Citation: 2005TCC190
Date: 20050316
Docket: 2004-845(IT)I
BETWEEN:
RICHARD MONTON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre
Proulx, J.
[1] This is an appeal by way of the informal procedure.
The question at issue concerns the amount of the Appellant's income for each of
the fiscal years 1996 to 1998.
[2] In
order to establish and confirm the assessments dated May 22, 2001, for the
taxation years 1996, 1997 and 1998, the Minister of National Revenue (the "Minister") relied on
the following assumptions of fact described at paragraph 11 of the Reply
to the Notice of Appeal (the "Reply") as follows:
Business
net income not declared
a) The Appellant had not
filed any income tax return for his 1996, 1997 and 1998 taxation years;
b) During a telephone
conversation on May 23, 2000, between our agent from the Identification
and Observation Section, and the Appellant, the latter mentioned to our agent
that he received only the following approximate amounts as business net income,
for the 1996, 1997 and 1998 taxation years:
|
1996
|
1997
|
1998
|
|
$22,000
|
$24,000
|
$25,000
|
c) Consequently, on
September 5, 2000, the Minister assessed the Appellant, pursuant to subsection 152(7)
of the Act, as follows:
|
|
1996
|
1997
|
1998
|
|
Business
net income
|
$32 000
|
$34 000
|
$35 000
|
d) On August 11, 2000,
in reply to the assessments dated September 5, 2000 for the 1996, 1997 and
1998 taxation years, the Appellant sent income tax returns claiming to have had
no income during these years;
e) The Identification and
Observation Section's agent was not satisfied at all with the income tax
returns filed by the Appellant, and sent them to the Minister's Audit Section,
for review;
f) Based on the information
on hand, the Minister's Auditor reassessed the Appellant for his 1996, 1997 and
1998 taxation years, on May 22, 2001, reducing the amounts as the
Appellant's business net income by $10,000 for each taxation year in
litigation;
g) During a telephone
conversation on September 9, 2002, between the Objection Section agent and
the Appellant's representative, the latter mentioned to our agent that the
Appellant did not receive any income, for the 1996, 1997 and 1998 taxation
years;
h) On November 5, 2002,
the Appellant's representative filed with the Minister amended income tax
returns for 1996, 1997 and 1998, declaring the following amounts as business
net income:
|
|
1996
|
1997
|
1998
|
|
Business
net income
|
$10 000
|
$14 000
|
$12 000
|
i) The Appellant never
provided the Minister with any proof of income or expenses for the years in
litigation;
[3] The Appellant and Mr. Jean-Claude Roy, the Minister's
agent testified.
[4] The Appellant explained that in those years he did
home renovations. It was while he was at work that he received a phone call
from the Minister's agent inquiring about his annual income. This event is
narrated at paragraph 11b) of the Reply.
[5] At the hearing, the Appellant swore that the amounts
mentioned to the Agent were gross income and not net business income, as was
assumed by the agent.
[6] It is on the basis that the amounts mentioned by the
Appellant over the phone were net business income amounts that the Appellant
was assessed. Moreover, as explained by Mr. Roy, the Appeals officer, an
arbitrary amount of $10,000 was added.
[7] The Appellant said that at that time, two of his three
children were living with him. His parents provided him with financial
assistance. He now receives welfare payments as he had hurt his back while
working.
[8] Mr. Roy stated that he had spoken with the Appellant's
parents and that they had confirmed that they were providing a house to their
son as well as some financial aid. They evaluated their overall assistance in
the amount of $12,000 per year.
[9] Mr. Roy also stated that on December 23, 1996,
the Appellant produced his income tax returns for the taxation years 1993, 1994
and 1995. The amounts of net business income that he had declared were $10,000,
$11,000 and $6,800 respectively.
Conclusion
[10] I am inclined to believe the Appellant when he says
that the income he was talking about to the auditor was gross income and not
net income. It would be surprising that he had told the agent phoning him that
he had doubled his net business income from the preceding years.
[11] I have to take into account that the Appellant's
parents provide him and his family with a house and alimony payments. The
parents have estimated the money value of these advantages to be $12,000. I also
have to take into account as well that the Appellant now receives welfare
payments.
[12] Thus, on one hand, I am not convinced that the numbers
given by the Appellant were amounts of net business income. However, on the
other hand, the Appellant has to earn some money to make a living for himself
and his family. I therefore decide that the amount of income for each of the
years in question is surely as high as the income declared for the year 1997
that is $14,000.
[13] The appeals are allowed and the assessments are
referred back to the Minister for reconsideration and reassessment on the basis
that the Appellant's income for each of the years 1996 to 1998 is in the amount
of $14,000.
Signed at Ottawa, Ontario, this 16th
day of March, 2005.
"Louise Lamarre Proulx"
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