Khanna – Federal Court of Appeal finds that a gross negligence penalty could not be sustained where the trial was all about the taxpayer’s husband and she was ignored

The taxpayer conceded that she had unreported income from rental properties owned equally by her and her husband, but appealed the imposition of a gross negligence penalty.

Monaghan JA noted that the taxpayer was not called to testify (which the Crown could have done) and that essentially the only testimony was of the taxpayer’s husband, which “was almost entirely about his actions and inactions,” so that essentially “nothing on the record address[ed] her involvement in or knowledge about the details of the rental business … and nothing on the record establish[ed] whether … the appellant knew she had unreported income prior to receipt of the reassessments.” Before allowing the taxpayer’s appeal, Monaghan JA stated:

Where is the evidence or finding about the appellant’s deliberate choice not to make inquiries or the finding of deliberate ignorance? I see nothing in the record.

Neal Armstrong. Summaries of Khanna v. Canada, 2022 FCA 84 under s. 163(2) and Tax Court Rule 146(2).