http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/135304/index.do
Fundy Spray Motel Limited v. The Queen (January 29, 2016 – 2016 TCC 25, Favreau J.).
Précis: The appellant operated a motel in Nova Scotia. It was assessed GST/HST on unreported revenues. The revenues were determined from occupancy reports it made to a third party: Check Ins Nova Scotia. The Tax Court accepted the third party evidence and dismissed the appeal except for a small concession made by the Crown: income from the rental of space for an ATM was from a financial service and therefore exempt from GST/HST. There was no order as to costs since this was an informal procedure appeal.
Decision: The taxpayer submitted that the Crown could not rely on third party data to support the GST reassessment under appeal:
[5] The appellant’s position is that the Canada Revenue Agency (“CRA”) had no authority to make a reassessment based on projections for the following reasons:
− the projections made by the CRA had no statistical value;
− the books and records of the appellant were accurate; and
− all income from room rentals were reported by the appellant.
The Court rejected this line of argument:
[17] Since the information in the present case was not adequate or available, the auditor used the data from Check Ins Nova Scotia to establish the number of rooms rented by the appellant during the relevant period. No information was provided by the appellant that would have otherwise established the number of rooms rented. The reservation book would have shown the occupancy of the rooms. The fact that the occupancy report was given to Check Ins Nova Scotia by the appellant on a monthly basis and that a hard copy of the Check Ins Nova Scotia information was remitted by the appellant to the auditor does not change the situation that the information was obtained from a third party and not from a reliable source of the appellant. Under the circumstances, the use of projections by the CRA was acceptable and necessary.
[18] To succeed in his appeal, the appellant had to demonstrate, on a balance of probabilities, that the Minister’s numbers were erroneous, doing so through the use of supporting documentation or through the testimony of independent and credible witnesses.
[19] In Baker v. The Queen, 2007 TCC 106, Bédard J. wrote at paragraph 25:
It is incumbent on the taxpayer to establish, on a balance of probabilities, that the assessment is too high in light of the applicable law and the pertinent facts. It is not enough for the taxpayer to demonstrate that it is conceivable that the assessment is too high. The taxpayer cannot use another, equally arbitrary method, to demonstrate that the amount of net tax assessed by the Minister was too high . . .
[20] In this case, the appellant did not succeed in establishing, on a balance of probability, that the reassessment was too high. The average room rate per month was based on the actual sales for the months of September to December 2012, extracted from the Z-tapes and the general ledger of the appellant. The average room rate of $68.20 was based on the appellant’s own data. The information obtained from the Check Ins Nova Scotia regarding the listing of rooms rented was not contested by the appellant. Finally, the appellant did not provide any reasonable information as to why there was a discrepancy between the Check Ins Nova Scotia data and the Z-tapes and general ledger of the appellant and as to why the invoices to Dexter Construction and to the Nova Scotia Transportation and Public Works did not show up on the Z-tapes.
As a result the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.