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Citation: 2005TCC555
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Date:20050826
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Docket: 2005-534(IT)I
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BETWEEN:
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LOUIS KORYCKI,
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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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REASONS FOR JUDGMENT
Beaubier, J.
[1] This appeal pursuant to the Informal Procedure was heard at Prince Albert, Saskatchewan on August 9, 2005. The Appellant testified and called Penny Gran. The Respondent called Lillian Paproski.
[2] The particulars of the appeal are set forth in paragraphs 8 to 12 inclusive of the Reply to the Notice of Appeal, which read:
8. The Minister confirmed the reassessments for the 1999 and 2001 taxation years by means of a Notification of Confirmation dated August 1, 2003.
9. In so reassessing tax of the Appellant for the 1999 and 2001 taxation years and in so confirming the reassessments, the Minister assumed the same facts, which are as follows:
(a) The Appellant was employed by Ahlstrom Kamyr Construction ("the Employer") during the 1999 and 2001 taxation years;
(b) At all material times, The Employer required the Appellant to attend and render services at a location that was approximately 10 kilometres from Prince Albert, Saskatchewan (the "Prince Albert work site");
(c) The Appellant received the following amounts from the Employer.
1999 2001
Living Out Allowance $11,400.00 $880.00
Travel Allowance $ 2,170.00 $415.00
Total $13,570.00 $1,295.00
(d) The amounts as referred to in subparagraph 9(c) above of $13,570.00 in 1999 and $1,295.00 in 2001 (the "Unreported Amount") were not included in the employment income reported by the Appellant in his 1999 and 2001 taxation years;
(e) During the 1999 and 2001 taxation year, the Appellant maintained a self-contained domestic establishment as his principal place of residence in Prince Albert, Saskatchewan; and
(f) During the 1999 and 2001 taxation years, by reason of distance, the Appellant could have reasonably been expected to return daily from the Prince Albert work site to his principal place of residence in Prince Albert, Saskatchewan.
10. In assessing the penalty under subsection 163(2) of the Act, the Minister relied on the following assumptions of fact:
(a) The Appellant made misrepresentations attributable to neglect, carelessness or willful default in filing his 1999 and 2001 income tax returns by failing to include the Unreported Amount as income.
(b) The Appellant knowingly, or under circumstances amounting to gross negligence made or participated in, assented to or acquiesced in the making of false statements or omissions in his 1999 and 2001 income tax returns;
(c) The Appellant made a false statement to his Employer by stating his principal place of residence was in Saskatoon, Saskatchewan when in fact it was in Prince Albert, Saskatchewan;
(d) The Appellant made the false statement regarding his principal place of residence for the purpose of receiving tax-free amounts from his Employer;
(e) The Appellant is knowledgeable regarding the taxability of the living out allowances and travel allowances;
(f) The Appellant has pleaded guilty to tax evasion in regards to receiving the living out allowance and travel allowance from his Employer in the 2000 taxation year;
B. ISSUES TO BE DECIDED
11. The issues to be decided are:
(a) Whether the Unreported Amount was properly included into the Appellant's income for the 1999 and 2001 taxation years pursuant to paragraph 6(1) (b) of the Act.
(b) Whether the penalties under subsection 163(2) of the Act were properly assessed on the Unreported Amounts.
C. STATUTORY PROVISIONS
12. He relies on section 3 and subsections 6(1), 6(6), 163(2) and 248(1) of the Act and subsection 22(1) of the Saskatchewan Income Tax Act.
[3] Assumption 9(e) is the only one disputed.
[4] The Appellant and Penny Gran denied allegations that the Appellant was living at all material times at 644-32nd Street North, Prince Albert as alleged by the Respondent. Penny Gran has rented that property from the Appellant for years at $400.00 per month. The market value of rent for such a property is not in evidence. Mrs. Paproski testified that she had seen Ms. Gran and the Appellant together three times in the last several year and made allegations that were merely hearsay.
[5] The Appellant testified that he had lived at Mrs. Paproski's residence and paid her cash rent-like amounts, in Saskatoon while taking union required welding courses. He has been an itinerant welder for decades, at times an employee and at times a self-employed contractor, depending on the availability of work. At all material times he has been separated from his wife. The Appellant stated that when he was not living at Mrs. Paproski's in Saskatoon, he resided in the Sutherland district. Mrs Paproski denied that he had ever lived at her residence. The Appellant stated that she did this and asked him to leave after being investigated by Canada Revenue Agency for not reporting his rent for income tax purposes. Canada Revenue Agency did make inquiries of Mrs. Paproski.
[6] The sworn evidence as to the Appellant's Saskatoon residence at Mrs. Paproski's is conflicting and there is no evidence as to exactly where the Appellant lived in the Sutherland district of Saskatoon, whether he rented or owned, or the kind of rental accommodation. The result is that the Appellant has failed to rebut assumption 9(e) and his appeal of the assessment is dismissed.
[7] Because of the conflicting oral evidence, the Respondent has failed to satisfy the onus on it to confirm the assessment of the penalty under subsection 163(2). The appeal of the assessment of the penalty is allowed.
[8] There is no order as to costs.
Signed at Sault Ste Marie, Ontario this 6th day of September, 2005.
Beaubier, J.
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