Citation: 2013 TCC 316
Date: 20131025
Docket: 2012-3217(GST)I
BETWEEN:
ATTILA LAZSLO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers J.
[1]
The appellant was
notionally assessed under Part IX of the Excise Tax Act (the Act)
on March 11, 2011 for his reporting periods between July 1, 2003 and December 31,
2006 and between January 1, 2008 and December 31, 2010, and on January 24,
2012 for the reporting periods between January 1, 2011 and June 26, 2011.
[2]
The notices of assessment
were issued under subsection 299(1) of the Act. The appellant had
not filed his GST returns on the dates they were due. The breakdown of the assessments
is as follows:
[3]
On May 17, 2011, the
appellant filed a notice of objection for the reporting periods between July 1,
2003 and December 31, 2006. On April 27, 2011, the appellant filed a notice of objection
for the reporting periods between January 1, 2008 and December 31,
2010. Finally, a third notice of objection was filed by the appellant on March
12, 2012 for the reporting periods between January 1, 2011 and June 26,
2011.
[4]
In addition, the
appellant filed some of his outstanding returns on April 12, 2012, and the
Minister of National Revenue (Minister) varied the assessments as follows:
[5]
By notice dated July
23, 2012, the Minister confirmed the assessments for the reporting periods
ending September 30, 2003, December 31, 2003, September 30, 2004, December
31, 2004, March 31, 2005, June 30, 2005, September 30, 2005, December 31, 2005,
September 30, 2006, December 31, 2006, March 31, 2008, June 30, 2008, September
30, 2008, December 31, 2008, December 31, 2009, September 30, 2010, December
31, 2010 and June 26, 2011, as no valid GST returns were submitted by the
appellant for those reporting periods. Hence, this appeal.
[6]
At the beginning of the
hearing (on April 25, 2013), counsel for the respondent informed the Court
that for the periods ending September 30, 2010, December 31, 2010 and June 26,
2011, the net tax is nil, and the assessments shall be amended to reflect this
change.
[7]
The appellant is an
audio technician. In 1991, he voluntarily registered for GST under Part IX of
the Act as sole proprietor of his business. No changes were made to his
registration status throughout the periods under appeal and he ceased to be a
registrant under the Act on June 26, 2011. He was so informed by the
Canada Revenue Agency (CRA) on January 13, 2012.
[8]
As the appellant did
not file his GST returns on a quarterly basis as he had been required to do since
the time he became a registrant and did not file them when they were due, the
Minister assessed the appellant for each of the reporting periods at issue. The
amount of GST collectible was determined with reference to the appellant’s net
business income as reported on his personal income tax returns.
[9]
In April 2012, the
appellant filed GST returns in respect of the reporting periods shown in
paragraph 4 above. The Minister reassessed accordingly and allowed all the input
tax credits (ITCs) claimed. The appellant also filed GST returns for the
remaining periods, but they were not accepted by the CRA as the dates on these
returns did not coincide with the dates of the relevant filing periods of the
appellant.
[10]
On June 14, 2012, the
appellant’s representative, Mr. Bernard Yevzeroff was advised of the defective
returns in a telephone conversation with the CRA, and the appellant was also advised,
by letter, on June 22, 2012. The appellant was asked to correct the dates on
the returns and to resubmit them to the Appeals Division of the CRA by June 28,
2012. The returns were not resubmitted and the assessments for the periods involved
were confirmed.
[11]
The appellant does not
recall having registered his business for GST purposes. He does however recall
having filed GST returns for a partnership made up of a company called Atlo and
another called Tarox International. He testified that he was getting a 20%
share of the profits and that he also worked as an employee of that partnership.
He has no documents to substantiate any of this and does not know if the
partnership filed GST returns. He was made aware in 1999 that he had tax issues
dating back to 1991.
[12]
He acknowledged that he
was not the one who prepared the quarterly returns found in Exhibit R-1. As for
the ITCs claimed, he says they were for equipment that he had purchased, but he
has no documents to substantiate any of the claim. The returns that were filed on
his behalf by Mr. Yevzeroff in April 2012 were filed with his consent. The
appellant also acknowledged that he never reported partnership income on his
income tax returns.
[13]
A summary of the
appellant’s income tax returns shows that from 2003 to 2011, the appellant
reported business income in addition to his T-4 earnings, but no partnership
income is reported. In his 2006 income tax return, the "Statement of Business
Activities" attached thereto shows the appellant's percentage of the
partnership as being 100%. No other information is provided in this regard. In Exhibit
A-1, a similar document, titled "Statement of Business or Professional Activities",
for his 2009 taxation year indicates that his percentage of the partnership was
20%. No reference is made to the partnership itself, except for the business
name, "Atlo Recording", which actually appears to identify the
appellant.
[14]
The issue in this
appeal is whether the Minister correctly calculated the net tax for the
reporting periods under appeal.
[15]
Counsel for the
appellant argues that when the appellant registered for the GST, he did so on
behalf of a partnership and not as an individual and that he did not understand
the difference. He is therefore not a registrant. Counsel also raises the fact
that the audit went further than the Act permits in that certain periods
covered by the assessments are beyond the normal assessment period. Counsel
also questions the reporting period, arguing that certain forms from the CRA
say that it is annual and the CRA cannot now say it is quarterly.
[16]
Counsel for the
respondent submits that the appellant voluntarily registered for the GST in
1991 and that at the very beginning he did file GST returns on time and on a
quarterly basis, but subsequently began filing late. The Minister made notional
assessments based on the net business income of the appellant, but counsel
admits that this was a mistake as the assessments should have been based on the
appellant’s gross business income. He further submits that the appellant has not
provided any explanation as to why the assessments are incorrect.
[17]
The evidence before the
Court, and particularly Exhibit A-5, which is a print‑out from the CRA’s business
number system, indicates that the appellant was registered for GST purposes as
an individual, that the type of operation was a sole proprietorship and that he
registered by telephone. In addition, the appellant testified that, although he
did not recall having phoned the CRA to register for GST purposes, he did file
GST returns and on those returns did not use the name of the partnership but rather
his own name. He also testified that the returns were filed quarterly. In
direct examination, the appellant could not say if the partnership had filed
tax returns.
[18]
When the appellant was
assessed for the reporting periods under appeal, he submitted GST returns for a
number of quarterly reporting periods and did so personally. In addition, he
testified that he never reported partnership income on his personal income tax
returns. Given his own testimony, the reference to a 20% interest in a
partnership found in the appellant’s Statement of Business or Professional Activities
in his 2009 tax return is of no assistance to the appellant, and the same is
true of the statement in the affidavit of Mr. Robert Haas that the appellant
reported income for 2009 from a 20% share in the business. No changes were made
to the appellant’s registration information during the reporting periods under appeal,
and the registration was not cancelled until June 26, 2011.
[19]
I therefore find that
the appellant was a registrant for GST purposes during the reporting periods
under appeal and that he had an obligation to file returns on a quarterly
basis. As he failed to do so, the CRA was justified in making notional assessments
for all the periods under appeal.
[20]
The appellant did file
GST returns after he was assessed, and the Minister accepted about ten of these
returns and reassessed them as filed. Some returns were not accepted because
the dates did not coincide with the appellant’s reporting periods. The
appellant was invited by letter dated June 22, 2012 to correct the dates and
resubmit them to the CRA. For unknown reasons, the appellant did not resubmit
them. He thus did not leave the CRA with much choice.
[21]
In this appeal, the
burden of proof is on the appellant to refute the assumptions of fact on which the
respondent relied to assess. The appellant has not met this burden. He has not
provided any evidence to show that the amount of GST collectible as assessed by
the Minister is incorrect. The assessments were based on the appellant's net
business income instead of his gross business income, and this for all intents
and purposes benefited the appellant.
[22]
The appeal is allowed
and the assessments are referred back to the Minister for the sole purpose of
reassessing for the three reporting periods with respect to which concessions
were made by the Minister.
Signed at Ottawa, Canada, this 25th day of October 2013.
"François Angers"
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