Date: 19990804
Docket: 98-502(IT)I
BETWEEN:
ELAINE M. ADUSEI,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
AND
Docket: 98-503(IT)I
BETWEEN:
BAMFO K. ADUSEI,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
P.R. Dussault, J.T.C.C.
[1] These appeals were heard on common
evidence under the informal procedure. According to the Reply to
the Notice of Appeal, the appellant Bamfo K. Adusei is
claiming $12,000[1]
in child care expenses for his 1993 taxation year. The appellant
Elaine M. Adusei is claiming $11,000 in child care expenses for
both her 1994 and 1995 taxation years. The deduction of the
expenses claimed was refused to both appellants.
[2] The appellants are married and
have three children, who were born on July 19, 1981,
December 21, 1983, and March 10, 1989.
[3] In assessing the appellants, the
Minister of National Revenue made the following assumptions of
fact set out in paragraph 10 of each Reply to the Notice of
Appeal:
(a) the expenses
were not incurred and the alleged payments thereof were not
proven by the filing of appropriate receipts with the
Minister;
(b) if incurred, the
expenses were not incurred as Child Care Expenses.
[4] The respondent also alleged the
following in paragraph 3 of the Reply to the Notice of Appeal of
the appellant Bamfo K. Adusei:
3. He admits
that the Appellant provided the name and the Social Insurance
Number of an individual who allegedly provided child care
services to the Appellant during the 1993 taxation year and that
the Appellant submitted a photocopy of a receipt for the child
care expenses he claimed to have incurred in 1993. He also states
that the alleged babysitter, during an interview with the Revenue
Canada's Auditor, denied providing at any time child care
services to the Appellant, and was not the person who signed the
receipt.
[5] Paragraph 3 of the Reply to the
Notice of Appeal of the appellant Elaine F. Adusei for
the 1994 and 1995 taxation years is to the same effect.
[6] The appellant Bamfo K. Adusei
testified. Cesar Montaniel, who audited the deductions claimed by
the appellants, inter alia for child care expenses,
testified for the respondent.
[7] According to Mr. Adusei's
testimony, he and his wife were looking for a babysitter for
their children and so put up advertisements at a number of bus
stops near their home. A friend of theirs, Veronica Johnson, saw
the advertisement and told them that she knew a woman who could
look after their children. She put them in touch with that woman,
whose name was Cennick Harry. The appellants hired her as a
babysitter after asking for her social insurance number. Mr.
Adusei stated that she worked weekdays from 8:00 a.m. to
4:30 p.m. during the school year and that he paid her $300 a week
cash. He said that she did not work during the summer. As we
shall see, that version was subsequently changed.
[8] Mr. Adusei filed in evidence the
receipts he says he provided during the audit (Exhibits A-2, A-3
and A-4). He said that they were prepared by the babysitter
herself and given to the Aduseis by her. He stated that he never
gave Revenue Canada any other receipts. According to Mr.
Adusei, he has no other documents or records proving the payments
since they were all made in cash.
[9] Exhibit A-4 relates to the 1993
taxation year. It reads as follows:
RECEIPT
Received from Mr. & Mrs. Adusei the sum of Twelve Thousand
& Five Hundred Dollars (12,500.00) being the cost of
babysitting their three (3) children from January 4th 1993 -
December 31st 1993.
Dated at Toronto this 21st day of January 1994.
[signature]
CENNICK HARRY
SIN 479-006-751
3235 Dundas St. W.,
Toronto, Ontario.
[10] Exhibit A-2 relates to the 1994
taxation year and reads as follows:
RECEIPT
Received from Mr. & Mrs. Adusei the sum of Eleven Thousand
& Five Hundred Dollars ($11,500.00) being the cost of
babysitting their three children from January 31st - August
1994.
Dated at Toronto this 20th day of January 1995.
[signature]
CENNICK HARRY
SIN 479-006-751
3235 Dundas St. W.,
Toronto, Ontario.
[11] Finally, Exhibit A-3 relates to
the 1995 taxation year. It reads as follows:
RECEIPT
Received from Mr & Mrs Adusei the sum of Twelve Thousand
dollars ($12,000) being the cost of babysitting their three
children from January to December, 1995.
Dated at Toronto this 31st day of December 1995.
[signature]
Cennick Harry
479-006-751
3235 Dundas St. W.
Toronto, On.
[12] In cross-examination, counsel for the
respondent pointed out to Mr. Adusei that the 1994 receipt
(Exhibit A-2) indicates that the babysitter worked until August
1994 and that she therefore worked during the summer as well, for
a total of eight months that year. Mr. Adusei thereupon stated
that she had indeed worked part of the summer of 1994. He added
that the children were still too young at that point and that she
had in fact looked after them. He said that it was actually in
1995 that she did not work during the summer. He added that his
wife, who is a nurse, was at home during the day from September
to December 1994 and that she worked either evenings or nights
during that period.
[13] When asked to explain the fact that the
1994 receipt for $11,500 covers only a period of eight months
whereas the 1995 receipt, for $12,000, is for the entire year,
Mr. Adusei stated that the babysitter was paid extra in 1994 for
weekends, as he and his wife had to work. He said that he worked
every other weekend and that his wife also worked weekends,
although he did not provide any further details. Mr. Adusei also
said that the babysitter did not work during the summer of 1995.
He further stated that she did not work for four weeks in
September while he was on vacation in Jamaica with his wife and
children. He added that during that period the children were away
from school for three weeks.
[14] Mr. Adusei said that he met with the
Revenue Canada auditor three times in 1996. At the last meeting,
the auditor told the appellant that the individual who allegedly
provided the child care services was in fact a male. He said that
the auditor then asked to meet the person Mr. Adusei claimed was
his children's babysitter.
[15] Mr. Adusei testified that he
subsequently saw the babysitter again when he had her come to his
home on the pretext of employing her once more. He asked her to
meet the Revenue Canada auditor. She refused, saying that she did
not have time. He then asked her for her social insurance card,
which he kept and filed in evidence at the hearing (Exhibit
A-5).
[16] Following those events and in spite of
that evidence, Mr. Adusei never contacted the auditor again and
never took any further action. He testified that he had not seen
the woman since then and that she never asked for her social
insurance card back. Mr. Adusei said that she simply disappeared.
The social insurance card that Mr. Adusei had and that he filed
in evidence is indeed in the name of Cennick Cosmore Harry, and
it bears the number 479 006 751.
[17] Mr. Adusei gave a different account of
things in his Notice of Objection dated February 25, 1997, in
which he stated the following:
The auditor's demand that we come to his office with the said
Cennick Harry seems unreasonable because we have tried all we
could to contact her to no avail. Moreover, there is no
obligation on this individual or anyone else to provide
forwarding address if they quit or are terminated from their
job.
[18] Cesar Montaniel, a Revenue Canada
auditor in 1996, testified concerning his audit of the expenses
claimed by the appellants, and in particular the child care
expenses.
[19] He stated that he had sent the
appellants an initial letter asking them to provide him with
documents to support the claimed expenses and informing them that
the deductions would be disallowed if he did not receive the
documents within 30 days. Since he did not receive the
requested documents within the time indicated, he sent the
appellants a second letter telling them that the deductions had
been disallowed. According to him, it was only then that Mr.
Adusei came to his office and handed him the receipts that have
been filed in evidence (Exhibits A-2, A-3 and
A-4).
[20] However, Mr. Montaniel said that he did
not remember whether at that time Mr. Adusei gave him, or
whether he saw, another receipt that is part of the record and
that relates to child care expenses for the 1993 taxation year.
That receipt (Exhibit R-1) reads as follows:
RECEIPT
Received from Mr. & Mrs. Adusei the sum of Twelve Thousand
Dollars (12,000.00) being the cost of babysitting their three (3)
children from January - December 1993.
Dated at Toronto this 4th day of January 1994.
[signature]
CENNICK HARRY
SIN 479-006-751
3235 Dundas St. W.,
Toronto, Ontario.
[21] Without a doubt, that receipt was
signed by the same person who signed the receipts filed as
Exhibits A-2, A-3 and A-4.
[22] Two different receipts were thus
submitted to Revenue Canada for the 1993 taxation year: one for
$12,000 (Exhibit R-1) and another for $12,500
(Exhibit A-4). According to the explanations given
subsequently by Mr. Adusei, he completed Form T778 (E)
Rev. 93, "Calculation of Child Care Expenses Deduction -
1993", and sent it to Revenue Canada after being requested to do
so. That request was evidently made prior to Mr. Montaniel's
audit, and the form filed at that time was accompanied by the
receipt filed as Exhibit R-1 (see Exhibit R-4).
[23] Mr. Montaniel further testified that he
audited the receipts submitted by the appellants and that he
found that the individual identified as Cennick Harry was a man,
whom he subsequently met with at his office. Mr. Montaniel asked
him for identification. The individual gave him his social
insurance card and his Health card, and Mr. Montaniel made a
photocopy of each (see Exhibit R-3, 2nd page). The photocopied
Health card is in the name of Harry Cennick Cosmore and bears the
number 9119 176 197. The photocopied social insurance
card is in the name of Cennick Cosmore Harry and bears the number
479 006 751. The photocopy of the social insurance card
is in all respects identical to the card filed by Mr. Adusei
as Exhibit A-5, aside from the signature. The individual in
question denied ever being a babysitter for the appellants'
children and signed a declaration to that effect, which was filed
as Exhibit R-3 (1st page). It reads as follows:
Nov 12 1996
I Cennick Harry did not received any money for Mr. and Mrs
Bamfo and Elaine
1993
1994
1995
12,000.00
11.000.00
11.000.00
[signature]
I understand from Mr. Montaniel's testimony that he did not go
any further with his audit at that point. Thus, although Mr.
Montaniel obtained the person's telephone number and the name of
the school he was attending, he does not remember whether he
asked him for further proof of his identity, photo ID for
example.
[24] Mr. Montaniel stated that he then met
with Mr. Adusei on November 22, 1996, to inform him of
the above facts and tell him that he would be disallowing the
deductions claimed for child care expenses and closing the file
unless Mr. Adusei arranged a meeting for him with the person
Mr. Adusei claimed was his children's babysitter. Mr. Adusei
told him that he was unable to locate that person.
[25] Mr. Montaniel said that he had no
further contact with Mr. Adusei after that meeting.
[26] Mr. Adusei argued that the deductions
claimed for child care expenses should be allowed because he and
his wife submitted the requisite receipts signed by the person
who provided the child care services. According to Mr. Adusei,
that person worked every weekday and also provided services on
the weekends when he and his wife were working. He argued that he
could not have known there was anything unusual and asserted that
he obtained the person's social insurance card when she refused
to meet the Revenue Canada auditor. It was only then that he
suspected something was amiss.
[27] Counsel for the respondent argued that
the deductions claimed by the appellants for child care expenses
should not be allowed in view of the substantial number of
inconsistencies in the evidence adduced.
[28] First of all, he noted that Mr. Adusei
submitted two receipts for different amounts for the 1993
taxation year (Exhibits A-4 and R-1).
[29] Next, he pointed out that the $11,500
receipt for the 1994 taxation year (Exhibit A-2) while
covering a period of only eight months is for an amount
equivalent to that shown on the 1993 and 1995 receipts, which are
for the entire year. According to counsel, Mr. Adusei's
assertion that the person in question also provided services on
weekends cannot be accepted.
[30] Counsel for the respondent maintained
that the very identity of the person who provided the services
also presents a problem and that Mr. Adusei's testimony on this
point was not very credible. Thus, although he knew the
whereabouts of the person in question for a number of years both
before and after the audit, he initially stated in his Notice of
Objection that he was unable to locate her so that she could meet
the Revenue Canada auditor. Yet, at the hearing, Mr. Adusei
said that he had indeed seen her and that she had refused to meet
the auditor, whereupon he asked her for her social insurance
card, which he then kept without telling anyone.
[31] Counsel for the respondent argued that,
if there are any doubts with respect to the receipts, Mr. Adusei
must adduce credible evidence to support his claims, which he has
failed to do. He asserted that Mr. Adusei should have gotten the
person he claims was the babysitter to meet the auditor or write
him a letter or should have himself informed the auditor that he
was in possession of that person's social insurance card, which
he did not do.
[32] In conclusion, counsel for the
respondent argued that Mr. Adusei had been unable to adduce any
cogent evidence in support of his claims.
[33] Counsel for the respondent referred to
a number of decisions by this Court on the issue of whether or
not a taxpayer must submit receipts in order to be entitled to
the deduction in question. I do not consider it necessary to
elaborate on counsel for the respondent's arguments on this
issue, since in this case the appellants did provide receipts. In
actual fact, it is the authenticity of the documents provided and
their content that are being challenged. In the final analysis, I
believe that the appellants' credibility is what is at issue in
view of the documents submitted and the other evidence
adduced.
[34] In early 1993, the appellants' three
children were 11, 9 and 3 years old. Two of them were therefore
of school age, and we can assume that they were in school. We can
also assume that they needed a babysitter during the summer. For
that year, Mr. Adusei submitted two receipts (Exhibits R-1 and
A-4) at two different times and for different amounts, namely
$12,000 (Exhibit R-1) and $12,500 (Exhibit A-4). The first
receipt (Exhibit R-1) covers the period from January to December
1993, while the second (Exhibit A-4) covers the period from
January 4 to December 31, 1993. Hence both receipts are for a
full year. Mr. Adusei testified that he usually took one
month's vacation. Thus, in 1995 he vacationed in Jamaica with his
wife and children for four weeks. Assuming that the appellants
took four weeks of vacation each year and that the babysitter was
not paid during that time, she would have been paid for 48 and
not 52 weeks a year. At $300 a week, her income should therefore
have been $14,400. In fact, 10 or 12 weeks a year would have to
be subtracted in order to arrive at the salary of $12,500 or
$12,000 shown on the receipts. The figures are simply
irreconcilable with the evidence adduced.
[35] The 1994 receipt (Exhibit A-2) is for
$11,500 for child care services from January 31 to August of that
year. Whether or not August should be included is unclear. In his
testimony, Mr. Adusei said that his wife was at home during the
day from September to December 1994 since she was working either
evenings or nights at that time. Thus, assuming that the
babysitter was paid from January 31 until the beginning of August
or from January 31 until the end of August 1994, she should
normally have received either $7,800 (for 26 weeks) or $9,300
(for 31 weeks). I would point out here that the period involved
is either six or seven months, depending on whether or not August
is included, and not eight months as stated by counsel for the
respondent, since the period indicated on the receipt did not
begin until January 31, 1994. However, the receipt is for
$11,500. Mr. Adusei testified that he worked every other
weekend and that his wife also worked weekends, although he did
not provide any further details in this regard, so that the
babysitter was paid extra, although he did not specify how much
extra. That explanation is not very credible since, unless
otherwise indicated, one can assume that during the other years
(1993 and 1995) the babysitter would also have received more than
$300 a week for the same reason. As the 1993 and 1995 receipts
cover a 12-month period, it can be assumed that the total amounts
received would have been even greater than $14,400 a year, which
represents 48 weeks at $300 a week. Yet the receipts are in
each case for an amount slightly higher than the $11,000 maximum
allowed under section 63 of the Income Tax Act based on
the children's ages at the end of 1993, 1994 and 1995 (that is,
$5,000 for the child under seven years of age and $3,000 each for
the other two children).
[36] The receipt submitted for 1995 (Exhibit
A-3) is for $12,000 for the period from January to December 1995.
Once again, if we subtract four weeks' vacation, then, at
$300 a week, the babysitter's income should have been $14,400,
not counting any additional amounts that may have been paid for
extra work on weekends. As we know, Mr. Adusei testified that the
babysitter did not work during the summer of 1995. It may
therefore be asked whether services were interrupted only during
the four weeks in September when Mr. Adusei was on vacation in
Jamaica with his wife and children or whether another eight or
ten weeks should also be subtracted to take into account the
school holidays. Mr. Adusei did not really provide any
explanation on this point. Since the receipt does not indicate
any substantial interruption of services lasting some 12 to 14
weeks but refers to a period running from January to December
1995, the above conclusion that services were interrupted only
during the four weeks of vacation seems to be the most logical
one. It is all the more so if one considers the fact that parents
need child care services even more during the summer than they do
during the school year.
[37] Finally, I note that the T778 (E) Rev.
93 form appended to the return of the appellant Elaine M. Adusei
indicates an amount of $11,200 as having been paid for 1995
(Exhibit R-5). This is not the same amount as that shown on the
receipt.
[38] In short, here again the explanations
given are irreconcilable with the receipt submitted.
[39] If we add to all of this the fact that
Mr. Adusei made no effort to approach the auditor after the
meeting of November 22, 1996, despite the events that he says
occurred thereafter (namely that he saw again the person he says
was his children's babysitter and took her social insurance card,
which he kept until the hearing), I believe that his credibility
can be seriously called into question.
[40] Moreover, in the circumstances, I have
no reason to doubt the credibility of the auditor, Mr. Montaniel,
who met with an individual named Harry Cosmore Cennick, from
whom he obtained two identity documents and some personal
information.
[41] In light of the evidence adduced, I
have no choice but to dismiss the appeals of both appellants.
Signed at Ottawa, Canada, this 4th day of August 1999.
J.T.C.C.
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