INCOME TAX |
Reassessment |
Hsu v. Canada
A-390-00
2001 FCA 240, Desjardins J.A.
24/7/01
18 pp.
Appeal from T.C.C. decision dismissing appeal from reassessments of income for 1993, 1994 taxation years--Issues whether TCJ erred in concluding that appellant bore onus of disproving validity of reassessments; whether T.C.J. erred in concluding appellant in receipt of undeclared income and whether correctly sustained reassessments--In support of his application for immigration, in 1991, appellant, now Canadian citizen, provided "Personal Worth Statement" listing immoveable property and shares located in Taiwan with aggregate value of $2,812,327--Yet, in 1993 and 1994 taxation years, appellant declared income of $1,207 and $636 respectively--Appellant refused to cooperate in MNR audit and never provided information required by auditor--As result, Revenue Canada determined to make arbitrary reassessments based on available information pursuant to Income Tax Act, s. 152(7)--Estimated appellant's net worth at $3,000,000 and auditor proposed to impute to appellant as income 10% "estimated return on capital" arising from this amount--Therefore, MNR included in appellant's income additional $298,792 for 1993 taxation year and additional $300,000 for 1994 taxation year--T.C.J. concluded auditor's methodology reasonable and logical in circumstances and upheld reassessments--Appeal dismissed--No merit to appellant's principal argument, resting on presumption Minister did not rely on net worth method of assessment--Act, s. 152(7) empowering MNR to issue "arbitrary" assessments using any method appropriate in circumstances--Act, s. 152(8) granting presumption of validity to these assessments and placing initial onus upon taxpayer to disprove state of affairs assumed by MNR--However, MNR obliged to disclose precise basis upon which formulated--Act, s. 152(7) not establishing specific method for determining tax payable by taxpayer--In most cases, MNR following "net worth method"--By its very nature, net worth assessment arbitrary and imprecise approximation of taxpayer's income--Perceived unfairness relating to this type of assessment resolved by recognizing taxpayer in best position to know his or her own taxable income--T.C.J. did not err in concluding MNR's approach variation of net worth assessment--Minister's modification did not fundamentally change nature of assessment--T.C.J. correctly concluded burden of disproving reassessments lay squarely upon appellant--Open to T.C.J. to conclude MNR's method for determining appellant's income reasonable and logical in circumstances of case--As T.C.J. observed, appellant has done nothing to ensure full, complete and correct audit--Appellant has consistently failed to provide any evidence which would prove his actual income during period in question--Accordingly, cannot complain MNR proceeded on basis of speculative assumptions--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 152(7),(8).