Can-Am Realty Ltd. v. Canada
Appeal from reassessments for 1980, 1981, 1982, 1983 taxation years -- Minister claims plaintiff Can-Am Realty failed to report income from proceeds of sale of certain joint venture properties; plaintiff Podavin failed to report income in accordance with Income Tax Act (ITA) -- Plaintiff, Canadian- controlled private corporation, engaged in business of real estate broker and land developer -- Plaintiff Podavin general manager of Can-Am Realty, principal shareholder owning 99 percent of voting shares of company -- Seeking declaration Minister erred in including certain amounts as income, in imposing penalty under ITA, s. 163(2), order setting aside notices of reassessment -- Seven incidents during taxation years in question of alleged unreported income by plaintiff Podavin; four incidents of under-reporting by plaintiff Can-Am Realty -- Whether plaintiffs within definition of ITA, s. 152(4)(a)(i), thereby allowing MNR to reassess plaintiffs beyond normal time period prescribed by legislation -- To rely on s. 152(4)(a)(i), MNR must show taxpayer committed error in completing tax return and mistake result of taxpayer's negligence, carelessness or wilful default -- Must prove taxpayer not exercising reasonable care in completion, filing of return thus causing misrepresentations -- Taxpayer having ultimate responsibility to ensure tax returns accurate, even where accountant or other agent engaged to prepare and complete returns -- Manner in which plaintiff Podavin handled joint venture financial data rendered it virtually impossible for his accountant to avoid omissions and errors in many instances -- Plaintiff's conduct not that of reasonably careful and prudent businessman -- Fact MNR succeeded in establishing misrepresentation, thereby opening statute-barred year to reassessment, not entitling MNR to reassess every incorrect item in return -- Minister must show conduct exceptional and flagrant to degree of gross negligence to impose penalty pursuant to ITA, s. 163(2) -- Podavin's conduct not gross negligence -- MNR entitled to reopen plaintiff Can-Am's 1981 and 1982 taxation years and reassess three items set out -- Can-Am's 1983 taxation year not reopened as MNR not proving misrepresentation caused by plaintiff's negligence, carelessness or wilful default -- MNR entitled to reassess Podavin's 1980, 1981, 1982, 1983 taxation years with respect to certain items -- Misrepresentations due to carelessness, neglect or wilful default, subject to reassessment -- Penalty imposed by MNR under s. 163(2) Income Tax Act rescinded -- Income Tax Act, S.C. 1970-71-72, c. 63, ss. 152(4)(a)(i) (as am. by S.C. 1990, c. 39, s. 38), 163(2) (as am. by S.C. 1977-78, c. 1, s. 77; 1978-79, c. 5, s. 7; 1984, c. 1, s. 87; 1986, c. 55, s. 64; 1988, c. 55, s. 142; 1990, c. 45, s. 51; 1992, c. 48, s. 17).