[1] This is an appeal of a Tax Court judgment which dismissed the appeal of Marie-Claude Boucher from a reassessment of income tax for the 1988 taxation year. That reassessment reflects the addition of certain previously unreported income, less applicable expenses, of $193,330. The Tax Court judgment is reported as Boucher v. Canada, [2003] 1 C.T.C. 2242, 2002 D.T.C. 2144 (T.C.C.).

[2] The reassessment did not result in a tax liability for 1988, because the appellant had sufficient losses in that year to offset the unreported income. However, a penalty was imposed under subsection 163(2) of the Income Tax Act, R.S.C. 1985, c. 1 (5^th Supp.), in respect of the unreported income, resulting in a liability under that provision of approximately $26,000.

[3] A number of issues were raised in the Tax Court, but in this appeal the appellant pursued only one argument, which was that the Tax Court Judge erred in law in finding that the reassessment, which was made outside the normal limitation period, was permitted by subparagraph 152(4)(a)(i) of the Income Tax Act. That provision permits a late reassessment if a taxpayer makes a "misrepresentation that is attributable to neglect, carelessness or wilful default" in filing a return or supplying information under the Income Tax Act.

[4] In dealing with subparagraph 152(4)(a)(i), the Tax Court Judge said this at paragraph 25 of his reasons:

[25] The four year limitation period to reassess is lost when a taxpayer has made "any misrepresentation", that is false. This has been interpreted as being really synonymous with incorrect: Nesbitt v. The Queen, 96 D.T.C. 6045. The Appellant fails on this issue.

[5] The appellant argues that this is an incorrect statement of the test in subparagraph 152(4)(b)(i), as explained in Nesbitt, because the existence of a misrepresentation by the taxpayer, without more, does not give the Minister the authority to reassess after the expiry of the normal reassessment period. I agree with the appellant that the quoted portion of the reasons is an incomplete and therefore incorrect statement of the applicable law. There must be, in addition to a misrepresentation, a finding that the misrepresentation is attributable to neglect, careless or wilful default in supplying the incorrect information.

[6] However, a careful review of the reasons for judgment in their entirety leaves no doubt that the Tax Court Judge concluded that the evidence established the requisite degree of fault on the part of the appellant. I do not propose to review all of the facts, which are well stated by the Tax Court Judge. It is enough to say that there was admissible evidence from a witness for the Crown and from the appellant herself that, taken together, supported the Tax Court Judge's finding that the appellant knew the facts relating to the unreported income before it was discovered by the Crown, that she could have disclosed the relevant facts before it was discovered by the Crown, and that she had deliberately chosen not to make the disclosure.

[7] At the hearing of the appeal, a number of questions relating to the computation of the penalty, that had not been raised by the appellant, were raised by the Court. In particular, the Court wished to be satisfied that a penalty may be assessed under subsection 163(2) in respect of unreported income for a particular year even if the unreported income is offset by preexisting losses arising in the same year. Counsel for the Crown explained the relevant provisions in some detail. Her explanation was challenged by the appellant. Having heard the submissions of both parties, I agree with counsel for the Crown that, by the combined operation of subparagraph 163(2)(a)(i) and paragraph 163(2.1)(a), a penalty may arise even in a loss year because, in effect, the previously recognized loss is ignored for purposes of the penalty calculation.

[8] I would dismiss this appeal with costs.

(Sgd.) "Karen R. Sharlow"

J.A.

"I agree"

(Sgd.) "Marshall E. Rothstein"

J.A.

"I agree"

(Sgd.) "B. Malone"

J.A.

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-577-02

Appeal from the Judgment of a Tax Court proceeding of the Honourable Judge Gordon Teskey dated October 17, 2002 in Court file number 1999-4482(IT)G

STYLE OF CAUSE: Marie-Claude Boucher v. HMQ

PLACE OF HEARING: Vancouver, British Columbia

DATE OF HEARING: January 26, 2004

REASONS FOR JUDGMENT: Sharlow, JA

CONCURRED IN BY: Rothstein, JA Malone, JA

DATED: January 29, 2004

APPEARANCES:

Ms. Marie-Claude Boucher,

Self-Represented

FOR THE APPELLANT

Ms. Lisa Macdonell,

Department of Justice

FOR THE RESPONDENT

SOLICITORS OF RECORD:

Ms. Marie-Claude Boucher (Self-Represented)

Cobble Hill, British Columbia

FOR THE APPELLANT

Mr. Morris Rosenberg

Deputy Attorney General of Canada

FOR THE RESPONDENT

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Boucher v. Canada, 2004 FCA 46

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2004 FCA 46