Docket: A-88-12
Citation: 2014 FCA 109
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CORAM:
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GAUTHIER J.A.
STRATAS J.A.
WEBB J.A.
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Docket:A-88-12
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BETWEEN:
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AZIZULLAH HAFIZY 2009-1160(IT)G
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FOROOZAN HONARI 2009-1159(IT)G
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MELANIE TACANAY 2009-1148(IT)G
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Appellants
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and
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HER MAJESTY THE QUEEN
(MINISTRY OF REVENUE)
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Respondent
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REASONS FOR
JUDGMENT
GAUTHIER J.A.
[1]
This is an appeal from the judgment of Sheridan
J. (the judge) of the Tax Court of Canada whereby the appeals from the
reassessments made under the Income Tax Act, R.S.C., 1985, c. 1 (5th
Supp.) (ITA) for the 2003 and 2004 taxation years were allowed. The judge
referred the reassessments back to the Minister of National Revenue (the
Minister) for reconsideration and reassessment only to give effect to the
Minister’s concessions made at the beginning of the hearing. In doing this, the
judge rejected the rest of the expenses claimed by the appellants. This
rejection is the subject of the appeal.
[2]
In the reassessment of the 2003 and 2004
taxation years of Azizullah Hafizy, Foroozan Honari and Melanie Tacanay (the
appellants), the Minister disallowed various expenses claimed relating to the
appellants’ real estate business, such as advertising, professional dues,
phones, parking, client incentives, gifts for referrals, clients’ meals, office
supplies, and third party costs. The Minister based her decision on the
insufficiency of supporting documentation and the poor quality of the documents
produced.
[3]
Before the judge, Mr. Hafizy gave evidence on
behalf of all three appellants and Ms. Honari provided some additional
information regarding certain points that Mr. Hafizy raised in his testimony.
All of the documentation was produced during the said testimonies and Mr.
Hafizy was cross-examined extensively.
[4]
The judge emphasized that the onus was on the
appellants to show that they incurred the expenses claimed and that these had a
business purpose. She then observed that the appellants’ failure to keep proper
books and records, combined with their practice of dealing in cash, made it
impossible for the appellants to prove their claims.
[5]
In her reasons (2012 TCC 56), the judge stated that
following the hearing, she made her own review of the documents and that the
testimony of Mr. Hafizy and Ms. Honari did not serve to correct or justify the
various irregularities identified in their documentary evidence. At paragraph
10 of her reasons, the judge lists various irregularities. She then concludes
that in this context, the Minister’s concessions were more than fair.
[6]
The appellants argue that the judge did not
consider their evidence carefully and fully and so her judgment was unfair and
unjust. After identifying what they consider to be factual errors (for example,
in subparagraph 10(2) of her reasons regarding the reference to Exhibit A-7, “Afghan Hindara”), they allege that the failure
to consider all the evidence constitutes a breach of procedural fairness.
[7]
They further submit that a judge can accept supplementary
evidence in the absence of documentary records, such as oral evidence, and that
in this case, the judge failed to do so.
[8]
Finally, they allege that the adjustments made
by the Appeal Officer on behalf of the Minister were unfounded, as these were
solely based on assumptions and estimations from Statistics Canada and other
approximations based on what the Appeal Officer thought was reasonable.
[9]
The standard of review of the judge’s findings
of mixed fact and law (absent an extricable legal principle) is palpable and
overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235
at paragraph 36 (Housen). The weighing of evidence is subject to this
same deferential standard of review.
[10]
Under the standard of palpable and
overriding error, the appellants have “a heavy
burden to meet”: Hokhold v. Canada, 2013 FCA 86 at
paragraph 24. Based on the evidentiary record before the judge, I am satisfied
that she was entitled to reach the conclusion that she did.
[11]
As Stratas J.A. explained
in Canada v. South Yukon Forest Corporation, 2012 FCA 165 at paragraph
46, “[w]hen arguing palpable and overriding error, it is not enough to pull at
leaves and branches and leave the tree standing. The entire tree must fall.”
Here, the appellants have indeed succeeded at pulling certain leaves off the
tree, as at least one of the judge’s references appears to be factually
incorrect if read literally (Exhibit A-7, “Afghan Hindara”). That being said, the tree
has not fallen. There are a number of irregularities with the evidence provided
by the appellants that support the judge’s decision not to recognize any
further expenses.
[12]
As for the appellants’ allegations that there
was a breach of procedural fairness, I see none. The appellants had the benefit
of a full hearing where they were able to present all of their arguments. In
fact, during the hearing, the judge explicitly sought further testimony on
expense items that the witness had failed to address during his examination and
cross-examination (A.B., page 185, lines 1 to 6).
[13]
In Housen, at paragraph 46, the Supreme
Court of Canada made it clear that a judge is presumed to have considered all
the evidence in the record. Here, not only did the judge tell the appellants at
the hearing that she “would look through the
documents carefully later” (A.B., page 163, lines
2 to 4; see also A.B., page 161, lines 15 to 19), she was taken through many of
the documents. And the judge expressly stated in her reasons that she made her
own review of the documents filed by the appellants (Reasons at paragraph 10).
She also detailed at length the imperfections in the evidence, citing specific
examples that the appellants argued the respondent had not properly considered (see
for example, Exhibit A-7, “Likha”, Exhibit A-2, “Taliba” and Reasons, subparagraph 10(4)).
[14]
In these circumstances, the presumption
that the judge reviewed all of the documents in the record has not been rebutted.
[15]
In these circumstances,
the appeal should be dismissed.
"Johanne Gauthier"
“I agree
David Stratas J.A.”
“I agree
Wyman W. Webb J.A.”
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