Sureyya Kaya v. Minister of National Revenue, [1982] CTC 2751, 82 DTC 1794

The Chairman:—The appeal of Sureyya Kaya is from an assessment with respect to the 1976 taxation year. The appellant declared a total income of $7,696 in her 1976 tax return. By notice of reassessment, the Minister added to the appellant’s declared income an amount of $23,920 on the basis that the appellant had purchased a term deposit of $12,000 on January 30, 1976 and in March 1976 had made net deposits in the amount of $11,920 in her account at the Bank of Montreal in Ottawa. The appellant contends that the $23,920 was not income but money which belonged to her brother Bill Kaya which he had sent to her from Iran to be deposited in her account.

Facts

The issue is one of fact and the credibility of the witnesses is a significant factor in its determination. Prior to 1976 the appellant, of Turkish origin, lived and worked in Montreal, Quebec and had a bank account at the Toronto Dominion Bank in Montreal.

At the end of 1975 or the beginning of 1976, the appellant came to Ottawa and lived with her brothers Feyyaz Kaya and Feridun Kaya, partners in Kaya Enterprises. She returned to live in Montreal in March 1976. While in Ottawa, she opened a bank account in her own name at one of the branches of the Bank of Montreal, Prince of Wales Drive.

The appellant alleges that at the beginning of 1976 she received by mail cheques from her brother Bill who was then in Iran. The cheques, some of which were from an American source, were made payable to Bill Kaya, allegedly from Bill Kaya’s business partners. To avoid the delay in having Bill Kaya’s endorsement before the appellant could deposit the cheques in her account, it is alleged that Bill Kaya gave instructions to his partners to make future issuance of cheques payable to the appellant.

In his testimony, Mr Bill Kaya contends that the source of the money sent to the appellant in Ottawa arises from two agreements, one dated December 18, 1975 (Exhibit A-3) and the other dated March 9, 1976 (Exhibit A-4). The combined effect of the agreements was that Bill Kaya, a geologist, was a participant and the manager of a project involving eight petroleum engineers in mineral explorations in Honduras. The eight petroleum engineers, working associates of the appellant in an American oil refinery in Iran, each had to pay an initial $1,000 in cash as of mid-December 1975 and $4,000 at the end of January 1976 to participate in the project. Bill Kaya did not make any cash investment and the total amount raised by the partners was $40,000. In an unsigned expense account attached to Exhibit A-4, allegedly dated March 9, 1976, the expenditures for the project were calculated to be $15,100, leaving a balance of $24,900. An additional expense account to the end of December 1976 was produced as Exhibit A-5.

In his testimony, Mr Kaya stated that the moneys received from the partners were not deposited in trust or even in his own bank account but were sent to his sister, the appellant, who deposited them in her personal account in Ottawa. The purpose, according to Mr Kaya, was to pay for Canadian know-how in the field of mineral explorations and, according to Mr Kaya, the partners had agreed that the payment for their participation would be deposited in the appellant’s personal account.

The evidence as to the number of cheques received by the appellant, is unclear. The appellant, whose memory was at best generally faulty, claimed she received eight $4,000 cheques. Bill Kaya, on the other hand, claimed he sent six $4,000 cheques, two of which were in American funds. The period of time in 1976 during which the cheques, made payable to Bill Kaya, were received by the appellant and deposited, is also unclear because of the time required to have cheques returned to Iran for Mr Kaya’s endorsement before the appellant could deposit them in her personal account. On being asked where she obtained the $12,000 for the term deposit she made in January 1976 in the Bank of Montreal in Ottawa, the appellant answered that it must have come from her personal account at the Toronto Dominion Bank in Montreal.

There are contradictions between the evidence given by the appellant and that given by Bill Kaya as to the extent of the role played by the appellant in the management of her brother’s financial affairs in Montreal. The appellant states she had always looked after her brother’s financial affairs, depositing his money in her personal bank accounts in Montreal and making necessary payments on his behalf. Bill Kaya, who had been away from Canada for an extended period of time, claimed that prior to 1976 he occasionally sent money to his sister and trusted her implicitly to use it on his behalf. There is no evidence however that Bill Kaya had $12,000 in the appellant’s personal account in January 1976 and no explanation of why it became necessary to transfer the $12,000 to Ottawa when Bill Kaya’s business affairs were, according to the evidence, in Montreal.

Serious contradictions also exist in the amounts that would have been spent on the procurement of what was referred to as Canadian know-how. For the appellant, who alleges to have paid the bills related to her brother’s project in 1976 and in 1977, (at least until her brother’s return to Canada in 1977), claimed she paid amounts of $250 to $300 for telephone calls, maps and mining books. Bill Kaya seemed unaware of these expenditures and spoke of contracts with Canadian firms for amounts ranging from $40,000 to $50,000 in years subsequent to 1976. All of which does not explain the appellant’s term deposit of $12,000 in January 1976 nor the deposits of $11,920 she made in her personal bank account in March 1976.

The appellant filed as Exhibit A-1 a letter dated January 29,1982 from the manager of the Bank of Montreal, Prince of Wales Drive in Ottawa, which indicates the date at which large deposits were made in the appellant’s bank account and the date of withdrawals. The earliest deposits that appear were made on March 3, 1976. The letter also refers to some moneys which the appellant had loaned Kaya Enterprises owned by her two other brothers, Feyyaz and Feridun, as early as March 8, 1976. In a note dated March 4, 1981 and filed as Exhibit A-2, the appellant claims to have loaned $21,000 to her two brothers during the 1976 taxation year.

On file as Exhibit A-10 is a cheque dated February 14,1976 signed by Mrs James Lawrence, made payable to William M Kaya, as well as a statement sworn before a Notary Public that Mrs James Lawrence was one of a group that gave Mr Kaya $5,000 for an interest in mining properties in Central America.

Althought I can accept, on the basis of the evidence, that substantial amounts of money were paid to Mr Kaya by persons interested in participating in mining claims, I find it very difficult to accept that moneys so received were not spent in relation to the mining project. Mr Kaya testified that the $15,000 expenses he incurred with respect to the mining project (attached to Exhibit A-4) had been paid for out of his own pocket. All the moneys Mr Kaya received from his partners are claimed to have been deposited in the appellant’s personal bank account. Whatever degree of confidence that may exist between the members of a family of Turkish origin, as suggested by the appellant and Mr Kaya, would not normally be shared by business partners.

Both the appellant and Mr Kaya were familiar with normal business practices in Canada. No reasonable explanation was offered as to why the moneys received by the appellant from her brother had not been deposited in a trust account, separate from the appellant’s personal account.

The appellant’s affirmation dated March 4, 1981 (Exhibit A-2) to the effect that $21,000 had been loaned to her brothers Fayyaz and Feridun (Kaya Enterprises) in 1976 is not pertinent to the issue. While Exhibits A-1 and A-2 refer to loans made to Kaya Enterprises as early as March 8, 1976, it does not establish that Bill Kaya was the owner of the funds loaned. The evidence is that Kaya Enterprises borrowed the money to open a night club in Ottawa. In his testimony Bill Kaya declared he had no shares or any interest in the night club. The loan was alleged to have been paid back subsequently but there is no evidence as to whom the moneys were repaid. Neither Feyyaz nor Feridun Kaya was called to testify with respect to the loan.

Conclusion

There is evidence which establishes that the appellant’s brother was involved in a mining project with eight partners. There is hard evidence that one of the partners, Mrs Lawrence, issued a cheque on February 14, 1976, payable to William Kaya, in the amount of $4,000 (Exhibit A-10).

There are letters written by William Kaya to three different banks, dated June 6, 1982, In which Mr Kaya seeks confirmation from the banks that various partners had issued cheques, either in his name or in his sister’s name, which she deposited in the Bank of Canada in Ottawa (Exhibits A-7, A-8 and A-9). No confirmation by the banks of such transactions (other than the Lawrence cheque) was obtained.

In objecting to and appealing from the Minister’s assessment, it is not sufficient for the appellant to state that the assumptions on which the Minister based his reassessments are wrong and the the purchase of a term deposit of $12,000 and the net deposits of $11,920 In her personal account in 1976 were moneys her brother had sent her. The appellant must establish that the money deposited in her bank account was not hers. This she failed to do. The appellant’s lack of memory of important facts; the unusual cir- cumstances surrounding the opening of a bank account in Ottawa; the possible transfer of $12,000 from her bank account in Montreal to her Ottawa account; the closing of the Ottawa bank account after three months; the deposits of moneys, which she alleges are not hers, into her personal bank account; and her brother’s alleged treatment of moneys received from his partners in the mining project do not convince me that the Minister’s assessment was based on an erroneous assumption and the appellant did not establish that the funds in her bank account in 1976 were not hers.

For these reasons, judgment will go dismissing the appeal.

Appeal dismissed.