[OFFICIAL ENGLISH
TRANSLATION]
Date:
20030113
Docket:
2000-1055(IT)I
BETWEEN:
DANNY TAWIL,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers,
J.T.C.C.
[1] The
Minister of National Revenue ("the Minister") disallowed charitable
donations credits claimed by Danny Tawil for the 1991, 1992, 1993 and 1994
taxation years. The disallowed donations amount to $2,000, $4,500, $3,000 and
$5,000, respectively, for each of the years at issue and were made to the Ordre Antonien
libanais des Maronites (hereinafter "the Order"). Moreover, the
Minister made the reassessment after the normal reassessment period for 1991,
1992, 1993 and 1994 and assessed penalties for each of those years. The
assessment was confirmed by the Minister on August 22, 1997, for each
of the years at issue.
[2] The
facts on which the Minister relied in making his reassessment, which the
appellant has either admitted or denied, are as follows:
[TRANSLATION]
Donations
(a) when he filed his tax return for the
1991 taxation year, the appellant claimed a charitable donations credit in
respect, inter alia, of $2,000 that he says he donated to the
Ordre Antonien libanais des Maronites during that taxation year; (admitted)
(b) the appellant did not in any way whatsoever
donate an amount of $2,000 to the Ordre Antonien libanais des Maronites in the
1991 taxation year; (denied)
(c) the appellant did not submit to the
Minister a valid receipt containing the prescribed information for the alleged
$2,000 donation he claims to have made to the Ordre Antonien libanais des
Maronites since the donation amount shown on the receipt is false; (denied)
(d) when he filed his tax return for the
1992 taxation year, the appellant claimed a charitable donations credit in
respect, inter alia, of $4,500 that he says he donated to the
Ordre Antonien libanais des Maronites during that taxation year; (admitted)
(e) the appellant did not in any way whatsoever
donate an amount of $4,500 to the Ordre Antonien libanais des Maronites in the
1992 taxation year; (denied)
(f) the appellant did not submit to the
Minister a valid receipt containing the prescribed information for the alleged
$4,500 donation he claims to have made to the Ordre Antonien libanais des
Maronites since the donation amount shown on the receipt is false; (denied)
(g) when he filed his tax return for the
1993 taxation year, the appellant claimed a charitable donations credit in
respect, inter alia, of $3,000 that he says he donated to the
Ordre Antonien libanais des Maronites during that taxation year; (admitted)
(h) the appellant did not in any way whatsoever
donate an amount of $3,000 to the Ordre Antonien libanais des Maronites in the
1993 taxation year; (denied)
(i) the appellant did not submit to the
Minister a valid receipt containing the prescribed information for the alleged
$3,000 donation he claims to have made to the Ordre Antonien libanais des
Maronites since the donation amount shown on the receipt is false; (denied)
(j) when he filed his tax return for the
1994 taxation year, the appellant claimed a charitable donations credit in
respect, inter alia, of $5,000 that he says he donated to the
Ordre Antonien libanais des Maronites during that taxation year; (admitted)
(k) the appellant did not in any way whatsoever
donate an amount of $5,000 to the Ordre Antonien libanais des Maronites in the
1994 taxation year; (denied)
(l) the appellant did not submit to the
Minister a valid receipt containing the prescribed information for the alleged
$5,000 donation he claims to have made to the Ordre Antonien libanais des
Maronites since the donation amount shown on the receipt is false; (denied)
(m) the appellant did not make the donations
for which he is claiming credits in his tax returns; rather, he was involved in
the following scheme: (denied)
in some cases, the Ordre Antonien libanais
des Maronites issued a receipt to a taxpayer indicating a cash donation equal
to the amount that the taxpayer paid it by cheque and then returned to that
taxpayer the same or nearly the same amount of money in cash;
in other cases, the Ordre Antonien libanais
des Maronites issued a receipt to a taxpayer showing a cash donation of a
certain amount when the taxpayer had not paid anything at all or had paid a
minimal cash amount in comparison with the amount indicated on the receipt;
(n) . . .
(o) in filing his tax returns and in supplying
information under the Act for the 1991, 1992 and 1993 taxation
years, the appellant made a misrepresentation attributable to wilful default
concerning credits claimed by him in respect of charitable donations of $2,000,
$4,500 and $3,000, respectively; (denied)
Penalties
(p) the appellant knowingly, or at least under
circumstances amounting to gross negligence, made a false statement or omission
by claiming credits for charitable donations of $2,000, $4,500, $3,000 and
$5,000, respectively, for the 1991, 1992, 1993 and 1994 taxation years
when he had not made any donation at all; (denied)
(q) since the appellant knowingly, or under circumstances
amounting to gross negligence, made or participated in, assented to or
acquiesced in the making of, a false statement or omission in the tax returns
filed for the taxation years at issue, the tax that the appellant would have
been required to pay on the basis of the information provided in the tax
returns filed for those years was lower than the amount of tax actually payable
by $484.68, $1,122.83, $754.94 and $1,234.25, respectively, for the taxation
years at issue. (denied)
[3] The
appellant did not testify at the trial. However, his agent, Abdo Nawar,
testified for him. Mr. Nawar stated that he and the appellant were always
together and that they would often go to the Order. According to
Mr. Nawar, the appellant quickly found a job in the accounting field when
he arrived in Canada and earned twice his income. He recognized the receipts
used by the appellant in his tax returns for the years at issue and stated that
Mr. Tawil's donations were made to help other people who, like him, turned
to the Order when they arrived in Canada.
[4] The
appellant's donations were made in cash and given to Father Khamar. His
agent could not explain why the total amount shown on the receipts was a round
figure. He said that the donations were recorded in a notebook. The appellant's
income for the four years at issue was $17,062, $26,270, $27,899 and $29,612,
respectively. Finally, Mr. Nawar said that the appellant stopped making
donations when he heard about the scheme and that he returned to Lebanon in 1994
at Christmas.
[5] The
respondent adduced extensive evidence. This had to be the case to show the
various schemes devised by the Order to reward some of the donors and provide
them with tax receipts. In 1990, the Order was audited by the Department of
Revenue and was given instructions as a result. The investigation that was
eventually conducted and the final audit show that the Order did not comply
with the instructions it received.
[6] The
Department of Revenue began the principal investigation after being informed of
various schemes used by the Order to obtain donations and reward donors.
Without giving all the details of the investigation, it is clear from the
evidence adduced that that exercise led to tax evasion convictions for a number
of people and to the reassessment of those who benefited from the scheme, that
is, nearly 1,200 people. Most of the taxpayers did not challenge the
reassessments. Some of them appealed.
[7] The
investigator, Gaétan Ouellette, testified about the role he played in
reviewing the Order's records. On November 8, 1995, the
investigators, armed with a warrant, seized all of the Order's documentation to
examine it. They seized the bank records, the deposit slips, the cheques the
Order had issued, the books showing the receipts given for the donations and
the diskettes containing accounting information. They also met with the Order's
accountants.
[8] Moreover,
nearly a hundred people told them about the existence of a scheme whereby the
donor made a substantial donation in return for a receipt and the Order then
returned 80 percent of the donation to the donor in cash. The other scheme
used involved making a cash donation in return for a receipt for an amount four
to five times greater than the amount of the donation.
[9] For
the most part, the donations were solicited by people who themselves kept
five percent of the donations as commission. Some accountants proposed
this scheme to their clients so that they could benefit from it. Several
admissions were filed in evidence confirming the existence of the schemes used
(Exhibit I‑12, Tabs 10 and 11). At Tab 3 of Exhibit I‑12,
the witness Ouellette reproduced the information obtained at the time of the
search from a diskette called "le bibliorec". For a given numerical
sequence of receipts, it provides details on the receipt and distribution of
the donation by indicating the donor's identity, the amount of the donation,
the amount given back to the donor, the amount kept by the Order and, finally,
the amount handed over by the canvasser. There is no need to say more about
this other than that the information obtained from the diskette and reproduced
in Exhibit I‑12 corresponds to other seized documents, such as the
cheques and deposit slips, that actually confirm the scheme whereby the Order
kept only 20 percent of the donations and gave the donor a receipt for the
full amount and the difference in cash.
[10] To return 80 percent to the donor, the Order wrote cheques on its
account that were payable to "cash". This was done immediately after
the deposit or in the days that followed. Tab 7 of Exhibit I‑12
contains several examples, and some of the withdrawals identified the donor to
whom the money was to be returned.
[11] The facts showed that, even after the searches, the Order still provided
receipts and offered receipts to certain people.
[12] The respondent also called as a witness Colette Langelier, who
was actively involved in the investigation. She began taking part in the
investigation after information was received from the spouse of one of the
participants in the scheme. She filed the correspondence sent to the Order and
the instructions given to it so that it would comply with Revenue Canada's
requirements. She also reviewed all of the Order's tax returns (Exhibit I‑10),
which contained a list of the donors. She then met with the priests to examine
the accounting records, and she realized that the Order did not have any. She
looked at some expense vouchers, the bank statements and the deposit slips so
that she could prepare a bank reconciliation (Exhibit I‑13), which
she filed. She recorded everything from 1989 to 1995. Her goal was to identify
the amounts deposited in comparison with the total amounts shown on the
receipts given.
[13] She was able to conclude from the result of this exercise that three
different schemes existed:
[TRANSLATION]
(1) Professionals,
predominantly doctors of Lebanese origin and/or their spouses, as well as
businesspeople, whose "amounts donated" represented about
80 percent of the total amounts shown on the receipts issued. In other
words, they provided a cheque equal to 100 percent of the official receipt
issued by the Order, and the Order then gave them back 80 percent of the
donation in cash;
(2) Partial
gifts: in this scheme, the donor's cheque represented 10 to 20 percent of
the amount on the official receipt. Those who participated in this scheme were
employees or retired persons, and the cheque was generally deposited between
January and May of the year following the date on the receipt; therefore the
receipts were backdated; and
(3) Donations
that cannot be traced or of which there is no material evidence other than the
official receipt. They were cash donations. It can be seen from the number on
the receipt that several of these donations were made the following year. To
reach this conclusion, one has only to compare the donations made by cheque,
the date on which they were deposited and the corresponding receipt number.
[14] She could not obtain any information that would have enabled her to
track the money collected, and she was unable to confirm the explanations given
by the priests. She could not find any evidence to conclude that the donations
obtained had, as the priests explained, been sent to Lebanon. The Order had not
changed its approach at all, even after agreeing to comply with the
requirements of the Department of Revenue. Table I‑18 shows that, to
comply with the 90 percent quota, the Order stated that the money was sent
to Lebanon.
[15] A dental technician named Bachar Hajjar testified that he knew
the Order and had attended musical evenings during religious holidays. It was
during one of those evenings that he was told about the possibility of
obtaining receipts to claim tax credits. In 1993, he made a cash donation to a
person from the monastery located on Avenue Richard in the Outremont
neighbourhood. He does not know the person's name, but he said that the person
gave him a receipt for $1,200 in return for a $240 donation.
[16] Jean‑Claude Perreault, a retired teacher, gave similar
testimony. He heard about the Order by chance while in a health care
professional's waiting room. People were talking about the possibility of
making a donation and obtaining in return a receipt for an amount up to four
times the amount donated. He therefore contacted a representative of the Order
and, in 1993, obtained an official tax receipt for $11,500 in return for a
donation of $2,500 to the Order. In 1994, he donated $2,500 to the Order and
obtained an official tax receipt for $10,000.
Analysis
[17] In argument, counsel for the respondent filed with the Court a book of
authorities setting out the legal principles applicable to the burden of proof
and the rules on the assessment of circumstantial evidence. On this last point,
the following passage is found in author Jean‑Claude Royer's book La
preuve civile, 2nd edition (Éditions Yvon Blais), at paragraph 175,
page 100:
[TRANSLATION]
175 — Direct evidence is preferred to indirect evidence — Direct evidence is evidence that has a
direct bearing on the fact at issue. Indirect evidence, circumstantial
evidence, or presumptive evidence concerns material facts that make it possible
to infer the existence of the fact at issue. . . .
Direct testimonial evidence is superior to presumptive
evidence. However, this rule is not absolute. In certain circumstances, a court
may prefer circumstantial evidence to direct evidence.
[18] It must also be recalled that the courts are not required to believe
witnesses, even when they are not contradicted by other witnesses, if their
version seems implausible based on the circumstances revealed by the evidence
or based on simple common sense (see Legaré v. The Shawinigan Water and
Power Co. Ltd., [1972] C.A. 372).
[19] In this case, the evidence adduced by the respondent leaves no doubt
as to the existence of a well‑structured scheme established by the Order.
Under that scheme, the Order could collect large sums of money while rewarding
donors through receipts for amounts greater than the actual donations. As
explained above, there were three possible methods of obtaining false receipts.
The issue here is whether the appellant participated in the scheme in order to
derive a benefit therefrom.
[20] The appellant's agent stated that the donors must not all be lumped
together. He explained that the appellant refused to be assisted by counsel
because he realized that most donors had participated in the scheme. He also
argued that the appellant had always dealt with Father Khamar, despite
Ms. Langelier's testimony that Father Khamar had left Canada around
the end of 1992. The appellant was single and could afford to be generous.
[21] Counsel for the respondent maintained that the appellant's case is no
different from that of the other donors. Counsel argued that, according to
Abdo Nawar's testimony, the appellant dealt with Father Khamar during
the years at issue. However, the signatures on the T3010 forms filled out by
the Order and also on the cheques support the position that Father Khamar
left Canada around the end of 1992. The respondent further argued that
Abdo Nawar's assertion that all of the donations made during the year by
the appellant were recorded in a blue notebook is also wrong because no such
document was found at the time of the search. Nor was any cash found in the
safe, and the audits did not make it possible to establish that money had been
sent to Lebanon.
[22] Table I‑26 submitted by Ms. Langelier allows us to
establish a connection between the date on which the receipts were given and
the receipt numbers. By comparing the date of the appellant's deposits with the
date of other deposits, it can be concluded that most of the receipts given to
the appellant were backdated. As regards all of the donations for the four
taxation years, no record or book showing the appellant's contributions was
found by the auditors at the time of the search, with the result that the exact
amounts of his donations during those years cannot be verified. We must also
recall the testimony of Ms. Langelier, who said that no cash donation had
actually been made or that, if amounts were paid, they did not correspond to
the total shown on the receipts since no money was found in the Order's safe at
the time of the search, and there was no evidence that money had been sent to
Lebanon or that the Order had received the money corresponding to the receipts
issued according to the Order's financial statements.
[23] Based on the table showing the appellant's income in Exhibit I‑27,
it may be implausible for a taxpayer to be so generous if his income and needs
do not enable him to make such donations.
[24] I am aware that a taxpayer has a duty to be generous and that, if the
donations comply with the provisions of the Act, they cannot be
contested. However, in this case, I can conclude from the weight of the
evidence adduced by the respondent that the appellant participated in the
scheme established by the Order for the two taxation years and that all the
explanations are implausible.
[25] Having concluded that the appellant did not make real donations, does
subsection 163(2) of the Act apply in this case? Did the appellant knowingly, or under circumstances amounting to gross
negligence, make a false statement or omission in filing his tax returns during
the years at issue? Having found
that the appellant participated in the scheme and was aware of the content of
his tax returns and the fact that the tax credits were based on false receipts
he had obtained, I find on a balance of probabilities that he made a false
statement in his tax returns and that the penalties are warranted.
[26] I also conclude that the respondent has shown on a balance of
probabilities that the appellant made misrepresentations
attributable to neglect,
carelessness or wilful default and that the respondent may therefore make
reassessments after the normal reassessment period.
[27] Accordingly, the appeals are dismissed.
Signed at Ottawa, Canada, this 13th day of
January 2003.
J.T.C.C.
Translation certified true
on this 8th day of March 2004.
Sophie Debbané, Revisor
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