[OFFICIAL ENGLISH TRANSLATION]
2001-548(GST)I
BETWEEN:
MODES CROSSFIRE INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on April 30, 2002, at Montréal, Québec, by
the Honourable Judge François Angers
Appearances
Agent for the Appellant: Haim Pinto
Counsel for the Respondent: Alain-François Meunier
JUDGMENT
The appeal from the September 21, 1999, assessment made under the Excise Tax Act, bearing number 0317785 and covering the period from November 1, 1996, to April 30, 1999, is dismissed, and the assessment made by the Minister of National Revenue is confirmed.
Signed at Ottawa, Canada, this 7th day of May 2002.
|
"François Angers" |
J.T.C.C.
Translation certified true
on this 4th day of September 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020611
Docket: 2001-548(GST)I
BETWEEN:
MODES CROSSFIRE INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Delivered orally from the bench on
April 30, 2002, at Montréal, Québec)
Angers, J.T.C.C.
[1] This is an appeal from a September 21, 1999, assessment made under the Excise Tax Act and covering the period from November 1, 1996, to April 30, 1999.
[2] At the beginning of the hearing, the agent for the appellant company accepted the amounts assessed and set out in subparagraphs 5(a), (c) and (d) of the Reply to the Notice of Appeal that dealt with the reconciliation of the taxes declared and the taxes that should have been declared and remitted to the Minister according to the appellant company's accounting records in the amount of $2,710.09; with a figure that was added and that corresponded to the value of the supply for the use or operation of an automobile belonging to Mr. Singh, a director of the appellant company, in the amount of $986.15; and, lastly, with a disallowed input tax credit in the amount of $27.80.
[3] As set out in subparagraph 5(b) of the Reply to the Notice of Appeal, at issue therefore is whether the increased consideration of the supplies sold by the appellant company during the period at issue is taxable, which represents an additional $5,430.76 payable by the appellant company. In computing this amount, the Minister reconstructed the amount of the taxable supplies sold by the appellant company during the period at issue by increasing the actual amount of purchases for resale shown on the appellant company's accounting records by a factor established on the basis of the appellant company's representations and on the financial statements it filed.
[4] The result of this exercise is shown in Exhibit I-3. According to the auditor, all the data used in these computations were obtained from the financial statements included in the appellant company's tax returns and from representations made by Mr. Singh, the appellant company's representative, and by Mr. Bourbeau, its accountant. Exhibit I-3 covers the period from November 1996 to April 30, 1997. For 1998, the auditor's report had no tax implications. The second chart covers the period from May 1, 1998, to April 30, 1999. The result of this exercise for the entire period is an amount payable of $5,430.76 in tax, which has obviously been contested by the appellant company.
[5] Mr. Pinto, the agent for the appellant company at the hearing, did not call any of the appellant company's directors or shareholders as witnesses. However, he himself testified, adducing as evidence a financial statement of the appellant company as at April 30, 1999, showing an inventory of zero at fiscal year end (Exhibit A-1), and another financial statement of the appellant company showing a year-end inventory of $65,764 (Exhibit A-3). That amount represents an outdated inventory valued by him and the proceeds from an April 28, 1999, inventory sale (contract adduced as Exhibit A-2), apparently a sale made by the appellant company to another company of which it is the shareholder. The agent for the appellant also questioned the factor used by the auditor to increase the amount of the appellant company's sales. He acknowledged that Exhibit A-3 had not been prepared using the financial statements filed by his client but was instead his opinion of what the financial statements should have reflected concerning the inventory. He even suggested that it might be necessary to file amended tax returns and financial statements. He also argued that the GST from the April 28, 1999, inventory sale should be credited against the assessed amount of tax payable by his client.
[6] The auditor testified that she computed the amount of the assessment on the basis of the financial statements included in the appellant company's tax returns and on the representations made during the audit by the appellant company's representative and its accountant. The zero inventory declared by the representative at the time of the audit was confirmed when the appellant company filed its tax return and financial statements in November 1999. The auditor also confirmed that in computing the amount of the assessment she took into account the appellant company's GST return, due on May 31, 1999, which included the GST from the April 28, 1999, inventory sale. Page 2 of Exhibit I-2, which consists of handwritten notes made by the appellant company, confirms this testimony. Therefore, adjustments should not be made, and I am satisfied that the GST from that transaction was taken into account when the amount of the assessment was computed.
[7] Nor did I detect anything in the auditor's approach that might allow me to find that she made any errors. All the amounts were computed on the basis of representations made by the appellant company's accountant or its representative and on the appellant company's financial statements included in its income tax returns.
[8] Although the appellant company's tax returns were prepared on the basis of unaudited financial statements, they are assumed to be accurate and complete and to show the appellant company's year-end financial position. The appellant company alone knows its financial position, and it is the company's responsibility to ensure that no errors are made. If errors do occur, the law allows for corrections and amendments may be made. In the present case, no amendments were made to the appellant company's financial statements or tax returns, except for this hearing. I therefore prefer to rely on the financial statements and the representations made at the time of the audit.
[9] The factor of 1.19 used to increase the amount of the appellant company's sales as at April 30, 1999, is the factor that was agreed upon between the auditor and the appellant company's representative and its accountant. There is no evidence before me indicating that this was not the case. In fact, I have no evidence that would allow me to send the matter back to the Minister and ask him to recompute the amount using a different factor. Nor am I satisfied that there was a lack of communication between the auditor and the appellant company's representative. The appellant company's accountant was present at all times, and neither the
accountant nor the representative testified that they had been misunderstood about the type of sale made and its impact on the factor used to increase the amount of the appellant company's sales.
[10] The onus is on the appellant company to establish on the balance of evidence that the Minister erred in making the assessment. There is nothing before me in this case allowing me to find that the Minister erred in computing this amount. The appellant company produced nothing concrete that could allow me to send specific, accurate information back to the Minister that might require him to recompute the amount of the assessment. The Minister's position is based on the appellant company's documents and representations. The explanations provided by the appellant company are therefore clearly insufficient.
[11] For these reasons, the appeal is dismissed and the assessment is confirmed.
Signed at Edmundston, New Brunswick, this 11th day of June 2002.
|
"François Angers" |
J.T.C.C.
Translation certified true
on this 4th day of September 2003.
Sophie Debbané, Revisor