Citation: 2005TCC709
Date: 20051103
Docket: 2004-3604(IT)I
BETWEEN:
RENALD RANCOURT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[OFFICIAL ENGLISH TRANSLATION]
Justice Dussault
[1] These are appeals
from assessments established under the Income Tax Act (the “Act”) on
December 16, 2002, for the taxation years 1993, 1994, 1995, 1996, 1997, 1998,
1999 and 2000.
[2] Through these
assessments, the Minister of National Revenue (the “Minister”) added to the
Appellant’s income for all of these years, except for 1999, amounts which he
considered to be undeclared income. For each of these years, apart from 1993
and 2000, the Minister also added to the Appellant’s income the amounts granted
by the company Scierie Rénald Rancourt inc. (“Scierie R.R.”), for whom Rénald
Rancourt was the sole shareholder and director, but not reimbursed.
[3] A late filing
penalty was also assessed for the years 1993, 1994, 1995, 1996 and 2000. A
penalty for repeated late filing was also assessed for the years 1997 and 1998.
[4] The assumptions of
fact upon which the assessments are grounded are set out in paragraphs (a)
through (uu) in paragraph 8 of the Reply to Notice of Appeal (“Reply”). They
read as follows:
Non declared income
(a) Over the course
of the taxation years at issue, the Appellant was the sole shareholder in
Scierie Rénald Rancourt inc. (hereafter the “Company”);
(b) Over the course
of the taxation years at issue, the Appellant was also director of the Company;
(c) According to the
registry of the Inspector General of Financial Institutions, the Company was
created on August 15, 1986;
(d) The Company was
a sawmill operator;
(e) Over the course
of the taxation years at issue, the Appellant was also employed as a taxi
driver;
(f) An audit of
the Company was performed by the Minstrère du Revenu du Québec (hereafter the
“MRQ”) given that the Company had failed to file its tax returns (Quebec Sales
Tax and Goods and Services Tax);
(g) The MRQ auditor
noted that the Appellant had not filed income tax returns (TP‑1) since
1993;
(h) The MRQ asked
the Appellant to produce its income tax returns for the taxation years from
1993 to 2000;
(i) Over the
course of the taxation years at issue, the Appellant’s Company appeared to be
without books or ledgers in order;
(j) In addition,
the Appellant had no record of his taxi income;
(k) An auditor from
the MRQ analyzed the Appellant’s financial situation for each of the taxation
years at issue, and proceeded:
(i) with the
compilation of all significant transactions occurring within the bank accounts
held by the Appellant and by the Company;
(ii) by interview with
the Appellant;
(l) The MRQ
auditor noted that the Appellant’s bank account had few transactions, almost
never any cheques and only enough deposits to cover the reimbursement of his
loans;
(m) The item
“advance to a director” appears in the Company’s balance sheets for the
taxation years from 1993 to 2000;
(n) In 1999, the
Appellant apparently liquidated all of his debts and the Company’s debts with
financial institutions, by borrowing from Gestion Fernand Rancourt Inc.;
(o) Gestion Fernand
Rancourt Inc. is held by “Fiducie Familiale Fernand Rancourt,” Fernand Rancourt
being the Appellant’s brother;
(p) The sum
borrowed by the Appellant from Gestion Fernand Rancourt Inc. is said to be
$135,000;
(q) This
transaction is said to have taken place on December 7, 1999;
(r) During the
period the audit was concerned with, the Appellant’s personal balance sheet did
not vary with regard to assets;
(s) The Appellant
owns two significant assets, i.e.:
(i) A house and its lot;
(ii) The Company’s shares;
(t) In light of
the previously mentioned facts, MRQ auditor determined that the Appellant had
not declared the following income for the years at issue (see appended table):
|
Year
|
Undeclared
income
|
Advances
not reimbursed
|
|
|
|
|
|
|
|
|
1993
|
$
|
22,817
|
$
|
0
|
|
|
1994
|
$
|
8,565
|
$
|
6,738
|
|
|
1995
|
$
|
7,985
|
$
|
4,710
|
|
|
1996
|
$
|
6,679
|
$
|
3,727
|
|
|
1997
|
$
|
8,057
|
$
|
2,995
|
|
|
1998
|
$
|
4,533
|
$
|
6,969
|
|
|
1999
|
$
|
0
|
$
|
781
|
|
|
2000
|
$
|
2,898
|
$
|
0
|
|
|
|
|
|
|
|
|
|
(u) The MRQ
informed the Minister of the changes made to the Appellant’s income for the
taxation years at issue;
(v) On December 16,
2002, the Minister issued reassessments to the Appellant for the taxation years
from 1993 to 2000, making the same changes to the Appellant’s income;
Late filing Penalty
1993
(w) For the taxation
year ending on December 31, 1993, the Appellant’s tax payable after Quebec tax
abatement was $2,405.89;
(x) The Appellant
filed his income tax return for his 1993 taxation year on July 6, 2001;
(y) Since the
Appellant filed his income tax return for the 1993 taxation year on July 6,
2001, when it should have been filed on April 30, 1994, the Minister assessed
him a late filing penalty in the amount of $409.00;
1994
(z) For the
taxation year ending on December 31, 1994, the Appellant’s tax payable after
Quebec tax abatement was $1,485.46;
(aa) The Appellant
filed his income tax return for his 1994 taxation year, on July 6, 2001;
(bb) Since the
Appellant filed his income tax return for the 1994 taxation year on July 6,
2001, when it should have been filed on April 30, 1995, the Minister assessed
him a late filing penalty in the amount of $252.53;
1995
(cc) For the taxation
year ending on December 31, 1995, the Appellant’s tax payable after Quebec tax
abatement was $1,245.47;
(dd) The Appellant
filed his income tax return for his 1995 taxation year, on July 6, 2001;
(ee) Since the
Appellant filed his income tax return for the 1994 taxation year on July 6,
2001, when it should have been filed on April 30, 1995, the Minister assessed
him a late filing penalty in the amount of 211.72$;
1996
(ff) For the
taxation year ending on December 31, 1996, the Appellant’s tax payable after
Quebec tax abatement was $1,454.97;
(gg) The Appellant
filed his income tax return for his 1996 taxation year on July 6, 2001;
(hh) Since the
Appellant filed his income tax return for the 1996 taxation year on July 6,
2001, when it should have been filed on April 30, 1997, the Minister assessed
him a late filing penalty in the amount of $247.34;
1997
(ii) For the
taxation year ending on December 31, 1997, the Appellant’s tax payable after
Quebec tax abatement was $1,397.36;
(jj) On April 25,
2001, the Minister sent the Appellant an enforcement notice requiring that his
income tax return for the 1997 taxation year be filed;
(kk) On June 5, 2001,
the Minister issued the Appellant with a formal request to file an income tax
return for his 1997 taxation year;
(ll) On July 6,
2001, the Appellant filed his income tax return for his 1997 taxation year;
(mm) Since the
Appellant filed his income tax return for the 1997 taxation year on July 6,
2001, when it should have been filed on April 30, 1998, the Minister assessed
him a late filing penalty in the amount of $698.68;
1998
(nn) For the taxation
year ending on December 31, 1998, the Appellant’s tax payable after Quebec tax
abatement was $361.60 ;
(oo) On April 25,
2001, the Minister sent the Appellant an enforcement notice requiring that his
income tax return for the 1998 taxation year be filed;
(pp) On June 5, 2001,
the Minister issued the Appellant with a formal request to file an income tax
return for his 1998 taxation year;
(qq) On July 6, 2001,
the Appellant filed his income tax return for his 1998 taxation year;
(rr) Since the
Appellant filed his income tax return for the 1998 taxation year on July 6,
2001, when it should have been filed on April 30, 1999, the Minister assessed
him a late filing penalty in the amount of $680.80;
2000
(ss) For the
taxation year ending on December 31, 2000, the Appellant’s tax payable after
Quebec tax abatement was $162.44;
(tt) On July 6,
2001, the Appellant filed his income tax return for his 2000 taxation year;
(uu) Since the
Appellant filed his income tax return for the 1998 taxation year on July 6,
2001, when it should have been filed on April 30, 1999, the Minister assessed
him a late filing penalty in the amount of $11.37.
[5] Two tables are
appended to the Reply. Table 1 details the calculations of undeclared income.
Table 2 details the variations in the advances granted to the Appellant by
Scierie R.R.
[6] The main point
contested by the Appellant concerns the amounts of the advances by Scierie R.R.
added to his income since he claims that Scierie R.R. also owed him sums that
he invested in it over the years. The sums thus owed the Appellant by Scierie
R.R. would have then been indicated in the financial statements as long-term
debt without repayment terms.
[7] Despite the
numerous documents introduced in evidence by the Appellant, it is impossible to
establish that any amount was owed him by Scierie R.R. The origin and the
amount of the Appellant’s investments in the form of loans cannot be retraced,
in particular because the Appellant also invested in Scierie R.R. by equity
subscription, and conciliation of the various transactions is simply
impossible. The Appellant, moreover, has never been able to say whether or not
he had received interest on the sum he claims to be owed by Scierie R.R.
[8] I will add to these
reasons, already set out orally at the hearing, that even if one can assume
that Scierie R.R. had a long term debt to the Appellant, it would have to be
demonstrated — which has not been done — how there could have been any compensation
between this long term debt and the annual advances granted the Appellant by
Scierie R.R., for the purposes of the application of subsection 15(2) of the Act.
[9] As for the other
amounts included in the Appellant’s income as undeclared income, they are the
direct result of the cost of living assessment by the auditor (Exhibit I-7) and
the Appellant did not present any evidence that this assessment was erroneous
in any way.
[10] Finally, I will add
that the penalties for late filing and repeated late filing are justified in
the circumstances set out in the Reply.
[11] Accordingly, the
appeals are dismissed.
Signed at Ottawa, Canada, this 3rd day of November
2005.
“ P. R. Dussault “
on this 21st day
of August 2006.
Gibson Boyd, Translator
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