Khattar v. R. - TCC: Taxpayer subject to penalties for claiming fictitious business losses

Khattar v. R. - TCC:  Taxpayer subject to penalties for claiming fictitious business losses

http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/127253/index.do

Khattar v. The Queen  (December 22, 2015 – 2015 TCC 338, Masse D.J.).

Précis:   Mr. Khattar claimed fictitious business losses in 2008 ( as well as loss carry backs to the three preceding taxation years) on the advice of his tax preparer, Mr. Rasool.  CRA denied the losses and imposed gross negligence penalties.  The only point at issue in this appeal were the penalties.

The Tax Court held that the evidence established that Mr. Khattar was grossly negligent and dismissed the appeal, awarding costs to the Crown if it claimed them.

Decision:   This is yet another in a long line of fictitious loss cases.  The Court rejected Mr. Khattar’s claim that he had not been grossly negligent:

[54]        The Appellant admits that he should have read his return before signing it. It is clear that had he taken a closer look at the tax return, he would have seen the questionable numbers and he would have seen that he was claiming outrageous business expenses. The Appellant acknowledges that he made a mistake and that imposing a penalty is the right way to encourage people not to make such mistakes, but he feels that the penalties imposed are too harsh and will ruin his life. He agrees that he should pay a penalty, but the penalty should be manageable given his personal circumstances. Unfortunately, I cannot alleviate the harshness of the penalties. I can only decide if the imposition of the penalties is appropriate as a result of intentionally making a false statement or acquiescing in the making of a false statement in circumstances amounting to gross negligence.

[55]        There is no doubt that the Appellant’s 2008 tax return and his request for loss carryback contained false statements — the Appellant did not carry on a business and he did not incur any business losses whatsoever, let alone business losses exceeding $188,000. I can come to no other conclusion than that the Appellant was wilfully blind and grossly negligent as to the falsity of these statements. This is especially so since he signed his return and thus certified the accuracy of the information contained therein without bothering to make any efforts to verify the return’s accuracy. As such, he is properly subject to the penalties imposed on him pursuant to subsection 163(2) of the Act.

[56]        For all the foregoing reasons, this appeal is dismissed. The Respondent is entitled to her costs if she wants them.