Docket: 2007-4053(IT)I
BETWEEN:
MATRIX MANAGEMENT INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal
heard on March 31, 2008, at Fredericton, New Brunswick.
Before: The Honourable
Justice Wyman W. Webb
Appearances:
|
Agent for the Appellant:
|
Gerald
David Webster
|
|
Counsel for the Respondent:
|
Martin Hickey and Kendrick Douglas
|
____________________________________________________________________
JUDGMENT
The appeal from the assessment made under
the Income Tax Act with respect to the Appellant’s 2005 taxation year is
dismissed, without costs.
Signed at Halifax, Nova Scotia, this 11th day of April 2008.
“Wyman W. Webb”
Citation: 2008TCC201
Date: 20080411
Docket: 2007-4053(IT)I
BETWEEN:
MATRIX MANAGEMENT INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb J.
[1] The Appellant was assessed a penalty pursuant to
subsection 162(1) of the Income Tax Act ("Act") on the
basis that the Appellant did not file its tax return for its taxation year
ending September 30, 2005 as and when required by subsection 150(1) of the
Act. The Appellant has appealed the assessment of this penalty. The
Appellant does not dispute the amount of taxes owing for that taxation year.
[2] The only witness that testified for the Appellant was Gerald Webster,
who is the President of the Appellant. Gerald Webster testified that the tax
return for the Appellant for its taxation year ending September 30, 2005 was
prepared by the Appellant’s accounting firm and then delivered by this
accounting firm to the offices of the Canada Revenue Agency (“CRA”) in Saint
John, New Brunswick before the end of March 2006 (which would have been within
the six month filing deadline for this return).
[3] Gerald Webster stated that this tax return was delivered with other tax
returns prepared by the accounting firm including the tax returns for
Gerald Webster and his spouse, and the tax return for an affiliated
company. Presumably the delivery of these returns was arranged by the
accounting firm. Two of these returns were processed (the one for Gerald
Webster's spouse and the one for the affiliated company) and the other two (the
one for the Appellant and the one for Gerald Webster) were not processed. The
Appellant and Gerald Webster later received notice that the CRA was stating
that these had not been filed.
[4] The difficulty in this case is the lack of evidence from the Appellant
of the filing of the return. The Collections Officer for the CRA testified and
she stated that there is no record of the filing of the tax return for the
Appellant until March 2007. She also testified that as of a few days
before the hearing the outstanding tax liability of the Appellant for its taxation
year ending September 30, 2005 had not been paid.
[5] The Appellant did not call the accountant as a witness, nor did the
Appellant produce any statements made by the accountant to confirm the filing
of the tax return. The only evidence provided by the Appellant was by a person
who did not personally file the tax return. Gerald Webster could, in fact, only
say that it was his understanding that the tax return had been filed as he was
not the person who filed the tax return. Gerald Webster stated that he
personally did not file the tax return, yet he did not call, as a witness, the
person whom he said did file the tax return.
[6] In Kennedy v. M.N.R., [1989] 2 C.T.C. 2121, 89 DTC 611,
Justice Taylor stated that:
12 In the nature of things, human beings and
even machines being what they are, — something less than perfect — there is
clearly always the possibility that the kind of event alleged by this appellant
can take place — an income tax return deposited in a proper postal box — and
ever being seen or heard of again. As properly pointed out by counsel for the
appellant in this matter, the determination of a dispute about mailing, then
may be a point of credibility. Taken to its extreme on one side, that could
mean that there would be no way for an appellant to prove he had mailed a tax
return. Taken to its other extreme, the Court could be asked to simply accept
as sufficient that the appellant swears that he had indeed mailed the return.
Clearly, neither of these extremities is totally satisfactory. However, from
the hearing, the court had before it certain representations which do help to
reach a decision. As noted earlier, the testimony of Mr. Boyce and that of Mrs.
Gauthier, while not directly relevant to the critical question are important.
13 First we should deal with the following
evidence directly related to the mailing transaction:
(1) The testimony of Mr. Kennedy that the return had been filed.
(2) The corroborating testimony of Mrs. Kennedy that the return
had been filed.
14 I am not aware of jurisprudence which
would warrant this Court acceding to the taxpayer's appeal based solely on his
own representation that the return had been mailed (although such evidence
should not be taken lightly) when there is no record of either receipt or
return of the documents. The corroborating testimony of Mrs. Kennedy has
considerable persuasive effect, since it provides the evidence of two witnesses
regarding the same act — mailing the return. It is a point for serious thought,
whether this simple unshaken testimony of two or more persons under
circumstances such as these before the Court, should be sufficient to discharge
the burden of proof on a taxpayer. I would certainly lean heavily in that
direction if the surrounding circumstances and external evidence, no matter how
limited, supported their contention. However, in this appeal, I am not called
upon to make that determination, as I see it, because what little relevant
other evidence we do have, points the other way. That does not mean Mr. and
Mrs. Kennedy may not be right in their contention or assumption that the return
was mailed, or at least that they believe that they are right. It simply means
that in my view that result — mailing the return — does not flow easily from
the situation surrounding the return and the cheque.
[7] In that case Justice Taylor had the testimony of the individuals who
stated that they were the ones who mailed the tax returns. In this case, there
was no evidence from the person whom Gerald Webster identified as the one who
filed the tax return.
[8] The Appellant argued that there is a due diligence defence to the
imposition of the penalty under subsection 162(1) of the Act. Justice
Bowman in Pillar Oilfield Projects Ltd. v. The Queen, [1993]
G.S.T.C. 49, held that a taxpayer could avoid liability for an administrative
penalty imposed under the Excise Tax Act if the taxpayer could
“establish that he or she was without fault and acted with due diligence”. This
due diligence defence was also held to be applicable to penalties arising under
section 162 of the Act in Ford v. The Queen, [1994] 2 C.T.C.
2395, 95 DTC. 848; Bennett v. The Queen, [1995] 2 C.T.C. 2308,
96 DTC 1630; Stuart Estate v. The Queen, [2003] 3 C.T.C. 2232,
2003 DTC 329, and Bateman v. The Queen, [2007] 2 C.T.C. 2020,
2007 DTC.156.
[9] However, as noted by Justice Bowman in Pillar Oilfield Projects Ltd.:
As stated above innocent good faith in the making of
unintentional errors is not tantamount to due diligence. That defence requires
affirmative proof that all reasonable care was exercised to ensure that errors
not be made.
[10] In this case, the Appellant has failed to lead the evidence that would
be required to establish due diligence on the part of the Appellant. As noted
above the only evidence introduced by the Appellant was the testimony of a
person who did not personally file the tax return. The accountant, whom Gerald
Webster identified as the person who prepared and filed the return, did not
testify nor was there any statement or documentation from that accountant. The
evidence was not sufficient to establish due diligence on the part of the
Appellant.
[11] The appeal is dismissed, without costs.
Signed at Halifax, Nova Scotia, this 11th day of April 2008.
“Wyman W. Webb”
CITATION: 2008TCC201
COURT FILE NO.: 2007-4053(IT)I
STYLE OF CAUSE: MATRIX MANAGEMENT INC. AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Fredericton,
New Brunswick
DATE OF HEARING: March 31, 2008
REASONS FOR JUDGMENT BY: The
Honourable Justice Wyman W. Webb
DATE OF JUDGMENT: April 11, 2008
APPEARANCES:
|
Agent for the
Appellant:
|
Gerald David Webster
|
|
Counsel for the
Respondent:
|
Martin Hickey and Kendrick Douglas
|
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa,
Canada
Email this Content