Gross negligence penalties were appropriate because taxpayer knowingly failed to report income

Minister of National Revenue assumed that taxpayer had failed to report income of $1,052,369 as compensation for labour that he had performed for corporation. Taxpayer claimed that it was not income because he lacked intent to earn profit and he carried on activity as “non-commercial personal endeavour”. Trial judge dismissed taxpayer’s appeal. Judge held that taxpayer’s position was nonsensical. Judge concluded that activity had no personal element and was business, given significant amount of compensation, labour and time. Judge denied deduction for business expenses because taxpayer acknowledged he had not incurred them. Judge found that gross negligence penalties were appropriate because taxpayer had knowingly failed to report income or been wilfully blind as to failure. Taxpayer appealed. Appeal dismissed. Judge’s findings were justified by record. There was no error. It was open to judge to decline to hear motion to strike part of Minister’s reply as it was not timely and prejudice had not been demonstrated. Allegations of OPCA litigant was not new issue raised for first time at hearing, as it was support for main issues in appeal. There was no breach of natural justice.

Meerman v. Canada (2019), 2019 CarswellNat 2477, 2019 FCA 119, Eleanor R. Dawson J.A., Judith Woods J.A., and Marianne Rivoalen J.A. (F.C.A.).

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