[OFFICIAL ENGLISH TRANSLATION]
Date: 20020606
Docket: 1999-946(IT)G
BETWEEN:
MARTINE PARISEAU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] This is an appeal concerning the
1991, 1992, 1993 and 1994 taxation years.
[2] The assessments under appeal were
made on the basis of the following assumptions of fact:
[TRANSLATION]
(a) during 1993 and
1994, the appellant operated a business called the New York
Pub the activities of which included selling beverages;
(b) the appellant
did not report all of her revenues on her tax returns for the
1991, 1992, 1993 and 1994 taxation years;
(c) further to a net
worth audit, the Minister of National Revenue noted the following
discrepancies with regard to the reconciliation of the
appellant's capital (copies of the balance sheets and of the
capital reconciliation are attached hereto to form an integral
part hereof):
1995
$20,985.97
1996
$29,212.45
1997
$58,484.06
1998
$39,089.84
(d) the amounts
indicated above are revenues that the appellant failed to report
and that must be taken into consideration for the purposes of
computing her income tax for those same taxation years;
(e) in filing her
tax returns for 1991 and 1992, the appellant misrepresented the
facts through neglect, carelessness or wilful default in failing
to report substantial revenues;
(f) in filing
her tax returns for the taxation years in issue, the appellant
knowingly or under circumstances amounting to gross negligence
made a false statement or an omission in failing to report the
revenues indicated in paragraph (c);
(g) penalties in the
following amounts were therefore assessed under subsection 163(2)
of the Income Tax Act:
1991
$1,447.73
1992
$3,060.17
1993
$7,146.18
1994
$4,733.88
[3] The appellant met Pierre Ouellette
when she was a student. At that point she was working at various
places to support herself but her income was very modest. When
she became pregnant with her first child, she decided to live
with her boyfriend, the father of her child.
[4] During the periods when she was
able to work, having completed her studies, she worked as a
substitute teacher at different school boards.
[5] She worked sporadically and her
income was minimal. When she became pregnant again, the couple
decided to purchase a house since their apartment was too
small.
[6] To do so, they obtained the
cooperation of the appellant's father, who lent them $20,000 as a
down payment on the purchase price of $70,000, with the balance
being obtained through a mortgage loan. The house was thus
acquired in co-ownership.
[7] The following spring, the couple
invested in various projects such as landscaping and acquired
various assets, including a swimming pool, a fence and a
shed.
[8] During all of the periods under
appeal, the appellant worked as a substitute teacher at different
school boards when she was available. She was paid for the small
number of hours she worked.
[9] For his part, the appellant's
spouse decided to purchase a business where alcoholic beverages
were sold. Since he had a criminal record, he could not hope to
obtain the necessary licences to operate the business he wanted
to acquire. He therefore asked his partner, the appellant, to
take out an $8,000 loan to purchase the business in her name.
[10] Considering that he was her spouse and
the father of their child, she agreed. The appellant thus became
the sole owner of the business under a notarized agreement dated
March 10, 1993.
[11] The appellant explained that, although
she was the registered owner of the business, she was never in
charge of it, a statement that was later confirmed by her spouse.
She maintained that despite the titles of ownership, she had
never had anything to do with the business. She did not do any
work there and did not receive any income.
[12] She testified that she had essentially
served as a figurehead because of the requirements surrounding
the liquor licence.
[13] She stated that she had never
administered, operated or contributed to the business. Her
involvement was limited to occasionally writing cheques, paying
certain accounts and occasionally depositing cheques.
[14] All of the family's expenses were
covered by her spouse, who was also repaying the $8,000 loan
taken out to purchase the business as well as the mortgage
payments on the house.
[15] In substance, the appellant stated that
she had not paid anything for the acquisition of either the
business or the house. As well, she categorically denied having
contributed to the financing or expenditures required for the
landscaping, the purchase of the shed, and the installation of
the fence and the pool.
[16] All of the payments were her spouse's
responsibility; the appellant occasionally acted as
representative or messenger.
[17] This was apparently how things had
worked until the break-up, when the appellant left the home with
the two children and some furniture and did not derive any profit
or benefit from the titles to the two properties, that is, the
bar called the New York Pub and the house.
[18] The respondent argued that the
appellant's testimony should be disregarded since it contradicted
a number of validly executed instruments, including two notarial
instruments.
[19] Her claims were based on the following
judgments:
Lise
Bourret v. Her Majesty the Queen, Action No. T-1136-87,
December 12, 1989 (90 DTC 6056);
Friedberg v. Canada, [1991] F.C.J. No. 1255 (Q.L.);
Caron v. Canada, [2002] T.C.J. No. 177 (Q.L.);
3099-2325 Québec inc. c. 2849-6810 Québec inc.,
[1999] J.Q. no 2748 (Q.L.);
Dussault-Zaidi c. Québec (sous-ministre du Revenu),
[1996] A.Q. no 2969 (Q.L.);
Saykaly v. Canada (Minister of National Revenue - M.N.R.),
[1976] F.C.J. No. 904 (Q.L.);
[20] The respondent concluded that the
appellant's explanations were not valid because they were not
consistent with the content of the documentary evidence, which
was clear, precise and not subject to interpretation.
[21] The assessments under appeal were made
on the basis of the net worth comprised of all of the assets of
which the appellant was co-owner according to the titles.
[22] For her part, the appellant never
denied having associated her name with the transactions in
question, instruments and documents accepted by the respondent.
She essentially maintained that she had not made any of the
necessary expenditures and had never benefited from the property
or from the business or the improvement of its assets. She stated
that all of the payments and expenditures had been made by her
partner, since she herself did not have the employment or the
income to take on such responsibilities.
[23] The appellant explained that she took
care of her children and worked occasionally when her services
were required by one of the schools at which she had expressed an
interest in working as a substitute teacher.
[24] All of the appellant's explanations are
plausible and credible. I did not observe anything that would
tend to diminish the quality of her testimony. The facts related
were clear and consistent. The appellant did not avoid any
questions and her answers did not give any reason to disregard
any or all of her testimony. I therefore conclude that the
appellant's evidence had all of the qualities to be
admissible.
[25] Can I disregard that testimony and
conclude that the assessments are valid simply on the basis that
the appellant served as a figurehead for Pierre Ouellette? I
do not believe so.
[26] The appellant provided the reasons and
explained why she had agreed to have her name associated with the
various transactions. Her reasons involved her spouse, the father
of her child and the family breadwinner, and were therefore
reasonable.
[27] Moreover, the appellant's spouse could
not hope to obtain the necessary operating licences given his
criminal record. As for the house, once again this was probably
the only way of obtaining a mortgage loan given that her
education was considered an asset, the bar was in her name and
her father had agreed to provide the necessary cash. Her spouse,
on the other hand, did not have much credibility because of his
record.
[28] The appellant never knowingly made a
false statement concerning her revenues; on the contrary, she
simply reported the revenues as determined and indicated by her
spouse who operated the business on his own.
[29] The respondent's valuation of the
assets on which the notices of assessment under appeal were based
was essentially taken from the titles of ownership. The appellant
never concealed any revenue with respect to the acquisition of
the said titles, as the respondent had assumed. Moreover, she
could not hide that which she did not have. The titles were
obtained through various loans, which the evidence established
had been repaid not by the appellant but by her spouse.
[30] The evidence demonstrated clearly that
the appellant neither benefited from nor received revenues that
could have increased her asset base. The fact that she was the
registered owner of the business and the co-owner of the house
does not mean in any way that she received or hid revenues in
order to hold the titles of ownership for them.
[31] The evidence submitted by the appellant
never rejected or repudiated those actions made with regard to
various transactions; it essentially established that the
appellant had not profited nor increased her own wealth as a
result thereof.
[32] The appeal should therefore be allowed
in that she discharged the burden of proof that was on her by
demonstrating on the balance of evidence that she had never
received the revenues that the notices of reassessment attributed
to her.
[33] In terms of costs, the appeal is
allowed without costs since, although the appellant had reasons
to act as she did, she nonetheless, unconsciously perhaps, led
the audit onto the wrong track.
Signed at Ottawa, Canada, this 6th day of June 2002.
J.T.C.C.
Translation certified true
on this 28th day of August 2003.
Sophie Debbané, Revisor
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