Docket: 2009-2924(IT)I
BETWEEN:
ONORIO ROTONDI,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals
heard on June 30, 2010, at Toronto,
Ontario
and decision rendered orally by conference
call on July 6, 2010
Before: The Honourable Justice Steven K.
D'Arcy
Appearances:
|
Agent for the Appellant:
|
Thomas
Rhoden
|
|
Counsel for the Respondent:
|
Khashayar Haghgouyan
|
____________________________________________________________________
JUDGMENT
The appeals are allowed, without costs, and
the matters are referred back to the Minister for reconsideration and
reassessment on the basis that the Appellant is entitled to deduct, when
determining his net business income for the 2003 and 2004 taxation years,
expenses of $16,709 and $13,741, respectively.
Signed at Antigonish,
Nova Scotia, this 13th day of July 2010.
“S. D’Arcy”
Docket: 2009-2924(IT)I
BETWEEN:
ONORIO ROTONDI,
Appellant,
and
HER MAJESTY THE QUEEN
Respondent.
____________________________________________________________________
Before: The Honourable
Justice Steven K. D'Arcy
|
Agent for the Appellant:
|
Thomas Rhoden
|
|
Counsel for the Respondent:
|
Khashayar Haghgouyan
|
____________________________________________________________________
EDITED VERSION OF
ORAL REASONS FOR JUDGMENT
Let the attached edited version of the
Reasons for Judgment, delivered orally by conference call on July 6, 2010, be
filed. I have edited the oral Reasons for Judgment for style, clarity, and
accuracy. I did not make any substantive changes.
Signed at Antigonish, Nova Scotia, this 13th day of July 2010.
“S. D’Arcy”
Citation: 2010 TCC 378
Date: 20100713
Docket: 2009-2924(IT)I
BETWEEN:
ONORIO ROTONDI,
Appellant,
and
HER MAJESTY THE QUEEN
Respondent.
____________________________________________________________________
EDITED VERSION OF
ORAL REASONS FOR JUDGMENT
(Delivered orally by
conference call on July 6, 2010)
D’Arcy J.
[1]
The Appellant has appealed notices of
reassessment in respect of his 2003 and 2004 taxation years. These are my oral
reasons for judgment.
[2]
When filing his income tax returns for the 2003
and 2004 taxation years the Appellant reported the following net business
income:
-
For the 2003 taxation year, net business income
of $21,044 comprised of gross business income of $46,188 and deductible
expenses of $25,144.
-
For the 2004 taxation year, net business income
of $25,085 comprised of gross business income of $51,950 and deductible
expenses of $26,865.
[3]
When reassessing the Appellant, the Minister
accepted the gross business income reported; however, he reduced the amount of
deductible expenses for the 2003 and 2004 taxation years to $4,449 and $4,749,
respectively.
[4]
The Appellant has appealed the Minister’s
adjustments to the deductible expenses.
[5]
The Appellant was the only witness at the
hearing. I found him to be a credible witness.
[6]
The Appellant carried on a drywall installation
business. In the relevant years, he worked on a number of subdivision projects
in the Greater Toronto area, including projects in Oakville, Mississauga, Newmarket, and other areas north of Toronto.
[7]
The Appellant testified that he was required to
provide the tools used to install the drywall, such as stepladders, drywall saw,
general tools, scaffolding, hard hats, safety boots, etc.
[8]
The Appellant retained a bookkeeper to prepare
his tax returns. The bookkeeper advised the Appellant that he did not require
receipts for all of the business expenses; rather, he could prepare the tax
returns based upon copies of the Appellant's bank statements, Visa statements,
and receipts for items not included in the bank and Visa statements.
[9]
Unfortunately, once the CRA performed its audit,
the bookkeeper disappeared. As a result, the Appellant was not able to obtain
copies of the working papers and supporting documentation used by the
bookkeeper to prepare his returns.
[10]
The Appellant then retained Mr. Rhoden as his
accountant. Mr. Rhoden also acted as the Appellant's agent at the hearing.
[11]
Using the Appellant's bank statements as a
source document, Mr. Rhoden was able to prepare schedules of expenses incurred
by the Appellant in 2003 and 2004. While Mr. Rhoden was not able to account for
all of the expenses reported on the Appellant's return, he was able to detail
expenses of $14,053 for the 2003 taxation year and $10,990 for the 2004
taxation year. Mr Rhoden referenced each amount reported to the bank statements
of the Appellant.
[12]
The Appellant, during his testimony, discussed
most of the items on the schedules.
[13]
The Respondent argued that the Appellant should
not be entitled to deduct the amounts noted on the schedules since he did not
provide receipts for the expenditures. I do not agree with this position.
[14]
Certainly, the Appellant bears the onus of
proving that the facts upon which the Minister based the reassessments are
wrong.
[15]
While the task of proving the expenses is made
more difficult when a taxpayer does not provide the Court with records or
receipts, it is still open for him or her to provide oral evidence relating to
these expenses. As the Supreme Court of Canada noted in Hickman Motors Ltd. vs.
Canada, [1997] 2 S.C.R. 335 at para. 87:
… where the ITA [Income Tax Act] does not
require supporting documentation, credible oral evidence from a taxpayer is
sufficient notwithstanding the absence of records.
[16]
In the current case, the Appellant described in
some detail each of the expenses categories noted on the schedules prepared by
his agent. He explained the nature of each item and how the expense related to
the earning of income from the drywall installation business.
[17]
Based upon the testimony of the Appellant, I
find that the schedules prepared by the Appellant's agent set out expenses
incurred by the Appellant to earn income from the drywall installation business
and that all amounts noted on the schedules are reasonable.
[18]
I note, however, that the Minister allowed a
deduction for a portion of the motor vehicles expenses contained in the
schedules prepared by the Appellant's agent. In particular, the Appellant was
allowed to deduct $1,793 in his 2003 taxation year and $1,998 in his 2004
taxation year. I have deducted these amounts from the motor vehicle expenses
shown on the schedule prepared by the Appellant's agent when determining the
total deductible expenses incurred by the Appellant.
[19]
When filing his return, the Appellant claimed
$10,748 and $12,042 for the 2003 and 2004 taxation years under the heading
Purchases. These amounts appear to be in addition to the expenses included in
the schedules prepared by the Appellant's agent.
[20]
The Appellant was not able to describe to the Court
what expenses where included in the Purchases. The amounts were arrived at by
the missing bookkeeper and the Appellant has no idea what purchases the
bookkeeper included in his calculation.
[21]
The Appellant's agent argued that the amounts
noted under the Purchase heading must relate to the purchase of tools required
by the Appellant to carry on his business and that I should allow for the
deduction of all or a portion of the $10,748 and $12,042.
[22]
I cannot agree with the Appellant's agent. There
is no evidence before me with respect to the nature of the items included under
the Purchase heading. I have no way of knowing if the items the bookkeeper
included in his calculation of purchases were incurred to earn income from the
drywall installation business, were incurred on account of income or capital,
or were reasonable.
[23]
In short, with respect to these amounts, the
Appellant has not discharged the evidentiary burden placed on him.
[24]
In summary, the Appellant is entitled to claim,
in addition to the amounts allowed by the Minister, expenses of $12,260 and
$8,992 for the 2003 and 2004 taxation years, respectively.
[25]
For the foregoing reasons, the appeals are
allowed, without costs, and the matters are referred back to the Minister for
reconsideration and reassessment on the basis that the Appellant is
entitled to deduct, when determining his net business income from the drywall
installation business for the 2003 and 2004 taxation years, expenses of $16,709
and $13,741, respectively.
D’Arcy J.
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