B Sandhu v. Minister of National Revenue, [1983] CTC 2558, 83 DTC 500

Roland St-Onge [ORALLY]:—The appeal of Mr Bhupendra Sandhu came before me on March 18, 1983, at the city of Montreal, Quebec, and it deals with a net worth assessment for the 1975, 1976, 1977 and 1978 taxation years.

The facts of this appeal are set forth at paragraph 4 of the reply to the notice of appeal which reads as follows:

4. In assessing the Appellant for the 1975, 1976, 1977 and 1978 taxation years, the Respondent relies among others on the following assumptions of facts:

(a) During the years under appeal, the Appellant operated a ladieswear boutique under the name “Boutique Bela”;

(b) An analysis of the taxpayer’s bank statements and cheques demonstrated higher deposits than reported sales and also substantial increase in business assets with no increase in liabilities;

(c) Since the Appellant did not keep adequate books and records, the Respondent proceeded to establish the Appellant’s true income on a net worth basis for the said years;

(d) By Notices of reassessments dated April 11, 1980 for the 1975 taxation year and dated June 30, 1981 for the other years under appeal, the Respondent included in the computation of the Appellant’s income additional amounts of income resuting from the net worth thereby establishing the following amounts of unreported income:

1975:	$ 7,387.99
1976:	$19,088.16
1977:	$16,935.64
1978:	$38,243.61

(e) The Appellant was unable to establish that any of the above figures were incorrect, that part of the said amount did not constitute income or should not be assessed as such for each of the years under appeal;

(f) The Appellant, under circumstances amounting to gross negligence, omitted to declare the amounts stated in sub-paragraph (e) in filing his tax returns for the taxation years under appeal which justifies the imposition of a penalty for each of the said years and pursuant to sub-section 163(2) for the following amounts:

1975:	$ 190.60
1976:	$ 561.68
1977:	$ 748.76
1978:	$2,136.85

The appellant contends that the conciliation of capital failed to take into account the following gifts:

At the hearing, the field auditor, who prepared the net worth assessment, testified that at the time of his investigation he did not discover any unreported sales and was told that the appellant had received various amounts of money from his father. The auditor did not take that into consideration.

Mr Tibor, who was the bank manager and the bookkeeper of the appellant, testified that in the years under appeal, 1975 to 1978, he went every three months to do the appellant’s books. He even made some spot checks and never discovered any unreported sales. As to the lump sum deposits in the appellant’s bank account (most of them in round figures) the appellant explained that he received this money from his father. It is inconceivable that these amounts were earned from the appellant’s small business and the only explanation is that they were amounts received from his father. Furthermore, there is an affidavit to tis effect and I have no reason to disbelieve the appellant’s witnesses.

The respondent failed to prove that the appellant did not keep adequate books and records.

Consequently, for these reasons the appeal is allowed.

Appeal allowed.