the outset, but this was apparently not done, nor did the accountant receive a copy of the resolution of June 21, 2004.
These inconsistencies are all the more striking given that the Appellant's reported income for the year in question was only $28,000 and that the amount of the deposit classified as income by its accountant was nearly the same as its total income for the year.
Mr. Martel's testimony that the $25,860 consisted of his savings is difficult to accept without additional evidence. Although he had a personal bank account, he did not attempt to show that he kept no money in that account. Nor did he specify the period during which he had amassed the funds or the level of his own income that allowed him to amass that money.
When all is said and done, I consider Mr. Martel's testimony too vague and, at times, too implausible to find that he has succeeded in reversing the burden of proof resting on him.
For all these reasons, the appeal is dismissed.
END OF REASONS FOR JUDGMENT
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Translation certified true
on this 14th day of February 2008.
Monica F. Chamberlain, Reviser