M
J
Bonner:—These
are
appeals
from
assessments
of
income
tax
for
the
appellant’s
1972
to
1975
taxation
years
inclusive.
During
that
period
the
appellant
operated,
as
a
sole
proprietor,
a
small
butcher
shop
and
grocery
store.
The
appellant
did
not
maintain
elaborate
financial
records
relating
to
his
business.
He
did
record
gross
revenues
from
sales
by
means
of
weekly
entries
in
a
scribbler
and
he
kept
boxes
containing
receipts
for
both
personal
and
business
expenditures.
Because
of
the
absence
of
records
of
drawings,
gasoline
expenses
and
what
were
described
as
“back-up”
records
of
sales,
the
respondent
decided
to
use
an
indirect
method
of
verifying
income,
the
bank
deposit
method.
Donald
Beamish,
the
assessor
responsible
for
the
assessments
in
issue,
gave
evidence
at
the
hearing.
His
evidence
was
that
in
applying
the
bank
deposit
method
for
each
of
the
taxation
years
in
question
he
first
analyzed
the
bank
accounts
of
the
appellant
and
his
wife.
He
determined
the
total
amount
of
deposits
made
in
the
accounts
in
the
year,
exclusive
of
deposits
which
appeared
to
be
unrelated
to
monies
received
from
the
grocery
store
business.
He
then
deducted
the
deposits
from
the
total
income
reported
to
arrive
at
the
amount
of
money
available
for
cash
drawings
and
business
expenses
paid
in
cash.
Next
he
determined
from
the
profit
and
loss
statement
attached
to
the
appellant’s
return
the
total
expenses
of
the
business
(exclusive
of
capital
cost
allowance).
He
then
identified
the
expenses
which
were
paid
by
cheque
and
by
subtraction
calculated
the
total
of
business
expenses
which
must
have
been
paid
in
cash.
He
then
determined
the
amount
of
personal
expenditures
made
by
the
appellant
in
cash.
He
compared
the
cash
expenditures
(both
business
and
personal)
with
the
money
determined
to
be
available
for
cash
payments
during
the
year
and
he
concluded
that
because
the
former
exceeded
the
latter
the
amount
of
the
excess
was
unreported
income.
This
method
is,
of
course,
a
very
crude
tool
for
the
determination
of
unreported
sales,
but
the
use
of
some
indirect
method
appears
to
have
been
justified
by
the
appellant’s
chaotic
records.
The
appellant
gave
evidence
at
the
hearing
and
conducted
his
appeal
without
the
benefit
of
professional
assistance.
He
was,
and
I
say
this
with
no
disrespect,
an
unsophisticated
man
evidently
not
wholly
familiar
with
the
English
language.
During
the
course
of
the
hearing
I
formed
the
impression
that
the
appellant
made
every
attempt
to
be
truthful.
I
have
concluded,
however,
from
the
manner
in
which
he
tried
to
establish
that
the
assessments
were
too
high,
that
he
had
at
best
only
partially
grasped
the
premises
underlying
the
assessments.
As
a
result,
his
attacks
on
the
assessments
were
in
large
part
ineffective.
It
is
apparent
too
that
initial
assessments
and
reassessments
were
made
after
the
respondent’s
officials
had
met
many
times
with
the
appellant
in
an
attempt
to
achieve
the
most
accurate
results
possible
in
the
circumstances.
The
appellant’s
first
complaint
was
that
the
respondent
overestimated
his
personal
expenses.
Save
for
general
allegations
indicating
that
the
appellant
and
his
wife
lived
frugally,
there
was
no
evidence
adduced
which
substantiated
this
point.
I
cannot
find
error
in
this
aspect
of
the
assessments.
Next
the
appellant
argued
that
insufficient
inclusion
was
made
by
the
respondent
in
the
“non-taxable
receipt”
category
for
board
received
by
the
appellant
from
his
daughter.
The
evidence
established
that
the
appellant
received
$780
in
1974
and
that
the
assessment
proceeded
on
the
basis
that
$700
was
received.
Thus,
I
find
that
the
appellant
is
entitled
to
a
reduction
of
$80
in
the
computation
of
income
for
1974.
Next,
still
in
the
“non-taxable
receipt”
category,
the
appellant
asserted
that
he
received
a
$270
rebate
on
the
purchase
in
1975
of
a
new
car.
Cross-
examination
established
that
this
fact
was
not
raised
by
the
appellant
during
previous
discussions
with
the
respondent’s
officials.
The
appellant’s
understanding
of
the
process
involved
in
the
respondent’s
calculations
ap-
peared
to
be
limited.
Thus,
I
can
quite
understand
the
appellant’s
failure
to
previously
raise
the
matter
and
I
accept
the
appellant’s
evidence.
It
follows
that
adjustment
in
the
computation
of
the
appellant’s
income
for
1975
is
required.
The
sum
of
$270
must
therefore
be
regarded
as
a
receipt
from
a
source
other
than
the
appellant’s
business.
However,
because
the
receipt
was
a
rebate
on
part
of
the
cost
of
the
car
purchased
by
the
appellant
in
1975,
and
because
the
car
was
required
in
part
for
the
purpose
of
gaining
or
producing
income
and
capital
cost
allowance
was
claimed,
it
follows
that
on
assessment
the
rebate
must
be
taken
into
account
as
a
reduction
of
capital
cost.
The
appellant
claimed
that
he
received
the
sum
of
$160
when
furnishings
contained
in
a
rented
flat
were
destroyed
by
fire.
Part
of
that
amount
was,
he
said,
the
proceeds
of
fire
insurance,
and
the
remainder
compensation
paid
to
him
by
the
tenant.
The
evidence
did
not
establish
when
the
property
was
destroyed.
The
appellant
stated
he
did
not
know.
I
cannot
therefore
find
that
the
transaction
is
relevant
to
the
computation
of
the
appellant’s
income
for
any
of
the
years
in
issue.
Next,
the
appellant
claimed
that
the
respondent
had
failed
to
take
into
account
three
further
amounts
which
fell
into
the
“non-taxable
receipt”
category:
(a)
the
sum
of
$125
received
in
1975
from
the
sale
of
a
space
heater
and
fan;
(b)
the
sum
of
$350
received
in
1972
from
the
sale,
while
on
holiday
in
Yugoslavia,
of
a
camera;
and
(c)
the
sums
of
$100
and
$80
received
in
1974
and
1975
respectively
as
interest
on
money
loaned
to
his
brother-in-law.
I
have
commented
previously
on
the
quality
of
the
evidence
of
the
appellant.
I
accept
it.
As
to
the
second
item,
it
appears
from
the
evidence
that
the
respondent’s
calculation
of
the
cost
of
the
appellant’s
holiday
trip
to
Yugoslavia
was
very
low.
The
evidence
did
not
show
that
the
respondent
failed
to
take
the
$350
into
account
as
an
offset
in
his
calculation
of
the
cost
of
the
trip.
Thus,
the
appellant
is
entitled
to
no
relief.
As
to
the
interest
which
the
appellant
claimed
he
received,
it
appears
the
appellant
was
not
dealing
with
his
brother-in-law
at
arm’s
length,
and
thus
the
amounts
do
not
enter
into
the
computation
of
exempt
income
by
reason
of
paragraph
110.1(2)(g)
of
the
Income
Tax
Act.
No
entitlement
to
relief
has
thus
been
established
with
respect
to
the
interest.
I
can
therefore
find
only
that
the
appellant
has
shown
that
he
is
entitled
to
a
reduction
of
$125
in
the
computation
of
his
income
for
1975.
The
appellant
argued
that
the
sum
of
$144
in
family
allowances
was
received
by
him
in
each
of
the
years
1972
and
1973
and
that
this
would
fall
into
the
“non-taxable
receipt”
category.
It
was
not
shown
that
this
amount
was
not
taken
into
account
by
the
respondent
in
assessing
and
thus
the
appellant
is
entitled
to
no
relief.
The
appellant
claimed
next
that
he
was
entitled
to
additional
capital
cost
allowance
on
a
refrigerator
and
stove.
These
goods
had
been
initially
used
by
the
appellant
in
his
own
home
and,
I
gather,
were
later
installed
in
a
flat
let
by
the
appellant
to
tenants.
The
appellant
did
not
establish
the
value
of
the
goods,
nor
did
he
indicate
when
he
commenced
to
use
them
for
the
purpose
of
gaining
or
producing
income.
Thus,
the
assessment
has
not
been
shown
to
be
wrong
in
this
respect.
Next,
the
appellant
claimed
a
deduction
of
$400
for
medical
expenses
for
1974.
It
appears
that
on
assessment
the
appellant
was
allowed
the
optional
standard
deduction.
At
the
hearing
the
appellant
produced
receipts
for
payments
to
dentists
in
1974
of
$375.
To
the
extent
that
the
total
exceeds
3%
of
the
appellant’s
income
as
determined
pursuant
to
the
reassessment
directed
by
this
decision,
the
appellant
is
to
be
allowed
the
deduction
authorized
by
paragraph
110(1)(c)
of
the
Act.
A
charitable
donation
claimed
was
not
shown
to
have
been
made
to
an
organization
described
in
subparagraph
110(1)(a)(i).
The
appellant
further
argued
that
certain
amounts
totaling
$425
had
been
included
as
part
of
the
capital
cost
of
an
automobile
purchased
by
him
in
1975
and
that
they
should
have
been
allowed
as
current
expenses.
It
was
not
established
that
the
proper
proportions
of
the
amounts
in
question
had
not
already
been
allowed
by
the
respondent
in
calculating
the
amount
of
the
automobile
expenses
incurred
by
the
appellant
in
carrying
on
his
business.
The
appellant
is
therefore
entitled
to
no
relief
in
this
regard.
I
have
carefully
considered
the
evidence
relating
to
a
number
of
other
areas
in
which
the
appellant
claimed
that
the
respondent
erred.
There
was
no
lucid
evidence
which
established
the
error
except
in
the
limited
instances
set
out
above.
The
appeals
for
the
1974
and
1975
taxation
years
will
therefore
be
allowed
and
the
assessments
referred
back
to
the
respondent
for
reconsideration
and
reassessment
in
accordance
with
these
reasons.
The
appeals
for
1972
and
1973
are
dismissed.
Appeal
allowed
in
part.