Tarsem L Kapal v. Minister of National Revenue, [1980] CTC 2083, 80 DTC 1085

The Chairman:— This is the appeal of Mr Tarsem L Kapal from an income tax assessment in respect of the 1975 taxation year. In his tax return, the appellant claimed an amount of $3,158 as payment for dependants in India, particularly his father-in-law, his mother-in-law and his sister-in-law. Of that amount, the respondent disallowed an amount of $2,100 and, further, by a reassessment dated September 13, 1977 imposed a penalty of $150.23.

In support of his claim, the appellant states that the amount of his monies claimed in his 1975 tax returns were in fact paid to and received by his dependents in India and in support of that, he has filed an affidavit Signed by Chandi Lal Kalia, Chand Rani Kalia and his four daughters, as well as T L Kapal. However, the appellant also stated that these people, all these dependants are now in Canada and would have been available to appear at this Hearing.

The evidence given by Mr Kapal is at large testimony evidence. I have accepted as an exhibit the affidavit. I would have by far preferred to have seen the dependants.

On the other hand, the respondent questions the receipts relative to an amount of $2,100, which were issued by a company known as Punjab Express Foreign Services and the reason for questioning those receipts was that in August of 1976 a special investigating officer, Mr Douglas Day, had examined the tax affairs of Mr Johal, owner of the Express Service and in the course of his examination and investigation, it appeared clear that false receipts were issued by that company which received from 2 to 5% for alleged sums transferred.

A search warrant was issued and all the records were seized and examined, but it appears that there were receipts issued by that company in the amount of $4,500,000 in the years 1974,1975 and 1976. Of those receipts and according to the investigation made from the records of Punjab Express, which is entered as Exhibit R-1, only 14,000 receipts in the amount of $500,000 were registered as having been actually transferred to India.

The owner of Punjab Express was called as a witness. He stated that the evidence given by Mr Day was true and that there were, according to his records, indications that false receipts had in fact been issued to people, on a percentage basis.

As far as Mr Kapal is concerned, nowhere in the records (Exhibit R-1) is it indicated that the amount of funds were actually transferred to India; nowhere in those records is the name of Mr Kapal found; nor any amount registered as having been forwarded to India on Mr Kapal’s behalf.

Mr Johal claims that he is not aware of whether or not Mr Kapal paid his employees money, but he did state under oath that he did not receive from his employees or Mr Kapal any amount of money, and that he had not transferred any amounts of money to India on Mr Kapal’s behalf.

The question of credibility is certainly in issue. It is, I think, necessary for an appellant who comes before the Board to give proof of what he advances and to rebut any proof to the contrary. In this particular instance, Mr Kapal did not in any way validly rebut the evidence given by Mr Day and Mr Johal and the witnesses testified that false receipts were given by Punjab Express Foreign Services.

According to the evidence, whether or not Mr Kapal may have paid the employees of Punjab, the Board is satisfied that Mr Johal did not receive that money, nor did he transfer any money to India. So the question of credibility comes in when the appellant claims with an affidavit that the monies were received by the dependants and the monies to which he refers are those which are included in the receipts. The amount that are included in the Punjab receipts are amounts which Mr Johal claims he did not receive nor did he transfer to India. The credibility of the taxpayer is seriously questioned by the Board.

I am satisfied on the basis of the evidence before me that the assessment made by the Minister is proper. I am also satisfied that the penalty imposed by the Minister is proper and I have no alternative but to dismiss Mr Kapal’s appeal.

Appeal dismissed.