D E Taylor:—This appeal was heard in Vancouver, British Columbia, on May 7, 1981. The facts upon which the parties were in agreement included:
— The appellant is a self-employed plumbing contractor.
— He did not file income tax returns for the years 1973 to 1976.
— By arbitrary assessment the respondent determined the appellant’s taxable income for the years in question to be as follows:
| 1973 | $12,827.00 |
| 1974 | 1 4,848.59 |
| 1975 | 2,224.54 |
| 1976 | 12,624.27 |
— By notices of assessment dated July 13, 1978 the respondent levied, inter alia, penalties under subsection 163(1) of the Federal Income Tax Act and section 19 of the BC Income Tax Act.
It was the contention of the agent for the appellant that:
Subsection 163(1) provides for a penalty of 50% of the amount of the tax sought to be evaded in the case of a person who “wilfully” attempts to evade payment. The term “wilfully” as used in subsection 163(1) comprehends the conscious and deliberate formation of an intent to do an act with the full knowledge that the act in question is unlawful.
In response, the Minister submitted that the appellant wilfully attempted to evade tax payable for each of the years under appeal by failing to file an income tax return as and when required by subsection 150(1) of the Income Tax Act SC 1970-71-72, c 63, as amended, and that accordingly penalties were properly imposed under subsection 163(1). The respondent relied, inter alia, upon subsections 150(1), 152(7) and 163(1) of the Income Tax Act, SC 1970-71-72, c 63, as amended, and section 19 of the Income Tax Act, SBC 1962, c 27, as amended.
Witnesses for the Minister outlined the efforts to have the appellant produce the income tax returns, and their general failure in this endeavour. The appellant provided certain reasons that he believed accounted for the fact that he had not filed the required tax returns — primarily that he was not certain of his income since many accounts receivable had not been collected, and he did not have the funds required to pay an accountant to do the necessary work.
As I see it, there is only one issue here — whether the failure to file income tax returns, even after formal demands (for whatever reason or excuse) can be regarded as a wilful attempt to evade payment of tax. Counsel for the respondent put forward that if the result of such non filing was even a “temporary evasion” of tax payable, the requirement of subsection 163(1) of the Act had been met and a penalty was justified. I do not share the opinion expressed above by the appellant in the notice of appeal that the term “wilfully” as used in subsection 163(1) implies actions greater and more deliberate than those of this appellant. I am quite satisfied that Mr Fulcher was aware that in the circumstances he was contravening the provisions of the Income Tax Act by not filing the required returns, and if the appeal depended on the defence raised by his agent, it should fail. However, I am also unable to read into the words of subsection 163(1) the interpretation placed thereon by counsel for the respondent. Where a taxpayer’s name, address, and location of employment or business are known to the Minister — as was the situation here — the failure to file income tax returns can hardly be founded in a serious belief in the mind of the taxpayer that, by such failure, he is evading the payment of income tax due. At best, he might be deferring payment, even avoiding it, but it would be optimistic in the extreme on his part to expect he was evading it. The Board makes no attempt to indicate what circumstances should obtain to permit the enforce- ment of subsection 163(1) of the Act, but only points out that they do not exist in this case.
The appeal is allowed and the matter is referred back to the respondent for reconsideration and reassessment accordingly.
Appeal allowed.
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