Citation: 2011TCC500
Date: 20111103
Docket: 2008-4073(IT)I
BETWEEN:
MICHEL MIGNAULT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1]
The Appellant was
reassessed for 2005 to include $12,500 in his income as an amount that the
Appellant had received from his RRSP and also to assess a penalty pursuant to
subsection 163(1) of the Income Tax Act (the “Act”). The
appellant was the victim of fraud committed by his former financial advisor (Gary Palmer)
for which the advisor was sentenced to serve a term in prison. It would appear
that the fraud was perpetrated over several years and in each case the
methodology was the same. The methodology was described in detail for the year
in question, 2005.
[2]
The financial advisor
prepared a form for the Appellant to sign under which the Appellant would
withdraw a net amount from his RRSP account with The Great West Life Assurance
Company. For 2005 the net amount was $10,000. After the form was signed the financial
advisor altered the form to add an address to which the cheque should be sent.
It would appear that the financial advisor received the cheque and then met
with the Appellant. The Appellant deposited the cheque in his account at the
credit union and then requested a certified cheque drawn on the same account in
the same amount that was deposited. The certified cheque was payable to a
company controlled by the financial advisor. It would appear that was the last
time that the Appellant saw those funds.
[3]
Based on the forms
submitted by the Respondent during the hearing, it appears that the following
were the amounts that the Appellant withdrew from his RRSP as part of the same
scheme:
|
Taxation Year
|
Gross Amount Withdrawn
|
Income Tax Deducted
|
Net Amount Withdrawn
|
|
2000
|
$42,857
|
$12,857
|
$30,000
|
|
2001
|
$71,429
|
$21,429
|
$50,000
|
|
2002
|
$161,134
|
$48,340
|
$112,794
|
|
2005
|
$12,500
|
$2,500
|
$10,000
|
|
|
$287,920
|
$85,126
|
$202,794
|
[4]
Paragraph 56(1)(h) of
the Act provides that:
56. (1) Without restricting the generality of section 3, there
shall be included in computing the income of a taxpayer for a taxation year,
…
(h) amounts
required by section 146 in respect of a registered retirement savings plan or a
registered retirement income fund to be included in computing the taxpayer's
income for the year;
[5]
Subsection 146(8) of
the Act provides that:
(8) There shall be included in computing a taxpayer's income for a
taxation year the total of all amounts received by the taxpayer in the year as
benefits out of or under registered retirement savings plans, other than excluded
withdrawals (as defined in subsection 146.01(1) or 146.02(1)) of the taxpayer
and amounts that are included under paragraph (12)(b) in computing the
taxpayer's income.
[6]
“Benefit” is defined in
subsection 146(1) of the Act as follows:
“benefit” includes any amount received out of or under a retirement
savings plan other than
(a) the portion thereof received by a person other than the
annuitant that can reasonably be regarded as part of the amount included in
computing the income of an annuitant by virtue of subsections (8.8) and (8.9),
(b) an amount received by the person with whom the annuitant
has the contract or arrangement described in the definition “retirement savings
plan” in this subsection as a premium under the plan,
(c) an amount, or part thereof, received in respect of the
income of the trust under the plan for a taxation year for which the trust was
not exempt from tax by virtue of paragraph (4)(c), and
(c.1) a tax-paid amount described in paragraph (b) of
the definition “tax-paid amount” in this subsection that relates to interest or
another amount included in computing income otherwise than because of this
section
and without restricting the generality of the foregoing includes any
amount paid to an annuitant under the plan
(d) in accordance with the terms of the plan,
(e) resulting from an amendment to or modification of the
plan, or
(f) resulting from the termination of the plan;
[7]
As a result if an
individual receives an amount from his or her RRSP (other than an excluded
withdrawal in relation to the Home Buyers’ Plan or the Lifelong Learning Plan)
or an amount that is included in income under paragraph 12(b) of the Act,
the amount is to be included in the income of that individual. For 2005 there
are two separate amounts – the $10,000 that the Appellant flowed through his
bank account to Gary Palmer’s company and the $2,500 that was remitted by The Great
West Life Assurance Company to the Canada Revenue Agency on account of the
Appellant’s tax liability. The Appellant argued that he did not receive either
amount.
[8]
With respect to the
$2,500 amount that was deducted for income taxes and remitted to the Canada
Revenue Agency, it is clear that the Appellant would have received this amount
for the purposes of the Act. In Morin v. The Queen, 75 DTC
5061 (FC-TD), the taxpayer made a similar argument in relation to amounts that
had been withheld from his salary for provincial income tax. The taxpayer’s
appeal was dismissed and Justice Lacroix
stated that:
In the case
at bar the provincial and federal statutes state that income tax is payable on
the salary, wages or remuneration that an employee receives during a taxation
year. In this case the plaintiff was recorded in his employer's books as being
entitled to a salary of $16,268.84. He contends that since the government
deducted the amount of tax, he did not receive his full salary, given the fact
that the amount of the tax was deducted at source. In other words, the
plaintiff puts forward as a proposition of law that in order to receive his
salary in the legal sense, he must actually touch or feel it, or have it in his
bank account.
We regret to
say that this proposition seems to us absolutely inadmissible, because the word
'receive' obviously means to get or to derive benefit from something, to enjoy
its advantages without necessarily having it in one's hands. In other words,
the plaintiff can, and must, say, 'what is left of my salary or income, after
taxes, is $14,639.85'; it is not correct to say 'My income is only $14,639.85'.
[9]
In The Queen v. Hoffman, 85
DTC 5508, Justice Rouleau of the Federal Court, Trial Division, stated as
follows:
14 If the proposition that income must
be in the actual possession of the employee before it can be taxed is correct,
then I would have to conclude that an employee's contributions to Canadian or
provincial pension plans, deducted at source by the employer, are not income in
the hands of the employee. Jurisprudence does not support this proposition.
15 In Lucien Gingras v. MNR
[unreported decision dated March 26, 1973] the Tax Review Board noted (at page
4):
[Translation]
The expression “touché” (received) does not necessarily mean that
the full amount of the salary must be physically received by the payee or be
deposited in full in his bank account.
According to the interpretation of s. 5 it is sufficient to say that
the amount of the salary was paid by the employer either to the employee
himself or to his benefit, or that it was handed over to a third party under a
federal or provincial statute.
16 The fact that defendant's employer
deducted at source employee's social security contributions in the 1978 and
1979 taxation years does not support the proposition that he received income
net of the withheld amounts. The amounts deducted and forwarded were for his
eventual benefit.
[10]
Clearly the $2,500 that
was remitted by The Great West Life Assurance Company as income tax payable by
the Appellant, was received by the Appellant for the purposes of the Act
and should have been included in his income for 2005.
[11]
The Appellant also
submitted that he did not know that this extra amount of $2,500 was being
withdrawn. As part of the re-direct examination of the Appellant by his lawyer,
the following exchange took place:
Q Thank you. I would like also to refer to
another exhibit marked A-3.
…
Now you told the Court that certain portions
of this were not on this letter. This is not, in fact, a true reflection of the
letter that you signed, but the portion that was there included the words,
"I wish to withdraw $10,000.00
net from my account. Please issue a cheque payable to me in the amount of
$10,000.00. [And] Any appropriate charges should be debited to the
account",
is that correct?
A Yes.
Q Did you understand that -- other than perhaps
these appropriate charges you refer to, was there anything over $10,000 being
withdrawn from your account?
A No.
Q Did you think $12,500 was being withdrawn from your account?
A No.
[12]
While the letter that
is referred to above (Exhibit A-3) was altered by Gary Palmer after the
Appellant signed the letter, the letter that the Appellant did sign did provide
that the Appellant wished to withdraw $10,000 net and that a
cheque for $10,000 was to be made payable to the Appellant. As a result of the
provisions of the Act and the Income Tax Regulations, the holder
of the RRSP account (The Great West Life Assurance Company in this case) would
be required to withhold an amount from the payment from the RRSP and remit such
amount to the Canada Revenue Agency on account of the Appellant’s income tax
liability.
[13]
Subsection 153(1) of
the Act provides in part as follows:
153. (1) Every
person paying at any time in a taxation year
…
(j) a payment out of or under a
registered retirement savings plan or a plan referred to in subsection 146(12)
as an “amended plan”,
…
shall deduct or withhold from the payment the amount determined in
accordance with prescribed rules and shall, at the prescribed time, remit that
amount to the Receiver General on account of the payee's tax for the year under
this Part or Part XI.3, as the case may be, and, where at that prescribed time
the person is a prescribed person, the remittance shall be made to the account
of the Receiver General at a designated financial institution.
[14]
Part I of the Income
Tax Regulations provides, in part, as follows:
100. (1) — In this Part and in Schedule I,
“employee” means any person receiving remuneration;
“employer” means any person paying remuneration;
…
“remuneration” includes any payment that is
…
(i) a payment made during the lifetime of an annuitant
referred to in the definition “annuitant” in subsection 146(1) of the Act out
of or under a registered retirement savings plan of that annuitant, other than
(i) a periodic annuity payment, or
(ii) a payment made by a person who has reasonable grounds to
believe that the payment may be deducted under subsection 146(8.2) of the Act
in computing the income of any taxpayer,
…
103 (4) Subject to subsection (5), where a lump sum payment is made
by an employer to an employee who is a resident of Canada,
…
(b) if the payment exceeds $5,000 but does not exceed
$15,000, the employer shall deduct or withhold therefrom, in the case of an
employee who reports for work at an establishment of the employer
(i) in Quebec, 10
per cent,
(ii) in any other province, 13 per cent, or
(iii) in Canada beyond the limits of any province or outside Canada, 20 per cent,
of such payment in lieu of the amount determined under section 102;
and
…
103 (6) For the purposes of subsection (4), a “lump sum payment”
means a payment that is
…
(c) a payment made during the lifetime of an annuitant referred to
in the definition “annuitant” in subsection 146(1) of the Act out of or under a
registered retirement savings plan of that annuitant, other than
(i) a periodic annuity payment, or
(ii) a payment made by a person who has reasonable grounds to
believe that the payment may be deducted under subsection 146(8.2) of the Act
in computing the income of any taxpayer,
[15]
The above provisions
only reflect the amount to be withheld under the Act and there would be
an additional amount that would have to be withheld and remitted under the Manitoba income tax provisions. Presumably the combined amount
that would have to be deducted and remitted for a lump sum payment between
$5,000 and $15,000 would be 20% and 20% of $12,500 is $2,500. By sending a
letter indicating that he wished to withdraw $10,000 net and receive a cheque
for $10,000, the Appellant set in motion a series of events that would result
in $12,500 being withdrawn from his RRSP as The Great West Life Assurance
Company would be required to comply with the provisions of the Act and
the Income Tax Regulations and the corresponding Manitoba income tax
provisions. In order to comply with the Appellant’s request to withdraw $10,000
net and to have a cheque for $10,000, the gross amount that was withdrawn was
$12,500 with $2,500 being remitted to the Canada Revenue Agency on account of
the Appellant’s liability under the Act and under the Manitoba Income
Tax Act. Whether the Appellant knew the additional amount that would be
withdrawn so that he would receive a cheque for $10,000 does not change the
fact that this additional amount was withdrawn (and would have to be withdrawn
for the holder to comply with the provisions of the Act and the Income
Tax Regulations and the Manitoba income tax provisions). The $2,500 (which
was in addition to the amount reflected in the cheque for $10,000) was
withdrawn from his RRSP and remitted to the Canada Revenue Agency. The
Appellant received this amount for the purposes of the Act and this
amount should have been included in the Appellant’s income for 2005.
[16]
With respect to the
$10,000 amount that eventually went to Gary Palmer’s company, the following
exchange took place between the Appellant and counsel for the Respondent during
his cross-examination:
Q Okay. Next I would like to refer to the
document which was marked as Exhibit A-4, which was the cheque that -- which
was the cheque.
A Yes, got it, yes.
Q So is it correct this is the cheque that you
received from Great-West Life pursuant to that letter?
A It is.
Q And you had this cheque in your hands?
A Yes.
Q Wouldn't you say that at this point in time
you had a choice to do whatever you wanted with this money? Is that correct?
A I had a choice, yes --
Q Yes.
A -- but I did one thing with it.
Q So it's correct to say that having this,
having withdrawn RRSPs and given authorization to withdraw RRSPs, you requested
this cheque, you received this cheque and had this cheque in your hand, you had
the choice to do whatever you wanted with this money, correct?
A Yes, but this wasn't viewed in my mind as a
withdrawal. It was a transfer. That was the --
Q Is it correct --
A That was the intent.
Q Is it correct you could have taken this money and donated it
to charity, you could have given it to a family member, but in this case you
chose to invest this money, is that correct?
A No argument.
Q So wouldn't you say that you received this money?
A Yes, I received the cheque, yes.
[17]
During re-direct, the
following exchange took place between the Appellant and his lawyer:
Q Could you turn now to Exhibit 4 please, Mr.
Mignault, A-4, pardon me?
A What is that?
THE REGISTRAR: That's the cheque payable to you
from Great-West Life.
THE WITNESS: Thank you.
BY MR. WEINSTEIN:
Q Now I believe my friend was asking you if you
had a choice to do anything you wanted with this cheque when it was in your
hands. Why did you withdraw this amount from Great-West Life, from your RRSP
from Great-West Life?
A Well, again it was on the instructions of Mr.
Palmer to withdraw it and make it payable to JDR for reinvestment in my
portfolio.
Q So whose idea was it to withdraw it?
A It was Mr. Palmer's request.
Q And other than Mr. Palmer's request, would you
have withdrawn the $10,000 otherwise?
A No.
[18]
Even though it was Gary
Palmer’s idea to withdraw the money, the money was still withdrawn. It is clear
that the Appellant (as acknowledged by the Appellant during cross-examination)
had the cheque for $10,000 and could have done whatever he wanted with that
money. Unfortunately he chose to give it to Gary Palmer’s company. That,
unfortunately, does not change the fact that he did receive the cheque for
$10,000 and he did deposit it into his bank account.
[19]
Counsel for the
Appellant referred to the decision of Justice Bowman (as he then was) in Tatarchuk
Estate v. Minister of National Revenue, [1993] 1 C.T.C. 2440.
However in that case the son fraudulently deregistered an RRSP account of his
father and then appropriated the funds from the father’s account without his father’s
knowledge or consent. In this case, the Appellant himself signed the letter
indicating that he wished to withdraw $10,000 net and he also deposited the
cheque himself into his account and arranged for a certified cheque for $10,000
to be paid to Gary Palmer’s company. These facts distinguish this case from the
Tatarchuk Estate case and the Tatarchuk Estate case does not
assist the Appellant.
[20]
The Appellant argued
that he did not think that he was withdrawing funds from his RRSP but instead
thought that he was simply reinvesting funds with The Great West Life Assurance
Company. However, the letter he signed did use the word “withdraw” and also indicated
that he wanted the cheque payable to himself. This should have alerted the
Appellant that this was something more than a simple change in the investments
held in his RRSP. It is clear that even though the Appellant was mistaken with
respect to the consequences of his actions in requesting a withdrawal and
receiving the cheque, he did withdraw the funds and he did receive the cheque.
All that is required under the Act in order for the amount to be
included in income is that the amount be received by the Appellant. As
acknowledged by the Appellant he did receive the amount and therefore the
$10,000 (together with the $2,500 amount referred to above) should have been
included in his income for 2005.
[21]
A penalty was also
assessed against the Appellant pursuant to subsection 163(1) of the Act.
This subsection provides as follows:
163. (1) Every person who
(a) fails to report an amount required to be included in
computing the person's income in a return filed under section 150 for a
taxation year, and
(b) had failed to report an amount required to be so included in any
return filed under section 150 for any of the three preceding taxation years
is liable to a penalty equal to 10% of the amount described in
paragraph (a), except where the person is liable to a penalty under
subsection (2) in respect of that amount.
[22]
Subsection 163(3) of
the Act provides that:
163. (3) Where, in an appeal under this Act, a penalty assessed by
the Minister under this section or section 163.2 is in issue, the burden of
establishing the facts justifying the assessment of the penalty is on the
Minister.
The penalty under subsection 163(1) of the Act
is imposed on a person who fails to report, in that person’s tax return that
was filed for a particular year, an amount that is required to be included in
computing that person’s income and also failed to report in a tax return that
was filed for any one of the three preceding taxation years an amount that was
required to be included in computing that person’s income for such year.
[23]
In Saunders v. The
Queen, 2006 TCC 51, 2006 DTC 2267, [2006] 2 C.T.C. 2255,
Justice Woods stated that:
12 The penalty in subsection 163(1) is one of strict liability,
although this Court has held that it can be vacated if the taxpayer can
establish due diligence.
[24]
Justice Boyle in Dunlop
v. The Queen, 2009 TCC 177, 2009 DTC 1124, [2009] 6 C.T.C. 2223
reiterated that the penalty will not apply if the taxpayer “can demonstrate he
exercised a requisite degree of due diligence”.
[25]
Justice Létourneau, on behalf of
the Federal Court of Appeal,
in Les Résidences Majeau Inc. v. The
Queen, 2010 FCA 28, stated as follows:
7 As far as
the penalty is concerned, we are satisfied that the judge did not make any
mistake in upholding it. To avoid this penalty, the appellant had to establish
that it was duly diligent.
8 According to
Corporation de l'école polytechnique v. Canada, 2004 FCA 127, a
defendant may rely on a defence of due diligence if either of the following can
be established: that the defendant made a reasonable mistake of fact, or that
the defendant took reasonable precautions to avoid the event leading to
imposition of the penalty.
9 A reasonable
mistake of fact requires a twofold test: subjective and objective. The
subjective test is met if the defendant establishes that he or she was mistaken
as to a factual situation which, if it had existed, would have made his or her
act or omission innocent. In addition, for this aspect of the defence to be
effective, the mistake must be reasonable, i.e. a mistake a reasonable person
in the same circumstances would have made. This is the objective test.
10 As already
stated, the second aspect of the defence requires that all reasonable
precautions or measures be taken to avoid the event leading to imposition of
the penalty.
[26]
Although the penalty in
issue is not identified in this decision of the Federal Court of Appeal, it
appears from the decision of Justice Tardif which was appealed to
the Federal Court of Appeal that the penalty in issue is the penalty that was, prior
to April 1, 2007, imposed under section 280 of the Excise Tax Act. The
imposition of this penalty was also subject to the due diligence defence (see Pillar
Oilfield Projects Ltd. v. The Queen, [1993] G.S.T.C. 49).
[27]
In Symonds v. The
Queen, 2011 TCC 274 I held that the due diligence defence will be
applicable to either one of the two years that are required to support the
imposition of the penalty under subsection 163(1) of the Act. In this
case those two years are 2002 and 2005.
[28]
As part of the direct
examination of the Appellant by his lawyer, the following exchange took place:
Q …Mr. Mignault, when did you first discover
that Mr. Palmer was acting fraudulently?
A When we received a letter from Great-West Life
in February of 2006.
Q And what did you learn about Mr. Palmer's
activities?
A Well, that he had absconded with funds not
only of ours but supposedly of others as well.
Q Again we mentioned that this has to do with a
reassessment for what CRA says is unreported RRSP income from 2005. At any
time previous to 2005 did you ever have any issues with unreported income
to CRA?
A Yes.
Q And what types of things do you recall about
that?
A Well, they were reassessment notices that we
received.
Q And what did the reassessment notices tell
you, do you recall?
A Well, it provided a number of financial
information, but we weren't quite certain what impact that was, and that's why
we went back to our financial advisor to get clarification as to what had
happened and why we were, why these assessments were being brought forward.
Q So you said you went back to your financial
advisor. You mean Mr. Palmer?
A Yes, that's correct.
Q And after you asked Mr. Palmer about them, did
you hear anything further?
A No.
Q Do you remember the years in question when you
might have received these reassessments from CRA?
A Well, I think it started back in 2001, it
might even be earlier than that, 2000, all the way down to 2005.
Q During that time, did you receive any T4 RRSP
slips from Great-West Life?
A No, we did not. Well, the last one we
received, the 2005 slip we did receive. That was the only one we did get.
Q So you did receive one?
A Yes.
Q Do you recall when you received that?
A It would have been in, I believe it was in
March of 2006.
[29]
When the Appellant would
receive the reassessment notices for the prior years he would contact Gary
Palmer and he would authorize him to act on the Appellant’s behalf. One such
form dated August 4, 2004 was introduced during the hearing. It appears that
authorization forms were also provided by the Appellant to Gary Palmer for
prior years.
[30]
During the cross-examination
of the Appellant a letter dated June 24, 2003 from the Canada Revenue Agency to
the Appellant was introduced. This letter was a response to a request to have
an “omission penalty” that had been assessed against the Appellant in relation
to his 2001 income tax return, waived. It appears that this is the same penalty
that is in issue in this appeal. The request was denied but it does show that
the Appellant knew or ought to have known that his income tax return for 2001
did not include all of his income.
[31]
The two taxation years
that are in question for the purposes of subsection 163(1) of the Act
are 2002 and 2005. The Minister has satisfied the onus that is on the Minister
to establish the facts justifying the assessment of the penalty in 2005 as the
Minister established that the Appellant failed to include amounts in his income
in 2002 and in 2005. The onus of proof to establish the facts as required in
order for the Appellant to rely on the due diligence defence would rest with
the Appellant. As noted by the Federal Court of Appeal in Les Résidences Majeau Inc., above,
“the appellant had to establish that it
was duly diligent”.
[32]
In order to establish that the
Appellant had made a reasonable mistake of fact, the Appellant must establish
both the subjective and the objective elements of this test. The Appellant
stated that it was his understanding that he was not withdrawing funds from his
RRSP but simply making arrangements to reinvest the money with The Great West
Life Assurance Company. However, the relevant fact for the purposes of the Act
is the receipt of an amount. If the Appellant had received the
amounts from his RRSP, then he would have been required to include the amounts
in his income. The mistake of fact would have to be a mistake with respect to
whether he received the amounts. However it appears that the Appellant was not
mistaken with respect to whether he received the amounts since he clearly
acknowledged that he had received the amounts. The Appellant’s mistake was with
respect to the legal implications arising from the transactions orchestrated by
Gary Palmer and whether these transactions would result in an amount being
included in his income under the Act. This is a mistake of law not a
mistake of fact and cannot be used to support a defence of due diligence.
[33]
As well, the Appellant
has not satisfied the objective component of this test. As noted by the Federal
Court of Appeal in Les Résidences
Majeau Inc., above:
In addition,
for this aspect of the defence to be effective, the mistake must be reasonable,
i.e. a mistake a reasonable person in the same circumstances would have made.
[34]
The mistake referred to
by the Federal Court of Appeal in Les
Résidences Majeau Inc., above, is a mistake of fact, not a mistake of
law. In this case, the mistake of fact would have to be a mistake with respect
to whether the amount had been received from his RRSP. A reasonable person
would conclude, as the Appellant concluded, that the amounts had been received
when the Appellant received the cheque from The Great West Life Assurance
Company.
[35]
The Appellant can also
rely on the due diligence defence if he can establish that he took all
reasonable precautions to avoid the failure to include the amounts in his income
in 2002 or 2005. The Appellant had been reassessed for prior years for
unreported income and sometime prior to June 24, 2003 had made a request for a
waiver of a penalty that had been imposed in relation to his 2001 income tax
return. As noted the onus of establishing the due diligence defence rests with
the Appellant. It is not clear when the Appellant was assessed the penalty in
relation to his 2001 income tax return. The Appellant failed to establish that
he was not aware of the imposition of the omission penalty in relation to his 2001
income tax return when he filed his 2002 income tax return or that he was not
aware of the previous reassessments when he filed his 2002 income tax return.
[36]
Of particular note for
2005 is the admission by the Appellant that he did receive the T4 slip from The
Great West Life Assurance Company in March of 2006. While it is not clear
whether this was before or after he had filed his tax return for 2006, the
Appellant would have had the onus of proof with respect to this point.
[37]
Having been reassessed
for unreported amounts and having been assessed a penalty in relation to his
2001 income tax return, the Appellant should have taken more precautions in
relation to filing his 2002 and 2005 income tax returns when the same scenario
was replayed in each year that money was taken. The Appellant did, in each year
that money was taken, sign a form indicating his desire to withdraw a
net amount and to receive a cheque for that amount. He received the cheque from
The Great West Life Assurance Company and deposited that cheque into his
account. It seems to me that the Appellant’s understanding that he could do
whatever he wanted with this money would be the same each time he received a
cheque from The Great West Life Assurance Company. It seems to me that in each
year during which an amount was withdrawn from his RRSP, the Appellant would
have known that he had received a cheque from The Great West Life Assurance
Company. His misunderstanding with respect to the consequences arising under
the Act as a result of receiving this cheque (which would be a mistake
of law), cannot be used as a basis to establish that he took reasonable
precautions to avoid the failure to include amounts in his income. As a result
I conclude that the Appellant has failed to establish that he took all
reasonable precautions to avoid the failure to include the amounts in his
income.
[38]
There is no indication
of what arguments were made in relation to the request to waive the imposition
of the penalty imposed in relation to the Appellant’s 2001 income tax return.
It would seem obvious that there would not have been any disclosure of the
fraud committed by Gary Palmer. In light of the subsequent discovery of this
fraud and Gary Palmer’s conviction perhaps the Minister could reconsider his
position on whether the penalties imposed on the Appellant should be waived. It
seems to me that the Appellant has suffered a very significant loss as a result
of the fraud of Gary Palmer and the imposition of penalties in addition to his
other losses seems harsh.
[39]
As a result the
Appellant’s appeal in relation to the reassessment of his liability under the Income
Tax Act for 2005 is dismissed without costs.
Signed at Halifax, Nova
Scotia, this 3rd day
of November 2011.
“Wyman W. Webb”
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