[OFFICIAL ENGLISH TRANSLATION]
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Date: 20030131
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Docket: 1999-4511(IT)G
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BETWEEN:
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MANUEL JOSÉ,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent,
AND
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Docket: 1999-4535(IT)G
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BETWEEN:
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TERRASSEMENT PORTUGAIS INC.,
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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
Lamarre
Proulx, J.T.C.C.
[1] These appeals were heard on
common evidence. At issue for both appellants are the taxation years from 1993
to 1995. The assessments were
based on the appellant Manuel José's net income that was computed using the net
worth method.
[2] In making the reassessments
concerning the appellant company, the Minister of National Revenue ("the Minister") relied on
the following assumptions of fact, set out in paragraph 4 of the Amended
Reply to the Notice of Appeal:
[TRANSLATION]
(a) the appellant
company's fiscal year ends on December 31 of each year;
(b) the voting shares
in the appellant company are held by Manuel José and by the corporation
Gestion Manuel José Ltée, in which all the shares are held by Manuel José;
(c) Manuel José is
the president of the appellant company;
(d) the appellant
company operates a commercial and residential earthmoving business;
(e) the residential
work performed by the appellant company is often paid for in cash;
(f) Manuel José's
only sources of income are the appellant company and Gestion Manuel José Inc.;
(g) the income of
Gestion Manuel José Inc. is derived solely from the management fees that the
appellant company pays it;
(h) Manuel José
declared total income of $11,360 in 1993; $18,000 in 1994; and
$16,000 in 1995;
(i) Manuel José does
not deposit into his bank accounts the income (salaries) declared and derived
from his corporations; he reinvests nearly all this income in the appellant
company;
(j) the appellant
company declared net income for tax purposes in the following amounts:
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1993
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$123,593
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1994
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$ 0
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1995
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$ 0
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(k) a calculation of
the variation in net worth indicated additional undeclared income for Manuel
José in the following amounts:
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1993
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$ 9,190
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1994
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$63,618
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1995
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$ 6,057
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(l) Appendixes I,
II and III, showing the statement of net worth and the statement of variation
in net worth, as calculated by the Minister, are attached to this Reply and
form an integral part thereof as if recited at length herein;
(m) the income of
Manuel José disclosed by the calculation of the variation in net worth is
income earned by the appellant company that it did not declare on its income
tax returns for the 1993, 1994 and 1995 taxation years and that Manuel
José appropriated;
Mercedes
E300
(n) in calculating
the variation in net worth for Manuel José, the Minster asked Manuel José to
submit a personal balance sheet for the taxation years at issue; the balance
sheet submitted by Manuel José made no reference at all to a Mercedes E300
car;
(o) moreover, the
Minister discovered that, on November 18, 1994, Manuel José purchased
a 1995 Mercedes E300 car from a car dealer for a total of $62,105, of
which $59,605 was paid in cash and $2,500 was paid by credit
card;
(p) the car was registered
with the Société d'assurance automobile du Québec (S.A.A.Q.) in Manuel José's
name until August 16, 1996, and was licensed as YGX 258;
(q) the S.A.A.Q.
records indicate that this car was "scrapped" on
August 16, 1996;
(r) from
March 25, 1995, to March 25, 1996, Manuel José insured the Mercedes
E300 with "General Accident, Compagnie d'assurance du Canada"; this
insurance covered all risks when the car was being driven by Manuel José;
(s) the Mercedes E300
was shipped [to] Portugal in December 1995;
(t) each year,
Manuel José would live in Portugal from December to March;
(u) Manuel José was
the owner of the Mercedes E300 during the 1994, 1995 and 1996 taxation
years and purchased this car with income of the appellant company that he
appropriated;
Net
worth
(v) the variation in
net worth, as calculated by the Minister, takes into account only assets owned
by Manuel José, as well as personal expenses (such as food, clothing,
transportation, recreation and personal care), which had to be based on an
average amount set by Statistics Canada, and of which the respective totals for
the taxation years at issue are as follows:
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1993
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$8,540
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1994
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$8,654
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1995
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$8,844
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(w) the above-computed
personal expenses do not even include the additional expenses that Manuel José
must incur for his annual trips to Portugal; nor were these expenses taken into
account in calculating the variation in net worth for the taxation years at
issue;
Disallowed
expense for professional fees
(x) for the 1995
taxation year, account 42140 in the appellant company's general ledger
includes expenses of $11,838.70 paid by the appellant company to
DesRivières, Vermette, Bérubé and claimed by the appellant company in computing
its taxable income for that year;
(y) this claim refers
to invoices 7777 to 7790 and includes an amount of $1,491, before G.S.T. and
Q.S.T., paid for a legal opinion on whether Manuel José should crystallize the
capital gain realized on his shares;
Penalties
(aa) during a 1991
audit, reassessments were made concerning the appellant company for undeclared
income in the following amounts, which had been erroneously identified in its
accounting records as advances received:
(bb) during a 1994
audit, reassessments were made concerning the appellant company for undeclared
income in the following amounts, which had been deposited directly into Manuel
José's bank account:
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April 1991
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$16,000
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December 1991
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$ 3,770
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(cc) in filing its
income tax returns, the appellant company knowingly, or at least under
circumstances amounting to gross negligence, failed to declare income in the
following amounts:
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1993
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$ 9,190
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1994
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$63,618
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1995
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$ 6,057
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(dd) by failing to
declare its income, the appellant company eluded payment of income tax in the
following amounts:
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1993
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$1,180
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1994
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$8,168
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1995
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$ 792
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[3] In the Amended Reply to the
Notice of Appeal concerning the appellant Manuel José, the assumptions of fact
differ from those concerning the appellant company only in subparagraphs 17(y), 17(z) and 17(aa), which read as
follows:
[TRANSLATION]
Penalties
(y) during a 1994 audit, reassessments were
made concerning the appellant Manuel José, adding the following amounts to his
income as
undeclared business income from "Terrassement Portugais Inc." that he
appropriated:
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1990
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$16,000
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1991
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$ 3,770
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(z) in filing his
income tax returns, the appellant Manuel José knowingly, or at least under
circumstances amounting to gross negligence, failed to declare income in the
following amounts:
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1993
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$ 9,190
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1994
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$63,618
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1995
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$ 6,057
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(aa) by failing to
declare that income, the appellant Manuel José eluded payment of income tax in
the following amounts:
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1993
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$ 1,352
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1994
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$14,571
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1995
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$ 891
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[4] The Notice of Appeal by the
appellant company simply denies that there was income in addition to the income
declared.
[5] The Notice of Appeal by the
appellant Manuel José is much more detailed, since the variation in declared
income using the net worth method was calculated with respect to the appellant
Manuel José. I quote paragraph 3
of the Notice of Appeal:
(a) the assessments
were made on the basis of a statement of assumed net worth of the APPELLANT for
the 1993, 1994 and 1995 taxation years, as well as a statement of net worth and
a statement of variation in net worth for the 1992 and 1996 taxation years;
(b) those statements
of net worth and statements of variation in net worth are inaccurate and do not
reflect the reality of the APPELLANT's actual lifestyle, assets and expenses;
MERCEDES E-300 CAR
(c) as well, for the
1994 taxation year in particular, an amount of $63,618 was added to the
APPELLANT's income; of this amount, $62,105 allegedly corresponds to the amount
the Department claims that the APPELLANT withdrew from Terrassement
Portugais inc., of which he is the sole shareholder, in order to purchase
a Mercedes E300 car;
(d) in fact, this
amount was not withdrawn from Terrassement Portugais inc. and the APPELLANT did
not purchase this car for himself;
(e) to the contrary,
this car was purchased in Canada by the APPELLANT acting simply as an agent of
the actual purchaser and owner of the car, Fernando Dos Santos José, who lives
in Pombal, Portugal;
(f) various
documents establishing this fact were submitted to the assessing officer, who
did not accept them and refused to believe the APPELLANT's version, without
requiring additional evidence that might have been considered necessary, where
relevant;
(g) the APPELLANT
filed with the assessing officer original Portuguese statements and official
documents sworn in Portugal, and a translation thereof into French, including
the following:
(i) a
February 18, 1999, statement by the owner Fernando
Dos Santos José that this car was fully owned by him and was imported
for him from Canada by the APPELLANT as an agent;
(ii) a
February 15, 1999, statement by the said Fernando
Dos Santos José that the said car was paid for by a bank transfer, of
which the number was duly identified, and that he himself was the owner of
the car;
(iii) proof of
registration (gray card), issued by the Republic of Portugal, of the said car
in the name of the said owner;
(iv) proof of
insurance of the said car by Metropole Seguros in the name of the said Fernando
Dos Santos José;
(v) February 25,
1994, proof of exchange of escudos and proof of purchase of $65,000 in Canadian
banknotes by the said Fernando Dos Santos José so that this money
could be remitted to the APPELLANT and the said vehicle purchased;
(h) in fact, for a
Portuguese citizen the cost of such a car if purchased in Portugal is nearly
double the cost of the car if purchased in Canada, and this was why the
transaction was carried out for the actual owner;
(i) however, in
order to benefit [sic]
from the customs duty on entry
into Portugal, the car must have been used for at least seven months, which
explains why the car remained in the APPELLANT's possession for a lengthy
period;
(j) the APPELLANT
merely acted as an agent and a broker to be of service to this person;
(k) the APPELLANT
offered to produce other evidence required by the assessing officer and is
still prepared to provide this evidence;
(l) the APPELLANT
also intends to produce new documents as evidence in this regard;
(m) the assessing
officer did not contest the legality of the documents that were produced;
NET WORTH
(n) as well, for the
1993 taxation year, in obtaining a variation of $9,190.40 in net worth, the
assessing officer indicated total income of $20,550.40, whereas the total
declared income was only $11,360.00;
(o) in addition, the
APPELLANT received Notices of Reassessment for the 1990 and 1991 taxation
years; he was assessed as having received $3,770.00 in income from Terrassement
Portugais inc. and having deposited that income into his personal bank
account for the 1990 taxation year; and he was assessed as having deposited
into his personal bank account an amount of $16,000.00, also derived from
Terrassement Portugais inc., for the 1990 taxation year;
(p) therefore, those
two amounts totalling $19,770.00 should have been considered the starting
point of the net worth for the 1992 taxation year and should have been carried
forward to 1993;
(q) as a result, even
if it were admitted that the total income computed using the net worth method
is accurately recorded for the 1993, 1994 and 1995 taxation years, which is not
the case, even under these circumstances, the variation added for undeclared
income would be inaccurate because the APPELLANT's net worth was greater at the
beginning of the 1993 fiscal year;
(r) the amount of
$19,770.00 must be taken into account for the 1994 and 1995 taxation
years;
[6] At the beginning of the
hearing, counsel for the appellants told the Court that the appellant company
was no longer claiming the $1,491 deduction for the 1995 taxation year and that, as a result, $1,595
should be added to the income of the appellant Manuel José for the 1995
taxation year. That claim is stated in subparagraphs 4(x) and 4(y) of the
Reply, quoted in paragraph [2] of these Reasons. According to counsel for
the appellants, that claim was an error of interpretation.
[7] Counsel for the appellants has strongly contested the inclusion of
the amount for the Mercedes in the income of the appellant Manuel José. He has
also contested the amount of personal expenses included in the net worth as
well as the assessment of the penalties.
Testimony by the appellant Manuel José
[8] The appellant Manuel José
stated that he was born in Portugal
and has lived in Canada since 1976. He was the first one to come to Canada. He
subsequently brought to Canada a sister and two brothers, including his brother
Joachim. Joachim, who was engaged when he came to Canada, married a number of
years later and brought his wife to Canada. Joachim now has two children and
owns his own house. He works for the appellant company. At present the
appellant Manuel José is living at Joachim's house. Although Manuel José lived
initially with his sister, she returned to Portugal.
[9] Manuel José is single. He
stated that he pays his brother neither room nor board. Since he is single, he
is part of the family and, according to the traditions of his home country, is
not required to pay anything. His only expenses are for clothing, the barber,
and a few restaurant meals. He neither smokes nor drinks.
[10] Manuel José is a landscaper.
He has held all the shares in the appellant company since 1982. The appellant company does
landscaping work and also civil engineering work such as parks, sidewalks,
sewers and aqueducts. According to the financial statements adduced as
Exhibit I-2, Tabs 4 to 6, gross contracting income was $5,056,193;
$6,029,733; $3,255,893; and $3,478,195 respectively for the taxation years
from 1992 to 1995. The contracting, administration and financial costs meant
that before-tax income was $221,404, $135,639, $32,597 and $22,837 respectively
for the taxation years from 1992 to 1995. As noted in the Reply, the appellant
Manuel José admitted that he reinvests the profits in the appellant company.
[11] The business can have
between 50 and
60 employees. It has a comptroller who is responsible for the payroll,
invoices and reports. It also has a secretary to answer the telephone. It has
estimators to prepare the bids, although Manuel José reviews all the bids.
[12] The appellant Manuel José
described a working day during the period from April to December as
follows. He gets up around
5:30 a.m. and goes to bed around 11:00 p.m. every day of the week. He
works on the sites until dark. He then makes preparations for the following day
and looks after administrative matters at the office of the appellant company.
In March, he works between 10 and 12 hours per day. He leaves Canada
around December 10 or 15 and returns around the end of February.
[13] Manuel José eats at the
office. His sister-in-law brings him a snack at noon. She does the same for her
husband and son, when the son works at the appellant company during his
vacations. In the evening, the appellant eats at the house. His sister-in-law
also works for the appellant company part-time.
[14] Manuel José stated that his
only assets are the shares in the appellant company and a Corvette purchased in 1991. At the time of the
hearing, the Corvette had 28,000 kilometres on the odometer.
[15] Manuel José has another
brother living in Canada, Fernando.
Fernando has his own landscaping business, which does only residential work.
[16] In Portugal, Manuel José lives at the house of his
mother, Joachina. He helps her with daily living. She is 86 years old. His
father died 11 years ago.
[17] When the other brothers of
the appellant Manuel José go to Portugal,
they also live at their mother's house, but for shorter periods of time, between two and three weeks, because
they have school-age children.
[18] Manuel José does not pay
himself regularly. Occasionally he cashes $3,000 or $4,000. When that money is spent, he
takes out some more money. Those payments are recorded in the accounting
records. For the 1994 and 1995 taxation years, Statements of Remuneration Paid
were issued in the amounts of $18,000 and $16,800 respectively (Exhibit I‑2,
Tabs 2 and 3).
[19] The appellant Manuel José
referred to Exhibit I‑1, Tab 1. At this Tab is the statement of personal expenses,
as estimated by Manuel José, in the amounts of $2,580, $2,630 and
$2,765 respectively for the 1993, 1994 and 1995 taxation years. Manuel
José stated that he still agreed with these figures, but he indicated that the
cost of a ticket to Portugal is approximately $750 or $850.
[20] Exhibit A‑2 contains certain documents;
counsel for the respondent has contested the adducing of these documents, that
is, the documents adduced at Tabs 4 to 7, on the ground that they are
a written statement by a witness who is not present and cannot be
cross-examined. She has also objected to the documents adduced in the appendixes.
[21] Exhibit A‑3 is a contract dated
November 11, 1994, for the purchase of a 1995 Mercedes car. The purchaser
was the appellant Manuel José. The car was purchased in Montréal. According to
the appellant, a diesel model was available only in Montréal although, he said,
the garage had to have the car delivered from Vancouver. Payment for the car
was made in cash.
[22] Manuel José stated that he
purchased that car for his cousin
Fernando Santos José, who lives in Pombal, Portugal. The cousin is a
construction contractor. He has never lived in Canada.
[23] The cousin was looking for
a Mercedes car and asked the
appellant Manuel José to check the prices in Canada for him. According to the
cousin, the price in Canada would be about half the price in Portugal. The cousin
asked Manuel José to purchase a Mercedes car for him and to ship it over to
him. Manuel José stated that he did so in order to do a favour for his cousin,
to whom he is very close.
[24] The appellant arranged to
have the car shipped to Portugal
by ocean container at the end of 1994. He also insured the car during shipping.
[25] Exhibit B-1-A is a December 16, 1994,
Portuguese customs document. It identifies the appellant Manuel José as the
owner. In Quebec, the car was registered in the name of the appellant Manuel
José.
[26] When the car arrived in
Portugal, the appellant Manuel José and his cousin realized that, in order to
be exempt from customs duty, the car should have been in the country of origin
for at least six or seven months. They decided to ship the car back to Canada. The cost of each shipment was
between $2,000 and $2,300.
[27] Exhibit B-1-B is a document establishing the
second shipment of the car to Portugal, on November 22, 1995.
Exhibit B-1-D is a December 18, 1995, Portuguese customs document
indicating the arrival of the Mercedes.
[28] The appellant Manuel José
stated that in February 1994 his cousin paid him $65,000 in Canadian banknotes, which he brought
back to Canada and with which he purchased the car. The banknotes were in
denominations of $100 and $1,000. That transaction took place in the village of
Lagoa das Ceiras, in the Pombal area.
[29] Manuel José referred to Exhibit A‑2, Tab 8. Counsel
for the respondent objected to the adducing of this document because the person
who wrote it was not available for cross-examination. In fact, the document is
not signed, but neither counsel noted this fact. This document is a certificate
from Banco Mello dated February 25, 1994, concerning the purchase of
foreign currency. This document has been on file with Revenue Canada since
1998. However, counsel for the respondent stated that it has been contested
since it was filed with Revenue Canada.
[30] This document was apparently given to Manuel
José by his cousin in 1998, the year following the first meetings with the
auditor in December 1997. The cousin apparently found this document among
his papers.
[31] Exhibit B-1-E is the translation of a document,
itself not appended, by the cousin of the appellant Manuel José concerning
ownership of the Mercedes. According to this document, this ownership was
established on November 21, 1997.
[32] At Tab 7 of Exhibit A‑2 are two
insurance policies on the car, issued respectively on
December 5, 1997, and November 28, 1998. The owner's name
is Fernando Santos José.
[33] Exhibit B-1-F is a June 30, 1996, notice of
payment of registration to the Société de l'assurance automobile du Québec
("the SAAQ") concerning two motor vehicles: a 1990 Corvette and a
1995 Mercedes. Exhibit B-1-G, dated August 16, 1996, indicates
that the Mercedes was scrapped.
[34] Exhibit B-2-B is a bank account of the appellant
Manuel José in Portugal, at the Pinto & Sotto Mayor bank. This account is
one in which Mr. José's mother and one of his sisters, Lucinda, are authorized
to make transactions. This account is used to provide for the needs of the
family, including the mother. The sisters live in a house near their mother's
house.
[35] This document is a translation. The original was
adduced as Exhibit B‑2‑B‑1. The currency is escudos but
a rough conversion indicates that the initial amount is approximately $1,500.
The appellant Manuel José stated that he had no other bank accounts in
Portugal.
Cross-examination
[36] Manuel José holds shares in
the appellant company personally and through a management corporation, Gestion Manuel José. The management
corporation employs the comptroller and the secretary. It administers the
appellant company as well as Parterre Portugais, a corporation belonging to the
brother of the appellant Manuel José.
[37] Manuel José began working
for the appellant company 25 years ago as an employee. The owner then
returned to Portugal to live.
It was at that time that Manuel José purchased the business with one
Mr. Ferrera. In 1989, he bought out Mr. Ferrera's shares for
$170,000, thus becoming the sole shareholder.
[38] According to Manuel José, the Banco Mello referred to in
Exhibit A‑2, Tab 8 no longer exists. According to counsel for
the respondent, it apparently became the Banco Atlantico. Mr. José was not
aware of that fact.
[39] The appellant stated that
he did not recall the purchase price of the Corvette. Counsel for the respondent showed him the
purchase contract, indicating a price of $43,912 and that $28,912.80 had
been paid in cash.
[40] In terms of recreation,
Manuel José practises skeet shooting. He also likes to hunt small game in the Thetford Mines and Beauce areas. He
occasionally goes to Montréal to visit friends and go to auctions.
Testimony by
Marie-Claude Poitras
[41] Ms. Poitras is an auditor with the Canada Customs
and Revenue Agency ("the Agency"). Her first meeting was held on
September 8, 1997, but the documents were not the right ones. They
had to wait until September 30 to obtain the information from the general
journal.
[42] Ms. Poitras was not
initially informed of the existence of a second car, the Mercedes or that this car was shipped to
Portugal twice. She learned about the Mercedes from the SAAQ and about the two
shipments from the insurers.
[43] Manuel José told
Ms. Poitras that he did not tell her about the Mercedes because it
belonged to his multimillionaire cousin. She asked to see the cousin's bank account showing
the receipts that needed to total $65,000. She wanted to make sure that the
money did indeed come from the cousin and not from Manuel José.
[44] Ms. Poitras stated
that there was no tax treaty between Canada and Portugal and that the CCRA was unable to obtain the relevant
bank figures.
[45] In Ms. Poitras'
opinion, the document adduced as Exhibit A‑2, Tab 8 is nothing
more than a currency conversion. She did not know where the money came from nor
did she know Fernando Santos
José, the cousin.
[46] Ms. Poitras also
stated that, in the previous taxation years, the appellant was assessed using
the net worth method on the basis of the year-end balances in his bank accounts
and that, in subsequent taxation years, he no longer made deposits into his bank accounts.
Analysis
[47] In adding $9,190 in
income for the 1993 taxation
year and $6,057 for the 1995 taxation year, the total income of the
appellant Manuel José is $20,550 and $23,652 respectively for those
taxation years (Exhibit I‑2, Tabs 12 and 14). In adding $63,618
in income for the 1994 taxation year, his income is
$81,618 (Exhibit I‑2, Tab 13). For the 1986 to 1991
taxation years, the income computed using the net worth method was
approximately $20,000 (Exhibit I‑5).
[48] Concerning the 1994
taxation year, one may wonder whether it is plausible that the appellant's
income increased so significantly in a single year. The same question came up
in Badaan v. Canada, [2000] T.C.J. No. 701 (Q.L.). In that
case, for the 1994 taxation year, there was an increase of $169,382 in
undeclared income, in comparison with an average increase of $33,962.66 for
the 1992 and 1993 taxation years. In 1994, the taxpayer, who wanted to dispose
of his convenience store and create another source of income for himself, had
purchased securities for a considerable amount of money, and this greatly
increased the value of his capital.
[49] I concluded that the
taxpayer's explanation that he purchased the securities with the proceeds of
the sale of his property in Israel and the savings he had accumulated over the
years was more plausible than the respondent's position, unsupported by any
evidence, that this substantial income was suddenly generated that year from
the sale of the convenience store.
[50] In the present case, the
explanation provided by Manuel José is that the Mercedes car was purchased by
his cousin with his cousin's money. The respondent has claimed that the
appellant is the actual owner. If that were the case, Manuel José could have
explained that the car was purchased with his own savings. That was not the
approach that was followed.
[51] Not everything about the
ownership of this car is as clear as one would wish. The first conundrum is the
payment in cash made to the appellant
Manuel José by his cousin in Portugal. It is odd that Manuel José, who
otherwise shows normal prudence, would have carried $65,000 in cash on him on
the plane. As well, he insured the car for both shipments. Another conundrum is
who paid for the shipments of the car. There is a disconcerting lack of
evidence on this point.
[52] As I was about to believe
that the appellant Manuel José
was indeed the owner of the car, I read and reread his testimony in order to
detect contradictions or pieces of testimony proving that he was its actual
owner. I was unable to find a single passage in which the appellant Manuel José
acted as if he owned the car. His cousin made the decisions. For example, the
decision to ship the car back to Canada was made by the cousin (page 113
of the transcript). The appellant's version of the facts never wavered. No
contradictions can be detected in his testimony. It is the same position he
consistently maintained with the auditor. It was the auditor who discovered the
existence of the car. When questioned by the auditor on this point, the
appellant spontaneously provided that explanation and has never altered it since.
[53] Nor do I have any evidence from the respondent that in 1994 the
appellant company was able to generate a hidden profit of the magnitude
alleged.
[54] Concerning the personal expenses for the 1993 taxation year, the appellant Manuel José estimated those expenses at
$2,580; taking into account conservative Statistics Canada figures and the fact
that the appellant Manuel José paid nothing for accommodation, the auditor
estimated those expenses at $8,904. Concerning personal expenses for the 1994 taxation
year, the appellant Manuel José estimated those expenses at $2,580; the
auditor estimated them at $8,654. Concerning personal expenses for the 1995
taxation year, the appellant Manuel José estimated those expenses at $2,765;
the auditor estimated them at $8,844. The statement of personal expenses, as
estimated by Manuel José, is found in Exhibit I‑1, Tab 1; the
statement of those expenses as estimated by the auditor is found in
Exhibit I‑1, Tab 3.
[55] The statement of personal expenses does not take into account the
expenses of Manuel José for trips to Portugal.
[56] I consider that the amount of personal expenses is at least the
amount estimated by the auditor.
[57] Concerning the penalties, I consider that they were correctly
assessed. The appellant Manuel José knowingly took steps to conceal his actual
income. For example, he does not deposit his money into bank accounts or, if he
does so, he does not disclose those bank accounts to the Minister. In argument, counsel for the appellants stated that, in computing
the net worth, the respondent did not take into account the 1990 and 1991
taxation years. The Minister took into account the 1992 taxation year, and this
is sufficient.
[58] The appeals are allowed,
and the assessments are referred back to the Minister for reassessment on the
basis that the cost of the Mercedes car, in the amount of $62,105, should not
be included in capital in computing the net worth of the appellant Manuel José.
The other components of the net worth are correct. The appellant is also
subject to the penalties, except on the amount admitted by counsel for the
appellants at the beginning of the hearing.
[59] The appellants are entitled to half the costs.
Signed at Ottawa, Canada, this 31st day of
January 2003.
J.T.C.C.
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