REASONS
FOR JUDGMENT
Hogan J.
I. Overview
[1]
The Appellant, Ladan Abootaleby-Pour, is
appealing reassessments by which the Minister of National Revenue
(the “Minister”) disallowed claims for charitable donations as follows:
|
Taxation Year
|
Donations Claimed
|
Donations
Disallowed
|
|
2006
|
$4,000
|
$4,000
|
|
2007
|
$3,000
|
$3,000
|
|
2008
|
$3,800
|
$3,800
|
[2]
The Minister alleges that the Appellant
purchased false charitable donation receipts from her accountants, Fareed Raza
and Saheem Raza (the “Raza Brothers”). The Raza Brothers provided accounting
and tax services under the trade names Fareed Raza & Co. Inc. and F & A
Accounting Corporation (“FA”). The Raza Brothers were charged with fraud for
making false statements on income tax returns prepared by them for their
clients.
[3]
The onus of disproving the Minister’s assumptions
was on the Appellant, except in respect of the reassessments for the 2006 and
2007 taxation years, which were made after the normal
reassessment period referred to in subsection 152(4) of the
Income Tax Act (the “Act”). With respect to those reassessments,
the Respondent has the burden of establishing that the Appellant made
a misrepresentation in the circumstances set out in subparagraph 152(4)(a)(i)
of the Act.
II. Factual Background
[4]
The Appellant immigrated to Canada in 1999. While working as a screener at the Vancouver International Airport she was introduced to FA by Khorshid Rasuli, a co‑worker and one of the
appellants whose appeals were heard on common evidence presented by the
Respondent.
[5]
The Appellant testified that she met Fareed Raza
(“Mr. Raza”) in 2007 when she hired him to prepare her 2006 tax return. Mr.
Raza allegedly introduced her to the Mehfuz Children Welfare Trust (the “Mehfuz
Trust”) and was instrumental in her decision to gift funds to that
organization. The Appellant testified that her returns were prepared by Saheem Raza for the 2007 and 2008 taxation years.
[6]
The Appellant admitted that the amounts she gave
the Raza Brothers were less than the donations she claimed on her 2006 to 2008
tax returns. She estimated that she would give Mr. Raza about $600 to $800
three times a year as donations for the prior taxation year, although she
appeared very hesitant and uncertain of her answer when questioned on this
matter by counsel for the Respondent.
[7]
Ms. Jane Yang, an investigator with the
enforcement division at the Vancouver Tax Services Office of the Canada Revenue
Agency (the “CRA”), testified on behalf of the Respondent. In October of
2008, while attending an internal training session in Toronto, Ms. Yang learned
that one of her colleagues in Toronto was having success in uncovering schemes
used by tax preparers to sell forged charitable donation receipts to their
clients.
[8]
On her return to Vancouver, Ms. Yang discovered
that a number of clients of FA appeared to have made large donations to the
Mehfuz Trust. The donation pattern appeared to be abnormal. The taxpayers were
donating a significant portion of their net income to the Mehfuz Trust.
[9]
A criminal investigation was launched and a
seizure was conducted at FA’s offices on July 14, 2010. The seized documents
included receipts from the Mehfuz Trust, which Ms. Yang believed were forged,
and Mr. Raza’s desk calendar. The calendar contained annotations that suggested
that Mr. Raza was recording amounts that he was receiving in return for
caregiver and donation receipts. Ms. Yang was able to establish that, in
many cases, the amount indicated on the calendar alongside a client’s name
represented from 8% to 11% of the amount claimed on the client’s return as a
gift to the Mehfuz Trust. Ms. Yang also observed that the receipts for the
Mehfuz Trust seized at the FA offices were different from the official receipts
issued by the Mehfuz Trust.
[10]
As a result of her investigation, Ms. Yang
concluded that the Raza Brothers had forged donation receipts totalling
approximately $12,000,000. Ms. Yang estimated that this scheme resulted in
a loss of tax revenue of approximately $4,700,000.
[11]
Mr. Mashud Miah, the chairman and founder of the
Mehfuz Trust, also testified on behalf of the Respondent. Mr. Miah was born in Bangladesh and immigrated to Canada in 1985. In addition to his duties at the Mehfuz Trust from 2001
to 2009, Mr. Miah worked as a cleaner.
[12]
Mr. Miah explained that the Mehfuz Trust was
named after his son, Mehfuz, who was born prematurely at a hospital in Vancouver. He believes that had his son been born prematurely in Bangladesh he likely would not have survived. In 1997, Mr. Miah was involved in two serious car
accidents, and the treatment he received while in hospital again made him recognizant
of the quality of health care services provided at Canadian hospitals. These
events inspired him to establish the Mehfuz Trust in 2000-2001, with the
assistance of Fareed Raza, as a vehicle to raise funds in Canada for the purpose of building and operating a medical clinic in Bangladesh. According to Mr.
Miah, the clinic was built, and it offered health care to poor and handicapped
children from 2003 to 2009. The clinic’s operations were abandoned in 2009
after the Mehfuz Trust became tainted by the controversy surrounding the
actions of the Raza Brothers.
[13]
Mr. Miah alleges that in 2008 he discovered
Saheem Raza forging charitable donation receipts of the Mehfuz Trust on
entering Saheem’s office, which he was to clean as part of his cleaning
services arrangement with FA. He testified that he saw Saheem signing his (Mr.
Miah’s) name to a receipt. He subsequently saw forged receipts lying
around the office. In the spring of 2008, after consulting with a lawyer, he
reported to the CRA that he suspected that the Raza Brothers were forging
charitable donation receipts in the name of the Mehfuz Trust. Mr. Miah
testified that he stopped using FA’s accounting services in 2007 as a result of his suspicions of the
Raza Brothers’ improprieties.
III. Analysis
[14]
The Respondent presented common evidence in these
appeals and the appeals of Jose Vekkal (2013-882(IT)I), Remmy Vekkal
(2013-883(IT)I), Martin Izkendar (2013-220(IT)I), Ruben
Nocon (2013-635(IT)I), Iraj Rasuli (2013-886(IT)I), Khorshid
Rasuli (2013-887(IT)I), Azim Bani (2012-3541(IT)I), and Oleg Komarynsky (2013-3354(IT)I).
[15]
At the conclusion of the hearing of these appeals,
an issue arose as to whether the evidence presented by the other eight appellants
or obtained by the Respondent through the cross-examination of those appellants
should form part of the Appellant’s appeals. I note that the case management
judge did not deal with this matter in his order setting down the appeals for
hearing. I also observe that the Appellant was not served with the pleadings in
the other appeals and did not partake in the examination or cross-examination
of the other appellants. Therefore, I will disregard the evidence of the other
appellants for the purpose of deciding these appeals.
[16]
In any event, nothing turns on this matter as I
did not find that evidence to be particularly relevant for the purpose of
deciding these appeals.
[17]
The Appellant’s 2006 and 2007 taxation years
were reassessed beyond the normal reassessment period. Therefore, the
Respondent bears the onus of establishing that the Appellant made with respect
to the gifts that she claims she made a misrepresentation attributable to neglect,
carelessness or wilful default. The Appellant argues that the Respondent has
failed to discharge her onus with respect to those taxation years.
[18]
For the sake of brevity, I incorporate by
reference my credibility findings with respect to Ms. Yang’s and Mr. Miah’s
evidence as set out in paragraphs 24, 25, 26 and 27 of the reasons for judgment
in the appeals of Jose Vekkal (2013‑882(IT)I) and Remmy Vekkal
(2013-883(IT)I) released on the same date as these reasons for judgment.
[19]
The Appellant admitted that she made cash
payments to Mr. Raza which were less than the amounts she claimed as donations
made to the Mehfuz Trust. From her demeanour, I also believe that the Appellant
was exaggerating when she claimed she paid Mr. Raza $600 to $800 three times a
year.
[20]
Further, I do not believe that the Appellant was
in a financial position to make the claimed donations. She reported net income
of $25,230, $29,756, and $34,686 for the 2006, 2007 and 2008 taxation years
respectively. With respect to the 2006 taxation year, the disallowed donation
claim represented 16% of her net income for that year. With respect to the 2007
and 2008 taxation years, the alleged donations represented 10% and 11% of her
net income. The Appellant left me with the impression that she knew very little
about the activities of the Mehfuz Trust. I find it implausible that she would have
given a substantial portion of her net income to a charity that she knew little
about.
[21]
The alleged gifts are also inconsistent with the
Appellant’s subsequent donation history. She gave only $350, $150 and $535 to
various charities in her 2009, 2010 and 2011 taxation years.
[22]
Considering the evidence as a whole, I believe
that the Appellant purchased false donation receipts from the Raza Brothers.
The fact that the Appellant may have relied on Mr. Raza’s advice in agreeing to
participate in the false donation scheme does not absolve the Appellant from responsibility
for her decision to claim tax credits for gifts that she did not make. This was
not an innocent mistake made by the Appellant. Under our self-assessment
system, taxpayers cannot, on the grounds that they failed to read their returns
before they signed and filed them, be absolved of liability for
misrepresentations made in their tax returns. Such conduct is at the very least
akin to neglect and carelessness. Therefore, the Minister was justified in
reassessing the Appellant for the 2006 and 2007 taxation years beyond the
normal reassessment period.
[23]
It follows from the above that the Appellant
also failed to establish that she made a gift to the Mehfuz Trust in respect of
her 2008 taxation year.
[24]
For all of these reasons, the reassessments are
upheld and the appeals are dismissed.
Signed at Ottawa, Canada, this 18th day of November 2014.
“Robert J. Hogan”
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