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Citation: 2003TCC419
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Date:20030630
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Docket: 2003-240(IT)I
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BETWEEN:
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H. GRASCHUK PROFESSIONAL CORPORATION,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
REASONS FOR JUDGMENT
Beaubier, J.T.C.C.
[1] This appeal pursuant to the
Informal Procedure was heard at Edmonton, Alberta on June
10, 2003. Harry Graschuk, F.C.A., the sole shareholder of the
Appellant was the only witness. He has been a chartered
accountant since before 1969.
[2] The Appellant carries on the
practice of chartered accounting with an emphasis on income tax
in Edmonton, Alberta and did so while the income tax return in
question in this appeal was filed.
[3] Paragraphs 8 to 12 of the Reply to
the Notice of Appeal outline the dispute before the Court. They
read:
...
8. In so
reassessing the Appellant, the Minister made the following
assumptions of fact:
(a) The facts admitted
above;
(b) At all material
times, Harry S. Graschuk owned all the issued shares of the
Appellant;
(c) During its
taxation years 1983 to 1993, the Appellant incurred non-capital
losses in the amounts reflected on Schedule A;
(d) During the
taxation years 1989 to 1999, the Appellant requested non-capital
losses be applied in the amounts reflected on Schedules A and
B;
(e) During the taxation
years 1989 to 1999, the Minister allowed the application of
non-capital losses in the amounts reflected on Schedules A and
B;
(f) The
Appellant filed its 1991 Tax Return listing the balance of the
1987 non-capital loss available as $41,552.00. The Appellant
filed its 1992 Tax Return listing the balance of the 1987
non-capital loss available as $48,552.00;
(g) On its 1992 tax
return, the Appellant overstated the 1987 non-capital loss
balance as $48,552, when that figure should have been $41,552.00.
Therefore, the 1987 non-capital loss was overstated by
$7,000.00;
(h) For the tax
years listed in Schedules C, the Minister applied the amount of
the non-capital loss requested by the Appellant, with the
exception of the Appellant's 1999 tax year;
(i) The
Appellant's 1993 non-capital loss reduced the Appellant's
1998 taxable income by the amount of $6,933.00;
(j) In
assessing the Appellant's 1999 Tax Return the Minister
reduced the amount of the non-capital loss requested by the
Appellant.
(i) In 1999,
the Appellant requested non-capital loss in the amount of
$16,781.00.
(ii) The Minister
reduced the Appellants 1999 taxable income by the maximum amount
available of $9,781.00. A difference of $7,000.00.
(iii) The difference of
$7,000.00 was a result of the Appellant's overstatement of
the Appellant's 1987 non-capital loss balance when filing its
1992 Tax Return;
(k) Since 1983, the
Appellant has not incurred any non-capital losses other than
those listed on Schedule A.
B.
ISSUES TO BE DECIDED
9. The issue
is:
a) What is the
amount of 1993 non-capital loss available to the Appellant for
application to its 1999 tax year.
C. STATUTORY
PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT
10. He relies on sections
3 and 111, subsections 152(3.1), 152(4), and 248(1) of the
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp) (the
"Act") as amended for the 1999 taxation
year.
11. He submits that the
Appellant incurred a non-capital loss in the amount of $48,340.00
in its 1987 taxation year pursuant to paragraph 111(8) of the
Act. Of this amount $38.00, $6,750.00 and $41,552.00 were
deducted in computing taxable income of the Appellant for the
1989, 1991 and 1994 taxation years respectively.
12. He submits that the
Appellant carried forward, the wrong amount of its 1987
non-capital balance from its 1991 tax return to its 1992 tax
return. As a result of this error, the Appellant overstated the
1987 non-capital loss balance by $7,000.00 from its 1992 tax
return, up to an including its 1999 tax return.
[4] In his testimony Mr. Graschuk
accepted all of the assumptions, with the following
exceptions:
8
(g)
Mr. Graschuk stated this was not a deliberate error. Rather,
the computer did it. In the Court's view, this error
should have been caught and corrected by the Appellant. The Court
finds that it was the Appellant's error, not the
computer's or anyone else's.
8
(i)
Mr. Graschuk stated that Canada Customs and Revenue Agency
("CCRA") reduced the Appellant's 1998 taxable
income by $6,933.00. However, it is admitted by the Appellant
that the 1987 non-capital loss balance was in fact $41,552.00,
and not $48,552.00.
8 (j) (ii) Mr.
Graschuk objected to the statement that the "maximum amount
available" was $9,781.00 in 1999.
8 (j) (iii)
Mr. Graschuk stated that this was the computer's
overstatement, not the Appellant's. The Court finds that the
overstatement was the Appellant's. It filed the income tax
return in question and its officer, Mr. Graschuk, signed it. Mr.
Graschuk then stated how CCRA discovered the error in November
2001, long after the expiry of the three year period described in
section 152 of the Income Tax Act, (the
"Act").
Analysis
[5] Subsection 152(4) allows the
Minister is entitled to reassess the Appellant at any time
... only if
(a) the taxpayer or person filing the return
(i) has made any misrepresentation that is attributable to
neglect, carelessness or wilful default or has committed any
fraud in filing the return or in supplying any information under
this Act,...
[6] The first element that must be
established by the Minister is that there was a misrepresentation
made on behalf of the Appellants.
[7] The term
"misrepresentation" was defined by Cameron, J. in
M.N.R. v. Taylor, 61 DTC 1139 (Ex.Ct.) at 1141 as
follows:
I have reached the conclusion that the words 'any
misrepresentation', as used in the section, must be construed
to mean any representation which was false in substance and in
fact at the material date, and that it includes both innocent and
fraudulent misrepresentations.
[8] This definition was also adopted
in Nesbitt v. The Queen, 96 DTC 6045 (F.C.T.D.) at
6049; affirmed in 96 DTC 6588 (F.C.A.). In the Nesbitt
case, Heald, D.J. agreed with the definition set forth in
M.N.R. v. Foot, 64 DTC 5196 (Ex.Ct.) at 5198;
affirmed in 66 DTC 5072 (S.C.C.), in which the Exchequer Court in
dealing with paragraph 42(4)(a) of the 1948 Income Tax Act, a
predecessor to subparagraph 152(4)(a)(i) of the Act, held that
the term "any misrepresentation" was synonymous with
the expression "incorrect". Heald, D.J. ruled that any
incorrect statement amounts to a "misrepresentation" as
that term is used in subparagraph 152(4)(a)(i) of the
Act.
[9] In his testimony, Mr. Graschuk
admitted that the correct loss to be carried forward is $41,552
as shown in the Appellant's 1991 income tax return (Exhibit
R-1) and not the erroneous figure of $48,522 as shown in the
Appellant's 1992 income tax return (Exhibit R-2). Thus, the
information provided by the Appellant is "incorrect",
and a misrepresentation has been made. The loss is $41,552.
[10] The second element that must be
established by the Minister is that the misrepresentation was
"attributable to neglect, carelessness or wilful
default".
[11] The Appellant and his counsel described
the error in question as the Minister of National Revenue's
(the "Minister"). In the Court's view, that is not
the case. Regardless of whether one chooses to use the more
polite description of "typographical error" or the much
less polite description of "false misrepresentation" to
characterize the incorrect figure of $48,552, it is in either
case a misrepresentation caused by the Appellant's
neglect.
[12] For these reasons, the appeal is
dismissed.
Signed at Saskatoon, Saskatchewan this 30th day of June
2003.
J.T.C.C.
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