Owda v. R. – TCC: Gross negligence penalties vacated on net worth reassessments of elderly cab driver

Owda v. R. – TCC:  Gross negligence penalties vacated on net worth reassessments of elderly cab driver


Owda v. The Queen (February 28, 2019 – 2019 TCC 46, Russell J.).

Précis:   Mr. Owda was an older man who drove taxi in the evenings for a few hours.  CRA issued net worth reassessments for unreported income in each of  2011, 2012 and 2013 ($42,470 (2011), $29,203 (2012) and $5,333 (2013)).   The Court allowed most of the CRA reassessments after making adjustments for family gifts but vacated the gross negligence penalties since “circumstances are not sufficiently extreme to justify these onerous penalties” [Para. [29]].  There was no order as to costs since success was divided.

Decision:   This case is a classic example of what one might term messy low dollar net worth reassessments:

[3]  The Appellant, a man of mature years, testified that during the subject period he drove taxi for four or five hours, five nights a week. He leased his taxi vehicle. He rented a taxi light to another taxi driver. No records of income from his taxi driving were entered in evidence. He said he sometimes gave a “piece of paper” to his wife Sara as to weekly income and otherwise he reported this information orally to her. Sara prepared his annual income tax returns. English was a second language (Arabic the first) for both husband and wife. The Appellant did not contest that the Minister chose to carry out a net worth audit due to inadequacy of his books and records. He had no separate bank account for business, but rather used a joint account with his wife. Most taxi clients used debit, few paid in cash. He knew his family was in a challenging financial situation during the subject period and that the two eldest of his three daughters had given money gifts to his wife, their mother, to assist the family finances. However, he did not know details of this.


[28]  Lastly, with respect to the gross negligence penalty assessed for each of the three years, I agree with the Appellant and his counsel that considering the small number of hours the Appellant drove cab weekly, and at night when business would be less busy, it is not readily apparent that he could have driven enough to have earned the amounts of unreported income found by the auditor. Of course also those amounts will be offset to a marked degree by the factual findings set out above. In these circumstances I consider it appropriate to deny the subsection 163(2) penalty assessments. The circumstances are not sufficiently extreme to justify these onerous penalties.

[29]  In conclusion I uphold the appealed reassessments, except to the extent of changes I have noted above. As success has been divided there will be no order for costs.

The Court’s decision to vacate the penalties under the circumstances is laudable.