[OFFICIAL ENGLISH TRANSLATION]
Date: 20030113
Docket: 2000-894(IT)I
2000-895(IT)I
BETWEEN:
SIMON DAOU,
VINCENT DAOU,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers, J.T.C.C.
[1] The Minister of National Revenue
("the Minister") disallowed charitable donation tax
credits claimed by the appellants for the 1989, 1990, 1991, 1992,
1993, 1994 and 1995 taxation years in the case of Simon Daou
and for the 1989, 1990 and 1991 taxation years in the case of
Vincent Daou. The amounts of the disallowed charitable
donation tax credits claimed by Simon Daou are $2,500, $4,000,
$6,000, $8,500, $5,000, $6,000 and $3,500 for these taxation
years respectively. All these donations were made to the Ordre
Antonien Libanais des Maronites ("the Order"). As well,
the Minister made this reassessment after the expiry of the
normal time limit for reassessments, for each of the 1989, 1990,
1991, 1992 and 1993 taxation years in the case of Simon Daou
and for each of the three taxation years at issue in the case of
Vincent Daou; the Minister also assessed penalties for both
appellants for each of the taxation years at issue. On
November 22, 1999, the Minister confirmed the
assessments for both appellants for each of the taxation years at
issue.
[2] The appeals were heard on common
evidence; the parties agreed that the hearing would be held in
French and that the Reasons for Judgment could be rendered in
French even though the arguments presented had been written in
English.
[3] In making the reassessment in the
case of Vincent Daou, the Minister relied on the following
assumptions of fact, the truth of each of which this appellant
admitted or denied:
DONATIONS
(a) in filing his
Income Tax Return for the 1989 taxation year, the Appellant
claimed a charitable donation tax credit in relation, among other
things, to an amount of $2,000 for which he contended having been
a charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1989 taxation year;
(ADMITTED)
(b) the Appellant
has not in any manner given donation for an amount of $2,000 to
the "Ordre Antonien Libanais des Maronites", during
1989 taxation year; (DENIED)
(c) the Appellant
never provided the Minister with any valid receipt containing
prescribed information in relation to the so-called donation in
the amount of $2,000 that the Appellant contends to having been
made to the "Ordre Antonien Libanais des Maronites", as
the amount of the donation that appears on the said-receipt is
false; (DENIED)
(d) in filing his
Income Tax Return for the 1990 taxation year, the Appellant
claimed a charitable donation tax credit in relation, among other
things, to an amount of $2,500 for which he contended having been
a charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1990 taxation year;
(ADMITTED)
(e) the Appellant
has not in any manner given donation for an amount of $2,500 to
the "Ordre Antonien Libanais des Maronites", during
1990 taxation year; (DENIED)
(f) the
Appellant never provided the Minister with any valid receipt
containing prescribed information in relation to the so-called
donation in the amount of $2,500 that the Appellant contends to
having been made to the "Ordre Antonien Libanais des
Maronites", as the amount of the donation that appears on
the said-receipt is false; (DENIED)
(g) in filing his
Income Tax Return for the 1991 taxation year, the Appellant
claimed a charitable donation tax credit in relation, among other
things, to an amount of $3,680 for which he contended having been
a charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1991 taxation year;
(ADMITTED)
(h) the Appellant
has not in any manner given donation for an amount of $3,680 to
the "Ordre Antonien Libanais des Maronites", during
1991 taxation year; (DENIED)
(i) the
Appellant never provided the Minister with any valid receipt
containing prescribed information in relation to the so-called
donation in the amount of $3,680 that the Appellant contends to
having been made to the "Ordre Antonien Libanais des
Maronites", as the amount of the donation that appears on
the said-receipt is false; (DENIED)
(j) the
Appellant has not given the donations for which he claims
charitable donations tax credits in his income tax returns for
the 1989, 1990 and 1991 taxation years, and has rather
participated in the following scheme:
in certain cases, the "Ordre Antonien Libanais des
Maronites" issued receipt to a taxpayer indicating a
donation in money for an amount equal to the amount that the
taxpayer had paid by cheque, giving back to the taxpayer a sum of
money or an amount approximately equal to the sum;
in other cases, the "Ordre Antonien Libanais des
Maronites" issued a receipt to a taxpayer indicating a
donation in money for a certain amount, the taxpayer having given
no donation or having paid by cheque a small 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 1989, 1990 and 1991 taxation years, relatively
to non-refundable tax credits claimed by the Appellant as
charitable donations, in relation with the amounts of $2,000,
$2,500 and $3,680 respectively, the Appellant has made
misrepresentation that is attributable to neglect, carelessness
or wilful default or has committed any fraud; (DENIED)
PENALTIES
(m) the Appellant
knowingly, or under circumstances amounting to gross negligence,
made false statements or omission in claiming non-refundable tax
credits as charitable donations, in relation to the amounts of
$2,000, $2,500 and $3,680 respectively, for the 1989, 1990 and
1991 taxation years, as he had never given any donation;
(DENIED)
(n) the Appellant
knowingly, or under circumstances amounting to gross negligence
in carrying out a duty or obligation imposed under the
Act, made or participated in, assented to or acquiesced in
the making of false statements or omission in the income tax
returns filed for the 1989, 1990 and 1991 taxation years, as a
result of which the tax that would have been assessed on the
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 $481.22, $615.26 and $917.76 respectively, for the
1989, 1990 and 1991 taxation years. (DENIED)
[4] In making the reassessment in the
case of Simon Daou, the Minister relied on the following
assumptions of fact, the truth of each of which this appellant
admitted or denied:
DONATIONS
(a) in filing his
Income Tax Return for the 1989 taxation year, the Appellant
claimed a charitable donation tax credit in relation, among other
things, to an amount of $2,500 for which he contended having been
a charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1989 taxation year;
(ADMITTED)
(b) the Appellant
has not in any manner given donation for an amount of $2,500 to
the "Ordre Antonien Libanais des Maronites", during
1989 taxation year; (DENIED)
(c) the Appellant
never provided the Minister with any valid receipt containing
prescribed information in relation to the so-called donation in
the amount of $2,500 that the Appellant contends to having been
made to the "Ordre Antonien Libanais des Maronites", as
the amount of the donation that appears on the said-receipt is
false; (DENIED)
(d) in filing his
Income Tax Return for the 1990 taxation year, the Appellant
claimed a charitable donation tax credit in relation, among other
things, to an amount of $4,000 for which he contended having been
a charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1990 taxation year;
(ADMITTED)
(e) the Appellant
has not in any manner given donation for an amount of $4,000 to
the "Ordre Antonien Libanais des Maronites", during
1990 taxation year; (DENIED)
(f) the
Appellant never provided the Minister with any valid receipt
containing prescribed information in relation to the so-called
donation in the amount of $4,000 that the Appellant contends to
having been made to the "Ordre Antonien Libanais des
Maronites", as the amount of the donation that appears on
the said-receipt is false; (DENIED)
(g) in filing his
income tax return for the 1991 taxation year, the Appellant
claimed a charitable donation tax credit in relation, among other
things, to an amount of $6,000 for which he contended having been
a charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1991 taxation year;
(ADMITTED)
(h) the Appellant
has not in any manner given donation for an amount of $6,000 to
the "Ordre Antonien Libanais des Maronites", during the
1991 taxation year; (DENIED)
(i) the
Appellant never provided the Minister with any valid receipt
containing prescribed information in relation to the so-called
donation in the amount of $6,000 that the Appellant contends to
having been made to the "Ordre Antonien Libanais des
Maronites", as the amount of the donation that appears on
the said-receipt is false; (DENIED)
(j) in filing
his Income Tax Return for the 1992 taxation year, the Appellant
claimed a charitable donation tax credit in relation, among other
things, to an amount of $8,500 for which he contended having been
a charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1992 taxation year;
(ADMITTED)
(k) the Appellant
has not in any manner given donation for an amount of $8,500 to
the "Ordre Antonien Libanais des Maronites", during
1992 taxation year; (DENIED)
(l) the
Appellant never provided the Minister with any valid receipt
containing prescribed information in relation to the so-called
donation in the amount of $8,500 that the Appellant contends to
having been made to the "Ordre Antonien Libanais des
Maronites", as the amount of the donation that appears on
the said-receipt is false; (DENIED)
(m) in filing his Income
Tax Return for the 1993 taxation year, the Appellant claimed a
charitable donation tax credit in relation, among other things,
to an amount of $5,000 for which he contended having been a
charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1993 taxation year;
(ADMITTED)
(n) the Appellant
has not in any manner given donation for an amount of $5,000 to
the "Ordre Antonien Libanais des Maronites", during
1993 taxation year; (DENIED)
(o) the Appellant
never provided the Minister with any valid receipt containing
prescribed information in relation to the so-called donation in
the amount of $5,000 that the Appellant contends to having been
made to the "Ordre Antonien Libanais des Maronites", as
the amount of the donation that appears on the said-receipt
is false; (DENIED)
(p) in filing his
Income Tax Return for the 1994 taxation year, the Appellant
claimed a charitable donation tax credit in relation, among other
things, to an amount of $6,000 for which he contended having been
a charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1994 taxation year;
(ADMITTED)
(q) the Appellant
has not in any manner given donation for an amount of $6,000 to
the "Ordre Antonien Libanais des Maronites", during the
1994 taxation year; (DENIED)
(r) the Appellant
never provided the Minister with any valid receipt containing
prescribed information in relation to the so-called donation in
the amount of $6,000 that the Appellant contends to having been
made to the "Ordre Antonien Libanais des Maronites", as
the amount of the donation that appears on the said-receipt
is false; (DENIED)
(s) in filing his
Income Tax Return for the 1995 taxation year, the Appellant
claimed a charitable donation tax credit in relation, among other
things, to an amount of $3,500 for which he contended having been
a charitable donation given to the "Ordre Antonien Libanais
des Maronites", during 1995 taxation year;
(ADMITTED)
(t) the
Appellant has not in any manner given donation for an amount of
$3,500 to the "Ordre Antonien Libanais des Maronites",
during 1995 taxation year; (DENIED)
(u) the Appellant
never provided the Minister with any valid receipt containing
prescribed information in relation to the so-called donation in
the amount of $3,500 that the Appellant contends to having been
made to the "Ordre Antonien Libanais des Maronites", as
the amount of the donation that appears on the said-receipt is
false; (DENIED)
(v) the Appellant
has not given the donations for which he claims charitable
donations tax credits in his income tax returns for the 1989,
1990, 1991, 1992, 1993, 1994 and 1995 taxation years, and has
rather participated in the following scheme:
in certain cases, the "Ordre Antonien Libanais des
Maronites" issued receipt to a taxpayer indicating a
donation in money for an amount equal to the amount that the
taxpayer had paid by cheque, giving back to the taxpayer a sum of
money or an amount approximately equal to the sum;
in other cases, the "Ordre Antonien Libanais des
Maronites" issued a receipt to a taxpayer indicating a
donation in money for a certain amount, the taxpayer having given
no donation or having paid by cheque a small amount as opposed to
the amount indicated on the receipt; (DENIED)
(w) ( ... )
(x) in filing his
income tax returns and in supplying any information under the
Act for the 1989, 1990, 1991, 1992 and 1993 taxation
years, relatively to non-refundable tax credits claimed by the
Appellant as charitable donations, in relation with the amounts
of $2,500, $4,000, $6,000, $8,500 and $5,000 respectively, the
Appellant has made misrepresentation that is attributable to
neglect, carelessness or wilful default or has committed any
fraud; (DENIED)
PENALTIES
(y) the Appellant
knowingly, or under circumstances amounting to gross negligence,
made false statements or omission in claiming non-refundable tax
credits as charitable donations, in relation to the amounts of
$2,500, $4,000, $6,000, $8,500, $5,000, $6,000 and $3,500
respectively, for the 1989, 1990, 1991, 1992, 1993, 1994 and 1995
taxation years, as he had never given any donation;
(DENIED)
(z) the Appellant
knowingly, or under circumstances amounting to gross negligence
in carrying out a duty or obligation imposed under the
Act, made or participated in, assented to or acquiesced in
the making of false statements or omission in the income tax
returns filed for the 1989, 1990, 1991, 1992, 1993, 1994 and 1995
taxation years, as a result of which the tax that would have been
assessed on the 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 $608.14, $1,026.24, $1,518.12,
$2,149.71, $1,242.52, $1,493.69 and $857.33 respectively, for the
1989, 1990, 1991, 1992, 1993, 1994 and 1995 taxation years.
(DENIED)
[5] The appellant Vincent Daou
testified that he settled permanently in Canada in 1988. After
leaving Lebanon in 1981, he studied in the United States
until 1988. His other brothers arrived in Canada in 1989 and
1990. Initially this appellant lived alone in an apartment; later
he lived for a number of years with his brothers, Georges and
Simon. During the taxation years at issue, this appellant was
single.
[6] The appellant Vincent Daou stated
that he was a Christian and that he occasionally attended the
religious services of the Order. He learned about the Order in
Lebanon, since most Lebanese Christians were members of the
Order. Because during the taxation years at issue war was raging
in this appellant's country of origin, the officiating priest
had asked for help in the form of donations to help families in
Lebanon cope with the conflict at the time. This appellant was
single at the time and considered himself lucky to be in his
position. He therefore considered that making a donation was the
least he could do. He stated that he consulted his accountant
before making the donations. The accountant apparently told him
that he could make donations since he had employment income, and
that the donations were deductible from his taxable income but
that there was an allowable maximum for charitable donations to
be observed.
[7] The appellant Vincent Daou made a
donation for each of the taxation years at issue. For the 1989
taxation year he made a donation in the amount of $2,000. This
cheque, which was given to the Order, was adduced as
Exhibit A-1. The cheque is dated December 28, 1989. The
receipt from the Order, dated December 31, 1989, was adduced
as Exhibit A-2 and meets the requirements set out in the
Income Tax Act ("the Act"). However, the
cheque was deposited to the account of the Order only on
April 3, 1990. The appellant stated that he recalled
having given the cheque after mass but that it was possible that
he wrote the cheque before that time. He himself gave the cheque
to Father Joseph Khamar, who apparently gave the receipt to him
at the same time. Under cross-examination, this appellant stated
that except for his brother he did not know any other persons who
had made similar donations. He was unable to explain why the
cheque was deposited only on April 3 of the year
following the donation. He admitted that this fact did not
trouble him at the time but added that the situation was
different now. He acknowledged that the account on which the
cheque was drawn was a joint account he had opened with his
brothers, and that they used this account in their business. He
admitted that he did not usually issue postdated cheques and
that, when issuing a cheque, he usually dated it the same
day.
[8] In 1989, the appellant Vincent
Daou declared employment income in the amount of $24,230, as well
as interest and investment income in the amount of
$3,388 (Exhibit I-2). The only charitable donation was
the one at issue; for that year, this appellant did not make a
contribution to a Registered Retirement Savings Plan (RRSP)
(Exhibit I-2).
[9] For the 1990 taxation year, the
appellant Vincent Daou made a donation to the Order in the amount
of $2,500. This cheque was not located, but a letter from the
bank (Exhibit A-3) confirms that a joint cheque in the
amount of $6,000 was issued to cover the donation by this
appellant and his brother. As was the case for the previous
taxation year, the cheque was drawn on a joint account that this
appellant had opened with his brothers. This appellant was unable
to explain why the cheque was issued jointly with his brother but
stated that his brothers each knew how much money in the account
belonged to them. This appellant did not recall how much money
belonged to each brother at the time but stated that enough money
belonged to him to cover his donation. On the day of the hearing,
this appellant did not recall how much of the
$13,856 balance in the joint account on
February 22, 1991 belonged to him but stated that he
knew that amount at the time. Nor did he recall how much of the
$190,902 balance in the joint account on December 20,
1988 belonged to each of his brothers.
[10] The receipt issued for the donation for
the 1990 taxation year is dated December 31, 1990
(Exhibit A-12). The bank withdrawal was made on
February 22, 1991. The appellant Vincent Daou did not
recall either the date he wrote on the cheque or the
circumstances in which he gave the cheque to the Order but, as
was the case for the 1989 taxation year, he stated that he was
given the receipt when he made the donation and that the cheque
should bear the same date as the receipt. This receipt meets the
requirements set out in the Act.
[11] In 1990, the appellant Vincent Daou
declared employment income in the amount of $31,915, as well as
interest and investment income in the amount of $4,870. He
made contribution in the amount of $5,000 to an RRSP, and made
the donation at issue (Exhibit I-3).
[12] For the 1991 taxation year, the
appellant Vincent Daou made a donation to the Order in the amount
of $3,700. This donation was made in two parts. The first part,
in the amount of $200, was paid on February 20, 1991;
the second part, in the amount of $3,500, was made on
December 5, 1991. The cheque for the second part was adduced
in evidence (Exhibit A-5). The first part of
this donation was apparently made in cash. This appellant adduced
in evidence two receipts, one for the donation in the amount of
$200 (Exhibit A-6), and another for the donation in
the amount of $3,500 (Exhibit A-6); these receipts
meet the requirements set out in the Act.
[13] In 1991, the appellant Vincent Daou
received employment income in the amount of $20,293, unemployment
insurance benefit income in the amount of $1,113 $, interest
income in the amount of $1,700, and other income in the amount of
$1,076. He made a contribution in the amount of $5,700 to an
RRSP, and made a donation to the Order in the amount of
$3,700 (Exhibit I-4).
[14] The evidence has established that, in
1992, the appellant Vincent Daou worked less and made no
donations to the Order. His income was approximately $19,000, and
he made a contribution in the amount of $3,500 to his
RRSP (Exhibit I-5). Furthermore, this appellant made no
further charitable donations after 1992. From 1995 to 2000, he
spend nearly all his time in Lebanon looking after his parents.
When questioned about the scandal involving the Order, he stated
that he had learned about these events by reading the newspapers.
He felt powerless in the face of these events, and was out of the
country. According to this appellant, only his brothers knew that
he had made donations to the Order.
[15] The appellant Simon Daou was born in
Lebanon. He studied with the Marist Brothers in his country of
origin. After the war broke out, his father sent him to the
United States, where he studied mechanical engineering. He then
worked for approximately six years in Saudi Arabia. His family
immigrated to Canada; he arrived in Canada in December 1988
to joint his brothers Georges and Vincent. His brother Ghassan
arrived later. From 1989 to 1995, this appellant worked for the
Worthington company. He is married to Marie Malek; they have two
children, aged six and three years.
[16] The appellant Simon Daou stated that,
during the years he spent in Saudi Arabia, his income varied
between US$35,000 and US$50,000. In that country, everything
was provided and he did not pay income tax. Simon Daou stated
that he was Catholic and therefore Christian, and Maronite by
birth. In Montréal, the Order has a monastery, a church,
and a bishop who leads the community. During the period at issue,
the Order was administered by three teams of priests; this
appellant recalled mainly Father Joseph Khamar. This appellant
stated that he was a practising Christian and more Christian than
the average person. He became a more practising Christian
because, he said, in Lebanon there are Lebanese Muslims and
Lebanese Christians, and the Lebanese Christians are the only
Christians in the Middle East.
[17] When announcements were made in church,
this appellant's conscience and his desire to help his people
led him to make donations to the Order. According to this
appellant, he made these donations in order to help the victims
of the war in his country of origin. The church was asking for
food, clothing and donations of money. In 1989, this appellant
discussed this matter with his brothers and visited his
accountant, one Mr. Bacopanos, in order to discuss with him
terms and conditions such as the allowable maximum for charitable
donations for income tax purposes and the tax benefits of
charitable donations.
[18] As a result, for the 1989 taxation
year, the appellant Simon Daou made a donation to the Order in
the amount of $2,500. A cheque for this amount, dated
December 28, 1989, was adduced as Exhibit A-10. A
receipt dated December 31, 1989 (Exhibit A-11) was also
adduced. This cheque was deposited into the Order's account
on April 3, 1990. This appellant did not recall who
gave him the receipt, but said he believed he gave the cheque to
a priest, whose name he did not know. He also said he believed
that he wrote the cheque on the date indicated on the cheque,
that is, December 28, 1989, but that the receipt was given
to him on the date indicated on the receipt, that is,
December 31, 1989. He stated that he probably gave the
cheque to the Order on December 31, 1989.
[19] Under cross-examination, the appellant
Simon Daou testified that the fact that this cheque was deposited
only on April 3 did not trouble him. He stated that at the
time he was financially comfortable and did not ask himself any
questions on this point. This receipt meets the requirements set
out in the Act.
[20] This cheque (Exhibit A-10) was
drawn on a joint account that the appellant Simon Daou held at
the time with his brothers Georges, Vincent and Ghassan.
Exhibit A-21 confirms this fact and the fact that the
account was debited for the amount of $2,500 on
April 3, 1990.
[21] For the 1990 taxation year, the
appellant Simon Daou made a donation to the same donee in the
amount of $4,000. Like his brother Vincent, he adduced a letter
from the Royal Bank (Exhibit A-3) confirming that a cheque
in the amount of $6,500 was drawn on their account but that
the 1991 files were destroyed and that it was impossible to
produce a copy of this cheque. The statements of account of this
appellant and his brother were adduced as Exhibit A-9 and
indicate that a cheque in the amount of $6,500 was debited
from their account on February 22, 1991. On the statement of
account, this appellant wrote the respective amounts of their
donations, that is, $4,000 donated by himself and
$2,500 donated by his brother Vincent. The Order gave this
appellant a receipt in the amount of $4,000 dated
December 31, 1990 (Exhibit A-12); this receipt
meets the requirements set out in the Act. The cheque was
drawn on an account that was different from the one used in 1989
but was opened in the names of this appellant and these same
brothers.
[22] For the 1991 taxation year, the
donation made was in the amount of $6,000. This cheque was drawn
on the same bank account as the donation made for the 1990
taxation year and was issued to the same donee. The cheque,
adduced as Exhibit A-13, is dated December 4, 1991 and
was cashed on December 6, 1991. The receipt
(Exhibit A-14) is dated December 5, 1991 and meets the
requirements set out in the Act. The appellant Simon Daou
stated that the amount of the donation made for that taxation
year was based on his income and that he consulted his accountant
before deciding on this amount. The donation was taken from an
account this appellant held with his brothers; Exhibit A-22
confirms that this account was debited on
December 6, 1991.
[23] In 1991, Simon Daou's income tax
return (Exhibit I-9) shows employment income in the
amount of $49,000 and interest and investment income in the
amount of $3,400. He made a contribution in the amount of $5,420
to an RRSP, and made the donation at issue as well as another
donation in the amount of $50 to the Centre des femmes de
Montréal. He explained that he made this second donation
at the time of a solicitation at his office. According to this
appellant, the difference in the amounts of the two donations can
be explained by the fact that Canada is a country that offers a
great deal more than does Lebanon.
[24] For the 1992 taxation year, the
donation made by the appellant Simon Daou to the Order was in the
amount of $8,500 (Exhibit A-15). This cheque,
dated December 30, 1992, was cashed on
January 8, 1993 (Exhibit A-23). A copy of
the receipt given to this appellant was adduced as
Exhibit I-6, Tab 5; this receipt meets the requirements
set out in the Act. The cheque was drawn on the same
account from which the donation made for the 1989 taxation year
was drawn, that is, a joint account that this appellant had
opened with his brothers.
[25] Simon Daou's 1992 income tax return
(Exhibit I-6, Tab 1) shows employment income in
the amount of $51,663 and interest and investment income in
the amount of $2,663. He made a contribution in the amount of
$3,757 to his RRSP, and made minimal donations to other
donees as well as the donation at issue.
[26] The donation made for the 1993 taxation
year was in the amount of $5,000. A photocopy of this cheque was
adduced (Exhibit A-16). The cheque appears to be dated
December 11, 1993. According to an inscription on the
back of the cheque and according to this appellant's
statement of account (Exhibit A-24), the cheque was
apparently cashed on December 16, 1993. It was drawn on
a joint account that this appellant had opened with his brother
Georges. For this donation, the Order gave this appellant a
receipt dated November 22, 1993 (Exhibit I-6,
Tab 5) that meets the requirements set out in the
Act.
[27] Simon Daou's 1993 income tax return
(Exhibit I-6, Tab 2) shows employment income in
the amount of $53,567 and income from other sources in the
amount of $2,577. He made a contribution in the amount of
$3,400 to an RRSP, and made donations by means of payroll
deductions to the United Way and the Red Cross, as well as the
donation at issue.
[28] On May 22, 1994, the appellant
Simon Daou married. For the 1994 taxation year, he made a
donation to the same donee in the amount of $6,000. This cheque
(Exhibit A-17) is dated December 27, 1994 and is
drawn on a joint account that this appellant opened with his
spouse. The cheque was cashed on January 31, 1995
(Exhibit A-25). On that date the donee gave this
appellant a receipt; this receipt meets the requirements set out
in the Act (Exhibit A-18 and Exhibit I-6,
Tab 5).
[29] The appellant Simon Daou acknowledged
that his 1994 income was made up of employment income in the
amount of $57,000 and interest and investment income and
income from other sources in the amount of $1,069. He made a
contribution in the amount of $3,674 to his RRSP, and made
other donations totalling $93.
[30] The last donation was the one made for
the 1995 taxation year. This donation was in the amount of
$3,500 and was made by cheque on December 22, 1995
(Exhibit A-19). This cheque was cashed on
January 9, 1996 (Exhibits A-19 and A-26). A
receipt for this amount was issued on December 25, 1995
(Exhibit A-20); this receipt meets the requirements
set out in the Act. The cheque was drawn on a joint
account of the appellant Simon Daou and his spouse that was
debited on January 9, 1996
(Exhibit A-26).
[31] In 1995, the appellant Simon Daou
declared income in the amount of $63,000. He made a contribution
in the amount of $4,787 to his RRSP, and made only one donation,
the donation at issue.
[32] The appellant Simon Daou acknowledged
that after 1995 he made no further donations to the Order. He
explained that after 1995 he was made aware of a scandal in the
print media and on the radio. He recalled that things had
happened that he described as "not right". He continued
to attend services at Oratoire St-Joseph and to make
donations in small amounts in order not to abandon them. He also
stated that he no longer sent money to Lebanon by other means
because in 1996 the situation in Lebanon improved greatly. Under
cross-examination, he confirmed that his salary was
$66,000 in 1996, was $68,000 in 1997, was similar to
the two previous years in 1998, doubled in 1999, and was nil in
2000.
[33] The appellant Simon Daou specified
that, after the scandal broke, he tried unsuccessfully to contact
one of the priests. He also admitted that he did not ask his
family in Lebanon to inquire into these events.
[34] The evidence adduced by the respondent
was voluminous, and necessarily so in order to establish the
various stratagems devised by the Order in order to reward some
of its donors and provide them with receipts for income tax
purposes. In 1990, the Order was audited by Revenue Canada and
received instructions following that audit. The eventual
investigation and final audit have indicated that the Order did
not follow the instructions it received in 1990.
[35] Revenue Canada initiated the main
investigation after receiving information about various
stratagems employed by the Order to receive donations and reward
its donors. While I shall not go into all the details of that
investigation, the evidence adduced has made it clear that the
investigation resulted in convictions of tax evasion for a number
of persons, and in reassessments for the participants in the
stratagem, nearly 1,200 persons. Most of those taxpayers did not
contest the reassessments; some appealed.
[36] Investigator Gaétan Ouellette
testified about his role in the review of the Order's files.
On November 8, 1995, armed with a warrant, the investigators
seized all of the Order's files for review: bank records,
deposit slips, cheques issued by the Order, books of receipts for
donations, and diskettes containing accounting records. They also
met with the Order's accountants.
[37] As well, nearly 100 persons informed
the investigators of the existence of a stratagem by means of
which the donors of substantial donations would each be given
receipts and the Order would subsequently return to the donors,
in cash, 80 percent of the donations made. By means of
another other stratagem employed, donors would make cash
donations, in return for which they would each be given receipts
for amounts four or five times as high as the amounts of the
donations.
[38] Most of the donations were solicited by
persons who, in turn, kept 5 per cent of the donations
as a commission. Some accountants suggested this stratagem to
their clients so that the clients could obtain a tax benefit from
it. A number of admissions were adduced in evidence, and confirm
the existence of the stratagems employed (Exhibit I-12,
Tabs 10 and 11). The witness Mr. Ouellette reproduced
(Exhibit I-12, Tab 3) the information taken from a
diskette referred to as "bibliorec" at the time of the
search; in a numeric sequence of receipts issued, this diskette
explains the reception and distribution of the donations and
identifies the donors, the amounts of the donations, the amounts
paid back to the donors, the amounts kept by the Order and,
lastly, the amounts remitted by the persons soliciting. No more
need be said on this point, except that the information taken
from this diskette and reproduced corresponds to information
taken from other files seized, such as the cheques and deposit
slips, and in fact confirms the stratagem by means of which the
Order kept only 20 per cent of the donations, issued
receipts for the full amounts, and paid back the differences to
the donors in cash.
[39] In order to pay the
80 per cent back to the donors, the Order issued
cheques drawn on its account and payable to cash. This procedure
implemented out immediately after the donations were deposited or
within the next few days. Exhibit I-12, Tab 7 contains
a number of examples of this procedure; some of these withdrawals
identify the donors to whom the money was to be paid back.
[40] The facts have shown that, even after
the searches, the Order continued to issue receipts and to offer
receipts to certain persons.
[41] The respondent also called as a witness
Colette Langelier, who actively participated in this
investigation. She began to participate in the investigation
after the informations were received from the spouse of one
participant in this stratagem. She prepared the correspondence
and the instructions sent to the Order in order to ensure that
the Order complied with Revenue Canada's requirements. She
also reviewed all the Order's income tax returns
(Exhibit I-15, Tab 1), which contained the donor
lists. She then met with the priests in order to review the
accounting records, and realized that the Order had no such
records. She reviewed certain expenditure vouchers, the bank
account statements and the deposit slips in order to carry out a
bank reconciliation (Exhibit I-16), which she adduced.
She noted all the details from 1989 to 1993. Her purpose was to
identify the amounts of the deposits made in comparison with the
total of the receipts issued.
[42] The results of this exercise allowed
Ms Langelier to conclude that three different stratagems
were employed:
(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 back to them 80 per cent of the donations in
cash;
(2) partial
donations: as part of this stratagem were found cheques from
donors for between 10 per cent and
20 per cent of the amounts of the official receipts.
The persons participating in this stratagem were employees or
retired persons; usually the cheques were deposited from January
to May of the year following the year indicated on the receipts,
which therefore were backdated;
(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 a number of these donations were made during the following
year. A simple comparison of the donations made by cheque, the
dates they were deposited, and the numbers of the corresponding
receipts points to this conclusion.
[43] Ms Langelier adduced two charts
(Exhibits I-19 and I-20) showing the tax benefits
the appellants obtained after making donations to the Order for
the taxation years at issue, and two additional charts
(Exhibits I-22 and I-23) showing amounts
from the appellants' income tax returns, the percentages of
their donations to the Order in comparison with their costs of
living, and the percentages of the receipts in comparison with
the allowable maximum for charitable donations. In the first
case, the donations varied between 11 per cent and
20 per cent; in the second case, they varied between
29 per cent and 85 per cent.
[44] A further chart
(Exhibit I-24) shows the relationship between the
dates of the receipts issued to the appellants and the dates the
cheques obtained as donations were deposited. The Order's
deposit books each contained either 25 or 10 receipts, all
numbered. By means of a comparison of the dates of the deposits,
the dates of the receipts, and the numbers of the receipts, the
chart shows that the receipts issued by the Order for the 1989
and 1990 taxation years had to be backdated. As well, according
to the order of the numbers of the receipts, the deposit of a
cheque in the amount of $6,500 issued by the two appellants
should have appeared in 1990. According to Ms Langelier, the
reconciliation does not show any deposit in this amount, which
leads her to conclude that the donation would have been made in
cash and that the receipt was backdated.
[45] Ms Langelier noted that, according
to Exhibit I-16, page 23, the cheques for the two donations
made by the appellants for the 1991 taxation year, that is, in
the amounts of $3,500 and $6,000, were deposited on
December 6, 1991. The deposit made that day and the
deposit made on December 10, 1991 totalled $69,000. The
same chart shows withdrawals made by the Order on
December 10 and 11 by means of cheques payable to cash
for approximately 80 per cent of the total of these two
deposits; Ms Langelier therefore concluded that this
occurrence was a hybrid case corresponding to the first
stratagem.
[46] Exhibit I-16, page 35, describes
the same occurrence concerning the donation made by the appellant
Simon Daou for the 1992 taxation year, in the amount of $8,500.
Along with other cheques, his cheque in the amount of
$8,500 was deposited on January 8, 1993. The total
amount of the deposit was $26,000. On January 15, 1993,
the Order made a withdrawal payable to cash in the amount of
$20,000, approximately 80 per cent of the amount
of the deposit. This occurrence also corresponds to the first
stratagem.
[47] According to Exhibit I-16,
page 40, a deposit for the 1993 taxation year in the amount
of $24,600 was made to the Order's account on
December 16, 1993. According to the receipt issued to
the appellant Simon Daou, this amount included the donation in
the amount of $5,000 made by him. The deposit was made one month
after the date the receipt was issued. On
December 20, 1993, the Order made a withdrawal in the
amount of $4,000 from another bank than the bank at which
the deposit was made. The amount of this withdrawal is
approximately 80 per cent of the amount of the donation
for which the receipt was issued.
[48] Still according to
Exhibit I-16, page 48, the Order made a deposit in the
amount of $11,000 on January 31, 1995; this amount included
the cheque from the appellant Simon Daou in the amount of $6,000,
for which he had been given a receipt dated
December 27, 1994, that is, one month earlier. This
receipt, numbered 860, is from a book of 10 receipts. All
the other receipts from the same book were issued at the
beginning of the month. Ms Langelier wondered about this
discrepancy, and also noted a large withdrawal made by the Order
a few days later.
[49] The respondent called as a witness
Michel Yazbeck, a dentist. Mr. Yazbeck was has lived in
Canada since 1979 and is familiar with the Order. He stated that
in 1990, 1991 and 1992 he made donations to the Order. He would
go to the church in order to donate a cheque, and would
return there approximately one week later in order to obtain a
receipt and a cash kickback. Although the donation for the 1990
taxation year in the amount of $10,000 was actually a
donation in the amount of only $2,000, he obtained a receipt in
the amount of $10,000. He also stated that the donation for the
1990 taxation year was made in March 1991 and that the
receipt was backdated to December 31, 1990. After being
contacted by Revenue Canada in 1997, he sent Revenue Canada a
letter confirming that the Order had paid back as much as
80 per cent of the donations he made during the three
years he participated in the stratagem.
[50] In making his arguments, counsel for
the respondent adduced before the Court a collection of case law
setting out the legal principles concerning the burden of proof
and the rules concerning the assignment of probative value to
circumstantial evidence. On this latter point, in La preuve
civile (2e édition), Éditions Yvon
Blais, author Jean-Claude Royer writes as follows at
page 100, paragraph 175:
175 - Direct evidence is preferable to indirect
evidence - Direct evidence is evidence that has a direct
bearing on the fact at issue. Indirect evidence, circumstantial
evidence, or evidence made by presumption has to do with relevant
facts that make it possible to infer the existence of the fact at
issue. [. . .]
Direct testimonial evidence is superior to evidence made by
presumption. However, this rule is not absolute. In certain
circumstances, the court may prefer circumstantial evidence to
direct evidence.
[51] It must also be borne in mind that the
courts are not obliged to believe witnesses, even if they are not
contradicted by other witnesses, if their versions of the facts
appear implausible according to the circumstances established by
the evidence or according to plain common sense (see
Legaré v. The Shawinigan Water and Power Co.
Ltd.).
[52] In this case, the evidence adduced by
the respondent leaves no doubt about the existence of a
well-structured stratagem set up by the Order. By employing this
stratagem, the Order could collect considerable amounts of money
and, at the same time, reward donors by means of receipts issued
for amounts higher than the actual amounts of the donations. As
has been explained above, there were three possible ways of
obtaining false receipts. At issue in this case is whether the
appellants participated in this stratagem in order to obtain a
tax benefit from it.
[53] Counsel for the appellants stated that
there was no direct evidence establishing that his clients
participated in the Order's stratagem. In making his
arguments, he adduced the donation cheques for all the taxation
years at issue except the 1990 taxation year. He stated that the
receipts adduced were acceptable as evidence, that his clients
could afford to make the donations at issue, and that they stated
that they made these donations. No admission taken by the
investigators pointed to the appellants. According to
Exhibits I-22 and I-23, the appellants'
contributions were well below the allowable maximum for
charitable donations, and their incomes allowed them to be
generous. According to counsel for the appellants, the evidence
of the existence of the stratagem was not sufficient to allow the
respondent to discharge the onus of establishing that the
appellants participated in the stratagem. Quoting author
Jean-Claude Royer, counsel for the appellants argued
that it is left to the Court to assign probative value to
assumptions of fact not established by law, and that the Court
must take into consideration only those assumptions of fact that
are serious, precise and in agreement. In this case, counsel for
the appellants argued, there is no agreement between the
donations made by the appellants and the allowable maximum for
charitable donations of 20 per cent of net income shown
in Exhibits I-22 and I-23.
[54] Counsel for the respondent, on the
other hand, argued that she had established the existence of a
stratagem and that her evidence pointing to the appellants,
although circumstantial, was sufficient to allow her to discharge
the burden of proof on her. The details of the Order's
transactions as part of the stratagem show how the Order
respected its financial obligations, but the receipts issued to
the taxpayers, including the receipts adduced by the appellants,
were illegal and false and had no probative value.
[55] Counsel for the respondent argued that,
for the 1990 taxation year, neither Mr. Ouellette nor
Ms Langelier was able to confirm the existence of the
deposit in the amount of $6,500 that the Order should have
made after receiving the donation from the appellants. She argued
that this was the only cheque the appellants did not locate or
adduce in evidence, and the only donation they made together. She
also wondered where the priest who signed the receipt
(Exhibit A-2) obtained the telephone number of the
appellant Vincent Daou, since this information does not appear on
this donation cheque. The same question arises for the 1994 and
1995 taxation years: where could the priest have obtained this
information? Counsel for the respondent argued that the
appellants and the priest must have spoken to each other more
often than the appellants suggested, since the address and
telephone number of the appellant Simon Daou do not appear on the
cheque for the donation for the 1991 taxation year
(Exhibit A-13) but do appear on the receipt
(Exhibit A-14).
[56] The receipt in the amount of
$5,000 issued to the appellant Simon Daou
(Exhibit I-6, Tab 5) is dated
November 22, 1993; the cheque for this donation
(Exhibit A-16) is dated December 11, 1993.
However, this appellant testified that he was given the receipts
on the same day. For the 1995 taxation year, counsel for the
respondent wondered why the Order would have issued a receipt
(Exhibit A-20) in the name of the appellant
Simon Daou alone when the donation was taken from the joint
account of this appellant and his spouse. For the 1994 taxation
year, the receipt (Exhibit A-18) for the donation
taken from the same account was issued in the name of this
appellant and his spouse. According to counsel for the
respondent, contrary to the allegations made by Simon Daou,
there must have been conversations between him and the
representatives of the Order.
[57] Another yet unanswered question,
according to counsel for the respondent, was why the Order waited
so long to deposit the donations when, according to
Exhibit I-16, it made deposits every day. On the
cheque dated December 30, 1992 (Exhibit A-15), it
can be seen that a change was made to the three letters
indicating the month, so that one might conclude that the writer
had initially written a "J", for January; counsel for
the respondent wondered about this fact as well. According to
Ms Langelier, if a deposit is made after the date of a
receipt, it must be concluded that the receipt is backdated. All
these arguments contradict the appellants' version of the
facts, that is, that they were given their receipts on the dates
they donated their cheques. Counsel for the respondent added that
Exhibit I-15, Tab 3 contains 13 pages of
receipts, all dated December 31, 1991, which supported
the hypothesis that the Order did not date the receipts
accurately.
[58] Counsel for the respondent continued,
stating that the priests found to have participated in the false
receipts stratagem were the same persons who signed the receipts
issued to the appellants. The investigation showed that the
taxpayers who made donations to the Order were very generous and
did not make donations to other organizations. The evidence also
established that the appellants made donations only in the
taxation years during which the stratagem was operative. She
therefore cast doubt on the appellants' version of the facts,
that is, that they consulted their accountant in order to
ascertain how much money they were allowed to donate. That
consultation was held before the end of the year, and it must
have been difficult for the accountant to respond before having
available all the information about the appellants' income.
Counsel for the respondent concluded that it was more than likely
that the appellants participated in the stratagem, even if their
names do not appear in the diskette referred to as
"bibliorec".
[59] As has been noted in paragraph 42
of these Reasons, the evidence adduced by the respondent exposes
a stratagem well established by the Order. Did the appellants
participate in this stratagem? Although all the receipts meet the
requirements set out in the Act, it is also true that the
donations must be legitimately made, that is, there must be a
remittance of the money constituting the irrevocable donation. In
this case, the balance of evidence adduced favours the respondent
and makes it possible to find that the appellants did indeed
participate in the stratagem set up by the Order during all the
taxation years at issue.
[60] The testimony by the appellants, the
percentages of their donations in comparison with their incomes
and the percentages of their donations in comparison with the
allowable maximum for charitable donations, the dates of the
deposits in comparison with the dates of the receipts, the
withdrawals made almost immediately after the deposits and in
amounts of approximately the percentage of the kickbacks made by
means of the stratagem, and the backdated receipts, to name only
these factors, allow me to find that the appellants did
participate in the stratagem.
[61] I find it odd that, except for one
donation in the amount of $50 made by Simon Daou for the
1991 taxation year, all the other donations made during the
taxation years at issue, amounting to $43,680, were made to the
Order.
[62] The information gathered by
Ms Langelier and adduced in evidence in chart form,
particularly Exhibits I-16, I-22,
I-23 and I-24, is quite revealing of the
circumstances that should not occur in the normal course of a
donor's making a donation and obtaining a receipt and the
donee's depositing the donation within a few days. In this
case, one must wonder why, as part of the first stratagem, the
receipts were backdated, the donations were deposited on later
dates, and the Order made withdrawals shortly thereafter in
amounts of approximately a percentage of the donations.
[63] It is true that the appellants made
donations that were within the allowable maximum for charitable
donations and that their incomes allowed them to be generous. On
the other hand, one cannot ignore all the circumstances in which
the donations were made, such as the fact that no evidence was
found of the donation in the amount of $6,500 made by the
appellants and the fact that this cheque was the only one the
appellants were unable to locate. What about the fact that one
receipt is dated November 22, 1993 while the cheque for
which this receipt was issued is dated December 11, 1993,
when this appellant claims that he was given the receipts on the
same days he made the donations? One may doubt the credibility of
the evidence regarding these donations: in fact, they were not
donations, but a semblance that allowed the appellants to obtain
a tax benefit.
[64] If it is found that the appellants did
not make genuine donations, is subsection 163(2) of the
Act applicable in this case? Did the appellants, knowingly
or under circumstances amounting to gross negligence, make a
false statement or an omission in filing their income tax returns
for the taxation years at issue? Having found that the appellants
participated in the stratagem and were aware of the contents of
their income tax returns and of the income tax credits based on
the false receipts they obtained, I consider that I am justified
in finding that on a balance of probabilities they made false
statements on their income tax returns and that the penalties are
justified.
[65] For the same reasons, I am also
justified in finding that on a balance of probabilities the
respondent has established that through neglect, carelessness or
wilful default the appellants made a misrepresentation of the
facts, and in finding that the respondent may make reassessments
after the expiry of the normal time limit for reassessments, for
the 1989 through 1993 taxation years in the case of
Simon Daou and for the 1989, 1990 and 1991 taxation years in
the case of Vincent Daou.
[66] For these reasons, the appeals are
dismissed.
Signed at Ottawa, Canada, this 13th day of January 2003.
J.T.C.C.
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