Adusei v. R., [1999] 4 CTC 2136 (Informal Procedure)

Dussault T.C.J.:

These appeals were heard on common evidence under the informal procedure. According to the Reply to the Notice of Appeal, the appellant Bamfo K. Adusei is claiming $12,000! [1] in child care expenses for his 1993 taxation year. The appellant Elaine M. Adusei is claiming $11,000 in child care expenses for both her 1994 and 1995 taxation years. The deduction of the expenses claimed was refused to both appellants.

The appellants are married and have three children, who were born on July 19, 1981, December 21, 1983, and March 10, 1989.

In assessing the appellants, the Minister of National Revenue made the following assumptions of fact set out in paragraph 10 of each Reply to the Notice of Appeal:

(a) the expenses were not incurred and the alleged payments thereof were not proven by the filing of appropriate receipts with the Minister;

(b) if incurred, the expenses were not incurred as Child Care Expenses.

The respondent also alleged the following in paragraph 3 of the Reply to the Notice of Appeal of the appellant Bamfo K. Adusei:

3. He admits that the Appellant provided the name and the Social Insurance Number of an individual who allegedly provided child care services to the Appellant during the 1993 taxation year and that the Appellant submitted a photocopy of a receipt for the child care expenses he claimed to have incurred in 1993. He also states that the alleged baby sitter, during an interview with the Revenue Canada’s Auditor, denied providing at any time child care services to the Appellant, and was not the person who signed the receipt.

Paragraph 3 of the Reply to the Notice of Appeal of the appellant Elaine F. Adusei for the 1994 and 1995 taxation years is to the same effect.

The appellant Bamfo K. Adusei testified. Cesar Montaniel, who audited the deductions claimed by the appellants, inter alia for child care expenses, testified for the respondent.

According to Mr. Adusei’s testimony, he and his wife were looking for a babysitter for their children and so put up advertisements at a number of bus stops near their home. A friend of theirs, Veronica Johnson, saw the advertisement and told them that she knew a woman who could look after their children. She put them in touch with that woman, whose name was Cennick Harry. The appellants hired her as a baby sitter after asking for her social insurance number. Mr. Adusei stated that she worked weekdays from 8:00

a.m. to 4:30 p.m. during the school year and that he paid her $300 a week cash. He said that she did not work during the summer. As we shall see, that version was subsequently changed.

Mr. Adusei filed in evidence the receipts he says he provided during the audit (Exhibits A-2, A-3 and A-4). He said that they were prepared by the baby sitter herself and given to the Aduseis by her. He stated that he never gave Revenue Canada any other receipts. According to Mr. Adusei, he has no other documents or records proving the payments since they were all made in cash.

Exhibit A-4 relates to the 1993 taxation year. It reads as follows:

Receipt

Received from Mr. & Mrs. Adusei the sum of Twelve Thousand & Five Hundred Dollars (12,500.00) being the cost of babysitting their three (3) children from January 4th 1993 - December 31st 1993.

Dated at Toronto this 21st day of January 1994.

[signature]

CENNICK HARRY

SIN xxx-xxx-xxx

3235 Dundas St. W.,

Toronto, Ontario.

Exhibit A-2 relates to the 1994 taxation year and reads as follows:

Receipt

Received from Mr. & Mrs. Adusei the sum of Eleven Thousand & Five Hundred Dollars ($11,500.00) being the cost of babysitting their three children from January 31st - August 1994.

Dated at Toronto this 20th day of January 1995.

[signature]

CENNICK HARRY

SIN xxx-xxx-xxx

3235 Dundas St. W.,

Toronto, Ontario.

Finally, Exhibit A-3 relates to the 1995 taxation year. It reads as follows:

Receipt

Received from Mr & Mrs Adusei the sum of Twelve Thousand dollars ($12,000) being the cost of baby sitting their three children from January to December, 1995.

Dated at Toronto this 31st day of December 1995.

[signature]

Cennick Harry

xxx-xxx-xxx

3235 Dundas St. W.

Toronto, On.

In cross-examination, counsel for the respondent pointed out to Mr. Adusei that the 1994 receipt (Exhibit A-2) indicates that the babysitter worked until August 1994 and that she therefore worked during the summer as well, for a total of eight months that year. Mr. Adusei thereupon stated that she had indeed worked part of the summer of 1994. He added that the children were still too young at that point and that she had in fact looked after them. He said that it was actually in 1995 that she did not work during the summer. He added that his wife, who is a nurse, was at home during the day from September to December 1994 and that she worked either evenings or nights during that period.

When asked to explain the fact that the 1994 receipt for $11,500 covers only a period of eight months whereas the 1995 receipt, for $12,000, is for the entire year, Mr. Adusei stated that the babysitter was paid extra in 1994 for weekends, as he and his wife had to work. He said that he worked every other weekend and that his wife also worked weekends, although he did not provide any further details. Mr. Adusei also said that the babysitter did not work during the summer of 1995. He further stated that she did not work for four weeks in September while he was on vacation in Jamaica with his wife and children. He added that during that period the children were away from school for three weeks.

Mr. Adusei said that he met with the Revenue Canada auditor three times in 1996. At the last meeting, the auditor told the appellant that the individual who allegedly provided the child care services was in fact a male. He said that the auditor then asked to meet the person Mr. Adusei claimed was his children’s babysitter.

Mr. Adusei testified that he subsequently saw the baby sitter again when he had her come to his home on the pretext of employing her once more. He asked her to meet the Revenue Canada auditor. She refused, saying that she did not have time. He then asked her for her social insurance card, which he kept and filed in evidence at the hearing (Exhibit A-5).

Following those events and in spite of that evidence, Mr. Adusei never contacted the auditor again and never took any further action. He testified that he had not seen the woman since then and that she never asked for her social insurance card back. Mr. Adusei said that she simply disappeared. The social insurance card that Mr. Adusei had and that he filed in evidence is indeed in the name of Cennick Cosmore Harry, and it bears the number XXX xxx xxx.

Mr. Adusei gave a different account of things in his Notice of Objection dated February 25, 1997, in which he stated the following:

The auditor’s demand that we come to his office with the said Cennick Harry seems unreasonable because we have tried all we could to contact her to no avail. Moreover, there is no obligation on this individual or anyone else to provide forwarding address if they quit or are terminated from their job.

Cesar Montaniel, a Revenue Canada auditor in 1996, testified concerning his audit of the expenses claimed by the appellants, and in particular the child care expenses.

He stated that he had sent the appellants an initial letter asking them to provide him with documents to support the claimed expenses and informing them that the deductions would be disallowed if he did not receive the documents within 30 days. Since he did not receive the requested documents within the time indicated, he sent the appellants a second letter telling them that the deductions had been disallowed. According to him, it was only then that Mr. Adusei came to his office and handed him the receipts that have been filed in evidence (Exhibits A-2, A-3 and A-4).

However, Mr. Montaniel said that he did not remember whether at that time Mr. Adusei gave him, or whether he saw, another receipt that is part of the record and that relates to child care expenses for the 1993 taxation year. That receipt (Exhibit R-1) reads as follows:

Receipt

Received from Mr. & Mrs. Adusei the sum of Twelve Thousand Dollars (12,000.00) being the cost of babysitting their three (3) children from January - December 1993.

Dated at Toronto this 4th day of January 1994.

[signature]

CENNICK HARRY

SIN xxx-xxx-xxx

3235 Dundas St. W.,

Toronto, Ontario.

Without a doubt, that receipt was signed by the same person who signed the receipts filed as Exhibits A-2, A-3 and A-4.

Two different receipts were thus submitted to Revenue Canada for the 1993 taxation year: one for $12,000 (Exhibit R-1) and another for $12,500 (Exhibit A-4). According to the explanations given subsequently by Mr. Adusei, he completed Form T778 (E) Rev. 93, “Calculation of Child Care Expenses Deduction — 1993”, and sent it to Revenue Canada after being requested to do so. That request was evidently made prior to Mr. Montaniel’s audit, and the form filed at that time was accompanied by the receipt filed as Exhibit R-l (see Exhibit R-4).

Mr. Montaniel further testified that he audited the receipts submitted by the appellants and that he found that the individual identified as Cennick Harry was a man, whom he subsequently met with at his office. Mr. Montaniel asked him for identification. The individual gave him his social insurance card and his Health card, and Mr. Montaniel made a photocopy of each (see Exhibit R-3, 2nd page). The photocopied Health card is in the name of Harry Cennick Cosmore and bears the number xxxx xxx xxx. The photocopied social insurance card is in the name of Cennick Cosmore Harry and bears the number xxx xxx xxx. The photocopy of the social insurance card is in all respects identical to the card filed by Mr. Adusei as Exhibit A- 5, aside from the signature. The individual in question denied ever being a baby sitter for the appellants’ children and signed a declaration to that effect, which was filed as Exhibit R-3 (1st page). It reads as follows:

Nov 12 1996

I Cennick Harry did not received any money for Mr. and Mrs Bamfo and Elaine

1993	1994	1995
12,000.00	11.000 .00	11.000 .00
[signature]

I understand from Mr. Montaniel’s testimony that he did not go any further with his audit at that point. Thus, although Mr. Montaniel obtained the person’s telephone number and the name of the school he was attending, he does not remember whether he asked him for further proof of his identity, photo ID for example.

Mr. Montaniel stated that he then met with Mr. Adusei on November 22, 1996, to inform him of the above facts and tell him that he would be disallowing the deductions claimed for child care expenses and closing the file unless Mr. Adusei arranged a meeting for him with the person Mr. Adusei claimed was his children’s baby sitter. Mr. Adusei told him that he was unable to locate that person.

Mr. Montaniel said that he had no further contact with Mr. Adusei after that meeting.

Mr. Adusei argued that the deductions claimed for child care expenses should be allowed because he and his wife submitted the requisite receipts signed by the person who provided the child care services. According to Mr. Adusei, that person worked every weekday and also provided services on the weekends when he and his wife were working. He argued that he could not have known there was anything unusual and asserted that he obtained the person’s social insurance card when she refused to meet the Revenue Canada auditor. It was only then that he suspected something was amiss.

Counsel for the respondent argued that the deductions claimed by the appellants for child care expenses should not be allowed in view of the substantial number of inconsistencies in the evidence adduced.

First of all, he noted that Mr. Adusei submitted two receipts for different amounts for the 1993 taxation year (Exhibits A-4 and R-1).

Next, he pointed out that the $11,500 receipt for the 1994 taxation year (Exhibit A-2) while covering a period of only eight months is for an amount equivalent to that shown on the 1993 and 1995 receipts, which are for the entire year. According to counsel, Mr. Adusei’s assertion that the person in question also provided services on weekends cannot be accepted.

Counsel for the respondent maintained that the very identity of the person who provided the services also presents a problem and that Mr. Adusei’s testimony on this point was not very credible. Thus, although he knew the whereabouts of the person in question for a number of years both before and after the audit, he initially stated in his Notice of Objection that he was unable to locate her so that she could meet the Revenue Canada auditor. Yet, at the hearing, Mr. Adusei said that he had indeed seen her and that she had refused to meet the auditor, whereupon he asked her for her social insurance card, which he then kept without telling anyone.

Counsel for the respondent argued that, if there are any doubts with respect to the receipts, Mr. Adusei must adduce credible evidence to support his claims, which he has failed to do. He asserted that Mr. Adusei should have gotten the person he claims was the babysitter to meet the auditor or write him a letter or should have himself informed the auditor that he was in possession of that person’s social insurance card, which he did not do.

In conclusion, counsel for the respondent argued that Mr. Adusei had been unable to adduce any cogent evidence in support of his claims.

Counsel for the respondent referred to a number of decisions by this Court on the issue of whether or not a taxpayer must submit receipts in order to be entitled to the deduction in question. I do not consider it necessary to elaborate on counsel for the respondent’s arguments on this issue, since in this case the appellants did provide receipts. In actual fact, it is the authenticity of the documents provided and their content that are being challenged. In the final analysis, I believe that the appellants’ credibility is what is at issue in view of the documents submitted and the other evidence adduced.

In early 1993, the appellants’ three children were 11,9 and 3 years old. Two of them were therefore of school age, and we can assume that they were in school. We can also assume that they needed a baby sitter during the summer. For that year, Mr. Adusei submitted two receipts (Exhibits R-l and A-4) at two different times and for different amounts, namely $12,000 (Exhibit R-l) and $12,500 (Exhibit A-4). The first receipt (Exhibit R-l) covers the period from January to December 1993, while the second (Exhibit A-4) covers the period from January 4 to December 31, 1993. Hence both receipts are for a full year. Mr. Adusei testified that he usually took one month’s vacation. Thus, in 1995 he vacationed in Jamaica with his wife and children for four weeks. Assuming that the appellants took four weeks of vacation each year and that the babysitter was not paid during that time, she would have been paid for 48 and not 52 weeks a year. At $300 a week, her income should therefore have been $14,400. In fact, 10 or 12 weeks a year would have to be subtracted in order to arrive at the salary of $12,500 or $12,000 shown on the receipts. The figures are simply irreconcilable with the evidence adduced.

The 1994 receipt (Exhibit A-2) is for $11,500 for child care services from January 31 to August of that year. Whether or not August should be included is unclear. In his testimony, Mr. Adusei said that his wife was at home during the day from September to December 1994 since she was working either evenings or nights at that time. Thus, assuming that the babysitter was paid from January 31 until the beginning of August or from January 31 until the end of August 1994, she should normally have received either $7,800 (for 26 weeks) or $9,300 (for 31 weeks). I would point out here that the period involved is either six or seven months, depending on whether or not August is included, and not eight months as stated by counsel for the respondent, since the period indicated on the receipt did not begin until January 31, 1994. However, the receipt is for $11,500. Mr. Adusei testified that he worked every other weekend and that his wife also worked weekends, although he did not provide any further details in this regard, so that the babysitter was paid extra, although he did not specify how much extra. That explanation is not very credible since, unless otherwise indicated, one can assume that during the other years (1993 and 1995) the baby sitter would also have received more than $300 a week for the same reason. As the 1993 and 1995 receipts cover a 12-month period, it can be assumed that the total amounts received would have been even greater than $14,400 a year, which represents 48 weeks at $300 a week. Yet the receipts are in each case for an amount slightly higher than the $11,000 maximum allowed under section 63 of the Income Tax Act based on the children’s ages at the end of 1993, 1994 and 1995 (that is, $5,000 for the child under seven years of age and $3,000 each for the other two children).

The receipt submitted for 1995 (Exhibit A-3) is for $12,000 for the period from January to December 1995. Once again, if we subtract four weeks’ vacation, then, at $300 a week, the babysitter’s income should have been $14,400, not counting any additional amounts that may have been paid for extra work on weekends. As we know, Mr. Adusei testified that the baby sitter did not work during the summer of 1995. It may therefore be asked whether services were interrupted only during the four weeks in September when Mr. Adusei was on vacation in Jamaica with his wife and children or whether another eight or ten weeks should also be subtracted to take into account the school holidays. Mr. Adusei did not really provide any explanation on this point. Since the receipt does not indicate any substantial interruption of services lasting some 12 to 14 weeks but refers to a period running from January to December 1995, the above conclusion that services were interrupted only during the four weeks of vacation seems to be the most logical one. It is all the more so if one considers the fact that parents need child care services even more during the summer than they do during the school year.

Finally, I note that the T778 (E) Rev. 93 form appended to the return of the appellant Elaine M. Adusei indicates an amount of $11,200 as having been paid for 1995 (Exhibit R-5). This is not the same amount as that shown on the receipt.

In short, here again the explanations given are irreconcilable with the receipt submitted.

If we add to all of this the fact that Mr. Adusei made no effort to approach the auditor after the meeting of November 22, 1996, despite the events that he says occurred thereafter (namely that he saw again the person he says was his children’s baby sitter and took her social insurance card, which he kept until the hearing), I believe that his credibility can be seriously called into question.

Moreover, in the circumstances, I have no reason to doubt the credibility of the auditor, Mr. Montaniel, who met with an individual named Harry Cosmore Cennick, from whom he obtained two identity documents and some personal information.

In light of the evidence adduced, I have no choice but to dismiss the appeals of both appellants.

Appeal dismissed.