Date: 20020424
Docket: 2001-991-IT-I
BETWEEN:
HENRY P. ROSE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
__________________________________________________________________
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Michael Taylor
____________________________________________________________________
Reasonsfor
Judgment
(Delivered orally from the Bench at Vancouver,
British Columbia, on Wednesday, January 16, 2002)
Margeson, J.T.C.C.
[1]
It is the duty of the Appellant, in a case of this nature, to
establish that the Minister of National Revenue's
("Minister") assessment is incorrect. Counsel for the
Respondent has outlined the provisions of the Income Tax
Act ("Act") which apply not only to this
Appellant but to all taxpayers.
[2]
The basic rule is that taxpayers have to file a return by April
30th of the subsequent year for earnings, all forms of income,
during the previous year. In this particular case, employment
income was in issue, which is covered by section 5 of the
Act. That section sets out what a taxpayer's
employment income is: one has to include income from an office,
employment, salary, wages and other remuneration, including
gratuities received by the taxpayer in the year. The Act
creates a self-assessing system because the taxpayer is the one
who knows how much he has earned in a year. The Minister has no
way of knowing how much a taxpayer earned, except from the return
that a taxpayer files.
[3]
The Minister, of course, has the right to require of employees
that they file returns and of employers, that they provide to the
Minister information as to what taxpayers have earned. In this
particular case, we have what is referred to as a T4. The
employer is required to file a T4 to confirm what the taxpayer
has earned. When the taxpayer files a return, he files a copy of
the T4 to confirm what he has earned. That is part of the system.
The Minister is entitled to rely upon the information contained
in the T4 and upon the information provided by the taxpayer.
[4]
In this particular case, there is no evidence before the Court
that the Minister received any filing from the taxpayer. The
taxpayer says that he did file a return before this reassessment
took place. There is no information before me that the Minister
has such a return, and indeed, the assessment that was made by
the Minister was obviously based upon subsection 152(7) of the
Act. This section entitles the Minister to make an
assessment if no return has been filed.
[5]
The Minister is not bound by a return or information supplied by,
or on behalf of, a taxpayer, which is the T4, or the T1 which a
taxpayer would file. If no return has been filed, the Minister
may assess the tax payable under this part.
[6]
The Minister did that on the basis of the only information
available. That was the T4 which was filed electronically
according to the evidence. The witness who testified on behalf of
the Minister said that he accessed the information electronically
in the Appellant's file and found the T4 which indicated that
the Appellant had earned the amount of $51,277 in the year in
question and indicated the deductions taken. Based upon that
information, the witness made an assessment of the taxpayer under
subsection 152(7) in accordance with the Act.
[7]
It was incumbent upon him to advise the Appellant and he did so.
He made it clear to the taxpayer that the taxpayer had a right to
appeal to the Tax Court of Canada, and did discuss with him, (by
the taxpayer's own admission) the taxpayer's position
that he thought that he had earned $35,000 rather than $51,000.
That is the way the conversation went between the two of them as
far as the Court is concerned.
[8]
The taxpayer did avail himself of his right to file an appeal to
the assessment and that is what is before this Court.
[9]
Every taxpayer in Canada who files an appeal has a right to come
before the Court to be heard, to be listened to, and to have the
information and the evidence that he provides, taken into
account. But the Court must remind the Appellant that, at this
stage, the Minister is entitled to rely upon the assessment that
he made until it is established that the assessment is incorrect.
The taxpayer seems to have the belief (incorrectly,
unfortunately) which may have come to him from other sources,
that the Minister has to prove that the assessment is
correct.
[10] The law
is such that, under our self-assessing system, it would be
impossible for the Minister to meet that burden because the
information as to what a taxpayer earns is, to a large extent,
known only by the taxpayer himself and to some extent, by the
employer. There are many forms of income which a taxpayer earns
which nobody knows anything about except the taxpayer himself.
That is the reason why the Act has what is commonly
referred to as a type of reverse onus provision; that is, that
the Minister does not have to prove that the assessment is
correct, the Appellant has to establish that the assessment is
incorrect.
[11] In this
case, the only evidence presented as to the proper amount that
the Appellant earned was the evidence that was submitted in the
T4. The Minister was entitled to rely upon that and make the
assessment. At that point in time, then, the assessment is deemed
correct until the Appellant establishes that it is incorrect.
[12] What
evidence has come before this Court to convince it that the
Minister's assessment was incorrect? The only evidence
presented is the belief of the Appellant, not supported by any
documentation, even an analysis by himself, or what would be
called a reconciliation of any sort, which would show that his
records indicate that the assessment that the Minister made was
incorrect, in that he earned only $35,000 in income rather than
$51,277 that the Minister is indicating that he earned.
[13] The
Appellant said that he believes that he received only $35,000 and
that the other $16,000 was expenses that were owed to him for
which he paid personally. Basically he says, "I only earned
$35,000 and therefore the other $16,000 is for expenses paid by
me. It has to be expenses which I had paid out on behalf of the
company and for which they had not rebated me".
[14] When the
Appellant was cross-examined he had to admit that he had no
documents whatsoever to substantiate what he paid out. He had no
receipts, no money orders, no cancelled cheques, no airline
tickets, no reconciliation or no record from the company
acknowledging that he was owed this amount of money. It is
unreasonable that a company that was of the apparent size and
means of the payor in this particular case, the employer, would
not have had bookkeeping or record-keeping, which would have
differentiated in its own records what amounts were submitted or
remitted to employees by way of earnings and those amounts which
were owing to employees as amounts paid by the employee on behalf
of the company. That would be something that would be almost
automatic in any bookkeeping system.
[15] From what
the Appellant said, this was a substantial company and it had
substantial holdings throughout the world at one point in time.
This particular branch of it went bankrupt and may not have been
operated in the same manner that the other parts of the parent
company operated but there should have been records available to
reflect what the Appellant is claiming here.
[16] In this
particular case the company submitted to the Minister a T4 return
which indicated that he earned $51,277. It refers to T4 earnings
and certain deductions. It is true that according to the evidence
given by the witness called on behalf of the Minister, that the
amount of the deductions were improper and; the Court accepts
that as a fact. But again, it is obvious from what the witness
for the Respondent said, and from what the Court can reasonably
deduce that there are many reasons why, at the end of the year,
an employee may not have had sufficient deductions taken from him
to comply with the Act, nor why the deductions may have
been greater than required.
[17] As
indicated, the amount of money that is deducted in a given year
may be dependent upon the income that was earned in the previous
year. It may be dependent upon the amount of income that the
employer expects that the Appellant is going to make in the year
in issue. It depends upon the information provided by the
taxpayer to the employer and to the government. There are many
reasons why the amount that should be deducted based upon an
income of a taxpayer in the year might not be the correct
amount.
[18]
Therefore, the argument by the Appellant is not well taken that,
since the employer did not deduct, in the year in question, an
amount which would represent the expected deduction from earnings
of $51,277, this is evidence which the Court can accept as
proving that he only earned $35,000 rather than $51,277. There is
no evidence from which the Court can conclude that the Appellant
has established, on a balance of probabilities, that the
Minister's assessment was incorrect.
[19] That
being the state of the law and the Minister being entitled to
rely upon the presumptions as being correct, the Court is
satisfied that there is no evidence before it from which it can
conclude that the assessment was incorrect.
[20] The
Appellant should have been able to show that the assessment was
incorrect if he had wanted to do so and he admitted that in
evidence. But he did not have copy of the initial tax return that
he filed and he had nothing to show that he filed a return for
1996 before the assessment was made by the Minister as he
claimed. He had no summary or breakdown of the disputed amount
and the Court has no copy of the covering letter sent to the
Minister with respect to the discrepancy between the amount his
employer said that he earned and what he said that he earned.
[21] According
to him he paid expenses with respect to hydro, to cleaning up the
restaurants, for air flights home, for accommodations, for
transportation, for salaries to other employees, for a vehicle
and a vehicle deposit. Those are all items for which receipts
should be available and which one would expect to be
available.
[22] In this
particular case, either because the Appellant chose not to do so,
or because he just did not think that they had to be presented or
because he believed that merely by coming into Court and saying
that he did not believe that the Minister's assessment was
correct would be sufficient to rebut the presumption that the
assessment was correct, there was no acceptable evidence to
support his position.
[23] Further
to that, the Appellant indicated that he contemplated at one time
suing his own employer and that they made a settlement. Well, one
would think, if the company made a settlement with him, that they
must have had some reason for believing that the Appellant could
establish what the amount of the indebtedness of the company was.
If that is the case, then the Appellant certainly could have
produced some of that evidence here today.
[24] His
position here is extremely tenuous. The argument that he poses is
based upon something that has not been established.
[25]
Consequently, the Court will have to dismiss the appeal and
confirm the Minister's assessment.
Signed at Ottawa, Canada, this 24th day of April 2002.
"T.E. Margeson"
J.T.C.C.
COURT FILE
NO.:
2000-991(IT)I
STYLE OF
CAUSE:
Henry P. Rose and Her Majesty The Queen
PLACE OF
HEARING:
Vancouver, British Columbia
DATE OF
HEARING:
January 16, 2002
REASONS FOR JUDGMENT BY: The
Honourable T.E. Margeson
DATE OF
JUDGMENT:
January 24, 2002
DATE OF WRITTEN REASONS: April 24,
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
2001-742(IT)I
BETWEEN:
RAYMOND A. FAUTLEY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on January 22, 2002 at Regina,
Saskatchewan, by
the Honourable Judge Terrence O'Connor
Appearances
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Tracey Harwood-Jones
Crystal McLeod, (Student-at-law)
JUDGMENT
The
appeals from the reassessments made under the Income Tax
Act for the 1997 and 1998 taxation years are allowed, without
costs, and the matters are referred to the Minister of National
Revenue for reconsideration and reassessment in accordance with
the attached Reasons for Judgment.
Signed
at Ottawa, Canada, this 24th day of April, 2002.
J.T.C.C.
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