[OFFICIAL ENGLISH TRANSLATION]
97-141(GST)I
BETWEEN:
GESTION 69692 INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on common evidence with the appeals of Gestion 69691 Inc. (97-146(GST)I), Claudette Ruest (97-147(GST)I) and Club Immobilier International Inc. (97-148(GST)I), on January 28, 29 and 30, 1998, at Montréal, Quebec, by
the Honourable Judge Alain Tardif
Appearances
Agent for the Appellant: Marcel Thiffault
Counsel for the Respondent: Maryse Lord
JUDGMENT
The appeal from the assessment made under subsection 296(1)(b) of the Excise Tax Act, notice of which is dated September 25, 1995, and bears number 22211, is allowed in part to set the fair market value of the immovable property located on Rue Hériot in Drummondville at $231,840. The assessment at issue is referred back to the Minister so that he can make a reassessment taking account of the fair market value of the said property. In all other respects, the appeal is dismissed and the assessment is confirmed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 11th day of September 1998.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 9th day of July 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 19980911
Docket: 97-141(GST)I
BETWEEN:
GESTION 69692 INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] The appellant filed its appeal by means of a Notice of Appeal that reads as follows:
[translation]
NOTICE OF APPEAL
The appellant is appealing the respondent's decision dated October 24, 1996, confirming the assessment made on September 25, 1995, for the period from March 22, 1993, to September 30, 1994.
1. On September 25, 1995, the respondent issued a notice of assessment numbered 22211 under the Excise Tax Act for the period from March 22, 1993, to September 30, 1994;
2. The appellant filed a notice of objection to the assessment referred to in the preceding paragraph;
3. In a decision made on October 24, 1996, the respondent confirmed notice of assessment number 22211 issued under the Excise Tax Act;
4. The appellant is appealing the decision of the Minister of Revenue confirming assessment number 22211;
5. Following an audit, the respondent made the following adjustments:
GOODS AND SERVICES TAX $2,674.63
INPUT TAX CREDIT ($1,330.31)
6. The respondent argues, inter alia, that she made those adjustments both because the registrant had claimed some ITCs without sufficient proof and because it had failed to claim other ITCs;
7. The respondent's auditor claims, inter alia, that the appellant failed to remit the tax on income from the sale of condominiums at 141-159 Rue Hériot and at 164 Rue Brock in Drummondville;
8. The assessments made by the respondent under the Excise Tax Act are incorrect because the auditor from the Department of Revenue overvalued the condominiums; the Department's appraisal is $32,840.00 more than the appellant's;
9. The Department's auditor also failed to take account of several invoices for expenses incurred to build condominiums and, as a result, the appellant was denied a number of ITCs;
10. The appellant gave the respondent all the invoices for which it claimed input tax rebates, and all of those invoices result from the registrant's commercial activities;
11. At all relevant times, the appellant complied with the provisions of the Excise Tax Act as regards the documentary requirements provided for by law;
12. This appeal is well founded in fact and in law;
FOR THESE REASONS, MAY IT PLEASE THE COURT:
TO ALLOW this appeal;
TO SET ASIDE notice of assessment number 2221 issued under the Excise Tax Act on September 25, 1995;
TO REFER the entire matter back to the respondent so that she can issue a notice of reassessment in accordance with the judgment to be made in this case;
THE WHOLE with costs.
MONTRÉAL, January 20, 1997
NORMAND BÉRUBÉ
10422 Rue de Martigny
Montréal, Quebec H2B 2M6
Tel.: (514) 389-6339
Counsel for the Appellant
[2] In the Reply to the Notice of Appeal, the respondent defended the soundness of the assessment, more specifically in paragraph 9, which reads as follows:
[translation]
9. In making the said assessment, the Minister relied on the following facts discovered during the audit carried out in 1994 and 1995:
(a) the appellant is a goods and services tax registrant;
(b) during the period at issue, the appellant carried on the following activities:
- rental of condominiums acquired after being substantially renovated for residential and commercial purposes;
- rental of a commercial building;
- rental of residential buildings;
(c) all of those activities were managed by Marcel Thiffault, the appellant's president and shareholder;
(d) during the same period, Marcel Thiffault also ran two other corporations, Club Immobilier International Inc., of which he is the president and shareholder, and Gestion 69692 Inc., the president and shareholder of which is Claudette Ruest, Mr. Thiffault's spouse, and he managed the many commercial activities carried on by Claudette Ruest in her own name;
(e) during the period at issue, Marcel Thiffault used just one bank account for all the activities of the four registrants mentioned above (the appellant, the other two corporations and Claudette Ruest), and that account was also used to pay Mr. Thiffault's personal expenses;
(f) the accountant prepared the appellant's quarterly returns on the basis of cheques but without having the purchase and sales invoices in his possession;
(g) moreover, since the accountant did not have the sales contracts, the rental agreements or the invoices in his possession, income was reported on the basis of deposits and adjusted at the end of the year when those documents were provided to him;
(h) the income also had to be adjusted at the end of the year to take account of income that had not been deposited in the account, and it then had to be broken down for each activity and each registrant on the basis of the information provided by Marcel Thiffault;
(i) thus, the amounts collected as residential rents by Claudette Ruest and Gestion 69691 Inc. could not be traced in the deposits, and the respondent was unable to confirm that the income reported for such residential rentals was indeed from those rentals or from the laundry rooms made available to tenants;
(j) it results from the foregoing that the appellant's accounting was deficient since the books of account were inadequate or non-existent, that the income was not all reported, that some invoices to justify the claimed ITCs were missing, that the ITCs were claimed without taking account of which registrant the invoices had been issued to, and that ITCs were claimed for non-taxable activities or were claimed twice;
(k) no entry was made in the general journal concerning the supplies made by the appellant, and the sales reported in the financial statements did not correspond to the income earned by the appellant;
(l) with regard to the rental of condominiums for residential purposes:
- the appellant purchased the immovable property from Claudette Ruest on April 20, 1993, for $527,500.00 before taxes;
- Ms. Ruest had made major renovations to the property, which was vacant and in which there were six residential condominiums and some business condominiums;
- the appellant purchased the property to sell or rent the condominiums for commercial and residential purposes;
- five of the six condominiums were thus rented for residential purposes as of October 1993 without the appellant collecting the GST on those supplies, which were deemed to have been made to itself;
- the appellant reported a fair market value of $241,000.00 for those five condominiums and remitted the GST computed on that amount after the respondent had told the appellant that the supplies were taxable and before the audit had been completed;
- the respondent adjusted the fair market value of the five condominiums to $273,840.00 and assessed the GST that had not been remitted on that amount accordingly;
(m) finally, after reviewing all the invoices submitted by the appellant, some ITCs were denied for the following reasons:
- some purchase invoices were missing;
- some amounts were claimed twice, that is, both by the appellant and by one of the other three registrants managed by Marcel Thiffault;
- some purchases were not eligible, inter alia, because they were personal in nature, because they concerned property that had not been acquired in the course of commercial activities or because they related to exempt activities and therefore did not entitle the appellant to ITCs;
however, the respondent allowed $1,330.31 net in additional ITCs.
[3] The appellant adduced deficient, incomplete and inadequate evidence in support of its arguments. Although the parties agreed that the evidence adduced in the appeals of Gestion 69691 Inc. (97-146(GST)I), Club Immobilier International Inc. (97-148(GST)I) and Claudette Ruest (97-147(GST)I) was to apply to all of the cases, including, of course, this appeal, there is absolutely nothing in the common evidence that broadens, completes or strengthens the evidence relating to this case.
[4] When he gave evidence concerning this appeal specifically, Marcel Thiffault testified and made vague, confused comments and observations about a number of invoices. Since the exercise could well have been a very lengthy one, I asked that the parties meet to clarify the amounts and documents at issue in this case so that a coherent and, above all, more effective analysis thereof would be possible.
[5] After several hours of discussions, the parties stated that the issues remained unresolved and that the discussions had not made it possible to clarify anything; on the other hand, the exercise had enabled the respondent to indicate to the appellant the invoices in respect of which credits had been accepted or denied.
[6] The appellant did not adduce any specific evidence. The respondent reiterated that the assessment was correct and added that the issues remained unresolved. However, she referred to the admission recorded the first day of the hearing, and she worded it as follows:
[translation]
RESPONDENT'S ADMISSION
On behalf of the respondent, the Deputy Attorney General of Canada admits, through his undersigned counsel, that the assessment at issue must be referred back to the Minister so that he can make a reassessment setting the fair market value of the immovable property located on Rue Hériot in Drummondville at $231,840 for the purpose of computing the goods and services tax.
Montréal, this 29th day of January 1998
Deputy Attorney General of Canada
Counsel for the Respondent
Maryse Lord
Veillette & Associés
Litigation
Quebec Department of Revenue
[7] The appellant basically criticized, contested and discredited the work method used by the respondent. It never demonstrated that its arguments were valid through documented facts or facts supported by adequate documentary evidence. Moreover, the criticisms themselves were essentially general and very vague. Since it did not have an adequate accounting system, the appellant was obviously unable to reinforce any evidence whatsoever.
[8] In view of the analysis of all of the more detailed evidence in Club Immobilier International Inc. (97-148(GST)I), a copy of the judgment of which is appended to this judgment to form a part hereof;
[9] In view of the complete lack of relevant evidence about this specific case and in view of the respondent's admission, I conclude as follows:
[10] The appeal of the appellant Gestion 69692 Inc. is allowed in part to set the fair market value of the immovable property located on Rue Hériot in Drummondville at $231,840. The assessment at issue is referred back to the Minister so that he can make a reassessment taking account of the fact that the fair market value of the said property is $231,840 for the purpose of computing the amount of goods and services tax. In all other respects, the appeal is dismissed.
Signed at Ottawa, Canada, this 11th day of September 1998.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 9th day of July 2003.
Sophie Debbané, Revisor