The appellant, a real estate brokerage firm, determined (based on agreement between its two employees) that the remuneration paid to them would be allocated as to $165,000 and $192,000 to Mrs. and Mr. Sutton, respectively. CRA noted that all but $12,675 of such remuneration had been deposited into the bank account of Mr. Sutton, considered that all of such deposits to his account were remuneration received by him, and imposed a late source-deductions remittance penalty under s. 227(9) on the appellant regarding its computed under-remittance.
After finding that Mrs. Sutton had constructively received at least a portion of the funds deposited into her husband’s account, Gagnon J stated (at para. 26):
[A]lthough this Court cannot confirm the exact remuneration received by Mrs. Sutton, and indirectly by Mr. Sutton, it remains clear that the remuneration used by the CRA to assess the penalty is incorrect.
After having noted (at para. 10) that “the Crown bears the onus for the penalty,” and in reversing the penalty, Gagnon J stated (at para. 28):
The role of the Court is to determine whether the penalty was either validly imposed or not. …. And adjusting the quantum of a given penalty would be beyond the jurisdiction of this Court. On that basis, it is determined that the evidence in the present case does not support that the conditions to levy the penalty as determined by the Minister have been established. In fact, the remuneration received by the employees and used by the Minister to assess the penalty is incorrect and necessarily result in an erroneous penalty.