Laurette Giroux, Adélard Giroux Inc v. Minister of National Revenue, [1979] CTC 3010, 79 DTC 798

Delmer E Taylor [TRANSLATION]:—These appeals were heard on common evidence in the City of Montreal, Quebec, on April 11, 1979. They were filed against the penalties imposed in relation to the reassessments on Laurette Giroux, dated December 22, 2976, for 1966 to 1971 inclusive, and those relating to Adélard Giroux Inc, dated February 3, 1977, for 1964 to 1971 inclusive. The respondent relied, inter alia, on subsection 56(2) of the Income Tax Act (RSC 1952, c 148), and on subsection 163(2) of the Income Tax Act (SC 1970-71-72, c 63).

Facts

Adélard Giroux Inc, a company specializing in the sale of construction materials, is located in the province of Quebec. Laurette Giroux is a shareholder in Adélard Giroux Inc.

Pleadings

The appellant’s position is as follows:

—These reassessments are the result of a series of amended returns filed voluntarily with the Minister on September 30,1976 at the Sherbrooke District Office by the appellant’s representatives;

—The T7W-C forms accompanying each of the notices of reassessment indicate clearly that the adjustments made to the appellants’ income

“follow from our audit of the documents and vouchers supplied by you, and our interviews with you and/or your representatives;’’

—The Minister did not, as he should have done, take any account of the voluntary disclosures made by the appellants;

—The penalties imposed for each year are illegal, excessive and unjust.

The respondent’s position is as follows:

re Adélard Giroux Inc

On February 3,1977, the Minister of National Revenue issued notices of reassessment assessing the income established by the amended returns and imposed the following penalties:

	Original reported	Assessed taxable
T2	income income	income income	Penalty
1964	11,887.26	28,300.71	451.37
1965	7,792.18	39,225.47	1,010.55
1966	6,604.90	41,618.43	1,411.51
1967	2,596.75	42,823.33	1,599.48
1968	6,429.58	32,278.14	664.53
1969	7,719.54	39,353.38	1,118.98
1970	273.87	55,735.62	3,025.16
1971	5,577.76	14,952.45	143.50
re Laurette Giroux

The reassessments add to the income reported by Miss Giroux certain amounts representing the appropriation of unreported sales, the appropriation of unreported sales tax, unreported income received from the company and unreported rental income. The amounts set out below represent the income assessed at the time of the original return, the income as revised by the assessment of December 22, 1976 and the penalties imposed in accordance with subsection 56(2) of the Income Tax Act.

	Original reported	Assessed taxable
Year	income income	income income	Penalty
1966	7,654.45	31,387.61	1,262.78
1967	4,068.14	34,111.70	1,509.20
1968	11,351.00	24,876.85	730.08
1969	17,401.91	38,700.34	1,335.63
1970	18,613.47	72,270.80	3,698.48
1971	14,739.70	35,713.60	1,148.18

Evidence

In my view, the significant facts adduced are as follows:

(1) In January 1973, the Department of National Revenue was informed by the Quebec Department of Revenue that a special investigation was being conducted into the affairs of the appellants.

(2) The taxpayers’ files were requisitioned and held in abeyance by a special section of the Department until the completion of the provincial investigation.

(3) In August 1976, the results of the provincial investigation were sent to the federal officers.

(4) During the period of three and a half years the appellants made no effort to advise or contact the federal officers about the provincial investigation.

(5) On or about September 30, 1976, certain documents described by the appellants as “amended returns” for the taxation years in question were handed personally to the officer of the Department during a meeting held in the offices of Lemay & Jodoin concerning the federal tax liability arising from the provincial investigation.

(6) These appeals were filed solely against the penalties imposed and not against the tax assessments themselves.

Arguments

Counsel for the appellants submitted that the reassessments arose from the filing of “amended returns’’ by the taxpayer which contained all the Significant information and that there was, therefore, no basis for imposing penalties after that date.

The position of counsel for the respondent was that the reassessments were issued in consequence of the provincial investigation and were based on the results of that investigation. He also submitted that the so-called filing of “amended returns” should be completely ignored.

Conclusions

A material point raised by counsel for the respondent was whether the documents described by the appellants as “amended returns” could be regarded as “amended returns” by the Minister of National Revenue. In my view, however, the central issue in the appeals in these circumstances is whether or not any document should be regarded as evidence of a “voluntary disclosure”. The choice of words to describe the reassessments in the Department’s form and in the Minister’s replies to the notices of appeal could be interpreted by the appellants as implying that the “amended returns” were the basis for the reassessments. As far as I am concerned, I see no evidence that the disclosure made by the appellants provided any new or vital information relevant to determining the point at issue. Furthermore, the circumstances surrounding the filing of “amended returns” do not suport the conclusion that the latter were made voluntarily.

Decision

The appeals are dismissed.

Appeals dismissed.