Citation: 2009TCC355
Date: 20090708
Docket: 2008-3779(IT)I
BETWEEN:
IZUCHUKWU ERNEST CHINYELUGO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Beaubier, D.J.
[1]
This appeal pursuant to
the Informal Procedure was heard at Lethbridge, Alberta
on June 25, 2009. The Appellant was the only witness.
[2]
At the opening of the
hearing, Respondent’s counsel filed the following statement of concessions that
were agreed to by the parties:
Concessions by the Respondent Her Majesty the Queen in the matter of
Izuchukwu Ernest Chinyelugo v. H.M.T.Q., 2008-3779(IT)I
Conceded issues
The Respondent agrees to a judgment allowing the appeal with respect
to:
a)
the 2002 taxation year and vacating the Notice
of Reassessment which was issued after the normal reassessment period for that
year;
b)
the 2003 taxation year and referring the matter
back to the Minister of National Revenue for reconsideration and reassessment
on the basis that the Appellant is not subject to gross negligence penalties
pursuant to section 163(2) of the Income Tax Act for that year; and
c)
the 2004 taxation year and referring the matter
back to the Minister of National Revenue for reconsideration and reassessment
on the basis that the Appellant will be allowed to claim a gross,
non-refundable tax credit relating to a charitable donation made by the
Appellant to the Christian Children’s Fund of Canada in the amount of $406.00 (Note,
this is a different charity than the charity to which the donations remain in
dispute).
Remaining
issue
The remaining
issue is whether the Minister of National Revenue correctly disallowed the
claimed credits relating to charitable donations allegedly made by the
Appellant to the Christ Ascension Church of Canada:
a)
of $2,000 in the 2003 taxation year;
b)
of $3,000 in the 2004 taxation year; and
c)
of $4,000 in the 2005 taxation year.
[3]
The result is that the
only matters in dispute are the claims by the Appellant for charitable
deductions for this 2003, 2004 and 2005 taxation years as specified in the last
paragraph of the Concession.
[4]
The remaining matters
in dispute are included in paragraphs 10, 11, 12 and 13 of the Reply. They
read:
10. In
determining the Appellant’s tax liability, for each of the 2002, 2003, 2004 and
2005 taxation years, the Minister relied on the following assumptions of fact:
(a) the Appellant did not make any donations, either by cash (or cheque)
or by gifts in kind, to any registered Charitable Foundations, at any time
during the 2002, 2003, 2004 or 2005 taxation years, including the amounts
claimed to CACC; and
(b) The Appellant did not provide Official Charitable Donation receipts
as defined in Regulations 3500 and 3501 of the Act, in respect of his
alleged donations to any Charitable Foundations, for each of the 2002, 2003,
2004 and 2005 taxation years.
11. In
reassessing after the statute-barred period for the 2002 taxation year and in
imposing penalties pursuant to subsection 163(2) of the Act, for each of
2002 and 2003 taxation years, the Minister relied on the following further
facts:
(a) both the Appellant and CACC could not provide any proof of payment
by the Appellant of the amounts allegedly donated as indicated on the documents
the Appellant is relying on to support his claims;
(b) both the Appellant’s income and living expenses cannot support the
amounts claimed to have been donated;
(c) in claiming non-refundable tax credits, for the 2002 taxation year,
in respect of Charitable Donations he did not make, the appellant made
misrepresentations that were attributable to neglect or wilful default and the
Appellant was aware, or alternatively, should have been aware that he was not
entitled to the amounts claimed; and
(d) in claiming non-refundable tax credits in respect of alleged
charitable donations made in the 2002 and 2003 taxation years, the Appellant
knowingly, or in the alternative, under circumstances amounting to gross
negligence, in carrying out a duty or obligation imposed under the Act,
made or participated in, assented to, or acquiesced in, the making of false
statements or omissions in the income tax returns filed for the each of those
taxation years, as a result of which the tax that would have been payable on
the information provided in the Appellant’s income tax returns filed for the
2002 and 2003 taxation years, was less than the taxes in fact payable by the
amounts of $276 and $554, respectively.
B. OTHER
MATERIAL FACTS
12. CACC’s
charitable registration number was revoked on August 4, 2007.
C. ISSUES TO
BE DECIDED
13. The issues
are whether:
a)
the Minister correctly disallowed the claimed
gross non-refundable tax credits relating to alleged charitable donations made
by the Appellant in each of the 2002, 2003, 2004 and 2005 taxation years,
respectively;
b)
the Minister was entitled to reassess the
Appellant after the normal reassessment period for the 2002 taxation; and
c)
the Minister properly imposed a penalty under
subsection 163(2) of the Act in respect of the denial of the charitable
donation non-refundable tax credits for the 2002 and 2003 taxation years.
“CACC” is Christ
Ascension Church of Canada, in this case located in Toronto,
Ontario.
[5]
Assumptions 11(c) and
11(d) were withdrawn by the Concession. The Appellant provided receipts to CRA
and the Court respecting assumption 11(a) which will be dealt with in detail.
His testimony respecting 11(b) is that he has lived a very basic and frugal
life in Canada while he supports relatives overseas. He
also testified that he was persuaded by CACC representatives to make the
alleged donations in question because that would assist him in establishing a good
character so as to aid in his Canadian citizenship application. The Court
believes him except respecting the alleged amounts of donations for which more
proof is necessary. In cross-examination the Appellant admitted that his
approximate net incomes for the years in question were:
2005
$30,000
2004
$17,000
2003
$20,000
[6]
As a result, the Court
is prepared to allow the appeal insofar as the Appellant can provide valid
acceptable receipts for the alleged charitable donations. These must contain
all of the information prescribed by Income Tax Act Regulation 3501 as
stated in paragraph 118.1(2)(a) of the Income Tax Act. Regulation
3501 reads as follows:
3501. (1) Every
official receipt issued by a registered organization shall contain a statement
that it is an official receipt for income tax purposes and shall show clearly
in such a manner that it cannot readily be altered,
(a)
the name and address in Canada of the organization as recorded with the Minister;
(b)
the registration number assigned by the Minister to the organization;
(c)
the serial number of the receipt;
(d)
the place or locality where the receipt was issued;
(e)
where the donation is a cash donation, the day on which or the year during
which the donation was received;
(e.1) where the donation is a gift of property other than cash
(i) the day on which the donation was received,
(ii) a brief description of the property, and
(iii) the name and address of the appraiser of the property if an
appraisal is done;
(f)
the day on which the receipt was issued where that day differs from the day
referred to in paragraph (e) or (e.1);
(g)
the name and address of the donor including, in the case of an individual, his
first name and initial;
(h)
the amount that is
(i) the amount of a cash donation, or
(ii) where the donation is a gift of property other than cash, the amount
that is the fair market value of the property at the time that the gift was
made;
(i)
the signature, as provided in subsection (2) or (3), of a responsible
individual who has been authorized by the organization to acknowledge
donations; and
(j)
the name and Internet website of the Canada Revenue Agency.
(1.1) Every official receipt
issued by another recipient of a gift shall contain a statement that it is an
official receipt for income tax purposes and shall show clearly in such a
manner that it cannot readily be altered,
(a)
the name and address of the other recipient of the gift;
(b)
the serial number of the receipt;
(c)
the place or locality where the receipt was issued;
(d)
where the donation is a cash donation, the day on which or the year during
which the donation was received;
(e)
where the donation is a gift of property other than cash,
(i)
the day on which the donation was received,
(ii)
a brief description of the property, and
(iii)
the name and address of the appraiser of the property if an appraisal is done;
(f)
the day on which the receipt was issued where that day differs from the day
referred to in paragraph (d) or (e);
(g)
the name and address of the donor including, in the case of an individual, his
first name and initial;
(h)
the amount that is
(i)
the amount of a cash donation, or
(ii)
where the donation is a gift of property other than cash, the amount that is
the fair market value of the property at the time that the gift was made;
(i)
the signature, as provided in subsection (2) or (3.1), of a responsible
individual who has been authorized by the other recipient of the gift to
acknowledge donations; and
(j)
the name and Internet website of the Canada Revenue Agency.
(2) Except as provided in
subsection (3) or (3.1), every official receipt shall be signed personally by
an individual referred to in paragraph (1)(i) or (1.1)(i).
(3) Where all official receipt
forms of a registered organization are
(a)
distinctively imprinted with the name, address in Canada and
registration number of the organization,
(b)
serially numbered by a printing press or numbering machine, and
(c)
kept at the place referred to in subsection 230(2) of the Act until completed
as an official receipt,
the
official receipts may bear a facsimile signature.
(3.1) Where all official receipt
forms of another recipient of the gift are
(a)
distinctively imprinted with the name and address of the other recipient of the
gift,
(b)
serially numbered by a printing press or numbering machine, and
(c)
if applicable, kept at a place referred to in subsection 230(1) of the Act
until completed as an official receipt,
the
official receipts may bear a facsimile signature.
(4) An official receipt issued
to replace an official receipt previously issued shall show clearly that it
replaces the original receipt and, in addition to its own serial number, shall
show the serial number of the receipt originally issued.
(5) A spoiled official receipt
form shall be marked “cancelled” and such form, together with the duplicate
thereof, shall be retained by the registered organization or the other
recipient of a gift as part of its records.
(6) Every official receipt form
on which
(a)
the day on which the donation was received,
(b)
the year during which the donation was received, or
(c)
the amount of the donation,
was
incorrectly or illegibly entered shall be regarded as spoiled.
[7]
For 2003 there is no
receipt.
[8]
For 2004’s claim of
$3,000 the Appellant filed Exhibit A-2, a purported receipt by CACC. But
contrary to Regulation 3501 paragraph (d), it does not say where the receipt
was issued from; contrary to (e), it does not say the year the alleged donation
was received, and contrary to (f), it does not say the year or date the receipt
was issued. Exhibit A-2 does not comply with Regulation 3501.
[9]
For 2005 the Appellant
filed Exhibit A-3 as a receipt from CACC for an alleged donation of $4,000.
Contrary to paragraph (f) of Regulation 3501, it does not contain the date
(that is, the “day”) upon which it was issued, it merely states “Jan 20006”.
[10]
When one considers the
millions of correct charitable receipts that legitimate charities issue every
year, this succession of incorrect receipts by CACC has the appearance of being
purposeful.
[11]
None of the receipts is
acceptable. For this reason, the appeal is allowed for 2002, 2003 and 2004 only
as to the matters conceded by the Concessions quoted in paragraph 2 of these
Reasons. The appeal for 2005 is dismissed.
Signed at Saskatoon, Saskatchewan, this 8th day of July 2009.
“D.W. Beaubier”
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