Docket: 2011‑3158(GST)I
BETWEEN:
JUNIOR GEORGE THELWELL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on common evidence with the appeal of Tina Thelwell
(2011‑3159(GST)I), on April 12, 2012, at London, Ontario.
Before: The Honourable Justice
Patrick Boyle
Appearances:
|
Agent for the Appellant:
|
Peter Tindall
|
|
|
|
|
Counsel for the Respondent:
|
Paul Klippenstein
|
____________________________________________________________________
JUDGMENT
The appeal from the reassessment made under
the Excise Tax Act, notice of
which is dated August 19, 2009, for the period from
January 1, 2008 to December 31, 2008, is dismissed, except as regards the additional
input tax credits in the amount of $578.17 conceded by the Crown at the opening
of the hearing, in accordance with the reasons for judgment attached hereto.
Signed at Toronto, Ontario, this 7th day of June 2012.
"Patrick Boyle"
Docket: 2011‑3159(GST)I
BETWEEN:
TINA THELWELL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on common evidence with the appeal of Junior George Thelwell
(2011‑3158(GST)I), on April 12, 2012, at London, Ontario.
Before: The Honourable Justice Patrick Boyle
Appearances:
|
Agent for the
Appellant:
|
Peter Tindall
|
|
|
|
|
Counsel for the
Respondent:
|
Paul Klippenstein
|
____________________________________________________________________
JUDGMENT
The appeal from the reassessment made under
the Excise Tax Act, notice of
which is dated August 6, 2010, for the period from
January 1, 2008 to December 31, 2008, is dismissed in accordance with the
reasons for judgment attached hereto.
Signed at Toronto,
Ontario, this 7th day of June 2012.
"Patrick Boyle"
Citation: 2012 TCC 185
Date: 20120607
Dockets: 2011‑3158(GST)I
2011‑3159(GST)I
BETWEEN:
JUNIOR GEORGE THELWELL,
TINA THELWELL,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Boyle J.
[1]
Mr. Junior Thelwell
operated a small courier business under the name Discount Courier Services. His
deliveries were in the local Southern and Southwestern Ontario areas. By 2008
his reported revenues from his business were slightly in excess of $100,000 and
he was subcontracting customer work that he was unable to handle to the extent
of approximately $5,000.
[2]
His wife, Mrs. Tina Thelwell,
worked in the business doing contract management, clerical and administrative
services, including receiving customer dispatch orders, maintaining logs for
the vehicles and for the orders, and generally keeping the business’ books and
records.
[3]
In 2007, the Thelwells
started using a new tax return preparer, Mr. Rudolfo Terracina. Rudolfo (Rudy) Terracina
operated a tax preparation and advisory business under the name “Doctor Tax”.
Based upon the evidence in this case, including the testimony and records of
the Thelwells and the testimony of Mr. Terracina, it appears that the term
“Doctor” was being used as a verb and not as a title. Unbeknownst to the
Thelwells, Mr. Terracina had previously pleaded guilty to tax evasion
under the Income Tax Act and the Excise Tax Act and was sentenced
to three years in federal prison for tax evasion involving his fraudulent
preparation of tax returns for other clients. He was convicted for having
manufactured expenses to be claimed in his clients’ returns. In the case before
me, he appears to have returned to his old ways. Perhaps unfortunately for the
Thelwells, just because one holds oneself out as a tax professional does not
make it so.
[4]
In this case, the
Thelwells’ 2008 income tax returns were put into evidence. They were
prepared and completed by Mr. Terracina. The amounts claimed are unable to
be explained by either of the Thelwells or Mr. Terracina. Junior Thelwell,
believably, said that was not his area of responsibility, but was contracted to
his wife and she used Mr. Terracina, so explanations should be forthcoming
from them. Tina Thelwell said that the numbers were assembled and prepared
by Mr. Terracina, so questions about them should be directed to him. In
his testimony, Mr. Terracina pointed back to Tina Thelwell as the
person who provided him all of the information which he said he did not audit. Based
upon his answers to the questions asked of him, it appears it did not enter his
mind to see if the amounts claimed even passed a preliminary reasonableness or smell
test.
[5]
Fortunately, I do
not have the Thelwells’ 2008 income tax matters before me. Their appeals only
involve their GST input tax credit (“ITC”) claims in respect of expenses
related to the business of Discount Courier Services, and in Tina Thelwell’s
case, the GST payable in respect of improvements made to a home they since sold,
as well as the GST payable upon a new home they purchased, along with the GST
paid in respect of the acquisition costs of two vehicles she acquired but made
available to her husband’s Discount Courier Services business.
[6]
Compounding the tax
predicament that the Thelwells found themselves in by following
Mr. Terracina’s advice and recommended reporting, they chose one of
Mr. Terracina’s sometime business associate or colleague, Mr. Peter Tindall,
to represent them in their informal GST appeals. Mr. Tindall holds himself
out to the public as capable of representing taxpayers in informal appeals as
their agent. Unfortunately, Mr. Tindall did not seem to be aware of the
fact that the onus is on the taxpayers to demonstrate their entitlement to the
tax relief sought, did not anticipate the need for, or value of, any supporting
documentary evidence relating to any aspect of the business, not even so much
as a breakdown of how the expenses were accrued, much less actual backup for
the expenditures in general ledger‑type document or having actual
purchase receipts for the expenses. Mr. Tindall led no evidence whatsoever
relating to either the improvements to the old house or anything else about the
old house, or to the purchase of the new house. Mr. Tindall does not have
any legal or paralegal training, experience or status. His previous employment
was in an unrelated area.
[7]
Canadians are free to
choose whomever they wish to represent them in informal tax appeals, and the
right to choose includes the right to make poor choices. Unfortunately for the
Thelwells, apparently as a result of their choice, there has been entirely
insufficient evidence to allow me to conclude on a balance of probabilities
that the underlying expenses in respect of which they have claimed ITCs were
even incurred, much less related to the business. No documents or evidence was put
forward in support of a claim that the GST in respect of their home expenses
should result in any ITC or otherwise be refundable, nor were any arguments
made or evidence put in relating to the very vague Charter of Rights and
Freedoms (“Charter”) claim advanced by Mr. Tindall in the
notices of appeal. As explained to Mr. Tindall at the opening of the
hearing, this Court is entirely without jurisdiction to hear the claim he
advanced alleging harassment and abuse by the Canada Revenue Agency (“CRA”) in
the course of the audit and his claim for the taxpayers’ costs of complying
with the audit. Having not put in sufficient evidence to discharge the burden
of proof on his clients, and not having advanced any evidence or arguments in
support of his Charter claim or his ITC claim in respect of the homes,
the appeals must be dismissed, subject only to the $578.17 concession made by
the Crown at the opening of the hearing in respect of Junior Thelwell’s
appeal.
[8]
I have no reason
not to believe the Thelwells that Junior Thelwell operated the Discount Courier
Services business, that the two vehicles acquired by Tina Thelwell were
acquired to be used primarily in the courier business, but were acquired by her
because she had a more favourable credit rating than her husband, or that Tina Thelwell
did real work for her husband’s Discount Courier Services business. That
evidence, however, comes nowhere close to the evidence needed to establish the
entitlement to the amount of ITCs claimed by the Thelwells and denied by the CRA.
[9]
It appears that the
Thelwells were not entirely blameless for their current situation. First, they
chose their tax return preparer, chose to follow his advice and chose to sign
the returns he prepared even though, as explained by Mr. Terracina, the
business expenses seemed to balloon in 2008 and they remained unable to explain
how that could have happened or what those claims were made up of.
[10]
Secondly, they chose
Mr. Tindall to represent them in this matter, upon the recommendation, or
at least with the support, of Mr. Terracina.
[11]
I am also unable
to accept Tina Thelwell’s evidence that the two subleases she entered into
with her husband’s business were prepared in 2003 and 2008 as she said they
were. It is perhaps odd that they both read identically in the circumstances.
She acknowledged that they were only printed off the computer and signed
recently but testified that they existed and she had the electronic formats
since 2003 and 2008. They both refer to the sublease being to Discount Courier
Services Inc. a corporation that was not incorporated until some time in 2007
at the recommendation of Mr. Terracina. I am entirely unable to
reconcile the use of a corporate name in 2003 if the corporation was not
incorporated until 2007.
[12]
I should also note
that the explanations given by the three witnesses were in large measure
inconsistent and irreconcilable. No one could explain the amounts of the
expenses and resulting loss claimed by Tina Thelwell in her Statement of
Professional Activities from the management services she provided to her
husband’s business. No one could explain why her subleasing revenue for the
cars did not seem to be reported in that statement or why, if, as Mr. Terracina
suggested, another Statement of Business Activities schedule must have been
prepared by him for the leasing revenue and expenses, that amount would not have
been incorporated on the income page of the return in any event. The parties
could not agree on the role, if any, played by the new Discount Courier
Services Inc. in 2008 in respect of Junior Thelwell’s Discount Courier
Services sole proprietorship business, even though a $24,000 management fee was
paid to it according to the testimony of, and return prepared by,
Mr. Terracina. No one could explain why the office supplies and office
expenses claimed in respect of Junior Thelwell’s courier business and
Tina Thelwell’s management services business exceeded $20,000. No one
could explain what type of travel expenses amounting to in excess of $5,000
were incurred on accommodation and meals by Junior Thelwell in respect of
his same‑day local courier delivery business.
[13]
These are just some of
the examples of why I am unable to accept any of the amounts claimed as
either having been incurred or reasonable if incurred. Therefore I cannot
accept that the evidence establishes that the underlying expenses for which the
Thelwells have claimed ITCs in these appeals were incurred or related to any
business or commercial activity. In these circumstances, I am simply
unable to accept the testimony of any of the three witnesses unless it is
corroborated with credible, contemporaneous, satisfactory backup documentation
which, as regards the matters in dispute, it was not.
[14]
For these reasons, the
appeal of Tina Thelwell is dismissed and the appeal of Junior Thelwell
is dismissed, except as regards the $578.17 concession made by the Crown at the
opening of the hearing.
Signed at Toronto, Ontario, this 7th day of June 2012.
"Patrick Boyle"
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