October 07, 2011

Her Majesty The Queen (Appellant) v. Anton J. Pongratz (Respondent)

82 DTC 6200
Federal Court of Appeal
May 19, 1982

Penalties — Wilful evasion of tax — Accountant — Failure to file within required time limit — No intention to not pay tax — No wilful evasion — Income Tax Act, S.C. 1970-71-72, 63, ss. 163(1).

The taxpayer accountant carried on business for a significant number of years in tax planning and the preparation of income tax returns. During the taxation years in issue, the taxpayer failed to file his personal tax return by the required filing date. The taxpayer filed the relevant returns before the end of the subsequent taxation year and, at the time of late filling, included payment of taxes owing. The taxpayer was assessed for and paid late filing penalties. When the Minister assessed the taxpayer for wilful evasion of tax and imposed the relevant penalty, the taxpayer appealed to the Federal Court-Trial Division (unreported) which decided that the taxpayer was not subject to the penalties, however, awarded costs against the taxpayer. The Crown appealed to the Federal Court of Appeal and the taxpayer cross-appealed the issue of the costs.

Held: The Crown’s appeal was dismissed and the taxpayer’s cross- appeal was allowed. The Court found that the taxpayer’s intentional failure to file a return within the required time limit was not a wilful attempt to evade payment of tax within the meaning of the relevant statutory provision and that the trial judge had not erred by not inferring evasion from the taxpayer’s conduct. The Court decided that “late filing” was not “non-filing” and that evasion “for a time” was not the evasion penalized by the relevant statutory provision. Therefore, the taxpayer had not “wilfully evaded” the payment of tax. The Court found that the costs were improperly awarded against the taxpayer. Therefore, the Crown’s appeal was dismissed and the taxpayer’s cross-appeal was allowed accordingly.