Citation: 2009 TCC 76
Date: 20090213
Docket: 2006-2584(GST)G
BETWEEN:
LES CONSTRUCTIONS ROSSI & FILS 2000 INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bédard J.
[1]
The Appellant, a
registrant for the purposes of the Excise Tax Act (“the Act”), claimed
input tax credits (“ITCs”) for the period from July 1, 2001, to
December 31, 2003 (the “relevant period”), in respect of an invoice for
$300,000 and two invoices for $150,000 each (the “disputed invoices”), which 9117‑0118 Québec
Inc. (the “Supplier”) issued to the Appellant for services that it allegedly rendered
to the Appellant. In a reassessment (the notice of which bears the
number 0311010380) made against the Appellant and dated September 21,
2004, the Minister of National Revenue, through the Quebec Minister of Revenue (the
“Minister”), essentially disallowed the ITCs thus claimed, on the ground that
all the transactions between the Appellant and the Supplier were shams because Raymond
Lepore and/or the Supplier never rendered the services for which the disputed
invoices were issued. Hence this appeal.
[2]
In making the
reassessment, the Minister relied on the following assumptions of fact:
(a)
The Appellant is a
registrant.
(b)
The Appellant is a
general contractor involved in construction and residential and commercial
renovation.
(c)
The Appellant was
audited by the Respondent for the period from July 1, 2001, to
December 31, 2003.
(d)
An invoice for $300,000
and two invoices for $150,000 issued by 9117‑0118 Québec Inc. to the
Appellant are shams and are in dispute in this appeal.
(e)
The Appellant claimed
the following ITCs in respect of those invoices:
|
Date of invoice
|
Pre-tax amount of invoice
|
ITC claimed by the Appellant
|
|
09-10-2002
|
$300,000
|
$21,000
|
|
06-12-2002
|
$150,000
|
$10,500
|
|
11-08-2003
|
$150,000
|
$10,500
|
(f)
The sole shareholder
and director of 9117‑0118 Québec Inc. is Raymond Lepore, CGA.
(g)
Raymond Lepore was presented
to the Respondent by Vincenzo Belmonte as the person responsible for the
Appellant's file at Belmonte Léger and Associates, a firm of tax credit incentive
advisors located at 50 Place Crémazie Ouest, Suite 721, in Montreal.
(h)
The Appellant was a
client of Belmonte Léger and Associates, which was the Appellant’s external accountant.
(i)
Initially, Raymond Lepore
told Diane Deluca, an auditor with the Ministère du Revenu, that he was not the
manager of 9117‑0118 Québec Inc., that he did not know what was going on
in that company, and that it did not have a place of business at 50 Place Crémazie
Ouest, Suite 721, in Montreal.
(j)
Later, Raymond Lepore
told Diane Deluca that 9117‑0118 Québec Inc. enabled the Appellant to get
better interest rates, and that 9117‑0118 Québec Inc's contract was
subcontracted in its entirety.
(k)
There is a sham
contract between the Appellant and Raymond Lepore (“on behalf of a company to
be incorporated”), which provides that the consideration for the services
rendered by Raymond Lepore is as follows:
3.02 Payment
In consideration for the Consultant's work and consultant services,
the Client shall pay the consultant a commission of 5% of the projected sales
of the Project in the amount of SIX MILLION DOLLARS ($6,000,000.00). Payment to
the Consultant shall be payable by cheque when the sales of the Project will
have reached the said amount. . . .
(l)
On June 4, 2004, Diane
Deluca, having been unable to obtain plausible explanations from Raymond Lepore
regarding the nature of the services rendered by 9117‑0118 Québec
Inc., contacted Vincenzo Belmonte of Belmonte Léger and Associates, who was
also unaware of the nature of the services rendered by Raymond Lepore in
connection with the sham contract.
(m)
On August 18, 2004, Diane
Deluca, having been unable to obtain explanations from Belmonte Léger and
Associates, contacted the Appellant directly. Through its representative, Bruno
Rossi, the Appellant asserted that the services were management services.
However, 9117‑0118 Québec Inc. was not registered with the Commission de
la construction du Québec (CCQ) or the Régie des bâtiments du Québec, and Raymond
Lepore had told Diane Deluca that he never went to the work sites.
(n)
Having been unable to
obtain a plausible answer from Mr. Lepore, Mr. Belmonte or Mr. Rossi,
the Respondent issued the notice of assessment under appeal on the ground that
the disputed invoices were shams and that Raymond Lepore had not rendered the
services for which they were issued.
Tracking the cheques
(o)
The Appellant issued, in
particular, the following cheques payable to 9117‑0118 Québec Inc.:
|
Date of cheque
|
Cheque No.
|
Amount of cheque related to invoice of -09-10-2002
|
Amount of cheque related to invoice of -06-12-2002
|
Amount of cheque related to invoice of 11-08-2003
|
|
09-10-2002
|
5429
|
$145,075
|
|
|
|
24-10-2002
|
5540
|
$100,000
|
|
|
|
22-11-2002
|
5676
|
$100,000
|
|
|
|
06-12-2002
|
5717
|
|
$52,537.50
|
|
|
14-02-2003
|
5917
|
|
$20,000
|
|
|
07-03-2003
|
6095
|
|
$20,000
|
|
|
21-03-2003
|
6155
|
|
$20,000
|
|
|
28-04-2003
|
6319
|
|
$20,000
|
|
|
16-05-2003
|
6345
|
|
$20,000
|
|
|
20-06-2003
|
6466
|
|
$20,000
|
|
|
28-08-2003
|
6894
|
|
|
$22,537.50
|
|
28-11-2003
|
7382
|
|
|
$9,000
|
|
05-12-2003
|
7413
|
|
|
$18,000
|
(p)
The cheques were
deposited into the account of 9117-0118 Québec Inc.
(q)
The amounts so
deposited were withdrawn for the benefit of the following persons, among
others:
|
Date of withdrawal
from account of 9117‑0118 Québec Inc.
|
Raymond Lepore
|
Teresa
Forte (Raymond Lepore's spouse)
|
Raymond Lepore
et associés Inc.
|
Cash
|
Reference
|
|
11-10-2002
|
$65,000
|
|
|
|
31-7 and 31‑8
|
|
23-10-2002
|
|
$10,000
|
|
|
31-6
|
|
12-11-2002
|
$38,000
|
|
|
|
31-9 and 31‑10
|
|
16-12-2002
|
$2,000
|
|
|
|
31-24 and 31‑25
|
|
16-12-2002
|
|
$4,000
|
|
|
31-24 and 31‑25
|
|
19-12-2002
|
|
$15,822.38
x
|
|
|
31-23
|
|
19-12-2002
|
|
$10,000
|
|
|
31-23
|
|
19-02-2003
|
|
|
|
$2,000
|
31-21
|
|
24-02-2003
|
|
|
|
$2,000
|
31-21
|
|
24-02-2003
|
|
$6,000
|
|
|
31-21 and 31‑22
|
|
11-03-2003
|
$2,000
|
|
|
|
31-18
|
|
11-03-2003
|
|
$2,000
|
|
|
31-19 and 31‑20
|
|
11-03-2003
|
|
|
|
$1,000
|
31-18
|
|
11-03-2003
|
|
$4,000
|
|
|
31-19 and 31‑20
|
|
05-05-2003
|
|
$2,000
|
|
|
31‑17
|
|
05-05-2003
|
$4,000
|
|
|
|
31-16
|
|
05-05-2003
|
|
|
$2,000
|
|
31-15
|
|
25-06-2003
|
$3,000
|
|
|
|
31-14
|
|
28-08-2003
|
$12,000
|
|
|
|
31-11 and 31‑12
|
|
15-10-2003
|
$24,400
|
|
|
|
31-1 and 31‑2
|
|
15-10-2003
|
$18,000
|
|
|
|
31-3
|
|
15-10-2003
|
|
$12,000
|
|
|
31-5
|
|
15-10-2003
|
|
|
$6,000
|
|
31-4
|
|
|
|
|
|
|
|
|
TOTAL
|
$168,400
|
$65,822.38
|
$8,000
|
$5,000
|
|
RAYMOND LEPORE
(r)
On June 28, 2004,
Raymond Lepore declared bankruptcy, and this time, in his bankruptcy
proceedings, he stated that he operated 9117‑0118 Québec Inc.
during the period from May 27, 2002, to March 1, 2004.
(s)
In his bankruptcy
proceedings, Raymond Lepore did not mention that he owed 9117‑0118 Québec
Inc. any amount whatsoever.
(t)
Moreover, the financial
statements of 9117-0118 Québec Inc. for the period ended
March 31, 2004, contain the following statement regarding Raymond Lepore:
Employment income Loan Shareholder $404,120
(u)
In August 2004, Raymond
Lepore made a voluntary disclosure of his income. According to that disclosure,
and as stated in the audit report in respect of Raymond Lepore's personal file,
his income for 2002 and 2003 was as follows:
|
Year
|
2002
|
2003
|
|
Income
reported by Raymond Lepore prior to his bankruptcy
|
$23,549
|
$20,799
|
|
Additional income reported by Raymond Lepore
following his bankruptcy
|
$377,150
|
$528,775
|
|
Total income
|
$400,699
|
$549,574
|
(v)
On September 8, 2004,
Diane Deluca learned that Raymond Lepore and all the corporations that he
controlled had declared bankruptcy.
(w)
These corporations owed
the tax authorities the following amounts:
|
Corporation
name
|
Income tax
|
QST
|
GST
|
Total tax debt
|
|
Raymond Lepore
& Associés Inc.
|
$5.24
|
$45,000
|
$30,000
|
$75.005.24
|
|
9117-0118
Québec Inc.
|
0
|
$60,000
|
$40,000
|
$100,000
|
(x)
Not only did Raymond Lepore
claim to have earned $400,699 in 2002 and $549,574 in 2003, but 9117‑0118
Québec Inc., which went bankrupt on June 23, 2004, admitted that it had collected
taxes which it did not remit to the Respondent, and that it had claimed,
without entitlement, the following input tax rebates (“ITRs”) and input
tax credits (“ITCs”) in the course of the 2003 and 2004 fiscal years, as shown
in the audit report concerning the file of 9117‑0118 Québec Inc., filed
as Exhibit ____ in support hereof:
|
9117‑0118 Québec Inc.
|
|
Fiscal year
|
2003 and 2004
|
|
QST collected but not remitted
|
$5,618
|
|
ITRs
|
$60,039
|
|
GST collected
but not remitted
|
$4,900
|
|
ITCs
|
$54,988
|
|
Total received
without entitlement
|
$125,545
|
(y)
Lastly, in his
bankruptcy proceedings, Raymond Lepore stated that he had not sold or disposed
of any property whatsoever in the five years preceding June 23, 2004,
as shown in his bankruptcy documents.
(z)
All transactions
between the Appellant and 9117‑0118 Québec Inc. are shams, and Raymond Lepore
and/or 9117‑0118 Québec Inc. never rendered the services for which the disputed
invoices were issued.
(aa)
All these transactions
were planned in order to take the amounts paid to 9117-0118 Québec Inc. out of
the Appellant's coffers without paying any income tax or consumption tax on
those amounts.
[3]
Bruno Rossi, Raymond Lepore,
and Bruno Rossi's sister, Diana Rossi, testified in support of the Appellant's
position. Diane Deluca and Hélène Bui testified in support of the Respondent's
position.
Testimony of Bruno Rossi
[4]
The testimony of Mr.
Rossi (the Appellant's sole shareholder and director) with respect to the
circumstances under which the Appellant and Mr. Lepore signed the contract
tendered as Exhibit A‑1 (the “Contract”) can be summarized as
follows: Mr. Lepore, a partner with the accounting firm of Belmonte Léger and
Associates, was the Appellant's external accountant starting in 1999. Mr.
Rossi’s business relationship with Mr. Lepore quickly turned into a
friendship. In 1999, the Appellant purchased a lot on Boyer Street in Montreal with the intention of building and selling
roughly 50 condos (the “Boyer project”). Mr. Rossi explained that the
Boyer project was by far the largest real estate project ever undertaken by the
Appellant, which until that time had not built any more than 10 condos in the
same year for the purposes of sale. Mr. Rossi proposed that Mr. Lepore
become an equal partner in the Boyer project, in the belief that his
involvement in the project could compensate for his own weak management and
financing skills, and thereby enable the Appellant to successfully complete
this major real estate project. Since Mr. Lepore did not have the
necessary funds to invest in the Boyer project, he declined the
Appellant's partnership offer, and instead accepted an offer under which his
remuneration would be based on the sales generated by the Boyer project. The parties
formalized this agreement on November 6, 2000, by signing the contract,
apparently in the presence of a witness whose name Mr. Rossi and Mr. Lepore
did not know. At most, Mr. Rossi remembered that the witness's first name
was Maria and that she had worked for the Appellant for a short time. Clauses 2.02
and 3.02 of the contract list the services that were to be rendered by Mr. Lepore
and the remuneration that the Appellant undertook to pay him in consideration of
those services. The two provisions in question read as follows:
2.02
Main Duties and Responsibilities
Without being restrictive, and subject to modification (in the
latter case, by prior notice from the Client), the Consultant's main duties and
responsibilities shall be as follows:
a) to plan and define the project stages, to allocate the
resources, to coordinate the project execution and to supervise their
application at the Project location;
b) to advise and assign the responsibilities to other team
members while ensuring the follow‑up of the plans, time‑schedule
and budgets;
c) to provide an efficient project management capacity and
to comply with the time‑schedule;
d) to manage all the financial aspect of the Project,
including the sales, the purchases, the revenues, the expenses;
e) to prepare all cash flows, financial reports and
forecasting necessary for the Project and to deal and negotiate with all and
any financial institution required to the Project;
f)
to negotiate and deal directly with all and any
of the suppliers with respect to the Project;
3.02
Payment
In consideration for the Consultant's work and consultant services,
the Client shall pay the Consultant a commission of 5% of the projected sales
of the Project in the amount of SIX MILLION DOLLARS ($6,000,000.00). Payment to
the Consultant shall be payable by cheque when the sales of the Project will
have reached the said amount.
The parties hereby agree that in the event that the sale of the
Project does not reach the sale price of SIX MILLION DOLLARS ($6,000,000.00),
then the Consultant will only receive payment for services rendered on the
Project in the amount of TWO HUNDRED THOUSAND DOLLARS ($200,000.00).
[5]
Moreover,
Mr. Rossi's testimony regarding the nature of the services that Mr. Lepore
purportedly rendered to the Appellant was at best vague, imprecise, and, for
all practical purposes, unverifiable. Mr. Rossi summarized the services
supposedly rendered by Mr. Lepore as follows:
Q. Did you describe the services that were rendered?
A. Yes, I did. He did some work, at that point, I don't
know the terms, exact terms of what it means to have a partner that helps you
see other projects, balance other projects and help you out on that paperwork,
an advisory to things, how to put things down on paper, how to go find
subsidies, how to go find, all those elements that I don't have, half of
my company runs on manual work and the other half is on paperwork and he did
all the... sort of accounting and "gestionnage" whatever you want to
call it.
I would emphasize, moreover, that the statements that
Mr. Rossi made to Ms. Deluca (the “auditor”) at their first meeting, concerning
the services that Mr. Lepore supposedly rendered to the Appellant, were
even more vague, imprecise and unverifiable than those made during his
testimony. Indeed, Mr. Rossi was content to tell Ms. Deluca that Mr. Lepore
did project management and that he never went to the work sites. I note as well
that, at that meeting, Mr. Rossi did not think it necessary to tell
Ms. Deluca that the services had been rendered to the Appellant in
accordance with the contract.
Mr. Lepore's testimony
[6]
In his testimony, Mr. Lepore
essentially reiterated, albeit in greater detail, the testimony that Mr.
Rossi gave with respect to the circumstances under which the contract was
signed on November 6, 2001, and the services allegedly rendered under the
contract. With respect to the services rendered, Mr. Lepore described the
strategic role that he played in terms of obtaining financing for the Boyer
project, obtaining subsidies from the City of Montreal and Gaz Métropolitain, and controlling the project costs. He also
explained that he had had to prepare a number of financial documents in performing
the services that he had undertaken to provide to the Appellant under the
contract. His testimony in this regard is worth quoting:
I was controlling costs and projecting revenues and projecting the
sales and undertaking the necessary documentation to provide to the banks on an
ongoing basis, cash flow analyses, any cash flow variances, budget versus
actual expenses, the variances generated between the two if they were in favour
or against Constructions Rossi. If our budget versus our expenses, if our
expenses were higher than our budget, why were the expenses higher? I had
to do an analysis of that to see maybe our costs were too high, maybe some
suppliers were selling us at higher prices than we could get elsewhere. So, you
know, and this had to be done on a phase by phase basis. So, it encompassed a
lot of work in that area.
Lastly, Mr. Lepore stated that he had also given
bookkeeping training to Mr. Rossi's sister. I note from Mr. Lepore's
testimony that, to all intents and purposes, the only people whom he met in connection
with his purported services to the Appellant were Mr. Rossi and Mr.
Rossi's sister. In fact, Ms. Bui, the person responsible for sales for the
Boyer project, was the only other person that Mr. Lepore acknowledged
having met in connection with his purported services to the Appellant. I would
immediately point out that Ms. Bui denies having met Mr. Lepore. In
fact, she testified that she simply did not know him.
[7]
It should also be pointed
out that Mr. Lepore admitted that all the amounts (including GST and QST)
paid by the Appellant (in connection with the services that Mr. Lepore supposedly
rendered to the Appellant) to the Supplier (of which he was the sole
shareholder) had been withdrawn from the Supplier for Mr. Lepore's benefit,
and that he had spent all those amounts for personal purposes (including meeting
the demands of his passion for gambling). Mr. Lepore also admitted
that the Supplier had not remitted to the Respondent the GST thus collected
from the Appellant, and that he had claimed ITCs and ITRs without being
entitled thereto. Lastly, Mr. Lepore admitted that the aforementioned amounts
withdrawn from the Supplier do not appear in his income tax returns for the
2002 and 2003 taxation years.
[8]
I
stress that Mr. Lepore did not deny that he had initially told
Ms. Deluca that he was not the Supplier's manager, that he did not know
what was going on with the Supplier and that the Supplier, did not have a place
of business at 50 Place Crémazie Ouest, Suite 721, in Montreal. Nor
did he deny that he had later told Ms. Deluca that the Supplier enabled
the Appellant to save 1% interest on its financing, and that the entire
contract awarded to the Supplier had been subcontracted. Mr. Lepore's
explanations with respect to these statements, which he acknowledged were false,
are worth quoting:
Well, like I say, I was in a panic situation because of
all the financial problems that I had and I was literally going
through a depression at that point in time and also since my first language is
English not French, I couldn't really respond properly to what she was
asking.
Ms. Rossi's testimony
[9]
Ms. Rossi's
testimony can be summarized as follows: Mr. Lepore had given her bookkeeping
training (two days a week at the Appellant's head office) in 2002 when she was
working (without pay) for the Appellant. Ms. Rossi also confirmed that
Mr. Lepore met her brother very frequently, but she was unable to specify
the nature of their discussions.
Invoice of August 11, 2003
[10]
The evidence shows that
(i)
the Supplier (whose
sole shareholder and director was Mr. Lepore) sent the Appellant an
invoice for $150,000 dated November 11, 2003, for services supposedly
rendered by Mr. Lepore in connection with the Chateaubriand project, and
(ii)
the Appellant claimed,
in computing its net tax, a $10,500 ITC in respect of that invoice, even though
only a portion ($66,687) of the fees that were billed had been paid.
[11]
I would immediately point
out that the testimony given by Mr. Rossi and by Mr. Lepore was
completely silent with respect to the nature of the Chateaubriand project.
It is worth quoting their testimony as to the reasons for which the Appellant
paid only a portion of the fees:
I don't think I paid him much as this bill because I know
that he was not on the job no more, he was now disappearing on me and he asked
me, you know, “we're going do a new project on Châteaubriand, we're going to
evaluate this at a $150,000 that I can help you.” And I go, “you're not here no
more, you're gone, you're... I don't know what's happening with you
anymore, why should I pay this bill? You haven't done much for me yet.” “Yes,
but I did, you know, give you lots of profit on this one”, he wanted to
start of[f] a new project we've started and I wasn't agreeing to it so
I didn't really pay the bill.
. . .
Q. Now, I understand that you issued a third invoice in
August 2003 with a different reference number which is 0314?
A. Yes. I was still in a lot of debt at
that point in time, this had to do with a separate project that Constructions
Rossi was going to be undertaking, I think the project was called
Châteaubriand, okay, and I went to Bruno and you know, I told him,
I said "look, I said, I need some money up front for this
particular project that we're going to be undertaking together", we didn't
sign an agreement yet, I was kind of desperate at that point in time,
I needed money. And "okay, fine." I present him with the
invoice, he didn't like the idea and all that but in the end, he did pay me a
little portion of that invoice but I think he didn't get paid very much, I don't
remember how much I got paid of that invoice but it wasn't that much.
[12]
I would point out that
Mr. Rossi testified that the Appellant had claimed the ITC as soon as it
received the invoice, but that, when the invoice was paid only in part,
the Appellant did not reimburse part of the ITC that it had claimed. According
to Mr. Rossi's explanation, the Appellant simply forgot to make that reimbursement.
[13]
I would also note that
the evidence discloses that the income statement in the Appellant's financial statements
for its fiscal year ended June 30, 2002 (Exhibit I‑1)
differs from the Appellant's income statement for its fiscal year ended
June 30, 2003 (Exhibit I‑2), notably with respect to the items
[TRANSLATION] “sales”, [TRANSLATION] “cost of sales”, and [TRANSLATION] “salary
and benefits” and [TRANSLATION] “management expenses”. I would point out that
Mr. Rossi, claiming he lacked accounting knowledge, was unable to provide any
explanations in this regard.
Analysis
[14]
The Appellant's
evidence was essentially based on the testimony given by Mr. Rossi, Mr.
Rossi’s sister (who cannot be called an independent witness) and Mr. Lepore.
The only documentary evidence submitted by the Appellant was
(i)
the contract (Exhibit A‑1),
(ii)
the invoice dated
October 9, 2002 (Exhibit A‑3),
(iii)
the invoice dated
December 6, 2002 (Exhibit A‑4), and
(iv)
the invoice dated August
11, 2003 (Exhibit A‑2).
[15]
Counsel for the
Appellant submits that his client discharged its onus of showing, on a balance
of probabilities, that the Supplier had truly rendered services to the
Appellant. In this regard, counsel for the Appellant argues that Mr. Rossi's
testimony was credible, especially since it was supported by the equally
credible testimony of his sister and of Mr. Lepore and by documentary
evidence that clearly showed that services were rendered. Counsel for the
Appellant further submits that this testimony was not contradicted by any other
testimony or documentary evidence.
[16]
The assessment of the
credibility of Mr. Rossi, of his sister and of Mr. Lepore, played an
important part in my decision because the Appellant's case essentially turned
on their testimony. I wish to emphasize that I accorded little weight to the
testimony of the witnesses for the Appellant. In this regard, I would
immediately point out that the courts are not required to believe witnesses,
even if their testimony is not contradicted. The accounts given by
witnesses can be found implausible on the basis of circumstances disclosed by
the evidence or in light of the dictates of common sense.
[17]
I would note that, quite
apart from the implausibility of Mr. Rossi's story, his answers were intentionally
vague and imprecise, and generally unverifiable. The Appellant could have
substantiated some of Mr. Rossi's assertions, thus establishing his credibility
through sufficient and serious evidence, notably with respect to the
Appellant's employee, who was apparently named Maria and who supposedly
witnessed the signing of the contract. For example, the Appellant, using its
books and records (including the payroll journal), could have found that
employee's name and contact information and summoned as a witness at the
hearing. At the very least, the Appellant could have tendered as evidence the
relevant books and records to show that the employee in question was in its
employ on November 6 when the contract was signed. The Appellant
could also have submitted reliable documentary evidence (such as the
contracts for the sale of the Boyer project condos) in order to show that the
$450,000 in fees were paid to the Supplier in accordance with the terms and
conditions set out in clauses 3.02 and 3.03 of the contract, especially
since the Appellant's financial statements, which cannot be characterized
as reliable, in no way show that the Appellant made a total of $6,000,000 in condo
sales in the Boyer project. In neither case did the Appellant submit sufficient
evidence of this kind to substantiate Mr. Rossi's assertions and thereby
establish his credibility, although it could have done so. The inference that I
draw from this is that such evidence would have been unfavourable to the
Appellant. Mr. Rossi's initial statement to Ms. Deluca, which was evasive
to say the least, suggests to me that he had much to hide. It is difficult for
me to understand why Mr. Rossi would not have disclosed the existence of
the contract to Ms. Deluca at the outset. Why did Mr. Rossi wait so
long before telling her about such a contract? Lastly, Mr. Rossi's
testimony with respect to the invoice dated August 11, 2003
(Exhibit A‑2), and especially with respect to the reasons why the
Appellant paid the Supplier a portion ($66,687) of the fees not withstanding
the fact that no services were rendered, only confirms my doubts regarding Mr.
Rossi's credibility.
[18]
I would also point out
that I give little weight to Mr. Lepore's testimony. Indeed, it is difficult
for me to give any weight to the assertions of an individual who has so openly
flouted our tax legislation. In addition, I note that Mr. Lepore's
testimony that, in the course of carrying out his mandate, he met the person
responsible for the sales of the Boyer project condos was contradicted by the
very credible testimony of Ms. Bui, who was that person. The Appellant
could have substantiated some of Mr. Lepore's statements and thus established
his credibility. For example, the Appellant could have tendered as
evidence the many financial documents (cash flow, etc.) that Mr. Lepore
says he prepared for the Appellant in carrying out the mandate that he received
from the Appellant. The Appellant did not submit sufficient evidence of this
kind to substantiate Mr. Lepore's assertions and thereby establish his
credibility, although it could have done so. The inference that I draw from
this is that such evidence would have been unfavourable to the Appellant.
Lastly, Mr. Lepore's testimony with respect to the invoice dated
August 11, 2003 (Exhibit A‑2), and especially with respect
to the reasons why the Appellant paid the Supplier a portion ($66,687) of the
fees nothwithstanding the fact that no services were rendered by the Supplier, only
confirms my doubts regarding Mr. Lepore's credibility.
[19]
In any event, I am of
the opinion that the story told by Mr. Rossi and Mr. Lepore is
implausible. Indeed, I find it utterly implausible that the Appellant would
have agreed to pay the Supplier astronomical fees of $450,000 (roughly 6.42% of
the Appellant's alleged gross sales from the Boyer project) for professional
services which, the final analysis, the Appellant could have obtained from
Mr. Lepore in his capacity as a partner of the accounting firm of Belmonte
Léger and Associates for a fraction of the $450,000 that the Supplier was paid.
Lastly, the story that those two witnesses told about the partial payment of
the invoice dated August 11, 2003 (the Chateaubriand project), even
though no services were rendered, can be added to the list of implausibilities
in the case at bar.
[20]
On my assessment of the
evidence, I find it more probable than not that the services were never provided
to the Appellant, and that the contract and the fee payment were merely shams
intended to conceal the truth. In addition, it is difficult to make any finding
other than that the Appellant deliberately made false statements when it
claimed the ITCs in computing its net tax for the relevant period. In my
opinion, the Minister met his burden of proof in the instant case, and was
entitled to impose the penalties prescribed in section 285 of the Act.
[21]
For these reasons, the
appeal is dismissed, with costs.
Signed at Ottawa, Canada, this 13th
day of February 2009.
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