Sarbjeet S Malhi v. Minister of National Revenue, [1980] CTC 2925, 80 DTC 1801

D E Taylor:—This is an appeal heard in the City of Toronto, Ontario, on September 23, 1980, against an income tax assessment for the year 1976 in which the Minister of National Revenue disallowed a claim on the income tax return in the amount of $2,550, for four non-resident dependants in India. The claim was detailed as follows on the required "Declaration of Support of Non-Resident Dependants” form attached to the tax return (T1E-NR):

In assessing the appellant, the respondent relied, inter alia, upon paragraph 109(1)(f), subsections 163(2) and 163(3) of the Income Tax Act, SC 1970-71-72, c 63, as amended.

Contentions

For the appellant:

—As far as the amount of $2,550 is concerned, I attached a cancelled cheque and sent to the department which must be in my file as proof that I did expend that money.

For the respondent:

—The alleged proof was receipts issued by Punjab Express Foreign Exchange Services (“Punjab").

—The receipts state that the payments were received by Punjab for transfer to India to be paid to the dependants named thereon.

—The records of Punjab were produced by its proprietor, Gian Singh Johal (“Johal") which records could not be relied upon to establish that the appellant had actually made the payments.

Evidence and Argument

In addition to the standard Punjab receipts submitted with his tax return, this appellant provided the cancelled cheque in the amount of $2,550 referenced above made out to Punjab Express Foreign Exchange, dated 3/11/76, but negotiated on January 4, 1977. The three Punjab receipts were serially numbered 695, 696, 697, all dated Nov 3, 1976, and totalled $2,600. These receipts all indicate that the funds were provided by way of a cheque. According to the testimony of Mrs Blair of Revenue Canada, there was no record of the cheque for $2,550 in the books of Punjab in the years 1976 or 1977, but she agreed that the endorsement on the cheque appeared to be that of Johal. She felt it was therefore a reasonable conclusion that it had passed through his hands at some time, in fact it may have been negotiated through his bank account. The appellant could give no explanation for the apparent differences of $50 ($2,600 receipts and $2,550 cheque) or the delay by Johal in negotiating the cheque. Air plane reservation documentation was submitted by the Minister that would indicate Johal may not have been in Canada on Nov. 3,1976, the date of the receipts. However, no one verified this assertion by the Minister. The appellant contended that he could not be responsible for the shortcomings of Johal’s business records, nor where Johal was on November 3,1976. It was his recollection that he had given the cheque to Johal on November 3,1976, but he couldn’t be absolutely sure of that precise date. For most practical purposes, the evidence in this appeal is similar to that of Tarsame Singh Burmi v MNR, [1980] CTC 2706; 80 DTC 1621, other than with regard to the cheque noted above. The respondent relied on that case.

Findings

As regards the receipts themselves, which represent the primary evidence of payment, the Board finds no difference from Burmi (supra) and, to that degree, the Minister’s position should be upheld. With regard to the cheque, there are some possible explanations which might tie it into the receipts, particularly when it appears to be related in a direct way to Johal, but an explanation is not sufficient, proof is required. This basic problem of proof for the appellant is accentuated because this cheque was for an amount different than the alleged payment; it was not negotiated for two months; and neither the cheque nor the alleged receipts were recorded in the books of Johal.

It is noted by the Board that the appellant claimed only $2,550 as a deduction on his tax return, even though he presented receipts for $2,600, and also completed the required T1E-NR for the $2,600. Accordingly, it would certainly appear that in making his actual claim he related to the amount of the cheque, not the receipts. However, a cheque in itself is not confirmation of payment for a particular amount. The cheque to Johal could have been for a purpose entirely different than that alleged, it could even have reached the relatives, but may not have been used for support. The net result is that the appellant had not supplied documentation that can be relied upon as proof that the payments claimed were actually expended for the support of the dependants.

It may be that some of the taxpayers assessed by the Minister in this manner have been victims of the questionable practice of Punjab rather than participants in it as the assessment of penalty might allege. The problem, however, as I see it, is the appellant must establish that he had “expended” (paragraph 109(1 )(f) of the Act) the amount claimed. If the appellant fails to do so (as I have already ruled in this case), then he had claimed an amount not expended. That of itself might well be sufficient to bring the matter under the penalty provisions of subsection 163(2) of the Act, but the additional fact of the involvement of Punjab in the matter, under the cir- cumstances recited in several previous cases (see Burmi (supra)) justifies the penalty imposition in my mind.

Decision

The appeal is dismissed.

Appeal dismissed.