Galachiuk – Tax Court of Canada finds that the taxpayer can demonstrate due diligence for either of the two years at issue under a s. 163(1) penalty

S. 163(1) imposes a 10% penalty on the amount of underreported income in a return (or 20% taking into account what usually is a matching provincial penalty) if any amount of income was also underreported in one of the three preceding taxation years.  Graham J found (in the face of conflicting decisions on the point) that there was a due diligence defence for a s. 163(1) penalty if the taxpayer established due diligence in either of the two years, so that it was not necessary for the taxpayer to establish due diligence for the second year.  Accordingly, because it was reasonable for the taxpayer not to notice that he had not received a T3 slip for $683 for 2008, he could avoid the penalty for not reporting a $436,890 withdrawal from his pension plan in 2009 (for which his excuse was lame).

Neal Armstrong.  Summary of Galachiuk v. The Queen, 2014 DTC 1153 [at 3494], 2014 TCC 188 under s. 163(1) and General Concepts - Onus.