Citation: 2011 TCC 513
Date: 20111102
Dockets: 2011-860(IT)I
2011-955(IT)I
2011-1591(IT)I
BETWEEN:
MICHAEL OSTROFF,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Favreau J.
[1]
The appellant appeals
by way of the informal procedure from the assessments made by the Minister of
National Revenue (the “Minister”) under the Income Tax Act, R.S.C. 1985,
C-1 (5th Supp.) as amended (the “Act”), dated May 13,
2010 concerning the appellant’s 2003, 2004, 2005, 2006, 2007 and 2008 taxation
years.
[2]
The appeals were heard
on common evidence and the issues are:
(a) whether the Minister
properly assessed the appellant for the 2003, 2004, 2005, 2006, 2007 and 2008
taxation years to include unreported income in the amounts of $56,599, $58,700,
$58,000, $58,700, $60,300 and $60,300 respectively in accordance with
subsection 152(7) of the Act ; and
(b) whether the late
filing penalties for each of the 2003, 2004, 2005, 2006, 2007 and 2008 taxation
years were properly assessed in accordance with subsection 162(1) of the Act.
[3]
In determining the
appellant’s tax liability for the 2003 and 2004 taxation years, the Minister
made the following assumptions of fact:
(a) the Appellant’s returns of income for the 2003
and 2004 taxation years, were not filed with the Minister as and when required
by subsection 150(1) of the Act.
(b) the Minister used information available to him
to prepare the assessments of tax payable for the 2003 and 2004 taxation years,
the Notices of which were dated May 13, 2010, in accordance with
subsection 152(7) of the Act.
(c) for the 2003 and 2004 taxation years, the
Appellant’s total income which he failed to report, was not less than the
following amounts:
|
|
2003
|
2004
|
|
Business income
|
$48,676
|
$58,700
|
|
Employment insurance
|
7,847
|
—
|
|
Interest
|
76
|
—
|
|
Total income
|
$56,599
|
$58,700
|
(d) for the 2003 and 2004 taxation years, the
Appellant was allowed the Basic Personal amounts, amounts for Canada Pension
Plan contributions and amounts for Employment Insurance premiums, in the
calculation of the non-refundable tax credits;
(e) the Appellant did not have any other deductions
in the calculation of his taxable income for the 2003 and 2004 taxation years
beyond the amounts already allowed;
(f) the Appellant did not incur any business
related expenses in the 2003 and 2004 taxation years;
(g) the Appellant’s returns of income for the 2003
and 2004 taxation years were required to be filed with the Minister on or
before April 30, 2004 and April 30, 2005 respectively;
(h) the Appellant’s returns of income for the 2003
and 2004 taxation years have not been filed with the Minister;
(i) the amounts of tax for the 2003 and 2004
taxation years that were unpaid when the returns of income for the 2003 and
2004 taxation years were required to be filed were $10,545.67 and $9,531.91
respectively.
[4]
In determining the
Appellant’s tax liability for the 2005 and 2006 taxation years, the Minister
made the following assumptions of fact:
(a) the Appellant’s returns of income for the 2005
and 2006 taxation years, were not filed with the Minister as and when required
by subsection 150(1) of the Act.
(b) the Minister used information available to him
to prepare the assessments of tax payable for the 2005 and 2006 taxation years,
the Notices of which were dated May 13, 2010, in accordance with
subsection 152(7) of the Act.
(c) for the 2005 and 2006 taxation years, the
Appellant’s total income which he failed to report, was not less than the
following amounts:
|
|
2005
|
2006
|
|
Business income
|
$58,000
|
$58,700
|
|
|
|
|
(d) for the 2005 and 2006 taxation years, the
Appellant was allowed the Basic Personal amounts, amounts for Canada Pension Plan
contributions and amounts for Employment Insurance premiums, in the calculation
of the non-refundable tax credits;
(e) the Appellant did not have any other deductions
in the calculation of his taxable income for the 2005 and 2006 taxation years
beyond the amounts already allowed;
(f) the Appellant did not incur any business
related expenses in the 2005 and 2006 taxation years;
(g) the Appellant’s returns of income for the 2005
and 2006 taxation years were required to be filed with the Minister on or before
April 30, 2006 and April 30, 2007 respectively;
(h) the Appellant’s returns of income for the 2005
and 2006 taxation years have not been filed with the Minister;
(i) the amounts of tax for the 2005 and 2006
taxation years that were unpaid when the returns of income for the 2005 and
2006 taxation years were required to be filed were $10,382.76 and $10,523.13
respectively.
[5]
In determining the
Appellant’s tax liability for the 2007 and 2008 taxation years, the Minister
made the following assumptions of fact:
(a) the Appellant’s returns of income for the 2007
and 2008 taxation years, were not filed with the Minister as and when required
by subsection 150(1) of the Act.
(b) the Minister used information available to him
to prepare the assessments of tax payable for the 2007 and 2008 taxation years,
the Notices of which were dated May 13, 2010, in accordance with
subsection 152(7) of the Act.
(c) for the 2007 and 2008 taxation years, the
Appellant’s total income which he failed to report, was not less than the
following amounts:
|
|
2007
|
2008
|
|
RRSP income
|
$ 4,772
|
$ —
|
|
Business income
|
55,528
|
60,300
|
|
Total unreported income
|
$60,300
|
$ 60,300
|
(d) for the 2007 and 2008 taxation years, the
Appellant was allowed the Basic Personal amounts and amounts for Canada Pension
Plan contributions in the calculation of the non-refundable tax credits;
(e) the Appellant did not have any other deductions
in the calculation of his taxable income for the 2007 and 2008 taxation years
beyond the amounts already allowed;
(f) the Appellant did not incur any business
related expenses in the 2007 and 2008 taxation years;
(g) the Appellant’s returns of income for the 2007
and 2008 taxation years were required to be filed with the Minister on or
before April 30, 2008 and April 30, 2009 respectively;
(h) the Appellant’s returns of income for the 2007
and 2008 taxation years have not been filed with the Minister;
(i) the amounts of tax for the 2007 and 2008
taxation years that were unpaid when the returns of income for the 2007 and
2008 taxation years were required to be filed were $8,487.08 and $8,415.99
respectively.
Other Material Facts
[6]
Counsel for the respondent
filed an affidavit signed by Shiraz Mukhida, a Non‑Filer/ on-Registrant
Officer Revenue Collections in the Toronto North TSO of the Canada Revenue
Agency (“CRA”), to which were attached the following documents (Exhibit R-1):
(a) a printout from Option
C (information pertaining to the income and deductions reported in the
taxpayer’s T1 tax return) showing the appellant's reported net income of
$46,486 for the 2002 taxation year;
(b) a printout from Option
I relating to the years under appeal showing that the appellant had not filed
returns for any of the 2003, 2004, 2005, 2006, 2007 and 2008 taxation years and
that the CRA has made assessments pursuant to subsection 152(7) of the Act;
and
(c) printouts of the CRA’s
computerized data base system records showing the income slips issued to the appellant
for the years under appeal as follows:
(i)
a T4E information slip
was issued to the appellant in respect of employment insurance and other
benefits in the amount of $7,847 for the 2003 taxation year;
(ii)
a T5 information slip
was issued to the appellant in respect of investment income in the amount of
$77 for the 2003 taxation year;
(iii)
a T4RSP information
slip was issued to the appellant in respect of RRSP income in the amount of
$4,772 for the 2007 taxation year.
[7]
In his Notices of
Appeal for the 2003, 2004, 2005 and 2006 taxation years, the appellant did not
raise the fact that the assessments for those years were made beyond the normal
reassessment period but he did so with respect to the assessments made for the
2007 and 2008 taxation years. The appellant also alleged that he has realized
non-capital losses in the 2002 and 2009 taxation years which eliminated all his
tax payable for the years under appeal.
[8]
The appellant testified
at the hearing. He explained that, up to 2002, he was a salesman and was making
good revenues. He lost his employment when the company for which he worked
closed its doors. He received employment insurance benefits in 2002 and 2003
and started a paralegal business in 2003. He said that he was aware of the
requirement to file an income tax return in respect of each taxation year but
he did not file any for the 2003, 2004, 2005, 2006, 2007 and 2008 taxation
years because he thought that no tax was payable by him for each of those
taxation years.
[9]
During his testimony,
the appellant made the following estimates of his net income for each year
under appeal:
|
2003:
|
$ 7,000
|
|
2004:
|
$12,000
|
|
2005:
2006:
2007:
2008:
|
$14,000 to $15,000
$18,000
$18,000
$20,000 to $21,000
|
[10]
The appellant’s
estimates of his net income were determined after taking into account a
deduction of 25% for business expenses incurred in the course of carrying his
paralegal business. No invoices were filed to support the deduction of the
business expenses and no documentary evidence was filed to corroborate the
estimates of his net income.
[11]
Furthermore, the
appellant did not file any documents showing that the assessments made by the
Minister were wrong nor did he provide any information concerning the alleged
non-capital losses realized in the 2002 and 2009 taxation years.
Analysis
[12]
The appellant has been
assessed for each taxation year under appeal pursuant to subsection 152(7)
of the Act which reads as follows:
(7) the Minister is not bound by a return or information supplied by
or on behalf of a taxpayer and, in making an assessment, may, notwithstanding a
return or information so supplied or if no return has been filed, assess the
tax payable under this Part.
[13]
The assessments made
for the taxation years under appeal were not beyond the normal reassessment
period, as defined in subsection 152(3.1) of the Act:
For the purposes of subsections (4), (4.01), (4.2), (4.3), (5) and
(9), the normal reassessment period for a taxpayer in respect of a taxation
year is
(a) if at the end of the year the taxpayer is a mutual fund
trust or a corporation other than a Canadian-controlled private corporation,
the period that ends four years after the earlier of the day of sending of a
notice of an original assessment under this Part in respect of the taxpayer for
the year and the day of sending of an original notification that no tax is
payable by the taxpayer for the year; and
(b) in any other case, the period that ends three years after
the earlier of the day of sending of a notice of an original assessment under
this Part in respect of the taxpayer for the year and the day of sending of an
original notification that no tax is payable by the taxpayer for the year.
[14]
All the assessments dated
May 13, 2010 were original assessments made under Part I of the Act in
respect of the appellant for each taxation year under appeal and were not
statute-barred pursuant to subsection 152(4) of the Act as there is
no deadline in the Act for issuing an initial assessment.
[15]
At the hearing, the
respondent admitted that the information slips issued to the appellant for the 2003
and 2007 taxation years were the only evidence available showing that the
appellant earned unreported income for the years under appeal but the
respondent did not explain the manner in which the appellant’s income was
computed for each taxation year under appeal.
[16]
Considering the fact
that the appellant has not demolished the assumptions on which the Minister
relied on to determine the appellant’s gross income for the years under appeal
and has not produced any prima facie evidence that the assessments made
by the Minister were not correct, the Minister was under no obligation to
provide information concerning the manner in which the appellant’s income was
computed.
[17]
Because of the lack of
evidence from the appellant and the absence of records corroborating the claims
for business expenses, the Minister’s unrebutted assumptions of the appellant's
gross income have to be accepted. (See Hamilton v. The Queen, 2005 D.T.C. 1330).
[18]
The appellant’s own estimates
of his net income in respect of each taxation year under appeal clearly
established that tax was payable and that he was required to file an income tax
return for each taxation year. In the circumstances, the late filing penalties
pursuant to subsection 162(1) of the Act were properly assessed.
[19]
For these reasons, the
appeals from the assessments dated May 13, 2010 are dismissed and the assessed
late filing penalties are confirmed.
Signed at Ottawa, Canada, this
2nd day of November 2011.
"Réal Favreau"
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