[OFFICIAL
ENGLISH TRANSLATION]
Citation: 2005TCC277
Date: 20051024
Docket: 2001-2505(IT)G
BETWEEN:
GUY TREMBLAY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bédard J.
[1] These appeals, lodged under the General Procedure
Rules, require that it be determined:
i) whether the Minister of National Revenue (the
“Minister”) was justified in reassessing the Appellant for each of the taxation
years 1991 to 1995, even though the normal period for reassessment had
expired;
ii) whether the imposition of a penalty on the
Appellant for these same taxation years with respect to a deduction for support
payments for the years in question was justified. I stress that the Appellant did not
contest the fact that he had no right to deductions for support payments for
the years in question.
[2] The facts on which the Minister relied to make the
assessments for the years in question are listed in Paragraph 10 of the Reply
to the Notice of Appeal:
[TRANSLATION]
a) An internal investigation
concerning certain employees of the Jonquière Tax Center revealed that they had
set up a scheme so certain persons, in particular the Appellant, could benefit
from fraudulent tax refunds.
b) With the help of an
accomplice of an employee of the Jonquière Tax Center, during the years in
question, the Appellant benefited from tax refunds to which he had no right;
c) The Appellant benefited
from deductions for support payments of $13,500 for the taxation years
1991, 1992, 1993 and 1994 and of $7,500 for the taxation year 1995;
d) The Appellant did not make
support payments during the taxation years 1991, 1992, 1993, 1994 and 1995;
e) With respect to the
taxation years in question, the Appellant made an erroneous presentation of
facts, through negligence, inattention or voluntary omission, or committed
fraud in filing his income tax returns or in submitting information under the Income
Tax Act;
f) With respect to the
deductions disallowed for the taxation years in question, the Appellant made,
knowingly or in circumstances equivalent to gross negligence, a false statement
or an omission in his income tax returns for the taxation years in question, or
consented, acquiesced or participated therein.
The
Appellant’s testimony
[3] The Appellant stated that he was working in computer
science in 1997. He would prepare and file his own tax returns. In early February 1997, he met his brother, Jean
Tremblay, who would then have informed him that one of his colleagues at work,
Guy Joncas, knew civil servants of the Ministry of Revenue of Canada in
Jonquière who offered individuals a tax return revision service. Jean Tremblay
would then have told his brother that he himself had benefited from these
revision services a few months earlier and all that had to be done was to
provide one’s Social Insurance Number. Wanting to benefit from this service, the Appellant
then gave his brother his Social Insurance Number. The Appellant testified that he had advised his
brother that he did not want his tax return modified without first having been
given explanations. He added that he did not know Guy Joncas nor the civil
servants the Ministry of Revenue of Canada, that he had never met them and
finally that he had never communicated with them. The Appellant also added that
before he received the refund cheque for $17,254.05, his brother Jean had
definitely not informed him that in exchange he had to pay these civil servants
for the revision services. Jean Tremblay’s testimony, to which I give little
probative value in this case, also corroborated the Appellant’s testimony in
this regard.
[4] And thus, without having signed a document nor a
modified return, the Appellant received, barely two weeks later, a tax refund
cheque for $17,254.05 from the Government of Canada. The Appellant stated that
this cheque was not accompanied by a reassessment notice which, it must be
recalled, usually indicates the nature of the modifications that leads to a
refund. The Appellant claimed to be quite surprised to receive a cheque for
such a large amount without a reassessment notice, all the more so since he had
not signed a document nor a modified return.
[5] He knew then that something was amiss. He stated that
after receiving this cheque, he had communicated immediately with his brother
Jean in order to convey to Guy Joncas the message that he would not cash the
cheque and that he wanted all steps and actions taken with respect to his tax
file to be cancelled. His brother Jean would then have called him back to tell
him that it was too late to back off and that if he insisted too much
[TRANSLATION] “it could be dangerous”. At the same time, his brother Jean would
then have informed him that the civil servants who had revised his tax returns
demanded a payment in return equal to two-thirds of the tax refund he had
received. Frightened, the Appellant cashed the refund cheque on February 26,
1997 and transferred $11,000 to his brother’s bank account for the latter to
make the payment demanded in return.
Analysis
[6] In my view, it can be seen from the evidence and the
Appellant’s testimony that from the moment he received the refund cheque, he
was very suspicious, if not certain, that the operation was illegal. Wasn’t he
surprised to receive such a large cheque, without a reassessment notice, and
all the more so since he had not signed any document nor a modified return? The
barely veiled threats uttered against him and the demand for a payment in
return that was completely out of line with the amount normally required for
such services had, in my view, dissipated any doubt he could have as to the
legality of the operation. In fact, two questions arise. Firstly, is the
Appellant’s version of the facts believable? Secondly, if such is the case, can
the Appellant be liable to a penalty under subsection 163(2) of the Income
Tax Act (the “Act”)? In other words, can a taxpayer who received
serious threats be considered as a person who knowingly participated in or
consented to a false statement in his tax return? Must there be a deliberate
action by the taxpayer for him to be liable to such a penalty?
[7] First of all, I stress the fact that a judge is not
held to believe a witness who is not contradicted. On this point, I refer to
the decision of the Quebec Court of Appeal in Légaré v. The Shawinigan Water
and Power Co. Ltd., [1972] C.A. 372. In that case, the court stated what
follows at pages 373 and 374 :
[TRANSLATION]
[...] But, the courts are not held to believe witnesses, even if they are not
contradicted by other witnesses. Their version can be implausible in the light
of circumstances revealed by the evidence or according to the rules of simple
common sense. [...]
[8] The version of the facts given by the Appellant and by
his brother Jean seemed to me to be simply implausible. Firstly, I wish to
stress that the Appellant seemed to me to be an intelligent, educated and
reasonable person. For this reason, I have great difficulty in convincing
myself that, at their first meeting, the Appellant had not inquired of his
brother Jean as to the cost of the revision services. I have even more trouble
believing that Jean Tremblay, as a good brother, had not seen fit to notify the
Appellant clearly as to the astronomical cost of the revision services offered
by the Revenue Canada employees. Indeed, one must remember that the evidence
revealed that the Appellant’s brother had benefited from such revision services
a few months earlier and so that he had paid the astronomical amount in return
usually demanded by the architects of this scheme. It seems to me to be
possible in theory but highly improbable that the refund cheque was not
accompanied by a reassessment notice which, it must be recalled, indicates the
nature of the modifications that give rise to a refund.
[9] Finally, the fact that the Appellant did not advance
earlier (be it in his Notice of Objection or in the Notice of Appeal) that he
had felt, in the threats supposedly uttered by the authors of the scheme,
threats to his physical integrity only added to my doubts as to the Appellant’s
credibility.
[10] Was the Appellant sincere when he testified that he had
wanted all the steps and actions taken in connection with his file to be
cancelled? Did he really want to get out of the predicament in which he found
himself? Why then did he not at the very least consult a lawyer, a tax expert,
if he really wanted to get out of the predicament in which he found himself?
Why did he cash the tax refund to which he had no right? These questions were
left unanswered and cast a serious doubt on the Appellant’s true intentions.
[11] It is my view that this is not even a case similar to
the cases Canada (Attorney General) v. Villeneuve, [2004] FCA 20, 2004
D.T.C. 6077, and Canada (Attorney General) v. Savard, [2004] FCA 150,
2004 D.T.C. 6383, where the Federal Court of Appeal confirmed penalties imposed
(on the basis of taxpayers’ willful blindness) on other taxpayers who
participated in the same scheme as the Appellant in this case.
[12] Rather, I believe that the Appellant simply made false
statements knowingly in his tax returns and participated, consented or
acquiesced to these false statements and so I see no useful purpose in tackling
the second question, that is whether there needs to be a deliberate action by
the taxpayer for him to be liable to such a penalty.
[13] I am therefore convinced that the Respondent has
established, on the balance of probabilities, that she was justified in
imposing a penalty upon the Appellant for each of the years in question.
[14] Therefore the appeals are dismissed with costs.
Signed
at Ottawa, Canada, this 24th day of October 2005.
« Paul Bédard »
on this 1th day
of March 2006.
Jean Mongenais, Translator
CITATION: 2005TCC277
COURT FILE NO.: 2001-2505(IT)G
STYLE OF CAUSE: GUY TREMBLAY AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Québec, Quebec
DATE OF HEARING: March 18, 2005
REASONS FOR JUDGMENT BY: The Honourable Justice Paul Bédard
DATE OF JUDGMENT: October 24, 2005
APPEARANCES:
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Counsel for the Appellant:
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Marc Bouchard
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Counsel for the Respondent:
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Martin Gentile
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COUNSEL OF RECORD:
For the Appellant:
Name: Marc Bouchard
Firm: Pouliot
L'Écuyer
Sainte-Foy,
Quebec
For the Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa,
Ontario
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