In finding that a taxpayer was not duly diligent in failing to review her return and spot an income omission of over $70,000, D'Aurray J noted that the Tax Court had been divided in its approach to s. 163(1) penalties. She stated (at para. 37):
One approach is that the due diligence defence applies to either one or the other of the first or second failure to report, whereas the second approach is that the due diligence defence will only apply to the second failure. I agree with the second approach since it is the second failure that gives rise to the imposition of a penalty and not the first, and the penalty is calculated on the amount involved in the second failure.