2005-0133411I7 F concerned an individual who filed his T1 income tax returns for the 2001, 2002, and 2003 taxation years at the same time in the 2004 calendar year. In each return, he failed to report income exceeding $500. It was first assumed that none of his prior three returns (for 1998, 1999 and 2000) were not subject to any audit adjustments; whereas, under the second (alternative) assumption, he had been reassessed for failure to report some income for one of the 1998, 1999 or 2000 taxation years.
Under the first assumption, CRA stated that s. 163(1) did not apply to any of the 2001 to 2003 returns because they had been filed simultaneously and, under the second assumption, indicated that if the failure to report an amount to be included in Mr. Y's income occurred in the 2000 taxation year, then the s. 163(1) penalty could be applied to all of the 2001, 2002 and 2003 taxation years, whereas if omission had occurred for the 1998 taxation year, only the amount of income omitted for the 2001 taxation year could be subject to the s. 163(1) penalty.
In reversing this position, based on Whissell where (dealing with similar facts) “the Court concluded that the fact that the returns for the taxation years in question were filed simultaneously is not relevant for the purposes of subsection 163(1)” (i.e., there would be the same result if the three subsequent returns had been filed sequentially), the Directorate stated:
[S]ubsection 163(1) is applicable with respect to the 2002 and 2003 taxation years in the context of the first assumption since all the conditions are satisfied for those two taxation years. With respect to the second assumption, our answer remains the same, i.e., that subsection 163(1) is applicable with respect to each of the 2001, 2002 and 2003 taxation years since all the conditions are satisfied for those three taxation years.