Citation: 2017 TCC 236
Date: 20171127
Docket:
2016-4210(IT)I
BETWEEN:
BRIAN
L. NORRIS,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR JUDGMENT
Paris J.
[1]
These are appeals in the informal procedure from
reassessments of the Appellant’s 2005, 2006, 2007 and 2008 taxation years. The
Appellant is disputing the inclusion of amounts in his income in those years as
shareholder benefits received from his corporation “Golden
Hinde Cable Services Ltd.” (the “Corporation”).
The amount included as shareholder benefits was $63,808 in 2005, $50,887 in
2006, $51,524 in 2007 and $30,730 in 2008.
[2]
It is not disputed by the Appellant that he received
those amounts from the Corporation, but he maintains that he received them as
reimbursements of business expenses of the Corporation that he paid personally.
[3]
The applicable statutory provision is subsection
15(1) of the Income Tax Act (the “Act”)
which reads as follows:
15. (1) Benefit conferred on shareholder – Where at any time in a taxation year a
benefit is conferred on a shareholder, by a corporation otherwise than by
(a) . . .
(b) . . .
(c) . . .
(d) . . .
the amount or
value thereof shall, except to the extent that it is deemed by section 84 to be
a dividend, be included in computing the income of the shareholder for the
year.
[4]
None of the exceptions in paragraphs 15(1)(a)
to (d) are relevant to the Appellant’s situation in this case.
Facts
[5]
The Appellant was at all times the sole
shareholder and director of the Corporation. According to the Appellant, the
Corporation ceased operations some time in 2011.
[6]
The Appellant did not file personal tax returns
for the taxation years in issue until April 20, 2012 after the Minister of
National Revenue (the “Minister”) issued
arbitrary assessments to the Appellant for those years under subsection 152(7)
of the Act.
[7]
The Corporation did not file tax returns for its
taxation years ending on the last day of February 2006, 2007, 2008 and 2009
until June 12, 2014. The Canada Revenue Agency (the “CRA”)
subsequently audited the Corporation and determined that the Appellant had made
substantial cash withdrawals from the Corporation’s bank account throughout
2005, 2006 2007 and 2008 and that the Corporation had also made payments on the
Appellant’s personal credit card in those years.
[8]
The cash withdrawals totaled $44,388.75 in 2005,
$45,988.00 in 2006, $42,699.95 in 2007 and $26,331.00 in 2008.
[9]
The credit card payments totaled $23,644.09 in
2005, $4,898.70 in 2006, $8,827.23 in 2007 and $4,398.63 in 2008.
[10]
The Appellant was reassessed to include those
amounts in his income as benefits conferred on him by the Corporation in his
capacity of shareholder of the Corporation.
[11]
The only employment income reported by the Appellant
from the Corporation was in 2005, in the amount of $4,225. It also appears that
he had RRSP income of $23,813 in 2005, $2,023 in 2006 and $3,000 in 2008.
[12]
In the course of the audit of the Corporation,
the Appellant was asked to provide records to show the amount of the expenses
which he said he had incurred for the Corporation. He gave the auditor three
grocery bags of unsorted receipts. When he was asked to organize the receipts
into some sort of coherent order, he said that he was unable to do so. The
Appellant admitted in cross-examination that his record keeping was “shoddy”.
[13]
At the hearing, the Appellant testified that he
worked away from home for the Corporation for 99% of the time during the years
in issue, and that he paid the expenses for meals and lodging with his credit
card. He said that the Corporation reimbursed him by paying his credit card
bills. He also said he withdrew money from the Corporation’s bank account to
make the payments on the mortgage on his house and to pay utility and motor
vehicle expenses because he used much of his house and the property surrounding
it for business purposes, both for his office and for storage of tools,
equipment and work vehicles. He also said that he maintained a shareholder loan
record but that it was “not written down”. The
Appellant was unable to produce any records and gave no details or particulars
of the expenses he said he incurred on behalf of the Corporation.
Appellant’s Position
[14]
The Appellant said that he was intimidated and
bullied during the audit and objection process and felt that he had not been
treated fairly. He argued that he had been unable to prepare for the hearing
because his requests for an explanation of the reassessments had gone unanswered
by the auditor, the appeals officer and by Justice counsel prior to the
hearing. He also said that he only received a copy of the audit working papers
a month before the hearing.
[15]
However, the appeals officer who handled the
Appellant’s objection testified that she provided the audit working papers to
the Appellant on two occasions (in January, 2015 and again in February, 2016)
and attempted to explain the reassessments to him but that he did not
understand them. She also told him that he would need to organize his receipts
and to demonstrate the connection between the expenditures and the
corporation's activities. She said she received nothing from the Appellant.
Decision
[16]
In an appeal of a reassessment of tax, the
taxpayer bears the onus of showing that the assumptions of fact made by the
Minister in making the reassessment are incorrect.
[17]
I find that the Appellant has not met that onus.
His testimony concerning the alleged business expenses was vague and
perfunctory. His evidence consisted largely of general, self-serving assertions
that the amounts in issue were received by him as repayments of expenses he
incurred on behalf of the Corporation, and excuses for his lack of preparation
for the hearing. He did not provide any documents whatsoever to support his
claim that the amounts in issue were reimbursements of expenses of the
Corporation that he had paid. I also question the overall reliability of the
Appellant’s testimony, given that his complaints about not having been provided
an explanation of the reassessments and a copy of the audit working papers in a
timely fashion were clearly refuted by the appeals officer. Her testimony was
corroborated by a letter she sent to the Appellant, a copy of which was
produced at the hearing, and I accept her testimony.
[18]
In my view, the comments of the Federal Court of
Appeal in the case of Njenga v. Canada, [1996] F.C.J. No. 1218 (QL) at
paragraphs 3 and 4 are applicable here:
3 The income tax system is based on self monitoring. As a
public policy matter the burden of proof of deductions and claims properly
rests with the taxpayer. The Tax Court Judge held that persons such as the
Appellant must maintain and have available detailed information and
documentation in support of the claims they make. We agree with that finding.
Ms. Njenga as the Taxpayer is responsible for documenting her own personal
affairs in a reasonable manner. Self written receipts and assertion without
proof are not sufficient.
4 The problem of insufficient documentation is further
compounded by the fact that the Trial Judge, who is the assessor of
credibility, found the applicant to be lacking in this regard.
[19]
Since the Appellant has not shown that the
Minister erred in assuming that the amounts in issue were received by the
Appellant as benefits from the Corporation, the appeals must be dismissed.
Signed at Ottawa,
Canada, this 28th day of November 2017.
“B.Paris”
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