Circumstances not sufficiently extreme to justify Minister’s onerous penalties

Tax - Income tax - Administration and enforcement

Taxpayer worked as taxi driver, reporting net business income of $8,985, $12,243 and $5,33 for taxation years 2011, 2012 and 2013 respectively. CRA’s net worth audit led to reassessment adding unreported income of $42,470, $29,203, and $5,333 in years at issue and imposing gross negligence penalties of $2,696, $1,411 and $2,492. Taxpayer appealed. Appeal allowed in part. Taxpayer received benefit of some cash gifts additional to those recognized by CRA auditor, particularly from his two sons-in-law. Son-in-law H contributed at least 75 per cent of amounts that he testified to contributing, or $2,745 in 2011, $11,734 in 2012 when he had markedly higher income, and $1,568 in 2013 taxation years, while son-in-law S’s contribution was more likely in area of $450 per month for last year in issue. As S was part-time student, he likely contributed less than estimate of $600-$1000 monthly especially as he had not yet married taxpayer’s daughter. Sons-in-law gave cash gifts to actual and prospective in-laws due to cultural traditions and kindness, and familial financial transactions were often not documented to extent expected in arm’s length dealings. Modest amounts of non-documented cash gifts would also be accepted from daughters. Friend’s payments for wife’s home-cooked meals were just to defray food costs, and would be accepted as being in order of $700 for each year. As no evidence was heard from wife’s brother or uncle about purported gifts, Minister’s position on their contributions would not be disturbed and nothing could be done to include consideration of credit card. Considering small number of hours that taxpayer worked, he could not have driven enough to have earned unreported income found by auditor. Circumstances were not sufficiently extreme to justify Minister’s onerous penalties.

Owda v. The Queen (2019), 2019 CarswellNat 511, 2019 CarswellNat 641, 2019 TCC 46, 2019 CCI 46, B. Russell J. (T.C.C. [Informal Procedure]).

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