[OFFICIAL ENGLISH TRANSLATION]
Date:
20030113
Docket:
2000-1344(IT)I
BETWEEN:
ANTOINE
CHAMOUN,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers,
J.T.C.C.
[1] Antoine Chamoun was denied charitable donations tax credits by the
Minister of National Revenue (the “Minister”) for the 1992 and 1993 taxation
years. The donations disallowed were for $1,500 and $1,000 respectively and
were made to the Ordre Antonien libanais des Maronites (hereinafter “the
Order”). In addition, the Minister reassessed for the 1992 taxation year
outside the normal reassessment period for that year and assessed penalties for
each of the years at issue. The Minister confirmed his reassessments for each
of the years on October 18, 1999. Subsequently, Mr. Chamoun filed notices of
appeal in respect of each of the years at issue.
[2] The facts that were relied on by the Minister in making the
reassessments and that were admitted or denied by the Appellant, as the case
may be, are as follows:
[TRANSLATION]
Donations
(a) in filing his
income tax return for the 1992 taxation year, the Appellant claimed a
charitable donations tax credit in relation, inter alia, to an amount of
$1,500 that he claimed to have donated to the Ordre Antonien libanais des
Maronites during the 1992 taxation year; (admitted)
(b) the appellant
did not in any way whatsoever donate the sum of $1,500 to the Ordre Antonien
libanais des Maronites during the 1992 taxation year; (denied)
(c) the appellant
did not submit to the Minister a valid receipt containing the prescribed
information for the alleged donation of $1,500 that he claimed to have made to
the Ordre Antonien libanais des Maronites since the amount of the donation that
appears on the receipt is false; (denied)
(d) in filing his
tax return for the 1993 taxation year, the appellant claimed a charitable
donations tax credit in relation, inter alia, to an amount of $1,000
that he claimed to have donated to the Ordre Antonien libanais des Maronites during
the 1993 taxation year; (admitted)
(e) the appellant
did not in any way whatsoever donate the sum of $1,000 to the Ordre Antonien
libanais des Maronites during the 1993 taxation year; (denied)
(f) the
appellant did not submit to the Minister a valid receipt containing the
prescribed information for the alleged donation of $1,000 that he claimed to
have made to the Ordre Antonien libanais des Maronites since the amount of the
donation that appears on the receipt is false; (denied)
(g) the appellant
did not make the donations for which he claimed credits in his tax returns but
rather 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 for an amount equal to the sum that the taxpayer had 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 indicating a cash donation for a certain amount whereas the taxpayer
had not paid any amount at all or had paid a small cash amount in comparison to
the amount indicated on the receipt;
(h) (...)
(i) in filing
his income tax return and in supplying information under the Act for the
1992 and 1993 taxation years in respect of charitable donations tax credits
claimed by the appellant in relation to the amount of $1,500, the appellant
made a misrepresentation attributable to wilful default; (denied)
Penalties
(j) the appellant
knowingly, or at least under circumstances amounting to gross negligence, made
a false statement or omission by claiming charitable donations credits in
relation to the amounts of $1,500 and $1,000 for the 1992 and 1993 taxation
years, whereas he had not made any donation; (denied)
(k) 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 less than the
amount of tax actually payable by $356.85 and $225.94 respectively for the
taxation years at issue. (denied)
[3] The appellant is a native of Lebanon and came to Canada in April
1990, accompanied by his wife and their two children. Before coming to Canada,
he knew about the Order and that there was a monastery in Outremont, Quebec. He
and his family accordingly attended religious services after they came to
Canada. Their participation in the activities of the Order included the
following: scouting on Friday, study of Arabic on Saturday and mass on Sunday.
[4] Shortly after coming to Canada, the appellant became a
representative for the Standard Life insurance company. Among the instructions
he received, it was suggested that he make some key contacts and obtain
references in order to increase his sales. He apparently asked Father Hage, a
priest in the Order, for his help by providing him with the names of potential
customers so that he could sell them insurance. In return, the appellant
promised to make unspecified amounts of donations to the Order.
[5] According to the appellant’s testimony, he primarily dealt with
Father Hage. He was the person in charge of the activities in which the
appellant’s family participated. Meetings were held after mass and it was there
that the appellant made contacts and handed out his business card. In the fall
of 1992, the appellant won the President’s Award, which was given to the best
salesman. This earned him a video camera and an appreciation plaque from his
employer. He also received a bonus of approximately $7,500, of which $2,884.95
was given to him in November 1992, and the balance was paid out later over
several months.
[6] The appellant explained that, on December 7, 1992, he had made a
withdrawal of $1,500 from his savings-checking account at the National Bank of
Canada and had given this amount to Father Hage in an envelope on which he had
written his name. The appellant was unable to explain why he had made his
donation in cash rather than by cheque. Several days after remitting the money,
that is, on December 21, 1992, the appellant obtained a receipt for that amount
from the Order (Exhibit I‑2, Tab 6).
[7] The appellant explained that the situation at work had changed in
1993 in that there were no more contests. Instead of making one big donation,
he put the money in an envelope whenever he made a sale and gave the priest a
donation to the Order. He acted in this manner a number of times during the
year. In return, the appellant was given a receipt from the Order on November
22, 1993, in the amount of $1,000. The appellant said he had stopped making
donations to the Order at the end of 1993. The appellant’s bank statements for
the two years at issue (Exhibit A-2) were filed in evidence. The December 7,
1992, withdrawal appears on the statements and, for 1993, there are many
withdrawals throughout the year for varying amounts. The appellant maintained
that these were amounts he had given to Father Hage and that his total
donations exceeded the amount indicated on the receipt.
[8] According to the appellant, the Order needed donations to renovate
the monastery. He recollected that there were renovations during the years at
issue because his children took part in the work and apparently his son even
became ill because of the dust. He did not know if the amounts from the
donations were sent by the Order to Lebanon or if the Order used the donations
to repay its mortgage. On cross-examination, he repeated that the Order had not
asked him to make donations. He made some donations when he was given the names
of potential customers. In 1997, the appellant learned from television of a tax
scandal involving the Order. He said he then contacted the Order, which
recommended a lawyer for him for a class action lawsuit.
[9] Again, on cross-examination, the appellant could not explain why
his donations were made in cash rather than by cheque when the money came from
his checking account. He explained that he had not asked for receipts but
Father Hage had given him receipts. The appellant gave the donations himself to
Father Hage who handed him directly the two receipts. The appellant claims that
the December 1992 withdrawal indicated in Exhibit A-2 is correct because it
shows a round figure of $1,500. For 1993, there were gifts varying from $20 to
$200. He did not know how Father Hage knew the total of his donations at the
end of the year, but he insisted that he had donated at least $1,000 in 1993
according to the receipt dated November 22. When asked why the Order had not
waited until the end of the year to give him the receipt, the appellant explained
by saying that he had had to tell Father Hage that, since he was no longer
being given the names of potential customers, he would not make any further
donations.
[10] The appellant admitted that he did not put his address on the
envelopes containing his donations. He was unable to explain how Father Hage
knew that he was the source of the donations given that there was another
individual with the same name as the appellant. The appellant also stated that
Father Hage knew him well because he saw him three times a week and was
recorded in the Order’s register. The appellant admitted that his income was
$25,000 in 1992 and approximately $20,000 in 1993. He made no further donations
to the Order after 1993. He did not make any other charitable donations afterwards,
with the exception of a donation of $50 in 1996 to the Orthodox Church to which
his wife belonged. The appellant said that he did not know the people involved
in the scheme and that the whole matter had been very damaging to the Lebanese
community.
[11] The respondent’s evidence 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
audited by the Department of National Revenue and had been given directives as
a result of the audit. The investigation and the final audit showed that the
Order had not complied with the directives it had been given.
[12] The Department of National Revenue launched the main investigation
after being informed of the various schemes used by the Order to collect
donations and reward its donors. Without going into all the details of the
investigation, it is clear, from the evidence adduced, that the exercise led to
tax evasion convictions for a number of people and reassessments for those who
profited from the scheme, i.e., almost 1,200 people. The majority of the
taxpayers did not contest the reassessments. Some filed appeals.
[13] Investigator Gaétan Ouellette testified about his role in
examining the Order’s records. On November 8, 1995, the investigators, armed
with a warrant, seized all of the Order’s documents for examination. They
seized bank records, deposit slips, the cheques issued by the Order, books of
receipts given for donation purposes and diskettes containing accounting data.
They also met with the Order’s accountants.
[14] In addition, nearly one hundred people told them about a scheme in
which the donor would make a substantial donation for which he received a
receipt, and later the Order would return 80 percent of the donation in cash to
the donor. The other scheme that was used involved making a cash donation in
return for which the donor received a receipt that was four to five times
greater than the amount of the donation.
[15] For the most part, the donations were solicited by people who in
turn kept five percent of the donations as their commission. Some accountants
proposed the scheme to their clients so they would receive a benefit. A number
of admissions were entered in evidence confirming the existence of the schemes
that were used (Exhibit I-12, Tabs 10 and 11). In Tab 3 of Exhibit I-12, the
witness Mr. Ouellette reproduced the information gathered during the search
from a diskette entitled “Bibliorec” that, in a numerical sequence of the
receipts issued, indicates the receipt of the donation and its distribution,
the donor's identity, the amount of the donation, the amount remitted to the donor, the amount
retained by the Order and, finally, the amount remitted by the solicitor. There
is no need to say more about this except that the information collected from
the diskette and reproduced is consistent with other documents that were
seized, such as the cheques and deposit slips, that in fact confirm the scheme whereby
the Order kept only 20 percent of the donations and gave the donor a receipt
for the full amount plus the difference in cash.
[16] To return the 80 percent to the donor, the Order issued cheques
drawn on its account payable to cash. This was done immediately after the
deposit or in the days thereafter. Tab 7 of Exhibit I-12 contains a number of
examples and some of those withdrawals identified the donor to whom the money
was to be remitted.
[17] The facts showed that, even after the searches, the Order was
still giving out receipts and some people were still being offered receipts by
the Order.
[18] The respondent also called Colette Langelier who had taken an
active part in the investigation. Her involvement in the investigation began
after information had been received from the wife of one of the participants in
the scheme. She produced in evidence the correspondence and the directives
intended for the Order to ensure its compliance with Revenue Canada’s
requirements. She also reviewed all of the Order’s tax returns
(Exhibit I-10), which contained the list of donors. Subsequently, she met
with the priests to examine the accounting records and realized that the Order
did not have any. She examined some of the supporting documentation for the expenses,
bank statements and deposit slips in order to prepare a bank reconciliation
statement (Exhibit I-13), which she filed in evidence. She looked at everything
from 1989 to 1995. Her goal was to identify the amounts deposited in relation
to the total receipts issued.
[19] The results 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 percent of the total of the receipts issued. In other words, these
persons issued cheques equivalent to 100 percent 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 percent to 20 percent 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, which were backdated; 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] Colette Langelier was unable to obtain any information on which
she could follow up concerning the amounts of cash collected and she found it
impossible to confirm the explanations provided by the priests. She could find
no evidence from which she could conclude that the donations collected had,
according to her explanations, been forwarded to Lebanon. In fact, even after
promising to comply with the requirements of the Department of National Revenue,
the Order had not changed its way of doing things at all. Table I-18 shows
that, to meet the 90 percent 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
knew the Order and had attended musical evenings during religious festivals. It
was during one of these evenings that he was made aware that he could obtain
receipts for tax credit purposes. In 1993, he made a cash donation to a person
from the monastery situated on Richard Avenue in the Outrement district. He did
not know the person’s name but said that he was given a receipt in the amount
of $1,200 for a $240 donation.
[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 discussing the possibility of making
a donation and in return obtaining a receipt for an amount greater than the
amount donated, as much as four times the amount of the donation. Accordingly,
he contacted a representative of the Order and, in 1993, in return for a
donation of $2,500 to the Order, he obtained an official tax receipt for
$11,500 and, in 1994, for a donation of $2,500 to the Order, he obtained an
official tax receipt 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 amounts greater 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 stated that he knew nothing about the scheme before
learning about it in March 1997 on television. He stated he had donated the
money to the Order and was given receipts matching his donation. He did this in
exchange for the names of potential clients given to him by the Order and at
all times acted in good faith. He criticized the respondent’s auditor for
treating all donors as guilty without exception.
[27] The respondent maintained that the appellant’s case was no different
from that of the others. In his direct testimony, the appellant stated that he
had obtained the names of potential customers from Father Hage in 1992 and
1993. After establishing that Father Hage had come to Canada at the end of
1992, the appellant changed his mind and altered his version of the facts. He
named Father Khamer as the one who provided him with the names of potential
customers. However, he added that, in 1992, it was the same Father Hage who
took care of the scouts on Friday, taught Arabic on Saturday and celebrated
Sunday mass. In my opinion, such weekly activities were spread out over a
number of months and it seems to me that it would be easy to identify the right
person.
[28] Counsel for the respondent raised the question of why the
appellant had made such a large donation—$1,500 in cash. The appellant was
unable to explain this fact and also could not explain why he had been given a
receipt dated December 21 inasmuch as he had made the withdrawal from his
account on December 7. Counsel also raised the question of why the appellant
did not want receipts for his donations at the time whereas today he is a party
to a dispute where he wants to put them to use. The evidence of Ms. Langelier
in Table I-21 relating to her analysis of the dates of deposit, the numbers on
the receipts and the appellant’s receipt of December 21, 1992, show
unequivocally that the appellant’s receipt for 1992 was backdated. His name
appears in the “Bibliorec” in 1993, even though the receipt had been cancelled.
[29] As for the 1993 donation, no record or book of account indicating
the appellant’s contributions was found by the auditors during their search
with the result that it is impossible to verify the exact amount of the
donations made by the appellant in that year. It is also strange that the date
on his receipt for 1993 bears the month of November instead of December. The
explanation he gave on that point is that he told the Order in November that he
would not make any more donations because he was getting fewer names of
potential customers and it was then that he obtained his receipt. Ms.
Langelier’s testimony should also be recalled. She affirmed that no cash
donation had actually been made and that if any amounts had been donated, they
did not match the total shown on the receipts since no sum of money was found
in the Order’s safe during the search and there was no evidence that sums of
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.
[30] According to the Table showing the income of the appellant and his
wife from 1990 to 1998 and to Exhibit I-23, it is perhaps implausible that a
taxpayer can be so generous to the Order if his income and family obligations
do not enable him to make such donations.
[31] I am aware that a taxpayer is entitled to be generous and that, if
the donations comply with the provisions of the Act, they cannot be
challenged. However, in the case at bar, the preponderance of the evidence
adduced by the respondent allows me to conclude that the appellant benefited
for both taxation years from the scheme set up by the Order and that his
explanations are all unlikely.
[32] Having concluded that he did not make genuine 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 or participate in, assent to or acquiesce in the making of, a false
statement or omission in his tax returns filed for the taxation years at issue?
Having concluded that the appellant took part in the scheme, that he was aware
of the content of his tax returns and the tax credits based on the false
receipts that he obtained, I conclude on a balance of probabilities that he
made a false statement in his tax returns and that the penalties are warranted.
[33] For the same reasons, I also conclude that the respondent showed
on a balance of probabilities that the appellant made a misrepresentation that
was attributable to neglect, carelessness or wilful default. Consequently, the
Minister may reassess outside the normal reassessment period.
[34] The appeals are accordingly dismissed.
Signed at Ottawa, Canada, this 13th day of
January 2003.
J.T.C.C.
Translation certified true
on this 5th day of March 2004.
Sophie Debbané, Revisor
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