Alan Zhuang v. Her Majesty the Queen, [1996] 3 CTC 2886 (Informal Procedure)

Sobier J.T.C.C. (orally): — The Appellant in this proceeding filed his Notice of Appeal with the Court apparently on or about January 29th, 1996 because there is a document called “Notice of Appeal, informal procedure” signed by Mr. Zhuang dated November 10th and received by us on January 29th. This is the Notice of Appeal. There is another Notice of Appeal — there is another document given to a local member of parliament in September 1995 and another document headed “Notice of Appeal, informal procedure” dated the 13th of November, 1995 which does not appear to have been — I beg your pardon, which appears to have been filed by fax on November 13th and this is a typewritten document.

In any event, The Tax Court of Canada — may I have the court file, please — The Tax Court of Canada forwarded by its records the Notice of Appeal to Revenue Canada on February 6th, 1996. Under the provisions of The Tax Court of Canada Act, section 18.16, “the Minister shall file a Reply to a Notice of Appeal within sixty days after the date on which the Registry of the Court transmits that to the Minister of the Notice of Appeal.” Accepting February 6th, 1996 as the date on which the Notice of Appeal was forwarded to Revenue Canada, Revenue Canada should have filed its Reply with The Tax Court of Canada on or before April 6. The Reply was in fact filed with The Tax Court on April 4th as witness the signature of a Registry Officer here in Toronto. That Rule 18.16 tells when the document was to be filed with The Tax Court and that is within sixty days, which it was. The Rules further state — where are we here?

MR. YASKOVICH: Section 6(2), Your Honour, of the Informal Procedure.

THE COURT: No. Of the Act.

The Rules subsection 6(2) that the Minister must — “After five days after the Reply is filed, the Minister of National Revenue shall serve a copy of it by registered mail addressed to these Appellants or service of documents.”

As counsel for the Minister has pointed out, there is no sanction for late serving as there is for late filing and on that basis, I am not authorized to grant the sanctions for late service as I am for late filing and that sanction is to have the facts contained in the Notice of Appeal taken as being true.

Therefore, Mr. Zhuang, the motion — first of all, I cannot grant any motion to allow the appeal without it being heard and therefore I am going to deny your motion and the appeal will proceed, but I’m also very very upset with the lack of any real concern on the part of Revenue Canada in dealing with this matter. They have known for sometime and I cannot say when but they have known for sometime that they were late and that it was Mr. Zhuang’s intention to attempt to make them pay for this lateness. They have completely, in my opinion, ignored him requiring him to bring this motion today. They did not try to prop up their filing or their service. It turns out now they needn’t have done so but I find that they have not been more — they’ve been less than forthright and speedy in their dealings with Mr. Zhuang.

Mr. Zhuang, although your motion to have the appeal allowed earlier in the hearing is denied and I am not given the opportunity or the power to — as I would if they had not filed the document on time to give the relief of permitting your statements of fact contained in the Notice of Appeal to be taken as true, so we’re on with the appeal, Mr. Zhuang. Thank you.

Mr. Zhuang, I’m going to try and be as clear as possible about this. In Canada we have what is known as a “self-assessing system” and that’s where a taxpayer puts down on paper in accordance with the provisions of the Income Tax Act what he earned in the business and what he spent in that business to earn that income. It’s call “self-assessing.” The Income Tax Act has rules. One of the rules is you can’t deduct something from income unless it’s permitted by the Act. And generally speaking what it says in 18(1) is no amounts can be deducted from income except for the purpose of earning that income. The system in Canada relies on the honesty of the people in reporting all of their income to the Government and reporting all of the legitimate expenses to the Government. It’s not for the Government to go through your shoe box and take your receipts and sort them out for you. It’s a “self-assessing system.” I have to report my income every year. Counsel has to report his income. The people at the back of the room have to report their income. It’s a given that you know more about your business and your life than they do. Therefore, it’s up to you to report your income and your taxable income, everything else in accordance with the Income Tax Act. It’s not for them to come into your house and say “Show me your books. We’ll tell you how much you owe us.” It’s not for them to do that. When you do send in your income tax return, they look it over and they ask you to justify the expenses on one hand and they ask you to report all of your income. “Don’t hide any income from us. Give it to us all. If you hide it, we’ll punish you for this. But tell us what you spent?”

Now, the law allows the Minister of National Revenue to make assumptions of facts upon which he based his assessments of your income tax. They’re set out in this Reply. Unless you show me either that he didn’t use those assumptions or that the assumptions were wrong or that even based on the fact that he made the assumptions they still couldn’t support the assessment, you’re going to lose. That’s how the tax system works. The Government doesn’t have to prove what it did was right. You have to prove what the Government did was wrong and that’s called an “onus of proof.” You have an onus upon you. You’re saying, “Hey, I’m going to tell you that those expenses I claimed were right because so much was for gas and I’ve got a receipt for it. So much was for entertainment and I’ve got a receipt for that. So much was for postage. So much is for rent. So much is for automobile.” You can’t — the taxpayer just can’t say - I mean he doesn’t have to keep perfect records. He can swear under oath that he spent the money but what we have here is the fact that I gather you didn’t even file an income tax return on file.

MR. ZHUANG: Yes. I was late.

THE COURT: Yeah. And they said to you “Come on. File.”

MR. ZHUANG: Yes, I did.

THE COURT: Then you filed and they just didn’t like what you said.

MR. ZHUANG: Huh-uh.

THE COURT: So they assessed you and from that point on, it’s up to you to say where they made a mistake. It’s not up to them. This is our system. I don’t know why it sounds unfair with all their bureaucracy, as you say, that they make you prove but you’re the one with the knowledge of the facts. You have the receipts, not them.

MR. ZHUANG: Yeah, but I gave them everything.

THE COURT: But I’m saying to you it’s your responsibility to come to Court today and show me that they were wrong. What you have done today is come to Court and tell me where they’ve been a bad bunch of people and treated you badly. I’m sorry for you and I apologize for them. Cause I’m not a member of Revenue Canada, if you’ve been sadly abused, I can’t apologize for them. I know not everybody is treated the same way at Revenue Canada but this is a Court, The Tax Court of Canada and I am required by law to interpret and enforce the Income Tax Act as it was written. I can’t punish Revenue Canada. I cannot make them come forward and explain things to you. And I can’t change the Income Tax Act. I can’t give you what is called “equitable relief.” I can take a look at your appeal and I can take a look at the Reply and I listen to your evidence. And if your evidence that you give to me refutes and destroys or demolishes their assumptions of fact, you win. But what you’ve come today to do is you have not refuted, demolished or destroyed any of their assumptions. That was your responsibility. That’s your duty to do before this Court. Your responsibility in a tax appeal is to demolish — and one of the old judges used to use the word “demolish” and “destroy.” It’s very hard language but that’s what your job is. You haven’t done it. So, on that basis, sir, I’m going to have to dismiss your appeal. You have not fulfilled the onus that was put upon you to show what the Minister did was incorrect. Thank you very much, sir. We’ll take a five-minute recess.

Appeal dismissed.