Ronald Alexander v. The Minister of National Revenue (Informal Procedure), [1993] 2 CTC 3041

D.W. Beaubier, T.C.C.J. (orally):—This matter was heard in Winnipeg, Manitoba on July 16, 1993. The appellant called as witnesses himself, his wife Carol Alexander, his son Rex Alexander and his daughter Donna Anderson. The Crown called as a witness the auditor on the assessment, Karen Forrest. The issue relates to a 1986 and 1987 net worth and penalties assessed upon the appellant.

In respect to 1986, the appellant particularly disputed a number of alleged personal expenses. The Court in particular relied upon the evidence of Mrs. Alexander, who was a credible witness, subject to certain exceptions not as to her credibility so much as to the fact the Court felt she was leaning somewhat more in the direction of the appellant than the Crown.

Referring to the amounts alleged in dispute by the appellant in his appeal, the Court will go through them item by item in respect to 1986, with a finding consisting of the number described.

1. Food: The Court finds that four out of the five members of the family were eating at home and therefore the number assessed by Revenue Canada is reduced by 20 percent, with a resulting figure of $5,127.

3. Household Operations: Pet expenses, $77. Cleaning supplies and paper, plastic and foil combined together $369.

4. Clothing: Women, $848. Men, $650.

6. Health care: $250.

7. Personal Care: $250.

8. Recreation, Toys, Hobbies: $289. Home entertainment and equipment, nil. Recreation services, $495. In relation to the latter, the Court finds that expenses respecting hockey are pretty considerable.

9. Education: $319.

10. Tobacco and Alcoholic Products: Tobacco, nil. Alcohol, $15.

11. Reading Material: $107.

12. Security, Life Insurance: $115.

13. Gifts and Contributions: Having regard to the Acapulco vacation, the Court finds that the assessment respecting gifts and contributions is correct and finds a figure of $665.

In 1987 both parties added 4.2 per cent to the amounts and therefore the Court simply adopts the numbers found for 1986 and adds 4.2 per cent. And we will direct the Minister accordingly in due course respecting calculations in this assessment.

In his business accounts Mr. Alexander is found to have either duplicated or triplicated some expenses. Mr. Alexander gave authorization to search the bank records at one branch of the Royal Bank of Canada. But he had accounts at other branches of the Royal Bank of Canada concerning which he did not give authorization so far as it is found by the Court.

With respect to the penalty, the evidence found by the Court is that when the Minister of National Revenue became aware of other accounts at different branches of the Royal Bank of Canada, the Court accepts the evidence that Mr. Alexander did not sign an authorization respecting inspection of these other accounts; furthermore, the Court accepts the evidence of the assessor that the supply of documents as requested was incomplete at the assessment level; finally, the Court simply reiterates the matter respecting the expenses claimed.

The Court had the benefit of the evidence of Mr. Alexander, who also conducted his own case. Mr. Alexander is an aware and knowledgeable man. Mrs. Alexander is a woman who kept the books and is a payroll clerk and the Court feels that, more than the average lay person, she had knowledge of how to conduct and set out books. Having said that, the Court finds that Mr. Alexander is entirely responsible for his own business affairs and decided to be a businessman and takes on the burden of being a businessman in those circumstances.

Subsection 163(2) of the Income Tax Act reads,

Every person who, knowingly, or under circumstances amounting to gross negligence in the carrying out of any duty or obligation imposed by or under this Act, as made or 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 as required by or under this Act or regulation . . . .

And then it goes on from there.

The Court finds that Mr. Alexander did fall within the provisions of Subsection 163(2). Mr. Alexander's business was a seasonal bear hunting business and does not last the entire year. It is a small business. Therefore the time and opportunity to be accurate existed. Mr. Alexander is an aggressive and intelligent man. What he does is done on purpose and with intent.

Mr. Alexander filed his income tax returns for 1986 and 1987 knowingly and intentionally. The Minister of National Revenue has satisfied the onus of proof upon him in respect to the penalties and they are confirmed subject to reduction in accordance with the previous findings of the Court in respect to the personal expenses already dealt with in this judgment.

The assessments for 1986 and 1987 are therefore referred to the Minister of National Revenue for reconsideration and reassessment, to be recalculated on the basis of the determinations contained in this judgment, both as to the assessments themselves and as to the penalties.

Appeal allowed in part.