Gross Negligence Penalty - based on net worth assessment

Singh v. The Queen.

Tax Court of Canada, December 17, 2019.

Neutral Cite: 2019 TCC 283.

Court File No. 2018-321(IT)I.

Russell J. Net worth assessment — Appeal from net worth assessment for statute-barred years —

In 2016 the Minister of National Revenue issued net worth assessments with respect to the taxpayer’s 2008 and 2009 taxation years. Those assessments included penalties under subsection 163(2) for gross negligence, and the taxpayer appealed from both assessments.

The Tax Court of Canada held that, following the jurisprudence, where a net worth assessment is raised for statute-barred years the Court is first required to determine whether, on a balance of probabilities, there was unreported income. Where a finding of such income is made and no credible explanation is provided, the respondent Crown has met the onus imposed on it for purposes of both the statute-barred issue and the gross negligence penalty.

The Court then reviewed the evidence put forward by the appellant with respect to his income for the years in question and held that such evidence showed that he had under-reported his income in the amounts assessed.

Consequently, the Court concluded that the Crown had met the required onus of showing that the taxpayer had made a misstatement attributable to negligence, carelessness, or willful default, such that the tax years in question were not statute-barred, and that penalties for gross negligence were properly imposed.

The taxpayer’s appeal was therefore dismissed. — Income Tax Act, RSC 1985, c. 1 (5th Supp.), s. 152, 163(2).

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