The taxpayer failed to report $683 of investment income in his 2008 return (representing less than 0.1% of his taxable income and corresponding to a T3 slip which he had not received due to a change in address), and $436,890 of income in his 2009 return (representing a portion of payments out of his pension plans which had been transferred to his personal bank account rather than into his RRSP and LIRA). The Minister's reassessment of 2009 included a s. 163(1) penalty.
Graham J found that there was a due diligence defence for a s. 163(1) penalty if the taxpayer established due diligence in either of the two years, so that it was not necessary for the taxpayer to establish due diligence for the year in relation to whose income the penalty was assessed (here, 2009). The taxpayer's (ultimately misplaced) reliance on Canada Post's mail-forwarding system in preparing his 2008 return was reasonable in the circumstances, so that his appeal was allowed.
However, were this issue relevant, the taxpayer would not have established due diligence for 2009. Although he in fact believed that an employer could only issue one T4A slip for each employee (whereas here there was a misplaced second T4A for 70% of the amounts in question), it was not reasonable for him to rely on the completeness of the first T4A given the materiality of the total amount and given detailed documents he had previously received from his employer listing the appropriate amounts and their proper tax reporting.