97-3604(IT)I
BETWEEN:
SARAH GRIMMAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on August 13, 1999 at Toronto, Ontario
by
the Honourable Judge T.P. O'Connor
Appearances
Agent for the
Appellant:
Howard Halpern, C.A.
Counsel for the
Respondent:
Michael Ezri
JUDGMENT
The
appeal from the reassessment made under the Income Tax Act
for the 1990 taxation year is allowed and the reassessment is
vacated in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 15th day of September 1999.
J.T.C.C.
Date: 19990915
Docket: 97-3604(IT)I
BETWEEN:
SARAH GRIMMAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
O'Connor, J.T.C.C.
[1] This appeal was heard at Toronto,
Ontario on August 13, 1999 pursuant to the Informal Procedure of
this Court. The relevant facts are as follows:
1. In computing her income
for the 1990 taxation year the Appellant reported total income of
$18,052.20, including employment income of $17,127.39 from her
employer Re/Max Central Realty Inc. ("Re/Max"). After
deducting various employment expenses of $16,072.14 her net
income was $1,980.06 and her taxable income was nil.
2. The total amount of
income tax withheld according to all T4s filed amounted to
$11,254.75. Included in the T4's was one issued by Re/Max
that contains only one figure indicating income tax deducted of
$8,742.50. When one adds to the $11,254.75 certain tax credits
the Appellant apparently became entitled to a refund of
$14,087.07 which she received.
3. The Minister initially
assessed the Appellant in July of 1991 as filed.
4. The Minister contends
that the amount of $8,742.50 reported as tax withheld was in fact
not tax withheld but actually consisted of further commission
income from Re/Max.
5. Consequently and
relying on subsection 152(4) of the Income Tax Act
("Act") the Minister reassessed the Appellant
for the 1990 taxation year by notice thereof mailed May 22, 1996
to include the $8,742.50 as real estate commission received in
the year and further disallowed the said amount as income tax
withheld. The Minister also levied a penalty of $575.41 pursuant
to subsection 163(2) of the Act in respect of the said
$8,742.50 not reported as income.
[2] The first issue is whether the
Appellant in filing her 1990 taxation year return made a
misrepresentation that was attributable to neglect, carelessness
or wilful default as contemplated in subsection 152(4), thus
enabling the Minister to assess beyond the three year period
provided for in that subsection. The second issue is whether the
Appellant must pay the penalty as provided for in subsection
163(2).
[3] The Respondent alleges that an
amended T4 slip from Re/Max was also issued which simply showed
the $8,742.50 as commission income with no deductions. The
Appellant contends that she never received the amended T4 and
there is evidence to support her in this regard besides her own
statement. Apparently the amended T4 slip of Re/Max was only
discovered recently in the possession of the Trustee of
Bankruptcy of Re/Max. The Appellant states further that in the
period in question, namely 1990 and early 1991, she was in
"bad shape" essentially suffering from a depression.
She states further that she only received the original T4 slip
showing the amount as income tax withheld one or two days prior
to the filing date of April 30, 1991, that she simply provided
that along with her other information and slips to her
accountant. The accountant prepared the return based on those
slips and the return was filed. The Appellant adds that cheques
representing commission income were only received sporadically,
often sometime after the income was actually earned. She
concludes that she could have been confused as to the erroneous
T4.
[4] The Appellant concludes from all
of the foregoing that she was not guilty of making a
representation that was attributable to her neglect, carelessness
or wilful default and that consequently the reassessment by the
Minister in 1996 is statute barred. She filed her 1990 return in
accordance with the T4 slips in her possession at that time.
[5] The Respondent points to the large
amount of the refund and the fact that after claiming expenses on
her original return the Appellant had negligible income and that
the she should have been aware of the fact that there must have
been a mistake in the T4 slip showing $8,742.50 as tax withheld.
In other words she should have been alerted and consequently she
made a misrepresentation. The Respondent also referred to a
series of cheques received by the Apellant from Re/Max (Exhibit
R-3) and concluded that the Appellant must have known that the
original T4 slip was erroneous. The Minister contends further
that there was gross negligence and that the penalties provided
for in subsection 163(2) of the Act are applicable.
Analysis and Decision
[6] I accept the credibility of the
Appellant including her testimony as to her depressed state in
1990 and 1991. The fact that she received the original slip
showing that income tax withheld only at a very late date and
relied on her accountant who filed on the basis of slips he had
supports a conclusion that she did not wilfully misrepresent.
Moreover, she never saw the amended T4. It should also be noted
that the Minister was aware of the amended T4 in October of 1991
but only reassessed in 1996. In conclusion, based on all the
evidence, the Appellant did not make a misrepresentation
attributable to neglect, carelessness or wilful default as
contemplated in subsection 152(4) of the Act. Having thus
decided there is obviously no justification for the penalty
imposed by the Minister.
[7] Consequently the appeal is allowed
and the reassessment in question is vacated.
Signed at Ottawa, Canada this 15th day of September 1999.
J.T.C.C.
COURT FILE
NO.:
97-3604(IT)I
STYLE OF
CAUSE:
Sarah Grimman and The Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
August 13, 1999
REASONS FOR JUDGMENT BY: The Honourable
Judge T.P. O'Connor
DATE OF
JUDGMENT:
September 15, 1999
APPEARANCES:
Agent for the
Appellant:
Howard Halpern, C.A.
Counsel for the Respondent: Michael
Ezri
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
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