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Docket: 2002-198(IT)I |
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BETWEEN: |
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ÉRIC FORCIER, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
[OFFICIAL ENGLISH TRANSLATION]
Appeals heard on November 23, 2004, at Chicoutimi, Quebec
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Before: The Honourable Justice Paul Bédard |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Annick Provencher |
____________________________________________________________________
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1992, 1993, 1994, 1995, 1996 and 1997 taxation years are dismissed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 11th day of January 2005.
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« Paul Bédard » |
Juge Bédard
Translation certified true
on this 22nd day of April 2005
Aveta Graham, Translator
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Citation: 2005TCC7 |
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Date: 20050111 |
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Docket: 2002-198(IT)I |
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BETWEEN: |
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ÉRIC FORCIER, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
BédardJ.
[1] The points at issue in these appeals, brought under the informal procedure, are whether
(i) the Minister of National Revenue (the "Minister") was entitled to reassess the Appellant for each of the 1992, 1993, 1994, 1995, 1996 and 1997 taxation years, despite the expiry of the normal reassessment period; and
(ii) the imposition of a penalty against the Appellant, for those same taxation years, with regard to a deduction for non-capital losses of other years for each of the taxation years in question, was justified.
The fact that the Appellant was not entitled to deduct the amounts claimed annually for non-capital losses of other years in computing his taxable income for the years in question is not disputed.
[2] The facts relied on by the Minister in making the assessments for the years at issue are listed in paragraph 5 of the Reply to Notice of Appeal as follows:
[translation]
(a) the case arises from an internal investigation of certain employees of the Jonquière Tax Centre who set up a scheme to enable certain persons to receive fraudulent tax refunds in consideration of a commission based on a percentage of those refunds;
(b) through the issuance of a zero balance assessment dated September 21, 1998, for the 1992 taxation year, the Minister granted the Appellant an allowable business investment loss totalling $112,500 ($150,000 x 3/4), and in that regard allowed a deduction of $20,078 in computing the income;
(c) through the reassessments made on September 21, 1998, the Minister granted, in computing the Appellant's income for the 1993, 1994, 1995, 1996 and 1997 taxation years, $13,206, $11,522, $21,477, $19,158 and $19,041, respectively, with regard to the carry-over of a loss other than a capital loss;
(d) pursuant to those reassessments, on September 21 1998, the Appellant received an tax refund totalling $17,316.76;
(e) the claims for a business investment loss deduction for the 1992 taxation year, and then the deduction for the carry-over of a loss other than a capital loss for the 1993, 1994, 1995, 1996 and 1997 taxation years had been made possible by the fraudulent entry in the Department's computer system of a business investment loss totalling a gross amount of $150,000 for the 1992 taxation year;
(f) the Appellant admitted to the Minister's investigators that he had followed the suggestion of Mario Boucher, an acquaintance who offered to review his tax returns, and it was for that purpose that the Appellant gave him his social insurance number;
(g) the Appellant did not know the nature of the deduction that would be claimed on his tax returns or the total amount of the resulting refund;
(h) the Appellant told the Minister's investigators that he had never operated a business;
(i) the Appellant only acknowledged to the Minister's investigators that after he had received the $17,316.76 refund, he withdrew $5,000 for his personal use;
(j) the Appellant did not undertake any steps with the Minister, such as:
(i) communicating with the authorities of the Jonquière Tax Centre, or
(ii) simply returning the cheque or cheques to those authorities;
(k) the Minister is of the view that the negligence shown by the Appellant in this case is tantamount to complicity;
(l) as to the 1992, 1993, 1994, 1995 and 1996 taxation years, the Appellant made a misrepresentation that is attributable to neglect, carelessness or wilful default or committed fraud in filing the return for each of those years or in supplying information under this "Act;"
(m) the false deduction claimed, for the 1992, 1993, 1994, 1995, 1996 and 1997 taxation years, leads the Minister to believe that the Appellant, knowingly or under circumstances amounting to gross negligence, made or participated in, assented to or acquiesced in the making of, a false statement or omission in the tax returns filed for the 1992, 1993, 1994, 1995, 1996 and 1997 taxation years, as a result of which the tax that he would have been required to pay based on the information provided in the tax returns filed for those years was less than the amount of tax payable for those years.
[3] The Appellant denied the statements in paragraphs (a), (k), (l) and (m) above.
Testimony
[4] The Appellant testified that he was a welder during the years at issue and as such his employment income was about $25,000 per year. He explained that his tax returns for the years at issue had been prepared by H & R Block and Carl Thibault. In the beginning of the summer of 1998, he had repaired a trailer belonging to Mario Boucher, an acquaintance with whom he had occasionally went motorcycling; instead of paying the Appellant for the repairs, Mr. Boucher offered to review his tax returns. It was for that purpose that the Appellant had given his social insurance number to Mr. Boucher. On September 21, 1998, the Appellant received a tax refund of $17,316.76. He admitted that he had found it odd to receive that cheque. He then called Mr. Boucher to find out about the tax refund. The Appellant's comments in that regard are worth quoting:
[translation]
. . . then I received a cheque for $17,000. Then I told him, I said: What's going on, $17,000 that doesn't make any sense? Ah, you're entitled to it, I went back five years, you're entitled to it.[1]
The Appellant explained that he was satisfied with Mr. Boucher's answer because he knew nothing about tax matters and he thought he was justified in relying on Mr. Boucher's explanations. The Appellant's comments in this regard are also worth quoting:
[translation]
Why didn't I take it further? Because I trusted what he told me. He's a government employee, that means that he must . . . I imagine that they are honest. That's what I thought.[2]
For those reasons, the Appellant did not feel it necessary to take other steps to understand the nature of the refund. On September 24, 1998, he deposited the cheque in his bank account. He withdrew $5,000, $2,000 and $1,700 in cash from his bank account on September 28, 1998, October 9, 1998, and November 20, 1998, respectively. He testified that he had withdrawn the money for his personal use and that at no time had he paid any money whatsoever to Mr. Boucher as commission or remuneration for his services.
[5] Roland Pelletier, a dedicated investigation officer with the Canada Customs and Revenue Agency, testified that in May 1998 an employee of that Agency realized that the Department had given tax refunds to taxpayers without supporting documents in their file. Mr. Pelletier explained that he had, with others, investigated the matter. That investigation led to the charging and conviction of two of the Agency's employees, including Mr. Boucher. The investigation, according to Mr. Pelletier, established that about 45 taxpayers had been contacted by those two employees or a third party and that they had received about 50% to 66.66% of the tax refund collected by the taxpayers. Mr. Boucher's name was linked to a number of files, including the one in the instant case. That is why Mr. Pelletier met with the Appellant and took his statements, which are set out in the Reply to Notice of Appeal. Mr. Pelletier also testified that the Appellant had always denied having paid a commission or any other form of remuneration to Mr. Boucher and that he was not able to prove otherwise. However, he added that he was persuaded that the Appellant had paid Mr. Boucher a commission given the funds withdrawn by the Appellant from his bank account in cash that corresponded to about 55% of the tax refund obtained in the instant case.
Analysis
[6] The Federal Court of Appeal recently applied the principle of wilful blindness with respect to penalties imposed under subsection 163(2) of the Act in Canada (Attorney General) v. Villeneuve, 2004 FCA 20 and Canada (Attorney General) v. Savard, 2004 FCA 150, when it confirmed the penalties imposed on other taxpayers who participated in the same scheme as the Appellant in the instant case.
[7] That being said, it is necessary to analyze the Appellant's behaviour once he received the tax refund of more than $17,000 in September 1998. He was first surprised by how much it was. He immediately contacted Mr. Boucher, and rightly so given the amount of the refund in relation to his income. So, he thought that there was something odd in all this. He was satisfied with Mr. Boucher's rather simplistic response. In my view, he then showed wilful blindness. Despite everything, he chose to cash the cheque. The Appellant had numerous chances to inquire with responsible people about what to do in that situation. As my colleague Angers J. said in Réjean Gosselin v. Her Majesty the Queen, [2002] T.C.J. No. 520, at paragraph 9 (QL):
. . . When he received the refund cheque, he had enough doubt in his mind as to the legitimacy of the refund and, at that point, should have approached authorities to correct the matter. The appellant chose to do nothing. This lack of action on his part demonstrates his carelessness in and indifference toward compliance with the act. His behaviour, in my view, constitutes a high degree of negligence, which I characterize as gross negligence. He took advantage of the money knowing that it had been obtained under abnormal circumstances. By failing to act, he therefore acquiesced in the making of false statements by Mr. Joncas' two friends to obtain the refund.
[8] Although it is understood from Villeneuve, supra, at paragraph 2, and Savard, supra, at paragraphs 3 to 7 that all the taxpayers in those cases had admitted to paying a commission in exchange for the refund, there was one taxpayer who had not admitted to making such payment. In fact, Lamarre Proulx T.C.J. wrote the following in Robin Villeneuve v. Her Majesty the Queen, [2002] T.C.J. No. 666, at paragraphs 14, 20 and 21 (TCC):
[14] The appellant did not admit that he had made a payment to the originator of the refund, but he did admit that he had immediately withdrawn two-thirds of the amount. He claimed that it had been to repay a loan that he had contracted with a friend in order to build his house.
. . .
[20] The appellant admitted subparagraph 8(c) of the Reply regarding the fact that the appellant withdrew $8,000 in cash the same day the deposit was made. That is standard procedure under this scheme. The statement that he did not pay a cent for the service rendered by the originator of the refund is not plausible. The evidence of the repayment of an $8,000 loan made by a friend for the construction of his house is not supported by any supporting document.
[21] I am convinced on the basis of a rational deduction from the facts and circumstances, that is, the immediate withdrawal of $8,000 corresponding to two-thirds of the amount of the refund and the absence of valid evidence of the repayment of a loan from a friend, that the appellant was not an exception to the system of paying two-thirds of the amount of the refund received, an organized scheme proven by the respondent.
[9] Not only would I agree with those paragraphs, but I would even add that the Appellant's testimony as a whole was not very credible.
[10] I am therefore persuaded that the Respondent established, on a balance of probabilities, that she was justified in imposing a penalty on the Appellant for each of the years at issue.
[11] The appeals are therefore dismissed.
Signed at Ottawa, Canada, this 11th day of January 2005.
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"Paul Bédard |
Bédard J.
Translation certified true
on this 22nd day of April 2005
Aveta Graham, Translator
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CITATION: |
2005TCC7 |
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COURT FILE NO.: |
2002-198(IT)I |
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STYLE OF CAUSE: |
Éric Forcier v. H.M.Q. |
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PLACE OF HEARING: |
November 23, 2004 |
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DATE OF HEARING: |
Chicoutimi, Quebec |
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REASONS FOR JUDGMENT BY: |
The Honourable Justice Paul Bédard |
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DATE OF JUDGMENT: |
January 11, 2005 |
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APPEARANCES: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Annick Provencher |
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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: |
John H. Sims Deputy Attorney General of Canada Ottawa, Canada |