Citation: 2007TCC711
Date: 20071203
Docket: 2007-1531(IT)I
BETWEEN:
GASTON MAILLOUX,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
relating to the 2000, 2001,
2002 and 2003 taxation years.
[2] The issues are as
follows:
(a) whether the Minister was correct to add
$5,152 for the 2000 taxation year, $26,550 for the 2001 taxation year, $8,170
for the 2002 taxation year and $6,791 for the 2003 taxation year to the Appellant's
net business income;
(b) whether the penalty for late filing for
the 2000 and 2002 taxation years was justified; and
(c) whether the penalty provided in subsection 163(2) of the
Act on unreported income for the 2000, 2001, 2002 and 2003 taxation years was
justified.
[3] In making and confirming the assessments
and penalties for the 2000,
2001, 2002 and 2003 taxation years, the Minister of National Revenue ("the
Minister") relied on the following facts, as set out in paragraph 8 of the
Reply to the Notice of Appeal:
[TRANSLATION]
8.
(a) During the years in issue, the Appellant operated a
construction business;
(b) The net
income from each project was determined by analyzing the amounts received from
customers and the purchases made from suppliers;
(c) In the 2000
taxation year, the Appellant earned gross income of $14,009.08 and net
income of $5,152 from various jobs;
(d) In the 2001
taxation year, the Appellant earned gross income of $47,027.64 and net
income of $18,851 from the Sûreté du Québec project;
(e) In the 2001
taxation year, the Appellant earned gross income of $20,935.28 and net
income of $7,699 from the Habitation Sainte Catherine project and other
work;
(f) In the 2002
taxation year, the Appellant earned gross income of $13,782.43 and net
income of $5,295 from the Habitation St-Germain project;
(g) In the 2002
taxation year, the Appellant earned gross income of $7,045.87 and net
income of $2,875 from the Havre de Paix project;
(h) In the 2003
taxation year, the Appellant earned gross income of $11,828.82 and net
income of $4,491 from the Les Jardins D'Eugénie project;
(i) In the 2003
taxation year, the Appellant earned gross income of $11,097.68 and net income
of $2,300 from the Coopérative Solidarité project;
(j) The Appellant
did not keep any accounting records;
(k) The Appellant
did not report any of this business income.
9.
(a) The Appellant has long experience in the business world;
(b) The unreported
income was collected directly by the Appellant;
(c) The
unreported income represents 94% of the income reported by the Appellant;
(d) In his income
tax returns for the 2000, 2001, 2002 and 2003 taxation years, the Appellant
made no mention of his business income, demonstrating intent to conceal that
income from the Canada Revenue Agency.
[4] The appellant was
sworn and admitted subparagraphs 8(a), (b), (j) and (k) and 9(a), (b) and (d).
8.
(a) During the
years in issue, the Appellant operated a construction business;
(b) The net
income from each project was determined by analyzing the amounts received from
customers and the purchases made from suppliers;
(j) The Appellant
did not keep any accounting records;
(k) The Appellant
did not report any of this business income.
9.
(a) The Appellant
has long experience in the business world;
(b) The
unreported income was collected directly by the Appellant;
(d) In his income
tax returns for the 2000, 2001, 2002 and 2003 taxation years, the Appellant made
no mention of his business income, demonstrating intent to conceal that income
from the Canada Revenue Agency.
[5] The Appellant adduced
in evidence a document dated February 22, 2007, with a covering letter that
reads as follows:
[TRANSLATION]
...
I HEREBY ELECT THE INFORMAL PROCEDURE.
FURTHER TO THE NOTICES OF OBJECTION DATED MARCH 12, 2005, SENT TO THE
SHAWINIGAN TAXATION CENTRE FOR THE YEARS 2000, 2001, 2002 AND 2003, THE RESPONSE TO WHICH I RECEIVED ON DECEMBER
27, 2006, FROM THE LAVAL OFFICE, APPEALS DIVISION.
THEY HAVE CORRECTED SOME THINGS, BUT THE
OPERATING EXPENSES SUCH AS DEPRECIATION, RENT, TELEPHONE, TRAVEL, PURCHASES OF
MATERIALS AND TOOLS, AND THE RATIO, MUST BE TAKEN INTO
CONSIDERATION IN THIS CASE IN COMPARISON WITH CASES OF THE SAME NATURE.
...
[6] The appellant
attached his worksheets to the letter, showing various expenses, such as travel
expenses, installation expenses, depreciation and so on. All of the amounts
were decided arbitrarily, without any supporting documents, in the weeks
preceding the hearing.
[7] On
cross-examination, the appellant used the following phrases or expressions:
[TRANSLATION] "it depends", "yes" and then "no" a
few seconds later, "yes, no", "it's an average", "I
don't remember", "it's been seven years", "approximately",
"I didn't keep any invoices", "I don't have any documents",
"I remember hiring someone but I don't remember his name", "I am
entitled to that, based on the tax, I am entitled, I paid, but I didn't keep
the invoices, I paid cash", and "I can't remember that".
[8] Regarding the
depreciation for office furniture and equipment, the Appellant did not remember
when he purchased the items, or how much he paid for them, but he asked for
them to be amortized based on arbitrary figures.
[9] I observed from the
Appellant's brief testimony that he was an intelligent and even shrewd
businessman. He even said that he never worked for nothing and that he made
money on all his contracts, but just not as much as the Respondent was
claiming.
[10] I am satisfied that
the Appellant knowingly and deliberately chose not to keep any books of account
and not to report any business income, believing that this approach would be to
his advantage. I am further satisfied that the Appellant has come out of this
very well, since the Respondent has obviously not been able to identify all of
the Appellant’s sources of income.
[11] His admissions alone
are largely sufficient to justify both the penalties for unreported income and
the penalty for late filing for 2000 and 2002. I would reiterate that the Appellant
made the admissions set out below:
(a) During the
years in issue, the Appellant operated a construction business;
(j) The Appellant
did not keep any accounting records;
(k) The Appellant
did not report any of this business income.
9.
(a) The Appellant
has long experience in the business world;
[12] The only evidence adduced
by the Appellant was given in his testimony. The Appellant essentially
confirmed that the assessment was well-founded. He adduced no evidence based on
which he could meet the burden of proof that rested on him. In fact, he
contributed to the failure of his own appeal by his admissions, the content of
which is reproduced in paragraph 11 of this judgment.
[13] Admissions of that
nature demonstrate temerity and lack of concern, and such negligence that it
does not seem to me to be excessive to conclude that the appeal proceedings in
a case this pitiful and frivolous are in fact an abuse of process that must be
sanctioned, over and above the penalties provided by the Act, by awarding costs
against the Appellant, which I assess at $500.
[14] The appeal is
accordingly dismissed and the Respondent is awarded costs in the amount of
$500.
Signed at Ottawa, Canada, this 3rd day of December 2007.
“Alain Tardif”
Translation certified true
on this 23rd day of January 2008.
Brian McCordick, Translator
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