Hare v. The Queen, docket 2001-3959(IT)I (Informal Procedure)

Date: 20020718

Docket: 2001-3959-IT-I

BETWEEN:

AVTAR HARE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for judgment

Little, J.

FACTS

[1]            In July 1995, the Appellant commenced operating a drywall business as a sole proprietorship under the name of Hare Drywall.

[2]            The Appellant retained the services of an accounting firm to prepare the income tax returns for Hare Drywall for the 1995, 1996 and 1997 taxation years.

[3]            The Appellant ceased to operate the business of Hare Drywall at the end of 1997

[4]            Officials of the Canada Customs and Revenue Agency (the "CCRA") carried out an audit of Hare Drywall. Following the completion of the audit the Minister of National Revenue (the "Minister") issued Notices of Reassessment for the Appellant 1995, 1996 and 1997 taxation years. In the reassessments the Minister added the following amounts to the Appellant's income

                                                   1995                      1996                      1997

Additional Income                $4,284.52                 $20,697.72               $20,103.86

[5]            The Appellant filed Notices of Appeal to the Notices of Reassessment issued for the 1996 and 1997 taxation years.

[6]            The additional income as determined by officials of the CCRA represented miscellaneous deposits made to the Appellant's personal bank accounts at the Canadian Imperial Bank of Commerce ("C.I.B.C.") and the Royal Bank of Canada ("Royal") plus the deposits made to the business account of Hare Drywall at the Khalsa Credit Union ("Credit Union") less some miscellaneous personal items.

ISSUE

[7]            Is the Appellant required to include in his income for the 1996 and 1997 taxation years the amounts of $20,697.72 and $20,103.86?

ANALYSIS

[8]            During the appeal the Appellant and his wife testified as follows:

(a)            A cheque in the amount of £ 3500 was issued by Surinder Bhandal on March 28, 1996 (Exhibit A-1). Mr. Bhandal is the uncle of the Appellant's wife. The cheque was payable to Charan Kaur. Charan Kaur is the aunt of the Appellant's wife. Charan Kaur lives with the Appellant and his wife. Charan Kaur deposited the money ($7,000.00 in Canadian funds) in the Appellant's bank account at the Royal. Charan Kaur used the money for her personal purposes.

Christina Yee, an official of the CCRA, stated that the amount of $7,000.00 was included in the reassessment of the Appellant for 1996.

(b)            The Appellant and his wife testified that Joginder Singh, the Appellant's uncle, issued a cheque payable to the Appellant on January 26, 1996 in the amount of $5,000.00. The Appellant testified that the amount of $5,000.00 was a loan made to him by his uncle. The amount of $5,000.00 was deposited in the Appellant's bank account at the Royal (Exhibit A-3).

                Christina Yee stated that the amount of $5,000.00 was included in the reassessment of the Appellant for 1996.

(c)            The Appellant and his wife testified that a cheque dated May 2, 1996 in the amount of $2,600.00 was issued from the bank account of Hare Drywall at the Credit Union (Exhibit A-4). The cheque was payable to the Appellant. The Appellant testified that he deposited the amount of $1,500.00 received from this cheque in his personal bank account at the C.I.B.C.

Christina Yee stated that the amount of $1,500.00 was included in the reassessment of the Appellant for 1996.

(d)            The aunt of the Appellant's wife (Charan Kaur) lent the Appellant's wife $1,000.00. This amount was deposited by the Appellant's wife in the Appellant's bank account at the C.I.B.C. on January 29, 1997 (Exhibit A-5).

Christina Yee stated that the amount of $1,000.00 was included in the reassessment of the Appellant for 1997.

(e)            The brother of the Appellant's wife, Baljit Aujla, transferred £ 1200 from London, England to the Appellant's business account at the Credit Union on September 22, 1997. The statement from the Credit Union shows a deposit on September 23, 1997 in the amount of $2,532.00 (Exhibit A-6).

Christina Yee stated that the amount of $2,532.00 was included in the reassessment of the Appellant for 1997.

(f)             The brother of the Appellant's wife, Baljit Aujla, transferred £ 600 from London, England to the Appellant's business account at the Credit Union on October 13, 1997 and transferred £ 500 to the account on December 20, 1997. The statement from the Credit Union shows the following deposits (Canadian funds):

October 18, 1997                    $1,278.00

December 23, 1997                $1,100.00

                                                                                $2,378.00 (Exhibit A-7)

Christina Yee stated that the amount of $2,378.00 was included in the reassessment of the Appellant for 1997.

(g)            On November 13, 1997, the Appellant issued a cheque from his C.I.B.C. account in the amount of $350.00. The cheque was payable to the Appellant. The cheque was deposited in Hare Drywall's account at the Credit Union. On December 13, 1997, the Appellant issued a cheque in the amount of $350.00 payable to Hare Drywall. The cheque was deposited in Hare Drywall's account at the Credit Union. (Exhibit A-8).

Christina Yee stated that the amount of $700.00 ($350 x 2) was included in the reassessment of the Appellant for 1997.

(h)            On July 10, 1996, the Appellant issued a cheque in the amount of $1,700.00 from the Credit Union payable to Cash. On July 11, 1996, the Appellant's wife deposited $1,600.00 of the $1,700.00 in the Appellant's bank account at the C.I.B.C. (Exhibit A-9).

Christina Yee stated that the amount of $1,600.00 was included in the reassessment of the Appellant for 1996.

(i)             On April 26, 1997, the Appellant issued a cheque in the amount of $1,000.00 from the account at the Credit Union payable to Cash. On April 28, 1997 cash totalling $1,000.00 was deposited in the Appellant's account at the C.I.B.C. (Exhibit A-10).

Christina Yee testified that the amount of $1,000.00 was included in the reassessment of the Appellant for 1997.

(j)             On March 15, 1997, the Appellant issued a cheque from the Credit Union account of Hare Drywall in the amount of $1,588.00 payable to himself. On March 18, 1997, the Appellant deposited the amount of $1,550.00 in the C.I.B.C. account (Exhibit A-11) (Note the Appellant said that $38.00 of the $1,588.00 was not deposited in the account).

              Christina Yee stated that the amount of $1,550.00 was included in the reassessment of the Appellant for 1997.

(k)            On March 21, 1997, the Appellant issued a cheque from the Credit Union account of Hare Drywall in the amount of $5,000.00 payable to himself. On March 21, 1997, the Appellant deposited $2,000.00 of the $5,000.00 amount in his account at the C.I.B.C. (Exhibit A-12).

              Christina Yee stated that the amount of $2,000.00 was included in the reassessment of the Appellant for 1997.

(l)             The Appellant's wife testified that she borrowed $3,000.00 from her father, Dharamjit Aujla. The Appellant's wife said that the amount of $2,729.47 was deposited in the bank account at the C.I.B.C. on April 14, 1997 (Exhibit A-13). (Note this deposit included the amount of $2,000.00 from the $3,000.00 lent by the father of the Appellant's wife plus miscellaneous amounts.)

              Christina Yee stated that the amount of $2,729.47 was included in the reassessment of the Appellant for 1997.

(m)           The Appellant testified that on February 2, 1996, he issued a cheque payable to himself in the amount of $1,900.00 from the Credit Union account of Hare Drywall. The Appellant testified that the cheque was deposited in his account at the C.I.B.C. (Exhibit A-14).

Christina Yee stated that the amount of $1,900.00 was included in the reassessment of the Appellant for 1996.

[9]            I have carefully examined the documents that were filed with the Court and the sworn testimony of the Appellant and his wife and I have concluded that the following amounts should be deleted from the Appellant's income for the 1996 and 1997 taxation years:

                Amounts Deleted                                  1996                                      1997

                Exhibit A-1                                                             $7,000.00

                Exhibit A-3                                                             $5,000.00

                Exhibit A-4                                                             $1,500.00

                Exhibit A-9                                                             $1,600.00

                Exhibit A-14                                           $1,900.00

                                                                                            $17,000.00

                Exhibit A-5                                                                                                                             $1,000.00

                Exhibit A-6                                                                                                                             $2,532.00

                Exhibit A-7                                                                                                                             $2,378.00

Exhibit A-8                                                                                                                             $ 700.00

                Exhibit A-10                                                                                                           $1,000.00

                Exhibit A-11                                                                                                           $1,550.00

                Exhibit A-12                                                                                                           $2,000.00

                Exhibit A-13                                                                                                           $2,729.47

                                                                                                                                                              $13,889.47

[10]          During the appeal Counsel for the Respondent conceded that the following amounts should be removed from the Appellant's income for 1996 (These amounts represented cheques issued by the Insurance Corporation of British Columbia) (Exhibit A-2):

                                                $1,468.32

                                                955.52

                                                $2,423.84

[11]          The appeal will be allowed to delete the following amounts from the Appellant's income:

                                                1996                         $17,000.00

                                                                                $ 2,423.84

                                                1997                         $ 13,889.47

[12]          The Minister is to issue Notices of Reassessment for the Appellant's 1996 and 1997 taxation years.

Signed at Vancouver, British Columbia, this 18th day of July 2002.

"L.M. Little"

J.T.C.C.

COURT FILE NO.:                                                 2001-3959(IT)I

STYLE OF CAUSE:                                               Avtar Hare and

                                                                                                Her Majesty the Queen

PLACE OF HEARING:                                         Vancouver, British Columbia

DATE OF HEARING:                                           July 10, 2002

REASONS FOR JUDGMENT BY:      The Honourable Judge L.M. Little

DATE OF JUDGMENT:                                       July 18, 2002

APPEARANCES:

For the Appellant:                                                 The Appellant himself

Counsel for the Respondent:              Michael Taylor

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2001-3959(IT)I

BETWEEN:

AVTAR HARE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeals heard on July 10, 2002 at Vancouver, British Columbia, by

the Honourable Judge L.M. Little

Appearances

For the Appellant:                                                 The Appellant himself

Counsel for the Respondent:              Michael Taylor

AMENDED JUDGMENT

                The appeals from the assessments made under the Income Tax Act for the 1996 and 1997 taxation years are allowed, with costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Amended Reasons for Judgment.

Signed at Vancouver, British Columbia, this 11th day of October 2002.

"L.M. Little"

J.T.C.C.

Date: 20021011

Docket: 2001-3959(IT)I

BETWEEN:

AVTAR HARE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

AMENDED REASONS FOR JUDGMENT

Little, J.

[1]            The above appeals were heard on July 10, 2002 in Vancouver, British Columbia.

[2]            On July 23, 2002 Reasons for Judgment were issued allowing the appeals in part.

[3]            On July 29, 2002 Michael Taylor, counsel for the Respondent, wrote to the Court. In his letter Mr. Taylor requested clarification from the Court on the following issues:

Issue No. 1:

Mr. Taylor noted that the Respondent conceded during the trial that the following amounts should be deleted from the Appellant's income for purposes of the appeal filed under the Income Tax Act and Goods and Services Tax imposed by the Excise Tax Act:

                                1996         -                $1,040.92

                                1997                         $1,624.10

Conclusion:

[4]            The Reasons for Judgment issued on the 23rd day of July 2002 should be amended to delete the amounts of $1,040.92 and $1,624.10 from the Appellant's income for the 1996 and 1997 taxation years respectively. The deductions should be allowed under the Income Tax Act and the Excise Tax Act.

Issue No. 2:

                Mr. Taylor in his letter noted that in the Reasons for Judgment issued under the Excise Tax Act the Court ordered that the Minister delete penalties imposed under the Excise Tax Act. Mr. Taylor pointed out that the only penalties imposed were imposed under section 280 of the Excise Tax Act. Mr. Taylor requested clarification as to whether the Court has made a finding of due diligence.

Penalties were imposed under section 280 of the Excise Tax Act because it was the view of the Canada Customs and Revenue Agency that Mr. Hare had failed to report all of his income under the Income Tax Act and the Excise Tax Act.

I have concluded that the Appellant attempted to comply with the Excise Tax Act and in my opinion there is no basis for the penalties that were imposed under section 280 of the Excise Tax Act. I therefore order that the penalties imposed under section 280 of the Act be cancelled.

Signed at Vancouver, British Columbia, this 11th day of October 2002.

"L.M. Little"

J.T.C.C.

COURT FILE NO.:                                                 2001-3959(IT)I

STYLE OF CAUSE:                                               Avtar Hare and

                                                                                                Her Majesty the Queen

PLACE OF HEARING:                                         Vancouver, British Columbia

DATE OF HEARING:                                           July 10, 2002

AMENDED REASONS FOR

JUDGMENT BY:                                                   The Honourable Judge L.M. Little

DATE OF AMENDEDJUDGMENT: October 11, 2002

APPEARANCES:

For the Appellant:                                                 The Appellant himself

Counsel for the Respondent:              Michael Taylor

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2001-3959(IT)I

BETWEEN:

AVTAR HARE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on July 10, 2002 at Vancouver, British Columbia, by

the Honourable Judge L.M. Little

Appearances

For the Appellant:                                                 The Appellant himself

Counsel for the Respondent:              Michael Taylor

JUDGMENT

                The appeals from the assessments made under the Income Tax Act for the 1996 and 1997 taxation years are allowed, with costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment

Signed at Vancouver, British Columbia, this 18th day of July 2002.

"L.M. Little"

J.T.C.C.