Lalonde, 82 DTC 1772, [1982] CTC 2749 (T.R.B.)

The Chairman [TRANSLATION]—This case was heard at Montreal, Quebec on September 14, 1982.

1. Issue

The issue is whether the appellant is entitled to claim reimbursement from the respondent of tax of $1,700 paid by him when the said tax was deducted by his employer but not remitted by him to the respondent.

2. Facts

2.01 In 1976, 1977 and 1978 the appellant worked for Jacques Thérrien as a bricklayer-mason. He had begun working for him in the fall of 1975.

2.02 Mr Thérrien had told the taxpayer that he always paid in cash, after deducting the amounts for income tax, pension plan, and so on. He said that he had no accountant and did this himself.

Mr Thérrien did not remit an envelope or document with the pay explaining the various deductions made. The appellant and Mr Thérrien’s son were the only employees.

2.03 When it come time to file his tax returns, despite repeated requests the appellant was never able to obtain T4 forms for the income earned and the various deductions made.

2.04 In response to the appellant’s requests, Mr Thérrien showed him a book in which the appellant’s name, the gross wages for the week, the various deductions and the new wages for the week were recorded.

2.05 The appellant was paid by the week. He said that he compared his pay with that of other construction employees working for other employers. For an equal number of hours of work, the appellant found that the gross wages and net wages after deductions were about the same. Out of gross earnings of approximately $240, He received about $175.

Once, after receiving substantially less, the appellant asked Mr Thérrien for an explanation; he was told that not enough tax had been taken off the previous time. The appellant subsequently remitted amounts to him to rectify the situation.

2.06 When the appellant could not obtain his T4 forms, he managed to obtain from the Office de la construction du Quebec a “statement of pension plan and paid vacation and statutory holidays” for 1976, 1977 and 1978 (Exhibit A-1). The respondent produced TP4 Supplementaries for the same years (Exhibit I-5). It was on the basis of these that the appellant and the respondent were able to establish the following income:

The returns were then completed for the years in question (Exhibits 1-1, 1-2 and I-3). The tax was determined to be $1,700 for the three years, plus interest and penalties for late filing (Exhibits 1-6, 1-7 and 1-8). The appellant paid the amounts owing to the respondent.

2.07 Following various visits from employees of the respondent, Mr Thérrien began making remittances and producing T4s for his employees in 1979.

2.08 The appellant’s wife, Madeleine Lalonde, testified that during the years in question her husband had talked to her about the problems he was having with Mr Therrien.

2.09 The Board was unable to hear the testimony of Mr Therrien. Despite being summoned to appear by means of a subpoena et duces tecum (Exhibit I-9, issued on August 12, 1982), the latter did not deign to comply with the order.

3. Analysis

3.01 The preponderance of the evidence is to the effect that the appellant paid tax (plus interest and penalties) for 1976, 1977 and 1978 when the said tax had been deducted at source by his employer. The Board does not doubt the credibility of the witnesses.

Under section 153 of the Income Tax Act, SC 1970-71-72, c 63, as amended, the said employer acts as an agent of the respondent in withholding the appropriate tax at source and remitting it to the respondent.

Since he is responsible for his agent, the respondent cannot require the appellant to pay tax already deducted by his agent but not remitted to the respondent. The interest and penalties resulting from the tax owing are not exigible either. The respondent must therefore reimburse to the appellant the sums paid by him plus the interest accrued.

3.02 It is up to the respondent to use the appropriate sections of the Income Tax Act to levy from Mr Thérrien the amounts deducted but not remitted, plus the appropriate interest and penalties.

4. Conclusion

The appeal is allowed in accordance with the above reasons for judgment.

Appeal allowed.