[OFFICIAL ENGLISH TRANSLATION]
Date:
20030113
Docket:
2000-1264(IT)I
BETWEEN:
ABDO
NAWAR
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers,
J.T.C.C.
[1] Abdo Nawar was disallowed credits for charitable donations by the
Minister of National Revenue (the “Minister”) for the 1992, 1993 and 1994
taxation years. The amounts of the donations disallowed are $1,500, $4,000 and
$4,000 respectively for each of the years at issue and the donations were made
to the Ordre Antonien libanais des Maronites (the “Order”). In addition, the
Minister made his reassessment after the normal reassessment period for each of
the 1992 and 1993 taxation years and assessed penalties for each of the years
at issue. The Minister confirmed the assessment on December 7, 1999, for each
of the years at issue.
[2] The facts on which the Minister relied in making his reassessment
and which the appellant admitted or denied, as the case may be, are the
following:
[TRANSLATION]
DONATIONS
(a) in filing his
Income Tax Return for the 1992 taxation year, the Appellant claimed a
charitable donations tax credit in relation, among other things, to an amount
of $1,500 that he contends he donated to the "Ordre Antonien Libanais des
Maronites" during the 1992 taxation year; (admitted)
(b) the Appellant
has not in any manner whatever made a donation in the amount of $1,500 to the
"Ordre Antonien Libanais des Maronites" during the 1992 taxation
year; (denied)
(c) the Appellant
never provided the Minister with a valid receipt containing prescribed
information in relation to the alleged donation of $1,500 that the Appellant
contends he made to the "Ordre Antonien Libanais des Maronites" since
the amount of the donation that appears on the said receipt is false; (denied)
(d) in filing his
Income Tax Return for the 1993 taxation year, the Appellant claimed a
charitable donations tax credit in relation, among other things, to an amount
of $4,000 that he contends he donated to the "Ordre Antonien Libanais des
Maronites" during the 1993 taxation year; (admitted)
(e) the Appellant
has not in any manner whatever made a donation in the amount of $4,000 to the
"Ordre Antonien Libanais des Maronites" during the 1993 taxation
year; (denied)
(f) the Appellant
never provided the Minister with a valid receipt containing prescribed
information in relation to the alleged donation of $4,000 that the Appellant
contends he made to the "Ordre Antonien Libanais des Maronites" since
the amount of the donation that appears on the said receipt is false; (denied)
(g) in filing his
Income Tax Return for the 1994 taxation year, the Appellant claimed a
charitable donations tax credit in relation, among other things, to an amount
of $4,000 that he contends he donated to the "Ordre Antonien Libanais des
Maronites" during the 1994 taxation year; (admitted)
(h) the Appellant
has not in any manner whatever made a donation of $4,000 to the "Ordre
Antonien Libanais des Maronites" during the 1995 taxation year; (denied)
(i) the
Appellant never provided the Minister with a valid receipt containing
prescribed information in relation to the alleged donation of $4,000 that the
Appellant contends he made to the "Ordre Antonien Libanais des
Maronites" since the amount of the donation that appears on the said
receipt is false; (denied)
(j) the
Appellant has not made the donations for which he claims charitable donations
tax credits in his income tax returns and has instead participated in the
following scheme:
in certain cases, the "Ordre
Antonien Libanais des Maronites" issued a receipt to a taxpayer indicating
a cash donation for an amount equal to the amount that the taxpayer had paid by
cheque, while at the same time giving back the taxpayer an equal or
approximately equal sum of money;
in other cases, the "Ordre
Antonien Libanais des Maronites" issued a receipt to a taxpayer indicating
a cash donation for a certain amount, whereas the taxpayer had made no donation
or had paid a small cash amount as opposed to the amount indicated on the
receipt; (denied)
(k) ( ... )
(l) in filing
his income tax returns and in supplying any information under the Act
for the 1992 and 1993 taxation years relating to tax credits for charitable
donations that the Appellant claimed in relation to the amounts of $1,500 and
$4,000 respectively, the Appellant has made a misrepresentation that is
attributable to wilful default; (denied)
PENALTIES
(m) the Appellant
knowingly, or under circumstances amounting to gross negligence, made false
statements or omissions in claiming tax credits for charitable donations in
relation to the amounts of $1,500, $4,000 and $4,000 respectively for the 1992,
1993, and 1994 taxation years, whereas he had not made any donation; (denied)
(n) the Appellant
knowingly, or under circumstances amounting to gross negligence, has made or
participated in, assented to or acquiesced in the making of false statements or
omissions in the income tax returns filed for the 1992, 1993 and 1994 taxation
years, as a result of which the tax that would have been assessed on the basis
of information provided in the Appellant's income tax returns filed for those
years was less than the tax in fact payable by the amounts of $384.14, $987.53
and $1,002.99, respectively, for the 1992, 1993 and 1994 taxation years. (denied)
[3] A native of Lebanon, the appellant came to Canada on April 13,
1990. He left his country, which at the time was in the middle of a war. He
arrived in the company of his childhood friend, Danny Tawil. The two stayed
with the appellant’s cousin, Wadih Avinaked, and they later went to the church
of the Order where they were welcomed by a priest who provided them with
furniture and the basics they needed. The appellant subsequently managed to
find a temporary job. Approximately two years later, he obtained a full-time
job.
[4] The appellant said that the priest who received them asked them to
make donations to help others in need. At the beginning, he gave when the
collection plate was passed and, later, he was asked to give directly, with the
result that after mass the appellant went to the priest’s office to make his
donation, and the priest entered the amount the appellant donated in a blue
notebook each time. In January of the following year, he received a receipt
dated the previous December that he used to obtain a tax credit for the years
at issue.
[5] When he arrived in Canada, the appellant knew only his cousin
Wadih, who in fact was his mother’s cousin and another distant cousin,
Raymond Nawar. His cousin Wadih told him about the Order. The appellant
explained that the donations were made for the purpose of helping other
Lebanese. He never heard anyone say that this money had to be sent to Lebanon
or used for renovations or to pay the Order’s mortgage.
[6] The appellant made his first donations in 1992 when his job became
permanent. He stated on cross-examination that he did not encourage other
people to make donations. He did not mingle with people after mass for fear of
being identified with one camp or another because there was still tension, even
here in Canada. Although the war in Lebanon ended in November 1990, the
tensions and other fighting continued for several years, which, according to
the appellant, explains why it was necessary to continue making donations.
[7] The appellant testified that he did not know the people who made
donations but admitted to recognizing the people who had made donations after
the scheme had been discovered. That is how he learned that his cousin Raymond
had made donations. According to the appellant, he learned the news in 1995
when he read in the press that Revenue Canada had raided the Order and that all
the Order’s books had been seized. There was talk of a scheme whereby people
obtained a receipt from the Order for more than the actual donation. He stated
that he had contacted the Order at that time and someone had told him that it
was necessary to wait. It was eventually recommended that he consult a lawyer.
[8] On cross-examination, the appellant explained that these donations
generally varied between $5 and $20 but never exceeded $100. He gave the money
in cash and never wrote anything down. He relied on the priest for the accuracy
of the amount shown on the receipts. According to the appellant, the Order had
a ledger or some blue notebook that the priest kept in an office at the
library. He was accompanied by his friend Danny Tawil when he made his
donations directly to Father Khamar. He could not explain why the total of
his donations came out to a round figure since the amount of his donations
varied. He stated that the total of his donations may have been rounded off and
that it is possible that he gave less than what was indicated on the receipts.
[9] The 1992 receipt is dated August 20, 1992. The appellant could not
explain why the receipt bore that date and maintained that he received his
receipt in December 1992 or in January 1993. He could also not explain why, in
1993, he received two receipts. The first was given to him on December 20,
1993, and it reports a payment of $2,500, and the second, issued eleven days
later, reports a payment of $1,500. He admitted that this made no sense because
he did not donate an amount of that size. He also acknowledged that he had
never asked himself any questions about the receipts. The appellant could not
provide any explanations about his addresses shown on the receipts prepared on
different dates. The appellant acknowledged that his father sent him money in
the first few years when he made donations and said that his father knew that the
appellant was making donations and had not said anything. The appellant was
convinced that the money given in Canada to charities was monitored.
[10] The appellant received help from his friend Danny Tawil in
preparing his income tax returns for the years at issue, with the exception of
the last one. He acknowledged that his donations entitled him to tax credits.
The appellant’s income during the years at issue amounted on average to $25,000
a year. In 1995, he made a few donations to the Order but could not obtain a
receipt because of Revenue Canada’s intervention. From 1995 to 1998, he
contributed $2,000 to $2,500 each year to his RRSP.
[11] The evidence adduced by the respondent was voluminous. It had to
be so in order to show the various schemes devised by the Order to reward some
of the donors and provide them with receipts for tax purposes. In 1990, the
Order had been the subject of an audit by the Minister of Revenue and had been
given directives as a result of the audit. The investigation and the final
audit showed that the Order did not act on the directives given.
[12] The Minister of Revenue undertook the main investigation after
being informed of the various schemes used by the Order to collect donations
and reward the donors. Without going into all of the details of this
investigation, it is obvious from the evidence tendered that this exercise
resulted in convictions for tax evasion for a number of people and
reassessments for those who participated in the scheme, that is, nearly 1,200
people. The majority of the taxpayers did not challenge the reassessments. Some
appealed.
[13] The investigator, Gaétan Ouellette, testified on the role he
played in examining the Order’s records. On November 8, 1995, the
investigators, armed with a warrant, seized all of the Order’s documents in
order to examine them. They seized the banking records, the deposit slips, the
cheques the Order issued, the books of receipts given for donation purposes and
the diskettes containing accounting information. They also met with the Order’s
accountants.
[14] In addition, close to one hundred people told them that there was
a scheme whereby the donor made a substantial donation for which he received a
receipt and, afterwards, the Order gave back the donor 80 per cent of his
donation in cash. The other scheme used consisted of making a cash donation in
return for which the donor obtained a receipt for an amount four to five times
greater than the amount of the donation.
[15] The donations were, for the most part, solicited by people who in
turn kept 5 per cent of the donations as a commission. Some accountants
proposed this scheme to their clients so they would draw a benefit from it. A
number of admissions filed in evidence confirm the existence of the schemes
used (Exhibit I-12, Tabs 10 and 11). Mr. Ouellette reproduced in Tab 3 of
Exhibit I-12 the information compiled on a diskette called the “bibliorec”
that was found during the search. The diskette contains information, in a
numerical sequence of the receipts issued, with respect to the receipt of the
donation and its distribution, that is, the donor’s name, the amount of the
donation, the amount returned to the donor, the amount kept by the Order and,
finally, the amount remitted by the solicitor. There is no need to say more
about this except that the information compiled on the diskette and reproduced
is consistent with other documents seized, such as cheques and deposit slips,
that confirm the scheme whereby the Order retained merely 20 per cent of the
donations, issued a receipt for the full amount and gave the donor the
difference in cash.
[16] To return the 80 per cent to the donor, the Order issued cheques
drawn on its account and made payable to cash. This was done immediately
following the deposit or in the days thereafter. Tab 7 of Exhibit I-12 contains
a number of examples of such cheques, and some of those withdrawals identified
the donor to whom the money was to be returned.
[17] The facts showed that, even after the searches, the Order was
still issuing receipts and some people were still being offered receipts by the
Order.
[18] The respondent also called Colette Langelier who took an active
part in that investigation. She began to participate in that investigation
after information was received from the wife of one of the participants in the
scheme. She produced in evidence the correspondence and directives intended for
the Order so that it would comply with Revenue Canada’s requirements. She also
examined all of the Order’s tax returns (Exhibit I-10), which contained
the list of donors. She subsequently met with the priests in order to examine
the accounting books and realized that the Order did not have any. She examined
some documents relating to the expenses, bank account statements and deposit
slips in order to make a bank reconciliation (Exhibit I-13), which she produced
in evidence. She looked at everything from 1989 to 1995. Her objective was to
identify the amounts deposited and compare them with the total of the receipts
given.
[19] The result of this exercise enabled her to conclude that there
were three different schemes:
[TRANSLATION]
(1) Professionals,
mostly physicians of Lebanese origin, and/or their spouses, as well as business
persons, whose "amounts donated" accounted for approximately 80 per cent
of the total of the receipts issued. In other words, these persons issued
cheques equivalent to 100 per cent of the amounts of the official
receipts issued by the Order, and the Order subsequently paid them back
80 per cent of the donations in cash;
(2) Partial
donations: under this scheme there were cheques from donors representing
10 per cent to 20 per cent of the amounts of the official
receipts. The persons participating in this scheme were employees or retired
persons; the cheques were usually deposited from January to May following the
year indicated on the receipts; therefore they were backdated receipts; and
(3) Donations
that could not be traced or for which no material evidence except the official
receipts was found. These donations were made by the donors in cash. It can be
seen from the numbers on the receipts that several of those donations were
made during the following year. This conclusion was reached by simply comparing
the donations made by cheque, the dates they were deposited and the numbers of
the corresponding receipts.
[20] She was unable to obtain any information that would enable her to
make a follow-up with regard to the amounts of money collected and it was
impossible for her to confirm the explanations provided by the priests. She was
unable to find any evidence from which she could conclude that the donations
collected had, according to these explanations, been sent to Lebanon. In fact,
even after promising to comply with the requirements of the Department of
Revenue, the Order had made no changes in the way it did things. Table I-18
shows that, to comply with the 90 per cent disbursement quota, the Order
indicated that the money was sent to Lebanon.
[21] A dental technician by the name of Bachar Hajjar testified that he
was familiar with the Order and had attended musical evenings during religious
festivals. It is at one of those evenings that he was made aware that he could
obtain receipts for tax credit purposes. In 1993, he made a cash donation to
someone from the monastery located on Richard Avenue in the Outrement district.
He did not know the person’s name but said that she gave him a receipt in the
amount of $1,200 for a donation of $240.
[22] Jean-Claude Perreault, a retired teacher, testified along the same
lines. He had heard about the Order by chance when he was in the waiting room
of a health professional. The people were talking about the possibility of
making a donation and in return obtaining a receipt for more than the amount
given, up to four times the amount of the donation. He therefore contacted a
representative of the Order and, in 1993, for a $2,500 donation made to the
Order, he received an official receipt for income tax purposes for $11,500. In
1994, for a $2,500 donation made to the Order, he received an official receipt
for income tax purposes for $10,000.
Analysis
[23] In argument, counsel for the appellant filed with the Court a book
of authorities setting out the legal principles relating to the burden of proof
and the rules for assessing circumstantial evidence. On this last point, there
is a passage from the author Jean-Claude Royer in La preuve civile,
2nd edition, Les Éditions Yvon Blais, at paragraph 175 on 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.
[24] It must also be remembered that, even if they are not contradicted
by other witnesses, the courts are not required to believe witnesses if their
version seems implausible on the basis of the circumstances revealed by the
evidence or on the basis of plain common sense (see Legaré v. The Shawinigan
Water and Power Co. Ltd., [1972] C.A. 372).
[25] In the case at bar, the evidence adduced by the respondent leaves
no doubt that there was a well-structured scheme put in place by the Order.
Under the scheme, the Order could collect substantial amounts of money while
rewarding the donors with receipts showing larger amounts than the actual
donations. As explained earlier, there were three possible methods of obtaining
false receipts. The issue in the case at bar is to determine whether the
appellant participated in this scheme in order to draw a benefit from it.
[26] The appellant said that all donors should not be placed in the
same basket. He refused the help of a lawyer who represented the whole group
because he realized that most of the donors had participated in the scheme. The
appellant maintains that he always did business with Father Khamar, even after
the date on which, according to Ms. Langelier, Father Khamar left Canada. The
appellant stated that he had the means to be generous to the Order because he
was single, shared rent and had no personal debts. He was, he said, less
generous after 1994 because he started his graphic design business. He closed
his argument by stating that he had filed his tax returns late because he was
too busy and that it was impossible for him to produce witnesses because they
could not be found.
[27] Counsel for the respondent maintain that the appellant’s case is
no different from that of the other donors. They emphasized that the
appellant’s testimony was erroneous. According to them, the appellant’s
statement that he did business with Father Khamar during the three taxation
years at issue is false because the evidence adduced—the signatures appearing
on the T-3010 forms completed by the Order and the cheques—supports the
respondent’s contention that Father Khamar left Canada towards the end of 1992.
Counsel for the respondent also maintain that the appellant’s statement that
all of the donations made during the year were recorded in a blue notebook is
false as well because no document of that nature was found during the search.
There was also no amount of cash in the safe and it cannot be established from
the audits conducted that the money would have been sent to Lebanon. They even
found different signatures of Father Khamar on the receipts appearing in
Exhibits I-3 and I-4. The appellant could not explain why, in 1992, he had
received two receipts. The respondent submits that the appellant received two
receipts to reach the allowable limit of 20 per cent. Furthermore, table I-25
shows the same scenario for the donation made in 1993. Table I‑24
also makes it possible to match the dates the receipts were given with their
numbers. By comparing the date of the appellant’s deposits with the date of
other deposits, it can be concluded that the majority of the receipts given to
the appellant were backdated.
[28] Counsel for the respondent also emphasized the fact that table
I-25 also shows the significant proportion of the appellant’s donations
compared to the cost of living. At the time, the appellant was receiving fairly
substantial financial assistance from his father, and the amount of this
assistance was almost the same as the amount of the donation. The changes of
address on the receipts in relation to the dates on those receipts also support
the contention that the receipts were backdated. Counsel for the respondent
closed by saying that it is strange that the amounts indicated on the receipts
were all round figures when they should have reflected the total of the various
amounts given on different occasions over the course of a year.
[29] As for the donations as a whole for the three taxation years, no
record or journal of the appellant’s contributions was found during the search
by the auditors and, consequently, it is impossible to verify the exact amounts
of the donations made by the appellant during the taxation years. As well, we
should recall Ms. Langelier’s testimony in which she maintained that no cash
donation had actually been made or that, if amounts had been paid, they did not
match the total appearing on the receipts since no cash amount was found in the
Order’s safe during the search, and there was no evidence that amounts of money
had been sent to Lebanon or that the Order had received money corresponding to
the receipts issued according to the financial statements of the Order.
[30] According to the table of the appellant’s income in Exhibit I-25,
it may be unlikely that a taxpayer could be so generous if his income and his
personal needs do not enable him to make such donations.
[31] I am aware that a taxpayer has the right to be generous and that,
if his donations comply with the provisions of the Act, they cannot be
challenged. However, in the case at bar, it may be concluded from the
preponderance of the evidence adduced by the respondent that the appellant took
advantage of the scheme put in place by the Order for the three taxation years
and that all his explanations are implausible.
[32] Having found that he did not make real donations, does subsection
163(2) of the Act apply in the case at bar? Did the appellant knowingly,
or under circumstances amounting to gross negligence, make a false statement or
omission in his tax returns filed during the years at issue? Having concluded
that the appellant participated in the scheme, that he was aware of the content
of his tax returns and of the tax credits that were based on the false receipts
he received, I find, on a balance of probabilities, that he made a false
statement in his income tax returns and that the penalties are warranted.
[33] I also find that the respondent has proved that the appellant made
a misrepresentation that is attributable to neglect, carelessness or wilful
default. The Minster may therefore make reassessments after the normal
reassessment period for the 1992 and 1993 taxation years.
[34] The appeals are accordingly dismissed.
Signed at Ottawa, Canada, this 13th day of
January 1993.
J.T.C.C.
Translation certified true
on this 24th day of February
2004.
Sophie Debbané, Revisor
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