Michael S Mark v. Minister of National Revenue, [1978] CTC 2262, 78 DTC 1205

Delmer E Taylor:—This is an appeal against the penalty levied by the Minister of National Revenue in an income tax assessment, for the year 1972. The penalty of $2,603.42 was levied under subsection 163(2) of the Income Tax Act, SC 1970-71-72, c 63, as a result of the addition to the taxpayer’s income of an amount of $17,500, unreported by him as a management fee.

Facts

The appellant is a businessman residing in Hamilton, Ontario. His interests were wide and varied, one such being as a 50% shareholder and secretary-treasurer in a company, Tandem Investments Limited (hereinafter referred to as “Tandem”), the other shareholder being a Mr Rosenblood. The management fee involved was paid by a Tandem cheque made out in June of 1972.

Contentions

The notice of appeal was prepared by Mr E P Nolan, CA and in it the contentions of the appellant were shown to be:

. . . his income is derived from several sources—salaries as an employee, directors fees and dividend income; share of profits or losses in the various partnerships and income from his proprietorship interests together with Capital gains and/or capital losses. Mr Mark does not employ a full-time accountant, but he delivers to my office, from time to time, information and advice regarding his financial transactions. This information, which comes in all kinds of forms, memoranda and sundry notations, is processed and recorded by me personally in the appropriate accounts.

. . . the cheque . . . was, at the request of the bank manager, endorsed to the bank and lodged as security for bank loans owed by Tandem Investments Limited. As a result, the cheque was not processed through any of Mr Mark’s accounts and therefore did not show up in the accounting records for 1972. Moreover, since Tandem Investments Limited fiscal year ends on June 30th annually and since the said management fee was set up as a liability of Tandem Investments Limited as at June 30, 1971 but was not paid until June 1972, there was no direct relationship between the expenses shown by Tandem Investments Limited and the management fees earned by Michael S Mark.

The position of the respondent, in the reply to the notice of appeal was that:

. . . the Appellant either knowingly or under circumstances amounting to gross negligence omitted to report or participated in, assented to or acquiesced in the omission to report the said management fee of $17,500 . . .

Evidence

An opening statement was given by the agent for the appellant generally reiterating the remarks in the notice of appeal.

Counsel for the respondent, assuming the role designated under the Act for the imposition of penalties, proceeded to outline the case for the Minister. A Mr Cathcart, an appeals officer with Revenue Canada, detailed for the Board his review of the assessment of the appellant’s tax return, and his reasons for recommending that the penalty should be applied. During such review he had dealt with both the appellant and Mr Nolan, and the circumstances, as he understood them, were:

—the appellant was responsible for banking transactions of Tandem;

—the fiscal year of Tandem ended June 30, 1971;

—on June 30, 1971, by resolution of the directors, a management fee of $35,000 ($17,500 each to the appellant and Mr Rosenblood) was declared;

—no income tax deduction at source was made from the amounts so declared;

—the amount was listed in the financial statements under “Accrued Expenses”;

—during the balance of the calendar year 1971, the fiscal year of Tandem was changed to December 31, in order to take advantage of the advent on January 1, 1972 of the new Income Tax Act;

—on or before December 31, 1971 the financial and corporation tax returns of Tandem were prepared and filed;

—the financial statements of Tandem for the 6-month period ended December 31, 1971 were prepared some time after that date and the amount in question now shown under the heading “due to directors”;

—the T4 returns normally due February 28, 1972 for the 1971 calendar year, if prepared, did not show the amounts in question;

—the fiscal year of Tandem was changed back to June 30 at some time between January 1 and June 30, 1972;

—the cheques to pay the management fees, including one to the appellant for $17,500, were prepared on either June 22 or June 27, 1972 (the exact date appeared uncertain);

—the cheque to the appellant was endorsed to the bank, processed through the Tandem bank account, and used to purchase bank term deposits which were then left with the bank as security for bank loans to Tandem;

—Mr Nolan prepared the financial statements and corporation tax returns of Tandem and also the personal income tax returns of the appellant. The reasons this witness gave in support of levying the penalty were:

—the appellant was a competent and experienced businessman with substantial knowledge of income tax requirements and obligations;

—there was no deduction for income tax at any time from the payment for management fee;

—the fact that it was part of his personal income must have come to his attention as secretary-treasurer of Tandem on many oc- casions during the progress of the events from June 30, 1971 through June 30, 1972 as detailed in the evidence above.

Argument

Counsel for the respondent argued that, at the minimum, the conduct of the appellant in not reporting the amount of $17,500 must be regarded as amounting to gross negligence in fulfilling his responsibilities under the Income Tax Act. The evidence showed, in counsel’s view, that there was no possibility the amount, which must have arisen several times in conducting the affairs of Tandem during 1971 and 1972, could possibly have escaped his purview.

The agent for the appellant took the position that he himself had made every reasonable effort to ensure adequate control over the personal affairs of the appellant, including establishing a particular bank account for this taxpayer’s private financial transactions. In some 30 years as a chartered accountant he had not before been in such a Situation with a client, and that should be taken into account. Income tax deductions are generally not made from “management fees”, since these are usually paid at the end of a fiscal year and the taxpayer could have made quarterly income tax instalments to apply against such items. He agreed that, as the accountant, he probably advised his client to declare the management fee, change the year- ends and to write the cheques in June of 1972, the latter item probably to avoid the application of section 78 of the Act which would have included the amount as income of the appellant in any event. In his view the appellant does not interest himself greatly in the technical and accounting details of transactions, only with the amounts that develop into cash, and in this case due to the unusual banking arrangements made, the amount was never received by him in cash. Finally, that in some 25 years or more of filing income tax returns, this was the first time this appellant had not properly shown amounts of income.

Little reference was made by counsel for the respondent to case law which might be of assistance to the Board, and no references were given by the agent for the appellant.

Findings

First the Board points out that neither the appellant himself, nor the agent for the appellant took the witness stand, nor did they have any physical evidence produced. That is certainly their privilege, the responsibility for establishing the basis for the penalty rested with the Minister. But in view of the fact that Mr Nolan’s efforts at cross- examination of Mr Cathcart provided little dilution of the evidence given by the Minister’s witness, it did leave the Board obligated to accept substantially the information presented by Mr Cathcart, and thereupon to make a judgment on the applicability of the penalty provisions of subsection 163(2) of the Act.

The appellant’s tax return for the year in question shows taxable income of some $90,000 arising from a variety of sources—salaries and wages, dividends, interest, farming, property rental, mortgages, property sales, and. the development of an industrial park. The Board would conclude from the evidence that financial transactions with which he was involved might well have totalled several hundred thousand or even one or two million dollars in receipts, payments and expenses during that year. The possibility that an amount of $17,500, dealt with in the manner indicated by the evidence, might escape appropriate income tax treatment did exist, and this had been portrayed. quite openly by the agent for the appellant. A. quotation from the letter of explanation from Mr Nolan which accompanied the notice of appeal indicates this:

At the end of the year, I diligently try to prepare a complete and accurate summary of Mr Mark’s income for his income tax returns. Where possible, the T5s, T4s and other information are reconciled with his personal bank accounts and substantiated with the available records. However, with so many transactions, often complicated and involving large amounts, it is almost inevitable that some error or omission may occur.

The point at issue in this appeal therefore is whether or not the conduct of the appellant and precautions taken to ensure the payment of the income tax due, were adequate and reasonable under the circumstances.

The distinctions to be made between “knowingly” and “under circumstances amounting to gross negligence” in subsection 163(2) of the Act have been dealt with in considerable detail in published judgments both by this Board (or its predecessor) and the courts. It is my view that there is no reasonable basis upon which to conclude that the penalty here imposed resulted from any conduct of the appellant to which the term “knowingly” could be applied.

This Board has also -dealt with the expression “gross negligence” at some length, and while it may be proposed that a clear and all- encompassing definition of “gross negligence”, perhaps even “negligence”, or the distinction between the two, has not been derived, it must at least be accepted that very helpful guidelines have been put forward. The following quotations from judgments examined in arriving at a decision in this case should serve to highlight these parameters:

Orest Sadownick v MNR, 40 Tax ABC 411 at 417-18; 66 DTC 280 at 283-4:

The evidence before the Board in this matter warrants the conclusion, in my view, that the appellant signed his 1960 and 1961 income tax returns without making any effort whatsoever to satisfy himself that the information contained therein was true, correct and complete in every respect and fully disclosed his income from all sources. Such indifference cannot be construed, from my standpoint, in any other way than as a dereliction of the serious duty imposed on all taxpayers under the Income Tax Act which goes to the very root of our system of income taxation, based as it is on the voluntary declaration of income by taxpayers and the voluntary payment of the tax exigible thereon. Thus, I have no hesitation in finding that the appellant is properly chargeable with gross negligence in this matter. There should be no shilly-shallying on this point. The Act clearly places a duty on the taxpayer himself to file a proper return of his income for each taxation year, and he cannot, in my view, abdicate his responsibility in the matter by having somebody else prepare the return for him. Whatever contractual arrangements the taxpayer makes for the preparation of his return are clearly and definitely matters. between him and the person with whom he is dealing. Therefore, if the taxpayer suffers any loss arising out of the preparation of his return that is plainly a matter between him and the other party to the contract.

While, what appears to be the proper disposition of this matter has been indicated above, I do not think that the record should be left only partially completed. The painful decision which the appellant must accept, at least before this tax tribunal, was not wholly brought about by any means through his own conduct. Although, he has committed a serious breach of his duty under the Act and must pay the penalties therein prescribed, there are extenuating circumstances, a few of which should be mentioned. To begin with the accountant herein had been preparing the taxpayer’s returns prior to 1959, and you would have expected him to have given the auditor herein the closest possible assistance, which he did not appear to do. For the preceding ten years, ie since 1955, the accountant had been employed by Peter Stodola or his company, and by Saskatoon S & G for the preceding seven years (since 1958) and had been responsible for all of the accounting work in those two companies, including the preparation of the T4-Supple- mentary returns referred to earlier herein. In his evidence, he admitted that there were mistakes and omissions in the T4-Supplementary returns prepared by him on behalf of the two companies, Stodola Concrete and Saskatoon S & G. However, my main comment at this point is that there did not seem to be very much liaison between the accountant and the auditor herein. So far as the T4-Supplementary returns are concerned, they are, of course, useful reminders to a taxpayer, but they are, obviously, intended more particularly for the Minister’s use. The taxpayer’s duty to disclose all of his income certainly does not depend on whether or not he has received a T4-Supplementary return from his company setting out correctly the total amount of the remuneration paid to him in the year in question. There is a duty on him to report the total remuneration which he received (see Section 5 of the Act.) and if he has kept no record of the amounts which he has received, the onus is on him to make the necessary enquiries and find out. The argument advanced an behalf of the appellant, that he did not receive certain amounts which were disbursed by each company, respectively, to various payees other than the appellant, in accordance with his instructions—which may be reasonably inferred under the circumstances—and charged to his personal account as a gratuitous convenience to him, is plain nonsense and does not call for any comment.

Arthur William Wallace v MNR, 42 Tax ABC 1 at 6-7: 66 DTC 593 at 596-7:

. . . Turning to our own courts, in Paul v Dauphin, [1941] 1 DLR 775, a Manitoba case, Dysart, J, after referring to a number of cases, stated that the term “gross negligence” was not susceptible of definition, but might be paraphrased as “very great negligence”. He said that when so stated, the term suggested that a defendant was not held up to the ordinary level of duty in respect of care, and was liable only if it fell very far below that level. After having examined many cases from various jurisdictions, it seems to me that Mr Justice Dysart’s words come as close to the mark as any that have been encountered in my searches. Consequently I shall refrain from mentioning a number of other judgments to the same effect; those from higher courts go no further.

Now I revert to the facts of the present matter. These have given me much anxious consideration and I have sought not to overlook anything that, in the slightest degree, is in the appellant’s favour. Mr Lindsay, counsel for the respondent, argued that failure to employ an auditor to check the partnership accounts constituted gross negligence, but I do not agree. It would have been desirable to engage an auditor, but no individual should be obliged to incur the expense of engaging an auditor to do that which he could do for himself by using due care. What troubles me is the magnitude of the error made by the appellant in declaring his taxable income. If the error had been, two, three, or perhaps even five, thousand dollars, mistakes made in the circumstances narrated by the appellant might—I do not say would—have seemed excusable. Here, however, the error amounts to the sum of $18,465.18; for most people this is the equivalent of a desirable income in itself. I find it difficult to comprehend how such a wide margin of error could arise if proper thought and diligence had been exercised by Mr Wallace. Even allowing for the fact that he had had an exceptionally busy year and was preoccupied with, and perhaps harrassed by, the details and demands of an exacting profession, there was something haphazard in the way he went about recording, computing and then reporting his income. Unfortunate as the circumstances may have been, I only can regard him as being the author of his own difficulty in this connection and hold, therefore, that the substantial discrepancies resulting from his calculations were such as to merit the imposition of a penalty by the respondent. Failure to so marshal the relevant facts and figures as to be certain that all necessary data were before him, rendered the making of a correct return of income hardly possible and the appellant should have taken much more trouble in this regard and verified his computations in some way.

Donald F Stonehouse v MNR, [1967] Tax ABC 1128 at 1133; 68 DTC 63 at 66:

Counsel for the appellant contended that gross negligence as referred to in Section 56(2) of the Income Tax Act implied something more than mere carelessness: that it must be considered to be conduct of such marked departure from ordinary reasonable conduct as to amount to something highly reprehensible.

Arthur B Haven v MNR, [1969] Tax ABC 833 at 835; 69 DTC 582 at 583:

By reason of all this, the appellant has been considered grossly negligent and penalized accordingly by the respondent. The distinction between negligence and gross negligence was discussed in some detail in Wallace v MNR, 42 Tax ABC 1 [66 DTC 593], and need not be reiterated here. , I think that particularly when dealing with matters ordained by statute and not governed by common law, gross negligence should be taken as signifying a greater degree of carelessness, such as failure to exercise due diligence or to take care, than is embraced by negligence pure and simple. Otherwise there would be no point in inserting “gross negligence’’ in Section 56(2) instead of “negligence”. The former term suggests negligence of a wholly inexcusable nature, regardless of the attendant circumstances. That, I consider, was not what occurred in the present instance. Appellant may have taken too much for granted—I think that perhaps he did—but his actions and/or omissions did not constitute gross negligence; at the most these were suggestive of some lesser degree of negligence. He did not conceal anything; in fact, the Toronto assessors concerned were made aware by him of his having received the above-mentioned amount during 1965 at some time after the end of April 1966, if not earlier, and thus were not ignorant of it. Moreover, he was the only source of information in this regard that they had and the award of the prize had been made known by him voluntarily. Nevertheless, the appellant remained somewhat too sanguine about his income tax position, in my view.

Michael J W Penn v MNR, [1971] Tax ABC 33 at 40-41; 71 DTC 71 at 76:

That brings me to the matter of “gross negligence” with which we are primarily concerned in this appeal. It is one thing to say it is great, glaring, flagrant or monstrous negligence but where does one draw the line between ordinary negligence and gross negligence? The answer to that question—which depends almost entirely on the facts of the matter under scrutiny—cannot, obviously, be reduced to some simple solution. First of all, it must be decided, in approaching a given situation, whether or not the errors and/or omissions in question are the result of carelessness or negligence. Having decided that there has been negligence in a tax matter (the appellant herein simplified the hearing of his appeal by admitting that, in the filing of his returns for the taxation years from 1961 to 1966 inclusive, he had been careless or negligent in the ordinary sense), the offence of “gross negligence’’ can only be determined. by balancing in one’s mind or in the traditional scales of Justice: first, the credibility or trustworthiness of the taxpayer; secondly, the plausibility of his recital of the events explaining how the errors and/or omissions had crept into or had otherwise got into his return for the taxation year in question; thirdly, the consistency of the taxpayer’s story with all the other evidentiary facts before the Board, and fourthly, the answer to this question: had anything occurred such as a previous investigation by the Minister’s local officials, or was there anything in the figures in the taxpayer’s above-mentioned return having in mind the figures in his return for the previous taxation year thereto which could reasonably be deemed to have placed him on his guard that there was something “fishy’’ about his estimated tax in the said return (in that regard, reference might be had to the case of Cowan v MNR, [1969] Tax ABC 773 [69 DTC 553])? The word “offence” is used above in connection with the term “gross negligence” in the sense of a breach of law, duty, propriety or misdemeanour, which are several of the meanings of the word “offence” contained in the Shorter Oxford English Dictionary, but I hasten to add that under the Act there is, undoubtedly, a very wide gap indeed between ordinary negligence and “gross negligence”.

Robert Roy Easton v MNR, [1971] Tax ABC 1096 at 1098; 71 DTC 731 at 733:

Towards the end of the joint hearing of his appeal and that of his wife, Mr Easton was obliged to admit that there had been negligence in the declaration of their respective incomes in the taxation years now under appeal but he strenuously maintained at the same time that the degree of negligence in each case was not such as to contitute gross negligence for the purposes of the above-quoted Section 56(2). Earlier in the hearing before the Board the taxpayer had taken the position that the non-disclosure of substantial amounts of income on the part of himself and of his wife could be attributed to oversight and human error. The expression “human error” is ordinarily used in connection with a situation where a person has done something in error or mistakenly, for example, where he has committed an error or mistake in judgment in an emergency, but that expression is not appropriate, in my view, to the present situation where there has, obviously, been a continuing pattern of carelessness or negligence on the part of the appellant commencing in or about the year 1964. According to Osborn’s Concise Law Dictionary, negligence is the “failure to use that degree of care which a person is bound by law to use”.

Donald Eugene Morgan et al v MNR, [1973] CTC 2192 at 2196; 73 DTC 146 at 149:

From time to time the courts have paid lip service to the distinction between negligence and gross negligence, but if one reads the cases decided in the last five or six years on this point, it is hard to distinguish just where the line is drawn. I can only assume that when Parliament chose to insert the words “gross negligence” in subsection 56(2), the expression was intended to mean something more than ordinary inadvertence on the part of a taxpayer.

Further, the application of these views to any particular case or situation has been carefully scrutinized and set out by the courts in the following quotations:

Cyrus C Udell v MNR, [1969] CTC 704 at 713-14; 70 DTC 6019 at 6025:

Whether the appellant has been properly assessed to penalties is, therefore, dependent upon the interpretation of Section 56(2). Does that section contemplate that a taxpayer shall be personally responsible for the gross negligence of his agent in the making of a statement or omission in a return? The language of the section is clear that the penalty is to be imposed, if the circumstances contemplated by the section are present, on the taxpayer and not upon a person who made the statement or omission on the taxpayer’s behalf. The person, who is liable to penalty, is the person by whom the tax is payable. Therefore, in the present case, the person who may be liable to penalty is the appellant, not his agent, the accountant. It is conceivable that the appellant might have a cause of action against the accountant for any loss arising out of the preparation of the returns, but that matter does not concern me in the present action.

There is no doubt that Section 56(2) is a penal section. In construing a penal section there is the unimpeachable authority of Lord Esher in Tuck & Sons v Priester (1887), 19 QBD 629, to the effect that if the words of a penal section are capable of an interpretation that would, and one that would not, inflict the penalty, the latter must prevail. He said at page 638:

“We must be very careful in construing that section because it imposes a penalty. If there is a reasonable interpretation which will avoid the penalty in any particular case, we must adopt that construction.”

At this point it is convenient to reproduce the relevant language of Section 56(2). It is that “every person” (which means the taxpayer) “who knowingly” (I have found that the appellant did not have knowledge of the errors and omissions made by his accountant) “or under circumstances amounting to gross negligence . . . has made or has participated in, assented to or acquiesced in the making of a statement or omission . . . is liable to a penalty . . .”.

The circumstances of this case, as I have found them to be, do not constitute personal gross negligence on the part of the appellant for the reasons I have previously outlined.

Accordingly there remains the question of whether or not Section 56(2) contemplates that the gross negligence of the appellant’s agent, the professional accountant, can be attributed to the appellant. Each of the verbs in the language ‘‘participated in, assented to or acquiesced in” connotes an element of knowledge on the part of the principal and that there must be concurrence of the principal’s will to the act or omission of his agent, or a tacit and silent concurrence therein. The other verb used in Section 56(2) is “has made’’. The question, therefore, is whether the ordinary principles of agency would apply, that is, that what one does by an agent, one does by himself, and the principal is liable for the actions of his agent purporting to act in the scope of his authority even though no express command or privity of the principal be proved.

In my view the use of the verb “made” in the context in which it is used also involves a deliberate and intentional consciousness on the part of the principal to the act done which on the facts of this case was lacking in the appellant. He was not privy to the gross negligence of his accountant. This is most certainly a reasonable interpretation.

I take it to be a clear rule of construction that in the imposition of a tax or a duty, and still more of a penalty if there be any fair and reasonable doubt the statute is to be construed so as to give the party sought to be charged the benefit of the doubt.

MNR v Donald M Weeks, [1972] CTC 60 at 63; 72 DTC 6001 at 6003:

The facts in the Udell case (supra) are similar to this case. There, although the taxpayer recorded his transactions meticulously in an account book, the professional accountant who prepared his tax returns made a number. of errors which resulted in substantial understatements of income. Counsel for the appellant here attempts to distinguish Udell on the basis that it was a case of a fairly large farmer involving both a grain and a cattle operation, that it was a far more complicated return and that, accordingly, the taxpayer could not be expected to understand the complexities of preparing the tax return and so was not grossly negligent in relying on his accountant to correctly prepare the returns. The appellant submits that in the case at bar the return was a relatively simple return, complicated to some extent by the election under section 36 insofar as the pension payments were Concerned, but certainly not nearly as complicated or involved as in the Udell case.

I am certainly not prepared to find personal gross negligence by the respondent on the facts of this case. I am not so sure either that I would be prepared to find gross negligence on the part of the accountant; however, as in the Udell case (supra), the facts here do not disclose any course of conduct by which I could find the respondent privy to any gross negligence by the accountant anyway.

John Victor Decore v The Queen, [1974] CTC 48 at 53-4; 74 DTC 6051 at 6055:

With a single exception all that transpired could, I think, be explained in the light of the pressures that exist in such an office with such a practice in the dying hours of April and again, whatever view one may take of the accountant’s failure to follow up the matter with the plaintiff, subsequent events cannot alter the nature of the act that is the basis of the penalty. The exception is the deliberate filing of the return notwithstanding actual doubt about its accuracy and actual knowledge that, if it was accurate, there was no urgency about the filing. I should emphasize that the accountant testified that he actually knew the import of subsection 44(1) in so far as it bears on the necessity of filing a personal income tax return on April 30 where no tax is payable.

This one act, in my view, was a marked departure from the standard of conduct that the accountant ought reasonably [to] have met and I find it to be gross negligence. The appeal is dismissed with costs.

and on appeal in John Victor Decore v The Queen, [1974] CTC 791; 74 DTC 6695:

[The Chief Justice (orally):—] It is not necessary to hear you further Mr Côté. We are all agreed that, on an examination of the evidence as a whole the finding of the learned trial judge that the appellant’s accountant omitted to include the amount of the dividend in the appellant’s return “under circumstances amounting to gross negligence” cannot be supported. (We are not deciding, however, that the appellant would have been liable to pay penalty in the circumstances of this case if the circumstances under which the dividend was omitted had amounted to “gross negligence”.)

When the allegation of ‘‘gross negligence” is examined against the background provided in the judgments cited above, its substantiation bears strongly upon the lack of care taken by a taxpayer to reasonably ensure compliance with the Income Tax Act. The maintenance of an adequate record of financial affairs, the assembling of facts and data in an orderly manner, the appropriate presentation of these in support of the voluntary declaration of income and tax liability, the availability of such records and the co-operation and assistance of the taxpayer would all appear to impinge on the view to be taken by this Board where some form of negligence, carelessness or oversight has resulted in improper declaration of taxable income. Pleas by the taxpayer of inexperience, lack of training, inadequate time opportunity or funds, etc as reasons for the improper preparation of his income tax return generally have not been viewed with favour. A major thread which does seem to bind together certain of the decisions accepting the appellants’ explanations however, is that of seeking out and obtaining competent professional advice.

In the matter before the Board the management fee was declared in June 1971, not only with the knowledge of Mr Nolan (the accountant who had prepared the appellant’s income tax returns for some 25 years), but apparently according to his advice. The recording of it in the balance sheets of Tandem, and its subsequent payment by cheque in June 1972 again were done within the ambit of either his knowledge or advice. The complexity and magnitude of the income tax return of the appellant was noted earlier—it consisted of some 53 pages of documents, schedules, attachments and financial statements. The amount of $17,500 is not large when reference is made either to the total reported income of the appellant or the funds which he managed in any given year in his various fields of business. Further, it is only one amount—one transaction—although it did have certain implications touching on the several corporate documents and returns required from Tandem during 1971 and 1972, it was not the sum total of several amounts or several transactions extending over the period of time involved. While Mr Nolan’s assertions that this was the only occasion upon which either he or the appellant had experienced difficulty in income tax matters was challenged by counsel for the respondent, there was no evidence put forward to the Board to support either view. In any event I have serious doubts that evidence either way on that point would be relevant to the particular matter at issue before this Board. A general overview would hardly be supportive of a charge of gross negligence on the part of the appellant in this matter. However there is a further, and I consider important, item not raised at the hearing, which in my view can only corroborate such a finding. The original alteration to the reported taxable income of the appellant came in a notice of reassessment dated October 31, 1975, in which there were only two additions to the total originally filed by Mr Mark, one representing profit from the sale of a certain “Zsiros property”, and the other amount forming the basis of this appeal. The part of the reassessment dealing with the gain on the sale of the “Zsiros property” was later reviewed and the appellant not charged with this in 1972. The Board is unaware of the circumstances surrounding either the addition above or the subsequent deletion, and makes no comment on either. However, the important point is that the “Zsiros” matter was brought to the attention of the Minister in the appellant’s 1972 tax return, albeit to state that it should not be taxed. This is not an act I would equate with a taxpayer being grossly negligent in fulfilling his responsibilities. The comment on the summary of property income of the appellant, attached to the tax return read:

NOTE: Share of principal payment received on Zsiros property mortgage receivable is considered to be realization of capital gain on sale of property which took place in 1971.

/ of $36,000.00 \ $12,000.00

The Board recognizes that the omission of the disputed amount from his reported taxable income was a lack of compliance with the responsibilities under the Act, and that both the ‘appellant and his accountant are experienced and knowledgeable businessmen who, with marginal extra care, could have ensured proper reporting. While Mr Nolan seemed quite certain that “gross negligence” was not involved, he did not however provide the Board with any reference points or definitive structures within which such a conclusion could be reached. Such lack of identification and the residual areas of uncertainty regarding the facts, which might have been clarified by the sworn testimony of the taxpayer or Mr Nolan, left the appellant’s case at considerable risk, since the Board was required to examine his appeal in the light of the evidence presented—all of which was contrary to his position. Nevertheless the review of the legislative requirements related earlier in this judgment has satisfied the Board that the charge of “gross negligence” is an excessive term to apply to the known acts of omission or commission by the appellant in this case.

Decision

The appeal is allowed.

Appeal allowed.