http://decision.tcc-cci.gc.ca/site/tcc-cci/decisions/en/item/62757/index.do 
Bandula v. The Queen[1] (September 12, 2013) involved opening up statute barred years, the disallowance of undocumented expenses and gross negligence penalties imposed under subsection 163(2) of the
Income Tax Act.[2] The appellant immigrated to Canada from Hungary in 2000 and commenced a dry wall business. The case is concerned with his income from that dry wall business in 2002 and 2003.[3] The court permitted the opening of the otherwise statute-barred years because it found evidence of negligence on the part of the appellant. Similarly the appellant was not successful in claiming undocumented business expenses – he simply failed to meet the onus of proof applicable to such expenses.
What is interesting about this case is that the court found that the Crown had not met to onus upon it to establish “gross negligence” to permit the imposition of penalties under subsection 163(2) of the Act. The court found that the appellant and his spouse were constrained during the taxation years in question by their inability to understand English and their lack of familiarity with Canadian business practices:
[38] On this particular issue, the Court finds this case factually unique. It involves the first filings of personal tax returns in respect of a business by a new immigrant within the Canadian tax system. The Court takes notice that not all new immigrants have the business initiative of Mr. Bandula and do not immediately undertake a business on one’s own to earn a living in one’s own enterprise and thereby employ other Canadians in doing so. This laudatory goal stands juxtaposition to a clear failure to appreciate (factually in the Court’s view through ignorance), the nature and the requirements of the system in providing one’s accountant with sufficient and suitable information for the filing of one’s tax returns.
[39] In fact, Mr. Bandula, together with Ms. Racz, credibly indicated that they intended to assimilate into the Canadian business milieu. The Court believes this; it is as well an admirable goal. Curiously, by attempting to do this very thing, Mr. Bandula admittedly did not retain the services of an accountant who spoke his native tongue, but rather went to an accountant and a firm otherwise notable in the community. He retained those services in order to put his best foot forward and attempt to comply with the domestic tax system to which he now belonged.
[40] Legally, the finding of misrepresentation in respect of the Statute-Barred Reassessments is a different test and must be separated from the issue of gross negligence. Factually the Court finds that the language challenges of the Appellant and his spouse played a perhaps greater role in the determination of the assessment of the gross negligence penalty than that which might otherwise be readily apparent: in terms of the Accountant’s communications with both the Appellant and Ms. Racz and in terms of the solid belief of the CRA that both parties (specifically the Appellant) spoke and understood English. These circumstances are in contrast to the observation of the Court (where both Mr. Bandula and Ms. Racz testified) of their ability to purport and connote understanding of a posed question and their reactive willingness to provide an answer prior to completely appreciating the full breadth of the question. This fact leaves the Court with a lack of conviction regarding actions which might otherwise amount to the requisite, critical intention regarding gross-negligence in this matter.
Accordingly, penalties were not warranted:
[44] Based upon these authorities, it is the Court’s determination that the imposition of the gross negligence penalties in this particular case is not warranted for the following reasons:
a) The extent to which ignorance of the system influenced decisions made by Mr. Bandula in the first two years of operating the dry-wall business given that he did not have the experience, knowledge, or insight to do so as regards appropriate record keeping, importance of ascertaining details regarding payments, vouchers, GST numbers and the like;
b) Additionally, the consequences related to the difference between operating within a cash system, his former experience, versus a general Canadian recorded payment system, differences which do not excuse him from the need to properly reflect the transactions, but offer some mitigation as to the presence of any deliberate act of conceit or omission;
c) The determination by the Accountant that it was not necessary in the case of Mr. Bandula and Ms. Racz to push move aggressively and further on the issue of ascertaining from them, given their novel situation, the nature and reasons as to why they did not have invoices, vouchers and receipts and records for the sub-trade payments and to connect those reasons with the ultimate compilation and preparation of the income tax returns and the GST returns; and,
d) Lastly, the fact that the penalty assessment process followed by the CRA clearly assumed on its face that the Appellant read, understood and functioned in the English language.
Interestingly, the court observed that for period after 2003 it would have sustained the imposition of penalties because by that time the appellant should have been aware of his responsibilities under the Act:
[45] If this Court were dealing with 2004 or subsequent taxation years (which followed in time the instructions and direction of the Accountant regarding the need for Mr. Bandula to revise his business practices) this Court would find that the Appellant was grossly negligent. Furthermore, in light of the factual circumstances and bona fides of both the taxpayer and his life partner that they have undertaken a strategy to amend and rectify their errors, which the Court finds were borne of ignorance and not male fides or intentional act, the Court is prepared in this instance to abide by its view that a penalty is not warranted because the finding of gross negligence cannot be substantiated nor comfortably fit within the facts before the Court. Therefore the penalties are vacated.
The court made no order as to costs because of the mixed results of the appeal.
Comment: This decision seems a balanced approach to the challenges facing recent immigrants with very limited knowledge of either official language.
[1] 2013 TCC 282.
[2] R.S.C. 1985, c. 1 (5th Supp.), as amended (the “Act”).
[3] The case involved both an income tax appeal and a GST appeal heard on common evidence.