Tax Court of Canada


830480 Alberta Inc. v. Canada


Appellant failed to treat tax compliance obligations as priority

Appeal by taxpayer from late filing penalties. Appellant land development company filed 2003 tax return, due April 30, 2004, in November 2004 declaring no net income and no tax payable. Appellant filed amended return for 2003 in November 2008 declaring income of $292,232 and tax payable of $28,659. Appellant filed 2006 tax return, due April 30, 2007, in August 2009. Appellant assessed late filing penalties of $3,152 for 2003 and $216,479 for 2006. Appellant also assessed late GST filing penalties for various periods. Appellant’s sole shareholder testified 2003 return not filed in timely manner because loss anticipated and appellant had unused non-capital losses from previous years to offset any income. Witness erred in anticipating loss as result of failure to consider “soft expenses” not deductible from income. Witness testified 2006 return also not filed in timely manner because of anticipated loss, but could not explain how income underestimated by $5.8 million. Witness provided similar explanation for failure to file returns and remit GST in timely manner. Appeal dismissed. Issue whether appellant exercised requisite level of due diligence in relation to filing various returns within time required. In circumstances, proof of due diligence required proof of reasonable mistake of fact. Taxpayer could avoid late filing penalties if able to establish, on balance of probabilities, reasonable grounds to believe no tax owing. Witness’s evidence fell short of establishing reasonable grounds on both subjective and objective tests. Court satisfied appellant had simply failed to treat tax compliance obligations as priority.

(Dec. 3, 2012, T.C.C., Hogan J., File No. 2010-3252(IT)G; 2012-115(GST)I) 221 A.C.W.S. (3d) 757.

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