REASONS
FOR JUDGMENT
Masse D.J.
Overview
[1]
Omar Ramlal is appealing the penalty for gross
negligence that was imposed on him pursuant to subsection 163(2) of the Income
Tax Act, R.S.C., 1985, c. 1 (5th Supp.) (the “Act”) in relation to his
2009 taxation year and related request for loss carryback to the 2006, 2007 and
2008 taxation years. A tax preparer who was unknown to the Appellant prepared
his tax return in such a way as to claim very large fictitious business losses.
These business losses, if allowed, would result in the refund to the Appellant
of all the taxes paid or deducted at source for the 2006, 2007, 2008 and 2009
taxation years. The fact is that the Appellant never owned or operated any kind
of business at all during the taxation period under consideration. The Canada
Revenue Agency (the “CRA”) disallowed the losses and penalized the Appellant
pursuant to subsection 163(2) of the Act. This case pertains only to the
penalties that were imposed.
Factual Context
[2]
The Appellant comes from Trinidad and Tobago. He
went to high school there up until the age of 16, but then he left school in
order to help his father support his family. He had gone up to “Form 5” in school which he understands is the
equivalent of grade 12 here in Canada. He came to Canada in 1995 with his wife
and children. He found a job in 1998 and held various employments until 2003
when he got a job with Unilever Canada. He has worked at Unilever ever since up
to the present day. He works as a machine operator and gets paid $30.79 per
hour.
[3]
He testified that a co-worker referred him to a
fellow named Len in Scarborough who apparently was an accountant. He does not
remember what Len’s last name is. Len prepared his tax returns and filed them
with the CRA using electronic filing. The Appellant testified that he never had
to sign anything while Len was doing his tax returns. Len’s fees ranged
anywhere from $300 to $500. Len never wanted to be paid by cheque; he only
wanted cash. Len told the Appellant that he kept everything on file; he had
copies of everything, but he never showed any copies to the Appellant. Some time
in 2008, the Appellant believes that he was audited by the CRA in respect to
his tax returns of prior years. Apparently, Len had been claiming fictitious
business losses on behalf of the Appellant in prior years. These business
losses were disallowed and the Appellant was assessed penalties for gross
negligence. When the Appellant received an audit letter from the CRA, Len told
him: “If you ever take me to court, I would deny that . . .
I ever did taxes for you.” This frightened the Appellant and his wife.
Two weeks later, Len called him and told him that he was sorry for what
happened and he knew somebody who would rectify the situation. The Appellant
got this other fellow’s number and called him. The Appellant met this fellow,
Reyul Magrah (the Appellant is not too sure about the last name). Reyul told
him that he knew an accountant who would help clean up the mess that Len had
created in the years gone by. At this point in time, the Appellant did not
trust Len, but Reyul told him that Len did not know this accountant. Reyul
asked him for his T4 slip, his social insurance number and his wife’s social
insurance number. Reyul told him there would be a fee of $500, but he wanted
cash, not a cheque. The two met again and the Appellant gave Reyul the cash. A
while later, they met again and Reyul asked the Appellant to sign some papers
which he did. Reyul took the papers back and told him that his tax return would
be filed within one or two weeks. Reyul only told him that he would get a
cheque in the mail but did not tell him how much.
[4]
Exhibit R-1, Tab 2, is the Appellant’s 2009 tax
return dated March 31, 2010. On the signature page, there is the usual
certification that the taxpayer certifies that the information contained in the
return and the attached documents is complete and accurate and fully discloses
all of his income. The Appellant did not read this before signing. He claims
that Reyul only presented about three or four pages and he signed them without
looking at them. He claims that Reyul was only a go-between or a courier
between the Appellant and the so-called accountant. He never did meet this
accountant.
[5]
On the return, the refund for 2009 is indicated
as being $20,696.99. The Appellant says he did not see this when he signed his
return. He does not even remember if there were figures on these documents or
not. Line 490 reserved for the identification of the professional tax preparer
that prepared the return is left blank. The Appellant apparently did not notice
this. He does not remember seeing the statement of business or professional activities
or the request for loss carryback, also dated March 31, 2010, even though
his signature appears on these documents. He cannot say if the word “per” was on the signature line when he signed the
documents. Clearly it was and this should have been obvious to him. It is
manifestly clear that he simply never paid any attention whatsoever to the
documents that were presented to him for his signature.
[6]
Had the Appellant bothered to even glance at his
tax return, he would have discovered some obviously false statements. In his
return, the Appellant reported gross business income, described as “receipts as agent”, in the amount of $97,599.82. He
also claimed business expenses, described as “amt to
principal fr agent”, in the amount of $362,350.72, resulting in a net
business loss of $264,750.90. The Appellant acknowledges that his only source
of income during those years is income from employment. At no time during the
period under consideration did he own or operate a business. The reported
business income and claimed business expenses are obviously false and blatantly
so. The Appellant claimed $80,963.90 of these business losses against his 2009
taxation year and he requested that the unused balance of these business losses
be carried back and applied to his 2006, 2007 and 2008 taxation years as
non-capital losses. The result of all of this is that the Appellant would get
refunds of all the taxes paid or deducted at source for 2006, 2007, 2008 and
2009 — an astounding result.
[7]
After the return was filed, the CRA sent a
letter dated June 30, 2010 (Exhibit R-1, Tab 4) to the Appellant requesting
information regarding his claimed business expenses and business income. The
CRA required the completion of a business questionnaire as well as the
production of all source documents in support of all the business expenses
claimed. The Appellant was confused and he perceived that the same thing was
happening to him all over again as what had happened with Len. The Appellant
did not respond directly to this letter from the CRA. Someone else, most likely
Reyul or the unknown tax accountant, drafted a response for his signature. This
response dated July 27, 2010 (Exhibit R-1, Tab 5) does not in any way
address the concerns raised by the CRA. It is highly confrontational and makes
no sense at all. The Appellant did sign this response and he admits that he did
not read it before signing. He claims that he does not know how he came to sign
the letter at Tab 5, saying: “[H]ow can I sign
something like this without knowing what this is?” Indeed, why would
anyone sign an important document that he does not understand without seeking
some explanation? However, he did.
[8]
After that, he got another letter from the CRA
dated November 25, 2010 (Exhibit R-1, Tab 6). He tried to contact the
unknown, anonymous and faceless accountant using a 1-800 number provided to him
by Reyul. He left messages countless times, but the accountant never returned
his calls. He also tried to contact Reyul, but without success.
[9]
The CRA disallowed the business income and
business expenses and denied the request to carry back the non-capital losses
to the 2006, 2007 and 2008 taxation years. The CRA also assessed penalties
under subsection 163(2) of the Act.
[10]
It is to be noted that the Appellant had been
reassessed on March 4, 2010, for earlier taxation years from 2002 to 2008
so as to disallow claimed business losses. He was also assessed gross
negligence penalties for those years. Consequently, he signed his 2009 tax return
on March 31, 2010 knowing full well that the CRA was questioning his prior
tax returns.
[11]
A friend of the Appellant introduced him to
Vijay Kapur, his present tax accountant. Mr. Kapur is an honourable man
and a true professional. Mr. Kapur obtained all of the Appellant’s prior
tax returns from the CRA back to 2003. That is when he found out that the
Appellant’s previous tax preparers had prepared fraudulent returns claiming
non-existent business losses. Mr. Kapur filed amended tax returns for the
2002 to 2009 taxation years. Mr. Kapur also instituted the present appeal
on behalf of the Appellant in order to try and get him out of this mess caused
by his unscrupulous tax preparers. Mr. Kapur rendered assistance to the
Appellant throughout this appeal. His assistance is appreciated.
[12]
The Appellant takes the position that he simply
has no knowledge or understanding of income taxation and he was totally unaware
that his 2009 tax return contained false information. In the past, he never
looked at, nor signed, his tax returns. He submits that he is the innocent and
unwitting victim of an unscrupulous tax preparer who took advantage of his
naivety and lack of knowledge and understanding. He had no idea what his tax
preparer was doing and he never received any explanation from his tax preparer
of what was going on. He simply signed his 2009 tax return and request for loss
carryback as these documents were presented to him and as he was instructed to
do. He was not aware of what was being filed on his behalf and he never
received any copies of his returns from his tax preparers. It took much effort
for Mr. Kapur to fix the problems caused by the unscrupulous “Len”. To now
be required to pay the very onerous penalties imposed upon him as a result of
what Reyul and the unknown tax preparer did to him would work a tremendous
hardship on him and his family. He prays that his appeal be allowed and that
this Court waive the penalties and interest that are the subject of the present
appeal.
[13]
The Respondent is of the view that the Appellant
never owned or operated any kind of business during the 2009 taxation year and
so his claimed business losses as reported in his 2009 tax return and related request
for loss carryback are obviously false. These false statements are of such a
magnitude that, if allowed, they would result in the refund of all taxes
withheld or paid from 2005 through to 2009. The Respondent submits that the
Appellant knowingly made these false statements. In the alternative, the
Appellant made or acquiesced in the making of these false statements in
circumstances amounting to gross negligence. At the very least, the Appellant
was wilfully blind regarding the falseness of the statements contained in his
return and the related request for loss carryback. The Respondent urges this
Court to dismiss the appeal with costs.
Legislative Dispositions
[14]
Subsection 163(2) of the Act reads in part as
follows:
163(2) Every person who, knowingly, or under
circumstances amounting to gross negligence, has made or has participated in,
assented to or acquiesced in the making of, a false statement or omission in a
return, form, certificate, statement or answer (in this section referred to as
a “return”) filed or made in respect of a taxation year for the purposes of
this Act, is liable to a penalty . . .
[15]
According to subsection 163(3), the burden of
establishing the facts justifying the assessment of the penalty is on the
Minister of National Revenue.
Analysis
[16]
Our system of taxation is both
self-reporting and self-assessing. It relies on the honesty and integrity of
the individual taxpayer. It is the taxpayer’s duty to report his taxable income
completely, correctly and accurately no matter who prepares the return.
Therefore, the taxpayer must be vigilant in ensuring the completeness and
accuracy of the information contained in his return. Justice Martineau stated
in Northview Apartments Ltd. v. Canada (Attorney General), 2009 FC 74,
at paragraph 11: “It is the essence of our tax
collection system that taxpayers are sole responsible for self‑assessment
and self‑reporting to the CRA.”
[17]
In the matter of R.
v. Jarvis, 2002 SCC 73, Justices Iacobucci and Major of the Supreme Court
of Canada explained the responsibilities and duties of taxpayers as well as some
of the measures in the Act designed to encourage compliance:
49 Every person
resident in Canada during a given taxation year is obligated to pay tax on his
or her taxable income, as computed under rules prescribed by the Act (ITA, s. 2
. . .). The process of tax collection relies primarily upon taxpayer
self‑assessment and self-reporting: taxpayers are obliged to estimate
their annual income tax payable (s. 151), and to disclose this estimate to
the CCRA in the income return that they are required to file (s. 150(1)). . . .
Upon receipt of a taxpayer’s return, the Minister is directed, “with all due
dispatch”, to conduct an examination and original assessment of the amount of
tax to be paid or refunded, and to remit a notice of assessment to this effect
(ss. 152(1) and 152(2)). Subject to certain time limitations, the Minister may
subsequently reassess or make an additional assessment of a taxpayer's yearly
tax liability (s. 152(4)).
50 While voluntary
compliance and self-assessment comprise the essence of the ITA’s regulatory
structure, the tax system is equipped with “persuasive inducements to encourage
taxpayers to disclose their income” . . . . For example, in
promotion of the scheme’s self-reporting aspect, s. 162 of the ITA creates
monetary penalties for persons who fail to file their income returns.
Likewise, to encourage care and accuracy in the self-assessment task, s. 163
of the Act sets up penalties of the same sort for persons who repeatedly fail
to report required amounts, or who are complicit or grossly negligent in the
making of false statements or omissions.
51 It follows from the tax scheme’s basic
self-assessment and self-reporting characteristics that the success of its
administration depends primarily upon taxpayer forthrightness. As Cory J.
stated in Knox Contracting, supra, at p. 350: “The entire
system of levying and collecting income tax is dependent upon the integrity of
the taxpayer in reporting and assessing income. If the system is to work, the
returns must be honestly completed.” It is therefore not surprising that the
Act exhibits a concern to limit the possibility that a taxpayer may attempt “to
take advantage of the self-reporting system in order to avoid paying his or her
full share of the tax burden by violating the rules set forth in the Act” . . . .
[Emphasis added.
Citations omitted.]
[18]
The penalties provided for in section 163 of the
Act have been conceived in order to ensure the integrity of our self-assessing
and self-reporting system and to encourage a taxpayer to exercise care and
accuracy in the preparation of his return, no matter who prepares the return.
In Sbrollini v. The Queen, 2015 TCC 178, Justice Boyle of this Court
opined that the penalty provisions set out in subsection 163(2) of the Act
reflect:
15 . . . the significance and
importance of the requirements of honesty and accuracy in the Canadian
self-reporting income tax system. . . .
16 Such
penalties are properly payable . . . if [a taxpayer] knowingly, or
under circumstances amounting to gross negligence, made or participated in,
assented to or acquiesced in, the making of false statements or omissions in
his returns.
[19]
Therefore, the decision of whether or not a
taxpayer should be subjected to the penalties under subsection 163(2) of the
Act should be determined in light of the responsibilities and duties of the
taxpayer to accurately and completely report his income in a self-reporting and
self-assessing system.
[20]
There are two necessary elements that must be
established in order to find liability for subsection 163(2) penalties:
(a) a false statement in a return, and
(b) knowledge or
gross negligence in the making of, assenting to or acquiescing in the making of,
that false statement.
[21]
There can be no question that the Appellant’s
2009 tax return and his request for loss carryback contained false statements.
The Appellant never owned or operated any kind of business during that year and
therefore could not have had any business income or business expenses. His
claim for business losses has no foundation in fact and is patently false.
[22]
I am satisfied, however, that the Appellant did
not knowingly make a false statement since he was not aware of what was
contained in his return and request for loss carryback. He never looked at
these documents before signing them. The issue becomes whether the Appellant made
a false statement in circumstances amounting to gross negligence. The burden of
proof is on the Crown. In discharging its burden of proof, the Crown must prove
more than mere negligence; it must prove that the Appellant’s conduct went
beyond simple negligence and that the Appellant was grossly negligent.
[23]
Negligence is defined as the failure to use such
care as a reasonably prudent and careful person would use under similar
circumstances. Gross negligence involves greater neglect than simply a failure
to use reasonable care. It involves a high degree of negligence tantamount to
intentional acting or indifference as to whether the law is complied with or
not; see Venne v. Canada, [1984] F.C.J. No. 314 (QL). In Farm
Business Consultants Inc. v. Canada, [1994] T.C.J. No. 760 (QL),
Justice Bowman (as he then was) of the Tax Court of Canada stated at paragraph
23 that the words “gross negligence” in
subsection 163(2) imply conduct characterized by so high a degree of negligence
that it borders on recklessness. In such a case a court must, even in applying
a civil standard of proof, scrutinize the evidence with great care and look for
a higher degree of probability than would be expected where allegations of a
less serious nature are sought to be established (paragraph 28).
[24]
It is also well‑settled law that gross
negligence can include “wilful blindness”, a
concept well known to the criminal law. The concept of “wilful
blindness” in the context of the criminal law was fully explained by
Justice Cory of the Supreme Court of Canada in the decision in R. v. Hinchey,
[1996] 3 S.C.R. 1128. The rule is that if a party has his suspicion aroused but
then deliberately omits to make further inquiries, because he wishes to remain
in ignorance, he is deemed to have knowledge. “Wilful
blindness” occurs where a person who has become aware of the need for
some inquiry declines to make the inquiry because he does not wish to know the
truth, preferring instead to remain ignorant. There is a suspicion which the
defendant deliberately omits to turn into certain knowledge. The defendant “shut his eyes” or was “wilfully
blind”.
[25]
It has been held that the concept of “wilful blindness” is applicable to tax cases; see Canada
v. Villeneuve, 2004 FCA 20, and Panini v. Canada, 2006 FCA 224. In Panini,
Justice Nadon made it clear that the concept of “wilful
blindness” is included in “gross negligence”
as that term is used in subsection 163(2) of the Act. He stated:
43 . . . the law will impute
knowledge to a taxpayer who, in circumstances that dictate or strongly suggest
that an inquiry should be made with respect to his or her tax situation,
refuses or fails to commence such an inquiry without proper justification.
[26]
It has been held that in drawing the line between
“ordinary” negligence or neglect and “gross” negligence, a number of factors
have to be considered:
(a) the magnitude of the omission in relation to the income
declared,
(b) the opportunity the taxpayer had to detect the error,
(c) the taxpayer’s education and apparent intelligence,
(d) genuine effort to
comply.
No single factor predominates. Each must be
assigned its proper weight in the context of the overall picture that emerges
from the evidence (see DeCosta v. The Queen, 2005 TCC 545, at paragraph
11; Bhatti v. The Queen, 2013 TCC 143, at paragraph 24; and McLeod v.
The Queen, 2013 TCC 228, at paragraph 14).
[27]
In Torres v. The Queen, 2013 TCC 380,
Justice C. Miller conducted a very thorough review of the jurisprudence
regarding gross negligence penalties under subsection 163(2) of the Act. He
summarized the governing principles to be applied at paragraph 65:
a) Knowledge of a
false statement can be imputed by wilful blindness.
b) The concept of
wilful blindness can be applied to gross negligence penalties pursuant to
subsection 163(2) of the Act . . . .
c) In determining
wilful blindness, consideration must be given to the education and experience
of the taxpayer.
d) To find wilful
blindness there must be a need or a suspicion for an inquiry.
e) Circumstances
that . . . indicate a need for an inquiry prior to filing . . .
include the following:
i) the magnitude
of the advantage or omission;
ii) the
blatantness of the false statement and how readily detectable it is;
iii) the lack of
acknowledgment by the tax preparer who prepared the return in the return
itself;
iv) unusual
requests made by the tax preparer;
v) the tax
preparer being previously unknown to the taxpayer;
vi) incomprehensible
explanations by the tax preparer;
vii) whether others
engaged the tax preparer or warned against doing so, or the taxpayer himself or
herself expresses concern about telling others.
f) The
final requirement for wilful blindness is that the taxpayer makes no inquiry of
the tax preparer to understand the return, nor makes any inquiry of a third
party, nor the CRA itself.
[28]
This is certainly not an exhaustive list and
there may be other factors that may need to be considered depending on the
circumstances of any particular case.
[29]
In the case at bar, I am satisfied that the Appellant
did not knowingly make a false statement. It is his own testimony that he
simply did not know what was in his 2009 tax return since he never even looked
at it. However, I am satisfied that he acquiesced in the making of the false
statements in circumstances amounting to gross negligence. At the very least,
he was wilfully blind as to the false contents of his 2009 tax return. I come
to this conclusion for the reasons that follow.
[30]
The Appellant has the equivalent of a high
school education here in Canada. He has been in Canada since 1995. He has been
steadily employed and earns a good living. Although he may not be the most
sophisticated of individuals, he has an understanding of the basic concept of
taxation and he understands the concept of business profit and loss. He is not
so lacking in education or life experience as to claim ignorance. Education,
experience and intelligence are not factors that could relieve the Appellant of
a finding that he made false statements under circumstances amounting to gross
negligence.
[31]
There were ample warning signs that should have
aroused the Appellant’s suspicions and awakened in him the need to make further
inquiries. Len, the accountant, was referred to him by a co‑worker. Len
did not belong to any well‑known accounting firms. The Appellant did not
check out any references regarding Len and, in fact, it would appear that he
did not even know Len’s last name. Len did not want to be paid by cheque; he
only wanted to be paid by cash. Cash is legal tender and payment by cash is
certainly legal, but one has to wonder why a professional tax preparer or
accountant would insist on cash instead of a cheque, credit card or debit card,
as would most professional people in today’s business world. Len never
explained anything to the Appellant and he never provided the Appellant with
any copies of his returns. When the Appellant was audited in respect to his
2002 to 2008 tax returns for having claimed false business losses, Len threatened
him. The Appellant then knew that Len was dishonest, deceitful and
unscrupulous. However, the Appellant still accepted Len’s advice and decided to
contact Reyul on Len’s recommendation. One would think that a reasonably
prudent taxpayer would be very wary of accepting the recommendations of someone
such as Len. I find it astounding that the Appellant would even consider
retaining someone recommended by Len.
[32]
Reyul, just like Len, did not want to accept a
cheque, only cash. This was an obvious warning sign that Reyul, like Len, was
probably not running an upfront operation. As it turns out, Reyul was not a tax
preparer or accountant; he was only a go-between between the Appellant and the
accountant. The tax preparer or accountant used by Reyul was previously unknown
to the Appellant and is still unknown to the Appellant since the two have never
met. The Appellant never asked for, nor checked out, any references regarding
this unknown accountant. The Appellant did not look at his return and simply
signed it without verifying the accuracy of the information contained therein
even though he is the one ultimately responsible for the accuracy of this
information. He was not offered any explanations and he did not ask any
questions about his return. The Appellant was never given a copy of his return.
He claims he did not even see if there were any numbers on the documents that
he signed and he did not even see if he was going to obtain a refund or how
much. I find it implausible that he would not see how much of a refund he was
getting since the refund is clearly indicated on the signature page. In
addition, the first thing a taxpayer wants to know is the good news of how much
he is getting back or the bad news of how much he has to pay. That is simply
human nature. When the Appellant filed his 2009 tax return, he knew that the
CRA was questioning his returns from prior years in relation to questionable
business expenses that were claimed on his behalf by Len. This should have
given him reason to exercise more diligence before signing and filing his 2009 tax
return, especially since Reyul was recommended to him by Len who simply could
not be trusted at all. All of the foregoing should have aroused the Appellant’s
suspicions concerning the unknown accountant who prepared his tax return and
should have incited the Appellant to question what was going on. However, he
did not. In fact, he did nothing. He chose to remain blissfully ignorant in the
face of truly questionable practices by his tax preparer. He simply relied on
and trusted someone he had never even met. Such conduct in refusing to inform
himself is not only evidence of wilful blindness, but amounts to gross
negligence in my opinion.
[33]
Even setting aside any consideration of wilful
blindness, I am of the view that the Appellant has demonstrated conduct amounting
to gross negligence. As has often been stated by our courts, our tax system is
one of self‑assessment and self‑reporting. Each individual taxpayer
has the obligation to ensure that all the information contained in his return
is complete and accurate regardless of who prepares the return. That is not an
onerous responsibility. The Appellant made no effort whatsoever to verify the
accuracy and completeness of his return. He simply signed it and filed it
without even looking at it. Had he made even the most minimal effort, he would
have quickly and easily discovered the blatantly false information contained
therein. The Appellant cannot be heard to say, in an effort to deflect blame
away from himself, that he was the victim of a dishonest tax preparer when he
made no effort at all to verify the accuracy of his return.
[34]
In Laplante v. The Queen, 2008 TCC 335,
Justice Bédard wrote:
15 . . . The Appellant cannot
avoid liability in this case by pointing the finger at his accountant. By
attempting to shield himself in this way from any liability for his income tax
returns, the Appellant is recklessly abandoning his responsibilities, duties
and obligations under the Act. . . .
[35]
In Brochu v. The Queen, 2011 TCC 75,
gross negligence penalties were upheld in a case where the taxpayer simply
trusted her accountant’s statements that everything was fine. She had quickly
leafed through the return and claimed that she did not understand the words “business income” and “credit”,
but yet had not asked her accountant or anyone else any questions in order to
ensure that her income and expenses were properly accounted for. Justice
Favreau of this Court was of the view that the fact that the taxpayer did not
think it necessary to get informed amounted to carelessness, which constituted
gross negligence.
[36]
Another recent example can be found in the
matter of Atutornu v. The Queen, 2014 TCC 174, where the taxpayers
simply blindly relied on the advice of their tax preparer without reading or
reviewing their returns and without making any effort whatsoever to verify the
accuracy of their returns.
[37]
It has been held that the failure to review
one’s return before signing and filing it may, in and of itself, be sufficient
to amount to gross negligence. As stated by Justice Tardif in Gingras v.
Canada, [2000] T.C.J. No. 541 (QL):
31 . . .
it is utterly reprehensible to certify by one’s signature that the information
provided is correct when one knows or ought to know that it contains false
statements. Such conduct is a sufficient basis for a finding of gross
negligence justifying the assessment of the applicable penalties.
[38]
In Laplante, above, Justice Bédard wrote:
15 In any event, the Court finds that the Appellant’s negligence (in
not looking at his income tax returns at all prior to signing them) was
serious enough to justify the use of the somewhat pejorative epithet “gross”.
The Appellant’s attitude was cavalier enough in this case to be tantamount to
total indifference as to whether the law was complied with or not. Did the
Appellant not admit that, had he looked at his income tax returns prior to
signing them, he would have been bound to notice the many false statements they
contained, statements allegedly made by Mr. Cloutier? . . . In
this case, the Appellant had an obligation under the Act to at least quickly
look at his income tax returns before signing them, especially since he himself
admitted that, had he done so, he would have seen the false statements made by
his accountant.
[Emphasis in original.]
[39]
Even more recently, Justice Bowie stated in Brown
v. The Queen, 2009 TCC 28:
20 Quite apart
from all of that, in respect of the gross negligence penalties under the Income
Tax Act, the Appellant in his own evidence early on made it clear that he
signed his returns for each of the four years under appeal without having paid
the least attention to what income was included in them and what expenses were
claimed in them. He said that he kept the records that he kept, prepared
spreadsheets from them and gave them to a tax preparer who, in each year,
prepared the returns for him based on the material that he gave her. We did not
hear from her on that, but taking that statement at its face value, it still
leaves the Appellant with an onus to look at the completed return before
signing it and filing it with the Minister. The declaration that the taxpayer
makes when he signs that form is,
I certify
that the information given on this return and in any documents attached is
correct, complete and fully discloses all my income.
To sign an
income tax return and make that certification without having even glanced at
the contents of the return, because that is what I understood his evidence to
be is of itself, in my view, gross negligence that justifies the penalties.
[40]
In Bhatti, above, Justice C. Miller pointed
out:
30
. . . It is simply insufficient to say I did not review my returns.
Blindly entrusting your affairs to another without even a minimal amount of
verifying the correctness of the return goes beyond carelessness. So, even if
she did not knowingly make a false omission, she certainly displayed the
cavalier attitude of not caring one way or the other . . . .
[41]
I am of the view that, in the circumstances of
the present case, the Appellant has been completely remiss in discharging his
duties under the Act. He made no effort at all to comply with the requirements
of the Act at the time of filing. His actions throughout are not only negligent,
but are grossly negligent.
Conclusion
[42]
There is no doubt that the Appellant’s 2009 tax
return and his request for loss carryback contained false statements — the
Appellant did not carry on a business and he did not incur any business losses
whatsoever. In the circumstances of this case, I can come to no other
conclusion than that the Appellant was wilfully blind and grossly negligent as
to the falsity of these statements. This is especially so since he signed his
return and thus certified the accuracy of the information contained therein
without bothering to even look at the return or make any efforts at all to verify
the return’s accuracy. As such, he is properly subject to the penalties imposed
on him pursuant to subsection 163(2) of the Act.
[43]
For all the foregoing reasons, this appeal is
dismissed. The Respondent is entitled to her costs if she wants them.
Signed at Kingston, Ontario, this 27th day of January 2016.
“Rommel G. Masse”
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