Michael v. R., [1999] 4 CTC 2810 (Informal Procedure)

Beaubier T.C.J.:

This appeal pursuant to the Informal Procedure was heard in Toronto, Ontario on July 23, 1999. The Appellant was the only witness.

Paragraphs 7 to 10 inclusive of the Reply to the Notice of Appeal read as follows:

7. In assessing the Appellant for the 1985, 1986 and 1987 taxation years by Notices of Assessment mailed on December 21, 1988 the Minister of National Revenue, (the “Minister”) assessed the Appellant’s returns as filed and for the 1985 and 1986 taxation years the Minister assessed late filing penalties in the amounts of $711.48 and $547.56, respectively, pursuant to subsection 162(1) of the Income Tax Act (the “Act”) and arrears interest in the amounts of $1,265.32, $592.33 and $367.34, respectively, pursuant to subsection 161(1) of the Act. 8. In assessing the Appellant for the 1990 and 1991 taxation years by Notices of Assessment mailed on January 6, 1993 the Minister assessed the Appellant’s returns as filed.

9. In so assessing the Appellant, the Minister made the following assumptions of fact:

(a) the Appellant’s returns of income for the 1985, 1986, 1987, 1990 and 1991 taxation years (the “Returns”) were required to be filed with the Minister on or before April 30, 1986, April 30, 1987, May 2, 1988, April 30, 1991 and April 30, 1992, respectively;

(b) the Appellant failed to file the Returns for the 1985, 1986, 1990 and 1991 taxation years as and when required by the Act;

(c) the Appellant filed his T-1 income tax returns for both the 1985 and 1986 taxation years on May 10, 1988, 1987 taxation year on May 2, 1988 and both the 1990 and 1991 taxation years on October 30, 1992;

(d) on May 10, 1988, the Appellant had an unpaid balance of tax owing in the amounts of $4,163,39 and $3,220.96 respectively with respect to his 1985 and 1986 taxation years;

(e) on May 2, 1988, the Appellant had an unpaid balance of tax owing in the amount of $5,938.50 with respect to his 1987 taxation year;

(f) the Appellant was assessed late filing penalties in the amounts of $711.48 and $547.56, respectively with respect to his 1985 and 1986 taxation years pursuant to subsection 162(1) of the Act;

(g) the Appellant was assessed arrears interest in the amounts of $1,265.32, $592.33 and $367.34, respectively with respect to his 1985, 1986 and 1987 taxation years pursuant to subsection 161(1) of the Act:

(h) for the 1990 and 1991, the Appellant was allowed a refund of $17,492.71 and $16,046.99, respectively:

B. Issues to be Decided

10. The issues are whether:

(a) the RRSP amount of $3,500.00 reported by the Appellant in the 1985 taxation year was properly included in the Appellant’s income and assessed by the Minister;

(b) late filing penalties for the 1985 and 1986 taxation years were properly assessed in accordance with subsection 162(1) of the Act;

(c) arrears interest for the 1985, 1986 and 1987 taxation years were properly assessed in accordance with subsection 161(1) of the Act;

(d) the Minister properly calculated the interest due to the Appellant for the 1990 and 1991 taxation years.

At the opening of the hearing, counsel for the Respondent consented to the appeal for a judgment that an RRSP refund of $3,500 in the 1985 taxation year is not to be included in the Appellant’s income and for that reason income tax, penalties, and interest assessed respecting that sum of $3,500 should be reconsidered and reassessed by the Minister of National Revenue.

The assumptions contained in paragraph 9 of the Reply respecting the remaining items assessed are correct.

The Appellant’s evidence is that he failed to file income tax returns on time because his tax advisors at that time told him that he did not have to on the basis of what they said was Revenue Canada’s advice. This testimony is entirely hearsay. In addition, during the years in question, the Appellant’s mother and child died, he was moving, and, while he had previously filed his own income tax returns, relied upon his tax advisors’ advice during the years in question. He also testified that he was advised by this tax advisors that he could offset any income tax owed by the amount of income tax refund to which his wife was entitled during the years in question and he adopted this procedure.

The Appellant was sincere in his testimony. However, the law is clear. Canada taxes each person individually and there is no provision for a husband and wife whereby taxes owing are offset between the two of them. Nor are the reasons give for the failure to file income tax returns during the years in question satisfactory in fact or in law. No detail was given as to why the death of the Appellant’s mother and child caused a delay in filing an income tax return in any of the years in question. Nor is the wrong advice of an advisor a satisfactory reason for failing to file income tax returns on time. The fact that the Appellant, himself, had filed his own income tax returns in previous years indicates that he had every reason to know the requirements respecting income tax returns and that he did know them, himself. Any incorrect advice that was give to him by a tax advisor is a matter to be determined between him and his advisor. However, it does not constitute a satisfactory excuse for the failure to file income tax returns, or to pay income tax when due.

For these reasons, the penalties were properly assessed for 1985 and 1986. Moreover, since income tax was in arrears for the years in question, interest is properly due in compliance with the statutory provisions of the Income Tax Act. The appeals respecting these matters are dismissed.

This matter is referred to the Minister of National Revenue for reconsideration and reassessment respecting the $3,500 income assessed on account of an RRSP refund for the Appellant’s 1985 taxation year.

Appeal allowed in part.