Guy Tremblay:—This case was heard in Saskatoon, Saskatchewan, on October 11, 1978.
1. Point at Issue
The point at issue is to know whether the amounts of $7,806.97 (1970), $4,846.22 (1971) and $10,777.50 (1972) are legally included in the revenue of the appellant (in trucking business) and whether the Minister legally imposed penalties on the appellant on the basis of gross negligence.
2. Burden of Proof
The appellant has the burden of showing that the respondent’s assessments were not justified. This burden of proof is based not on a particular section of the Income Tax Act but on several judicial decisions, among them a decision of the Supreme Court of Canada rendered in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.
3. Admissions of the Appellant
At the beginning of the hearing, counsel for appellant made admissions concerning different items so that the following amounts be considered as revenue:
| 1970— income not included | $3,649.34 | |
| 1971— income not included | $1,972.97 | |
| —unidentified cheques deposited | $ 51.25 | |
| 1972— unidentified cheques deposited | $ | 74.50 |
During the evidence, counsel for appellant admitted that penalties were well founded.
4. Admissions of the Respondent
After the evidence was given and before the arguments were presented, counsel for respondent made admissions so that the following amounts should not be considered as revenue:
| 1970— | Nil |
| 1971— manure trade | $ 500 |
| —unidentified cheques deposited | $1,500 |
| 1972— sale of one truck | $5,999 |
5. The Points in Dispute for 1970
5.1 Unidentified cheque deposited October 2, 1970—$207.63
It is a cheque issued by the Department of Welfare, Province of Saskatchewan, on October 1, 1970 to Nita Fertuck. According to the appellant, this cheque in the amount of $207.63 was given to him for a load of manure which cost $25. He reimbursed the difference to Mrs Nita Fertuck. This cheque has the same address as the appellant: 453 Avenue W South, Saskatoon, Saskatchewan. In his 1970 income tax return, he does not clearly show rent revenue. He declared revenue from many business sources in the amount of $10,290.60. In 1971, however, he clearly declared a rent revenue of $1,020. Since the address of the property is 453 Avenue W South, Saskatoon, Saskatchewan, ie the same address as the appellant in 1970, it is logical to assume that he received rent in 1970. It is plausible. that a tenant bought a load of manure.
The amount of $207.63 is allowed and must not be included in the revenue.
5.2 Unidentified cheque deposited October 5—$2,900
According to the appellant, that amount of $2,900 is part of the amount of $3,000 which is the price of a 1967 Dodge Tandem. On the bank deposit slip (Exhibit A-3), the amount deposited is $3,000: $2,900 in cheque and $100 cash. With his 1970 income tax return filed on March 16, the appellant annexed a schedule: ‘‘capital cost allowance 1970”.
On that document it is written on the second line:
’67 Dodge Tandem $4,624.14 (sold for $3,000).
On the same document the vehicles the appellant owned in 1969 are listed. The 1967 Dodge Tandem appears valued at $5,504.93. A depre- ciation of 16% was taken on that amount on December 31, 1969.
It is obvious to the Board that the document annexed to the 1970 income tax return filed in March 1971 confirms the appellant’s testimony made in 1978.
The amount of $2,900 is allowed and must not be included in the appellant’s revenue.
5.3 Unidentified cheque February 3—$400
According to the appellant, it would be rent together with something else. What is the part of the “something else” and the part of the rent?
For the party who has the burden of proof, it is not very clear. It is proven that in 1971 it has a gross rent revenue of $1,020. It was not more in 1970, that is $91 per month. The amount of $400 was deposited at the beginning of February. The Board concludes that the part of the “something else” was $309.
The amount of $91 is allowed because it is already included in the revenue. The difference, that is $309, must be maintained in the revenue.
5.4 Unidentified cheque May 1—$650
According to the appellant, this amount comes from the sale of a vehicle. He did not identify it. After studying the capital cost allowance schedule for the years 1969 and 1970, annexed to the 1970 income tax return, the Board cannot identify a vehicle which could be sold at the price of $650. Moreover, according to that schedule, the only vehicle sold in 1970 was the 1967 Dodge Tandem (see paragraph 5.2). In his testimony, the appellant said that probably on this vehicle he had never used capital cost allowance.
On one hand it is not very clear; on the other hand, it may be one of those vehicles (if it is) that the appellant had bought at an auction sale and sold after. The point remains confused. The burden of proof is not reversed.
The amount of $650 is disallowed and must be considered as revenue.
6. The Point in Dispute in 1971
The only point in dispute is an amount of $822 for an unidentified cheque deposited on February 1. According to the appellant perhaps it is the sale price of a vehicle. During that year, fourteen vehicles were registered in his name at the Registration office of the Department of Transport. In 1972, only one was registered. The appellant sold thirteen of them. Maybe, on one hand, the amount of $822 is one of them. On the other hand, as the deposit is on February 1, 1971, as the evidence has given the date of purchase of the vehicles and none of these vehicles seem to have been purchased before February 1971, as according to the appellant himself, “perhaps it is a sale of motor vehicle’’ but perhaps also it is not. As the burden of proof is on the appellant, this amount of $822 is disallowed and must be considered as revenue.
7. The Points in Dispute in 1972
7.1 Unidentified cheque April 10—$4,500
According to the appellant, after saying he did not recall, he said it was the sale price of the 1967 Ford Tandem. The vehicle was sold to his brother Jacob.
However, on the capital cost allowance 1971 schedule, it is indicated that this vehicle was sold in 1971. It is quite difficult to believe that the amount of $4,500 was deposited only in April 1972.
As Exhibit R-1 was filed, a loan application in the amount of $4,800 dated July 16, 1971, was signed by the appellant and his brother Jacob. According to Jacob Fehr, $4,500 was for the vehicle and $300 for the licence plates.
On the same date of the loan, an amount of $4,800 was deposited in the bank account of the appellant.
It is obvious to the Board that the amount of $4,500 deposited in April 1972 cannot be the amount of the sale price of the 1967 Ford Tandem. What is it? The evidence presented does not give the answer.
This amount is disallowed and must be considered as revenue.
7.2 Unidentified cheque April 24—$204 -e -
As the appellant does not remember what this amount represents, it must be disallowed and considered as revenue.
8. Request to Amend the Appeal by Using CCA
At the beginning of his argument, counsel for appellant made a verbal request to amend the appeal so that capital cost allowance could be used for the years 1970 and 1971.
Indeed, in his 1970 and 1971 income tax returns, the appellant ‘did not use capital cost allowance because he did not need it. Following the reassessments, the evidence at the hearing of the appeal, and the increase of revenue for the years 1970 and 1971, it is clear that it would be sensible that the capital cost allowance be used.
Counsel for respondent objected to the amendment on the basis that it is too late and counsel for appellant should have included it in the Original appeal.
It is useful to quote subsections 9(1 j_, (2) of the Tax Review Board Act:
9.(1) Where an appeal is made to the Board under any Act, the appeal . Shall be made in writing but no special form of. petition or pleadings shall
be Required by the Board, unless. the Act under which the appeal is made expressly otherwise provides.
(2) Notwithstanding the provisions of the Act under which an appeal is made, the Board is not bound by any legal or technical rules of evidence in. conducting a hearing for the purposes of that Act, and all appeals shall be dealt with by the Board as informally and expeditiously as the circumstances and considerations of fairness will permit.
On the basis of this section, the request for amendment is allowed.
Since the trial before the Federal Court of Canada is a trial de novo, ft would be easy for the appellant to provide in the appeal a paragraph concerning the use of capital cost allowance for the years 1970 and 1971, or concerning a claim for some other expenses against the revenue added by the respondent. It would be accepted. Why force the appellant to spend money to arrive at the same end?
9. Conclusion
The appeal is allowed in part and the matter referred back to the respondent for reassessment in accordance with the above reasons for judgment.
Appeal allowed in part.