BETWEEN:
and
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Appeals heard on December 16, 2005, at Ottawa, Ontario.
Before: The Honourable Justice Lucie Lamarre
Appearances:
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JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1998 and 1999 taxation years are dismissed with costs.
Signed at Ottawa, Canada, this 19th day of January 2006.
BETWEEN:
STEVE SAMSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[1] In these appeals, the appellant challenges the assessment of penalties pursuant to subsection 163(1) of the Income Tax Act ("Act") for the 1998 and 1999 taxation years. The Minister of National Revenue ("Minister") has, pursuant to subsection 163(3) of the Act, the burden of establishing the facts justifying the assessment of the penalties.
[2] Under subsection 163(1) of the Act, a taxpayer who fails to report an amount required to be included in his income for a taxation year and who has failed to report an amount required to be included in his income for any of the three preceding taxation years, will be liable to a penalty equal to ten percent of the amount that he omitted to report for the taxation year at issue.
[3] Here, there is reliable evidence that income was not reported by the appellant in 1997 (which is one of the three taxation years preceding the taxation years at issue). (See affidavit of Thomas McKenna, Exhibit R-1, paragraphs 8 to 10; see also T4A slips, Exhibit R-8[1]; assessments reproduced in Exhibit R-1, Tab E).
[4] For 1998, one of the years at issue, it has been shown that the appellant omitted to report amounts (totalling $24,168) withdrawn from his Registered Retirement Savings Plan ("RRSP") (see affidavit of Thomas McKenna, Exhibit R-1, paragraphs 11 to 13; electronic record of the 1998 reassessment in Exhibit R-1, Tab H; T4RSP slips in Exhibit R-4). The penalty was calculated on the aforementioned amount of $24,168.
[5] For 1999, the second year at issue, the taxpayer filed a nil tax return. The appellant withdrew amounts from his RRSP with Sun Life and did not report them (the gross amounts involved being $2,521 ($2,269.35 net): Exhibit R-3, Tabs C, E and G; and $4,000 ($3,600 net): Exhibit R-3, Tabs B and D and the T4RSP slips showing the appellant's address that was on record, Exhibit R-3, Tab H). Nor did the appellant report his employment income from TriNet Employer Grp Canada($163,286 according to the T4 slips filed, last page of Exhibit R-2).
[6] The total amount omitted to be declared for 1999 according to the respondent's evidence is $169,807. The Minister calculated the penalty on that amount.
[7] In Maltais v. Canada, [1991] T.C.J. No. 1003 (QL), the Court said that the onus put on the Minister is met if he establishes that the taxpayer has failed to report an amount of income in one year (here 1998 and 1999) and that he has failed to report an amount in a return for any of the three preceding taxation years.
[8] Here, the Minister has shown that the taxpayer omitted to report income in 1997, 1998 and 1999. Even the appellant has admitted this by only challenging the penalties. By not challenging the reassessed amounts as such, which are unreported income, he acknowledged the fact that he failed to report amounts of income in those years.
[9] The appellant does not invoke the due diligence defence in asking this Court to cancel the penalties. He requests rather that they be cancelled on the basis that the Minister did not prove that he received the exact amounts that were added to his income by way of reassessment and on which the calculation of the penalties was based through the application of subsection 163(1) of the Act.
[10] This is a new argument that was not raised in his Notice of Appeal. In his Notice of Appeal, he argued only that he did not receive the T4 and T4RSP slips and that he had thought it better not to declare anything than to estimate amounts of income. This obviously was not a good argument.
[11] Indeed, it is the taxpayer's responsibility to take action to collect all the necessary information in order to be able to report his income correctly in his tax return (see Lemay v. R., [2001] 3 C.T.C. 2357). He has the same responsibility with regard to his change of address. It is his duty to advise the payer of this change so as to ensure that the information slips are sent to the right address.
[12] This obviously was not done, as shown by the documents filed in evidence. We see from the T4RSP slips that the address appearing on them does not correspond to the address indicated on the appellant's tax return.
[13] With respect to the new argument, raised by the appellant for the first time in court, that the Minister has the burden of showing the exact amount on which the calculation of the penalties was based, I note first that this new argument caught the respondent by surprise. This is a case heard under the general procedure and there are accordingly some rules to be followed. The appellant should have raised this argument earlier. In this context, I will have to take this into account in determining whether, on a balance of probabilities, the respondent discharged her burden of proving that the penalties should stand.
[14] In my view, the respondent succeeded in so proving and demonstrated sufficiently, using the evidence which was available in the circumstances, that the penalties were calculated on the amounts that the appellant failed to report in his tax returns. There are cancelled cheques for the amounts withdrawn from the appellant's RRSP with Sun Life. For the other amounts of unreported income, there are affidavits stating that the T4 and T4RSP slips showed the amounts paid to the appellant.
[15] Taking into account that the appellant has acknowledged that he did not report all his income in the years at issue, that he himself started the whole process by not reporting all his income and by forcing the Minister to do an audit as a consequence of having received T4 and T4RSP slips filed by the payers, that it was the appellant's responsibility to report all his income and take the necessary steps to ensure that he had all the documents in hand that he needed in order to fill in his tax returns correctly, and that he did not take all these steps as he did not advise the payers of his change of address and did not try to estimate his income, I find that the respondent brought sufficient evidence to demonstrate on a balance of probabilities that the penalties were calculated on the amount of income that the appellant failed to report and that he was required to report under the Act.
[16] It is true, as suggested by the appellant, that the Minister made mistakes at the audit level. These mistakes were caught at the appeals level and I agree with the respondent that on a balance of probabilities the end result reflects the right amount of unreported income used as the basis on which the penalties were calculated.
[17] The appeals are therefore dismissed with costs.
Signed at Ottawa, Canada, this 19th day of January 2006.
"Lucie Lamarre"
Lamarre, J.
COURT FILE NO.: 2003-1327(IT)G
STYLE OF CAUSE: STEVE SAMSON v. HER MAJESTY THE QUEEN
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: December 16, 2005
REASONS FOR JUDGMENT BY: The Honourable Justice Lucie Lamarre
DATE OF JUDGMENT: January 19, 2006
APPEARANCES:
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For the Appellant: |
The Appellant himself
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Counsel for the Respondent: |
Ifeanyichukwu Nwachukwu |
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Ontario
[1] With respect to Exhibit R-8, the appellant was not sure when it was delivered to him and was therefore opposed to the filing of that document at trial, as there was no evidence that it was served on him on time. He did not, however, deny receiving it. Counsel for the respondent, on his lawyer's oath, said that it was delivered Friday, December 8, 2005, but that the document to that effect had been misplaced. I have no reason to believe that counsel for the respondent was not speaking the truth. I therefore find that the appellant was given notice of the respondent's intention to produce Exhibit R-8 seven days before the trial, pursuant to subsection 30(7) of the Canada Evidence Act. I accordingly accept it in evidence.