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Dockets: 2001-3493(IT)G
2003-2655(GST)I
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BETWEEN:
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KEWAL SIDHU,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Appeals heard on January 23, 2004 at Vancouver,
British Columbia
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Before: The Honourable Justice J.E. Hershfield
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Appearances:
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Counsel for the Appellant:
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David Davies
Sergio A. Rodriguez
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Counsel for the Respondent:
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Linda Bell
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____________________________________________________________________
JUDGMENT
The appeal from the reassessment made under the Income Tax
Act (the "Act") with respect to the 1993
disposition of the Appellant's 60th Avenue
Property is dismissed for the reasons set out in the attached
Reasons for Judgement. Costs to the Respondent in respect of such
matter are fixed in the amount of $1,000, such cost being allowed
for preparation for the hearing and the appearance of counsel at
the hearing of the matter.
The appeals from the reassessments made under the Act
with respect to the 1994, 1995, 1996, 1997 and 1998 taxation
years are allowed, without further costs, on the basis consented
to in a signed Consent to Judgment presented at the commencement
of the hearing. In accordance with such Consent these
reassessments are referred back to the Minister for
reconsideration and reassessment on the basis that:
1. In 1994:
(a) The Appellant's net rental
income will be reduced to $8,403.20;
(b) The Appellant's business
income from K & S Sidhu Trucking will be reduced to
$10,509.72;
2. In 1995:
(a) The Appellant's net
rental income will be reduced to a loss of ($4,962.10);
(b) The Appellant's business
income from K & S Sidhu Trucking will be reduced to Nil;
3. In 1996, the
Appellant's net rental income will be reduced to a loss of
($11,208,87);
4. In 1997, the
Appellant's net rental income will be reduced to $541.43;
and
5. In 1998, the
Appellant's net rental income will be reduced to
$8,964.47.
Signed at Ottawa, Canada, this 2nd day of April 2004.
Hershfield J.
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Citation: 2004TCC174
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Date: 20040402
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Dockets: 2001-3493(IT)G
2003-2655(GST)I
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BETWEEN:
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KEWAL SIDHU,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Hershfield J.
[1] This is an appeal in respect of
the Appellant's 1993, 1994, 1995, 1996, 1997 and 1998
taxation years from reassessments respecting:
(a) income or losses on four
rental properties in all such years except 1993;
(b) income or losses from a trucking business in the 1994 and
1995 years;
(c)
an RRSP withdrawal in the 1997 year; and
(d)
a capital gain on the disposition of a property (the
"60th Ave Property" or "subject
property") in 1993.
[2] The first two areas of appeal were
resolved prior to the hearing by way of a Consent to Judgment.
Such resolution is set out, in accordance with that Consent, in
my Judgment. The third area of appeal was not argued and was not
dealt with under the Consent. Accordingly, the appeal in respect
of the RRSP inclusion in 1997 is dismissed.
[3] The fourth area of appeal was
argued at length. The Appellant and a son testified on the
Appellant's behalf and an auditor from the CCRA testified on
the Respondent's behalf. A book of documents was submitted by
each party.
[4] The fourth issue has a number of
sub-issues:
- whether the
reassessment being beyond the normal reassessing period at the
time of the reassessment is grounds to allow the appeal;
- whether there was
an increased cost base in the subject property due to a change of
use in 1992 such that there was no gain to report on the
disposition in 1993;
- whether there was
a principal residence exemption available in respect of the
subject property; and
- whether the
Appellant was entitled to a lifetime capital gains deduction on
the sale of the subject property pursuant to section 110.6 of the
Income Tax Act (the "Act") as it read in
1993.
[5] The 60th Ave Property
was acquired by the Appellant in 1983. According to the Notice of
Appeal, it was a rental property until 1992 when the Appellant
and his family began to occupy it as their principal residence.
Until that change, the Appellant asserts that he and his family
lived at a property on 62nd Ave (the
"62nd Ave Property"). The Reply denies that
the Appellant moved into the 60th Ave Property and
that it was his principal residence until it was sold in 1993.
The Reply asserts that there was a gain on the disposition that
was not reported. The Appellant's assertions raise the issue
as to whether there was a change in use in 1992 (that the
Appellant also failed to report). If there was a change of use, a
disposition would thereby be deemed to have occurred in 1992
pursuant to section 45 of the Act. This would permit
the Appellant to claim, as he does, that he has the benefit of,
on disposition in 1993, the increased cost base that arises from
that unreported deemed disposition in 1992 so that the actual
disposition in 1993 would not give rise to a gain.
[6] It is acknowledged that both 1992
and 1993 were beyond the normal reassessment period at the time
of the reassessment. The Appellant asserts that the requirement
for 1993 to be an open year for reassessment has not been met. He
asserts that if he made a misrepresentation on his 1993 return,
it was not attributable to neglect, carelessness, willful default
or fraud and the appeal must be allowed on that basis. The
misrepresentation would be failing to report the 1993 disposition
if it were found that there was a gain in 1993 to report. The
Appellant asserts that the omission to report a gain was based on
his honest belief that he was not required to report a gain in
respect of a property that was his residence.[1]
[7] The Appellant says that he
ordinarily inhabited the subject property throughout 1992 and in
1993 until it was sold and now wants to designate it as his
principal residence in the event that the reassessment is found
not to be statute barred and the change of use position is not
accepted. Further, the Appellant says that even if the
reassessment is found not to be statute barred on the basis that
the requirements of subparagraph 152(4)(a)(i) of the
Act have been met,[2] and the change of use position is not accepted, he is
entitled to the lifetime capital gains deduction as the statutory
bar to that claim, arising from his failure to report the gain,
requires that the failure be due to gross negligence which
he asserts has not been established (even if I find that such
failure was due to neglect).
[8] On the change of use issue, the
Appellant relies on the 1992 year being statute barred. His
position is that if I find that there has been such change of
use, the Minister will have to reassess 1992 and he will live
again to fight another day. What alarms me about this position is
not that it is an attempt to avoid tax on the gain on the subject
property (which it is open for him to do if the facts bare out
his assertions) but that the facts of this case are so suspicious
and inconclusive, the evidence so inconsistent and lacking in
disinterested corroboration in both oral testimony and
documentation, and so confused that one can readily imagine that
the Appellant could bring his case, on another day, in respect of
the 1992 year, on the basis that there was no change of use in
1992 without apparent contradiction or, if there was a change of
use in 1992, he could bring his case on the basis that the
failure to report a disposition under section 45 should stand up
better in terms of an argument that the 1992 year is statute
barred.
[9] I do not trust the Appellant's
innocence as to any of this. Aside from the evidentiary problems
of when, if ever, the subject property was used in any real sense
as a residence, the Appellant wants me to believe that when he
filed his 1993 return he believed that the principal residence
exclusion applied to his entire gain without regard to the fact
that it had only been used as a residence, if it was so used at
all, for a short period prior to sale after holding it as rental
property for some nine years and realizing a gain of some
$160,000. He had an accountant prepare his return for the year
(in which he reported some $39,000 of employment income as a
longshoreman and some $15,000 in rental and business losses) but
mentioned nothing to him of the significant gain on the
disposition. He said he relied on things his friends told him.
Such reliance and his failure to mention the sale to his
accountant was negligent at best. Indeed, in light of all the
facts and circumstances of this case, I find it to be grossly
negligent of the Appellant not to have reported the disposition
to his accountant. His failure to have even mentioned it to his
accountant ensured either a misrepresentation of his income in
1993 or the ongoing non-disclosure of the gain in 1992 that would
arise if there was a change of use. I distrust the Appellant. He
relied on his accountant to compute his tax liabilities on his
real estate holdings and trucking business. Although he was
represented as being a longshoreman with a grade 10
education having no knowledge of tax requirements, this affords
the Appellant no excuse in this case. To act on self-serving
advice from fellow longshoremen and withholding mention of a
disposition of property to his professional adviser while seeking
assistance in reporting rental and business losses is to turn a
blind eye to, and reflects a wanton disregard of, compliance
obligations in a self-assessing system. Accordingly, I would
dispose of the first issue in favour of the Respondent subject to
finding that there was no change of use in 1992.[3] That is, the subparagraph
152(4)(a)(i) requirements for reassessments beyond the
normal period, have been clearly met in this case provided there
was no change of use in 1992. Beyond this, I am suspicious that
the Appellant may be craftier than he wants me to believe. It is
easy to imagine that the evidence reveals something of a shell
game where the pea under the shell is a dwelling or two or three.
Suspicions that the asserted change of use of the subject
property was contrived as an afterthought, as argued by the
Respondent, have not been undermined by the evidence presented.
On the other hand however, the evidence would not support a
finding that the occupation of the subject property for some
short time in or about 1992 was fabricated. As explored further
in these Reasons, there is room to find, irrespective of my
distrust of the Appellant's testimony, that the subject
property was actually occupied as a family residence at some
point. On the evidence however, such occupation has not been
proven by the Appellant to be other than marginal and temporary.
This takes me to consider the evidence presented at the hearing
in respect of the Appellant's change of use argument.
[10] One focus of the Respondent's case
was on documentary inconsistencies regarding where the Appellant
and his family resided in 1992. That focus established that the
Appellant had, primarily in terms of changing his address for
receiving mail purposes, not abandoned the 62nd
Ave Property as his residence. That is, there were a
number of documentary examples showing the 62nd Ave
Property as his place of residence well after the asserted
move to the subject property. His 1992 chequing account
statements and personal cheques drawn on such account with his
credit union showed the 62nd Ave Property as
his address. Similarly, newspaper ads on his rental properties
were billed to the 62nd Ave Propertyin 1992 and
1993 as opposed to the 60th Ave Property or to his
current residence on 62nd Ave that he testified
that he moved to in or about March 1993 (such current residence
being a different residence than the one referred to in these
Reasons as the 62nd Ave Property). Repair and
maintenance supplies were billed to the 62nd Ave
Property in 1992 and 1993. A mortgage application in 1993 showed
the Appellant's address as the 62nd Ave Property.
The Appellant's lawyer in 1992 sent title documents in
respect of a purchase of certain real estate to the Appellant at
the 62nd Ave Property. Even the address of a
daughter of the Appellant was shown on a Tuition and Education
Credit Certificate as the 62nd Ave Property as
at January 1993. On the other hand, a few of the Respondent's
exhibits and one of the Appellant's exhibits showed that the
Appellant had also used the 60th Ave Property as his
mailing address during the period in question.
[11] Such evidence simply shows that the
Appellant may never have abandoned the 62nd Ave
Property as a place that he regarded as a satisfactory
place to receive his mail. It does not in itself contradict his
testimony that he did not actually live there in 1992 or 1993.
The use of the 62nd Ave Property as a mailing
address however is consistent with a finding that the Appellant
had not abandoned the 62nd Ave Property
as his residence even though he and his family may have lived
elsewhere at times and someone else, a renter, lived there during
all or a part of the time under review. He still owned the
property and described it as his "main" house. Such
finding, while not incompatible with a finding that the
60th Ave Property was being used as a residence at
some point in 1992 or 1993, is not of much assistance to the
Appellant in the resolution of concerns in respect of the time
and nature of any occupation of the subject property in terms of
supporting a change of use. Indeed such finding when taken
together with other evidence tends to support my general distrust
of the Appellant's testimony.
[12] The Appellant testified that the move
to the 60th Ave Property was made because it was
bigger and it allowed for the rental of the 62nd Ave
Property which he testified could be rented for more money than
the 60th Ave Property. While he testified that his
whole family lived at the 60th Ave Property from about
January 1992 until about March 1993, during cross-examination he
said he stopped renting the 60th Ave Property due to
damage to the house by tenants and that he lived there himself to
fix the house. While rental income did increase in 1992 when
receipts were reported from the 62nd Ave Property and
while no rental receipts were reported in 1992 from the
60th Ave Property, I am unconvinced that the move, to
the extent there was one, was motivated by either the size of the
subject property or rental opportunities. Doubts as to this
latter aspect of his testimony were raised given that
considerable renovations had been done to the larger
60th Ave Property and given, according to the
Appellant's own testimony, that the tenant at the
62nd Ave Property could not afford to rent that
property without sub-tenants who had to be secured.
[13] The Appellant testified that his
children changed schools as a result of the move but it was
uncertain which of his children had changed schools or for how
long. No school records were produced. He testified that he knew
his neighbors well but no disinterested testimony of neighbors
was brought. The Appellant also testified that he moved out of
the 60th Ave Property because it was unsafe. A
neighbor had been killed. He later said that the reason for the
move out of that property was because the house had a bad
smell.
[14] As to the Appellant's living
patterns that might be drawn from documentary evidence, there is
one particularly troublesome example of the confused nature of
his evidence. His 1992 tax return showed a different address than
either of the 60th Ave Property or the 62nd
Ave Property addresses. He said that such other address
was for a property that belonged to a friend but he could not
remember why he showed it as his address. He was questioned as to
whether he stayed at this friend's home while his
current home on 62nd Ave was being constructed
and he said "yes". His having put this address on his
1992 return then suggests that the construction of his current
home would have been done in the fall of 1993 when he signed the
1992 return. This is inconsistent with his testimony that the
construction was done in 1994, more than a year after his family
had commenced living at the current address in a home that was on
the property prior to the new construction. If the new home
construction was really one year earlier as evidenced by the
address on the Appellant's 1992 return, the Appellant's
entire evidence becomes untrustworthy. Indeed, it suggests
another scenario which, although speculative, seems on balance to
fit the general circumstances of the Appellant's overall
situation as it unfolded at the hearing. He was not intending any
real move away from the area of his main home. He was building a
new home in the area and was selling the 60th Ave
Property. In the hiatus of selling one property (staying there to
fix it up) and preparing to move out of another property, he may
have lodged some of his family at the 60th Ave
Property for a short period. This may have been as late as
December 1992 or January 1993.[4] His children grew up in the main house, had
friends there, went to school near there and wanted to live there
or near there. A move to the 60th Ave Property
only raises questions - except as a temporary move for some of
his family members at some point. That I am so suspicious
underlies that the burden on the Appellant in this case has not
been met. I am convinced of nothing except that I do not trust
the testimony of the Appellant. I am not even satisfied that he
in any real sense moved out of his 62nd Ave
Property prior to his move to the new property on
62nd Ave where he currently resides.
[15] The son's testimony was that one of
the reasons for the move to the subject property was to be in a
particular school district. His sister, he said, wanted to go to
the school in the district of the 60th Ave Property. He
was admitted there as well - he said he was in grade 8. He also
said they were only there (at the subject property) a short time
and that he transferred after Christmas to the new school and
that things did not work out and he changed his mind and went
back to his old school when they moved back to 62nd
Ave when he was in grade 9. He said he started grade 9 in
September of 1993 at the old school. This would mean, if he was
transferred in the middle of grade 8, that it was in January 1993
when he started living at the 60th Ave
Property, one year later than the Appellant wanted me to
believe. Admittedly the son was confused and ultimately
acknowledged that he could not remember what years he was at
which school. The calendar years versus the school years were
confusing him. School records would have helped.
[16] I do not distrust the son's
testimony. I am not suspicious of it. However all I can accept
from his testimony is that it confirmed that there was a short
stay at the 60th Ave Property. Taking the evidence of the
Appellant and his son together and the documentary evidence
produced by the Respondent, I would say that people were moving
about for different reasons and there was more than one house
available. The main house was always the 62nd Ave
Property.
[17] I turn now to the auditor's
testimony. Her testimony taken from notes was to the effect that
during the audit in 1998 that gave rise to the reassessment
currently under appeal, the Appellant told her a different story
than the one he was currently telling. He told her at the first
meeting in January 1998, in the presence of his accountant, that
the current 62nd Ave Property had been
his residence since 1993 and that prior to that his residence had
been the 62nd Ave Property. No mention was made
of his living at the 60th Ave Property. He admitted
selling the 60th Ave Property but offered no
explanation as to why he did not report the disposition. In a
proposal letter sent out in January 1999 (proposing to assess the
gain), the auditor stated that in the interview with the
Appellant he could not remember why he did not report the gain.
It was only then that explanations were offered in a meeting in
February 1999. The Appellant only then told the auditor that he
lived at the 60th Ave Property in December 1992 or
January 1993. I find it more than a little suspicious that the
Appellant would say nothing of the subject property being used as
a personal residence until a second meeting after a proposal
letter had been sent out. This was in direct conflict with what
he told the auditor at the earlier meeting. However, my suspicion
is not so much that the asserted personal use of the subject
property in 1992 or 1993 was a fabrication, but rather that the
asserted personal use of the subject property was not of such
substance in the mind of the Appellant as to be worthy of mention
until its mention posed a tax advantage. On the one hand the
Appellant now says that in 1995 when he filed his return for
1993, he thought he did not have to report a $250,000 disposition
(or even mention it to his accountant) because he knew then that
he resided in it and that such residence meant he did not have to
report the gain, while on the other hand, such residency was not
of sufficient substance to mention to the auditor in 1998 or even
in 1999 except as an ambiguous reference to living there in
December 1992 or January 1993. The notion of a meaningful
residence at the subject property clearly appears to be an
afterthought to cover-up the Appellant's misrepresentation on
his 1993 return. That is, while I accept, based on the son's
testimony, that there was likely some occupation of the subject
property in 1992 or 1993 and that the explanation was not a
fabrication, such occupation was never the reason for not
reporting the income.
[18] While the confusion created by the
evidence or lack of it has left me wholly uncertain as to the
actual living habits of the Appellant, I have accepted that there
was some sort of move to the 60th Ave Property (albeit
likely a marginal and temporary move). It may have been a
transitional move pending relocation to the current residence and
the sale of the subject property or even a move contrived to lend
optical support for a desirable tax position. The question then
is whether such occupancy is sufficient to constitute a change of
use.
[19] The relevant provision of the
Act reads as follows:
45. (1) For the purposes of this subdivision the following
rules apply:
(a) where a
taxpayer,
(i) having acquired property for some other purpose, has
commenced at a later time to use it for the purpose of gaining or
producing income, or
(ii) having acquired property for the purpose of gaining or
producing income, has commenced at a later time to use it for
some other purpose,
he shall be deemed to have
(iii) disposed of it at that later time for proceeds equal to its
fair market value at that time, and
(iv) immediately thereafter reacquired it at a cost equal to that
fair market value; ...
[20] If then at any time in 1992, the family
"commenced" living in the subject property for some
purpose other than the income producing use for which it was
acquired, there will be a change in use of the property. The
Respondent has not disputed the Appellant's testimony that
the property was not rented during this period. The Respondent
denies that a new non-income producing use had commenced. Without
commencement of such new use there is no deemed disposition under
the foregoing provision. Commencement of a new use has been held
to mean being put to a use not consistent with the use for which
the property was acquired: see Hewlett Packard (Canada) Ltd.
v. Canada, [2003] T.C.J. No. 594 (T.C.C.). This case
includes a review and analysis of authorities dealing with change
of use. Such authorities include Hughes v. M.N.R., [1980]
C.T.C. 2173 (T.R.B.), Peachey v. The Queen, 79 DTC
5064 (F.C.A.) and Cantor et al. v. M.N.R., 85 DTC 79
(T.C.C.). The analysis concludes that the cessation of an income
earning use is not sufficient to constitute a change of use. An
unequivocal act to commence a use inconsistent with the original
use is required. A use made of an asset might be found during a
period of liquidation not to be a use inconsistent with the
original use even if that use does not derive revenue. Such use
might be consistent with the liquidation of the asset which is
not a use inconsistent with the original use. The burden of proof
on the Appellant in the case at bar is to satisfy the Court that
it is reasonable to find on the evidence that the occupation of
the subject property was an unequivocal use inconsistent with the
original use or, at least, that such occupation was not a use
reasonably consistent with the original use. The nature of the
occupation in the case at bar has not been established so it
cannot be said that the Appellant has satisfied the burden of
proof imposed on him by these authorities. Aside from the
inconsistencies in the Appellant's story, I have no
disinterested corroborative testimony or evidence of anything the
Appellant has asserted. I draw a negative inference from
this. Further, the evidence that tends to support
suspicions that the occupation of the subject property was
transitional would support a finding that such occupation was not
inconsistent with a prior rental use in the context of section
45. When property is being readied for sale, the rental use may
cease. The brief occupation by the owner that follows during a
pre-sale period is not necessarily a use that is inconsistent
with the prior rental use of the property. I am not satisfied
that this is not the circumstance of the case at bar. There was
evidence that the subject property was being readied for sale
(e.g. the recent renovations followed by the actual sale) and I
have little hesitation in suggesting that the cessation of rental
may be as readily attributed to that as to anything else. A
convenient short-term resolution of an occupation hiatus of a
rental property being readied for sale is not a use of such
property that is inconsistent with the rental use for which it
was acquired. Again, there is a burden of proof on the Appellant
to show that the occupation of the subject property was not such
an occupation and, again, the Appellant has failed to meet such
burden. Accordingly I find that there has been no change of use
in 1992.
[21] It should be clear then that given this
finding, it is not open for the Appellant to argue that the
60th Ave Property was his principal residence in 1992
(or 1993). Interestingly, Appellant's counsel took a reverse
approach to this analysis. He argued firstly that the subject
property was a principal residence as defined in section 54 of
the Act. That definition requires a finding that the
Appellant or his family "ordinarily inhabited" the
subject property in 1992. He argued that the authorities on what
constituted "ordinarily inhabited" would support a
finding that even a short-term occupation was sufficient to
constitute the subject property as a principal residence and that
such designation then required a finding that there was a change
in use. However, the authorities submitted included the case of
Shlien v. M.N.R., 88 DTC 1152 where at page 1154
Couture, C.J.T.C.C. referred to a dictionary definition of
"inhabit" that embraced the notion of occupation
"as a settled residence". This is consistent with a
line of cases that find that a casual residence, which is a
residence occupied by a person but which is not reflective of
where that person lives in the course of his/her customary mode
of life, is not a residence at which that person
"ordinarily" resides.[5] On the evidence in the case at bar, once again,
the Appellant has failed to satisfy the burden of proof placed on
him in this appeal. That is, as in the analysis respecting change
of use, if I am unconvinced on the evidence as to the use the
Appellant put the subject property when he ceased renting it out
in 1992, how can it be said that it became his settled place of
abode in 1992. Further, as in the analysis respecting change of
use, the evidence that tends to support suspicions that the
occupation of the subject property was transitional, would
support a finding that such occupation cannot be said to be
"settled". Accordingly, the subject property cannot be
regarded for the purposes of this appeal as the Appellant's
principal residence in 1992 or 1993.
[22] This takes me to the last issue which
is whether the Appellant can now claim the lifetime capital gains
deduction in respect of the unreported gain on the disposition of
the subject property in 1993. I have already determined that it
is an open year on the basis that the Appellant was negligent in
not reporting the gain. However, he will only be disallowed the
deduction sought if he "knowingly or under circumstances
amounting to gross negligence"[6] failed to report the gain in the
return required to be filed for the year. The Act
expressly puts the burden of proof on the Minister in respect of
this issue.
[23] The Appellant relies on the decision in
Venne v. The Queen, 84 DTC 6247 (F.C.T.D.) and argues that
the bar for finding gross negligence has been raised to require a
finding of a high degree of negligence tantamount to intentional
acting. While some support may be found to argue otherwise, the
decision in Venne does not raise the bar to require the
Minister to establish actual intent to deceive or willful
misconduct. If that were the test, the subject provision of the
Act need only have referred to "knowingly"
failing to report a gain. Actions "tantamount" to
intentional actions are actions from which an imputed intention
can be found such as actions demonstrating "an indifference
as to whether the law is complied with or not".[7] The non-reporting of
the gain in the circumstances of this case is a gross
self-serving indifference to compliance. Not to mention such a
significant gain to one's accountant upon whom you rely to
ensure appropriate shelter for employment income from property
and business losses, on the facts of this case which have shown
the Appellant to be untrustworthy, is as tantamount to
intentional acting as I might imagine. The burden here is not to
prove, beyond a reasonable doubt, mens rea to evade taxes.
The burden is to prove on a balance of probability such an
indifference to appropriate and reasonable diligence in a
self-assessing system as belies or offends common sense. Beyond
this, I note that the evidence in this case that suggests an
attempted cover-up of the Appellant's initial
non-reporting only enhances the Respondent's
position.
[24] One last point to mention is that
counsel for the Appellant wanted me to draw a negative inference
in respect of this last issue from the fact that the Respondent
did not assess penalties under subsection 163(2). Indeed the last
proposal letter which expressly denied the capital gains
deduction for failure to report the gain only warns, after
referring to "continually omitting amounts", of
potential future penalties for knowingly making false statements.
I agree with counsel for the Appellant that this is somewhat
inconsistent. In spite of the evidence facing the auditor at the
time, contained in her own notes, the non-reporting issue
was never raised in terms of gross negligence penalties. The
unreported gain was raised and pursued and then assessed and
confirmed without penalty under subsection 163(2). Do I now have
suspicions that the gross negligence theory adopted by the
Minister has been reconstructed from old notes only in response
to the appeal of the capital gains deduction issue? Yes, I do but
that does not assist the Appellant. There is no estoppel against
the Minister. The appeal proceeds on the facts and issues
presented at the hearing. The Appellant's representative
during the time of the proposed reassessments might have made
headway on this point, but once the matter comes to Court, the
evidence determines the outcome, not the inconsistencies in the
assessing practices of the Minister.
[25] Accordingly, the appeal is
dismissed.
Signed at Ottawa, Canada, this 2nd day of April 2004.
Hershfield J.
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