Giovanni Marinelli v. Minister of National Revenue, [1982] CTC 2400, 82 DTC 1378

The Chairman [TRANSLATION]:—The appeals of Mr Giovanni Marinelli are from assessments for the taxation years, 1972 to 1976 inclusive, in which the respondent added to the taxpayer’s income certain amounts that had not been included in the appellant’s returns, namely:

$245 for 1972

$690 for 1973

$790 for 1974

$1125 for 1975 and

$315 for 1976.

Moreover, under subsection 163(2) of the Income Tax Act, the Minister assessed a penalty for each of the years at issue.

In his notice of appeal and at the hearing, the agent of the taxpayer contended that the appellant had completed his tax returns in accordance with the T-4 forms supplied by his employer for each of the relevant years. He thus concluded that the Minister erred in assessing the penalties, since there could be no question of a serious error on the part of the appellant.

For his part, the respondent contended that the appellant knowingly participated in, consented to and acquiesced in the filing of income tax returns in which certain amounts of income received by the appellant during each of the years in question had not been reported, and he maintained that the assessing of the penalties was justified.

The appellant further emphasized in his pleading that he had not been given an opportunity prior to the hearing to examine the figures on which the respondent relied in reassessing the appellant. The appellant’s agent deemed it necessary in this case to file as Exhibits A-1 and A-2 two letters which really have no bearing on the decision that the Board must make.

The Board is charged with examining only such facts and figures as are presented to it by the parties during the hearing, provided that they are relevant to the issue. The Board, in delivering its judgment, is not obliged to consider the possibility of a misunderstanding or a lack of co-operation between the parties before the hearing of their case.

None the less, it would be unacceptable for the parties to be forced to appear before the Board in order to learn what points of difference are separating them. It is customary, both in tax appeals and in civil or criminal cases, for the necessary steps to be taken on both sides to ensure that the issue is clearly established between the parties before it is submitted to the Board for adjudication. This, it seems to me, constitutes an elementary though essential condition to the proper functioning of any judicial tribunal.

In the case before us, the appellant, Mr Giovanni Marinelli, called as a witness Miss Carmen Meagher, an audit accountant with the Department of National Revenue; he also testified on his own behalf.

In the circumstances of this appeal, a brief statement of the facts should suffice since, according to the evidence submitted by the respondent, the appellant admitted that he had received from his employer additional remuneration that had not been included in his income for the years in question.

During the relevant taxation years, the appellant was in the employ of Les Plâtriers Modafféri Inc (“Modafféri”). The appellant and other Modafféri employees were paid a weekly wage in the form of a cheque for the regular hours they worked. These cheques were entered in Modafféri’s books and the statutory deductions were made and entered on the cheque stubs. The T-4 form accurately reflected the total of regular wages received by the appellant for each of the years in question (Exhibit I-8). In his tax returns (Exhibit A-5), the appellant entered as income the salary amounts appearing on the T-4 forms.

While the appellant did not seem to be blessed with a prodigious memory, he did admit that in addition to his regular hours of work he worked overtime hours. He recalled that he received his cheque with a cheque stub for his regular work each week and that on occasion he received additional cheques. He did not recall if the regular cheques were signed by the accountant, but testified that the additional cheques were signed by Mr Modafféri himself and did not come with a cheque stub. He stated that his tax returns were completed by a neighbour who was also a lawyer, but added that it was his wife and not he himself who gave the lawyer the information required for the tax returns. None of the tax returns was signed by the lawyer who had prepared them.

From the testimony given by Mr Modafféri, the appellant’s employer and witness for the respondent, it appears that the appellant and other employees informed him that they were paying too much tax and they demanded that no tax deductions be made in respect of the overtime they were working. Mr Modafféri confirmed that he made no deductions from the wages paid in respect of overtime worked by the apellant and the other employees; that he made no entry in his books; and that it was he and not his accountant who signed the overtime cheques.

The respondent filed as Exhibits I-1 to I-6 inclusive the cheques made out to the appellant by Mr Modafféri, from which no deduction has been made. The total of these cheques corresponds with the amount added by the respondent to the appellant’s income for each of the years in question (Exhibit I-7).

The evidence that the appellant received income that he did not report during the relevant taxation years is clear and is, moreover, admitted by the appellant.

There now remains the issue of deciding whether the assessing of the penalties was justified. It is at this point that the respondent must assume the burden of proof and establish that subsection 163(2) of the Act is applicable.

In the examination of the appellant, it was evident to me that while he was reluctant to answer questions, he did admit that he received income for the overtime work he performed. It was the appellant who endorsed the regular cheques with cheque stubs and the cheques without stubs signed by the Modafféri. I find it very difficult to accept that the appellant did not realize that no deductions were made in respect of the additional wages.

The appeal before the Board is that of Mr Marinelli and not that of Mr Modafféri or the lawyer who completed the appellant’s tax returns. Having admitted that he had received income that he did not report in the relevant years, the evidence, in my opinion, demonstrates that not only was the appellant aware of this fact, but also that he participated and acquiesced in an arrangement between the employer and the employees whereby no income tax was deducted from their overtime wages. The evidence as a whole submitted by the respondent on this matter is more than sufficient to justify the imposition of penalties.

For these reasons, the appeals are dismissed.

Appeals dismissed.