THORSON,
P.:—These
appeals
under
the
Income
War
Tax
Act,
R.S.C.
1927,
chap.
97,
raise
an
important
question
as
to
the
nature
of
the
Minister’s
power
under
sec.
47
of
the
Act,
which
provides
as
follows:
"47.
The
Minister
shall
not
be
bound
by
any
return
or
information
supplied
by
or
on
behalf
of
a
taxpayer,
and
notwithstanding
such
return
or
information,
or
if
no
return
has
been
made,
the
Minister
may
determine
the
amount
of
the
tax
to
be
paid
by
any
person.”
During
1940
and
1941
the
appellant
kept
a
10-room
hotel
at
Aylsham,
Saskatchewan,
a
hamlet
of
from
200
to
250
persons,
situate
about
250
miles
northeast
of
Regina
in
the
Carrot
River
Valley,
a
well
settled
agricultural
area.
In
addition
to
letting
the
hotel
rooms
he
also
ran
a
dining-room
and
a
beer
parlor.
His
income
was
derived
solely
from
these
sources.
In
his
income
tax
returns
for
these
years
he
reported
a
net
taxable
income
of
$135.75
for
1940
and
$338.43
for
1941.
The
Minister
took
the
position
that
the
appellant
had
failed
to
produce
proper
books
of
accounts
or
accounting
records
and,
acting
under
sec.
47
of
the
Act,
determined
his
net
taxable
income
to
be
$2,565.31
for
1940
and
$1,025.98
for
1941
and,
as
shown
by
amended
assessment
notices,
dated
March
31,
1945,
assessed
him
accordingly.
Appeals
from
these
assessments
were
taken
to
the
Minister
who
affirmed
them
on
the
ground
that
in
the
absence
of
proper
proof
and
accounting
records
and
upon
investigation
and
in
view
of
all
the
facts
the
Minister
had
under
sec.
47
determined
the
amount
of
tax
to
be
paid
by
the
appellant
for
the
said
years.
Being
dissatisfied
with
the
Minister’s
decision
the
appellant
now
brings
his
appeals
from
the
assessments
to
this
Court.
While
the
amounts
of
net
taxable
income
as
determined
by
the
Minister
differ
in
a
number
of
respects
from
those
shown
on
the
appellant’s
returns,
the
appeals
are
concerned
only
with
the
items
that
relate
to
the
sale
of
beer
in
the
appellant’s
beer
parlor
and
the
profits
therefrom.
He
sold
both
draught
and
bottled
beer,
some
of
the
latter
being
sold
for
consumption
off
the
premises.
In
his
returns
for
1940
he
showed
total
sales
amounting
to
$8,170.05
with
a
cost
of
$6,631.54,
making
a
profit
of
$2,078.50.
The
details
of
the
amended
assessment
as
determined
by
the
Minister
showed
total
sales
of
$11,044.80
with
a
cost
of
$6,631.54,
making
a
profit
of
$4,413.26.
In
respect
of
1941
the
appellant’s
return
showed
total
sales
of
$10,526.50
with
a
cost
of
$6,819.04,
making
a
profit
of
$3,707.46,
whereas
the
Minister’s
determination
showed
total
sales
of
$10,984.10
with
a
cost
of
$6,929.09,
making
a
profit
of
$4,155.01.
There
can
be
no
doubt
that
the
Minister
had
the
right
to
act
under
sec.
47
in
the
present
case.
While
there
was
evidence
at
the
hearing
of
the
appeal
that
the
appellant
had
kept
accounts
of
his
receipts
from
the
beer
parlor,
the
dining-room
and
the
hotel
rooms
and
of
his
expenses
in
a
school
exercise
book
for
each
of
the
years
1940
and
1941
and
that
these
accounts
had
been
used
when
his
returns
were
being
made
out
but
that
the
exercise
books
had
been
lost,
the
fact
is
that
there
were
no
books
of
account
or
records
of
receipts
and
expenditure
available
for
inspection
by
the
income
tax
officials.
Under
the
circumstances,
the
Minister,
acting
through
his
officials,
could
properly
question
the
correctness
of
the
appellant’s
returns
and
determine
the
amount
of
the
tax
to
be
paid
by
him.
But
that
is
not
the
end
of
the
matter.
The
statement
in
sec.
47
that
the
Minister
may
determine
the
amount
of
the
tax
to
be
paid
by
any
person
is
only
another
way
of
saying
that
he
may
determine
the
amount
of
any
person’s
assessment,
for
when
the
amount
of
the
assessment
is
determined
the
amount
of
the
tax
to
be
paid
follows
as
a
matter
of
course.
It
ought
really
to
be
included
in
the
part
of
the
Act
dealing
with
assessments
rather
than
in
that
relating
to
returns.
When
read
with
its
context
it
means
that
the
Minister
is
empowered
to
determine
the
amount
of
any
assessment
without
being
bound
by
any
return
or
information
and
even
although
no
return
has
been
made.
There
is
nothing
extraordinary
about
the
power
at
all.
It
might
even
be
that
it
would
exist
without
any
mention
of
it
in
sec.
47
under
the
general
power
of
assessment
conferred
upon
the
Minister
by
sec.
55
and
that
the
statement
in
sec.
47
is
made
ex
dbundanti
cautela.
Indeed,
it
would
be
very
strange
if
there
were
no
such
power
and
the
Minister’s
power
of
determining
the
amount
of
an
assessment
were
limited
to
that
shown
by
the
taxpayer’s
own
return
or
information
supplied
by
him
or
for
him
or
made
dependent
on
whether
the
taxpayer
had
made
a
return.
The
effect
of
the
section
is
that
when
the
Minister
makes
an
assessment
under
the
section
there
is
a
presumption
of
validity
in
its
favor
which
is
not
rebuttable
by
proof
that
its
amount
is
different
from
that
shown
on
the
taxpayer’s
return
or
information
supplied
by
or
for
him
or
that
no
return
has
been
made.
The
power
is
in
the
interests
of
adequate
administration
of
the
Act.
It
extends
to
the
case
of
every
taxpayer
and
is
conferred
so
that
there
shall
be
no
gap
in
the
Minister’s
administrative
power
of
assessment
of
every
person
and
the
determination
of
the
amount
of
such
assessment
so
that
every
one
may
be
made
subject
to
liability
for
the
amount
of
tax
he
ought
to
pay
and
no
one
be
able
to
confine
the
amount
of
his
liability
to
that
which
he
has
himself
stated
or
supplied
or
to
escape
liability
by
not
making
a
return.
It
was
contended
on
behalf
of
the
respondent
that
the
Minister’s
determination
was
the
exercise
of
an
administrative
discretionary
power
and
as
such
not
reviewable
by
the
Court.
I
have
come
to
the
conclusion
that
this
contention
is
quite
untenable.
In
my
opinion,
the
Minister’s
power
under
sec.
47
is
not
of
the
same
kind
as
the
various
discretionary
powers
vested
in
the
Minister
by
the
Act
such
as,
for
example,
that
conferred
by
sec.
6(2),
whereby
he
is
made
the
sole
judge
of
the
particular
matter
entrusted
to
his
discretion
so
that
when
he
has
acted
in
the
manner
required
by
law
in
the
exercise
of
his
discretionary
power
his
actual
exercise
of
it
is
not
subject
to
review
by
the
Court.
There
is
a
difference
between
the
exercise
of
discretionary
powers
in
respect
of
particular
items
that
may
enter
into
an
assessment
and
the
assessment
itself,
as
explained
in
Pure
Spring
Company
Limited
v.
Minister
of
National
Revenue
(1946)
Ex.
C.R.
471
at
498;
[1946]
C.T.C.
197.
Such
discretionary
powers
must
be
exercised
before
the
assessment
operation,
which
is
purely
an
administrative
function
of
the
Minister
not
involving
the
exercise
of
discretion,
can
be
performed
at
all.
But
the
power
under
sec.
47
is
not
concerned
with
any
particular
item.
It
is
general
in
nature
and
relates
to
the
amount
of
the
assessment
as
a
whole.
In
my
view,
a
right
of
appeal
from
such
amount
is
expressly
given
by
sec.
58
of
the
Act
which
provides
in
part
:
"‘58.
Any
person
who
objects
to
the
amount
at
which
he
is
assessed,
or
who
considers
that
he
is
not
liable
to
taxation
under
this
Act,
may
personally
or
by
his
solicitor
serve
a
notice
of
appeal
upon
the
Minister.”
There
may
be
sound
reasons
of
policy
why
Parliament
has
entrusted
particular
matters
that
may
be
difficult
or
impossible
of
proof
as
matters
of
fact
to
the
discretionary
determination
of
the
Minister
and
in
such
matters
preferred
the
opinion
of
the
Minister
to
that
of
the
Court,
but
there
can
be
no
similar
reasons
in
the
case
of
such
a
general
power
of
assessment
as
that
conferred
by
sec.
47.
The
statement
that
the
Minister
may
determine
the
amount
of
the
tax
to
be
paid
by
any
person
extends
to
the
case
of
every
taxpayer.
Under
the
circumstances,
the
contention
that
the
Minister’s
determination
is
not
subject
to
review
by
the
Court
amounts
to
a
total
denial
of
the
taxpayer’s
right
of
appeal
against
"‘the
amount
at
which
he
is
assessed’’
and
renders
the
language
of
sec.
58
nugatory
so
far
as
the
amount
of
any
assessment
is
concerned.
Moreover,
if
the
Minister’s
determination
under
the
section
were
to
make
an
assessment
binding,
there
would
be
no
need
for
most
of
the
specific
provisions
of
the
Act.
A
construction
of
the
section
that
would
lead
to
such
astounding
results
ought,
in
the
absence
of
clear
and
explicit
terms,
to
be
rejected
as
an
unreasonable
one.
A
more
reasonable
construction
of
the
section
must
be
sought.
While
the
Minister’s
power
under
sec.
47
is
not
expressly
limited
it
is
not
unlimited
in
the
sense
that
he
may
do
as
he
pleases.
It
is
quite
clear,
I
think,
that
the
power
must
be
exercised
within
the
Act
and
subject
to
it.
That
opinion
was
expressed
in
Trapp
v.
Minster
of
National
Revenue
(1946)
Ex.
C.R.
245
at
255,
[1946]
C.T.C.
40,
where
it
was
held
that
when
the
Act
has
fixed
a
particular
basis
of
taxability
of
income
sec.
47
does
not
empower
the
Minister
to
depart
from
such
basis
and
fix
a
different
one.
Parliament
could
not
have
intended
to
confer
any
extraordinary
or
over-riding
general
power
upon
the
Minister.
All
that
he
is
empowered
to
do
is
to
find
the
fact
of
the
amount
of
the
assessment
in
the
case
of
any
person
regardless
of
the
amount
shown
by
his
return
or
information
supplied
by
or
for
him
and
regardless
of
whether
he
has
made
a
return
or
not.
When
he
exercises
his
power
under
the
section
he
makes
a
finding
of
fact
as
to
the
amount
of
the
assessment
which
is
clearly
subject
to
the
appellate
jurisdiction
of
the
Court
within
the
meaning
of
sec.
66
of
the
Act
and
not
excluded
therefrom
by
its
opening
words.
The
result
is
that
when
the
Minister,
acting
under
sec.
47,
has
determined
the
amount
of
the
tax
to
be
paid
by
any
person,
the
amount
so
determined
is
subject
to
review
by
the
Court
under
its
appellate
jurisdiction.
If
on
the
hearing
of
the
appeal
the
Court
finds
that
the
amount
determined
by
the
Minister
is
incorrect
in
fact
the
appeal
must
be
allowed
to
the
extent
of
the
error.
But
if
the
Court
is
not
satisfied
on
the
evidence
that
there
has
been
error
in
the
amount
then
the
appeal
must
be
dismissed,
in
which
case
the
assessment
stands
as
the
fixation
of
the
amount
of
the
taxpayer’s
liability.
The
onus
of
proof
or
error
in
the
amount
of
the
determination
rests
on
the
appellant.
This
view
of
the
nature
of
the
Minister’s
power
under
sec.
47
is,
I
think,
a
reasonable
one.
It
is
consistent
with
the
other
provisions
of
the
Act
and
complete
and
equitable
administration
of
it.
The
object
of
an
assessment
is
the
ascertainment
of
the
amount
of
the
taxpayer’s
taxable
income
and
the
fixation
of
his
liability
in
accordance
with
the
provisions
of
the
Act.
If
the
taxpayer
makes
no
return
or
gives
incorrect
information
either
in
his
return
or
otherwise
he
can
have
no
just
cause
for
complaint
on
the
ground
that
the
Minister
has
determined
the
amount
of
tax
he
ought
to
pay
provided
he
has
a
right
of
appeal
therefrom
and
is
given
an
opportunity
of
showing
that
the
amount
determined
by
the
Minister
is
incorrect
in
fact.
Nor
need
the
taxpayer
who
has
made
a
true
return
have
any
fear
of
the
Minister’s
power
if
he
has
a
right
of
appeal.
The
interests
of
the
revenue
are
thus
protected
with
the
rights
of
the
taxpayers
being
fully
maintained.
Ordinarily,
the
taxpayer
knows
better
than
any
one
else
the
amount
of
his
taxable
income
and
should
be
able
to
prove
it
to
the
satisfaction
of
the
Court.
If
he
does
so
and
it
is
less
than
the
amount
determined
by
the
Minister,
then
such
amount
must
be
reduced
in
accordance
with
the
finding
of
the
Court.
If,
on
the
other
hand,
he
fails
to
show
that
the
amount
determined
by
the
Minister
is
erroneous,
he
cannot
justly
complain
if
the
amount
stands.
If
his
failure
to
satisfy
the
Court
is
due
to
his
own
fault
or
neglect
such
as
his
failure
to
keep
proper
accounts
or
records
with
which
to
support
his
own
statements,
he
has
no
one
to
blame
but
himself.
A
different
view
of
the
nature
of
the
Minister’s
power
under
sec.
47,
namely,
that
it
is
not
subject
to
the
specific
provisions
of
the
Act
and
that
the
amount
of
his
determination
is
not
subject
to
review
by
the
Court
would
lead
to
such
extraordinary
results,
without
any
need
or
justification
for
them,
that
they
ought
not
to
be
considered
as
having
been
within
the
intention
of
Parliament.
The
amount
of
the
Minister’s
determination
being
thus
subject
to
review
by
the
Court
the
issue
on
these
appeals
is
solely
one
of
fact.
The
amounts
of
$8,710.04
and
$10,526.50
shown
on
the
appellant’s
returns
as
the
amounts
of
his
total
sales
in
the
beer
parlor
for
1940
and
1941
respectively
are
not
broken
up
to
show
the
receipts
from
draught
beer,
bottled
beer,
and
the
return
of
kegs
separately.
But
the
memoranda
filed
on
behalf
of
the
Minister
at
the
hearing
(Exhibits
I
and
H)
giving
the
details
of
the
amended
assessments
do
show
the
estimates
of
such
receipts
separately.
The
important
details
so
far
as
these
appeals
are
concerned
are
those
dealing
with
the
returns
from
the
sale
of
draught
beer.
The
memorandum
for
1940
(Exhibit
I)
shows
the
sale
of
208
kegs
at
$32.00
per
keg
and
the
one
for
1941
(Exhibit
H)
167%
kegs
at
$32.00
per
keg.
The
information
as
to
the
number
of
kegs
was
obtained
from
the
Saskatchewan
Liquor
Board
and
its
correctness
is
not
questioned.
At
the
hearing
counsel
for
the
appellant
confined
his
attack
on
the
assessments
solely
to
the
Minister’s
estimate
of
gross
receipts
of
$32.00
per
keg.
The
correctness
of
the
other
items
was
conceded.
The
issue
of
fact
is
thus
a
narrow
one.
The
Court
has
had
the
advantage
of
evidence
as
to
how
the
amount
of
$32.00
per
keg
was
arrived
at.
Mr.
J.
B.
McFadyen,
the
chief
assessor
of
the
Saskatoon
Income
Tax
Office,
who
was
the
person
actually
dealing
with
the
appellant’s
returns,
explained
that
he
was
familiar
with
the
returns
of
about
200
beer
parlor
operators
in
Saskatchewan;
that
50%
of
these
kept
good
records,
25
%
incomplete
ones
and
the
rest
practically
no
records
;
that
he
had
arrived
at
the
gross
receipts
of
$32.00
per
keg
as
a
result
of
comparison
with
other
returns
filed
in
the
office;
that
the
returns
from
hotels
that
kept
good
records
indicated
that
the
realization
from
sales
of
draught
beer
amounted
to
$32.00
per
keg
or
better;
that
he
knew
of
cases
where
the
return
was
as
high
as
$37.00
but
that
he
had
taken
$32.00
as
an
average.
The
estimate
made
by
Mr.
McFadyen
must
be
taken
to
have
been
adopted
by
the
Minister
as
his
estimate.
An
assessment
made
under
sec.
47
is
often
called
an
arbitrary
assessment
but
it
would
be
more
nearly
correct
in
view
of
Mr.
McFadyen’s
evidence
to
describe
the
assessments
under
appeal
as
estimated
assessments
rather
than
as
arbitrary
ones.
While
I
was
favourably
impressed
with
the
manner
in
which
Mr.
McFadven
gave
his
evi-
dence
I
have
come
to
the
conclusion
that
the
estimate
of
gross
receipts
of
$32.00
per
keg
was
too
high.
There
are
a
number
of
reasons
for
this
conclusion.
It
is
clear
that
it
was
intended
that
the
estimate
should
not
be
too
low
but
should
amply
protect
the
revenue
and
this
is
to
be
expected.
The
viewpoint
of
the
taxing
authorities
is
shown
in
a
letter
from
the
Inspector
of
Income
Tax
at
Saskatoon,
per
Mr.
McFadyen,
to
the
appellant’s
accountants,
dated
November
19,
1948,
in
the
following
well
expressed
statement
:
"‘I
would
point
out
that
in
the
absence
of
specific
records
and
where
it
becomes
necessary
to
issue
an
arbitrary
assessment,
as
in
the
case
of
your
client,
the
interests
of
the
Crown
must
be
fully
protected,
and
while
there
is
no
desire
to
estimate
the
taxpayer’s
income
beyond
what
is
a
reasonable
figure,
it
must
be
borne
in
mind
that
the
estimated
income
should
be
sufficiently
high
that
it
is
comparable
with
the
reported
by
like
businesses
where
accurate
recards
are
kept.
The
taxpayer
who
does
not
maintain
records
cannot
reasonably
expect
his
income
to
be
estimated
on
a
basis
lower
than
the
taxpayer
who
does
maintain
records.’’
No
exception
can
be
taken
to
this
statement
of
the
objectives
to
be
sought
in
the
exercise
of
the
Minister’s
powers
under
sec.
47,
but
I
think
the
estimate
in
this
case
has
gone
beyond
them.
In
my
opinion,
the
returns
with
which
Mr.
McFadyen
was
familiar
did
not
warrant
him
in
making
the
estimate
he
did.
He
admitted
that
the
hotels
that
kept
good
records
were
mostly
city
hotels
and
he
could
not
recall
the
return
of
any
rural
hotel
similar
to
the
appellant’s
where
good
records
were
kept
and
gross
receipts
of
$32.00
per
keg
were
realized.
Furthermore,
receipts
from
the
sale
of
draught
beer
in
beer
parlors
even
where
records
were
well
kept
did
not
always
appear
separately
from
those
from
the
sale
of
bottled
beer.
The
experience
on
which
Mr.
McFadyen
based
his
estimate
was
thus
much
narrower
than
at
first
appears
and
was
in
respect
of
beer
parlors
not
comparable
with
that
run
by
the
appellant.
A
gross
return
of
$32.00
per
keg
is
possible
only
if
the
beer
parlor
operator
supplies
only
614
ounces
instead
of
the
8
ounces
which
the
law
prescribes.
This
is
a
mathematical
calculation
based
upon
2,000
ounces
per
keg
and
the
sale
of
the
beer
at
10
cents
per
glass
and
makes
no
allowance
whatever
for
any
wastage.
There
must
always
be
some
wastage
so
that
in
actual
practice
the
operator
of
the
beer
parlor
would
have
to
put
even
less
than
the
672
ounces
of
beer
in
the
8-ounce
glass
in
order
to
realize
a
gross
return
of
$32.00
per
keg.
While
it
appears
from
the
evidence
that
this
practice
of
cheating
beer
parlor
patrons
was
widespread
in
the
province
it
is
clearly
estab-
lished
that
it
was
much
more
common
in
the
large
city
beer
parlors
than
in
the
small
ones
in
the
country.
Of
the
complaints
regarding
short
measure
sales
75%
came
in
respect
of
city
beer
parlors
and
only
25%
from
rural
ones.
Mr.
McFadyen
frankly
admitted
that
a
city
beer
parlor
would
make
a
larger
gross
return
per
keg
than
a
country
one.
Moreover,
there
would
also
be
less
wastage
in
city
beer
parlors
than
in
country
ones
because
of
the
more
efficient
beer
drawing
equipment
in
the
former.
In
the
country
beer
parlors
wastage
would
amount
to
4%
as
comparted
with
2%
in
the
case
of
those
in
the
cities.
This
was
the
evidence
of
Mr.
Boyle,
President
of
the
Hotels
Association
of
Regina
and
Vice-President
of
the
Saskatchewan
Hotels
Association,
who
also
stated
that
the
glasses
were
filled
nearer
the
top
in
country
beer
parlors
than
in
the
city
ones.
His
experience
was
that
any
rural
beer
parlor
operator
who
put
less
than
7
ounces
in
the
glass
was
creating
trouble
for
himself.
These
statements
lend
strong
support
to
the
appellant’s
own
evidence
that
he
served
full
glasses
to
his
patrons,
that
he
had
had
no
complaints
and
that
his
business
had
been
growing,
which
without
such
support
I
would
have
held
at
some
discount.
Moreover,
there
is
the
evidence
of
Mr.
Pearson
that
the
appellant
was
very
generous
and
filled
up
the
glasses
and
that
there
had
been
no
complaints.
I
find
no
difficulty
in
believing
that
in
country
beer
parlors
the
operator
would
not
be
as
likely
to
succeed
in
selling
short
measure
beer
as
he
would
be
in
larger
city
beer
parlors
and
that
he
would
not
be
likely
to
realize
$32.00
per
keg.
While
I
am
satisfied
that
the
estimate
of
$32.00
per
keg
is
too
high,
it
is
difficult
in
the
absence
of
reliable
records
to
find
precisely
how
much
too
high
it
is.
But
since
the
Minister’s
estimate
is
reviewable
the
Court
may
substitute
its
finding
even
although
such
finding
may
itself
have
to
be
an
estimate.
On
the
evidence
as
a
whole,
I
am
of
opinion
that
a
gross
return
of
$28.00
per
keg
was
more
likely
in
the
appellant’s
case
than
the
amount
estimated
by
the
Minister,
and
I
so
find.
This
would
mean
approximately
7
ounces
of
beer
per
glass
rather
than
614.
While
I
do
not
think
the
appellant
is
entitled
to
full
credence
in
view
of
his
initial
erroneous
returns
I
am
of
the
opinion
that
he
has
sufficiently
satisfied
the
onus
of
showing
that
the
amounts
of
the
assessments
under
appeal
were
incorrect
and
that
a
reduction
of
$4.00
per
keg
ought
to
be
made.
The
assessment
for
1940
should,
therefore,
be
reduced
by
$832.00
and
that
for
1941
by
$670.00.
To
the
extent
of
such
reductions
the
appeals
will
be
allowed.
The
appellant
is
entitled
to
costs
to
be
taxed
in
the
usual
way.
Judgment
accordingly.
384
CANADA
Tax
CASES
[1947]