Alcala v. The Queen, 2010 DTC 1147 [at at 3277], 2010 TCC 198 (Informal Procedure) -- summary under Subsection 163(1)

The taxpayer failed to report nearly $1,800 in income for 2006, but she had reason to believe her employer had made source deductions in respect of that income. Accordingly, she established a due diligence defence and was not liable under s. 163(1) for a 10% penalty in respect of roughly $38,000 of unreported income in 2007. In so finding, Little J. remarked at para. 13 that the equities of the case were in the taxpayer's favour because the 10% penalty for the 2007 amount, roughly $3800, was over twice the unreported amount in 2006 that gave rise to the penalty.