Citation: 2006TCC189
Date: 20060411
Docket: 2004-4765(GST)I
BETWEEN:
GISÈLE BOUCHER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1] Following an audit
done by a representative of the Ministère du Revenu du Québec (the
"MRQ"), the Appellant received a notice of assessment dated
March 11, 2003, bearing the number 2-17-5106, for the period from
July 1, 1997, to December 31, 2000. Pursuant to the Excise
Tax Act (the "Act"), the assessment adjusted the net tax of
$21,008.25, the $4,439.75 in interest, and the $7,102.03 in penalties. The
Appellant objected, and a notice of reassessment dated November 29, 2004,
and bearing the number 4‑17‑5065, was issued in respect of the same
period to take account of the Appellant's revised unreported business income
for the 1997 taxation year. The assessment is now $20,311.54, plus $4,240.05 in
interest and $6,644.25 in penalties. This is an appeal from the latter
reassessment.
[2] The unreported
income on which the Respondent's assessment is based was determined by the
auditor using the deposit method. As revised, the unreported income for the
1997 taxation year is $42,117, the unreported income for the 1998 taxation year
is $185,521, and the unreported income for 1999 is $70,736. In addition,
expenses of $4,544 were disallowed for 1998 on the ground that they were
personal expenses. All of this unreported income was considered to consist of
taxable supplies that were subject to $20,311.54 in unremitted goods and
services tax (GST), plus interest and penalties.
[3] The Appellant and
her husband operated a business called "Bar Le Griffon" (the
"bar") until he died in 1993. The Appellant continued to operate the
bar on her own until February 11, 1998, at which time she sold it to
9056-4428 Québec inc. (the "Corporation"). The sole shareholder of
the Corporation is Diane Leclair, wife of Guy Boucher,
the Appellant's son. The Corporation rents premises on the ground floor of
a building that belongs to the Appellant and is adjacent to her dwelling. Only
a door separates the two premises. There are four apartments on the upper
floor. The Appellant's son Guy lived in an apartment with his wife after
the Appellant's husband died, and, in 1995, they lived with the Appellant.
During the period in issue, the son operated a garage where he repaired cars.
According to the evidence, the Appellant continued to be actively involved in
the management of the bar after it was sold. She was always the one who looked
after deposits because her daughter-in-law worked days and her son split his
time between the bar and the garage.
[4] The MRQ audited the
Corporation, as well as a corporation involving its sole shareholder, Diane
Leclair, and her husband, Guy Boucher. The audit of the Corporation was
related to the operation of the bar in question. Auditor Sylvain Genest
went to the Caisse populaire de Richmond to obtain information about the bank
accounts and was informed that Guy Boucher had powers of attorney in respect of
two of the Appellant's bank accounts. This led the auditor to investigate the
Appellant's income, whereupon he discovered that the Appellant had reported a
loss of $14,000 in 1998 from the operation of the bar. Knowing that the
Appellant had sold the bar in February 1998, he decided to
audit her.
[5] The two bank
accounts of the Appellant over which her son had powers of attorney are folios
#8352 and #13399. After examining the transaction history for these accounts
and obtaining documents from the Appellant's accountant, the auditor
determined that he would have to use the deposit method. This decision was
necessary because, in view of the number of transactions, which included
several large deposits, and in view of the fact that the accountant was unaware
of the existence of folio #13399, it was difficult to account for what had been
sold or for the transactions at the bar.
[6] The audit began in
March 2001. The analysis using the deposit method produced the following
results:
[TRANSLATION]
Gisèle Boucher:
Folios #8352 and #13399
Analysis Based on
the Deposit Method
Appendix 1
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|
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31/12/1997
|
31/12/1998
|
31/12/1999
|
31/12/2000
|
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|
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|
Deposits - folio #8352
|
|
$378,753.10
|
$166,537.54
|
$88,982.26
|
$30,729.49
|
|
|
|
|
|
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|
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Deposits - folio #13399
|
PCA [Pers. Cheq.
Acct.]
|
|
$30,010.00
|
|
|
|
|
|
RS1 [Reg.
Savings Acct. 1]
|
$36,001.00
|
$62,731.66
|
$6,000.00
|
closed
|
|
|
Deposit subtotal
|
|
$414,754.10
|
$259,279.20
|
$94,982.26
|
$30,729.49
|
|
|
|
|
|
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|
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less:
|
|
|
|
|
|
|
|
Reported income
|
|
$9,900.00
|
$48,527.28
|
$24,246.71
|
$30,123.00
|
|
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|
|
|
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|
|
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|
Gross income "Bar Le Griffon"
(Business and rental income entered as gross)
|
$315,355.00
|
$21,935.27
|
|
|
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GST to remit
|
$22,074.85
|
$1,535.47
|
|
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QST to remit
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$25,307.24
|
$1,760.31
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|
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Income subtotal
|
|
$372,637.09
|
$73,758.32
|
$24,246.71
|
$30,123.00
|
|
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Unreported income
|
|
$42,117.01
|
$185,520.88
|
$70,735.55
|
$0.00
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Explanations
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The following amounts were removed from the deposits:
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"folio
#8352"
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"VIM" [manual transfer at counter] 12/02/1998
from folio #13399
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$4,000.00
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"VIM" 18/02/1998 from folio #13399
|
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$20,000.00
|
|
|
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"CT" [misc. deposit] re "LN1"
[Loan 1] on 13/10/1998
|
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$10,000.00
|
|
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Gift received from Guy Boucher on 27/10/1999
|
|
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$38,311.40
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"folio #13399"
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Sale of a Corvette on 4/6/1999
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$30,000.00
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"VIM" on 15/10/1998 from folio #8352
|
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$3,000.00
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The following DSLs [no-book deposits] are cheques that
were made and must be removed from the folio #8352 deposits.
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29/10/98
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$214.90
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18/01/99
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$225.00
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13/04/99
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$45.14
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26/04/99
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$183.81
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|
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8/06/99
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$51.75
|
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26/07/99
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$42.00
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29/12/99
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$124.25
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18/01/99
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$53.86
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4/02/99
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$51.33
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11/02/99
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$50.00
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23/06/99
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$70.42
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24/08/99
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$58.14
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24/11/99
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$50.96
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14/12/99
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$109.00
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23/12/99
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$51.82
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16/03/00
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$96.68
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Total DSLs corresponding to cheques:
|
$ -
|
$214.90
|
$1,167.48
|
$96.68
|
|
[7] This table shows
the total of all deposits made into the Appellant's folios #8352 and #13399.
The deposits were compiled monthly for each of the years during the period in
issue, and included DSLs [no-book deposits] in which nothing was deposited. The
breakdown can be found in Appendix 3 of the analysis. From these amounts,
the auditor deducted the income (both from the bar and from the rental units)
that the Appellant had reported in her income tax returns, as well as the GST
and Québec sales tax (QST) collected on the reported gross income, and other
amounts found in Appendix 1. These calculations resulted in the discrepancy
entered in Appendix 1 under the heading "Unreported income". Appendix
1 also records certain transfers into the two accounts which, upon
consideration, were removed from the deposits.
[8] The auditor was
unable to identify the DSLs or link them to anything whatsoever, other than the
fact that they can be found in the Caisse populaire microfiches. According to
the auditor, these DSLs consisted of cheques that were cashed at the
Caisse populaire and then re-cashed by the Appellant. The Appellant's
accountant did not provide the auditor with any explanations or supporting
documents with regard to this situation, except the cheques found at Tab 6
of Exhibit A‑1. The cheques at Tab 5 were not provided to him.
[9] The auditor
examined the deposit slips and the receipts and disbursements for the period in
which the bar was operated, but that information was incomplete, and he had to
supplement it with the microfiches from the Caisse populaire.
Further, in Appendix 2, the auditor explains certain input tax
credits that he disallowed. According to the information obtained from the
Appellant's accountant, the Appellant used the cash basis of accounting and
there were no year-end adjusting entries. The auditor acknowledges that, in the
deposits into account #8352, he included amounts that may have included video
lottery terminal revenues payable to the Société des loteries vidéo du Québec.
He did not remove these amounts from the deposits because there were no
supporting documents regarding the amounts.
[10] The auditor was
unable to trace the source of the discrepancies identified by his audit. The
discrepancies consist of income that went through the accounts, and there
appear to be various kinds of income, but he cannot identify them. He took
folio #13399 into consideration because the Appellant made the deposits into
that account and signed the cheques drawn on it despite the fact that her son
Guy had a power of attorney. In fact, the auditor attributed the account
to the Appellant because her son Guy had other accounts at the same Caisse
populaire.
[11] At the objection
stage, the file was assigned to Luc Veillette. Mr. Veillette noticed that
a few errors had been made in the Appellant's favour, but in order to avoid
penalizing her more, he decided not to make any corrections.
Apparently, the reported income of the bar, i.e., $21,935, was included
twice, and a Guaranteed Income Supplement (GIS) payment to the Appellant was
not subtracted. The net result was a benefit of $14,436 that should have
been added to the Appellant's unreported income. This error occurred because
the Appellant failed initially to report this GIS payment in her 1997 income
tax return.
[12] On
cross-examination, reference was made to a sum of $16,000 that was paid to the
Appellant upon the sale of the bar and should have offset the unreported income
by an equal amount, and to a sum of $24,964 attributable to Loto-Québec.
According to Mr. Veillette, neither amount was subtracted from the
reported income because there was no evidence that the $16,000 had actually
been deposited into the Appellant's account. No supporting documents were
tendered to confirm the amount. The cross-examination also raised the question
of how the no-book deposits were dealt with. The Appellant submits that they
should be subtracted from the total income computed using the deposit method.
A "DSL" [dépôt sans livret] is a deposit made without a
deposit book. According to the first page of the analysis that is
reproduced above and can also be found at Tab 2 of Exhibit I‑2,
some of these deposits were subtracted from the unreported income for the years
1998, 1999 and 2000. However, the number of "undeposited" DSLs is
much higher, and can be found in Appendix 3 of the same exhibit.
The auditor reconstructed these deposits from the Caisse populaire's
microfiches, and they are taken into account in determining the unreported
income.
[13] The issue of the
DSLs has arisen because the Appellant would go to the Caisse populaire
with cheques endorsed by customers of the bar and would exchange those cheques
for cash. The cash was not deposited, but the Caisse populaire's
microfiches contained an accounting entry indicating that a cheque had been the
subject of a transaction on the account without an actual deposit appearing in
the Caisse populaire's microfiches.
[14] In fact, two
witnesses testified about the manner in which the Appellant exchanged cheques.
Paul Desmarais testified that he went to see the Appellant at the bar five or
six times to exchange cheques. This enabled him to avoid having to wait three
or four days to get his money. The biggest cheque was for $125.
On cross‑examination, Mr. Desmarais said that this transaction
was carried out behind the bar and that the Appellant took the money from her
wallet. He added that he would take his cheque back four or five days
later and repay the money that had been advanced to him. As for
Sylvain Dubé, he explained that he endorsed his cheque over to the
Appellant and that she went to the Caisse populaire to exchange it. She gave
him the money when she got back. He did not necessarily have any drinks in
connection with these transactions. A series of similar cheques, including
Mr. Dubé's cheque, was adduced in evidence by the Appellant. The reverse
of the cheque contains the endorsement [TRANSLATION] "For Deposit Only to
the Account of Gisèle Boucher, Folio #8352." Some of these cheques
contain this endorsement, while others do not. They all date back to 1997.
[15] Diane Leclair and
Guy Boucher were also assessed. The assessments of the Corporation and Guy
Boucher pertained to the GST. In his audit report, Sylvain Genest writes
that Guy Boucher filled out a credit application in 1998 stating that he had
been the owner of the bar in question for three years. Mr. Genest's report
also says that the bar belonged to the Appellant until
February 11, 1998, when it was sold to a corporation the shares of
which were wholly owned by Diane Leclair. Mr. Genest's report adds
that according to the auditor who had audited the Appellant for a period ending
in June 1997, Guy Boucher is closely involved in the operation of the bar. In
fact, Mr. Genest even adds that Mr. Boucher apparently was the one
who made decisions regarding operations, that he has powers of attorney over
his mother's bank accounts, and so forth. Mr. Boucher was made a registrant
under the Act retroactively to 1994, and the audit was related to the period
from January 1, 1994, to December 31, 2000. Guy Boucher was
assessed under the Act for unreported income from the operation of the bar
during that period.
[16] According to the
books, on February 11, 1998, the Appellant ceased being registered as an
agent for the purposes of the Act. It should also be noted that the audit
disclosed no discrepancy between the accounting books and the reported GST and
QST. It was the unreported income that was assessed. However, there was no way
to identify the sales based on the monthly income reports.
[17] Mr. Genest's
testimony, especially on cross-examination, dealt primarily with certain cash
deposits which the Appellant is alleged to have made during the years covered
by the assessment and which are apparently not from the operation of the bar.
The deposits in question were identified in a table prepared by Accountant
Claude Bérard to explain the makeup of the $166,537 deposited in 1998 and the
$88,982 deposited in 1999. I will reproduce this table (Exhibit A‑1,
Tab 4) below because it will be relevant in assessing the testimony of
each of the Appellant's witnesses. The table does not cover the year 2000
because the analysis using the deposit method did not yield any discrepancy for
that year.
[TRANSLATION]
1 — 1997
Photocopies of cheques provided to Revenu
Québec, totalling $48,786.08, in connection with undeposited DSLs that were
included in the $378,753.10 in total deposits.
These undeposited DSLs were related to
cheques issued to people, most of whom were Bar Le Griffon customers.
Ms. Boucher accommodated these people by going to the Caisse populaire
across the street from the bar and cashing the cheques. Several of the people did
this because they had no bank account. Thus, the bar's cash was not
utilized in order to negotiate the cheques.
The undeposited DSLs were not unreported
income and, consequently, the reassessment for the year 1997 should be
cancelled in its entirety.
2 – 1998
$166,537 in deposits is explained as
follows:
|
Þ Sales
by Bar Le Griffon, operated by Ms. Boucher
until February 18, 1998
|
Amount
$21,935
|
|
Þ Rental
income
|
$24,950
|
|
Þ Proceeds from the sale of equipment upon the transfer of
the bar to Guy Boucher on February 18, 1998
|
$16,000
|
|
Þ Deposits made by Guy Boucher to cover the payments to be
made to Loto‑Québec for the period from February 19, 1998, to June 30,
1998. The permit for the operation of the video lottery terminals was
transferred by Loto‑Québec to Guy Boucher's corporation on June 30, 1998.
|
$29,964
|
|
Þ Cheques
from customers negotiated by Ms. Boucher directly at the
Caisse populaire
|
$20,553
|
|
Þ Direct deposits of Guaranteed Income Supplement cheques
|
$7,589
|
|
Þ Other deposits of cash given by Guy Boucher as compensation
to his mother for providing him with lodging throughout the year ($1,000 x
12 months)
|
$12,000
|
|
Þ Other
cash deposits by Ms. Boucher
|
$38,546
|
|
|
$166,537
|
The remaining cash deposits, totalling
$38,546, were made from the cash that Ms. Boucher kept at home following
the closing, in 1993, of two safety deposit boxes that had been kept at the
Caisse populaire de Warwick et de Richmond.
It should be noted that these remaining
deposits consisted almost entirely of $50 and $100 bank notes.
The cash that Ms. Boucher kept at home in
late 1996 amounted to approximately $80,000 and came from the following
sources:
|
Þ One-half of her husband Gaétan Boucher's account balance at
the Caisse populaire de Warwick (Gaétan Boucher died in 1993)
|
Amount
$15,162
|
|
Þ Cash received upon the death of her husband in 1993
|
$25,000
|
|
Þ Cash received upon the death of Aurelle Boucher in
1994
Þ Proceeds of insurance paid by Metropolitan Life on October
12, 1993, following the death of her husband
|
$20,000
$19,107
|
|
|
$79,269
|
3 - 1999
$88,982 in deposits is explained as
follows:
|
Þ Rental
income
|
Amount
$24,120
|
|
Þ Cheques from Bar Le Griffon customers, negotiated by Ms.
Boucher directly at the Caisse populaire
|
$9,963
|
|
Þ Direct deposits of Guaranteed Income Supplement cheques
Þ Compensation paid by Guy Boucher to his mother for lodging
Þ Other
cash deposits by Ms. Boucher
|
$4,884
$12,000
$38,015
|
|
|
$88,982
|
[18] Marc Rochon
testified that in February 1998, the Appellant was given a cheque for
$25,065.83 because she was the beneficiary of a life insurance policy. However,
this amount does not appear in the list of deposits reproduced above.
[19] The Appellant called
Normand Houle, her personal income tax accountant starting in 1997, as a
witness. Mr. Houle recalls having done the income statement for the bar
before the incorporation of the Corporation and the sale to that company.
His testimony focussed on his analysis of the banking transactions on the
Appellant's accounts #8352 and #13399 during the years 1997, 1998 and 1999,
and, in particular, entry errors in deposits that need to be reversed. These
errors are identified by the code "CCT" in the Caisse populaire
statements. Thus, he compared those statements with the deposit slips to make
sure that what he was saying was correct. He also concluded, based on his
analysis, that all the transactions on account #13399 involved
Guy Boucher, even though he acknowledged that the Appellant made all the
deposits and that the account is in her name. I reproduce the result of his
analysis below:
[TRANSLATION]
1. For
the year 1997, you deposited a total of $378,538.20 into folio #8352.
Our
verifications arrive at a total of $391,491.09, broken down as follows:
|
1997
|
|
Deposit
|
|
January
|
|
$29,022.76
|
|
February
|
|
31,415.56
|
|
March
|
|
22,762.07
|
|
April
|
|
31,399.96
|
|
May
|
|
42,601.48
|
|
June
|
|
27,814.44
|
|
July
|
|
33,837.30
|
|
August
|
|
35,920.54
|
|
September
|
|
28,793.76
|
|
October
|
|
41,237.08
|
|
November
|
|
28,425.18
|
|
December
|
|
38,260.96
|
|
|
|
$391,491.09
|
|
|
|
|
|
We have determined that $56,617.06 was mistakenly
included in these deposits because this amount appears to have been debited
to the "CCT" account. The breakdown is as follows:
|
|
|
|
1997
|
|
Deposit
|
|
January
|
|
$4,778.64
|
|
February
|
|
8,269.06
|
|
March
|
|
1,396.60
|
|
April
|
|
2,850.00
|
|
May
|
|
12,108.75
|
|
June
|
|
950.00
|
|
July
|
|
6,442.00
|
|
August
|
|
1,792.00
|
|
September
|
|
1,362.00
|
|
October
|
|
11,076.57
|
|
November
|
|
-----
|
|
December
|
|
5,591.44
|
|
|
|
$56,617.06
|
To summarize
Point 1, when the deposit correction of $56,617.06 is subtracted from the
$391,491.09 in deposits, the actual total amount deposited is $334,874.03.
You are
considering the amount of $378,538.20 when the deposits actually total
$334,874.03. The difference of $43,664.17 accounts for the income that you
characterize as "unreported".
2. For the year
1998:
(A) With respect
to folio #13399 ("PCA") [Personal Chequing Account], our verification
achieves the same result as your audit, i.e., $30,010 in deposits. However, all
these amounts come from Ms. Boucher's son, Guy Boucher.
(B) With respect
to folio #13399 ("RS1") [Regular Savings Account 1], the amount of
$62,731.66 is also from Guy Boucher and is not part of Ms. Boucher's
income.
(C) With respect
to account #8352, the total deposits for the year amount to $187,713.08, broken
down as follows:
|
1998
|
|
Deposit
|
|
January
|
|
$47,900.81
|
|
February
|
|
51,051.48
|
|
March
|
|
10,485.02
|
|
April
|
|
13,034.28
|
|
May
|
|
11,528.06
|
|
June
|
|
11,128.05
|
|
July
|
|
3,635.80
|
|
August
|
|
2,718.00
|
|
September
|
|
2,002.42
|
|
October
|
|
13,871.64
|
|
November
|
|
4,100.00
|
|
December
|
|
16,257.52
|
|
|
|
$187,713.08
|
|
|
|
|
|
This amount must be reduced by the following deposit
errors which were debited:
|
|
|
|
|
|
1998
|
|
Deposit
|
|
January
|
$14,006.74
|
|
|
February
|
2,020.00
|
|
|
December
|
4,926.57
|
20,953.31
|
|
|
|
$166,759.77
|
|
|
|
|
|
The following transfers must also be removed:
|
|
|
|
|
|
1998
|
|
Deposit
|
|
February 12
|
$4,000.00
|
|
|
February 18
|
20,000.00
|
|
|
October 13
(loan)
|
10,000.00
|
34,000.00
|
|
|
|
$132,759.77
|
|
|
|
|
|
Moreover, the Loto-Québec revenues belonging to Bar Le
Griffon must be removed:
|
|
|
|
|
|
1998
|
|
Deposit
|
|
Subtotal
brought forward
|
|
$132,759.77
|
|
Loto-Québec
revenues from Bar Le Griffon
|
|
(24,840.00)*
|
|
|
|
|
|
Cheques
exchanged
|
|
(13,581.67)*
|
|
|
|
|
|
Deposits belonging to Bar Le Griffon
|
|
(19,745.00)*
|
|
|
|
(58,166.67)
|
|
|
|
$74,593.10
|
|
|
|
|
|
* The breakdown of these three amounts follows.
|
|
1998
|
|
Cheques
exchanged
|
Deposits
|
Lottery
|
|
February
|
|
$1,036.00
|
$
|
$1,230.00
|
|
|
|
784.88
|
|
1,190.00
|
|
|
|
201.45
|
|
2,020.00
|
|
|
|
1,089.95
|
|
1,000.00
|
|
|
|
908.75
|
|
1,540.00
|
|
March
|
|
24.47
|
1,000.00
|
1,470.00
|
|
|
|
144.00
|
1,500.00
|
1,161.00
|
|
|
|
|
|
565.00
|
|
April
|
|
3,413.49
|
$500.00
|
1,617.00
|
|
|
|
313.17
|
1,000.00
|
1,090.00
|
|
|
|
|
490.00
|
710.00
|
|
|
|
|
1,450.00
|
442.00
|
|
May
|
|
1,366.00
|
1,100.00
|
900.00
|
|
|
|
|
500.00
|
1,605.00
|
|
|
|
|
|
2,910.00
|
|
June
|
|
1,811.65
|
400.00
|
1,350.00
|
|
|
|
476.95
|
105.00
|
2,170.00
|
|
|
|
|
1,000.00
|
1,870.00
|
|
July
|
CSST
|
468.16
|
500.00
|
|
|
|
|
|
500.00
|
|
|
|
|
|
500.00
|
|
|
|
|
|
200
|
|
|
August
|
|
850.36
|
|
|
|
September
|
|
134.78
|
|
|
|
October
|
|
|
1,000.00
|
|
|
|
|
|
1,000.00
|
|
|
|
|
|
1,000.00
|
|
|
November
|
|
|
2,000.00
|
|
|
December
|
|
557.51
|
3,000.00
|
|
|
|
|
________
|
1,000.00
|
_________
|
|
|
|
$13,581.57
|
$19,745.00
|
$24,840.00
|
|
|
|
|
|
|
In summary, for
the year 1998, if the fact that the amounts in account #13399 ("PCA"
and "RS1") belong to Guy Boucher is taken into account, Ms. Boucher
has $74,593.10 in deposits to report, less the reported income of $73,758.82.
This results in an unexplained difference of $834.76, as opposed to
$185,112.94.
3. For the year
1999:
(A) Account
#13399, in the amount of $6,000, belongs to Guy Boucher.
(B) Below is the
analysis of the deposits for account #8352:
|
1999
|
|
Deposit
|
|
January
|
|
$7,939.00
|
|
February
|
|
5,277.00
|
|
March
|
|
7,734.00
|
|
April
|
|
6,687.13
|
|
May
|
|
5,656.33
|
|
June
|
|
4,498.00
|
|
July
|
|
5,229.43
|
|
August
|
|
4,533.93
|
|
September
|
|
7,007.08
|
|
October
|
|
46,219.95
|
|
November
|
|
3,347.57
|
|
December
|
|
4,817.57
|
|
|
|
108,896.99
|
|
(A) Less a gift
received from Guy Boucher
|
38,311.40
|
|
|
70,585.59
|
|
|
|
|
(B) Less the
Guaranteed Income Supplement that was not reported because it is not taxable
|
4,883.55
|
|
|
65,702.04
|
|
(C) Cheques
returned by the Caisse
|
|
|
-March 1999
|
$1,150.00
|
|
|
-April 1999
|
1,500.00
|
|
|
-April 1999
|
550.00
|
3,200.00
|
|
|
|
62,502.04
|
|
(D) Cheques exchanged
|
(7,021.35)*
|
|
|
55,480.69
|
|
(E) Deposit of Guy Boucher
|
(25,645.00)*
|
|
|
$29,835.69
|
|
|
|
|
The breakdown of these two amounts follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1999
|
|
Cheque
exchanges
|
Deposits of Guy
Boucher
|
|
January
|
|
$794.00
|
$5,645.00
|
|
February
|
|
502.00
|
1,000.00
|
|
|
|
525.00
|
|
|
March
|
|
224.00
|
1,000.00
|
|
|
|
560.00
|
1,500.00
|
|
April
|
|
280.73
|
2,000.00
|
|
|
|
218.03
|
1,500.00
|
|
|
|
82.97
|
500.00
|
|
May
|
|
896.00
|
|
|
June
|
|
|
1,000.00
|
|
|
|
|
1,000.00
|
|
July
|
|
635.00
|
1,000.00
|
|
August
|
|
284.00
|
1,000.00
|
|
September
|
|
138.50
|
2,000.00
|
|
|
|
|
1,000.00
|
|
October
|
|
991.12
|
1,000.00
|
|
|
|
|
1,000.00
|
|
November
|
|
351.00
|
500.00
|
|
|
|
35.00
|
|
|
|
|
504.00
|
|
|
December
|
|
|
2,000.00
|
|
|
|
|
1,000.00
|
|
|
|
$7,021.35
|
$25,645.00
|
|
|
|
|
|
In
summary, for the year 1999, if the fact that folio #13399, in the amount of
$6,000, belongs to Guy Boucher is taken into account, the amount of actual
deposits into account #8352 is $29,835.69, not $86,844.93, for a difference of
$57,009.24, which should be subtracted from the $68,598.22 in unreported
income.
[20] In addition to his
analysis above, which utilized the deposit method, Claude Bérard did a net
worth analysis. He determined that this was necessary because of the problems
raised by the deposit method, owing especially to the DSLs and the trouble
identifying the source of the funds that justify the $38,546 in deposits that
Ms. Boucher made in 1998 and the $38,015 in deposits that she made in 1999. Mr.
Bérard testified that these were cash deposits in $50 and $100 denominations.
He added that it makes more sense to proceed using the net worth method because
that was the method used to audit the Corporation, Guy Boucher and his
spouse and because the Appellant, her son and the bar shared the same accounts.
However, his testimony revealed that the source of the funds could not be
established more precisely by the net worth method than by the deposit method,
and that no cash transactions during the year would figure into the
calculations.
[21] The opening balance
sheet for the purpose of calculating the difference using the net worth method
shows $80,000 in cash on hand in 1996. This amount apparently consists of
$19,107 in proceeds from the life insurance of the Appellant’s spouse received
on October 12, 1993, $30,323 in an account belonging to the
Appellant's spouse on December 31, 1992, and roughly $25,000 in cash
in a safety deposit box. The Appellant sent this information
(except the information about the money in the safety deposit box) to Mr.
Bérard along with supporting documents. Mr. Bérard says that he did not need to
do a deposit method analysis to complete his calculations of the difference
based on net worth.
[22] Based on his
calculations using the deposit method, Mr. Bérard agrees that the total
deposits, as calculated by the auditor, are accurate, but he says that the no‑book
deposits should be subtracted because they always consisted of cheques that
were exchanged and not deposited. In fact, he went through the process for 1997
by verifying and producing the undeposited cheques. He relied on the amount
established by the auditor for the years 1998 and 1999.
[23] The Appellant
testified that she was always responsible for depositing the bar revenues, even
after she sold her interest. Her daughter-in-law was busy during the daytime,
and her son split his time between the bar and his garage. In fact, since her
son did things in what he termed a [TRANSLATION] "family‑oriented" way,
the cash boxes, and the envelopes of money, were kept at her home. She would
sometimes even take some money if she needed it, but she had to give it back.
She acknowledges that the revenues from the bar were deposited into account
#8352 and that this account was used both for bar-related and personal purposes.
She stated that she did indeed continue to deposit the video lottery terminal
revenues into account #8352 after the sale of the bar in February 1998 until
the permit was transferred to the Corporation. Loto-Québec was authorized to
withdraw what it was owed from account #8352 every week.
[24] The Appellant
testified that she cashed cheques for customers or for her tenants using cash
from the bar or envelopes of money that she kept, or — and this is what all
the witnesses testified were the DSLs — by going to the
Caisse populaire to exchange the cheques for money without making a
deposit. The Appellant received $5 to $10 in compensation for going to the
Caisse populaire.
[25] The Appellant
testified that the accountant used the deposit slips from account #8352 to
prepare her income statements. Into this account she deposited her rent,
pensions, and, sometimes, the cash which she had at home or which was in her
safety deposit box. When questioned about the source of the funds in her safety
deposit box, she mentioned an amount of $30,323 that her husband had held in an
account at the Caisse populaire upon his death, a further $25,000 that he had
also held in a safety deposit box, and an amount of $19,107 representing the
proceeds of an insurance cheque that were placed in her safety deposit box. In
fact, these amounts constitute the cash on hand that the witness Bérard used as
a starting point from which to calculate the difference using the net worth
method. The Appellant added that she also had $10,000 to $15,000 in another
safety deposit box, as well as $7,000 to $8,000 in cash that she kept at home.
However, she added that she gave her son Guy one-half of the amounts of
$30,323, $25,000 and $19,107 after her husband died, and that all this money
was in the safety deposit box because the box was in her name and in her son's
name.
[26] She explained that
she cashed the cheque for $19,107 and that she wished to retain that cash
because she did not want to pay tax on the amounts in question. However,
she explained that she would occasionally deposit money from the safety deposit
box into account #8352. Nevertheless, she cannot provide any specifics
regarding the amounts of these deposits or say whether the money was from the
box or from the $7,000 to $8,000 that she kept at home at all times in an
envelope.
[27] When questioned
about the $38,546 in deposits in 1998 and the $38,015 in deposits in 1999
identified in Accountant Claude Bérard's table, the Appellant said that she
believes that these amounts are from the inheritance. She took some of the
money to pay her expenses and those of her son. The Appellant was also
questioned about the sale of the bar, and she responded that she received
$16,000 in cash from that sale. She cannot say whether the amount was deposited
in whole or in part or whether all of it ended up in the safety deposit box.
[28] The Appellant states
that after the bar was sold, her only income was from the rental payments, her
pension and the $1,000 per month that her son Guy gave her for board for
himself and his spouse, for his lodging, and for the garage that he used for
his car-repair business. She does not know whether this amount of $1,000 was
reported in her income. In 1999, her son Guy gave her $38,311.40 to help her
pay a hypothec, and the auditor subtracted this amount from the deposits, as
indicated in his table for that year.
[29] As for account
#13399, the Appellant testified that the money belongs to her son Guy and that
her only role was to make deposits. However, she acknowledged that she signed a
total of $63,349.43 in cheques drawn on the account to pay amounts that she and
her son Guy owed the Ministère du Revenu du Québec in 1995 (Exhibit I-1).
She manages the account for her son because he does not like to go to the bank
and is often away. She acknowledged under cross-examination that her son sold
cars and motorcycles and that several of his cars were registered under her
name. She does not know why this is so.
[30] The Appellant also
acknowledged that she had been audited and assessed for unreported income and
unpaid GST of $12,497.68 for the period from October 1, 1993, to
June 30, 1997.
[31] Diane Leclair
testified that her corporation paid the Appellant $17,000 for the purchase of
the bar and that this amount was paid in monthly instalments of $1,000. She
was unable to explain why the corporation was incorporated and why she did not
talk with her husband to determine whether he wished to become a shareholder or
director. She even testified that she did not need him. Like her husband,
she confirmed that the video lottery terminal revenues payable to Loto‑Québec
were deposited into the Appellant's account for an additional six months, the
amount of time needed to transfer the permits and the direct debits to Loto‑Québec.
[32] As for Guy Boucher,
he testified that his income for the years 1997, 1998 and 1999 came from his
salary from the bar, which was $600 to $800 per week, and from his business of
buying, repairing and reselling cars. He also acknowledged that he inherited
money, and that this money is kept in a safety deposit box along with his
mother's money. He keeps no records from which each person's share can be
determined, and the Appellant was the only one who looked after the box. Mr.
Boucher says that he received, from his father and from others, one half of the
$80,000 that can be found in Mr. Bérard's calculations using the net worth
method. He says that his brother Denis did not receive anything because he
has a drug problem. On cross‑examination, he stated that the division
between himself and his mother was done in 1993. All of the money was placed in
the safety deposit box, which was closed on September 15, 1999. He
said that at one point there was no more cash in the box, and that at another
point the cash was placed elsewhere, but he did not specify where. It appears
that his grandfather and father paid for everything in cash and kept as much as
$20,000 at home.
[33] Guy Boucher
testified that he pays $1,000 per month for room and board for himself and his
wife, and for the rental of the garage. He pays this money in cash; he did not
explain this approach and does not know what his mother did with the money.
[34] Account #13399 was
used for his own transactions, and his mother looked after deposits and
withdrawals as needed. The money deposited into the account came from the sale
of the cars that he purchased and repaired, from his cash in the safety deposit
box or kept at his niece's home, and from his "loose" cash.
He acknowledges that he paid $45,582 in cash for a Corvette in 1995 or
1996, and that he paid $20,000 in cash toward the purchase of a home. He says
that the money came from the sale of vehicles and from the money left by his
parents.
[35] Guy Boucher was
assessed under the Act for a six-year period. The documentation states
that the assessment was primarily based on his failure to remit GST on the sale
of automobiles. The sales for certain years were roughly $17,500, $104,000 and
$184,000.
[36] The Appellant made
several arguments, and those arguments can be summarized as four main issues:
(a) Was
the assessment made outside the normal assessment period within the meaning of
subsection 298(1) of the Act?
(b) Was the method used by
the Respondent to make the assessment a reliable method having regard to the
circumstances?
(c) Did the Appellant meet
her burden of proof?
(d) Did the Appellant, under
circumstances amounting to gross negligence, make a false statement in a
return, application, form, etc., within the meaning of section 285 of the Act?
[37] For her part, the
Respondent has identified the same issues, and submits that the Deputy Minister
of Revenue was entitled to assess the Appellant at any time in accordance with
subsection 298(4) of the Act, that the deposit method is an acceptable
alternative in the case at bar and that the penalties were warranted.
[38] The issues
identified above were the subject of lengthy submissions by both parties
regarding questions of credibility, the method used to audit the Appellant and
other parties, the amounts to be subtracted from the deposits, the double
taxation of the income from the bar, the record keeping, and much more.
However, it must be acknowledged that the problems raised by this appeal
are primarily due to the fact that it is very difficult, during the period in
issue, to determine whether the transactions on the two identified bank
accounts are of a personal or business nature and, worse still, to the fact
that it is difficult to know who this money actually belongs to. The distinction
must be drawn having regard to the fact that the Appellant sold the bar in
February 1998. Another factor which, in my opinion, raises problems is the
fact that the bar's bookkeeping is so deficient that the financial statements
themselves are based on the deposits, and that it is impossible to verify
anything at all, not to mention the innumerable cash transactions that the
Appellant and her son carried out on the pretext that all money issues are
handled in a "family-oriented" way. It goes without saying that,
regardless of the audit method used, it will be impossible to reconcile the
numbers.
[39] This having been
said, we now have three audit tables based on the deposit method and one table
based on the net worth method. Clearly, neither method provides a true
financial portrait of the taxpayer and her obligations as an agent under the
Act. Thus, our task is to reconstruct a financial balance sheet that is as
close as possible to reality, while bearing in mind that such an exercise will
be far from perfect. Counsel for the Appellant submits that the most reliable
method in the case at bar is the net worth method, primarily because the
Respondent used the same method with the Corporation and the Appellant's son
Guy Boucher and his wife. This approach offers a consistent method,
which is particularly important as he submits that there is double taxation in
the instant case because the MRQ assessed the Corporation, Guy Boucher and
the Appellant under the Act for the same period based on the income derived
from the operation of the bar. He also submits that the deposit method is
unreliable in the instant case because it does not account for the fact that
the Appellant cashed many cheques without making deposits and it would
attribute those cheques to her.
[40] In my opinion, prima
facie, it makes perfect sense to use such a method with a business of the
type operated by the Appellant. The commercial activities in issue consist of
making supplies all of which are taxable and are therefore treated similarly,
with the exception of the revenues attributable to Loto‑Québec.
The alleged DSLs in the case at bar are no-book deposits that are not
truly deposits. All of them were identified, as was the portion of the revenues
attributable to Loto‑Québec following the sale of the business in
February 1998, and the Appellant's personal income. Moreover, the
Appellant's accountant relied on the deposits to prepare the financial
statements because there was nothing within the business that made it possible
to do any accounting based on the supplies. However, the deposit method could
benefit certain taxpayers or agents who do not deposit all the income derived
from their business, especially those who use cash and wish to circumvent their
fiscal obligations. The same problem arises with the other methods. As for the
cheques that were cashed using the funds of the business and then deposited,
this approach has no effect on the deposits because the cheques replace the
cash.
[41] This having been
said, and in light of the Respondent's evidence as a whole and the testimony of
the Appellant's two accountants with respect to their calculations using the
deposit method, I find that this method is the most reliable one in the instant
case. Suffice it to say that the method used by Accountant Claude Bérard,
consisting of calculating the difference in net worth, is defective right from
its starting assumption that the Appellant was in possession of $80,000.
This amount consisted of an inheritance, the proceeds of a life insurance policy,
and money contained in a safety deposit box. It should be recalled that the
Appellant testified that she gave half this money to her son Guy. Moreover,
this method does not take account of all the cash transactions done by the
Appellant over the years, or the exchanges of money between the Appellant and
her son.
[42] Thus, I accept, as a
starting point, the unreported income established by the Respondent's auditor
for each of the years within the period in issue, as well as the amounts that
were removed from the deposits. The unreported income is $42,117 in 1997,
$185,520 in 1998, $70,735.55 in 1999 and zero in 2000.
[43] I am aware that the
total unreported income determined by the auditor includes the two bank
accounts. However, given the amounts removed from the deposits, the impact on
the results is truly minimal. In 1998, the auditor subtracted the amount of the
transfers and the amount from the sale of the Corvette, amounts that were
equivalent to the deposits into account #13399, which was Guy Boucher's
account even though it was under the Appellant's name. In 1999, the
additional deposit amount for account #13399 was only $6,000.
[44] Based on the
evidence adduced by the Appellant, is it possible to subtract other amounts
from the unreported income? The first hotly contested point was the auditor's
inclusion of the undeposited DSLs in the deposits. According to counsel for the
Appellant, this amount represents the total of all the cheques that the
Appellant took directly to the Caisse populaire to negotiate for cash which she
then remitted to customers. The evidence discloses that the Appellant was in
the habit of proceeding in this manner during the period in issue in order to
help certain customers who did not have a bank account. The Caisse populaire's
microfiches identify these transactions and show that these amounts were,
indeed, not deposited. The testimony of the Appellant and Mr. Bérard, and
the fact that these transactions could be isolated, are sufficient support for
my finding that they should be subtracted from the unreported income. Since the
auditor testified that he took them into consideration in his calculations, and
that they were added to the deposits, the total undeposited DSLs for the year
1997, in the amount of $48,786, must be subtracted from the unreported income
amount of $42,117. The result is that there seems to be no unreported income in
1997.
[45] The situation in
1998 is somewhat different. Even if the $36,831 in undeposited DSLs is
subtracted from the unreported income of $185,520, there remains a balance of
$148,689. According to the auditor's report, significant amounts were already
removed from the deposits. Moreover, the Appellant's reported income of
$48,527, and the $21,935 in revenues from the bar for the first two months of
operations prior the sale to the Corporation, plus the GST and QST on those
revenues, were subtracted from the deposits. Since the Appellant's only income
is her rental income and old age pension, it is difficult to accept that such deposits
could have come from such sources considering that the Appellant operated her
business for barely two months. The same comment can be made with respect to
the year 1999.
[46] According to the
testimony of the Appellant and Diane Leclerc, revenue from the video lottery
terminals continued to be deposited into the Appellant's account for
approximately six months pending the transfer of the permit and because
Loto-Québec had the authorization to withdraw what it was owed automatically
from account #8352. Certain deposit slips mention the fact that the deposits
were for Loto-Québec, and the amount of all deposits identified in this manner
is $24,964. While the transition period strikes me as somewhat lengthy,
I find the situation plausible, and would therefore allow the subtraction
of an additional sum of $24,964 from the unreported income for 1998.
[47] The Appellant
submits that she also deposited $1,000 in cash that her son Guy gave her every
month as compensation for the lodging that she provided him and his wife, and
for the rental of the garage that he occupied. Based on the testimony that
I have heard, I find that the Appellant did not report this income in her
tax returns, even though part of the amount was for the rental of the garage to
her son. Since the Appellant kept envelopes at home containing cash, it is
difficult to believe that she deposited this amount every month and did not use
it for her day‑to‑day needs. Thus, I am not satisfied, on a balance
of probabilities, that this amount of $1,000 per month was actually deposited
in 1998 and 1999 as she claims.
[48] Accountant Claude
Bérard, like the Appellant, explained that the amounts deposited into account
#8352 come from the cash that she kept at home or in her safety deposit box,
because she received considerable amounts as an inheritance and in insurance
money — for a total of $79,269, according to the accountant's
calculations — after her husband and others
died. As I have said, the Appellant and her son claim that these amounts were
split evenly. All of these amounts would also need to have been deposited in
1998. First of all, nothing in the evidence suggests to me that the Appellant
changed her cash retention habits, and secondly, the Appellant certainly cannot
have needed to deposit this money in order to provide for herself because, here
again, the evidence, specifically the witness Claude Bérard's calculations of
the difference in net worth, showed us that the Appellant's lifestyle was very
modest. Her personal expenses were estimated at
roughly $30,000 per year. I see nothing that could justify the
deposit of such considerable amounts, particularly in 1998, assuming, of
course, that the bar was actually sold in February of that year and that the
Appellant's income after that date consisted only of rental payments and her
pension.
[49] The situation in
1999 is quite similar, except that the amount of money that the Appellant
deposited was almost 50% lower. Nonetheless, it is difficult to understand how
so much money could have been deposited given the Appellant's
potential income. According to the auditor's table, $88,982 was deposited
into the account, and she reported $24,982 in income. If I subtract the $19,094
in undeposited DSLs, there remains $51,641 in deposits for which there are few
explanations. According to Mr. Bérard, these deposits continued to consist of
money that the Appellant kept at home or in her safety deposit box. Still,
given her lifestyle, it is difficult to believe that she would have deposited
this money to tide her over at the end of each month, not to mention the
apparently inexhaustible supply of funds to be deposited without any plausible
explanation as to its origins. In conclusion, the unreported income for the
year 1998 is $123,725, and the unreported income for 1999 is $51,641.
[50] Could it be that the
amounts deposited by the Appellant in 1998 and 1999 consist of some of the
income from the bar, despite the fact that she sold her business to the
Corporation? The financial statements and income tax returns of the Appellant,
and the documents related to the incorporation of the Corporation, report a
sale transaction involving the bar's operations. However, in my opinion, there
is evidence that impugns the legitimacy of this transaction. The backdrop
obtained from my assessment of the evidence can be summarized as follows:
(a) Because
of the bar's home-cooked bookkeeping and accounting, it is impossible to
account for the sales, so the financial statements are prepared based on the
deposits. Since the Appellant was audited in previous years, she should have
known that these deficiencies needed to be rectified.
(b) This
is a business in which many transactions are done in cash, and that makes it
easy to not leave a trace.
(c) The
Appellant keeps envelopes at home containing significant amounts of cash
consisting of her personal funds and revenue from the bar.
(d) The
Appellant has a bank account in which she commingles and manages her personal
money and money from the bar.
(e) The
Appellant has another bank account into which she makes deposits and from which
she makes withdrawals, but the money belongs to her son. There are large cash
deposits into the account, and there are cheques signed by the Appellant that
are drawn on the account, including certain cheques in repayment of debts that
she and her son owe Revenu Québec.
(f) The
Appellant's son operates a garage in which he purchases, repairs and sells
automobiles, most of which are registered to the Appellant. The vehicles
include a Corvette, motorcycles, and other cars identified by the evidence.
(g) The
only explanation provided by the Appellant and her son Guy with respect to the
existence of account #13399 is that the son did not like to go to the Caisse
populaire and that his mother always looked after that for him.
(h) The
Appellant admits that when her husband Gaétan Boucher died, she withdrew
the $30,323 that had been deposited into her bank account, and kept that cash
in a safety deposit box on the pretext of protecting it from income tax, and
that, for the same reasons, she saw fit to do the same thing with the $19,107
in life insurance that she received upon the death of her husband and the
$25,065 in life insurance that she received upon the death of her friend Ronald
Pearson.
(i) Strangely,
the Appellant also decided to share her husband's insurance proceeds and
inheritance with her son Guy in equal shares even though there was no legal
obligation to do so.
(j) Guy
Boucher claims that his approach to bank accounts, which consists of having an
account under his mother's name for his own use and handing over cash, is due
to the fact that they do everything in a [TRANSLATION]
"family-oriented" way.
(k) Diane
Leclair is the sole shareholder and director of the corporation that purchased
the bar in February 1998. She cannot explain where the idea of
incorporating a corporation came from, but she says that it is a way to protect
oneself. She adds: [TRANSLATION] "I wasn't going to leave it under her
name; I put it under a numbered company." She says that she thought
of the idea on her own, that she did not mention anybody, that she told her
husband Guy that she would appoint him as manager, and that he was pleased. She
did not discuss with him the idea of his being a shareholder or director, and
she adds that she did not need him. She believes that she paid $17,000 in the
form of 17 monthly cheques of $1,000 to purchase the assets; she adds that she
has no idea and that she is not certain.
(l) According
to the Appellant, the purchase price was $16,000.
(m) No
contract of purchase or sale was tendered in evidence.
(n) Diane
Leclair worked full-time as a seamstress.
(o) I
have trouble believing that it would take six months to transfer a
Loto-Québec permit as part of a sale of a business at arm's length.
(p) According
to the report on the audit of Guy Boucher, Mr. Boucher filled out a
credit application in 1998 claiming that he had been the owner of Bar Le
Griffon for three years. He refers to the purchase of the bar by his
wife's company, and the report states that Mr. Boucher is heavily involved in
the operation of the bar. I find it strange that Ms. Leclair told the
Court that her husband was pleased when she informed him that she would appoint
him as manager.
(q) According
to Guy Boucher, the practice of keeping cash in safety deposit boxes or at home
originated with his father and even his grandfather. However, his father had a
bank account with nearly $30,000 in it upon his death.
[51] In my opinion, the
testimony of the Appellant, her son and his wife provides sufficient evidence
to question the legitimacy of the manner in which they manage their affairs. In
light of these circumstances, it should come as no surprise that I find
that this situation results from a deliberate intent to avoid their tax
obligations. In my opinion, the transfer of the bar's assets to the Corporation
did not change the management in the slightest. The Appellant and her son
continued to operate the bar. The Appellant continued to exchange cheques and make
deposits, so she continued to be present. In my opinion, her son simply
continued to look after the bar, and he was certainly not appointed manager by
his wife.
[52] In my opinion, this
transfer to the Corporation was gradual, and the Appellant continued to deposit
a part of the bar revenues into her bank account even after the purported sale.
A cursory examination of the deposit slips shows that the deposits were made
regularly and included $5, $10, $20, $50 and $100 bank notes.
Certain cheques on which the name of the drawee is stated cannot have come
from her tenants, because the names of the drawees were not the same in the
subsequent month's deposits. In my opinion, the deposits are consistent with
the operation of a bar, and thus, the sale to the Corporation served only to
create a legal entity that was not actually distinct from the Appellant and her
son, except insofar as the sharing of the revenues gradually changed. In
practice, the Corporation simply became an additional member of the family.
[53] Given this
allocation of bar revenues between family members during the period in issue,
the Appellant was required to file a return under subsection 238(2) of the Act.
Even though the Corporation, Guy Boucher and his wife were assessed for
additional income associated with the bar, such, in my opinion, are the
consequences and the price to pay for seeking to confuse all one's assets.
[54] It is my opinion
that the Respondent has established on a balance of probabilities that the
Appellant continued to operate a business making taxable supplies and, thus,
that she carried on a commercial activity within the meaning of the Act. In my
opinion, ceasing to file returns, while knowing that one is continuing to
receive part of the income from a business, constitutes a misrepresentation
attributable to wilful default which permitted the Minister to make an
assessment at any time under subsection 298(4) of the Act. The penalty provided
for in section 285 of the Act was warranted for the same reason. I cannot
disregard the fact that the Appellant has already been audited. Moreover, the
books of account that she kept facilitated the avoidance of her tax
obligations. The amounts of cash in her possession at all times, and the
jumble of bank accounts, made it easy to not leave a trace of her commercial
transactions or those of her son. The Appellant was an experienced
businesswoman who, in my opinion, was aware of the benefits of operating in
such a manner. Thus, the Deputy Minister of Revenue was justified in imposing
the penalty under section 285.
[55] For these reasons,
the appeal is allowed in part. The assessment is referred back to the Minister
of National Revenue for reconsideration and reassessment on the basis that
there is no unreported income for 1997, that the unreported income for 1998 is
$123,725, that the unreported income for 1999 is $51,641, and that there is no
unreported income for 2000.
Signed at Montréal, Quebec, this 11th day of April
2006.
"François Angers"
on this 1st day of
May 2007.
Susan Deichert,
Reviser
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