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Citation: 2004TCC374
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Date: 20040528
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Docket: 1999-3628(IT)G
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BETWEEN:
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FERDINAND CHARLAND,
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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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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
(Delivered
orally from the bench
on
March 11, 2004, in Montréal, Quebec,
and
subsequently edited in Ottawa, Canada, on May 27, 2004.)
Paris J.
[1] Appeal heard in
Montréal, Quebec, on March 11, 2004.
[2] Mr. Ferdinand Charland is appealing the
assessments by the Minister of National Revenue (the "Minister") for
the 1991 to 1996 taxation years; said assessments disallow the deduction of
substantial business expenses claimed by Mr. Charland in relation to his
two businesses, a body shop repair service and a mushroom production enterprise.
[3] The issue at bar is
whether Mr. Charland is entitled to deductions in excess of the amounts
allowed by the Minister for the business expenses he incurred through those
years. Mr. Charland represented himself and he gave evidence on his
behalf. He explained to the Court that he had no documentary evidence to
produce in support of his position because the location where he kept his
documents, his mushroom production plant, burned down in August 1995.
[4] However, he
stressed that he had incurred all the expenses claimed in his returns. He said
that he was in the habit of submitting all the cheques, receipts and invoices
related to his businesses to his accountant and that his accountant prepared
his financial statements on the basis of these documents. Mr. Charland
said he cannot comprehend why the Minister did not allow him to deduct the
expenses set out in his financial statements.
[5] It is conceded that
during the taxation years at issue, he worked at a car dealer, Auto Simard
("Simard") as a body worker; he was self employed. Mr. Charland
claims that he hired his son to work with him at Simard and that he paid his
son half of the revenue that he earned. He also employed a student for a period
of time and paid him the amounts that appear as "labour" in the financial
statements. He also said that he had incurred automobile expenses during the
performance of his duties and that he personally provided some of the tools and
other necessary material.
[6] In terms of the
mushroom production enterprise, he again stressed that he had spent the amounts
set out in the financial statements. The expenses listed as purchases include
material required for his business; the motor vehicle expenses claimed were
related to the use of his car, a tractor and various machinery while performing
the activities of his business. Insurance expenses claimed were related to the
motor vehicles, the machinery and the plant assets.
[7] When cross‑examined,
Mr. Charland admitted that he did not file his tax returns for the years
1991 to 1994 until September 1995. He was aware of his obligation to file
them yearly; however, he said he was missing some information that could have
had an impact on his income. It seems the information in question was related
to a debt incurred in the 1970s. Apparently, a friend of his told him to wait
before filing his tax returns.
[8] Counsel for the
Respondent asked Mr. Charland to describe all the steps he took after the
beginning of the 1996 audit, to attempt to obtain copies of all the necessary
documentation, such as insurance policies, cheques or the notice of claim
related to the fire that took place in the mushroom plant.
[9] His answers were
evasive, vague and contradictory. At one point, he claimed that all the
documents were in the possession of his attorney; he then suggested that it was
his attorney’s fault that there were no documents available, that he had asked
his attorney to return the documents.
[10] He later said that
he could not get the insurance documents because the insurance policy was in a
friend’s name. He also said that he could not speak with his broker because he
was not his broker’s client anymore and he also said that he had no right to
speak to the broker anymore because he had retained legal counsel. Finally, he
said that the auditor should have gathered all the necessary documents.
[11] Mr. Marcel Bates,
accountant for the Appellant until 1996, testified that he prepared the
financial statements, and Mr. Charland’s income tax returns for all the
years at issue. The financial statements were prepared at the end of each year,
on the basis of the documents provided by Mr. Charland. Mr. Bates
returned these documents to the Appellant after completing the financial
statements. He testified that he did not keep any worksheet, record or account
ledger with respect to these assignments. According to him, he only deducted
expenses that were paid by cheque; he did not deduct any expenses that were not
supported in this manner. He said that he saw all the documentary evidence in
support of the claimed deductions.
[12] On cross‑examination,
Mr. Bates admitted that he had prepared another set of financial
statements for 1994 and 1995, different from the statements attached to
Mr. Charland’s tax returns, and that the other set had been submitted to
the National Bank with an application for a line of credit filed by
Mr. Charland. Those financial statements showed a much higher net income
resulting from Mr. Charland's businesses than the income declared in his
returns. Mr. Bates simply explained that he had made a mistake.
[13] For its part, the
Respondent called auditor Robert Larochelle. His testimony
indicated that he had asked Mr. Charland and his representatives several
times to provide him with the necessary documentary evidence supporting the
expense claims and that he had not received the proof. The auditor kept the
file open for two years to give the Appellant opportunity to get them; the
auditor received no documents from him.
[14] In my view,
Mr. Charland has not met his burden of proof in this matter. Other than
Mr. Bates’ testimony, the Appellant has not submitted any other evidence,
neither documentary nor by calling other witnesses to support his assertion
that he effectively did incur all the expenses claimed with respect to his
businesses for the taxations years at issue.
[15] I am unable to place
much weight on the evidence presented by Mr. Bates' testimony since he
admitted to having prepared a second set of financial statements with respect
to two of the years at issue, knowing that one of the sets was false;
he also experienced significant difficulty remembering the events that
took place during this period of time, with the exception of seeing the cheques
connected to the expense claims.
[16] I am also unable to
place much weight on the Appellant's testimony. His testimony lacked
clarity and detail. It was also contradictory and hard to believe at times. In
my opinion, the Appellant is not a credible witness. Neither can I accept his
explanation of the lack of documentary evidence in this matter; it does not
have the ring of truth.
[17] It follows that
there is insufficient evidence to allow me to conclude that the Minister has
erred when he established the assessments with respect to Mr. Charland.
[18] To summarize, the
Appellant failed to establish on a balance of probabilities that he effectively
incurred, for the purpose of his businesses, all the expenses that he claims.
His appeal will be dismissed with costs.
Signed in Ottawa, Canada, this 28th day
of May 2004.
Paris J.
Translation
certified true
on this 25th day
of October 2004.
Ingrid B. Miranda,
Translator
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