Date:
20020820
Docket:
2001-679-GST-I
BETWEEN:
JAMES TIMOTHY PETER
BURKE,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasons for
Judgment
Angers,
J.T.C.C.
[1] This is an appeal from an
assessment under Part IX of the Excise Tax Act (the
"Act"), dated December 13, 1999, where by
the Minister of National Revenue (the "Minister")
determined the Appellant's goods and services tax (GST)
and harmonized sales tax (HST) liability for the period from
January 1, 1997 to June 30, 1999.
[2] In so assessing the Appellant, the
Minister relied on the following assumptions of fact which were
either admitted or denied by the Appellant as
indicated:
a) at all
relevant times the Appellant was registered under Part IX of
the Excise Tax Act (the "Act"), R.S.C.
1985, c.E-15, as amended, under registration number
12628 8968RT; (admitted)
b) the
taxable supplies made by the Appellant were made in Nova Scotia;
(denied)
c) the
Appellant's principal activity was auto repairs;
(denied)
d) in
filing its quarterly GST/HST returns for the period from January
1, 1997 to June 30, 1999 the Appellant reported GST/HST
Collectible and ITCs as detailed in Schedule "A" to
this Reply to the Notice of Appeal and summarized as
follows:
GST/HST
Collectible:
$ 217.28
Less:
ITCs:
(2,365.07)
Total Net Tax
(Credit)`:
$(2,147.79)
(admitted)
e) the
Appellant underreported his GST/HST collectible by the amount of
162.16 for the period from January 1, 1997 to June 30, 1999, as
detailed in Schedule "B" to this Reply to the Notice of
Appeal; (denied)
f) in
many instances, the Appellant calculated the tax collectible at
the rate of 7%; (denied)
g) the
Appellant overstated his ITCs by the amount of $1,859.12 for the
period from January 1, 1997 to June 30, 1999, as detailed in
Schedule "C" to this Reply to the Notice of Appeal;
(denied)
h) the
Appellant did not provide adequate documentation to support his
claim for the ITCs referred to in the preceding subparagraph
5(d); (denied)
SCHEDULE
"A"
Net Tax
Reported by the Appellant
|
Period Ending
|
Supplies
|
GST/HST
|
ITC's
|
Net
Tax
|
|
March
31, 1997
|
$350.00
|
$22.89
|
$(75.60)
|
$(52.71)
|
|
June
30, 1997
|
100.00
|
7.00
|
(34.72)
|
(27.72)
|
|
September 30, 1997
|
542.00
|
37.94
|
(191.45)
|
(153.51)
|
|
December 31, 1997
|
280.00
|
19.60
|
(117.32)
|
(97.72)
|
|
March
31, 1998
|
225.00
|
15.75
|
(566.98)
|
(551.23)
|
|
June
30, 1998
|
350.00
|
24.50
|
(662.85)
|
(638.35)
|
|
September 30, 1998
|
380.00
|
26.60
|
(181.44)
|
(154.84)
|
|
December 31, 1998
|
150.00
|
10.50
|
(375.96)
|
(365.46)
|
|
March
31, 1999
|
200.00
|
30.00
|
(95.00)
|
(65.00)
|
|
June
30, 1999
|
150.00
|
22.50
|
(63.75)
|
(41.25)
|
|
Total
|
$2,727.00
|
$217.28
|
$(2,365.07)
|
$(2,147.79)
|
SCHEDULE
"B"
Adjustment
to GST/HST collectible
|
Period Ending
|
Supplies
|
GST/HST
Reported
|
GST/HST
Collectible
|
Adjustment
|
|
March
31, 1997
|
$350.00
|
$22.89
|
$22.89
|
$0
|
|
June
30, 1997
|
100.00
|
7.00
|
15.00
|
8.00
|
|
September 30, 1997
|
542.00
|
37.94
|
81.30
|
43.36
|
|
December 31, 1997
|
280.00
|
19.60
|
42.00
|
22.40
|
|
March
31, 1998
|
225.00
|
15.75
|
33.75
|
18.00
|
|
June
30, 1998
|
350.00
|
24.50
|
52.50
|
28.00
|
|
September 30, 1998
|
380.00
|
26.60
|
57.00
|
30.40
|
|
December 31, 1998
|
150.00
|
10.50
|
22.50
|
12.00
|
|
March
31, 1999
|
200.00
|
30.00
|
30.00
|
0
|
|
June
30, 1999
|
150.00
|
22.50
|
22.50
|
0
|
|
Total
|
$2,727.00
|
$217.28
|
$379.44
|
$162.16
|
SCHEDULE
"C"
Adjustment
to ITC's
|
Period Ending
|
ITC's claimed
|
ITC
allowed
|
Adjustment
|
|
March
31, 1997
|
$75.60
|
$21.86
|
$53.74
|
|
June
30, 1997
|
34.72
|
22.08
|
12.64
|
|
September 30, 1997
|
191.45
|
76.64
|
114.81
|
|
December 31, 1997
|
117.32
|
166.48
|
(49.16)
|
|
March
31, 1998
|
566.98
|
28.81
|
538.17
|
|
June
30, 1998
|
662.85
|
22.51
|
640.34
|
|
September 30, 1998
|
181.44
|
68.04
|
113.40
|
|
December 31, 1998
|
375.96
|
82.13
|
293.83
|
|
March
31, 1999
|
95.00
|
0.55
|
94.45
|
|
June
30, 1999
|
63.75
|
16.85
|
46.90
|
|
Total
|
$2,365.07
|
$505.95
|
$1,859.12
|
[3] The Appellant is in the engine
rebuilding business in Halifax, Nova Scotia, and was the subject
of an audit by the Canada Customs and Revenue Agency (CCRA)
in the fall of 1999. On the auditor's first visit on
October 26, 1999, the Appellant requested a week to get
his records together for the audit. A further week was granted
and, after attempted telephone contact failed, a letter was sent
to the Appellant by the auditor on November 23, 1999. A telephone
conversation between the auditor and the Appellant followed and
some receipts were provided by the latter. As for other receipts,
the Appellant had none.
[4] As a result, the auditor sent the
Appellant a letter on December 7, 1999 advising him that his
books and records were inadequate for the determination of his
tax liabilities and obligations under the Act. The next
day, the auditor sent the Appellant a further letter, enclosing a
summary of the adjustments made to the GST and HST returns for
the period in question. The adjustments are as reflected in the
schedules reproduced above. The letter clearly states that only
amounts supported by supplier invoices showing the GST
registration number and the amount of GST paid had been allowed
as input tax credits (ITCs). The other changes were referable to
a miscalculation of the tax that became the HST on April 1, 1997.
Those changes are reflected in Schedule "B" above and
show an increase of $162.16 in taxes owed. A notice of assessment
giving effect to the above adjustments was sent to the
Appellant.
[5] The Appellant objected to the
above-mentioned assessment on the basis that he had receipts to
substantiate his position. Despite a written request sent to him
on March 14, 2000 by the Chief of Appeals at the CCRA, the
Appellant provided no additional documents. A further written
request was made on July 10, 2000, but no documents were
forwarded by the Appellant to the Appeals Officer. The Minister
confirmed the assessment on September 28, 2000 and the Appellant
appealed to this Court.
[6] At the hearing, the Appellant
readily acknowledged that he had not kept proper books and
records for his business and thus was unable to provide the
necessary receipts to support the ITCs claimed for the period in
question. As for the calculations in Schedule "B"
above, he accepted them without modification during
cross-examination.
[7] The issue left to be decided is
whether the Minister properly disallowed the Appellant's ITCs
for the period in question. Jacqueline Hughes, the Appeals
Officer, testified that the Appellant's ITCs were disallowed
because the auditor found no documentary evidence to support
them. At trial, the Appellant produced six exhibits containing
various receipts purporting to show amounts disallowed as ITCs by
the auditor. I will deal with these separately.
(a)
Exhibit A-2 is a receipt for the purchase of an automobile by the
Appellant on January 24, 1996. The Appellant was unable to say if
the GST paid on the purchase was claimed as an ITC in 1996. Since
this receipt is outside the period in question, it cannot be
considered.
(b) Exhibit A-3
is an invoice sent to the Appellant by the Department of Finance
for the Province of Nova Scotia. As it is for a period in 1996,
this invoice is not relevant for the determination of this
appeal.
(c) Exhibit A-4
contains four accounts that the Appellant was unable to collect
in 1997 and 1998. The Appeals Officer testified that the ITCs on
the Appellant's purchases shown on these invoices were
allowed and properly credited during the audit, even though the
documents do not identify the vendors and their GST registration
numbers. I am satisfied that the ITCs have been properly
allowed.
(d) Exhibit A-5
is a small booklet of receipts which do not identify the vendors
and their HST registration numbers or the amount of HST actually
paid by the Appellant. These receipts are therefore of no
assistance to the Appellant and cannot be considered as
establishing a valid claim to ITCs.
(e) Exhibit A-6
is a receipt dated June 23, 1998 for professional services
rendered to the Appellant as a result of a personal injury claim
by him following a motor vehicle accident in which he was
involved. The Appeals Officer rejected that receipt - and rightly
so - on the grounds that it had nothing to do with the
Appellant's commercial activity. It therefore cannot be
considered as establishing a valid claim to an ITC for the
purposes of the Act.
(f) Exhibit A-7
consists of the last receipts produced by the Appellant. They are
for cash purchases and the Appellant is not identified thereon.
One receipt is for $35.37 with $4.61 in HST and the other is for
$712.48 with $92.93 in HST. At trial, the Appeals Officer allowed
the $4.61 but disallowed the $92.93 on the basis that the receipt
does not meet the requirements set out in paragraph 3(c)
of the Input Tax Credit Information Regulations under the
Act, and I agree. That amount is therefore not an
allowable ITC.
[8] The Appellant did not provide any
other receipts or documentary evidence and by his own admission
did not keep proper books or records regarding his commercial
activities. The Act is quite clear as to the obligation of
a person who carries on a business or is engaged in a commercial
activity in Canada. Subsection 286(1) reads as
follows:
286.
(1) Keeping books and records - Every person who carries on a business or is engaged
in a commercial activity in Canada, every person who is required
under this Part to file a return and every person who makes an
application for a rebate or refund shall keep records in English
or in French in Canada, or at such other place and on such terms
and conditions as the Minister may specify in writing, in such
form and containing such information as will enable the
determination of the person's liabilities and obligations
under this Part or the amount of any rebate or refund to which
the person is entitled.
[9] It is obvious that the
Appellant's own neglect of this obligation has caused him to
become the author of his own misfortune. The auditor did what he
could with what he had, and the Appellant, who had the onus of
disproving the auditor's findings, was unable to do so. In
fact, the Appellant did not bring forward any evidence that could
allow this Court to vary the assessment made by the Minister,
with the exception of one of the last receipts produced, which
showed an HST amount of $4.61 that, at the hearing, the Minister
allowed as constituting a valid ITC for the period in question.
All the other receipts produced at trial with respect to which
ITCs were disallowed were therefore properly rejected by the
Minister.
[10]
For the above reasons, the appeal is allowed and the Minister
shall reassess the Appellant to credit him with the amount of
$4.61. In all other respects, the assessment shall remain
unchanged.
Signed at Edmundston, New
Brunswick, this 20th day of August 2002.
J.T.C.C.
COURT FILE
NO.:
2001-679(GST)I
STYLE OF
CAUSE:
JAMES TIMOTHY PETER BURKE
and Her Majesty the Queen
PLACE OF
HEARING:
Halifax, Nova Scotia
DATE OF
HEARING:
June 24, 2002
REASONS FOR JUDGMENT
BY: The Honourable Judge François
Angers
DATE OF
JUDGMENT:
August 20, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the
Respondent: Cecil Woon
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-679(GST)I
BETWEEN:
JAMES TIMOTHY PETER
BURKE,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Appeal heard on June
24, 2002, at Halifax, Nova Scotia, by
the Honourable Judge
François Angers
Appearances
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Cecil Woon
JUDGMENT
The appeal from the assessment made under the Excise Tax
Act for the period from January 1, 1997 to June 30, 1999 is
allowed, and the assessment is referred back to the Minister of
National Revenue for reconsideration and reassessment on the
basis that the Appellant should be credited with the amount of
$4.61. In all other respects, the assessment shall remain
unchanged.
Signed at Edmundston, New
Brunswick, this 20th day of August 2002.
J.T.C.C.
Email this Content