[OFFICIAL ENGLISH
TRANSLATION]
Date:
20020823
Docket:
2001-1827(IT)I
BETWEEN:
ROBERT
BOULIANNE,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre
Proulx, J.T.C.C.
[1] These are appeals under the
informal procedure for the
1996 and 1997 taxation years. The reassessments were made subsequent to a
calculation of the appellant's income by means of the net worth method.
[2] The facts that the Minister
of National Revenue (the "Minister")
relied on in making his reassessments are described in paragraph 5 of the
Reply to the Notice of Appeal (the "Reply"), as follows:
[TRANSLATION]
(a) the appellant has
been sole proprietor of "Salon de Quilles et Billards de Donnacona
Enr." since 1984;
(b) during the years in issue, the
bowling alley had four lanes and a billiard table;
(c) during the years in issue, the
bowling alley was open for business seven days a week from noon until
11:00 p.m.;
(d) during the years
in issue, the appellant worked in his business full time¾-he maintained the lanes and gave courses;
(e) during the years in issue, his de
facto spouse, Lisette Doré, performed managerial duties at the bowling
alley;
(f) during the years in issue, the
appellant reported net business income of $6,880 and of $1,361 respectively;
(g) in view of the poor internal
control of the business, the Minister audited the appellant's income using the
net worth method (pages 1 to 17);
(h) the statement of net worth for
the appellant includes the assets, liabilities and the reported income of his
spouse, Lisette Doré;
(i) most of the personal expenses
were estimated on the basis of an analysis of withdrawals from the various bank
accounts;
(j) at the objection stage, the
Minister was convinced that in computing the change in net worth he should
lower the grocery and restaurant expenses in the table of personal expenses
(see Schedule 1);
(k) the grocery expenses for the 1996
and 1997 taxation years were revised to $2,000 a year;
(l) the restaurant expenses for the
1996 and 1997 taxation years were revised to $800 a year;
(m) at the objection stage, the
Minister excluded certain large withdrawals in computing the change in net
worth;
(n) for the 1996 taxation year,
withdrawals totalling $28,692 were completely deleted on grounds that an
initial sum of $10,000 constituted a bank correcting entry; that the origin of
another $10,000 had been clarified and that the amount did not constitute
unreported income; and that a total of $8,692, consisting of transfers between
the appellant's various bank accounts, should not have been considered in
determining personal expenses;
(o) for the 1997 taxation year, a
total of $7,000, consisting of transfers between the appellant's various bank
accounts should not have been considered in determining personal expenses.
[3] The additional income for
1996 was originally $47,409. After revision at the objection level, it was
$15,652. For 1997, the additional income was originally $34,528 and, after
revision, it was $24,368.
[4] The appellant and Lisette Doré, the appellant's
spouse, testified at the request of their agent, Mr. Pépin.
Marc Fournier, auditor, and Etienne Sabourin, appeals officer,
testified for the respondent party.
[5] The appellant admitted subparagraphs 5(a) to (f)
of the Reply. He stated that he was the owner of a bowling alley, which had a
bar in addition to the bowling lanes. The establishment receives approximately
200 bowlers a week—individual players in the afternoons and bowling
leagues in the evenings. The alley is open from September to mid-April.
[6] A few points concerning the
net worth calculation were raised in the notice of appeal and discussed again
at the hearing.
[7] The first point concerns
the amount of grocery expenses included in the statement of personal expenses (Exhibit I‑1). At the audit
level, the grocery expenses were established at $4,311.47 and at $4,381.42 for
1996 and 1997 respectively. At the objection stage, the appeals officer reduced
them to $2,000 a year. According to that officer, they could not be reduced
further because the withdrawals from the account from which they were
purportedly paid, account number 2168596, a description of which appears
in Schedule 3, did not corroborate payment for food. There were no withdrawals
for a number of months. The explanation could therefore not be accepted.
[8] The restaurant expenses of $1,553.95 and of $1,579.16 determined at
the audit stage were reduced to $800. The appellant and his spouse contended
that they did not spend more than $250 a year at restaurants and furthermore
that the credit card account payments, statements for which they filed as
Exhibit A‑1, had included the restaurant expenses.
[9] To grasp the argument on
this first point, it must be understood that, in the statement of personal
expenses of the appellant and his spouse, the estimated amounts for grocery and
restaurant expenses and the actual amounts of the bank withdrawals and credit
card account payments were taken into account. The bank accounts were those
numbered 01‑261‑28
and 2168596. The appellant and his spouse therefore argued that the grocery
expenses had already been included in the withdrawals from account
number 2168596 and the restaurant expenses, in the credit card account
payments.
[10] The credit card account
payments (Schedule 2) that were included in the statement of personal
expenses are those whose origin the auditor was unable to trace. Some payments
were made by cheque drawn on account number 2168596. Those payments were not considered in establishing
the net worth or as credit card account payments or as bank account
withdrawals. According to the Minister's agents, that was a mistake in the
audit that benefited the taxpayer. The appellant and his wife explained that
three persons had had access to the credit card, the two spouses and
their son Éric. Their son Éric lives in France. They said that the payments
whose origin could not be determined had been made out of amounts of money
remitted to them by their son Éric to pay his own expenses. Those payments were
in the amounts of $5,239.37 and of $7,354.84, and the appellant asked that they
be cancelled.
[11] Schedule 4 is composed
of large withdrawals from two bank accounts. The large unexplained
withdrawals were included in computing net worth. For 1996, the added total of $28,692 was completely written off by the
appeals officer. For 1997, the amount of $27,091 was reduced at the appeals
level to $20,091. The appellant testified that there was a practice at bowling
alleys of depositing cash each week in order to establish a fund for a party
and prizes at the end of the bowling year, around mid-April. That would be the
explanation for the withdrawals of $3,000 and of $2,000 on April 11 and
21, 1997. The explanations concerning the withdrawals of $10,054 and of $5,037
remained unclear. In addition, that account which, according to the appellant,
was specially designated for the party and prizes for bowlers, as the appeals
officer noted, was clearly used on a number of occasions for other purposes and
for transfers to the appellant’s or his spouse’s other accounts. It should be
noted that no record was filed concerning those amounts of money purportedly
placed in the appellant's care.
Conclusion
[12] The onus was on the appellant and his spouse to prove the
submissions they made. Apart from the credit card account statements they
filed, they adduced no other documents or records. This is not sufficient.
These are people who gave me the distinct impression that they knew how to take
care of their affairs. Surely they have books in which they mark what is owed
them and what they owe. It is therefore impossible to believe that there is no
record of the amounts that were remitted to them for prizes to be awarded at
the end of the bowling year. No league would agree to hand over between $100
and $1,000 without a record being kept in a book at the league's disposal.
[13] With respect to the grocery expenses purportedly paid by means of
withdrawals from the bank account, the withdrawals do not corroborate that
claim. The amount of $2,000 a year entered by the
appeals officer is reasonable enough that it must be accepted.
[14] As to the credit card account payments, which the parents say were
made by their son Éric, no instrument of payment showing this was filed. For
the other payments made out of the bank accounts of the appellant and his wife,
since they were not included in establishing net worth, I cannot consider them
as having been used to pay for restaurant meals.
[15] With respect to the restaurant meals, I have some hesitation,
which I believe should operate in the appellant's favour. The cost was fixed at
$800 a year. The appellant and his wife submit that, consistent with their
lifestyle, the figure should instead be set at $250 a year. The amount of $800
a year compared to the $2,000 a year in grocery expenses, which was accepted by
the appeals officer, may seem high. I therefore accept the amount of $250 a
year.
[16] As to the large withdrawals entered in Schedule 4, the
appellant's explanations cannot be accepted because they are not corroborated
by any written document and cannot explain the withdrawals in question.
[17] The appeals are allowed with respect to the reduction of the
amount of restaurant expenses to $250 a year. The appellant is entitled to no
further relief.
Signed at Ottawa, Canada, this 23rd day of August 2002.
J.T.C.C.
Email this Content