http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/218433/index.do
By-Pass Ranch Ltd. v. The Queen (January 27, 2017 – 2017 TCC 14, V. Miller J.).
Précis: The taxpayer claimed ITCs totalling roughly $11,000 for the period from April 1, 2007 and June 30, 2011. CRA denied the claim on the basis that it was not supported by documentation and there was no commercial activity by the taxpayer during this period. It also assessed a gross negligence penalty of roughly $3,000. The Court dismissed the appeal holding that the expenses claimed were fictitious and that the taxpayer carried on no commercial activity during the period in question. There was no award of costs since this was an informal procedure appeal.
Decision: This case was as simple as the Court completely disbelieving the evidence of Mr. Moran, the principal of the corporate taxpayer:
[18] Counsel for the Respondent cross-examined Mr. Moran on copies of credit card statements which he had given to her prior to the hearing of the appeal. These credit card statements allegedly contained the Appellant’s expenses and supported the estimated ITCs claimed by the Appellant. I note that some of the credit card statements were in Mr. Moran’s name and others were in both the Appellant and Mr. Moran's name.
[19] The credit card statements were for the periods from June 26, 2006 to July 28, 2012. Mr. Moran stated that all of the expenses on the credit cards were business expenses but he did not claim the GST on all of these expenses in his estimate of ITCs. He could not give any explanation for any of the amounts appearing on the credit card statements. He did not know which amounts had been claimed.
[20] The Appellant has not provided any documentation which meets the requirements of the Act and the Regulations and these requirements are mandatory. As a result, the Appellant is not entitled to claim any amount as an ITC for the period under appeal.
Penalties
[21] Mr. Moran stated that the Appellant did not have any clients or sales for the quarterly periods. The Appellant has not shown that it had a commercial activity for any of the periods between April 1, 2007 and June 30, 2011 and it is my view that it did not have a commercial activity for these periods. In arriving at this conclusion, I have not overlooked that in Exhibit A-1 the Appellant listed that it had revenue of $7,000 in 2010. As I previously stated, there were no documents to support any of the entries on Exhibits A-1 and A-2.
[22] Based on the evidence, I have also concluded that the ITCs which the Appellant claimed in its return for the period ending June 30, 2011 were not an estimate of ITCs incurred in respect to a commercial activity but instead were fictitious amounts.
[23] Since the evidence supports my conclusion that the Appellant did not have a commercial activity during the period, the Minister has met her burden under section 285 of the Act and I find that the gross negligence penalties were properly imposed.
The Court dismissed the appeal holding that the expenses claimed were fictitious and that the taxpayer carried on no commercial activity during the period in question. There was no award of costs since this was an informal procedure appeal.