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Citation: 2005TCC83
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Date: 20050304
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Dockets: 2004-2206(IT)I
2004-2209(GST)I
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BETWEEN:
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YEUNG KWONG CHEUNG,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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AMENDED REASONS FOR JUDGMENT
Rowe, D.J.
[1] The appellant - Cheung - appealed
from assessments of income tax for his 1999, 2000 and 2001
taxation years. When filing his return of income for the years
under appeal, the appellant reported business income of $3,496
for 1999, $3,410 for 2000 and $3,495 for 2001 and total family
income in the following amounts: 1999 - $6,996; 2000 - $9,355;
2001 - $10,465, as referred to within Schedule "A" of the Reply
to the Notice of Appeal (Reply) filed in respect of appeal
2004-2206(IT)I. The Minister of National Revenue (the
"Minister") undertook a net worth analysis and concluded the
appellant's income in those years was under-reported for the
years under appeal, as follows: 1999 - $42,892; 2000 - $42,024;
2001 - $42,139. Details of the appellant's personal expenditures
- as assumed by the Minister - were provided in Schedule "B" of
said Reply.
[2] The appellant was generating
income as a practicing Certified General Accountant (CGA) and the
Minister - pursuant to the relevant provisions of the Excise
Tax Act (the "ETA") - issued a Notice of Assessment -
number 11BU0500057, dated February 13, 2003 - in which
Cheung was assessed for unreported Goods and Services Tax (GST)
in the sum of $33,475.75 together with a penalty of $5,076.02 and
interest of $3,300.51 for the reporting periods from January 1,
1998 to December 31, 2001. Following objection by the appellant,
the Minister - by Notice of Decision dated December 10, 2003 -
confirmed the assessment. The appellant appealed from this
confirmation and counsel for the respondent applied for an Order
that these appeals be consolidated and heard on common evidence.
The application was granted pursuant to Rule 26 of the General
Rules of Procedure which I held was applicable to the within
proceedings since there was no corresponding rule in the Rules
respecting informal procedure and there was a common question of
law and/or fact arising out of the same series of
occurrences.
[3] Yeung Kwong Cheung testified in
Cantonese and the questions and answers and other aspects of the
proceedings were translated from English to Cantonese and
Cantonese to English by Linda Clipperton, interpreter.
[4] Cheung stated he was born in Hong
Kong - in 1954 - and came to Canada in 1989. He is married and
the father of two children born in 1994 and 1996, respectively.
He and his wife and children live in Richmond, British Columbia,
in a house purchased jointly with his mother in 1994. He and his
wife each own 25% and his mother owns 50%. The house was
purchased outright in accordance with the precepts of his culture
which advocates a reduction of living expenses in order that a
family may pursue a stable lifestyle devoid of worry about paying
interest charges in respect of a large mortgage on a family home.
In 1996, the appellant obtained his CGA designation and was a
partner with Iris So in a two-person accounting firm - So &
Cheung - without any employees. A business licence for the firm -
issued by the City of Richmond - for the 2000 year was filed as
Exhibit A-1. Cheung stated he is certain the Minister considered
him to have been a sole practitioner in the accounting business
even though it was always a partnership with Iris So, who had
obtained her CGA designation about 1994. Iris So was the manager
of business operations and signed documents on behalf of the
partnership and was the sole signing authority on the So &
Cheung bank account at the Hongkong Bank of Canada (HBC) in
Richmond. Rent cheques to the landlord - Exhibit A-2 -
were signed by So. Cheung stated So dealt with other matters such
as completing a registration form - Exhibit A-3 - for purposes of
the Business Watch program. Cheung explained the office procedure
was as follows: he issued invoices to his clients and when paid,
he handed the cheques to Iris So in order that she could deposit
them to the firm bank account. Each month, So prepared a
statement of expenses and classified them as pertaining to
business or to personal expenditures. Then, So calculated his
total earnings, subtracted his share of office and business
expenses and issued him a cheque for the balance. Cheung prepared
a diagram on a sheet with attached documents - Exhibit A-4 - in
order to explain the process followed. Included in those
documents is a sample invoice to a client, a photocopy of an
adding machine tape, a statement of expenses prepared by So, and
a copy of Cheung's Toronto-Dominion (TD) bank statement - for the
period from September 30, 1999 to October 29, 1999 - in respect
of the joint account operated with his wife. Cheung referred to
the deposit of $1,900.36 on October 29, 1999, which corresponded
to the amount of his entitlement according to the calculations
undertaken by Iris So. Cheung referred to a Schedule for 1999 and
attached documents- Exhibit A-5 - that he
prepared in order to meet with Munief Mohammed -
Canada Customs and Revenue Agency (CCRA) auditor. In that
Schedule, according to Cheung's statement of net business income
for 1999, he earned the sum of $20,434.66. Following the meeting
with Mohammed, Cheung prepared a two-page statement of income and
expenses - Exhibit A-6 - in which he also set forth his
understanding of details of an agreement he considered had been
reached as a result of discussions with Mohammed. By preparing
said statement, Cheung acknowledged that his business income in
1999 was considerably greater than originally reported in his
income tax return. In said statement, he referred to receipt of
certain funds by way of gift and produced a Customer's Receipt
- Exhibit A-7 - issued by Royal Bank of Canada
(Royal) indicating he received the sum of $6,000 CAD which he
attributed to his share of the estate of his deceased aunt. The
appellant stated his mother had a pension from her previous
service as a school principal in Hong Kong and contributed to
family food purchases which he estimated were $4,300 per year. He
filed - as Exhibit A-8 - a State of Title Certificate from the
Land Title Office in New Westminster, B.C. indicating there was
no mortgage on the family residence. He filed a City of Richmond
tax certificate for 2000 - Exhibit A-9 - in respect of the family
residence, showing a total amount payable of $1,310.40. Insurance
for the house was $474 per year according to the invoice -
Exhibit A-10 - issued by the insurer. The water, sewer and waste
management invoice - Exhibit A-11 - issued by the City of
Richmond indicated a total billing of $502.90 for the year 2000.
Cheung estimated the annual bill for BC Hydro was about $1,000
and that he spent approximately $300 per year for the purchase of
small items needed for maintenance of the home. He estimated
annual telephone costs were around $360 and produced a typical
bill - Exhibit A-12 - in the sum of
$29.70 - for the month of January, 1999. As a result of his
calculations, Cheung concluded that his household expenses were
only about $3,600 per year. He stated his family did not spend
much money on clothing and considered an annual expenditure of
$1,500 was reasonable rather than the amount of $3,118.83 assumed
by the Minister. With respect to transportation, Cheung stated
the family used a 1993 Honda Civic registered in his wife's name
and the annual cost of insurance was $1,187 for the period May,
1999 to May, 2000, as shown on the Insurance Corporation of
British Columbia (ICBC) Owner's Certificate, filed as Exhibit
A-13. The appellant estimated gasoline consumption required an
expenditure of $15 per week - $780 per year - as fuel prices were
much lower during the years under appeal as indicated by the
photocopy - Exhibit A-14 - of 3 gas station receipts ranging from
$14.51 to $16.97. The appellant stated he and his family were not
required to pay Medical Services Plan of British Columbia (MSP)
premiums due to their low annual family income. Cheung stated
that because the children were young, he and his wife did not go
out much and entertainment was limited mainly to watching
television. The cable connection cost $51.25 per month according
to the statement - Exhibit A-15 - issued by Rogers
Cable TV in January, 1999. Cheung referred to a draft income tax
return - Exhibit A-16 - he had prepared in order
to reflect what he considered would have been an accurate
portrayal of his tax situation - in 1999 - if it had been filed
for that taxation year. In that draft, he calculated his net
income - and taxable income - was $19,734. Cheung's annual CGA
membership - Exhibit A-17 - was in the sum of $682.66. Cheung
acknowledged that he had originally reported the sum of $3,496 as
constituting business income for 1999 rather than the sum of
$20,434 he currently adopts as the proper amount and - further -
regards that amount as one which had been accepted by Mohammed as
representing the true state of Cheung's business revenue. Cheung
stated he prepared a statement - Exhibit A-18 - showing the
effect on the total of personal expenditures once the proper
amount for income tax had been inserted rather than using the
inflated figure supplied by the Minister which was based on an
excess amount of income. The net result - according to Cheung -
was that he and his wife and children had personal expenditures
of $20,060 in 1999. The appellant stated he had only been
practicing as a CGA since 1996 and his clients were mostly Asians
who were not accustomed to paying expensive accounting fees. He
denied that the income of the accounting practice was $117,692.31
- as assumed by the Minister - based on Statistics Canada
(StatsCan) numbers gathered in respect of revenue earned by
accountants. Cheung referred to the GST return - Exhibit A-19 -
filed by Iris So - on behalf of So & Cheung for the
1997 year - in which the sum of $39,037 was reported as gross
revenue. Cheung explained his rates were dependent on the sort of
work performed. If it was something that ordinarily would be done
by a bookkeeper, then he charged his time out at between $8 and
$10 per hour but when performing the type of work usually
associated with an accountant holding a designation, he billed
clients at $25-$30 per hour. Since So & Cheung had no
accounting students or other employees, the ordinary work had to
be performed by him and/or Iris So in order that they could offer
competitive rates for those tasks and retain their clients for
more lucrative work such as preparing financial statements and
income tax returns. Cheung stated the firm's rent was only $600
per month because he and So occupied only 400 square feet in an
upstairs office and they kept other expenses to a minimum so that
their total office expenses were about $10,000 per year. Their
joint revenue was approximately $50,000 which permitted them to
divide the $40,000 profit in accordance with their own billings
to personal clients. Cheung stated that even though his
explanation for personal and business expenses related primarily
to 1999, there would be very little difference in those numbers
- representing either income or expenses - in the
following years, 2000 and 2001.
[5] Turning to the matter of the GST
assessment, the appellant stated he was not registered for GST as
a sole proprietor until May, 2002, as he and Iris So did not
dissolve their partnership until the end of 2001. The appellant
stated he had determined his taxable income was $20,434.66 for
the 1999 taxation year and that it was probably 7% higher in 2000
and had increased by the same percentage again in 2001 for a
total gain of nearly 15% in comparison with 1999 revenue. Cheung
acknowledged that he reported business income in the sums of
$14,300, $14,380 and $14,811, respectively for 1999, 2000 and
2001. He explained this understatement of income on the basis
that he had been confused - three years consecutively - because
he had reported only 6 months business income - instead of a
complete year - for 1999, and continued thereafter to make the
same mistake. Cheung stated that although he and So divided
business expenses equally, they did not share revenue on the same
basis. His share of revenue was based strictly on payments
deposited to the bank for work performed for his own clients and
once his 50% share of monthly office expenses was calculated - by
So - she issued him a cheque for the proper net amount. Each
deposit slip was marked by So to indicate whether the cheque was
from one of his clients and she would make the notation "YK"
beside the entry to denote it was to be credited to him. The
appellant stated that all invoices were sent to clients on So
& Cheung letterhead and a client would not be aware of the
system in place between himself and Iris So to apportion revenue
based upon which person had performed the work. Since the firm
did not have a lot of clients and most of them handed over a
cheque while in the office, Cheung stated it was not difficult to
identify which partner was entitled to the proceeds of a cheque.
The appellant stated that even though he made an error when
calculating the amount of GST owed, the arrears were not in the
amount claimed by the Minister in accordance with the document -
Exhibit A-21 - prepared by Munief Mohammed.
[6] Yeung Kwong Cheung was
cross-examined by counsel for the respondent. Cheung agreed the
issue before the Court was the amount of under-reported income
for the years under appeal but stated the sums suggested by the
auditor were incorrect. Cheung confirmed that in the course of
his accounting practice he prepared income tax returns
- both personal and corporate - and had passed a
written examination - in English - in order to become qualified
as a CGA. He also agreed he was bound by the code of conduct and
ethics as established by his professional association. Counsel
referred the appellant to a web listing for the firm of Y.K.
Cheung & Co. and to the preferred areas of practice listed
thereon which included performing accounting work in the
hospitality industry and for businesses involved in retail,
preparing tax returns and dealing with non-resident
taxation issues. The appellant agreed that listing accurately
described his current practice. Counsel directed the appellant to
his 1999 tax return - Exhibit R-2 - which was not filed until
August 11, 2000. In that return, the appellant reported his gross
business income was $14,300 and his taxable income was only
$3,690. According to the Statement of Professional Activities -
Form T2032 - filed with the tax return, the appellant's business
income was $14,300 and his expenses were in the sum of $10,804,
resulting in net income of $3,496. Counsel suggested to the
appellant that it should have been apparent these numbers were
not correct and Cheung agreed he had been negligent when filing
the return in that manner. In filing his return of income for the
1999 taxation year, Cheung acknowledged he had included a receipt
for a charitable donation - in the sum of $3,810 - issued by the
Anglican Church of Canada, Diocese of New Westminster. He
explained that he and his wife, as well as his mother and friends
of their family, made donations using envelopes with a particular
number printed thereon so that the contents were credited to his
donation account since it had been established in his name. The
appellant conceded he had reported all his business expenses in
1999 even though he had reported less than 50% of his income.
Cheung stated that when filing his 2000 and 2001 returns, he had
relied on the 1999 revenue as a basis for reporting and had not
noticed the error until it was made apparent during the audit
procedure. The appellant agreed that when signing his 1999 return
- filed August 11, 2000 - he certified the information given on
the return and in any documents attached was correct and that the
return was complete and disclosed all his income. Cheung
was referred to his return of income for the 2000 taxation year -
Exhibit R-3 - wherein he reported gross business revenue in the
sum of $14,380 and expenses of $10,970.11, resulting in net
business income of $3,409.89. The return was filed on August 10,
2001. The appellant agreed he had reported rent in the sum of
$3,150, a greater amount than in the previous year when it had
been only $2,730. Cheung explained he had been in a hurry when he
filed his returns and had not taken into account the proper
amount of gross business income during the years under appeal.
The appellant filed his 2001 tax return - Exhibit R-4 - on July
19, 2002 and reported gross business income in the sum of $14,811
which, after deducting expenses of $11,316, resulted in net
business income of $3,495. Cheung reiterated his admission that
he had been negligent when filing these returns and conceded he
had not properly disclosed his income. Cheung agreed he received
the letter - dated August 29, 2002 - from Munief Mohammed in
which Mohammed listed items numbered #1 to #14 that he wanted
produced for inspection. Cheung agreed he had not produced most
of the items requested, including any general ledgers or journals
and that he had not shown Mohammed the documents now entered as
Exhibits A-4, A-5 and A-6 in these proceedings in which he
explained - inter alia - his method of receiving revenue
as well as providing details of personal and household expenses.
Cheung stated that during the meeting with Mohammed, he accepted
that his income had been under-reported for the years under
appeal. He stated he informed Mohammed that he was unable to
produce statements on the So & Cheung account because Iris So
had been the sole signing authority and the bank would not give
him that information. Since all cheques payable to So &
Cheung had been deposited to the firm bank account, Cheung stated
it would not have been difficult for the Minister to confirm the
total amount of deposits to that account. The appellant recalled
Mohammed had mentioned that he would be relying on certain
information gathered by StatsCan in the course of his audit.
However, Cheung stated he had not been informed by Mohammed that
he was the subject of a net worth assessment. Instead, Cheung
stated that upon leaving the meeting with Mohammed, he was
convinced an agreement had been reached with regard to the
correct amount of taxable income in each of the three years at
issue but never received any subsequent confirmation - from
Mohammed - of that arrangement. Cheung stated he attempted to
arrange a meeting with Mohammed's supervisor but was refused.
However, he still provided additional information prior to the
final assessment being issued. In terms of providing a full set
of statements with respect to the personal joint account at TD,
Cheung stated he considered that course of action would have been
too expensive since the bank charged a fee for that service.
Although the Appeals Officer requested bank statements on the So
& Cheung account, the appellant stated he made it clear that
he was in no position to provide information because Iris So had
been the sole signatory. In response to a query from the Bench,
Cheung stated he had not asked So to provide this information
because their relationship had suffered as a result of the
dissolution of their partnership. He agreed with counsel's
suggestion that the only statement - Exhibit A-4
- ever produced with respect to the TD account had not been shown
to the Appeals Officer nor had he provided the information in
Exhibits A-4, A-5 and A-6. The appellant stated that when meeting
with the Chief of Appeals, he handed over a copy of what is
currently Exhibit A-20, pertaining to the 1999
taxation year. Cheung explained that in his own mind there was no
point in providing any further bank statements because the Notice
of Confirmation had been issued and he had been advised that the
only remaining course of action was to appeal to the Tax Court of
Canada. He confirmed that Exhibit A-4 - the diagram and chart
with attached documents and photocopies of adding machine tape
and TD bank statement - had not been produced to counsel for the
respondent until September 15, 2004. The opening entry on the
statement for the period ending October 29, 1999, showed a
balance of $8,378.63, as of September 30, 1999. Cheung stated the
Appeals Officer had not requested any statements on his TD joint
account and agreed he was aware there is a duty to provide
information to the Minister, particularly following a demand for
specific items. Cheung stated his position was that even though
he had not reported all his income for the years under appeal,
the position advanced by the auditor on behalf of the Minister
was incorrect and was based on unreliable information.
[7] Munief Mohammed testified he is
employed as an auditor by Canada Revenue Agency (CRA) - successor
to CCRA - and that his duties include verifying information
contained in an income tax return and examining documents
relevant to that return. He stated his audit of the appellant
commenced in a normal manner and that he had been aware Cheung
was a CGA. He contacted Cheung by telephone and stated he acceded
to the appellant's somewhat unusual request that the meeting not
take place for one month in order that Cheung have sufficient
time to prepare. Mohammed stated that - usually - auditors attend
at the taxpayer's place of business but Cheung wanted to attend
an interview at Mohammed's office. In the interim, Mohammed sent
Cheung the letter - Exhibit R-5 - requesting that he
produce certain documents and records. At the meeting, Mohammed
stated he informed Cheung of the purpose of the audit and that it
pertained to both income tax returns and GST arrears. At that
time, Cheung produced some documents such as invoices to clients
and other pieces of paper pertaining to expenses as well as a
sheet on which the numbers purported to record Cheung's income.
Mohammed stated the expenses appeared to be in order but he
wanted to verify Cheung's income and needed to examine ledgers or
deposit records and bank statements. Mohammed stated Cheung
promised to fax bank statements as soon as he returned to his own
office but never did so even though he had been advised of
potential consequences for failing to comply with demands for
information. While speaking to the appellant, Mohammed stated he
learned Cheung, a married professional with two young children,
was in a situation similar to his own and had commented to Cheung
that in his personal experience it required an annual cash flow
of at least $48,000 to maintain a reasonable lifestyle and to
make payments on a residential mortgage. Mohammed stated Cheung
advised he did not have a mortgage on his family home and that
his mother also paid some household expenses. Mohammed stated he
was prepared to take that information into account when
calculating the personal and household expenses and the amount of
income required to cover the cost thereof and that even though
Cheung's expenditures might be lower than the general averages -
as compiled by StatsCan - the onus was on the appellant to
demonstrate that was so. In the course of their discussions,
Mohammed suggested Cheung's net business income - as reported -
was too low by at least $15,000 per year and that in the absence
of reliable documentary and other evidence pertaining to income
and expenses, the net worth method would be utilized and during
that process much of the information would be from numbers,
amounts and averages collected by StatsCan. Apart from that
explanation to Cheung, Mohammed stated he is aware that the net
worth procedure is well known to anyone who has obtained an
accounting designation such as CGA. Mohammed made notes of his
interview with Cheung and included them in a typed document -
Exhibit R-6 - he prepared in which he also detailed other steps
taken in the course of his dealings with the appellant. In
addition, Mohammed completed a Memo for File - Exhibit R-7 - in
which he recorded ongoing activity in respect of the Cheung
audit. At all times material, Mohammed had voicemail at his
office and stated he had not received any messages from Cheung as
the appellant had claimed. During the interview with Cheung,
Mohammed stated the appellant had not disclosed that he had been
in a partnership with Iris So and that after two months, Cheung
had not provided any bank statements on the account used by that
accounting firm. Mohammed referred to the Statement of
Professional Activities, as contained in the 1999 tax return
- Exhibit R-2 - on which the appellant stated he was
entitled to "100%" of the partnership and, as a result,
considered the appellant had intended to show he was a sole
proprietor. Mohammed stated he consulted with his Team Leader and
decided to prepare a proposed net worth assessment based on
averages and information obtained from StatsCan and sent a copy
of his finished work to the appellant with the intent that it
would "shock him into providing some bank statements". As noted -
in Exhibit R-7 - Mohammed telephoned Cheung on October 31, 2002
and asked for bank statements which had not been provided, as
promised earlier. At that point, Mohammed noted Cheung denied
having been asked for said statements, hung up the phone and did
not respond when Mohammed called back immediately thereafter.
When preparing his net worth assessment, Mohammed stated he used
the relevant schedules contained in the document - Exhibit R-8 -
and was concerned mainly with the amount of personal expenditures
required to sustain a family of four in circumstances similar to
the Cheungs. In Schedule IV of said exhibit, Mohammed estimated
Cheung's income was $50,019.25 in 1999, $51,377.24 in 2000 and
$52,689.66 in 2001. He agreed these figures included an allowance
for income tax of $15,684.95 in 1999, $16,110.78 in 2000 and
$16,522.42 in 2001, as though those sums had been paid or - at
least - were required to have been paid. Later, Mohammed prepared
an amended statement - Exhibit R-9 - pertaining to a
calculation he had undertaken in respect of the amount of GST
that should have been remitted by the appellant for the period
covered by the assessment issued pursuant to the ETA.
Several worksheets were sent to the appellant for his perusal
including one in which Mohammed had used a StatsCan figure taken
from the bottom 25% of the complete range of income earned by
accountants in Canada and then applied a factor of 42.5% of gross
revenue to represent business expenses normally associated with
an accounting practice. For 1999, Mohammed determined that
Cheung's accounting practice should have grossed the sum of
$117,692.31 and since GST is collected on the gross amount
collected from clients, the appellant should have remitted
$8,238.46 since no Input Tax Credits (ITCs) were claimed in
respect of said income. Using the same method, Mohammed
calculated the appellant should have remitted the sum of
$8,462.13 in 2000 and $8,678.35 in 2001, based on gross revenues
of $120,887.55 and $123, 976.38, respectively. Even though there
was an acknowledgement that those amounts of gross revenue would
be subject to 42.5% expenses - on average - Mohammed stated he
was not permitted to take into account the effect of any
potential ITCs, because in order to do so there has to be
compliance with section 169(4) of the ETA which requires
supporting documentation. Upon receiving a fax from Cheung
containing a number for a GST account, Mohammed stated he checked
the CRA system but could not find any GST account in that name
that had been registered to receive remittances from the
appellant's accounting practice, although Cheung had a total of 5
separate accounts for GST pertaining to other business
activities. Although the GST return - Exhibit A-19 - was not
disclosed to Mohammed during the course of the audit, he has
since confirmed the appellant should be credited with the sum of
$1,084.85 in order to represent his 50% share of the GST remitted
during the period ending July 31, 2001 when Iris So had been
sending in the returns and remittances on behalf of So &
Cheung.
[8] In cross-examination by the
appellant, Munief Mohammed stated he had been compelled to
calculate GST on the basis of gross revenue and had not been
aware Cheung was operating within a partnership with Iris So,
particularly in light of the representation during all 3 years at
issue that the appellant was entitled to 100% of the proceeds set
forth on the Statement of Professional Activities contained in
the returns filed for 1999, 2000 and 2001 taxation years. In
addition, no bank statements were ever produced to confirm the
amount of deposits to the So & Cheung bank account during
that period. Mohammed stated he had never been provided with the
draft tax return - Exhibit A-16 - upon which Cheung currently
relies to assert that his taxable income was $19,734 for the 1999
taxation year. Mohammed stated he informed Cheung at the outset
of their meeting that his reported income was probably too low by
approximately $20,000 per year and that the final figure used for
purposes of a reassessment would result from the detailed process
as later demonstrated within the working papers. Mohammed denied
that he had agreed to any so-called arrangement whereby the
reassessment for the years at issue would be limited only to
those additional amounts conceded by the appellant. Mohammed
stated that the methodology employed to issue the assessments -
for income tax and GST - was a last resort and he would not have
had to use the net worth assessment method if Cheung had provided
reliable information concerning his business income and personal
expenditures.
[9] In re-examination by counsel for
the appellant, Munief Mohammed was referred to the bank statement
- last page of Exhibit A-4 - for one month in 1999 and agreed the
total withdrawals from that account were in the sum of $4,669.79
which - when annualized - amounted to over $56,000.
[10] By way of rebuttal evidence, the
appellant was permitted to state that the expenditures for the
month ending October 29, 1999 - as reflected by that particular
bank statement - are unreliable within the context of an entire
year because he recalled he was required to pay wages - on behalf
of a client - for that client's business and had used the TD
joint account for that purpose. The appellant was also permitted
to file - as Exhibit A-22 - photocopies of deposit slips to the
So & Cheung account for 1999. He stated these
copies demonstrated the amount of revenue generated by him during
that year since cheques payable to the firm by his own clients
were identified on said slips by the notation "YK" in the various
columns next to the amounts.
[11] Counsel for the respondent stated the
Minister was willing to concede that the appellant should receive
credit for 50% of the GST remittances made by his former
accounting firm - So & Cheung - during the assessed period
from January 1, 1998 to December 31, 2001, as follows:
1998 -
$122.35
1999 -
$400.17
2000 -
$408.18
2001 -
$122.35
[12] Counsel advised these amounts would be
taken into account by the Minister upon issuing any reassessment
required in order to comply with these Reasons.
[13] Prior to dealing with submissions
relating to relevant jurisprudence, counsel agreed with my
observation that the method followed by Munief Mohammed, whereby
he added an amount for income tax as though it had been paid by
the appellant, was not a reliable indicator of annual cash flow
since it was merely an hypothetical amount that should have been
paid if the appellant had earned an amount sufficient to permit
him to retain approximately $36,000 per year - after tax - for
personal expenditures.
[14] Counsel pointed out that the only
penalties to which the appellant had been subjected were
administrative in nature according to the relevant provisions of
the ETA. Counsel submitted that in order to arrive at a
reasonable amount of income generated by the appellant during the
years under appeal, it was necessary for the auditor to use
StatsCan data because the appellant consistently neglected and/or
refused to provide proper information in relation to his
accounting practice and in respect of his personal and family
expenditures. In view of that fact, Schedules "A" and "B" -
attached to the Reply in the income tax appeal- were relied
on by the Minister in paragraph 11(f) of the assumptions, and
counsel submitted the onus was on the appellant to demonstrate
the basis for those calculations was wrong and that other numbers
should be preferred by the Court. Counsel submitted the
methodology employed by the auditor was correct and should be
adopted - generally - in order to arrive at the amount
of income that the appellant should have reported during the
years at issue. Overall, counsel submitted the evidence was
capable of supporting a conclusion that the annual net business
income of the appellant was at least $35,000 per year in 1999,
2000 and 2001 and that the gross income of the business - for
purposes of determining the proper amount of GST remittances -
was approximately $50,000. Counsel further submitted that since
there were no eligible ITCs to reduce the amount payable, the GST
arrears were based on gross revenue for the period covered by the
assessment.
[15] The appellant submitted that he was
unable to provide banking information on the account of So &
Cheung because his former partner had been the sole signatory and
none of those records were in his possession. The appellant
conceded he had not correctly reported his income during the
years under appeal. However, he submitted the numbers used by the
auditor to arrive at annual income were flawed and that his
calculations - contained in Exhibit A-6 - for the 1999
taxation year should be viewed as a more realistic representation
of his revenue. The appellant stated he was prepared to abide by
that amount and suggested it was also applicable to the 2000 and
2001 taxation years since there was only a small difference in
both income and expenses since 1999. The appellant referred to
his testimony in respect of particular expenditures and submitted
his evidence and documentary proof should be preferred instead of
the estimated amounts used by the auditor which were based on
statistical averages and did not apply to his personal
circumstances. The appellant submitted that his share of the
small accounting practice was not capable of generating the
average gross revenue of between $115,000 and $120,000, and that
those amounts were used by the auditor to determine the amount of
GST that should have been remitted. The appellant referred to the
inheritance of $6,000 that he received in 1999 and to the
evidence that his accounting practice did not incur much expense.
He submitted it was apparent that he and his family typically
spent about 50% of the amount expended by the average Canadian
family on the various categories listed in Schedule "B" of the
Reply, filed with respect to appeal 2004-2206(IT)I.
[16] First, I will deal with the income tax
appeals for the 1999, 2000 and 2001 income tax years.
[17] Pursuant to subsection 152(7) of the
Income Tax Act, (the "Act") the Minister is
empowered to issue assessments - sometimes referred to as
"arbitrary" assessments - and to use any appropriate method
having regard to circumstances. Subsection 152(8) grants a
presumption of validity to such assessments and the traditional
onus rests on an appellant to demonstrate the assumptions of the
Minister are incorrect.
[18] In the case of Hsu v. The Queen,
2001 DTC 5459, the Federal Court of Appeal considered the appeal
of the taxpayer who had been reassessed by the Minister on the
basis of a net worth assessment. The judgment of the Court was
delivered by Desjardins J.A. and at paragraph 29 and following,
she stated:
[29] Net worth assessments are a
method of last resort, commonly utilized in cases where the
taxpayer refuses to file a tax return, has filed a return which
is grossly inaccurate or refuses to furnish documentation which
would enable Revenue Canada to verify the return (V. Krishna,
The Fundamentals of Canadian Income Tax Law,
5th ed. (Toronto: Carswell, 1995) at 1089). The net
worth method is premised on the assumption that an appeciation of
a taxpayer's wealth over a period of time can be imputed as
income for that period unless the taxpayer demonstrates
other-wise (Bigayan, ... at 1619). Its purpose
is to relieve the Minister of his ordinary burden of proving a
taxable source of income. The Minister is only required to show
that the taxpayer's net worth has increased between two
points in time. In other words, a net worth assessment is not
concerned with identifying the source or nature of the
taxpayer's appeciation in wealth. Once an increase is
demonstrated, the onus lay entirely with the taxpayer to separate
his or her taxable income from gains resulting from non-taxable
source (Gentile v. The Queen, [1988] 1 C.T.C. 253 at 256
(F.C.T.D.)).
[30] By its very nature, a net
worth assessemnt is an arbitrary and imprecise approximation of a
taxpayer's income. Any perceived unfairness relating to this
type of assessment is resolved by recognizing that the taxpayer
is in the best position to know his or her own taxable income.
Where the factual basis of the Minister's estimation is
inaccurate, it should be a simple matter for the taxpayer to
correct the Minister's error to the satisfaction of the
Court.
[31] Despite his contention that
the Minister's pleadings were inadequate, the appellant was
not deceived concerning the case against him. In the
auditor's October 4, 1996, proposal letter, the basis of the
proposed reassessments was communicated to the appellant. Any
confusion arising from the methodology set out in that letter was
clarified by Schedule "A" of the Minister's reply.
In the light of these documents, the appellant cannot now be
heard to say that the Minister determined the amount of the tax
without giving him a fair opportunity of meeting the case against
him.
[32] The Tax Court judge did not
err in concluding that the Minister's approach was a
variation of a net worth assessment. The Minister's
modification did not fundamentally change the nature of the
assessment. The Minister was entitled to make a rough estimate of
net worth based on an estimated annual appreciation. I do not,
therefore, accept the appellant's characterization that the
Minister relied on an unpleaded "property income"
method. Consequently, the Tax Court judge, in my view, correctly
concluded that the burden of disproving the reassessments lay
squarely upon the appellant.
[33] I would add that it was
open to the Tax Court judge to conclude that the Minister's
method for determining the appellant's income was reasonable
and logical in the circumstances of this case. Although the
Minister's reassessments were clearly arbitrary, it cannot be
forgotten that this approach was the direct result of the
appellant's refusal to disclose any financial information or
documentation. In Dezura, ... [(1947), 3 DTC 1101] at
1103-1104, the President of the Exchequer Court of Canada
explained:
The object of an assessment is the ascertainment of the amount
of the taxpayer's taxable income and the fixation of his
liability in accordance with the provisions of the Act. If
the taxpayer makes no return or gives incorrect information
either in his return or otherwise he can have no just cause for
complaint on the ground that the Minister has determined the
amount of tax he ought to pay provided he has a right of appeal
therefrom and is given an opportunity of showing that the amount
determined by the Minister is incorrect in fact. Nor need the
taxpayer who has made a true return have any fear of the
Minister's power if he has a right of appeal. The interests
of the revenue are thus protected with the rights of the
taxpayers being fully maintained. Ordinarily, the taxpayer knows
better than any one else the amount of his taxable income and
should be able to prove it to the satisfaction of the Court. If
he does so and it is less than the amount determined by the
Minister, then such amount must be reduced in accordance with the
finding of the Court. If, on the other hand, he fails to show
that the amount determined by the Minister is erroneous, he
cannot justly complain if the amount stands. If his failure to
satisfy the Court is due to his own fault or neglect such as his
failure to keep proper account or records with which to support
his own statements, he has no one to blame but himself.
[34] As the Tax Court judge
observed, the appellant has done nothing to ensure a full,
complete and correct audit. The appellant has consistently failed
to provide any evidence which would prove his actual income
during the period in question. Accordingly, he cannot complain
that the Minister has proceeded on the basis of speculative
assumptions.
[35] Given that the burden of
disproving the reassessments lay squarely with the appellant, it
is necessary to consider whether the appellant successfully
discharged that onus. In M.N.R. v. Pillsbury Holdings Ltd.
((1964), 64 DTC 5184 at 5188 (Ex.Ct.)), the Court explained that
an appellant can satisfy this burden in three ways:
(a) challenging the Minister's allegation that
he did assume those facts;
(b) assuming the onus of showing that one or more
of the assumptions were wrong; and
(c) contending that, even if the assumptions were
justified, they do not of themselves support the
assessment.
[36] The appellant did not
attempt to demonstrate that the Minister's assumptions were
wrong in fact. Further, for the reasons set out above, I
have rejected the appellant's contention that the Minister
proceeded other than by way of a net worth
assessment. Therefore, the only issue is whether the
assumptions, as pleaded, operate to support the Minister's
reassessments.
[19] In the case of Bigayanv. The
Queen, 2000 DTC 1619, Bowman, T.C.J. (as he then was) at
paragraphs 2-4, inclusive, described the net worth method of
assessment as follows:
[2] The net worth
method, as observed in Ramey v. The Queen, 93 DTC 791, is
a last resort to be used when all else fails. Frequently it is
used when a taxpayer has failed to file income tax returns or has
kept no records. It is a blunt instrument, accurate within a
range of indeterminate magnitude. It is based on an assumption
that if one subtracts a taxpayer's net worth at the beginning
of a year from that at the end, adds the taxpayer's
expenditures in the year, deletes non-taxable receipts and
accretions to value of existing assets, the net result, less any
amount declared by the taxpayer, must be attributable to
unreported income earned in the year, unless the taxpayer can
demonstrate otherwise. It is at best an unsatisfactory method,
arbitrary and inaccurate but sometimes it is the only means of
approximating the income of a taxpayer.
[3] The best method
of challenging a net worth assessment is to put forth evidence of
what the taxpayer's income actually is. A less satisfactory,
but nonetheless acceptable method is described by Cameron, J. in
Chernenkoff v. Minister of National Revenue,
49 DTC 680 at page 683:
In the absence of records, the alternative course open
to the appellant was to prove that even on a proper and complete
"net worth" basis the assessments were wrong.
[4] This method of
challenging a net worth assessment is accepted, but even after
the adjustments have been completed one is left with the uneasy
feeling that the truth has not been fully uncovered. Tinkering
with an inherently flawed and imperfect vehicle is not likely to
perfect it. The appellant chose to use the second method.
[20] By way of illustrating the inherent
difficulty in assessing income by way of the net worth method,
Judge Bowman - at paragraphs 14 and 15 commented:
[14] I am faced here with two
sets of unreliable numbers. The Department of National Revenue in
many instances used figures taken from Statistics Canada
("StatsCan") for the expenditures made by a family
consisting of a husband and wife and three children. No one
from StatsCan was called, nor was the assessor who used them. The
appellant's counsel had therefore no opportunity to
cross-examine on the figures used. I was given no evidence of the
way the StatsCan figures are arrived at. Both counsel agreed that
the StatsCan figures are a "national average", whatever
that may mean. What figures go into the determination of that
average, what methodology is used, what areas were taken as
representative, whether any weighting was done by reference to
the area from which the figures were taken - all these and many
other questions remain unanswered.
[15] The appellant's
estimates are just about as unreliable. The figures given in 1996
differ significantly from these given in 1999 at trial. I should
have thought that the earlier estimates would likely be more
accurate.
[21] With respect to the use of StatsCan
numbers, Judge Bowman went on to note that he was not prepared to
make any adjustment in respect of the personal expenditures
because, "unreliable as the StatsCan figures may be they at least
represent the Minister's assumptions that it was the appellant's
onus to demolish".
[22] The category of personal expenditures
is important in any consideration of the reliability of a net
worth assessment. An examination of cash flow is critical
because, as individuals and families are keenly aware, there must
have been a source from which funds were available so they could
be spent. The position of the appellant - in comparison to that
of the Minister - was set out on the second page of Exhibit A-6,
in respect of the 1999 taxation year. The figure used by Munief
Mohammed for a family of two adults and two children as
representing the cost of food was $6,083.24. The appellant
testified this sum was excessive and that the sum of $4,300 was a
better estimate of the amount needed to feed himself and his
family because his mother also contributed to the purchase of
groceries. Cheung stated that because there was no mortgage on
the house, the amount expended on taxes, insurance, water, sewage
and waste management, and ordinary maintenance amounted to less
than $3,000 per year. The figure used by Mohammed for the
category of Household Operation was $2,878.84. The appellant
estimated the proper expenditure under this category was only
$880 per year and testified that his telephone bill was about
$300 per year. There was no estimate provided for the cost of
electricity and/or gas other than the appellant's comment during
his direct examination that hydro cost about $1,000 per year.
According to StatsCan, the normal clothing allowance for a family
of two adults and two young children - in 1999 - was $3,118.83.
The appellant testified he and his wife did not go out much and
estimated they spent only $1,500 on clothing in that year.
Because their family car was a 1993 Honda Civic and used about
$800 per year in gasoline and was insured at an annual cost of
$1,187, the appellant asserted the sum of $2,300 was sufficient
to cover the costs of transportation rather than the sum of
$4,250.96 assumed by the auditor. The appellant's reported income
for the years under appeal was so low that the family's MSP
coverage was subsidized by the government and he paid only about
$300 in premiums instead of the normal amount of $1,089.35. The
appellant's position was that the sum of $500 was sufficient to
account for expenditures of Personal Material - whatever that may
be - instead of the sum of $1,162.39 relied on by the Minister.
The appellant testified that the cost of cable television - about
$600 per year - constituted the main entertainment expense for
his family and because the children were young, he and his wife
stayed at home except for visiting friends and attending church.
As a result, he took the position that $800 was an adequate
amount to attribute to the Recreation category instead of the sum
of $3,654.12 gleaned from StatsCan data. Regarding the matter of
expenditures for Education, the Minister assumed the sum of
$762.75 was reasonable; the appellant stated the amount actually
expended for this purpose was nil. The category of Security -
according to page 16 of Exhibit R-9 - is composed of amounts
payable for life insurance premiums, Employment Insurance (EI)
premiums, Canada Pension Plan (CPP) contributions and pension
funds, excluding any Registered Retirement Savings Plan (RRSP).
The Minister assumed the total expenditure within this category
was $4,114.27 while the appellant's estimate was $1,120. It is
obvious the appellant - a self-employed CGA - would not be paying
EI premiums nor would he be participating in any pension plan
other than a CPP contribution in an amount based on reported
taxable income. The appellant increased - to $3,000 - the amount
attributable to Gifts and Contributions from the sum of $1,272.99
used by the Minister. The appellant agreed his miscellaneous
expenditures were $1,000 and that the Minister's figure of
$1,018.39 was reasonable. The appellant did not pay the sum of
$15,684.95 in income tax as assumed by the Minister. Instead, he
paid nothing because his reported income in each of the years
under appeal was Nil. An amount payable - but not paid
- cannot be considered as a cash flow requirement. One does not
expend a deemed amount and - therefore - if not actually paid, a
debt - contingent or fully mature - does not diminish the supply
of money available for other current purposes. The situation
would be different if the method employed by the auditor was a
net worth in the usual sense where the difference in assets over
liabilities during the period under examination would be
determined by also taking into account any outstanding debt for
unpaid income tax on monies earned. In the within appeals, the
assessment mechanism utilized was for the purpose of determining
the amount of income required to service the cash flow
requirements of Cheung and his family for the years under appeal
without regard to the accumulation of additional assets or any
increase in equity with respect to existing property that could
have been attributable only to unreported income.
[23] The next question is whether the net
business income from the accounting practice was sufficient to
provide for the needs of the appellant and his family if it
produced only $30,000 gross per year, as claimed by the
appellant. I am satisfied on an examination of the documentary
evidence as well as the testimony of the appellant, that he had a
small accounting practice that catered to Cantonese-speaking
clients and that much of his work was billed out at rates usually
applicable to services provided by a student or an employee
working at or near minimum wage. The office was located in a
small space on the second floor and according to the amounts
identified on the deposit slips
- Exhibit A-22 - the gross income from his
own clients was about $29,000 in 1999, assuming - for the moment
- that all deposit slips were photocopied by the appellant and
also that all fees were payable by cheque since there is no
indication any cash was deposited. The appellant testified that
he and Iris So merely split office and related business expenses
rather than income and according to his own Statement of
Professional Activities - supplied with his 1999 tax return - his
total business expense was $10,804. This expense increased to
$10,970.11 in 2000 and to $11,316 in 2001. The expenses were in
line with the StatsCan average used by Mohammed in his working
paper but the gross income was low even when compared with the
bottom quartile of earnings for Canadian accountants.
[24] The appellant suggested the figures
supplied for 1999 should be used for the 2000 and 2001 years and
in terms of amounts attributable to categories of personal
expenditures that - without more - is not unreasonable since the
Minister's total estimate - based on StatsCan figures - increased
only 2.7% between 1999 and 2000 and by a further 2.5% in 2001.
However, there is no method by which to determine the amount of
the appellant's gross business income in 2000 and 2001 other than
his own estimate that it might have increased a total of 15%
during those years as compared to 1999. There are no records upon
which to arrive at this conclusion and the appellant chose not to
provide any details of his income other than by creating his own
sheets containing numbers that he asserted were reliable. The
appellant is not very credible overall. He was filing his returns
in July and August of each year - well past the end of the busy
April 30th filing deadline - and his claim that he was pressed
due to professional demands does not make sense since he was only
generating a small monthly gross income from his practice. His
explanation that he reported only 6 months business in 1999 - and
thereafter perpetuated the same mistake when filing returns for
2000 and 2001 - is ludicrous. The appellant is a CGA and
according to the ethics of his professional association was bound
to report his income - and that of his clients - in an
honest, forthright manner. His attitude throughout was difficult
to understand and he attempted to delay, hide, obfuscate, dodge
and twist at every opportunity. He is extremely fortunate that
the Minister did not levy penalties under the Act for
under-reporting income in the years under appeal as he was - by
his own admission - negligent. One could go further than that and
conclude it was deliberate. I am astounded that someone who has
lived in Greater Vancouver since 1989 and who obtained a CGA
designation by successfully completing a course of study - and
passed a written examination in English - can assert that he
requires an interpreter in order to appear in Court. It is not as
though Cheung was required to speak about a topic with which he
was not familiar; that would be understandable since a general
ability to speak a language adequately for everyday purposes is
often insufficient in a formal setting in which a command of
formal and/or technical language is required. The subject matter
of these appeals was Cheung's failure to report his business
income and to remit GST, as required. He is a practicing CGA, yet
was unable to testify about these matters except through a
Cantonese interpreter. The appellant's explanation that the
amount of money - $4,669.79 - going through his personal bank
account in October, 1999, was not representative of normal
monthly flow - because he paid some wages for a client from that
account - is not reasonable nor is it remotely credible. He did
not cooperate with Munief Mohammed - as alleged - and while there
is no duty to do so other than by providing information demanded
by the Minister, the appellant attempted to blame Mohammed for
not obtaining certain information relevant to the audit. In
respect of these matters, I accept Mohammed's version of
events.
[25] The issue still remains: how does one
determine the amount of the appellant's business income for the
years under appeal. The remainder of the appellant's income and
personal deductions were not at issue so a determination of net
business income for those years will enable the Minister to
reassess the appellant using that number for the relevant
taxation year and applying it to other calculations, as required.
Further, the Minister can use the gross amount of business income
in each year for the purpose of determining the amount of GST
owing for the period covered by the assessment after taking into
account the amounts to be credited to the appellant as conceded
by counsel earlier. Pursuant to the provisions of subsection
241(1) of the ETA, the effective date of the appellant's
GST registration was changed from a date in 2002 to January 1,
1998.
[26] Each time one looks for independent
corroboration for a material statement coming from Cheung's
mouth, it is not there. He relies on his figures as contained in
Exhibit A-5 - pertaining to the 1999 taxation year -
on the basis these calculations accurately reflect the income and
expenses of his accounting practice. In those calculations, he
states his rent was in the sum of $3,000. However, in the
Statement of Professional Activities contained in his tax return
- Exhibit R-2 - he reported rental cost of $2,730. Within Exhibit
A-5, the appellant showed an insurance expense of $700 whereas in
the statement included in his return, that expense was only $460.
According to Exhibit A-5, the total office expenses were
$5,074.02 yet the overall business expenses amounted to
$10,804.00 according to the 1999 tax return filed by the
appellant. If the allowable portion of Meals and Entertainment
expense - $1,673 - was claimed as a business expense in the
statement within the return, then why would it be excluded as an
expense when preparing Exhibit-A-5? The appellant seems to
have a bizarre concept of accounting principles whereby he claims
a charitable donation for amounts paid to the church by other
people. He reports income for 2000 and 2001 based on a guess of
what he reported in 1999 when he failed to include - by his own
admission - 6 months revenue. Sometimes, he reports expenses on
the wrong line in the activity statement. The fact this man is
practicing as a CGA should be a matter of concern for the
Certified General Accountants Association of British Columbia
even allowing - by analogy - for the fullest extent of the adage
- perhaps myth is a better word - that it is the shoemaker's
children who have no shoes and that lawyers are prone to die
intestate.
[27] The time has come for me to decide the
probable amount of net business income earned by the appellant
for the years under appeal and to determine the gross business
income of his accounting practice so the Minister can
re-calculate the amount of GST that should have been remitted for
the period covered by the assessment. However, I can only make
pots with the clay I am given; in this instance, the insufficient
raw material was shaped by turning it around and around on an
off-kilter wheel, firing it a garage-sale kiln and then allowing
the end product to remain unglazed so that imperfections remain
exposed.
[28] I am satisfied that the lifestyle of
the appellant and his family consumed less financial resources
than the average Canadian family in similar circumstances as
revealed by StatsCan data. I find the estimates of the appellant
with respect to the categories of food, household operation,
transportation, clothing and health care are too low. Even though
MSP coverage was subsidized due to the appellant's low reported
income, there are other expenditures associated with family
health and any family with two young children will be visiting
the local pharmacy on a regular basis in order to purchase a
variety of products to be used for the care of the children and
in the household generally. For the 1999 year, the evidence leads
me to conclude that the appellant required the sum of $27,000 to
meet the needs of himself and his family. I am aware he received
a share - $6,000 - of his aunt's estate in August,
1999, but those funds were probably not devoted to household
expenses since the bank statement on the TD joint account - last
page of Exhibit A-4 - indicates there was a balance of
$8,378.63 on September 30, 1999. In 1999, the appellant claimed
business expenses in the sum of $10,804 including the sum of
$1,950 in "legal, accounting and other professional fees". I do
not know the purpose of said expenditure in that year or for
other amounts claimed in subsequent years under the same category
but the auditor - Munief Mohammed - appeared to be content with
the expense side of the statements for all of the years under
appeal.
[29] I find the appellant's gross income
from his accounting practice must have been at least $40,000
because there were some personal expenses already paid by So
& Cheung - as recorded by Iris So - prior to him receiving
his cheque for his entitlement from the total proceeds deposited
to the firm's bank account. After deducting the claimed expenses
in the sum of $10,804, I conclude the appellant's net business
income - in 1999 - was $29,196, rounded up to $29,200.
[30] For the 2000 taxation year, it is
reasonable to conclude that the appellant's gross business income
increased 10% - over 1999 - and was $44,000. As a result, and
after deducting $10,970.11 in expenses - as claimed in his return
- I find his net business income was $33,029.89, rounded down to
$33,000.
[31] For the 2001 taxation year, I find the
appellant's gross business income increased by a further 10% - to
$48,400 - and after deducting claimed business expenses of
$11,316, that he earned net business income in the sum of
$37,084, rounded up to $37,100.
[32] With respect to the GST appeal, I find
the appellant's gross business income for the following taxation
years was as follows:
1998
- $36,000
1999 -
$40,000
2000 -
$44,000
2001 -
$48,400
[33] Therefore, the appeal from the GST
assessment is allowed and is referred back to the Minister for
reconsideration and reassessment on the basis that the amount of
GST payable for the period under assessment is calculated on the
gross business income for the years as stated above, and that any
determination of arrears incorporates the concession by counsel
for the respondent that the appellant be credited - during the
assessed period from January 1, 1998 to December 31, 2001 - for
the following amounts:
1998 -
$122.35
1999 -
$400.17
2000 -
$408.18
2001 -
$122.35
[34] The appellant's income tax appeals with
respect to 1999, 2000 and 2001 are allowed and the assessments
with respect to each year are referred back to the Minister for
reconsideration and reassessment on the basis the appellant's net
business income was in the following amount:
1999 -
$29,200
2000 -
$33,000
2001 -
37,100
[35] The appellant's level of success in the
within income tax and GST appeals - heard together -
is not sufficient to award costs. In any event, I would not have
awarded costs to the appellant since his refusal to provide
counsel for the respondent with copies of material and documents
- upon which he based his appeal - precluded the possibility of
any agreement with respect to certain matters at issue in these
proceedings.
Signed at Sidney, British Columbia, this 4th day of March
2005.
Rowe, D.J.
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