[OFFICIAL ENGLISH TRANSLATION]
97-3787(IT)I
BETWEEN:
MARCEL GAUTHIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on common evidence with the appeal of
Diane Gauthier (97-3742(IT)I), on May 28, 1998,
at Québec, Quebec, by
the Honourable Judge Alain Tardif
Appearances
For the
Appellant:
The Appellant himself
Counsel for the Respondent: M.
Lamarre
JUDGMENT
The appeal from the assessments made under the Income Tax
Act for the 1991, 1992, 1994 and 1995 taxation years is
dismissed in accordance with the attached Reasons for
Judgment.
Signed at Ottawa, Canada, this 18th day of August 1998.
J.T.C.C.
Translation certified true
on this 27th day of June 2003.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
97-3742(IT)I
BETWEEN:
DIANE GAUTHIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on common evidence with the appeal of
Marcel Gauthier (97-3787(IT)I), on May 28,
1998, at Québec, Quebec, by
the Honourable Judge Alain Tardif
Appearances
Agent for the
Appellant:
Marcel Gauthier
Counsel for the Respondent: M.
Lamarre
JUDGMENT
The appeal from the assessments made under the Income Tax
Act for the 1991, 1992, 1994 and 1995 taxation years is
dismissed in accordance with the attached Reasons for
Judgment.
Signed at Ottawa, Canada, this 18th day of August 1998.
J.T.C.C.
Translation certified true
on this 27th day of June 2003.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 19980818
Docket: 97-3787(IT)I
97-3742(IT)I
BETWEEN:
MARCEL GAUTHIER,
DIANE GAUTHIER,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] These are appeals for the 1991,
1992, 1994 and 1995 taxation years. Marcel Gauthier, the
appellant in file no. 97-3787(IT)I, stated that his
spouse, Diane Gauthier, the appellant in file
no. 97-3742(IT)I, would not be present and that he
wished to submit common evidence for both files.
[2] To that end, Mr. Gauthier
filed a power of attorney dated May 26, 1998, signed by
Diane B. Gauthier, authorizing him to act on her
behalf.
[3] In lengthy preliminary remarks,
the Court informed the appellant Marcel Gauthier that the
absence of the appellant Diane Gauthier could be prejudicial
to her since the burden of proof is always on the appellant,
except however with respect to the issue of penalties.
[4] In spite of these remarks and
warnings, the appellant Marcel Gauthier chose to proceed,
stating that the evidence he was filing applied to both appeals.
He himself had completed the appellant Diane Gauthier's
tax returns and he said he was better informed than she about the
facts and other aspects of his spouse's case.
[5] Counsel for the respondent
expressed concern about the difficulties caused by the appellant
Diane Gauthier's absence, particularly since penalties
had been assessed against her as well.
[6] Having decided to proceed despite
the comments on the possible consequences of the appellant
Diane Gauthier's absence, Marcel Gauthier presented
evidence. This evidence consisted mainly of documents of
debatable and dubious relevance. A number of the documents were
moreover objected to on the ground that they were documents
concerning which the appellant Marcel Gauthier could not
testify or simply because they were irrelevant.
[7] At the start of the trial, the
appellant Marcel Gauthier gave the impression that his
evidence would be substantiated by numerous documents. He
expressed himself with ease and his thoughts were clearly
articulated. He appeared to have a definite plan for the
presentation of his evidence. From there, however, things rapidly
deteriorated into confusion and utter ambiguity.
[8] After filing a number of
documents, the appellant Marcel Gauthier testified in an
incoherent, rambling manner and the explanations he provided
were, in most instances, of no interest. On a number of
occasions, he stated that he had undergone audits for previous
years and that everything had proved to be in order, and so he
did not understand why the Minister did not accept his
explanations this time.
[9] He candidly admitted that he had
neither any accounts nor any records or inventory of his large
and numerous stock market transactions; he even said that he did
not have all the supporting documents.
[10] What is more, he admitted in
cross-examination that he had arbitrarily fixed the RRSP amount
without having made any contribution, saying to himself that the
Minister would make the adjustments if that was not
acceptable.
[11] He also admitted and acknowledged a
number of times that there was little or no order in the
management of his affairs, which the evidence very convincingly
demonstrated.
[12] He criticized the method used by the
department in making the assessments, but admitted, however, that
many supporting documents absolutely essential for the purpose of
determining the acquisition cost of some of his investments were
missing.
[13] According to the appellant
Marcel Gauthier, the department should have relied on the
incomplete information he had provided orally, the basis of which
was more often than not intuitive or indeed fictitious.
[14] This is all the more absurd since he
admitted he had claimed the benefits of an RRSP without having
made a contribution. He also admitted that all the facts on which
the penalty was based were true, that is, that the expenses
claimed in respect of the income property had in fact been
claimed for the appellants' personal residence.
[15] In particular, I refer to the
replacement of the cupboards and the purchase of a water bed, a
bathtub, an armchair and stool and so on, on which substantial
amounts were spent. The explanation and justification provided by
the appellant Marcel Gauthier were to the effect that it
compensated for the unremunerated work he had done with respect
to the income property. In other words, Marcel Gauthier took
matters into his own hands.
[16] On this important question of
misrepresentation, the appellant Marcel Gauthier also admitted
that his spouse was aware that personal expenses had been
deliberately claimed as expenses relating to the management of
the income property, which was done for the purpose of reducing
the amount of tax they had to pay. Marcel Gauthier moreover
received large refunds during the years in issue.
[17] The evidence showed that the appellants
had completed their tax returns for the taxation years in issue
based on the amounts of tax payable. The appellant Marcel
Gauthier first arbitrarily evaluated his tax burden, then
arranged things so that the figures would support the
pre-established result. He admitted to what is amply
sufficient to justify the penalties assessed, namely that, to
achieve this, he had arbitrarily fixed the amount of the
purported RRSP contribution.
[18] The officer responsible for the audit
of the appellants' files testified. He said that he had met
the appellant Mr. Gauthier at his private residence and that
he had had to manage with very incomplete information. He was
obliged to obtain certain information from securities dealers and
Revenu Québec. He explained how he had gone about the
audit work that led to the assessments giving rise to the
appeals.
[19] To be sure, it came out that the method
used was not scientific; it was even arbitrary in some respects,
but never unreasonable. On the contrary, the same evidence showed
that the appellants benefited from a favourable bias in some of
the evaluations.
[20] The appellants may perhaps criticize
the lack of rigour in the method used, but they only have
themselves to blame since their gross negligence, carelessness
and recklessness are the sole factors responsible for the
situation they do not accept. They were required to have in their
possession at all times records, accounts or a compilation of
relevant data on the basis of which an audit could be conducted.
The appellant Marcel Gauthier is an administrator by
training and a health services consultant and should have had at
least some rudimentary system of accounting, particularly since
he himself admitted he was undisciplined in the management of his
affairs.
[21] Not only were the documents relevant to
an audit not available, but what he had was a real jumble and
incomplete, and, which is a much more serious matter, utterly
false. I refer in particular to the RRSP amounts claimed and to
the personal expenses camouflaged as income property
expenses.
[22] Since the evidence submitted by the
appellant in support of the two appeals was totally
insufficient to justify and explain any point whatever in
dispute; since the burden of proof in this matter was on the
appellants; since the appellant Marcel Gauthier admitted
unequivocally that he had indeed arbitrarily invented the RRSP
amount claimed and that he and his spouse had wilfully and
knowingly made misrepresentations regarding certain major
expenses claimed, in order to reduce the amount of tax that he
and his spouse would have to pay; since the explanations provided
to justify their actions were bizarre, absurd and totally
unacceptable; and in view of the total absence of any evidence
in support of their claims, I unhesitatingly dismiss the appeals
in both cases.
Signed at Ottawa, Canada, this 18th day of August 1998.
J.T.C.C.
Translation certified true
on this 27th day of June 2003.
Erich Klein, Revisor
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