Docket: A-344-16
Citation:
2017 FCA 83
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CORAM:
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DAWSON J.A.
WEBB J.A.
RENNIE J.A.
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BETWEEN:
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ANTHONY MELMAN
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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 OF THE COURT
(Delivered from the Bench at Toronto, Ontario, on
April 25, 2017).
DAWSON J.A.
[1]
For reasons cited as 2016 TCC 167, the Tax Court
of Canada dismissed the appellant’s appeal from a notice of reassessment which
assessed gross negligence penalties arising from the appellant’s failure to
include certain taxable dividends in his return of income filed in respect of
the 2007 taxation year.
[2]
On this appeal from the judgment of the Tax
Court, the appellant argues that the Tax Court erred by misapplying the legal
test for gross negligence, by incorrectly determining that the respondent met her
onus and by failing to weigh properly the totality of the evidence.
[3]
Despite the able submissions of counsel for the
appellant, we disagree for the following reasons.
[4]
First, subsection 163(2) of the Income Tax
Act, R.S.C., 1985, c. 1 (5th Supp.) imposes a penalty on any taxpayer “who, knowingly, or under circumstances amounting to gross
negligence” makes, participates or acquiesces in the making of an
omission in a return. At paragraphs 29 to 30 of its reasons, the Tax Court
articulated the correct legal test for establishing gross negligence: neglect
beyond a failure to use reasonable care. The impugned conduct must include a
high degree of negligence equal to intentional acting or indifference as to
compliance (Venne v. Her Majesty the Queen, [1984] C.T.C. 223, 84 D.T.C.
6247, at paragraph 37).
[5]
Contrary to the appellant’s submission, the
respondent need not establish that the appellant knowingly made an omission.
Subsection 163(2) is disjunctive. It is sufficient for a taxpayer to make an
omission in circumstances amounting to gross negligence.
[6]
The Tax Court went on to make a number of
findings of fact, including:
i.
The appellant signed his tax return without
reviewing or reading it in either draft or final form (reasons, paragraph 21).
ii.
In so acting, the appellant departed from his
usual practice of meeting in person with his primary accountant in order to
conduct a page by page review of the appellant’s tax return. This departure
“constituted an unusual casualness” on the part of the appellant and reflected
“insouciance and an indifferent delegation of responsibility” (reasons,
paragraphs 40 and 43).
iii.
After the declaration and payment of the
dividends, the appellant arranged for an escrowed investment to be made in an
amount to cover his estimated tax liability due in April, 2008. This “‘tickler’
for that tax liability was unobserved, unmentioned and inexplicably redeployed
contemporaneously with the filing of the 2007 return. The maturity of such a
large, matching, purpose-specific investment reasonably constitutes a clear
reminder to make a specific inquiry as to why such funds were no longer
needed.” (reasons, paragraphs 11 and 45).
[7]
No palpable and overriding error has been
demonstrated with respect to these findings and they support the Tax Court’s
finding of wilful blindness amounting to gross negligence.
[8]
Second, at paragraph 33 of its reasons the Tax
Court observed that in this case the respondent was required to prove that the
appellant “was, more likely than not, wilfully blind to
the warnings or markers set before him which would, if taken, have likely led
to detection of the omission.” In light of this statement of the law
with respect to onus and the Court’s findings of fact, the appellant has failed
to demonstrate that the Tax Court erred in finding that the respondent had met
her onus.
[9]
Finally, the determination of whether a taxpayer
is grossly negligent is highly fact-specific. The appellant has not
demonstrated any palpable and overriding error in the Court’s appreciation of
the totality of the evidence.
[10]
It follows that the appeal will be dismissed
with costs.
“Eleanor R. Dawson”
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