Couture,
CJ.T.C.:—The
issue
with
respect
to
this
appeal
is
whether
an
allowable
business
investment
loss
can
be
claimed
as
a
deduction
in
computing
the
appellant's
income
for
his
1982
taxation
year
rather
than
his
1983
taxation
year
as
contended
by
the
respondent.
Evidence
was
adduced
by
the
appellant
and
an
accountant
in
respect
of
the
disputed
loss.
The
appellant,
of
the
City
of
Calgary,
sold,
as
of
January
1,
1982,
to
240402
Alberta
Ltd.
(the
"company")
a
body
corporate
incorporated
pursuant
to
the
laws
of
the
Province
of
Alberta
and
operating
as
Bauer
Produce
assets
described
in
a
purchase
and
sale
agreement
(the
"agreement")
copy
of
which
was
filed
at
the
hearing.
It
states
in
part:
(a)
Certain
land
(the
"Land")
legally
described
in
Certificate
of
Title
No.
81
Q
239,
a
copy
of
which
is
attached
hereto
as
schedule
"A";
(b)
The
gravel
pit
(the
“Gravel
Pit")
located
on
the
Land;
(c)
All
mineral
rights
held
by
the
Vendor
in
respect
of
the
Land,
including
the
rights
to
gas
well
located
thereon
held
by
virtue
of
Natural
Gas
Lease
No.
1171
(the
Lease),
a
copy
of
which
is
attached
hereto
as
schedule
"B";
and
(d)
All
buildings
located
on
the
Land
as
at
the
effective
date;
in
consideration
for
a
total
purchase
price
of
Seven
Hundred
and
Fifty
Thousand
Dollars
($750,000).
1.2
The
purchase
and
sale
described
herein
shall
be
effective
as
of
January
1,
1982
(the
“Effective
Date")
The
agreement
also
provides:
2.1
The
total
purchase
price
for
the
Property
shall
be
payable
as
follows:
(a)
One
Hundred
Thousand
Dollars
($100,000)
as
at
the
date
hereof;
(b)
A
promissory
note
(the
“Promissory
Note"),
made
in
accordance
with
clause
4,
in
the
principal
amount
of
Two
Hundred
Thousand
Dollars
($200,000)
;
and
(c)
4,500
Class
A
Preferred
Shares
(the
"Preferred
Shares")
in
the
capital
of
the
Purchaser
to
be
issued
by
the
Purchaser
to
the
Vendor
at
the
time
of
execution
of
this
Agreement,
which
shares
shall
have
an
aggregate
Redemption
amount
(as
that
term
is
more
particularly
defined
in
paragraph
4(c)
of
the
memorandum
of
Association
of
the
Purchaser)
of
Four
Hundred
and
Fifty
Thousand
Dollars
($450,000)
Clauses
3
and
4
read:
3.
Promissory
Note
3.1
The
Promissory
Note
to
be
delivered
to
the
Vendor
by
the
Purchaser
shall
be
dated
as
of
the
Effective
Date,
shall
be
for
a
principal
amount
of
Two
Hundred
Thousand
Dollars
($200,000),
shall
be
repayable
as
to
Forty
Thousand
Dollars
($40,000)
on
each
of
the
first
anniversary
dates
of
the
Promissory
Note,
and
shall
bear
interest
at
the
rate
of
14
per
cent
per
annum
calculated
on
the
unpaid
principal
portion
of
the
Promissory
Note
outstanding
from
time
to
time,
such
interest
to
be
paid
annually
on
the
same
dates
as
the
principal
repayments
referred
to
above.
A
copy
of
the
form
of
the
Promissory
Note
is
attached
hereto
as
Schedule
"C".
4.
Preferred
Shares
4.1
The
Preferred
Shares
shall
have,
inter
alia,
the
following
attributes:
(a)
A
Redemption
Amount
of
$100
per
shares;
(b)
A
par
value
of
$100
per
share;
(c)
Redeemable
in
whole
or
in
part,
at
the
option
of
the
holder,
at
any
time
after
five
years
from
the
date
that
they
are
issued;
and
(d)
Preference
as
to
dividends
over
all
other
classes
of
shares,
such
dividends
to
be
payable
at
the
rate
of
9
A
per
cent
per
annum
of
the
Redemption
Amount
per
share,
which
rate
is
for
greater
certainty
hereby
agreed
to
as
the
sum
of
$925
per
share
per
annum;
All
as
more
particularly
described
in
the
Special
Resolution
by
which
the
Class
A
Preferred
Shares
were
created,
a
copy
of
which
is
attached
hereto
as
schedule
"D".
It
should
be
mentioned
that
the
promissory
note
referred
to
above
was
unsecured.
A
photocopy
of
the
promissory
note
was
filed
and
reads:
Promissory
Note
For
Value
Received,
and
in
connection
with
the
Purchase
and
Sale
Agreement
dated
May
14,
1982
made
between
the
undersigned
and
William
Lee,
240402
Alberta
Ltd.
(an
Alberta
company),
hereby
promises
to
pay
to
William
Lee,
in
accordance
with
the
repayment
Schedule
set
forth
below,
the
principal
sum
of
Two
Hundred
Thousand
Dollars
($200,000)
in
lawful
Canadian
money
together
with
interest
hereon
at
a
rate
equal
to
Fourteen
Per
Cent
(14%)
per
annum
calculated
on
the
amount
of
the
principal
sum
outstanding
under
this
promissory
note
from
time
to
time.
Repayment
Schedule
1)
January
1st,
1983
—
$40,000
2)
January
1st,
1984
-
$40,000
3)
January
1st,
1985
—
$40,000
4)
January
1st,
1986
—
$40,000
5)
January
1st,
1987
—
$40,000
Interest
on
the
principal
from
time
to
time
outstanding
shall
be
payable
as
well
after
as
before
maturity
and
both
before
and
after
judgement
on
the
same
dates
as
set
forth
in
the
Repayment
Schedule
at
the
rate
aforesaid.
All
overdue
interest
shall
bear
interest
at
the
rate
aforesaid
from
the
due
date
to
the
date
of
payment.
All
payments
received
by
William
Lee
in
accordance
with
the
terms
hereof
shall
be
acknowledged
by
the
said
William
Lee
on
Schedule
"A"
to
this
promissory
note.
The
undersigned
agrees
that
this
promissory
note
may
be
negotiated,
assigned,
discounted,
pledged
or
hypothecated
by
William
Lee
and
in
every
such
case
payment
thereof
is
to
be
made
to
the
holder
of
the
promissory
note
instead
of
William
Lee
upon
notice
being
given
by
the
holder
to
the
undersigned,
and
no
holder
of
the
promissory
note
shall
be
affected
by
the
state
of
accounts
between
the
undersigned
and
William
Lee
but
shall
be,
and
shall
be
deemed
to
be,
a
holder
in
due
course
and
for
value
of
the
promissory
note
held
by
him.
240402
Alberta
Ltd.
Per:
President
Per:
Secretary
The
appellant
who
owned
a
farm
outside
of
Medicine
Hat
explained
that
a
friend
by
the
name
of
Hans
Muhlbauer
had
introduced
him
to
a
Mr.
Ken
Groves
who
proposed
incorporating
a
company
for
the
purpose
of
building
and
operating
a
greenhouse
on
the
appellant's
farm.
At
the
time
of
the
sale
the
appellant
owned
10
per
cent
of
the
common
shares
of
the
company
and
Muhlbauer
and
Groves
were
the
other
shareholders
and
directors.
The
appellant
was
neither
an
officer
or
a
director.
The
appellant
never
received
the
$100,000
cash
payment
that
should
have
been
paid
to
him
at
the
time
of
the
execution
of
the
agreement
or
any
of
the
other
payments
in
respect
of
the
principal
or
interest
on
the
note
or
the
dividends
on
the
preferred
shares
for
reasons
that
will
become
apparent
as
the
evidence
is
unfolded.
In
June
1982
the
appellant
went
to
Medicine
Hat,
met
with
Muhlbauer
and
demanded
payment
of
his
$100,000,
but
he
was
informed
that
the
company
was
already
in
an
overdraft
position
at
the
bank
in
the
amount
of
$300,000
and
could
not
make
the
payment.
The
evidence
that
followed
was
not
as
explicit
as
one
would
wish,
but
it
appears
that
around
August
1982
the
company
proposed
to
the
Bank
of
Nova
Scotia
that
it
refinance
its
liabilities
by
way
of
a
new
mortgage
to
replace
an
original
mortgage
with
the
Mercantile
bank.
The
appellant
said
that
he
was
informed
that
if
the
company
could
eliminate
its
overdraft
that
the
bank
would
look
favourably
on
its
proposal.
A
portion
of
the
proceeds
of
this
new
mortgage
would
be
used
to
repay
the
appellant.
Eventually
the
company's
proposal
was
rejected
by
the
bank.
Later
on
in
the
year,
the
company
applied
to
the
Agricultural
Development
Corporation
(ADC)
under
its
Agribusiness
Lending
Program
for
financial
assistance
in
the
amount
of
$2,941,675.
This
request
was
turned
down
in
a
letter
to
the
company
dated
December
17,
1982
over
the
signature
of
the
manager
of
Agribusiness.
The
appellant
filed
his
1982
and
1983
income
tax
returns
in
1985
only,
and
in
his
1982
return
he
did
not
claim
any
loss
in
respect
of
the
amount
owing
to
him
by
the
company
on
the
sale
price
of
his
farm.
However,
in
his
income
tax
return
for
1983,
he
did
claim
an
allowable
business
investment
loss
in
the
amount
of
$452,698.46.
During
his
cross-examination,
counsel
for
the
respondent
caused
to
be
filed
a
copy
of
pages
2
and
4
of
the
appellant's
1983
tax
return.
The
claim
for
the
deduction
of
the
allowable
business
investment
loss
of
$452,698.46
is
recorded
on
page
2
and
in
the
box
captioned
“net
income"
a
loss
of
$320,952.37
is
reported.
The
appellant's
signature
appears
on
page
4
below
the
certificate
regarding
the
accuracy
of
the
return.
The
appellant
admitted
to
counsel
that
he
had
read
the
certificate
above
his
signature
to
the
effect
that
the
information
contained
in
his
return
was
true,
correct
and
complete
and
fully
disclosed
all
his
income
for
the
taxation
year.
The
appellant
also
acknowledged
that
he
had
filed
a
form
captioned
"Request
for
Loss
Carry-Back"
with
his
1983
tax
return
claiming
that
a
portion
of
a
non-capital
loss
for
the
year
be
deducted
against
his
1982
income.
The
next
witness
on
behalf
of
the
appellant
was
Wilfred
Waites,
a
chartered
accountant,
who
in
1985
was
a
partner
in
the
firm
of
chartered
accountants
carrying
on
a
practice
under
the
name
of
Maertens-Poole
&
Co.
He
explained
that
in
October
1982
he
was
asked
by
his
partner
to
perform
an
audit
and
prepare
financial
statements
for
the
company
for
the
purpose
of
obtaining
financing
from
ADC
and
a
copy
of
his
audit
was
filed.
It
covered
the
period
from
January
1st
to
October
31st,
1982.
He
explained
that
a
clerk
of
the
firm
had
prepared
the
1982
and
1983
tax
returns
of
the
appellant
which
were
submitted
to
Mr.
Poole
who
had
reviewed
them
with
the
appellant
prior
to
filing
them
with
the
respondent.
He
stated
that
the
firm
was
not
involved
with
the
preparation
of
the
company's
tax
return.
He
was
aware
that
ADC
had
rejected
the
application
for
financial
assistance
to
the
company
and
a
copy
of
a
letter
dated
December
17th,
1982
attesting
to
this
rejection
was
filed.
He
mentioned
that
while
he
was
performing
the
audit
on
the
company
in
October
1982,
he
was
informed
by
Messrs.
Poole
and
Muhlbauer
that
if
ADC
rejected
its
application
for
a
loan
that
it
would
fail,
which
it
did
subsequently
in
1983.
With
reference
to
the
appellant
he
stated
that
he
had
been
involved
with
him
for
approximately
two
years
(prior
to
the
date
of
hearing),
that
is
just
after
the
partnership
of
Marteens-Poole
&
Co.
had
terminated.
He
had
prepared
his
income
tax
returns.
He
said
that
he
was
not
initially
involved
with
the
preparation
of
his
1982
and
1983
returns,
but
he
was
asked
by
his
partner
at
the
time
to
examine
these
returns
after
they
had
been
filed
with
Revenue
Canada
and
as
a
result
of
his
review
he
informed
his
partner
that
in
his
opinion
an
error
had
been
committed
regarding
the
claim
for
the
allowable
business
investment
loss.
He
said
that
he
told
him
that
the
appellant
as
a
shareholder
of
the
company
was
precluded
from
treating
his
shares
in
the
company
as
a
business
investment
loss,
but
that
the
debt
owing
to
the
appellant
by
the
company
should
have
been
written
off
in
1982.
On
the
basis
of
this
information
his
former
partner
wrote
a
letter
to
Revenue
Canada
dated
November
4,
1985
asking
that
the
following
corrections
be
made
to
the
appellant's
income
tax
returns
for
1982
and
1983:
1982:
1.
To
show
a
taxable
capital
gain
of
$225,000
2.
To
include
an
allowable
business
investment
loss
in
the
amount
of
$452,698.46.
1983:
1.
To
adjust
taxable
capital
gains
to
$21,316.87
2.
To
delete
the
allowable
business
investment
loss
of
$452,698.46;
3.
To
include
a
non-capital
loss
carry
forward
of
$30,222.53.
Also
adjust
the
amount
of
loss
carry-back
to
1981
to
$8,796.91
per
form
TIA-E
attached.
It
appears
from
the
documentary
evidence
that
three
assessments
were
processed
by
the
respondent
in
respect
of
the
tax
return
filed
by
the
appellant
for
his
1982
taxation
year.
The
final
one
which
gave
rise
to
this
appeal
is
dated
May
25,
1987
and
it
shows
a
revised
taxable
income
of
$1,950,
penalties
of
$14,983.58
and
arrears
interest
of
$18,419.49,
an
increase
of
$5,878.03
over
the
previous
assessment
according
to
the
information
contained
on
the
notice
of
assessment.
Since
the
respondent
admitted
that
the
allowable
business
investment
loss
in
the
amount
of
$452,698.46
was
deductible,
but
in
1983
only,
the
Court
does
not
have
to
concern
itself
with
the
application
of
the
various
relevant
provisions
of
the
Act
or
with
whether
the
full
amount
of
the
loss
is
deductible
in
the
light
of
the
evidence.
The
Court
expresses
no
opinion
on
these
two
issues.
The
burden
of
proof
to
be
applied
in
litigation
of
this
nature
is
one
based
on
the
balance
of
probabilities.
The
Court,
after
having
considered
all
the
evidence,
must
determine
which
of
the
propositions
submitted
by
the
parties
offers
the
most
probable
and
logical
conclusion
to
the
problem
raised
by
the
appeal,
and
reach
determination
on
a
finding
based
on
its
own
appreciation
of
the
evidence.
The
facts
are
somewhat
simple
and
may
be
summarized
as
follows:
Pursuant
to
a
written
argument
the
appellant
in
1982
sold
to
the
company
a
farm
and
all
the
appurtenances
described
in
the
agreement
for
the
sum
of
$750,000.
Payments
were
to
be
made
to
the
appellant
in
the
following
manner:
a)
$100,000
cash
at
the
time
of
the
signature
of
the
agreement,
b)
A
promissory
note
in
the
amount
of
$200,000
bearing
interest
at
the
rate
of
14%
and
repayable
at
the
rate
of
$40,000
per
year;
c)
4,500
of
Class
A
preferred
shares
of
the
capital
share
of
the
purchaser
of
a
par
value
of
$100
each
with
a
preferential
annual
dividend
of
9.25%.
The
evidence
has
disclosed
that
throughout
1982
the
company
experienced
major
financial
difficulties
and
as
at
October
31,1982
its
financial
picture
was
somewhat
alarming
and
the
possibility
of
its
survival
was
uncertain
at
best.
In
the
recital
of
the
preamble
to
the
financial
statements
which
had
been
prepared
by
Mr.
Waites
for
the
purpose
of
obtaining
financial
assistance
of
ADC,
we
read
this
note
of
caution:
The
accompanying
financial
statements,
in
our
opinion,
do
not
draw
attention
explicitly
to
doubts
concerning
the
company's
ability
to
realize
its
assets
and
discharge
its
liabilities
in
the
normal
course
of
business.
These
doubts
arise
because
of
its
operating
loss
and
the
deficiency
in
working
capital
of
$2,086.341
at
October
31st,
1982
and
it
is
uncertain
whether
the
company
will
be
able
to
consolidate
its
current
and
long-term
debt
under
a
refinancing
scheme
currently
under
negotiation.
If
refinancing
cannot
be
arranged,
it
is
not
known
whether
the
company
can
sell
its
assets
for
an
amount
sufficient
to
satisfy
its
liabilities.
Its
balance
sheet
showed
current
assets
in
the
amount
of
$80,351
against
current
liabilities
of
$2,166,692,
not
a
very
healthy
situation,
considering
that
the
current
portion
of
a
long
term
debt
was
$478,033
and
the
operations
for
the
year
to
that
date
had
given
rise
to
a
loss
of
$798,769
with
total
sales
of
$35,104.
Its
fixed
assets
were
reported
at
$2,711,900
after
a
provision
for
depreciation
of
$107,052.
Its
long
term
liabilities
amounted
to
$967,163.
The
bottom
line
of
the
balance
sheet
indicates
that
the
company
had
a
deficiency
of
capital
in
the
amount
of
$328,589
at
October
31,
1982.
Notes
to
the
balance
sheet
concerning
the
company's
liabilities
read:
2.
Bank
loans
Bank
loans
are
secured
by
a
first
mortgage
on
the
company's
land
and
greenhouses
together
with
all
related
equipment:
an
assignment
of
book
debts,
key
personnel
life
insurance,
fire,
casualty
liability
insurance
on
the
facility,
mineral
rights
and
their
sale
proceeds
a
postponement
of
claim
by
the
shareholders;
demand
promissory
notes;
and
personal
guarantees
of
the
shareholders.
Interest
is
charged
at
notes
varying
with
bank
prime
rate
as
follows:
|
Operating
loan
|
Bank
prime
rate
plus
1%
|
|
Capital
loan
|
Bank
prime
rate
plus
1.5%
|
|
3.
Finance
contract
|
|
This
debt
is
secured
by
a
chattel
mortgage
on
one
of
the
company's
tractors.
Interest
is
charged
at
12.9%
p.a.
4.
Notes
payable—shareholder
This
note
is
unsecured
and
accrues
interest
at
14%
p.a.
One
of
the
major
factors
which
appears
to
have
contributed
to
the
company's
dire
financial
situation
is
obviously
a
production
problem
which
was
alluded
to
in
the
letter
of
ADC
of
December
17,
1982
rejecting
the
company's
proposal
for
a
refinancing.
It
reads:
"Revenue
is
based
on
yields
that
appear
optimistic
in
view
of
the
weed
infestation
in
the
fields.”
In
the
light
of
the
financial
situation
as
of
the
end
of
October
and
the
subsequent
rejection
by
ADC
to
provide
an
infusion
of
the
needed
capital
to
permit
the
company
to
carry
on
with
its
operations,
only
an
event
akin
to
a
miracle,
in
my
opinion,
would
have
saved
it
from
an
imminent
bankruptcy.
The
financial
statements
indicated
clearly
that
the
company
was
on
the
brink
of
a
financial
collapse
and
following
receipt
of
that
letter
any
possible
recovery
from
such
a
critical
situation
could
not
reasonably
have
been
foreseen
at
the
time.
It
was
obvious
that
the
company
had
exhausted
all
possible
sources
for
financial
assistance.
Again,
on
the
balance
of
probabilities,
it
appears
to
me
that
the
only
logical
conclusion
that
one
could
have
reached
at
the
end
of
1982
from
an
objective
analysis
of
the
situation
was
that
the
company
could
not
have
carried
on
any
further
operations.
Insofar
as
its
creditors
were
concerned
those
whose
debt
was
secured
might
probably
be
repaid.
The
unsecured
creditors,
including
the
appellant,
had
no
hope
whatsoever
of
retrieving
their
money
in
the
light
of
the
situation
that
existed
at
the
time.
In
his
reply
counsel
for
the
respondent
says:
10.
In
so
reassessing
the
appellant
for
his
taxation
year
1982
and
refusing
deduction
of
an
A.B.I.L.
in
the
amount
of
$452,698
the
respondent
made
and
relied
inter
alia
upon
the
following
assumptions
of
fact:
(a)
The
appellant
was
a
shareholder
of
240402
Alberta
Ltd.
a
corporation
operating
under
the
name
of
Bauer
Produce.
(b)
On
December
17,
1982
the
Alberta
Agricultural
Development
Corporation
refused
a
request
for
a
loan
by
240402
Alberta
Ltd.
on
the
basis
that
it
was
a
lender
of
last
resort
and
that
it
expected
that
the
corporation
could
obtain
financing
from
other
institutions
provided
the
borrowing
be
guaranteed
by
it's
shareholders
or
that
the
shareholders
increase
their
equity
in
the
corporation.
(c)
With
the
audited
financial
Statement
of
the
corporation
for
1982,
the
report
by
the
auditor
dated
November
27,
1982
expressed
only
uncertainty
as
to
whether
the
corporation
in
the
event
of
the
failure
of
the
then
ongoing
negotiations
for
refinancing
would
be
able
to
sell
its
assets
for
an
amount
sufficient
to
satisfy
its
liabilities.
(d)
A
loan
outstanding
to
the
Mercantile
Bank
of
Canada
in
the
amount
of
$1,726,439.73
was
called
in
on
March
3,
1983
and
in
June,
1983
foreclosure
proceedings
against
the
Corporation
were
initiated
by
the
Mercantile
Bank
of
Canada.
(e)
The
Corporation
was
in
the
business
of
producing
and
distributing
produce
and
its
operations
had
been
on
going
for
less
than
a
year
in
1982.
(f)
It
was
not
possible
at
the
end
of
the
appellant's
taxation
year
1982
to
say
that
the
debt
owed
to
him
by
the
Corporation
was
bad
but
only
that
it
was
doubtful.
(g)
the
appellant
did
not
in
considering
when
the
debt
became
bad,
judge
that
it
had
become
bad
in
his
taxation
year
1982
but
rather
(and
correctly
so)
in
his
taxation
year
1983
since
at
the
end
of
1983
the
corporation
had
been
the
object
of
mortgage
foreclosure
proceedings
and
had
ceased
its
business
operations
for
several
months.
(h)
The
appellant’s
change
of
position
as
to
the
timing
of
the
A.B.I.L.
was
not
motivated
by
his
honest
appreciation
(without
the
use
of
hindsight)
that
the
debt
had
become
uncollectible
at
the
end
of
his
taxation
year
1982
but
rather
by
his
desire
to
offset
the
impact
of
the
1985
and
1987
reassessments
assessing
late
filing
penalties
for
his
taxation
year
1982.
The
above
assumptions
upon
which
the
respondent
relied
in
reassessing
the
appellant
are
manifestly
groundless
in
the
light
of
the
documentary
evidence
he
considered
that
is
referred
to
in
his
paragraph
(c).
To
attempt
to
justify
the
validity
of
the
assessment
on
the
basis
that
the
auditor's
report
had
expressed
only
"uncertainty"
as
to
whether
the
company
could
satisfy
all
its
liabilities
was
in
the
light
of
the
financial
information
contained
in
the
balance
sheet
an
untenable
proposition.
As
to
paragraph
(f),
I
fail
to
see
what
additional
adverse
conditions
would
have
convinced
the
respondent
that
the
debt
owing
to
the
appellant
at
the
end
of
the
1982
was
for
all
practical
purposes
not
recoverable.
To
assert
that
the
debt
was
only
“doubtful”
again
in
the
light
of
the
financial
information
leaves
me
with
the
impression
that
the
respondent
made
a
concerted
effort
to
ignore
the
reality.
Counsel
never
addressed
himself
to
the
financial
data
submitted
in
evidence
and
never
attempted
to
demonstrate
that
in
spite
of
the
precarious
financial
picture
they
depicted
for
the
company
that
it
would
have
been
reasonable
to
expect
that
the
appellant
could
have
recovered
his
debts
at
some
future
time
despite
the
very
difficult
circumstances
it
was
experiencing.
His
only
arguments
in
favor
of
the
validity
of
the
assessment
were
that
at
the
time
the
appellant
had
filed
his
return
in
1985
he
had
represented
that
his
claims
against
the
company
had
become
bad
in
1983
and
not
in
1982
and
that
he
had
made
this
determination
consciously
and
with
the
full
knowledge
of
all
the
relevant
factors
that
had
to
be
considered
in
arriving
at
such
a
conclusion.
He
also
submitted
that
the
only
reason
why
the
appellant
changed
his
mind
as
to
the
taxation
year
during
which
his
claim
became
bad,
was
that
he
was
upset
with
the
assessment
because
the
respondent
had
levied
a
late
filing
penalty.
These
arguments
in
support
of
the
validity
of
the
assessment
having
regard
to
the
unchallenged
evidence
adduced
by
or
on
behalf
of
the
appellant
are
not
persuasive.
The
reason
why
the
appellant
changed
his
mind
as
to
the
year
in
which
his
debt
from
the
company
became
bad
was
clearly
explained
by
the
witness
Waites
and
his
explanation
was
reasonable
and
I
accept
it.
Furthermore,
I
am
not
aware
of
any
authority
for
the
proposition
that
once
a
taxpayer
has
signed
his
tax
return
that
he
may
not
change
his
mind
subsequently
following
the
discovery
of
a
mistake
notwithstanding
the
certificate
that
he
signed
as
part
of
his
return.
Certainly,
when
an
honest
mistake
has
been
discovered
by
a
taxpayer
he
must
be
permitted
to
correct
it
and
the
procedure
to
do
so
is
provided
in
the
Income
Tax
Act
within
certain
prescribed
requirements.
The
appeal
process
serves
this
purpose.
Waites
had
completed
an
audit
of
the
company,
and
having
done
so
he
was
certainly
qualified
to
advise
his
former
partner
as
to
the
financial
position
of
the
company
at
the
end
of
1982.
In
Blier
v.
M.N.R.
(1957),
16
Tax
A.B.C.
433;
57
D.T.C.
128,
Fabio
Monet
who
was
then
chairman
of
the
Income
Tax
Appeal
Board
had
to
deal
with
the
situation
of
a
taxpayer
who
had
filed
income
tax
returns
for
a
number
of
taxation
years
on
a
net
worth
basis,
had
paid
the
tax
as
estimated
by
her
and
was
assessed
accordingly,
but
took
the
position
later
on
that
her
returns
as
filed
were
not
correct
and
filed
notices
of
objection
against
the
assessments
followed
by
notices
of
appeal.
Mr.
Monet
at
page
435
(D.T.C.
129)
said:
[Translation]
Before
proceeding
on
merit,
the
respondent
contended
that
the
appeal
should
be
dismissed
as
ill-founded
in
law
since
the
assessments
under
appeal
made
no
change
in
the
estimate
the
appellant
herself
had
made
of
her
taxable
income
and
the
tax
payable
by
her.
Under
the
Act,
any
person
not
satisfied
with
an
income
tax
assessment
issued
by
the
Minister
of
National
Revenue
may
object
to
it
and
having
done
so,
file
an
appeal
once
the
Minister
has
given
a
decision
thereon
or
180
days
have
elapsed
after
service
of
the
said
notice
of
objection.
I
agree
with
these
comments
and
I
am
satisfied
that
they
constitute
a
valid
interpretation
of
the
provisions
of
the
Act
dealing
with
the
appeal
process.
Finally,
as
to
the
argument
that
the
only
reason
that
the
appellant
had
changed
his
mind
was
because
he
was
upset
with
the
assessment
of
a
penalty,
such
a
proposition
is
without
any
legal
foundation
in
support
of
the
validity
of
an
assessment.
In
the
light
of
the
evidence,
I
have
no
hesitation
in
arriving
at
the
conclusion
that
the
allowable
business
investment
loss
was
deductible
in
his
1982
taxation
year.
In
her
closing
argument
counsel
for
the
appellant
submitted
that
the
late
filing
penalty
for
1982
should
be
cancelled.
The
Court
has
no
authority
to
cancel
a
late
filing
penalty
if
a
taxpayer's
return
has
been
filed
beyond
the
date
prescribed
for
its
filing
in
the
legislation.
However,
with
the
adjustment
to
the
1982
return
of
the
appellant
as
a
result
of
the
disposition
of
this
appeal
the
penalty
as
well
as
the
interests
levied
by
the
assessment
will
have
to
be
reduced
accordingly.
For
the
above
reasons
the
appeal
is
allowed
and
the
assessment
is
referred
back
to
the
respondent
for
reconsideration
and
reassessment.
The
appellant
is
entitled
to
his
costs
on
solicitor-client
basis.
Appeal
allowed.
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