Vincenzo Curcio v. Minister of National Revenue, [1978] CTC 2076, 78 DTC 1097

A W Prociuk (orally: November 15, 1977):—The appellant, Vincenzo Curcio, appeals from the respondent’s reassessment of his income for the taxation years 1967 to 1972 inclusive, on a net worth basis wherein the following amounts of unreported income were added in each taxation year and taxed accordingly:

The appellant was also assessed for penalties pursuant to subsection (2) of section 56 of the Income Tax Act, RSC 1952, c 148, and Subsection (2) of section 163 of the Income Tax Act, SC 1970-71-72, c 63, and section 17 of The Income Tax Act of the Province of Ontario as follows:

The appellant was also assessed a late filing penalty for the taxation year 1972 in the sum of $106.76 but at the commencement of the hearing of this appeal counsel for the appellant advised that this portion of the appeal is being abandoned.

The statute-barred years for reassessment were 1967, 1968 and 1969 and accordingly counsel for the respondent led evidence in the first instance to determine whether the reassessment for the said years ought to be permitted and considered by the Board.

Mrs Mary Evans, now Section Head of the Field Audit Unit, and in 1974 a Group Head in the same unit, testified that she and one of the assessors in her Group worked together. The assessor’s name was Mr Elliott. Having obtained a lead from another file which she was auditing in 1974, she and Elliott decided to audit the appellant’s records as it appeared that he had acquired substantial property but his returns indicated only small amounts of income.

The audit commenced in the taxation year of 1972 and they went on back to earlier years. According to her evidence, the appellant, a barber by trade, had hardly any records with which to properly audit; and it was impossible to verify his statements as filed with the Department. They then proceeded on a net worth basis. As will be observed in Exhibit R-1, being the net worth assessment for the years under appeal, the result obtained shows a substantial amount of unreported income; in some cases more than 100% of the gross reported income. Exhibit R-1 reads as follows (see pages 2078 and 2079).

Mrs Evans and Mr Elliott also obtained a signed bank authorization form from the appellant to enable them to check the various bank accounts. She also stated that in August 1965, after reviewing the bank statements, the appellant borrowed some $5,000 from the Toronto-Dominion Bank to buy a barber shop. On July 27, 1966 he borrowed $4,500 to purchase his house, or to make a down-payment on his house. On March 13, 1968 he borrowed a further $3,000 to purchase an automobile and on July 24, 1968 he borrowed $8,000 to make a down-payment on 63 Staynor Avenue, a rental unit.

All these loans, with interest accrued thereon, were paid off by the time of the audit. He did not report any real estate rental income except for the year 1972.

Mrs Evans stated that she and Mr Elliott were concerned about the substantial discrepancy between their findings and the amounts reported in the appellant’s returns. She stated that she questioned the appellant as to his sources of income and any other assets that he may have acquired before 1967, but he gave her no information and appeared disinterested in discussing the matter. He stated he had no other source of income, nor any other assets prior to 1967. He was advised by Mrs Evans that reassessments would follow and penalties would be assessed in the circumstances.

When the first notice of reassessment was issued in November 1974, the appellant filed his notice of objection and the matter was dealt with by the District and Regional Appeals Office; certain adjustments were made and the final reassessments dated May 31, 1976 were issued. The appeal herein is from these later reassessments.

Mrs Evans was ably cross-examined by counsel for the appellant; Mr Elliott was not called to testify because he is no longer in the employ of the respondent. I found Mrs Evans’ testimony most fair. Her credibility, in my opinion, is beyond question and, where the evidence is at variance between her and the appellant, I have no hesitation in accepting that of Mrs Evans.

Assuming for the moment the unreported income was inadvertently omitted by the appellant in his returns before the 4-year statutory limit, I refer to MNR v M Taylor, [1961] CTC 211; 61 DTC 1139. Accordingly I rule on the evidence that the respondent has discharged the onus herein and was entitled to go beyond the statutory limitation period and the assessment ought to be considered.

The appellant testified on his own behalf, as did his wife and his wife’s brother. The appellant comes from a poor family in Italy. He emigrated to Canada in November 1954 at the age of 19 years. He had learned the trade of barber in Italy where, he states, he had his own shop. He came to Canada to seek a better life and to join his father who had emigrated a few years earlier. His mother and sister remained in Italy. He states he brought with him $2,000 in 1954 and he lived with his father. Both cooked their meals and he contributed $10 a week towards the food. He lived rent free.

As soon as he arrived in Toronto, in 1954, he obtained employment with a barber at a shop at Bloor and Yonge Streets. He stayed there two weeks only because he was only paid $32 a week. He commenced work as a labourer in the construction field and continued so until 1959 when he got married. His wages were $1.50 an hour and later increased to $1.75. In the four years he states that he saved $4,000. I gather that he must have worked very hard with many hours of overtime, and his life style must have been very frugal indeed. He struck me as a very capable young man.

In this period he did not bank any of his savings as he did not trust the banks. His mother came to Canada in 1956 and became the custodian of his savings. In March 1959 he married, by proxy, Maria Carvelli, while she was still in Italy. She was aged 21 years, more or less. His wife’s parents had a vineyard. They forwarded $5,000 in Italian lira to the appellant in March 1959 as their daughter’s dowry, via the appellant’s cousin, Salvatore Vetere, who emigrated to Canada at that time.

The appellant states he took the money and gave it to his mother to keep for the time being. The bride arrived in Canada on or about April 28, 1959, and a second wedding was celebrated in Canada on June 27, 1959. She was a seamstress by trade and brought her savings of $1,000 with her. At the wedding there were approximately 200 people present. The appellant states that he received wedding gifts in the form of cash, in the sum of $5,000. It would appear, if all this actually happened, that the appellant by now was well on the road to financial success.

He started barbering again right after his marriage and continued to earn his living in that manner ever since. In 1962 his uncle gave him a strong-box for his money and he used it for that purpose. The size of the box varied with each witness, from 3 feet to 12 inches in length. It was kept in the appellant’s bedroom.

The first child was born in 1960 and the second child in 1966. In 1964 they visited Italy where they received a further $8,000 from Maria’s parents as her share of the family income. In 1966 her brother Frank, then aged 23 years more or less, came over to settle in Canada and brought a further $8,000 for Maria as her further share. Some of the money was spent earlier but in December 1966 the appellant, his wife and her brother Frank said they counted all the money in the box and it totalled $22,000.

The evidence is that Maria was not sure whether or not to remain in Canada, and that is why the money was kept in the box intact. In December 1966. however, she decided to stay in Canada and turned this money over to the appellant who was free to use it as he required it.

The evidence is that the money brought from Italy was in lira, it was not exchanged at any bank but only with friends who were returning to Italy from Canada for holidays or to stay. Thus, only a few lira remained in the box and the $22,000, in December 1966. were in Canadian funds.

When Maria’s brother Frank testified he was asked whether he had received his share of the $21,000 from his parents and he said he had not. The share is still in Italy where his father no longer works. His brother in Italy operates a small grocery store or canteen and apparently has not received his share either. Frank, on arrival in Canada in 1966, obtained a job with a mattress manufacturer as a labourer. He is now employed as a butcher.

On cross-examination the appellant was vague as to the amount he spent prior to 1966 and the amount he saved and/or banked. He produced a letter from his former bank, the Bank of Nova Scotia at Lawrence and Birchmount, dated June 10, 1974. which letter states that he deposited between October 1959 and September 1965 about $15,000. There is no indication of the amounts, if any, which were withdrawn.

The appellant states that the barber shop business began to sour about 1967 and he began to use the $22,000 at his disposal to pay accounts and make periodic bank deposits. He did not bank the entire sum at once. He states that in 1974, when interviewed by Elliott alone, he attempted to explain that he had substantial sums of money on hand in December 1966, and that he could explain the difference or the inconsistency between the amount appearing in his returns and the amount arrived at by Mr Elliott. He states l\/lr Elliott did not believe him at all. I also note that there was no logical explanation regarding his bank loans where there appeared to be a Substantial amount of cash on hand.

Reviewing this evidence of substantial wealth coming from Italy at the most opportune time, I must say it strikes me as the most unusual, if not bizarre, series of episodes. If all this is true, it would have been quite a simple matter to establish before Mr Elliott and Mrs Evans that there were outside funds at his disposal, which would have undoubtedly ended the matter there. To accept this portion of the evidence as a fact in the circumstances of this case, and in view of the totality of the evidence, would be to stretch the credulity of the Board beyond all limits.

The appellant has struck me as a hard worker and an intelligent man. If any money was placed in the box in the bedroom, it was his own earnings which he failed to report properly over the years.

I am of the view the respondent has made very generous allowances to the appellant in the adjustments subsequent to the filing of the notice of objection. In my opinion the' assessments, including the penalties levied, ought not to be disturbed.

The appeal, accordingly, is dismissed.

Appeal dismissed.