Minister of National Revenue v. William Panko, [1970] CTC 397, 70 DTC 6247

Kerr, J.:—This is an appeal by the Minister of National Revenue (hereinafter sometimes called ‘‘the Minister’’) from a judgment of the Tax Appeal Board dated May 27, 1969, which allowed the taxpayer’s appeal from six assessments of penalties by the Minister under Section 56(2) of the Income Tax Act in respect of the respondent’s 1960, 1961, 1962, 1963, 1964 and 1965 taxation years.

The assessments of penalties were made on a date subsequent to the laying of informations and conviction of the respondent for offences under Section 132(1) (a) and (d) of the Income Tax Act in respect of his income tax returns for the said years.

The only issue is the right of the Minister to assess those penalties after the informations had been laid and the convictions made.

The facts were put before the court by an Agreement of Facts, Exhibit A-2, and are not in dispute.

The respondent filed income tax returns (Tl’s) on or after August 1, 1960 for each of his taxation years 1960 to 1965 inclusive.

Following an investigation by officers of the appellant in 1966 and 1967 it was determined that the respondent had suppressed certain income in each of the years 1960 to 1965 inclusive and following the investigation the Minister, pursuant to Section 132 of the Act, caused two informations to be laid against the respondent in January 1967 for violations of the Act. In one of the informations there was one charge for each of the said years for making a false statement in his income tax return by failing to report fully the taxable income received by him, by not including all the income, taxable benefits and interest received from certain named corporations, contrary to Section 132(1) (a) of the Act. In the other information there was one charge only, that the respondent did between March 23, 1961 and June 30, 1966 wilfully evade the payment of taxes by failing to report all his income contrary to Section 132(1) (d) of the Act. The informations are more explicitly set forth in copies attached to the Agreement of Facts.

In February 1967 the respondent pleaded guilty to each of the said charges and was fined as follows on the charges in the first of the informations :

and was fined $5,000 on the charge in the other information.

By Notices of Re-assessment made and dated May 2, 1967 (which, as already indicated, was subsequent to the laying of the informations) the Minister re-assessed the respondent for tax for each of his taxation years 1960 to 1965 and increased the tax for each of the years* [1] and, in addition and purportedly pursuant to Section 56(2) of the Act, assessed penalties as follows for the respective years:

The Minister had not prior to the said re-assessments on May 2, 1967 assessed or re-assessed the respondent for a penalty pursuant to either Section 56(1) or Section 56(2) for any or all of the said taxation years.

Section 56(1) of the Income Tax Act reads as follows:

56. (1) Every person who has wilfully, in any manner, evaded or attempted to evade payment of the tax payable by him under this Part for a taxation year or any part thereof is liable to a penalty, to be fixed by the Minister, of not less than 25% and not more than 50% of the amount of the tax evaded or sought to be evaded.

Prior to 1960 this subsection constituted the whole of Section 56, but subsections (2)f and (3)f [2] were added by Section 16 of chapter 43 of the Statutes of 1960 (assented to on August 1 of that year) and the original section became subsection (1). Subsections (2) and (3) are as follows:

(2) Every person who, knowingly, or under circumstances amounting to gross negligence in the carrying out of any duty or obligation imposed by or under this Act, has made, or has participated in, assented to or acquiesced in the making of, a statement or omission in a return, certificate, statement or answer filed or made as required by or under this Act or a regulation, as a result of which the tax that would have been payable by him for a taxation year if the tax had been assessed on the basis of the information provided in the return, certificate, statement or answer is less than the tax payable by him for the year, is liable to a penalty of 25% of the amount by which the tax that would so have been payable is less than the tax payable by him for the year.

(3) Where a person is liable to a penalty under subsection (2) in respect of any statement or answer filed or made as required by or under this Act, or a regulation, he is not liable to any penalty under subsection (1) in respect of the same statement or omission.

When those subsections were amended in 1960 an amendment of Section 132(3) was also made by Section 31 of the said chapter 43 whereby ‘‘subsection (1) of section 56” was substituted for the previous ‘‘section 56” in Section 132(3). Otherwise Section 132(3) was not changed and it now reads as follows:

132. (3) Where a person has been convicted under this section of wilfully, in any manner, evading or attempting to evade payment of taxes imposed by Part I, he is not liable to pay a penalty imposed under subsection (1) of section 56 for the same evasion or attempt unless he was assessed for that penalty before the information or complaint giving rise to the conviction was laid or made.

In the Agreement of Facts the parties admitted that the acts or omissions of the respondent in filing his T1 Returns without including therein as part of his income the amounts shown in paragraph 10 of the Agreement of Facts (1.e. certain specified amounts) would have such a character that, were there no other provisions of the Income Tax Act applicable, the provisions of Section 56(1) would apply to the tax increase caused by such acts or omissions.

For the respondent it was argued that he is being punished twice for the same offence, i.e. by conviction upon information laid on January 25, 1967 and by the subsequent assessment by the Minister of penalties under Section 56(2), and that the assessment of the latter penalties is not authorized by the Act and as a double punishment runs counter to justice and the policy of the Act as exemplified in Sections 132(3) and 131(3) ; that Section 56(2) applies to a suppression of income amounting to something less culpable than wilful evasion of payment of taxes and is not applicable in a case where the taxpayer has been convicted of wilful evasion under Section 132(1) (d) ; that Section 132(3) having limited the Minister’s power to collect a penalty under Section 56(1), where the taxpayer has been convicted of wilful evasion of payment of taxes, to cases where the Minister’s assessment of the penalty was made before the laying of the information, it is not reasonable to interpret the Act as conferring on the Minister by Section 56(2) much the same power as was taken away by Section 132(3). Counsel for the respondent submitted that a court, in considering what fine to impose on a taxpayer convicted under Section 131 or 132, will want to know whether the taxpayer is also liable to ministerial penalties, and Sections 131(3) and 132(3) are saving provisions which serve in that respect. Also that the Act should not be construed to give the Minister power to assess a penalty under Section 56(2) where by virtue of Section 132(3) the taxpayer is not liable for a penalty under subsection (1), unless there are very clear words giving that power, and in a case of reasonable doubt a construction against double penalties and otherwise most beneficial to the taxpayer should be adopted.

On behalf of the Minister it was argued that the non-liability contained in Section 132(3) to pay a penalty is clearly in respect only of a penalty imposed under Section 56(1) and that the Minister not only has power to assess a penalty upon the respondent under Section 56(2) in the circumstances prevailing here but also has an obligation under Section 46 to do so.

The Minister also says that the respondent made himself liable to a penalty under Section 56(2) for each of the years, and being liable to such penalty he was, because of Section 56(3). not liable to a penalty by the Minister under Section 56(1), and no penalty was assessed on the respondent under subsection (1) at any time. SUR

The Tax Appeal Board agreed substantially with the arguments offered by counsel for the respondent and referred the assessments back to the Minister to be varied by deletion of the penalties levied by the Minister.

If a statute is unambiguous and admits of only one construction we are bound to give effect to the intention of Parliament as disclosed by the statute, even if such construction may appear to lead to absurd, unreasonable or unjust results. And we can only take the intention of Parliament from the words used by Parliament to express its intention. On the other hand we are bound to assume that Parliament intends to act reasonably and if a statute, when fairly read, is open to alternative constructions, one of which leads to absurd, unreasonable or unjust results and the other does not lead to such results or leads to less absurd, unreasonable or unjust results, we should adopt the latter alternative construction. It is also trite law, I believe, that if the language is fairly open to a particular construction, then the policy of the statute, as disclosed by the statute itself, read in the light of the known circumstances, may legitimately be called in aid.* [3]

There is much to be said for' the case put forward by the Minister, with which in my initial consideration I was disposed to agree, for when Parliament amended Section 132 in 1960 and particularized the reference in it to Section 56 to its subsection (1) it did so in full knowledge that by the same amending statute it was providing a new penalty in Section 56(2) and it did not expressly provide any relief from payment of that new penalty; and if it had intended to give relief from penalty under Section 56(2) similar to the relief given by Section 132(3) in respect of penalty under Section 56(1) it would have been easy to have said so expressly. But it does not necessarily follow from Parliament’s failure to give such relief expressly that it neither intended to give nor gave. such relief.

In my view the amendment of Section 132(3) in 1960, which particularized Section 56(1), does no more than continue for a taxpayer the relief he previously had against payment of a penalty imposed by the Minister under Section 56 for wilfully evading or attempting to evade payment of taxes, in the situation when he has been convicted under Section 132 for the same evasion or attempt to evade but had not been assessed for that penalty by the Minister before the laying of the information or complaint giving rise to the conviction.

To me it seems strange for Parliament to preserve the relief from payment of penalty under Section 56(1) for a taxpayer convicted of wilful evasion and at the same time allow the Minister to assess a penalty on the taxpayer under Section 56(2) after such conviction. It seems almost like giving relief with one hand and taking it away with the other.

Undoubtedly there is nothing in Section 56 or 132, as amended, expressly giving relief against a penalty under Section 56(2) where a taxpayer has been convicted under Section 132(1) (d) in respect of the same statement or omission, and the problem is whether such relief can be reasonably inferred from the relevant provisions. I have reached the conclusion, after having initially thought otherwise, that it can and should be inferred. In my opinion the intention of Parliament in Section 56(3) was to prevent imposition of a penalty under Section 56(1) and another penalty under Section 56(2) in respect of the same statement or omission. In the present case I am assuming, and there was no suggestion to the contrary, that the statements or omissions of the respondent that led to his conviction under Section 132(1) (d) were the same as led to the imposition by the Minister of the penalties under Section 56(2). In my opinion the 1960 amendments do not force a construction that the Minister can or must impose a penalty under Section 56(2) on the respondent for his statements or omissions. I think an inference ean be drawn that a taxpayer is not liable to a penalty under Section 56(2) in respect of a statement or omission that constituted wilful evasion under Section 56(1) or Section 132(1) (d) and for which he was convicted under Section 132(1) (d) upon information laid before any penalty was assessed by the Minister under Section 56(1) or (2) in respect of the same statement or omission.

The appeal is dismissed, with costs.