Citation: 2014TCC84
Date: 20140318
Docket: 2013-1231(IT)I
BETWEEN:
NEIL JOHNSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
This appeal relates to Mr.
Johnson’s 2002 and 2003 taxation years in which he claimed non-refundable tax
credits for charitable donations he allegedly made to Canadian Foundation for
Child Development (“CFCD”) in the amount of $18,550 and $15,500 respectively.
[2]
The Appellant’s
testimony was as follows.
[3]
When he came to Canada in 1995, he attended school. After he finished his studies, he started to work and
he earned $55,000 making parts for automobiles. He lived at home with his
parents; he did not pay rent; and, he had no expenses. He attended church both
while he was in school and after he started to work. He met a couple of people
outside the church who told him about CFCD and he wanted to help the “needy
kids”.
[4]
The Appellant stated
that he made his donations in cash every two weeks at CFCD’s office on Beaconfield Road in Mississauga. He said that he gave “$350 or so” every two weeks. He
stated that he had no records to prove that he made the donations because CRA
took too long to reassess him and his records were now lost or destroyed.
[5]
In support of his
evidence that he made donations to CFCD, the Appellant submitted two receipts
from CFCD; one for 2002 in the amount of $18,550 and one for 2003 in the amount
of $15,550.
[6]
It was his evidence
that he had previously donated $15,400 in 2001 and claimed this amount on his
2001 income tax return. In July 2002, the Canada Revenue Agency (“CRA”)
requested that he provide proof of his 2001 donation. He sent the charitable
donation receipt to them; it was accepted; and, no adjustment was made to his
return. He believed that his charitable donations for 2002 and 2003 were also
accepted because he was not reassessed for these years until December 7, 2009.
It was his position that he was led astray by the CRA.
[7]
The Appellant stated
that for one of the years under appeal his income tax return was prepared by
his sister and e-filed by Cantax Tax Preparers. He wasn’t sure whether this
occurred in 2002 or 2003. However, in the other year, his income tax return was
prepared and e-filed by ADD Accounting Services (“ADD Accounting”). The
Appellant later said that in 2002 or 2003 he filed a paper copy of his return.
[8]
According to the
records held by the CRA, the Appellant’s 2002 and 2003 tax returns were both
e-filed by ADD Accounting.
[9]
Barbara Lovie, a former
employee with the Investigations Division of the CRA, testified that in January
2006 she was assigned the investigation of the CanAfrica International Foundation
(“CanAfrica”) and ADD Accounting. CanAfrica was a registered charity whose
alleged purpose was to aid poor women and children in Africa. Ambrose
Danso-Dapaah was the president of the charity CanAfrica and the sole proprietor
of ADD Accounting. ADD Accounting was an income tax return preparation service.
Ms. Lovie’s investigation related to the 2002 to 2005 years, inclusive.
[10]
Pursuant to search
warrants issued during the investigation, Ms. Lovie seized both financial
records and a computer from Ambrose Danso-Dapaah’s home. She found
approximately 3800 Cantax files on the hard drive of the computer. Cantax is a
software program used to prepare income tax returns. In particular, she found
the Appellant’s 2002, 2003 and 2004 Cantax returns on the hard drive of Ambrose
Danso-Dapaah’s computer. According to these returns, the Appellant donated
$18,550.21 and $15,500.00 to CanAfrica in 2002 and 2003 respectively. Included
in the Appellant’s Cantax return for 2003 was a receipt for $1,550 which
equalled 10% of his alleged donation for that year.
[11]
Ms. Lovie stated that
Ambrose Danso-Dapaah was charged with one count of fraud over $5,000. He
entered a guilty plea to selling false charitable donation receipts. He charged
his clients a fee of 10% of the false donation for the charitable receipts. The
total amount of false donation receipts provided to taxpayers by Ambrose
Danso-Dapaah was $21,400,000 which equated to $6,200,000 in false
non-refundable tax credits.
[12]
The Appellant denied
that he donated any amount to CanAfrica and stated that his donations were made
to CFCD.
[13]
The issues in this
appeal are: (1) whether the Appellant made a donation to a charity in 2002 and
2003 which would entitle him to claim non-refundable tax credits pursuant to
section 118.1 of the Income Tax Act (the “Act”); (2) whether the
receipts issued by CFCD are in prescribed form in accordance with subsection
118.1(2) of the Act and sections 3500 and 3501 of the Income Tax
Regulations (the “Regulations”); and, (3) whether the Minister of
National Revenue (the “Minister”) was entitled to reassess the Appellant after
the normal reassessment period.
[14]
It is my view that the
Appellant did not make any donations to CFCD in 2002 and 2003. Aside from
having no records to support that he made these cash donations, I concluded
from the Appellant’s evidence that he was not credible. His evidence was
imprecise, confused and changed when he was questioned. As an example, when he
was asked if he learned about CFCD from people at his church, he answered that
he met its representative at a portable office outside his church; then he
stated that he met the representative at a plaza down the road from his church.
He stated that one Sunday when he was leaving church he saw a portable sign and
a man who was speaking to a group of people who were gathered around the sign.
He was driving past the plaza and he stopped to listen. He learned that he
could help children in Singapore (sic), Africa if he donated to CFCD.
[15]
The Appellant stated
that he gave $350 in cash every two weeks to CFCD. When counsel for the
Respondent told him that this amount would not equal his alleged donations, the
Appellant said that he gave “$700 or so” every two weeks in 2002 and “$600 or
so” every two weeks in 2003. First he stated that his donations for both years
were entirely in cash. Then, during cross examination, he stated that in 2002,
his donation was 95% cash and 5% gifts in kind which consisted of a television,
a DVD player and some clothes. In 2003, his donation was entirely cash.
[16]
Initially, the
Appellant stated that he went to CFCD’s office on Beaconfield Road in Mississauga to make his donations. When reminded by me that the address on the receipts
from CFCD was Battleford Road in Mississauga, the Appellant changed his
evidence.
[17]
According to the
documents submitted by the Respondent, the Appellant’s income in 2002 and 2003,
after deductions, was $39,336.88 and $32,412.24 respectively. I find it
implausible that he gave almost one-half of it to a charity that he really knew
nothing about.
[18]
The Appellant stated
that he did not pay rent to his parents yet in 2002, he reported in his income
tax return that he paid rent of $6,000.
[19]
The Appellant’s
evidence as to who prepared his income tax returns and who e-filed his returns
kept changing. He said that Cantax e-filed his tax return for one of the years
in issue when Cantax is not a tax preparer who would be registered to file tax
returns but is a software program used to prepare tax returns. The Appellant
stated that he only went to ADD Accounting once to e-file one of his returns.
However, the evidence established that both his 2002 and 2003 returns were
e-filed by ADD Accounting.
[20]
ADD Accounting was
owned by Ambrose Danso-Dapaah who pled guilty to selling fake charitable
donations and Ambrose Danso-Dapaah was also a director and officer of CFCD.
[21]
When I consider all of
this evidence, I have concluded that the Appellant did not donate $18,550 and
$15,500 to CFCD in 2002 and 2003. Rather he purchased the charitable donation
receipts for 10% of their face value. See exhibit R-3.
[22]
I will review the
receipts submitted by the Appellant.
[23]
Subsection 118.1(2) of
the Act provides that proof of a charitable gift shall be made by filing
an official receipt which contains prescribed information. Section 3501 of the Regulations
sets out the prescribed information as follows:
(1) Every official receipt issued by a registered organization shall
contain a statement that it is an official receipt for income tax purposes, and
shall show clearly, in such a manner that it cannot readily be altered,
(a) the name and address in of the organization
as recorded with the Minister;
(b) the registration
number assigned by the Minister to the organization;
(c) the serial number
of the receipt;
(d)
the place or locality where the receipt was issued;
(e) where the gift is a cash gift, the date on which or the
year during which the gift was received;
(e.1)
where the gift is of property other than cash
(i) the day on which
the gift was received,
(ii) a brief
description of the property, and
(iii) the name and
address of the appraiser of the property if an appraisal is done;
(f)
the date on which the receipt was issued;
(g) the name and address of the donor including, in the case
of an individual, the individual's first name and initial;
(h)
the amount that is
(i) the amount of a cash
gift, or
(ii) if the gift is of property other than cash, the amount that is
the fair market value of the property at the time that the gift is made;
(h.1) a description of the advantage, if any, in respect of
the gift and the amount of that advantage;
(h.2)
the eligible amount of the gift;
(i) the signature, as provided in subsection (2) or (3), of a
responsible individual who has been authorized by the organization to
acknowledge gifts; and
(j) the name and
Internet website of the Revenue Agency.
[24]
Neither of the receipts
submitted by the Appellant contained the information prescribed in paragraphs (e.1),
(f), (h) and (j) of section 3501.
[25]
The Appellant stated
that in 2002 a portion of his alleged donation consisted of gifts in kind.
Contrary to paragraph 3501(e.1), the 2002 receipt did not contain the
day on which this alleged donation was made; nor did it contain a description
of the goods. The receipt did not show that an appraisal of the goods was
completed. It did not give the fair market value of the property at the time
that the goods were donated as required by subparagraph 3501(h)(ii).
[26]
Neither receipt
contained the date on which it was issued. The name and Internet website of the
CRA was missing from each receipt.
[27]
The requirements in
section 3501 are not frivolous but are absolutely necessary for ensuring that a
gift was actually made. The purpose of the requirements is to prevent abuses of
any kind: Plante v The Queen, [1999] TCJ No. 51.
[28]
However, even if the
requirements of section 3501 had been met, as I stated earlier, I would have
found that the Appellant did not make “a gift” to CFCD. There was no credible
evidence to support his assertion that he made the donations in issue and I
have concluded that he bought the receipts from Ambrose Danso-Dapaah.
[29]
It was the Appellant’s
position that the CRA led him astray by accepting that he made a donation in
2001 and they took too long to reassess his 2002 and 2003 years.
[30]
Subparagraph 152(4)(a)(i)
of the Act provides that the Minister can reassess a taxpayer at any
time if the taxpayer or the person filing the return of income has made a
misrepresentation that is attributable to neglect, carelessness or wilful
default or has committed any fraud in filing the return of income. The
Respondent had the onus of establishing that this subparagraph applied.
[31]
In this case, counsel
for the Respondent showed that the Appellant was not credible. When questioned,
his evidence changed continuously. In addition, the Appellant had no records to
support that he made a donation of any amount to any charity. I have inferred
from these two factors that the Appellant made a misrepresentation in claiming
the credits for charitable donations in 2002 and 2003.
[32]
The Respondent also
established that Ambrose Danso-Dapaah was charged with fraud and he entered a
guilty plea to selling false charitable donation receipts. Ambrose Danso-Dapaah
was a director and officer of CFCD. There were three crucial pieces of evidence
which connected the Appellant to Ambrose Danso-Dapaah’s fraud. The first was
that his 2002 and 2003 income tax returns were e-filed by Ambrose Danso-Dapaah.
The second piece of evidence was a receipt for $1,550 for the Appellant’s 2003
year which was found on Ambrose Danso-Dapaah’s computer. The amount of this
receipt equalled 10% of the Appellant’s alleged donation which was the amount
Ambrose Danso-Dapaah charged his clients for the false charitable donation
receipts. The third were the charitable donation receipts themselves. Ambrose
Danso-Dapaah, as director and officer of CFCD, had access to these receipts.
[33]
It is my opinion that
the Respondent has met the onus given in subparagraph 152(4)(a)(i).
[34]
It is my view that the
Appellant did not make any donations to a charity in 2002 and 2003 and he and
the person filing his tax returns for those years made misrepresentations that
were attributable to fraud. The Minister was justified in reassessing the
Appellant beyond the limitation period.
[35]
The appeal is
dismissed.
Signed at Ottawa, Canada, this 18th
day of March 2014.
“V.A. Miller”
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