[OFFICIAL ENGLISH TRANSLATION]
Date: 19980911
Docket: 97-141(GST)I
BETWEEN:
GESTION 69692 INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1]
The appellant filed its appeal by means of a Notice of Appeal
that reads as follows:
[translation]
NOTICE OF APPEAL
The appellant is appealing the respondent's decision dated
October 24, 1996, confirming the assessment made on
September 25, 1995, for the period from March 22, 1993, to
September 30, 1994.
1. On
September 25, 1995, the respondent issued a notice of
assessment numbered 22211 under the Excise Tax Act for the
period from March 22, 1993, to September 30, 1994;
2. The
appellant filed a notice of objection to the assessment referred
to in the preceding paragraph;
3. In a
decision made on October 24, 1996, the respondent
confirmed notice of assessment number 22211 issued under the
Excise Tax Act;
4. The
appellant is appealing the decision of the Minister of Revenue
confirming assessment number 22211;
5. Following
an audit, the respondent made the following adjustments:
GOODS AND SERVICES
TAX
$2,674.63
INPUT TAX
CREDIT
($1,330.31)
6. The
respondent argues, inter alia, that she made those
adjustments both because the registrant had claimed some ITCs
without sufficient proof and because it had failed to claim other
ITCs;
7. The
respondent's auditor claims, inter alia, that the
appellant failed to remit the tax on income from the sale of
condominiums at 141-159 Rue Hériot and at
164 Rue Brock in Drummondville;
8. The
assessments made by the respondent under the Excise Tax
Act are incorrect because the auditor from the Department of
Revenue overvalued the condominiums; the Department's
appraisal is $32,840.00 more than the appellant's;
9. The
Department's auditor also failed to take account of several
invoices for expenses incurred to build condominiums and, as a
result, the appellant was denied a number of ITCs;
10. The appellant gave the
respondent all the invoices for which it claimed input tax
rebates, and all of those invoices result from the
registrant's commercial activities;
11. At all relevant times,
the appellant complied with the provisions of the Excise Tax
Act as regards the documentary requirements provided for by
law;
12. This appeal is well
founded in fact and in law;
FOR THESE REASONS, MAY IT PLEASE THE COURT:
TO ALLOW this appeal;
TO SET ASIDE notice of assessment number 2221 issued
under the Excise Tax Act on
September 25, 1995;
TO REFER the entire matter back to the respondent so
that she can issue a notice of reassessment in accordance with
the judgment to be made in this case;
THE WHOLE with costs.
MONTRÉAL, January 20, 1997
NORMAND BÉRUBÉ
10422 Rue de Martigny
Montréal, Quebec H2B 2M6
Tel.: (514) 389-6339
Counsel for the Appellant
[2] In the Reply to the Notice of
Appeal, the respondent defended the soundness of the assessment,
more specifically in paragraph 9, which reads as
follows:
[translation]
9. In making
the said assessment, the Minister relied on the following facts
discovered during the audit carried out in 1994 and 1995:
(a) the appellant is
a goods and services tax registrant;
(b) during the
period at issue, the appellant carried on the following
activities:
-
rental of condominiums acquired after being substantially
renovated for residential and commercial purposes;
-
rental of a commercial building;
-
rental of residential buildings;
(c) all of those
activities were managed by Marcel Thiffault, the
appellant's president and shareholder;
(d) during the same
period, Marcel Thiffault also ran two other corporations,
Club Immobilier International Inc., of which he is the president
and shareholder, and Gestion 69692 Inc., the president and
shareholder of which is Claudette Ruest, Mr.
Thiffault's spouse, and he managed the many commercial
activities carried on by Claudette Ruest in her own
name;
(e) during the
period at issue, Marcel Thiffault used just one bank account
for all the activities of the four registrants mentioned above
(the appellant, the other two corporations and
Claudette Ruest), and that account was also used to pay
Mr. Thiffault's personal expenses;
(f) the
accountant prepared the appellant's quarterly returns on the
basis of cheques but without having the purchase and sales
invoices in his possession;
(g) moreover, since
the accountant did not have the sales contracts, the rental
agreements or the invoices in his possession, income was reported
on the basis of deposits and adjusted at the end of the year when
those documents were provided to him;
(h) the income also
had to be adjusted at the end of the year to take account of
income that had not been deposited in the account, and it then
had to be broken down for each activity and each registrant on
the basis of the information provided by
Marcel Thiffault;
(i) thus, the
amounts collected as residential rents by Claudette Ruest and
Gestion 69691 Inc. could not be traced in the deposits, and the
respondent was unable to confirm that the income reported for
such residential rentals was indeed from those rentals or from
the laundry rooms made available to tenants;
(j) it results
from the foregoing that the appellant's accounting was
deficient since the books of account were inadequate or
non-existent, that the income was not all reported, that
some invoices to justify the claimed ITCs were missing, that the
ITCs were claimed without taking account of which registrant the
invoices had been issued to, and that ITCs were claimed for
non-taxable activities or were claimed twice;
(k) no entry was
made in the general journal concerning the supplies made by the
appellant, and the sales reported in the financial statements did
not correspond to the income earned by the appellant;
(l) with
regard to the rental of condominiums for residential
purposes:
-
the appellant purchased the immovable property from
Claudette Ruest on April 20, 1993, for $527,500.00
before taxes;
-
Ms. Ruest had made major renovations to the property, which
was vacant and in which there were six residential condominiums
and some business condominiums;
-
the appellant purchased the property to sell or rent the
condominiums for commercial and residential purposes;
-
five of the six condominiums were thus rented for residential
purposes as of October 1993 without the appellant collecting
the GST on those supplies, which were deemed to have been made to
itself;
-
the appellant reported a fair market value of $241,000.00 for
those five condominiums and remitted the GST computed on that
amount after the respondent had told the appellant that the
supplies were taxable and before the audit had been
completed;
-
the respondent adjusted the fair market value of the five
condominiums to $273,840.00 and assessed the GST that had not
been remitted on that amount accordingly;
(m) finally, after
reviewing all the invoices submitted by the appellant,
some ITCs were denied for the following reasons:
-
some purchase invoices were missing;
- some
amounts were claimed twice, that is, both by the appellant and by
one of the other three registrants managed by
Marcel Thiffault;
-
some purchases were not eligible, inter alia, because they
were personal in nature, because they concerned property that had
not been acquired in the course of commercial activities or
because they related to exempt activities and therefore did not
entitle the appellant to ITCs;
however, the respondent allowed $1,330.31 net in additional
ITCs.
[3] The appellant adduced deficient,
incomplete and inadequate evidence in support of its arguments.
Although the parties agreed that the evidence adduced in the
appeals of Gestion 69691 Inc. (97-146(GST)I), Club
Immobilier International Inc. (97-148(GST)I) and
Claudette Ruest (97-147(GST)I) was to apply to all of
the cases, including, of course, this appeal, there is absolutely
nothing in the common evidence that broadens, completes or
strengthens the evidence relating to this case.
[4] When he gave evidence concerning
this appeal specifically, Marcel Thiffault testified and
made vague, confused comments and observations about a number of
invoices. Since the exercise could well have been a very lengthy
one, I asked that the parties meet to clarify the amounts and
documents at issue in this case so that a coherent and, above
all, more effective analysis thereof would be possible.
[5] After several hours of
discussions, the parties stated that the issues remained
unresolved and that the discussions had not made it possible to
clarify anything; on the other hand, the exercise had enabled the
respondent to indicate to the appellant the invoices in respect
of which credits had been accepted or denied.
[6] The appellant did not adduce any
specific evidence. The respondent reiterated that the assessment
was correct and added that the issues remained unresolved.
However, she referred to the admission recorded the first day of
the hearing, and she worded it as follows:
[translation]
RESPONDENT'S ADMISSION
On behalf of the respondent, the Deputy Attorney General of
Canada admits, through his undersigned counsel, that the
assessment at issue must be referred back to the Minister so that
he can make a reassessment setting the fair market value of the
immovable property located on Rue Hériot in
Drummondville at $231,840 for the purpose of computing the goods
and services tax.
Montréal, this 29th day of January 1998
Deputy Attorney General of Canada
Counsel for the Respondent
Maryse Lord
Veillette & Associés
Litigation
Quebec Department of Revenue
[7] The appellant basically
criticized, contested and discredited the work method used by the
respondent. It never demonstrated that its arguments were valid
through documented facts or facts supported by adequate
documentary evidence. Moreover, the criticisms themselves were
essentially general and very vague. Since it did not have an
adequate accounting system, the appellant was obviously unable to
reinforce any evidence whatsoever.
[8] In view of the analysis of all of
the more detailed evidence in Club Immobilier
International Inc. (97-148(GST)I), a copy of the
judgment of which is appended to this judgment to form a part
hereof;
[9] In view of the complete lack of
relevant evidence about this specific case and in view of the
respondent's admission, I conclude as follows:
[10] The appeal of the appellant Gestion
69692 Inc. is allowed in part to set the fair market value of the
immovable property located on Rue Hériot in
Drummondville at $231,840. The assessment at issue is referred
back to the Minister so that he can make a reassessment taking
account of the fact that the fair market value of the said
property is $231,840 for the purpose of computing the amount of
goods and services tax. In all other respects, the appeal is
dismissed.
Signed at Ottawa, Canada, this 11th day of September 1998.
J.T.C.C.
Translation certified true
on this 9th day of July 2003.
Sophie Debbané, Revisor
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