Jean Louis Tessier v. Minister of National Revenue, [1980] CTC 2384, 80 DTC 1322

Roland St Onge [TRANSLATION]:—The appeal of Mr Jean Louis Tessier came before me on February 11, 1980 in Montreal, Quebec.

The question relates to the penalties imposed for the 1970, 1971, 1972 and 1973 taxation years.

The facts of this appeal are clearly set out in paragraph 5 of the reply to the notice of appeal: I quote:

5. In assessing the appellant for his 1970, 1971, 1972 and 1973 taxation years, the respondent relied, inter alia, on the following presumptions of fact:

(a) during the years in question, the appellant operated a transport business and was a partner in the operation of a bar in the city of La Salle;

(b) the appellant did not file tax returns for the years in question within the time limits specified in the Income Tax Act;

(c) on May 8, 1975, the appellant was required to file tax returns for the said years;

(d) following this requirement to file, the appellant filed returns for 1970 and 1971 on July 4, 1975 and returns for 1972 and 1973 on July 22, 1975;

(e) the appellant reported the following amounts of taxable income in computing his income for each of these years:

Year	Taxable amount
1970	$ 9,068.50
1971	$23,911.32
1972	$53,184.20
1973	$55,833.81

(f) the taxpayer failed to include his share of the income from the operation of the bar in the taxation years 1970 and 1971; $3,577.98 for 1970 and $7,616.94 for 1971;

(g) the taxpayer therefore made a reconciliation of the appellant’s income and determined that his taxable income for the years in question was as follows:

Year	Taxable amount
1970	$11,546.48
1971	$29,828.26
1972	$53,184.20
1973	$55,833.81

(h) in a notice of assessment dated February 13,1976, the respondent applied a penalty under s 56(1) and s 163(1) of the Act, on the amounts of tax payable for each of the years in question:

Year	Tax payable	Penalty (50%)
1970	$ 1,770.97	$ 885.48
1971	$ 5,829.06	$ 2,914.53
1972	$13,770.87	$ 6,885.44
1973	$14,695.09	$ 7,347.54

(i) the appellant wilfully attempted to evade payment of the tax payable by him by failing to file tax returns for the years in question.

The respondent has proved all the allegations in his reply to the notice of appeal, and the reasons given by the appellant for his failure to file his income tax returns are invalid.

The appellant knew that he was required to pay tax. He was also aware that his accountant had not filed his tax returns; he was aware of this in 1970,1971,1972 and 1973. He took no steps to rectify the situation. It is very easy to say, “I have turned everything over to my accountant”. When the accountant fails to act, he must be replaced.

Even though his accountant failed in his duty, the appellant knew that he was making larger and larger profits.

His total income in 1971 was approximately $26,000: the figures in 1972 and 1973 were $57,000 and $61,000 respectively. Thus he was aware that he was liable to tax.

It was stated that the accountant had filed all the documents; this is incorrect—the only documents referred to were balance sheets which were prepared for “Caribou Enr” by another accountant. Instead of sending these balance sheets to his accountant for the preparation of his income tax return, the appellant put them in a drawer where they remainded.

I should like to refer to the various cases cited, inter alia, The Queen v George E Pavely, [1976] CTC 477; 76 DTC 6415; I quote from 480 [6417]:

I am not satisfied, for example, that there must be an attempt on the part of the respondent to conceal his income and, unless that is found, then his reasons for failing to file returns are not material. Likewise, I am not persuaded that there is no such thing as a temporary evasion. It may well be, as counsel for the appellant argued, that the deliberate failure or refusal to file income tax returns as and when required is itself a crude artifice or stratagem to attempt to evade the payments of taxes, even temporarily. If this is so, then the reasons for failing to file returns are not only relevant but vital.

I quote from The Queen v William Arthur Branch, [1976] CTC 193; 76 DTC 6112, at 196:

In my opinion the word evade implies something of an underhanded or deceitful nature. In other words a deliberate attempt to escape the requirement of paying tax on income that had been earned. This intention can be inferred from acts of omission or commission. Certainly failure to file tax returns and to pay taxes for four successive years might suggest an attempt to evade in some way the payment of taxes.

I endorse all the principles explained in these extracts; there is no doubt in my mind that the taxpayer in the case at bar wilfully attempted to evade payment of tax by failing to file tax returns as and when required by subsection 150(1) of the Income Tax Act.

I would have been in some doubt if this situation had occurred only once but, in the circumstances, I am not satisfied with the manner in which the appellant explained his situation when he was called as a witness. He knew almost nothing and his replies were consistently vague and far from convincing.

In the Board’s view, therefore, the respondent has correctly applied the prescribed 50% penalty in accordance with subsection 56(1) of the former Act, subsection 163(1) of the new Act and subsection 62(3) of the 1971 Income Tax Application Rules.

For these reasons, the appeal is dismissed.

Appeal dismissed.